PRUDENTIAL PACIFIC GROWTH FUND INC, 497, 1998-01-06

PRUDENTIAL PACIFIC GROWTH FUND INC
497, 1998-01-06

Previous: VANS INC, S-8, 1998-01-06

Next: INTEGON CORP /DE/, 15-12B, 1998-01-06

<PAGE>
Prudential Pacific Growth Fund, Inc.

PROSPECTUS DATED DECEMBER 31, 1997

- ----------------------------------------------------------------

Prudential Pacific Growth Fund, Inc. (the Fund) is an open-end, diversified
management investment company whose investment objective is long-term growth of
capital. The Fund seeks to achieve this objective by investing primarily in
equity related securities (including common stock, preferred stock, rights,
warrants and debt securities or preferred stock which are convertible or
exchangeable for common stock or preferred stock and master limited
partnerships) of companies doing business in or domiciled in the Pacific Basin
region. Under normal circumstances, the Fund intends to invest at least 65% of
its total assets in such securities. The Fund may invest in equity securities of
other companies and in nonconvertible debt securities. The Fund also may engage
in various derivative transactions, such as those involving options on stock,
stock indices, foreign currencies and futures contracts on foreign currencies
and groups of currencies and on financial or stock indices so as to hedge its
portfolio and to attempt to enhance return. See "How the Fund
Invests--Investment Objective and Policies." There can be no assurance that the
Fund's investment objective will be achieved. The Fund's address is Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, and its
telephone number is (800) 225-1852.

The Fund is not intended to constitute a complete investment program. Because of
its objective and policies, including its Pacific Basin orientation, the Fund is
subject to greater investment risks than certain other mutual funds. See "How
the Fund Invests--Risks and Special Considerations of Investing in Foreign
Securities" and "How the Fund Invests-- Other Investments and
Policies--Portfolio Turnover."

This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Additional information about
the Fund has been filed with the Securities and Exchange Commission (the
Commission) in a Statement of Additional Information, dated December 31, 1997,
which information is incorporated herein by reference (is legally considered a
part of this Prospectus) and is available without charge upon request to the
Fund at the address or telephone number noted above. The Commission maintains a
web site (http:/www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund.

- --------------------------------------------------------------------------------

INVESTORS ARE ADVISED TO READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE
REFERENCE.

- --------------------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
FUND HIGHLIGHTS

The following summary is intended to highlight certain information contained
in this Prospectus and is qualified in its entirety by the more detailed
information appearing elsewhere herein.

WHAT IS PRUDENTIAL PACIFIC GROWTH FUND, INC.?

Prudential Pacific Growth Fund, Inc. is a mutual fund. A mutual fund pools
the resources of investors by selling its shares to the public and investing
the proceeds of such sale in a portfolio of securities designed to achieve
its investment objective. Technically, the Fund is an open-end, diversified
management investment company.

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is long-term growth of capital. It seeks
to achieve this objective by investing primarily in equity related
securities and other securities of companies doing business in or domiciled
in the Pacific Basin region. There can be no assurance that the Fund's
investment objective will be achieved. See "How the Fund Invests--Investment
Objective and Policies" at page 9.

WHAT ARE THE FUND'S RISK FACTORS AND SPECIAL CHARACTERISTICS?

Under normal circumstances, the Fund anticipates that at least 65% of its
total assets will consist of Pacific Basin region equity related securities.
See "How the Fund Invests--Investment Objective and Policies" at page 9.
Investing in securities of foreign companies and countries involves certain
risks and considerations not typically associated with investments in U.S.
Government Securities and securities of domestic companies. See "How the
Fund Invests--Risks and Special Considerations of Investing in Foreign
Securities" at page 10. The Fund is permitted to invest up to 25% of its net
assets in lower quality foreign convertible debt securities provided that
such securities have a minimum rating of at least B as determined by a
nationally recognized securities rating organization (NRSRO), such as
Standard & Poor's Ratings Group or another NRSRO, or, if unrated, are of
equivalent quality. Lower rated securities (I.E., high yield or high risk
securities, commonly referred to as "junk" bonds) are subject to a greater
risk of loss of principal and interest. See "How the Fund Invests--Risks and
Special Considerations of Investing in Foreign Securities--Risk Factors
Relating to Investing in Foreign Debt Securities Rated Below Investment
Grade" at page 12. The Fund may also engage in various hedging and return
enhancement strategies, including investing in derivatives. See "How the
Fund Invests--Hedging and Return Enhancement Strategies--Risks of Hedging
and Return Enhancement Strategies" at page 15. As with an investment in any
mutual fund, an investment in this Fund can decrease in value and you can
lose money.

WHO MANAGES THE FUND?

Prudential Investments Fund Management LLC (PIFM or the Manager), is the
Manager of the Fund and is compensated for its services at an annual rate of
.75 of 1% of the Fund's average daily net assets. As of November 30, 1997,
PIFM served as manager or administrator to 64 investment companies,
including 42 mutual funds, with aggregate assets of approximately $60
billion. The Prudential Investment Corporation, which does business under
the name of Prudential Investments (PI, the Subadviser or the Investment
Adviser), furnishes investment advisory services in connection with the
management of the Fund under a Subadvisory Agreement with PIFM. See "How the
Fund is Managed--Manager" at page 18.

WHO DISTRIBUTES THE FUND'S SHARES?

Prudential Securities Incorporated (Prudential Securities or the
Distributor), a major securities underwriter and securities and commodities
broker, acts as the Distributor of the Fund's Class A, Class B, Class C and
Class Z shares and is paid an annual distribution and service fee which is
currently being charged at the annual rate of .25 of 1% of the average daily
net assets of the Class A shares, and at the annual rate of 1% of the
average daily net assets of each of the Class B and Class C shares. The
Distributor incurs the expenses of distributing the Class Z shares under a
Distribution Agreement with the Fund, none of which is reimbursed by or paid
for by the Fund. See "How the Fund is Managed--Distributor" at page 18.

2
<PAGE>
WHAT IS THE MINIMUM INVESTMENT?

The minimum initial investment is $1,000 per class for Class A and Class B
shares and $5,000 for Class C shares. There is no minimum initial investment
requirement for investors who qualify to purchase Class Z shares. The
minimum subsequent investment is $100 for all classes, except for Class Z
shares for which there is no such minimum. There is no minimum investment
requirement for certain retirement and employee savings plans or custodial
accounts for the benefit of minors. For purchases made through the Automatic
Savings Accumulation Plan, the minimum initial and subsequent investment is
$50. See "Shareholder Guide--How to Buy Shares of the Fund" at page 24 and
"Shareholder Guide-- Shareholder Services" at page 35.

HOW DO I PURCHASE SHARES?

You may purchase shares of the Fund through Prudential Securities, Pruco
Securities Corporation (Prusec) or directly from the Fund, through its
transfer agent, Prudential Mutual Fund Services LLC (PMFS or the Transfer
Agent), at the net asset value per share (NAV) next determined after receipt
of your purchase order by the Transfer Agent or Prudential Securities plus a
sales charge which may be imposed either (i) at the time of purchase (Class
A shares) or (ii) on a deferred basis (Class B or Class C shares). Class Z
shares are offered to a limited group of investors at net asset value
without any sales charge. See "How the Fund Values Its Shares" at page 20
and "Shareholder Guide--How to Buy Shares of the Fund" at page 24.

WHAT ARE MY PURCHASE ALTERNATIVES?

The Fund offers four classes of shares:

- Class A Shares:
Sold with an initial sales charge of up to 5% of the
offering price

- Class B Shares:
Sold without an initial sales charge but are subject to
a contingent deferred sales charge or CDSC (declining
from 5% to zero of the lower of the amount invested or
the redemption proceeds) which will be imposed on
certain redemptions made within six years of purchase.
Although Class B shares are subject to higher ongoing
distribution-related expenses than Class A shares, Class
B shares will automatically convert to Class A shares
(which are subject to lower ongoing distribution-related
expenses) approximately seven years after purchase.

- Class C Shares:
Sold without an initial sales charge and for one year
after purchase, are subject to a 1% CDSC on redemptions.
Like Class B shares, Class C shares are subject to
higher ongoing distribution-related expenses than Class
A shares but do not convert to another class.

- Class Z Shares:
Sold without either an initial sales charge or CDSC to a
limited group of investors. Class Z shares are not
subject to any ongoing service or distribution-related
expenses.

See "Shareholder Guide--Alternative Purchase Plan" at page 25.

HOW DO I SELL MY SHARES?

You may redeem your shares at any time at the NAV next determined after
Prudential Securities or the Transfer Agent receives your sell order.
However, the proceeds of redemptions of Class B and Class C shares may be
subject to a CDSC. See "Shareholder Guide--How to Sell Your Shares" at page
29. Participants in programs sponsored by Prudential Retirement Services
should contact their client representative for more information about
selling their Class Z shares.

HOW ARE DIVIDENDS AND DISTRIBUTIONS PAID?

The Fund expects to pay dividends of net investment income, if any, and
make distributions of any net capital gains at least annually. Dividends and
distributions will be automatically reinvested in additional shares of the
Fund at NAV without a sales charge unless you request that they be paid to
you in cash. See "Taxes, Dividends and Distributions" at page 21.

3
<PAGE>
FUND EXPENSES

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Z SHARES
-------------- ------------------------------ --------------------------- --------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES+
Maximum Sales Load Imposed
on Purchases (as a
percentage of offering
price)..................... 5% None None None
Maximum Sales Load or
Deferred Sales Load Imposed
on Reinvested Dividends.... None None None None
Deferred Sales Load (as a
percentage of original
purchase price or
redemption proceeds,
whichever is lower)........ None 5% during the first year, 1% on redemptions made None
decreasing by 1% annually to within one year of purchase
1% in the fifth and the sixth
years and 0% the seventh year*
Redemption Fees................. None None None None
Exchange Fees................... None None None None
</TABLE>

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Z SHARES
-------------- ------------------ ----------------- -------------------
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees............. .75% .75% .75% .75 %
12b-1 Fees (after
reduction)................. .25%++ 1.00% 1.00% None
Other Expenses.............. .48% 0.48% 0.48% .48 %
--- --- --- ---
Total Fund Operating
Expenses................... 1.48% 2.23% 2.23% 1.23 %
--- --- --- ---
--- --- --- ---
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
EXAMPLE
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at
the end of each time period:
Class A............................. $64 $94 $127 $218
Class B............................. $73 $100 $129 $229
Class C............................. $33 $70 $119 $256
Class Z............................. $13 $39 $ 68 $149
You would pay the following expenses on
the same investment, assuming no
redemption:
Class A............................. $64 $94 $127 $218
Class B............................. $23 $70 $119 $229
Class C............................. $23 $70 $119 $256
Class Z............................. $13 $39 $ 68 $149
</TABLE>

The above example is based on data for the Fund's fiscal year ended
October 31, 1997. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.

The purpose of this table is to assist an investor in understanding the
various types of costs and expenses that an investor in the Fund will
bear, whether directly or indirectly. For more complete descriptions of
the various costs and expenses, see "How the Fund is Managed." "Other
Expenses" include operating expenses of the Fund, such as Directors' and
professional fees, registration fees, reports to shareholders and transfer
agency and custodian (domestic and foreign) fees (but excludes foreign
withholding taxes).
- ---------------

* Class B shares will automatically convert to Class A shares approximately
seven years after purchase. See "Shareholder Guide--Conversion Feature--
Class B Shares."

+ Pursuant to rules of the National Association of Securities Dealers, Inc.,
the aggregate initial sales charges, deferred sales charges and
asset-based sales charges on shares of the Fund may not exceed 6.25% of
total gross sales, subject to certain exclusions. This 6.25% limitation
is imposed on the Fund rather than on a per shareholder basis. Therefore,
long-term shareholders of the Fund may pay more in total sales charges
than the economic equivalent of 6.25% of such shareholders' investment in
such shares. See "How the Fund is Managed--Distributor."

++ Although the Class A Distribution and Service Plan provides that the Fund
may pay up to an annual rate of .30 of 1% of average daily net assets of
the Class A shares, the Distributor has agreed to limit its distribution
fee with respect to Class A shares of the Fund to .25 of 1% of the
average daily net asset value of the Class A shares for the fiscal year
ending October 31, 1998. Total operating expenses without such limitation
would be 1.53%. See "How the Fund is Managed--Distributor."

4
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH OF THE INDICATED PERIODS)
(CLASS A SHARES)

The following financial highlights for the fiscal year ended October 31, 1997,
have been audited by Price Waterhouse LLP, independent accountants, and by
Deloitte & Touche LLP, independent auditors, for the four years ended October
31, 1996, and for the period from July 24, 1992 through October 31, 1992. Each
of the respective reports by Price Waterhouse LLP and Deloitte & Touche LLP on
such financial statements was unqualified. This information should be read in
conjunction with the financial statements and notes thereto, which appear in the
Statement of Additional Information. The financial highlights contain selected
data for a Class A share of common stock outstanding, respectively, total
return, ratios to average net assets and other supplemental data for the periods
indicated. The information is based on data contained in the financial
statements. Further performance information is contained in the annual report,
which may be obtained without charge. See "Shareholder Guide-- Shareholder
Services--Reports to Shareholders."

<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------
JULY 24,
1992 (a)
YEAR ENDED OCTOBER 31, THROUGH
---------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE (d):
Net asset value, beginning of
period............................. $ 15.86 $ 15.75 $ 16.90 $ 16.10 $ 10.65 $10.00
-------- -------- -------- -------- -------- -------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)......... .02 .07 .04 (.08) (.01) (.02)
Net realized and unrealized gain
(loss) on investment and foreign
currency transactions.............. (3.31) .23 (1.09) 1.15 5.48 .67
-------- -------- -------- -------- -------- -------------
Total from investment operations..... (3.29) .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.............................. (.35) -- (.10) (.21) -- --
-------- -------- -------- -------- -------- -------------
Total distributions.................. (.35) (.19) (.10) (.27) (.02) --
-------- -------- -------- -------- -------- -------------
Net asset value, end of period....... $ 12.22 $ 15.86 $ 15.75 $ 16.90 $ 16.10 $10.65
-------- -------- -------- -------- -------- -------------
-------- -------- -------- -------- -------- -------------
TOTAL RETURN (c)..................... (21.32)% 1.97% (6.23)% 6.67% 51.39% 6.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...... $35,860 $113,585 $98,998 $98,921 $64,353 $13,918
Average net assets (000)............. $73,942 $106,148 $101,920 $92,233 $26,264 $12,884
Ratios to average net assets:
Total Expenses.......................
Operating Expenses, including
distribution fees................. 1.42% 1.37% 1.46% 1.57% 1.63% 2.72%(b)
Operating Expenses, excluding
distribution fees................. 1.17% 1.12% 1.21% 1.33% 1.43% 2.52%(b)
Net investment income (loss)....... .14% .44% .26% (.50)% (.04)% (.75)%(b)
Portfolio turnover rate.............. 81% 91% 54% 56% 44% 0%
Average commission rate paid per
share.............................. $ .0194 $ .0209 N/A N/A N/A N/A
</TABLE>

- -------------

(a) Commencement of investment operations.

(b) Annualized.

(c) Total return does not consider the effects of sale 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.

(d) Calculated based upon weighted average shares outstanding during the
period.

5
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH OF THE INDICATED PERIODS)
(CLASS B SHARES)

The following financial highlights for the fiscal year ended October 31, 1997,
have been audited by Price Waterhouse LLP, independent accountants, and by
Deloitte & Touche LLP, independent auditors, for the four years ended October
31, 1996, and for the period from July 24, 1992 through October 31, 1992. Each
of the respective reports by Price Waterhouse LLP and Deloitte & Touche LLP on
such financial statements was unqualified. This information should be read in
conjunction with the financial statements and notes thereto, which appear in the
Statement of Additional Information. The financial highlights contain selected
data for a Class B share of common stock outstanding, respectively, total
return, ratios to average net assets and other supplemental data for the periods
indicated. The information is based on data contained in the financial
statements. Further performance information is contained in the annual report,
which may be obtained without charge. See "Shareholder Guide-- Shareholder
Services--Reports to Shareholders."

<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------
JULY
24,
1992 (a)
THROUGH
YEAR ENDED OCTOBER 31, OCTOBER
------------------------------------------------------------ 31,
1997 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE (d):
Net asset value, beginning of period........ $ 15.40 $ 15.38 $ 16.62 $ 15.94 $ 10.63 $10.00
-------- -------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss......................... (.09) (.04) (.08) (.21) (.10) (.04)
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions.............................. (3.19) .25 (1.06) 1.13 5.43 .67
-------- -------- -------- -------- -------- -------
Total from investment operations............ (3.28) .21 (1.14) .92 5.33 .63
-------- -------- -------- -------- -------- -------
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 period.............. $ 11.77 $ 15.40 $ 15.38 $ 16.62 $ 15.94 $10.63
-------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
TOTAL RETURN (c)............................ (21.84)% 1.36% (6.82)% 5.79% 50.17% 6.30%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............. $128,694 $327,315 $344,313 $459,949 $250,997 $20,050
Average net assets (000).................... $244,462 $357,548 $368,771 $404,506 $ 74,590 $16,025
Ratios to average net assets:
Total Expenses
Operating Expenses, including distribution
fees..................................... 2.17% 2.12% 2.21% 2.33% 2.37% 3.52%(b)
Operating Expenses, excluding distribution
fees..................................... 1.17% 1.12% 1.21% 1.33% 1.37% 2.52%(b)
Net investment loss....................... (.61)% (.25)% (.55)% (1.27)% (.83)% (1.55)%(b)
Portfolio turnover rate..................... 81% 91% 54% 56% 44% 0%
Average commision rate paid per share....... $ .0194 $ .0209 N/A N/A N/A N/A
</TABLE>

- -------------

(a) Commencement of investment operations.

(b) Annualized.

(d) Calculated based upon weighted average shares outstanding during the
period.

6
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH OF THE INDICATED PERIODS)
(CLASS C SHARES)

The following financial highlights for the fiscal year ended October 31, 1997,
have been audited by Price Waterhouse LLP, independent accountants, and by
Deloitte & Touche LLP, independent auditors, for the 2 years ended October 31,
1996 and for the period from August 1, 1994 through October 31, 1994. Each of
the respective reports by Price Waterhouse LLP and Deloitte & Touche LLP on such
financial statements was unqualified. This information should be read in
conjunction with the financial statements and notes thereto, which appear in the
Statement of Additional Information. The financial highlights contain selected
data for a Class C share of common stock outstanding, respectively, total
return, ratios to average net assets and other supplemental data for the periods
indicated. The information is based on data contained in the financial
statements. Further performance information is contained in the annual report,
which may be obtained without charge. See "Shareholder Guide-- Shareholder
Services--Reports to Shareholders."

<TABLE>
<CAPTION>
CLASS C
---------------------------------------------
AUGUST 1,
1994 (a)
YEAR ENDED OCTOBER 31, THROUGH
------------------------------ OCTOBER 31,
1997 1996 1995 1994
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE (d):
Net asset value, beginning of period....... $ 15.40 $ 15.38 $ 16.62 $ 16.68
-------- -------- -------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... (.09) (.04) (.08) (.06)
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions............................. (3.19) .25 (1.06) --
-------- -------- -------- ------
Total from investment operations........... (3.28) .21 (1.14) (.06)
-------- -------- -------- ------
LESS DISTRIBUTIONS:
Distributions in excess of net investment
income................................... -- (.19) -- --
Distributions from net realized gains...... (.35) -- (.10) --
-------- -------- -------- ------
Total distributions........................ (.35) (.19) (.10) --
-------- -------- -------- ------
Net asset value, end of period............. $ 11.77 $ 15.40 $ 15.38 $ 16.62
-------- -------- -------- ------
-------- -------- -------- ------
TOTAL RETURN (c)........................... (21.84)% 1.36% (6.82)% (.36)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............ $ 2,932 $ 12,360 $ 2,443 $ 718
Average net assets (000)................... $ 6,557 $ 6,402 $ 1,624 $ 458
Ratios to average net assets:
Total Expenses
Operating Expenses, including
distribution fees....................... 2.17% 2.12% 2.21% 3.00%(b)
Operating Expenses, excluding
distribution fees....................... 1.17% 1.12% 1.21% 2.00%(b)
Net investment income (loss)............. (.61)% (.25)% (.43)% (1.64)%(b)
Portfolio turnover rate.................... 81% 91% 54% 56%
Average commission rate paid per share..... $ .0194 $ .0209 N/A N/A
</TABLE>

- -------------

(a) Commencement of offering of Class C shares.

(b) Annualized.

(d) Calculated based upon weighted average shares outstanding during the
period.

7
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH OF THE INDICATED PERIODS)
(CLASS Z SHARES)

The following financial highlights for the fiscal year ended October 31, 1997,
have been audited by Price Waterhouse LLP, independent accountants, and by
Deloitte & Touche LLP, independent auditors, for the period from March 1, 1996
through October 31, 1996. Each of the respective reports by Price Waterhouse LLP
and Deloitte & Touche LLP on such financial statements was unqualified. This
information should be read in conjunction with the financial statements and
notes thereto, which appear in the Statement of Additional Information. The
financial highlights contain selected data for a Class Z share of common stock
outstanding, respectively, total return, ratios to average net assets and other
supplemental data for the periods indicated. The information is based on data
contained in the financial statements. Further performance information is
contained in the annual report, which may be obtained without charge. See
"Shareholder Guide--Shareholder Services--Reports to Shareholders."

<TABLE>
<CAPTION>
CLASS Z
---------------------------
MARCH 1,
1996 (a)
YEAR ENDED THROUGH
OCTOBER 31, OCTOBER 31,
1997 1996
------------ ------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE (d):
Net asset value, beginning of period.............. $ 15.89 $ 16.57
------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)...................... .06 .11
Net realized and unrealized gain (loss) on
investment and foreign currency transactions.... (3.32) (.79)
------------ ------------
Total from investment operations.................. (3.26) (.68)
------------ ------------
LESS DISTRIBUTIONS:
Distributions in excess of net investment
income.......................................... -- --
Distributions from net realized gains............. (.35) --
------------ ------------
Total distributions............................... (.35) --
------------ ------------
Net asset value, end of period.................... $ 12.28 $ 15.89
------------ ------------
------------ ------------
TOTAL RETURN (c).................................. (21.02)% (4.09)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)................... $ 19,520 $ 37,288
Average net assets (000).......................... $ 31,945 $ 33,868
Ratios to average net assets:
Total Expenses
Operating Expenses, including distribution
fees........................................... 1.17% 1.12%(b)
Operating Expenses, excluding distribution
fees........................................... 1.17% 1.12%(b)
Net investment income (loss).................... .39% .68%(b)
Portfolio turnover rate........................... 81% 91%
Average commission rate paid per share............ $ .0194 $ .0209
</TABLE>

- -------------

(a) Commencement of offering of Class Z shares.

(b) Annualized.

(d) Calculated based upon weighted average shares outstanding during the
period.

8
<PAGE>
HOW THE FUND INVESTS

INVESTMENT OBJECTIVE AND POLICIES

THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL. THE FUND SEEKS
TO ACHIEVE THIS OBJECTIVE BY INVESTING PRIMARILY IN EQUITY SECURITIES OF
CORPORATIONS DOING BUSINESS IN OR DOMICILED IN THE PACIFIC BASIN REGION,
INCLUDING, BUT NOT LIMITED TO, JAPAN, AUSTRALIA, HONG KONG, SINGAPORE, SOUTH
KOREA, MALAYSIA, THAILAND, INDONESIA, THE PHILIPPINES AND NEW ZEALAND. CURRENT
INCOME FROM DIVIDENDS AND INTEREST WILL NOT BE AN IMPORTANT CONSIDERATION IN
SELECTING PORTFOLIO SECURITIES. UNDER NORMAL CONDITIONS, AT LEAST 65% OF ITS
TOTAL ASSETS WILL CONSIST OF PACIFIC BASIN REGION EQUITY RELATED SECURITIES,
INCLUDING COMMON STOCK, PREFERRED STOCK, RIGHTS, WARRANTS AND DEBT SECURITIES OR
PREFERRED STOCK WHICH ARE CONVERTIBLE OR EXCHANGEABLE FOR COMMON STOCK OR
PREFERRED STOCK AND MASTER LIMITED PARTNERSHIPS, AMONG OTHERS. THERE IS NO LIMIT
ON THE PERCENTAGE OF FUND ASSETS THAT MAY BE INVESTED IN ANY SINGLE COUNTRY. THE
FUND RESERVES THE RIGHT AS A TEMPORARY DEFENSIVE MEASURE TO HOLD OTHER TYPES OF
SECURITIES WITHOUT LIMIT, INCLUDING COMMERCIAL PAPER OF CORPORATIONS, BANKERS'
ACCEPTANCES, CONVERTIBLE AND NON-CONVERTIBLE DEBT SECURITIES OR GOVERNMENT AND
HIGH QUALITY MONEY MARKET SECURITIES OF UNITED STATES AND NON-UNITED STATES
ISSUERS, OR CASH (FOREIGN CURRENCIES OR UNITED STATES DOLLARS), IN SUCH
PROPORTIONS AS, IN THE OPINION OF THE FUND'S INVESTMENT ADVISER, PREVAILING
MARKET, ECONOMIC OR POLITICAL CONDITIONS WARRANT. A PORTION OF THE PORTFOLIO
NORMALLY WILL BE HELD IN DOLLARS OR SHORT-TERM INTEREST-BEARING
DOLLAR-DENOMINATED SECURITIES TO PROVIDE FOR POSSIBLE REDEMPTIONS. THERE CAN BE
NO ASSURANCE THAT THE FUND'S INVESTMENT OBJECTIVE WILL BE ACHIEVED. See
"Investment Objective and Policies" in the Statement of Additional Information.

THE FUND'S INVESTMENT OBJECTIVE IS A FUNDAMENTAL POLICY AND, THEREFORE, MAY
NOT BE CHANGED WITHOUT THE APPROVAL OF THE HOLDERS OF A MAJORITY OF THE FUND'S
OUTSTANDING VOTING SECURITIES, AS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940,
AS AMENDED (THE INVESTMENT COMPANY ACT). FUND POLICIES THAT ARE NOT FUNDAMENTAL
MAY BE MODIFIED BY THE BOARD OF DIRECTORS.

As with an investment in any mutual fund, an investment in this Fund can
decrease in value and you can lose money.

UNDER NORMAL CIRCUMSTANCES, THE FUND MAY INVEST UP TO 35% OF ITS TOTAL ASSETS
IN THE SECURITIES OF ISSUERS DOMICILED OR DOING BUSINESS OUTSIDE OF THE PACIFIC
BASIN REGION. For example, the Fund may invest in a company domiciled or doing
business outside of the Pacific Basin region when the Fund's investment adviser
believes at the time of investment that the value of the company's securities
may be enhanced by conditions or developments in the Pacific Basin region even
though the company's production facilities are located outside of the Pacific
Basin region.

THE FUND MAY INVEST IN SECURITIES NOT LISTED ON SECURITIES EXCHANGES. THESE
SECURITIES WILL GENERALLY HAVE AN ESTABLISHED MARKET (SUCH AS THE
OVER-THE-COUNTER MARKET), THE DEPTH AND LIQUIDITY OF WHICH MAY VARY FROM TIME TO
TIME AND FROM SECURITY TO SECURITY. THE FUND MAY INVEST UP TO 15% OF ITS NET
ASSETS (DETERMINED AT THE TIME OF INVESTMENT) IN SECURITIES FOR WHICH MARKET
QUOTATIONS ARE NOT READILY AVAILABLE AND IN REPURCHASE AGREEMENTS WHICH HAVE A
MATURITY OF LONGER THAN SEVEN DAYS. THE FUND MAY FROM TIME TO TIME LEND ITS
PORTFOLIO SECURITIES TO BROKERS OR DEALERS, BANKS OR OTHER RECOGNIZED
INSTITUTIONAL BORROWERS OF SECURITIES AND MAY INVEST TO A LIMITED EXTENT IN
SECURITIES OF COMPANIES THAT HAVE BEEN IN EXISTENCE FOR LESS THAN THREE YEARS
AND IN SECURITIES OF OTHER REGISTERED INVESTMENT COMPANIES. See "Investment
Restrictions" in the Statement of Additional Information.

In addition to analyzing the companies in which investments are made, the
investment adviser also considers such factors as prospects for economic growth
for each foreign country; expected levels of inflation and interest rates;
government policies influencing business conditions; the range of individual
investment opportunities available to international investors; and other
pertinent financial, tax, social, political and national factors--all in
relation to the prevailing prices of securities in each country.

9
<PAGE>
IN ADDITION TO PURCHASING EQUITY SECURITIES OF PACIFIC BASIN REGION ISSUERS,
THE FUND MAY INVEST IN AMERICAN DEPOSITARY RECEIPTS (ADRS), EUROPEAN DEPOSITARY
RECEIPTS (EDRS) OR OTHER SECURITIES CONVERTIBLE INTO SECURITIES OF CORPORATIONS
DOING BUSINESS IN OR DOMICILED IN PACIFIC BASIN REGION COUNTRIES. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. Generally, ADRs, in registered
form, are designed for use in the United States securities markets and EDRs, in
bearer form, are designed for use in European securities markets.

IN ADDITION TO THE PACIFIC BASIN REGION COUNTRIES LISTED ABOVE, THE FUND MAY
INVEST DIRECTLY IN TAIWAN, INDIA, PAKISTAN, VIETNAM AND THE PEOPLE'S REPUBLIC OF
CHINA, IF AND WHEN THEIR RESPECTIVE STOCK MARKETS BECOME OPEN TO DIRECT FOREIGN
INVESTMENT AND SUBJECT TO LOCAL RESTRICTIONS. COMPANIES LOCATED IN THOSE
COUNTRIES IN WHICH THE FUND MIGHT INVEST MAY HAVE LIMITED PRODUCT LINES, MARKETS
OR FINANCIAL RESOURCES AND MAY LACK MANAGEMENT DEPTH. THE SECURITIES OF THESE
COMPANIES MAY HAVE LIMITED MARKETABILITY AND MAY BE SUBJECT TO MORE ABRUPT OR
ERRATIC MARKET MOVEMENTS THAN SECURITIES OF LARGER, MORE ESTABLISHED COMPANIES
OR THE MARKET AVERAGES IN GENERAL. Due to restrictions on direct investment in
equity securities in those countries, the Fund may currently invest in such
markets only through a limited number of approved vehicles. At present, this
includes investments through listed and unlisted mutual funds. Investment in
such funds is subject to limitations under the Investment Company Act, and
market availability and may involve the payment of substantial premiums above
the value of such funds' portfolio securities. The yield of such securities will
be reduced by the operating expenses of such funds. To the extent to which such
vehicles would be treated as "passive foreign investment companies" under the
Internal Revenue Code of 1986, as amended (the Internal Revenue Code), the Fund
may further limit its investments in order to avoid adverse U.S. federal income
tax consequences.

AS INDICATED ABOVE, WHEN CONDITIONS DICTATE A DEFENSIVE STRATEGY, THE FUND MAY
INVEST, WITHOUT LIMIT, IN HIGH QUALITY MONEY MARKET INSTRUMENTS OF UNITED STATES
AND NON-UNITED STATES ISSUERS (INCLUDING, WITH RESPECT TO UNITED STATES ISSUERS,
REPURCHASE AGREEMENTS MATURING IN SEVEN DAYS OR LESS). The Fund will only invest
in money market instruments that have short-term ratings in at least the second
highest category by at least one Nationally Recognized Statistical Rating
Organization (NRSRO) or are issued by companies that have outstanding debt
securities rated BBB or higher, or its equivalent, by an NRSRO or in unrated
securities of issuers that the Fund's investment adviser has determined to be of
comparable quality. Subsequent to its purchase by the Fund, a security may be
assigned a lower rating or cease to be rated. Such an event would not require
the elimination of the issue from the portfolio, but the investment adviser will
consider such an event in determining whether the Fund should continue to hold
the security in its portfolio. Securities rated Baa by Moody's Investors
Services, Inc. (Moody's) or BBB by Standard & Poor's Ratings Group (S&P), for
example, although considered to be investment grade, lack outstanding investment
characteristics and, in fact, have speculative characteristics. See "Description
of Security Ratings."

RISKS AND SPECIAL CONSIDERATIONS OF INVESTING IN FOREIGN SECURITIES

FOREIGN SECURITIES INVOLVE CERTAIN RISKS, WHICH SHOULD BE CONSIDERED CAREFULLY
BY AN INVESTOR IN THE FUND. THESE RISKS INCLUDE POLITICAL OR ECONOMIC
INSTABILITY IN THE COUNTRY OF THE ISSUER, THE DIFFICULTY OF PREDICTING
INTERNATIONAL TRADE PATTERNS, THE POSSIBILITY OF IMPOSITION OF EXCHANGE CONTROLS
AND THE RISK OF CURRENCY FLUCTUATIONS. Such securities may be subject to greater
fluctuations in price than securities issued by U.S. corporations or issued or
guaranteed by the U.S. Government, its instrumentalities or agencies. In
addition, there may be less publicly available information about a foreign
company than about a domestic company. Foreign companies generally are not
subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is generally less
government regulation of securities exchanges, brokers and listed companies
abroad than in the United States and there is a possibility of expropriation,
confiscatory taxation or diplomatic developments which could affect an
investment in securities of a foreign issuer.

ALTHOUGH THE FUND INTENDS TO INVEST PRIMARILY IN EQUITY SECURITIES, IT MAY
INVEST FROM TIME TO TIME IN DEBT SECURITIES OF FOREIGN ISSUERS. In many
instances, foreign debt securities may provide higher yields than securities of
domestic issuers

10
<PAGE>
which have similar maturities and quality. These investments, however, may be
less liquid than the securities of U.S. corporations. In the event of default of
any such foreign debt obligations, it may be more difficult for the Fund to
obtain or enforce a judgment against the issuers of such securities.

ADDITIONAL COSTS COULD BE INCURRED IN CONNECTION WITH THE FUND'S INTERNATIONAL
INVESTMENT ACTIVITIES. Foreign brokerage commissions are generally higher than
in the United States. Increased custodian costs as well as administrative
difficulties (such as the applicability of foreign laws to foreign custodians in
various circumstances) may be associated with the maintenance of assets in
foreign jurisdictions.

If the security is denominated in a foreign currency, it will be affected by
changes in currency exchange rates and in exchange control regulations, and
costs will be incurred in connection with conversions between currencies. A
change in the value of any such currency against the U.S. dollar will result in
a corresponding change in the U.S. dollar value of the Fund's securities
denominated in that currency. Such changes also will affect the Fund's income
and distributions to shareholders. In addition, although the Fund will receive
income in such currencies, the Fund will be required to compute and distribute
its income in U.S. dollars. Therefore, if the exchange rate for any such
currency declines after the Fund's income has been accrued and translated into
U.S. dollars, the Fund could be required to liquidate portfolio securities to
make such distributions, particularly in instances in which the amount of income
the Fund is required to distribute is not immediately reduced by the decline in
such currency. Similarly, if an exchange rate declines between the time the Fund
incurs expenses in U.S. dollars and the time such expenses are paid, the amount
of such currency required to be converted into U.S. dollars in order to pay such
expenses in U.S. dollars will be greater than the equivalent amount in any such
currency of such expenses at the time they were incurred. The Fund may, but need
not, enter into futures contracts on foreign currencies, forward foreign
currency exchange contracts and options on foreign currencies for hedging
purposes, including: locking-in the U.S. dollar price of the purchase or sale of
securities denominated in a foreign currency; locking-in the U.S. dollar
equivalent of interest or dividends to be paid on such securities which are held
by the Fund; and protecting the U.S. dollar value of such securities which are
held by the Fund.

SHAREHOLDERS SHOULD BE AWARE THAT INVESTING IN THE EQUITY AND FIXED-INCOME
MARKETS OF DEVELOPING COUNTRIES GENERALLY INVOLVES EXPOSURE TO ECONOMIES THAT
ARE GENERALLY LESS DIVERSE AND MATURE, AND TO POLITICAL SYSTEMS WHICH CAN BE
EXPECTED TO HAVE LESS STABILITY THAN THOSE OF DEVELOPED COUNTRIES. HISTORICAL
EXPERIENCE INDICATES THAT THE MARKETS OF DEVELOPING COUNTRIES HAVE BEEN MORE
VOLATILE THAN THE MARKETS OF DEVELOPED COUNTRIES. THE FUND IS ALSO SUSCEPTIBLE
TO POLITICAL AND ECONOMIC FACTORS AFFECTING ISSUERS IN PACIFIC BASIN COUNTRIES.
MANY OF THE COUNTRIES IN THE PACIFIC BASIN ARE DEVELOPING BOTH POLITICALLY AND
ECONOMICALLY AND MAY HAVE RELATIVELY UNSTABLE GOVERNMENTS, ECONOMIES BASED ON
ONLY A FEW COMMODITIES OR INDUSTRIES, AND SECURITIES MARKETS TRADING
INFREQUENTLY OR IN LOW VOLUME. SOME PACIFIC BASIN COUNTRIES MAY ALSO RESTRICT
THE EXTENT TO WHICH FOREIGNERS MAY INVEST IN THEIR SECURITIES MARKETS OR IN A
PARTICULAR COMPANY. IN ADDITION, FOREIGN MARKETS MAY HAVE INCREASED RISKS
ASSOCIATED WITH CLEARANCE AND SETTLEMENT. DELAYS IN SETTLEMENT COULD RESULT IN
PERIODS OF UNINVESTED ASSETS, MISSED INVESTMENT OPPORTUNITIES OR LOSSES TO THE
FUND.

UNDER NORMAL CONDITIONS, THE FUND MAY ALSO INVEST UP TO 35% OF ITS TOTAL
ASSETS IN CONVERTIBLE OR NONCONVERTIBLE DEBT OBLIGATIONS, INCLUDING OBLIGATIONS
ISSUED OR GUARANTEED BY THE U.S. GOVERNMENT, ITS AGENCIES OR INSTRUMENTALITIES
OR BY FOREIGN GOVERNMENTS OR SUPRANATIONAL ORGANIZATIONS, OBLIGATIONS ISSUED BY
BANKS AND CORPORATIONS AND OTHER DEBT OBLIGATIONS. These obligations may be
denominated in U.S. dollars or in foreign currencies. The issuers of such
securities may or may not be domiciled in the Pacific Basin region.
Supranational organizations include entities such as the World Bank, which was
chartered to finance development projects in developing member countries, and
the Asian Development Bank, which is an international development bank
established to lend funds, promote investment and provide technical assistance
to member nations in the Asian and Pacific regions.

The Fund will purchase "investment grade" debt obligations. Investment grade
debt obligations are bonds and other obligations rated within the four highest
quality grades as determined by Moody's (currently Aaa, Aa, A and Baa for bonds,
MIG 1,

11
<PAGE>
MIG 2, MIG 3 and MIG 4 for notes and P-1 for commercial paper) or S&P (currently
AAA, AA, A and BBB for bonds, SP-1 and SP-2 for notes and A-1 for commercial
paper), or by another nationally recognized statistical rating organization
(NRSRO) or, if unrated, securities of equivalent quality in the opinion of the
investment adviser.

The Fund is permitted to invest up to 25% of its net assets in lower quality
foreign convertible debt securities (I.E., high yield or high risk securities,
commonly referred to as "junk" bonds) provided that such securities have a
minimum rating of at least B as determined by one NRSRO or, if unrated, are
deemed by the investment adviser to be of comparable quality. Securities rated
Baa by Moody's or BBB by S&P, although considered to be investment grade, are
subject to changes in economic conditions or other circumstances which are more
likely to lead to a weakened capacity to make interest and principal payments
than is the case with higher grade bonds. Lower rated securities are subject to
a greater risk of loss of principal and interest.

CONVERTIBLE SECURITIES

A convertible security is a bond or preferred stock which may be converted at
a stated price within a specified period of time into a certain quantity of the
common stock of the same or a different issuer. Convertible securities are
senior to common stock in a corporation's capital structure, but are usually
subordinated to similar nonconvertible securities. While providing a fixed
income stream (generally higher in yield than the income derivable from a common
stock but lower than that afforded by a similar nonconvertible security), a
convertible security also affords an investor the opportunity, through its
conversion feature, to participate in the capital appreciation dependent upon a
market price advance in the convertible security's underlying common stock. The
Fund may invest up to 25% of its net assets in foreign convertible securities as
described above. See "Risk Factors Relating to Investing in Foreign Debt
Securities Rated Below Investment Grade" below.

In general, the market value of a convertible security is at least the higher
of its "investment value" (I.E., its value as a fixed-income security) or its
"conversion value" (I.E., its value upon conversion into its underlying common
stock). As a fixed-income security, a convertible security tends to increase in
market value when interest rates decline and tends to decrease in value when
interest rates rise. However, the price of a convertible security is also
influenced by the market value of the security's underlying stock. The price of
a convertible security tends to increase as the market value of the underlying
stock rises, whereas it tends to decrease as the market value of the underlying
stock declines. While no securities investment is without some risk, investments
in convertible securities generally entail less risk than investments in the
common stock of the same issuer.

WARRANTS

THE FUND MAY INVEST UP TO 5% OF ITS NET ASSETS IN WARRANTS. A warrant gives
the holder thereof the right to subscribe by a specified date to a stated number
of shares of stock of the issuer at a fixed price. Warrants tend to be more
volatile than the underlying stock, and if at a warrant's expiration date the
stock is trading at a price below the price set in the warrant, the warrant will
expire worthless. Conversely, if at the expiration date the underlying stock is
trading at a price higher than the price set in the warrant, the Fund can
acquire the stock at a price below its market value.

RISK FACTORS RELATING TO INVESTING IN FOREIGN DEBT SECURITIES RATED BELOW
INVESTMENT GRADE

The Fund is permitted to invest up to 25% of its net assets in lower quality
foreign convertible debt securities. Fixed-income securities are subject to the
risk of an issuer's inability to meet principal and interest payments on the
obligations (credit risk) and may also be subject to price volatility due to
such factors as interest rate sensitivity, market perception of the
creditworthiness of the issuer and general market liquidity (market risk). Lower
rated or unrated (I.E., high yield or high risk) securities, commonly referred
to as "junk" bonds, are more likely to react to developments affecting market
and credit risk than are more highly rated securities, which react primarily to
movements in the general level of interest rates. The investment adviser
considers both credit risk and market risk in making investment decisions for
the Fund. Investors should carefully consider the relative risks of investing in
high yield securities and understand that such securities are not generally
meant for short-term trading.

12
<PAGE>
Under adverse economic conditions, there is a risk that highly leveraged
issuers may be unable to service their debt obligations or to repay their
obligations upon maturity. In addition, the secondary market for high yield
securities, which is concentrated in relatively fewer market makers, may not be
as liquid as the secondary market for more highly rated securities. Under
adverse market or economic conditions, the secondary market for high yield
securities could contract further, independent of any specific adverse changes
in the condition of a particular issuer. As a result, the investment adviser
would find it more difficult to sell these securities or may be able to sell the
securities only at prices lower than if such securities were widely traded.
Prices realized upon the sale of such lower rated or unrated securities, under
these circumstances, may be less than the prices used in calculating the Fund's
net asset value.

Lower rated or unrated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the Fund may
have to replace the security with a lower yielding security, resulting in a
decreased return for investors. If the Fund experiences unexpected net
redemptions, it may be forced to sell its higher rated securities, resulting in
a decline in the overall credit quality of the debt portion of the Fund's
portfolio and increasing the exposure of the Fund to the risks of high yield
securities.

HEDGING AND RETURN ENHANCEMENT STRATEGIES

THE FUND MAY ALSO ENGAGE IN VARIOUS PORTFOLIO STRATEGIES, INCLUDING
DERIVATIVES, TO REDUCE CERTAIN RISKS OF ITS INVESTMENTS AND TO ATTEMPT TO
ENHANCE RETURN. THE FUND, AND THUS ITS INVESTORS, MAY LOSE MONEY THROUGH THE
UNSUCCESSFUL USE OF THESE STRATEGIES. These strategies currently include the use
of options, forward currency exchange contracts and futures contracts and
options thereon. The Fund's ability to use these strategies may be limited by
market conditions, regulatory limits and tax considerations and there can be no
assurance that any of these strategies will succeed. See "Investment Objective
and Policies" and "Taxes, Dividends and Distributions" in the Statement of
Additional Information. New financial products and risk management techniques
continue to be developed and the Fund may use these investments and techniques
to the extent consistent with its investment objective and policies.

OPTIONS TRANSACTIONS

THE FUND MAY PURCHASE AND WRITE (I.E., SELL) PUT AND CALL OPTIONS ON
SECURITIES, FINANCIAL INDICES AND CURRENCIES THAT ARE TRADED ON U.S. OR FOREIGN
SECURITIES EXCHANGES OR IN THE OVER-THE-COUNTER MARKET TO ENHANCE RETURN OR TO
HEDGE THE FUND'S PORTFOLIO. THESE OPTIONS WILL BE ON EQUITY SECURITIES,
FINANCIAL INDICES (E.G., THE S&P 500) AND FOREIGN CURRENCIES. The Fund may write
covered put and call options to generate additional income through the receipt
of premiums, purchase put options in an effort to protect the value of a
security that it owns against a decline in market value and purchase call
options in an effort to protect against an increase in the price of securities
(or currencies) it intends to purchase. The Fund may also purchase put and call
options to offset previously written put and call options of the same series.
See "Investment Objective and Policies--Options on Securities" in the Statement
of Additional Information.

A CALL OPTION GIVES THE PURCHASER, IN EXCHANGE FOR A PREMIUM PAID, THE RIGHT
FOR A SPECIFIED PERIOD OF TIME TO PURCHASE THE SECURITIES OR CURRENCY SUBJECT TO
THE OPTION AT A SPECIFIED PRICE (THE EXERCISE PRICE OR STRIKE PRICE). The writer
of a call option, in return for the premium, has the obligation, upon exercise
of the option, to deliver, depending upon the terms of the option contract, the
underlying securities or a specified amount of cash to the purchaser upon
receipt of the exercise price. When the Fund writes a call option, it gives up
the potential for gain on the underlying securities or currency in excess of the
exercise price of the option during the period that the option is open.

A PUT OPTION GIVES THE PURCHASER, IN RETURN FOR A PREMIUM, THE RIGHT, FOR A
SPECIFIED PERIOD OF TIME, TO SELL THE SECURITIES OR CURRENCY SUBJECT TO THE
OPTION TO THE WRITER OF THE PUT AT THE SPECIFIED EXERCISE PRICE. The writer of
the put

13
<PAGE>
option, in return for the premium, has the obligation, upon exercise of the
option, to acquire the securities or currency underlying the option at the
exercise price. The Fund might, therefore, be obligated to purchase the
underlying securities or currency for more than their current market price.

THE FUND WILL WRITE ONLY "COVERED" OPTIONS. A written option is covered if, as
long as the Fund is obligated under the option, it (i) owns an offsetting
position in the underlying security or currency or (ii) maintains in a
segregated account, cash or other liquid assets in an amount equal to or greater
than its obligations under the option. Under the first circumstance, the Fund's
losses are limited because it owns the underlying security or currency; under
the second circumstance, in the case of a written call option, the Fund's losses
are potentially unlimited. See "Investment Objective and Policies--Options on
Securities" in the Statement of Additional Information. There is no limitation
on the amount of call options the Fund may write.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

THE FUND MAY ENTER INTO FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS TO PROTECT
THE VALUE OF ITS ASSETS AGAINST FUTURE CHANGES IN THE LEVEL OF CURRENCY EXCHANGE
RATES. The Fund may enter into such contracts on a spot, I.E., cash, basis at
the rate then prevailing in the currency exchange market or on a forward basis,
by entering into a forward contract to purchase or sell currency. A forward
contract on foreign currency is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days agreed upon by
the parties from the date of the contract at a price set on the date of the
contract.

THE FUND'S DEALINGS IN FORWARD CONTRACTS WILL BE LIMITED TO HEDGING INVOLVING
EITHER SPECIFIC TRANSACTIONS OR PORTFOLIO POSITIONS. Transaction hedging is the
purchase or sale of a forward contract with respect to specific receivables or
payables of the Fund generally arising in connection with the purchase or sale
of its portfolio securities and accruals of interest or dividends receivable and
Fund expenses. Position hedging is the sale of a foreign currency with respect
to portfolio security positions denominated or quoted in that currency or in a
different currency (a cross hedge). Although there are no limits on the number
of forward contracts which the Fund may enter into, the Fund may not position
hedge (including cross hedges) with respect to a particular currency for an
amount greater than the aggregate market value (determined at the time of making
any sale of foreign currency) of the securities being hedged. See "Investment
Objective and Policies--Risks Related to Forward Foreign Currency Exchange
Contracts" in the Statement of Additional Information.

FUTURES CONTRACTS AND OPTIONS THEREON

THE FUND MAY PURCHASE AND SELL FINANCIAL FUTURES CONTRACTS AND OPTIONS THEREON
WHICH ARE TRADED ON A COMMODITIES EXCHANGE OR BOARD OF TRADE TO REDUCE CERTAIN
RISKS OF ITS INVESTMENTS AND TO ATTEMPT TO ENHANCE RETURN IN ACCORDANCE WITH
REGULATIONS OF THE COMMODITY FUTURES TRADING COMMISSION (CFTC). THE FUND, AND
THUS ITS INVESTORS, MAY LOSE MONEY THROUGH THE UNSUCCESSFUL USE OF THESE
STRATEGIES. These futures contracts and related options will be on financial
indices and foreign currencies or groups of foreign currencies such as the
European Currency Unit. A European Currency Unit is a basket of specified
amounts of the currencies of certain member states of the European Economic
Community, a European economic cooperative organization. A futures contract is
an agreement to purchase or sell an agreed amount of securities or currencies at
a set price for delivery in the future. A stock index futures contract is an
agreement in which one party agrees to deliver to another an amount of cash
equal to a specific dollar amount times the difference between the value of a
specific stock index at the close of the last trading day of the contract and
the price at which the agreement is made. No physical delivery of the underlying
stocks in the index is made. The Fund may purchase and sell stock index futures
contracts or related options as a hedge against changes in market conditions.

The Fund may not purchase or sell futures contracts and related options to
attempt to enhance return, if immediately thereafter the sum of the amount of
initial margin deposits on the Fund's existing futures and options on futures
and premiums paid for such related options would exceed 5% of the liquidation
value of the Fund's total assets. The Fund may purchase and sell futures

14
<PAGE>
contracts and related options, without limitation, for BONA FIDE hedging
purposes in accordance with regulations of the CFTC (I.E. to reduce certain
risks of its investments). The value of all futures contracts sold will not
exceed the total market value of the Fund's portfolio.

Futures contracts and related options are generally subject to segregation and
coverage requirements of the CFTC or the SEC. If the Fund does not hold the
security or currency underlying the futures contract, the Fund will be required
to segregate on an ongoing basis with its Custodian cash or liquid assets in an
amount at least equal to the Fund's obligations with respect to such futures
contracts.

THE FUND'S SUCCESSFUL USE OF FUTURES CONTRACTS AND RELATED OPTIONS DEPENDS
UPON THE INVESTMENT ADVISER'S ABILITY TO PREDICT THE DIRECTION OF THE MARKET AND
IS SUBJECT TO VARIOUS ADDITIONAL RISKS. The correlation between movements in the
price of a futures contract and the movements in the index or price of the
currencies underlying the futures contract may increase or decrease at a greater
rate than the related futures contracts resulting in losses to the Fund. Certain
futures exchanges or boards of trade have established daily limits on the amount
that the price of futures contracts or related options may vary, either up or
down, from the previous day's settlement price. These daily limits may restrict
the Fund's ability to purchase or sell certain futures contracts or related
options on any particular day.

The Fund's ability to enter into or close out futures contracts and options
thereon is limited by the requirements of the Internal Revenue Code for
qualification as a regulated investment company. See "Taxes, Dividends and
Distributions" in the Statement of Additional Information.

RISKS OF HEDGING AND RETURN ENHANCEMENT STRATEGIES

PARTICIPATION IN THE OPTIONS OR FUTURES MARKETS AND IN CURRENCY EXCHANGE
TRANSACTIONS INVOLVES INVESTMENT RISKS AND TRANSACTION COSTS TO WHICH THE FUND
WOULD NOT BE SUBJECT ABSENT THE USE OF THESE STRATEGIES. THE FUND, AND THUS ITS
INVESTORS, MAY LOSE MONEY THROUGH THE UNSUCCESSFUL USE OF THESE STRATEGIES. If
the investment adviser's predictions of movements in the direction of the
securities, foreign currency and interest rate markets are inaccurate, the
adverse consequences to the Fund may leave the Fund in a worse position than if
such strategies were not used. Risks inherent in the use of options, foreign
currency and futures contracts and options on futures contracts include (1)
dependence on the investment adviser's ability to predict correctly movements in
the direction of interest rates, securities prices and currency markets; (2)
imperfect correlation between the price of options and futures contracts and
options thereon and movements in the prices of the securities or currencies
being hedged; (3) the fact that skills needed to use these strategies are
different from those needed to select portfolio securities; (4) the possible
absence of a liquid secondary market for any particular instrument at any time;
(5) the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences; and (6) the possible inability of the Fund to purchase
or sell a portfolio security at a time that otherwise would be favorable for it
to do so, or the possible need for the Fund to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with hedging transactions. See "Taxes,
Dividends and Distributions" in the Statement of Additional Information.

The Fund will generally purchase options and futures on an exchange only if
there appears to be a liquid secondary market for such options or futures; the
Fund will generally purchase over-the-counter (OTC) options only if management
believes that the other party to the options will continue to make a market for
such options. However, there can be no assurance that a liquid secondary market
will continue to exist or that the other party will continue to make a market.
Thus, it may not be possible to close an options or futures transaction. The
inability to close options and futures positions also could have an adverse
impact on the Fund's ability to effectively hedge its portfolio. There is also
the risk of loss by the Fund of margin deposits or collateral in the event of
bankruptcy of a broker with whom the Fund has an open position in an option, a
futures contract or related option.

15
<PAGE>
OTHER INVESTMENTS AND POLICIES

REPURCHASE AGREEMENTS

The Fund may enter into repurchase agreements, whereby the seller of the
security agrees to repurchase that security from the Fund at a mutually
agreed-upon time and price. The repurchase date is usually within a day or two
of the original purchase, although it may extend over a number of months. The
resale price is in excess of the purchase price, reflecting an agreed-upon rate
of return effective for the period of time the Fund's money is invested in the
repurchase agreement. The Fund's repurchase agreements will at all times be
fully collateralized in an amount at least equal to the resale price. In the
event of a default or bankruptcy by a seller, the Fund will promptly seek to
liquidate the collateral. To the extent that the proceeds from any sale of such
collateral upon a default in the obligation to repurchase are less than the
resale price, the Fund will suffer a loss. The Fund participates in a joint
repurchase account with other investment companies managed by Prudential
Investments Fund Management LLC pursuant to an order of the Securities and
Exchange Commission (SEC). See "Investment Objective and Policies-- Repurchase
Agreements" in the Statement of Additional Information.

BORROWING

The Fund may borrow an amount equal to no more than 20% of the value of its
total assets (calculated when the loan is made) from banks for temporary,
extraordinary or emergency purposes or for the clearance of transactions. The
Fund may pledge up to 20% of its total assets to secure these borrowings. If the
Fund borrows to invest in securities, any investment gains made on the
securities in excess of interest paid on the borrowing will cause the net asset
value of the shares to rise faster than would otherwise be the case. On the
other hand, if the investment performance of the additional securities purchased
fails to cover their cost (including any interest paid on the money borrowed) to
the Fund, the net asset value of the Fund's shares will decrease faster than
would otherwise be the case. This is the speculative factor known as "leverage."
See "Investment Restrictions" in the Statement of Additional Information.

ILLIQUID SECURITIES

The Fund may hold up to 15% of its net assets in illiquid securities including
repurchase agreements which have a maturity of longer than seven days,
securities with legal or contractual restrictions on resale (restricted
securities) and securities that are not readily marketable in securities markets
either within or outside of the United States. Restricted securities eligible
for resale pursuant to Rule 144A under the Securities Act of 1933, as amended
(the Securities Act) and privately placed commercial paper that have a readily
available market are not considered illiquid for purposes of this limitation.
The Fund's investments in Rule 144A securities could have the effect of
increasing illiquidity to the extent that qualified institutional buyers become,
for a time, uninterested in purchasing Rule 144A securities. The investment
adviser will monitor the liquidity of such restricted securities under the
supervision of the Board of Directors. Repurchase agreements subject to demand
are deemed to have a maturity equal to the applicable notice period.

The staff of the SEC has taken the position, which the Fund intends to follow,
that OTC options and the assets used as "cover" for written OTC options are
illiquid securities unless the Fund and the counterparty have provided for the
Fund, at the Fund's election, to unwind the OTC option. The exercise of such an
option would ordinarily involve the payment by the Fund of an amount designed to
reflect the counterparty's economic loss from an early termination, but does
allow the Fund to treat the securities used as "cover" as "liquid." See
"Investment Objective and Policies--Illiquid Securities" in the Statement of
Additional Information.

16
<PAGE>
PORTFOLIO TURNOVER

As a result of the Fund's investment policies, its portfolio turnover rate may
exceed 100%, although the rate is not expected to exceed 200%. High portfolio
turnover (over 100%) may involve correspondingly greater brokerage commissions
and other transaction costs, which will be borne directly by the Fund. See
"Portfolio Transactions and Brokerage" in the Statement of Additional
Information. In addition, high portfolio turnover may result in increased
short-term capital gains, which, when distributed to shareholders, are treated
as ordinary income. See "Taxes, Dividends and Distributions."

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

The Fund may purchase or sell securities on a when-issued or delayed delivery
basis. When-issued or delayed delivery transactions arise when securities are
purchased or sold by the Fund with payment and delivery taking place in the
future in order to secure what is considered to be an advantageous price and
yield to the Fund at the time of entering into the transaction. The Fund's
Custodian will maintain, in a segregated account of the Fund, cash or other
liquid assets, marked-to-market daily, having a value equal to or greater than
the Fund's purchase commitments. The securities so purchased are subject to
market fluctuation and no interest accrues to the purchaser during the period
between purchase and settlement. At the time of delivery of the securities the
value may be more or less than the purchase price and an increase in the
percentage of the Fund's assets committed to the purchase of securities on a
when-issued or delayed delivery basis may increase the volatility of the Fund's
net asset value.

SECURITIES LENDING

The Fund may lend its portfolio securities to brokers or dealers, banks or
other recognized institutional borrowers of securities, provided that the
borrower at all times maintains cash or equivalent collateral or secures a
letter of credit in favor of the Fund in an amount equal to at least 100%,
determined daily, of the market value of the securities loaned which are
maintained in a segregated account pursuant to applicable regulations. During
the time portfolio securities are on loan, the borrower will pay the Fund an
amount equivalent to any dividend or interest paid on such securities and the
Fund may invest the cash collateral and earn additional income, or it may
receive an agreed-upon amount of interest income from the borrower. As with any
extensions of credit, there are risks of delay in recovery and in some cases
loss of rights in the collateral should the borrower of the securities fail
financially. As a matter of fundamental policy, the Fund cannot lend more than
30% of the value of its total assets. See "Investment Objective and
Policies--Lending of Securities" in the Statement of Additional Information. The
Fund may pay reasonable administration and custodial fees in connection with a
loan.

INVESTMENT RESTRICTIONS

The Fund is subject to certain investment restrictions which, like its
investment objective, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities as defined in the Investment Company Act.
See "Investment Restrictions" in the Statement of Additional Information.

HOW THE FUND IS MANAGED

The Fund has a Board of Directors which, in addition to overseeing the actions
of the Fund's Manager, Subadviser and Distributor, decides upon matters of
general policy. The Fund's Manager conducts and supervises the daily business
operations of the Fund. The Fund's Subadviser furnishes daily investment
advisory services.

For the fiscal year ended October 31, 1997, the Fund's total expenses as a
percentage of average net assets for the Fund's Class A, Class B, Class C and
Class Z shares were 1.48%, 2.23%, 2.23% and 1.23%, respectively. See "Financial
Highlights."

17
<PAGE>
MANAGER

PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM OR THE MANAGER), GATEWAY
CENTER THREE, 100 MULBERRY STREET, NEWARK, NEW JERSEY 07102-4077, IS THE MANAGER
OF THE FUND AND IS COMPENSATED FOR ITS SERVICES AT AN ANNUAL RATE OF .75 OF 1%
OF THE FUND'S AVERAGE DAILY NET ASSETS. PIFM is organized in New York as a
limited liability company. For the fiscal year ended October 31, 1997, the Fund
incurred management fees of PIFM of 0.75% of the Fund's average net assets. See
"Manager" in the Statement of Additional Information.

As of November 30, 1997, PIFM served as the manager to 42 open-end investment
companies, constituting all of the Prudential Mutual Funds, and as manager or
administrator to 22 closed-end investment companies with aggregate assets of
approximately $60 billion.

UNDER THE MANAGEMENT AGREEMENT WITH THE FUND, PIFM MANAGES THE INVESTMENT
OPERATIONS OF THE FUND AND ALSO ADMINISTERS THE FUND'S CORPORATE AFFAIRS. SEE
"MANAGER" IN THE STATEMENT OF ADDITIONAL INFORMATION.

UNDER A SUBADVISORY AGREEMENT BETWEEN PIFM AND THE PRUDENTIAL INVESTMENT
CORPORATION (PIC), DOING BUSINESS AS PRUDENTIAL INVESTMENTS (PI, THE SUBADVISER
OR THE INVESTMENT ADVISER), PI FURNISHES INVESTMENT ADVISORY SERVICES IN
CONNECTION WITH THE MANAGEMENT OF THE FUND AND IS REIMBURSED BY PIFM FOR ITS
REASONABLE COSTS AND EXPENSES INCURRED IN PROVIDING SUCH SERVICES. Under the
Management Agreement, PIFM continues to have responsibility for all investment
advisory services and supervises PI's performance of such services.

In October 1997, portfolio management for the Fund was assumed by Stephen F.
Auth, David C. Descalzi and Toru Komatsu, as co-managers.

Stephen F. Auth is Senior Managing Director of PIC. He manages global equity
portfolios for institutional clients, including The Prudential Insurance Company
of America (Prudential), as well as Prudential Global Genesis Fund, Inc. Mr.
Auth has co-managed the Fund's portfolio since October 1997 and has been
employed by PIC as a portfolio manager since 1985. Mr. Auth heads PIC's global
and international investment management organization. Mr. Auth is a Chartered
Financial Analyst.

David C. Descalzi is a Managing Director of PIC and, since 1994, has been a
member of PIC's global equity investment team. Mr. Descalzi currently leads a
team of investment professionals managing small cap portfolios investing in the
Pacific rim (except Japan). Mr. Descalzi has held a number of positions with
Prudential since 1978, and has served as co-manager of the Fund since October
1997.

Toru Komatsu is also a Managing Director of PIC. He has been employed by PIC
since 1991 and has been responsible for managing Japanese small capitalization
stocks. Mr. Komatsu has served as co-manager of the Fund since October 1997. He
earned his Chartered Financial Analyst designation in 1989.

PIFM and PIC are wholly-owned subsidiaries of Prudential, a major diversified
insurance and financial services company.

DISTRIBUTOR

Prudential Securities Incorporated (Prudential Securities, PSI or the
Distributor), One Seaport Plaza, New York, New York 10292, is a corporation
organized under the laws of the State of Delaware and serves as the distributor
of the Class A, Class B, Class C and Class Z shares of the Fund. It is an
indirect, wholly-owned subsidiary of Prudential.

UNDER SEPARATE DISTRIBUTION AND SERVICE PLANS (THE CLASS A PLAN, THE CLASS B
PLAN AND THE CLASS C PLAN, COLLECTIVELY, THE PLANS) ADOPTED BY THE FUND UNDER
RULE 12b-1 UNDER THE INVESTMENT COMPANY ACT AND A DISTRIBUTION AGREEMENT (THE
DISTRIBUTION AGREEMENT), PRUDENTIAL SECURITIES INCURS THE EXPENSES OF
DISTRIBUTING THE FUND'S CLASS A, CLASS B AND CLASS C SHARES. The Distributor
also incurs the expenses of distributing the Fund's Class Z shares under the
Distribution Agreement, none of which is reimbursed by or paid for by the Fund.
These expenses include commissions and

18
<PAGE>
account servicing fees paid to, or on account of, financial advisers of
Prudential Securities and representatives of Pruco Securities Corporation
(Prusec), an affiliated broker-dealer, commissions and account servicing fees
paid to, or on account of, other broker-dealers or financial institutions (other
than national banks) which have entered into agreements with the Distributor,
advertising expenses, the cost of printing and mailing prospectuses to potential
investors and indirect and overhead costs of Prudential and Prusec associated
with the sale of Fund shares, including lease, utility, communications and sales
promotion expenses.

Under the Plans, the Fund is obligated to pay distribution and/or service fees
to the Distributor as compensation for its distribution and service activities,
not as reimbursement for specific expenses incurred. If the Distributor's
expenses exceed its distribution and service fees, the Fund will not be
obligated to pay any additional expenses. If the Distributor's expenses are less
than such distribution and service fees, it will retain its full fees and
realize a profit.

UNDER THE CLASS A PLAN, THE FUND MAY PAY THE DISTRIBUTOR FOR ITS
DISTRIBUTION-RELATED ACTIVITIES WITH RESPECT TO CLASS A SHARES AT AN ANNUAL RATE
OF UP TO .30 OF 1% OF THE AVERAGE DAILY NET ASSETS OF THE CLASS A SHARES. The
Class A Plan provides that (i) up to .25 of 1% of the daily net assets of the
Class A shares may be used to pay for personal service and/or the maintenance of
shareholder accounts (service fee) and (ii) total distribution fees (including
the service fee of .25 of 1%) may not exceed .30 of 1% of the average daily net
assets of the Class A shares. Prudential Securities has agreed to limit its
distribution-related fees payable under the Class A Plan to .25 of 1% of the
average daily net assets of the Class A shares for the fiscal year ending
October 31, 1998.

UNDER THE CLASS B AND CLASS C PLANS, THE FUND PAYS THE DISTRIBUTOR FOR ITS
DISTRIBUTION-RELATED ACTIVITIES WITH RESPECT TO CLASS B AND CLASS C SHARES AT AN
ANNUAL RATE OF 1% OF THE AVERAGE DAILY NET ASSETS OF EACH OF THE CLASS B AND
CLASS C SHARES. The Class B and Class C Plans provide for the payment to
Prudential Securities of (i) an asset-based sales charge of .75 of 1% of the
average daily net assets of each of the Class B and Class C shares, and (ii) a
service fee of .25 of 1% of the average daily net assets of each of the Class B
and Class C shares. The service fee is used to pay for personal service and/or
the maintenance of shareholder accounts. Prudential Securities also receives
contingent deferred sales charges from certain redeeming shareholders. See
"Shareholder Guide--How to Sell Your Shares--Contingent Deferred Sales Charges."

For the fiscal year ended October 31, 1997, the Fund paid distribution
expenses of .25%, 1%, and 1% of the average net assets of the Class A, Class B
and Class C shares, respectively. The Fund records all payments made under the
Plans as expenses in the calculation of net investment income.

Distribution expenses attributable to the sale of Class A, Class B or Class C
shares of the Fund will be allocated to each such class based upon the ratio of
sales of each such class to the sales of Class A, Class B and Class C shares of
the Fund other than expenses allocable to a particular class. The distribution
fee and sales charge of one class will not be used to subsidize the sale of
another class.

Each Plan provides that it shall continue in effect from year to year provided
that a majority of the Board of Directors of the Fund, including a majority of
the Directors who are not "interested persons" of the Fund (as defined in the
Investment Company Act) and who have no direct or indirect financial interest in
the operation of the Plan or any agreement related to the Plan (the Rule 12b-1
Directors), vote annually to continue the Plan. Each Plan may be terminated at
any time by vote of a majority of the Rule 12b-1 Directors or of a majority of
the outstanding shares of the applicable class of the Fund. The Fund will not be
obligated to pay distribution and service fees incurred under any Plan if it is
terminated or not continued.

In addition to distribution and service fees paid by the Fund under the Class
A, Class B and Class C Plans, the Manager (or one of its affiliates) may make
payments out of its own resources to dealers (including Prudential Securities)
and other persons which distribute shares of the Fund (including Class Z
shares). Such payments may be calculated by reference to the net asset value of
shares sold by such persons or otherwise.

19
<PAGE>
The Distributor is subject to the rules of the National Association of
Securities Dealers, Inc. (the NASD) governing maximum sales charges.

For more detailed information concerning the foregoing matters, see
"Distributor" in the Statement of Additional Information, a copy of which may be
obtained at no cost by calling (800) 225-1852.

The Fund is not affected by PSI's financial condition and is an entirely
separate legal entity from PSI, which has no beneficial ownership therein and
the Fund's assets which are held by State Street Bank & Trust Company, an
independent custodian, are separate and distinct from PSI.

FEE WAIVERS AND SUBSIDY

PIFM may from time to time waive all or a portion of its management fee and
subsidize all or a portion of the operating expenses of the Fund. Fee waivers
and expense subsidies will increase the Fund's total return. See "Performance
Information" in the Statement of Additional Information and "Fund Expenses."

PORTFOLIO TRANSACTIONS

Prudential Securities may act as a broker or futures commission merchant for
the Fund provided that the commissions, fees or other remuneration it receives
are fair and reasonable. See "Portfolio Transactions and Brokerage" in the
Statement of Additional Information.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT

State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities and
cash and, in that capacity, maintains certain financial and accounting books and
records pursuant to an agreement with the Fund. Its mailing address is P.O. Box
1713, Boston, Massachusetts 02105.

Prudential Mutual Fund Services LLC (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as Transfer Agent and Dividend Disbursing Agent and in
those capacities maintains certain books and records for the Fund. PMFS is a
wholly-owned subsidiary of PIFM. Its mailing address is P.O. Box 15005, New
Brunswick, New Jersey 08906-5005.

HOW THE FUND VALUES ITS SHARES

THE FUND'S NET ASSET VALUE PER SHARE OR NAV IS DETERMINED BY SUBTRACTING ITS
LIABILITIES FROM THE VALUE OF ITS ASSETS AND DIVIDING THE REMAINDER BY THE
NUMBER OF OUTSTANDING SHARES. NAV IS CALCULATED SEPARATELY FOR EACH CLASS. For
valuation purposes, quotations of foreign securities in a foreign currency are
converted to U.S. dollar equivalents. THE BOARD OF DIRECTORS HAS FIXED THE
SPECIFIC TIME OF DAY FOR THE COMPUTATION OF THE FUND'S NAV TO BE AS OF 4:15
P.M., NEW YORK TIME.

Portfolio securities are valued based on market quotations or, if not readily
available or if such quotations are deemed not representative of fair value, at
fair value as determined in good faith under procedures established by the
Fund's Board of Directors. For valuation purposes, quotations of foreign
securities in a foreign currency are converted to U.S. dollar equivalents. See
"Net Asset Value" in the Statement of Additional Information.

The Fund will compute its NAV once daily on days that the New York Stock
Exchange is open for trading except on days on which no orders to purchase, sell
or redeem shares have been received by the Fund or days on which changes in the
value of the Fund's portfolio securities do not materially affect the NAV.

20
<PAGE>
Although the legal rights of each class of shares are substantially identical,
the different expenses borne by each class will result in different NAVs and
dividends. The NAV of Class B and Class C shares will generally be lower than
the NAV of Class A shares as a result of the larger distribution-related fee to
which Class B and Class C shares are subject. The NAV of the Class Z shares will
generally be higher than the NAV of the three other classes because Class Z
shares are not subject to any distribution and/or service fees. It is expected,
however, that the NAV of the four classes will tend to converge immediately
after the recording of dividends, which will differ by approximately the amount
of the distribution and/or service fee expense accrual differential among the
classes.

HOW THE FUND CALCULATES PERFORMANCE

FROM TIME TO TIME THE FUND MAY ADVERTISE AVERAGE ANNUAL TOTAL RETURN,
AGGREGATE TOTAL RETURN AND YIELD IN ADVERTISEMENTS OR SALES LITERATURE. TOTAL
RETURN AND YIELD ARE CALCULATED SEPARATELY FOR CLASS A, CLASS B, CLASS C, AND
CLASS Z SHARES. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. The total return shows how much an
investment in the Fund would have increased (decreased) over a specified period
of time (I.E. , one, five, or ten years or since inception of the Fund) assuming
that all distributions and dividends by the Fund were reinvested on the
reinvestment dates during the period and less all recurring fees. The aggregate
total return reflects actual performance over a stated period of time. Average
annual total return is a hypothetical rate of return that, if achieved annually,
would have produced the same aggregate total return if performance had been
constant over the entire period. Average annual total return smooths out
variations in performance and takes into account any applicable initial or
contingent deferred sales charges. Neither average annual total return nor
aggregate total return takes into account any federal or state income taxes
which may be payable upon redemption. The yield refers to the income generated
by an investment in the Fund over a one-month or 30-day period. This income is
then "annualized;" that is, the amount of income generated by the investment
during that 30-day period is assumed to be generated each 30-day period for
twelve periods and is shown as a percentage of the investment. The income earned
on the investment is also assumed to be reinvested at the end of the sixth
30-day period. The Fund may also from time to time advertise its 30-day yield.
The Fund also may include comparative performance information in advertising or
marketing the Fund's shares. Such performance information may include data from
Lipper Analytical Services, Inc., Morningstar Publications, Inc., other industry
publications, business periodicals and market Indices. See "Performance
Information" in the Statement of Additional Information. Further performance
information is contained in the Fund's annual and semi-annual reports to
shareholders, which may be obtained without charge. See "Shareholder
Guide--Shareholder Services--Reports to Shareholders."

TAXES, DIVIDENDS AND DISTRIBUTIONS

TAXATION OF THE FUND

THE FUND HAS ELECTED TO QUALIFY AND INTENDS TO REMAIN QUALIFIED AS A REGULATED
INVESTMENT COMPANY UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
CODE). ACCORDINGLY, THE FUND WILL NOT BE SUBJECT TO FEDERAL INCOME TAXES ON ITS
NET INVESTMENT INCOME AND NET CAPITAL GAINS, IF ANY, THAT IT DISTRIBUTES TO ITS
SHAREHOLDERS. SEE "TAXES, DIVIDENDS AND DISTRIBUTIONS" IN THE STATEMENT OF
ADDITIONAL INFORMATION.

The Fund may, from time to time, invest in corporations that are treated for
federal income tax purposes as passive foreign investment companies (PFICs).
PFICs are foreign corporations which own mostly passive assets or derive a
majority of their income from passive sources. For tax purposes, the Fund's
investments in PFICs are subject to special tax provisions that may subject the
Fund to federal income taxes and a charge in the nature of interest with respect
to certain gains and income realized by the Fund. See "Taxes, Dividends and
Distributions" in the Statement of Additional Information.

21
<PAGE>
TAXATION OF SHAREHOLDERS

Any dividends out of net taxable investment income, together with
distributions of net short-term gains (i.e., the excess of net short-term
capital gains over net long-term capital losses) distributed to shareholders,
will be taxable as ordinary income to the shareholder whether or not reinvested.
Any net capital gains (i.e., the excess of net long-term capital gains over net
short-term capital losses) distributed to shareholders and properly designated
by the Fund will be taxable as long-term capital gains to the shareholders,
whether or not reinvested and regardless of the length of time a shareholder has
owned his or her shares. Thus, subject to certain limitations, distributions of
capital gains received by individual shareholders may be eligible for 20% or 28%
capital gains rates of taxation.

The Fund may incur foreign income taxes in connection with some of its foreign
investments. Certain of these taxes may be credited to shareholders. See "Taxes,
Dividends and Distributions" in the Statement of Additional Information.

Any gain or loss realized upon a sale or redemption of shares by a shareholder
who is not a dealer in securities will be treated as long-term capital gain or
loss if the shares have been held more than one year and otherwise as short-term
capital gain or loss. The maximum long-term capital gains rate for individual
shareholders for securities held between 12 and 18 months currently is 28% and
for securities held more than 18 months is 20%. The maximum tax rate for
individual shareholders for ordinary income is 39.6%. The maximum long-term
capital gains rate for corporate shareholders is currently the same as the
maximum tax rate for ordinary income. Any capital loss with respect to shares
held for six months or less will be treated as long-term capital loss to the
extent of any capital gain distributions received by the shareholder with
respect to such shares.

Any loss realized on a sale, redemption or exchange of shares of the Fund by a
shareholder will be disallowed to the extent the shares are replaced within a
61-day period (beginning 30 days before the disposition of shares). Shares
purchased pursuant to the reinvestment of a dividend will constitute a
replacement of shares.

A shareholder who acquires shares of the Fund and sells or otherwise disposes
of such shares within 90 days of acquisition may not be allowed to include
certain sales charges incurred in acquiring such shares for purposes of
calculating gain or loss realized upon a sale or exchange of shares of the Fund.

Distributions by the Fund to a shareholder that is a qualified retirement plan
would generally not be taxable to participants in the plan. Distributions from a
qualified retirement plan (or non-qualified arrangement) to a participant or
beneficiary are subject to special rules. These rules vary greatly with
individual situations, therefore potential investors are urged to consult with
their own tax advisors.

The Fund has obtained opinions of counsel to the effect that neither (i) the
conversion of Class B shares into Class A shares nor (ii) the exchange of any
class of the Fund's shares for any other class of its shares constitutes a
taxable event for federal income tax purposes. However, such opinions are not
binding on the Internal Revenue Service.

Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, state or local taxes. See "Taxes, Dividends and
Distributions" in the Statement of Additional Information.

WITHHOLDING TAXES

Under U.S. Treasury Regulations, the Fund is required to withhold and remit to
the U.S. Treasury 31% of dividends, capital gain income and redemption proceeds,
on the accounts of certain shareholders who fail to furnish their correct tax
identification numbers on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) with the required certifications regarding the
shareholder's status under the federal income tax law.

SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISERS REGARDING SPECIFIC
QUESTIONS AS TO FEDERAL, STATE OR LOCAL TAXES. SEE "TAXES, DIVIDENDS AND
DISTRIBUTIONS" IN THE STATEMENT OF ADDITIONAL INFORMATION.

22
<PAGE>
DIVIDENDS AND DISTRIBUTIONS

The Fund expects to pay dividends of net investment income, if any, and make
distributions of any capital gains in excess of net long-term capital losses on
an annual basis. Dividends paid by the Fund with respect to each class of
shares, to the extent any dividends are paid, will be calculated in the same
manner, at the same time, on the same day and will be in the same amount except
that each class (other than Class Z) will bear its own distribution charges,
generally resulting in lower dividends for Class B and Class C shares in
relation to Class A and Class Z shares and lower dividends for Class A shares in
relation to Class Z shares. Distribution of net capital gains, if any, will be
paid in the same amount per share for each class of shares. See "How the Fund
Values its Shares."

DIVIDENDS AND DISTRIBUTIONS WILL BE PAID IN ADDITIONAL FUND SHARES, BASED ON
THE NAV OF EACH CLASS ON THE RECORD DATE OR SUCH OTHER DATE AS THE BOARD OF
DIRECTORS MAY DETERMINE, UNLESS THE SHAREHOLDER ELECTS IN WRITING NOT LESS THAN
FIVE BUSINESS DAYS PRIOR TO THE RECORD DATE TO RECEIVE SUCH DIVIDENDS AND
DISTRIBUTIONS IN CASH. Such election should be submitted to Prudential Mutual
Fund Services LLC, Attn: Account Maintenance Unit, P.O. Box 15015, New
Brunswick, New Jersey 08906-5015. The Fund will notify each shareholder after
the close of the Fund's taxable year both of the dollar amount and the taxable
status of that year's dividends and distributions on a per share basis. If you
hold shares through Prudential Securities, you should contact your financial
advisor to elect to receive dividends and distributions in cash.

WHEN THE FUND GOES "EX-DIVIDEND," ITS NAV IS REDUCED BY THE AMOUNT OF THE
DIVIDEND OR DISTRIBUTION. IF YOU BUY SHARES JUST PRIOR TO THE EX-DIVIDEND DATE
(WHICH GENERALLY OCCURS TWO BUSINESS DAYS PRIOR TO THE RECORD DATE), THE PRICE
YOU PAY WILL INCLUDE THE DIVIDEND OR DISTRIBUTION AND A PORTION OF YOUR
INVESTMENT WILL BE RETURNED TO YOU AS A TAXABLE DISTRIBUTION. YOU SHOULD,
THEREFORE, CONSIDER THE TIMING OF DIVIDENDS AND DISTRIBUTIONS WHEN MAKING YOUR
PURCHASES.

If you buy shares on or immediately prior to the record date (the date that
determines who receives the dividend, you will receive a portion of the money
you invested as a taxable dividend. Therefore, you should consider the timing of
dividends when buying shares of the Fund.

GENERAL INFORMATION

DESCRIPTION OF COMMON STOCK

THE FUND WAS INCORPORATED IN MARYLAND ON AUGUST 14, 1991. THE FUND IS
AUTHORIZED TO ISSUE 2 BILLION SHARES OF COMMON STOCK, $.001 PAR VALUE PER SHARE,
DIVIDED INTO FOUR CLASSES, DESIGNATED CLASS A, CLASS B, CLASS C AND CLASS Z
COMMON STOCK EACH CONSISTING OF 500 MILLION AUTHORIZED SHARES. Each class of
common stock represents an interest in the same assets of the Fund and is
identical in all respects except that (i) each class (with the exception of
Class Z shares) is subject to different sales charges and distribution and/or
service fees, which may affect performance, (ii) each class has exclusive voting
rights on any matter submitted to shareholders that relates solely to its
arrangement and has separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
any other class, (iii) each class has a different exchange privilege, (iv) only
Class B shares have a conversion feature and (v) Class Z shares are offered
exclusively for sale to a limited group of investors. See "How the Fund is
Managed--Distributor." In accordance with the Fund's Articles of Incorporation,
the Board of Directors may authorize the creation of additional series and
classes within such series, with such preferences, privileges, limitations and
voting and dividend rights as the Board of Directors may determine.

The Board of Directors may increase or decrease the number of authorized
shares without approval by shareholders. Shares of the Fund, when issued, are
fully paid, nonassessable, fully transferable and redeemable at the option of
the holder. Shares are also redeemable at the option of the Fund under certain
circumstances as described under "Shareholder Guide--How to Sell Your

23
<PAGE>
Shares." Each share of each class of common stock is equal as to earnings,
assets and voting privileges, except as noted above, and each class (with the
exception of Class Z shares which are not subject to any distribution and/or
service fees) bears the expenses related to the distribution of its shares.
Except for the conversion feature applicable to the Class B shares, there are no
conversion, preemptive or other subscription rights. In the event of
liquidation, each share of common stock of the Fund is entitled to its portion
of all of the Fund's assets after all debts and expenses of the Fund have been
paid. Since Class B and Class C shares generally bear higher distribution
expenses than Class A shares, the liquidation proceeds to shareholders of those
classes are likely to be lower than to Class A shareholders and to Class Z
shareholders whose shares are not subject to any distribution and/or service
fees. The Fund's shares do not have cumulative voting rights for the election of
Directors.

THE FUND DOES NOT INTEND TO HOLD ANNUAL MEETINGS OF SHAREHOLDERS UNLESS
OTHERWISE REQUIRED BY LAW. THE FUND WILL NOT BE REQUIRED TO HOLD MEETINGS OF
SHAREHOLDERS UNLESS, FOR EXAMPLE, THE ELECTION OF DIRECTORS IS REQUIRED TO BE
ACTED ON BY SHAREHOLDERS UNDER THE INVESTMENT COMPANY ACT. SHAREHOLDERS HAVE
CERTAIN RIGHTS, INCLUDING THE RIGHT TO CALL A MEETING UPON A VOTE OF 10% OR MORE
OF THE FUND'S OUTSTANDING SHARES FOR THE PURPOSE OF VOTING ON THE REMOVAL OF ONE
OR MORE DIRECTORS OR TO TRANSACT ANY OTHER BUSINESS.

ADDITIONAL INFORMATION

This Prospectus, including the Statement of Additional Information which has
been incorporated by reference herein, does not contain all the information set
forth in the Registration Statement filed by the Fund with the SEC under the
Securities Act. Copies of the Registration Statement may be obtained at a
reasonable charge from the SEC or may be examined, without charge, at the office
of the SEC in Washington, D.C.

SHAREHOLDER GUIDE

HOW TO BUY SHARES OF THE FUND

YOU MAY PURCHASE SHARES OF THE FUND THROUGH PRUDENTIAL SECURITIES, PRUSEC OR
DIRECTLY FROM THE FUND, THROUGH ITS TRANSFER AGENT, PRUDENTIAL MUTUAL FUND
SERVICES LLC (PMFS OR THE TRANSFER AGENT), ATTENTION: INVESTMENT SERVICES, P.O.
BOX 15020, NEW BRUNSWICK, NEW JERSEY 08906-5020. Participants in programs
sponsored by Prudential Retirement Services should contact their client
representative for more information about Class Z shares. The purchase price is
the NAV next determined following receipt of an order in proper form by the
Transfer Agent or Prudential Securities plus a sales charge which, at your
option, may be imposed either (i) at the time of purchase (Class A shares) or
(ii) on a deferred basis (Class B or Class C shares). Class Z shares are offered
to a limited group of investors at net asset value without any sales charge.
Payment may be made by wire, check or through your brokerage account. See
"Alternative Purchase Plan" below. See also "How the Fund Values its Shares."

The minimum initial investment is $1,000 per class for Class A and Class B
shares and $5,000 for Class C shares, except that the minimum initial investment
for Class C shares may be waived from time to time. There is no minimum initial
investment requirement for investors who qualify to purchase Class Z shares. The
minimum subsequent investment is $100 for all classes, except for Class Z shares
for which there is no such minimum. All minimum investment requirements are
waived for certain retirement and employee savings plans or custodial accounts
for the benefit of minors. For purchases through the Automatic Savings
Accumulation Plan, the minimum initial and subsequent investment is $50. See
"Shareholder Services" below.

Application forms can be obtained from PMFS, Prudential Securities or Prusec.
If a stock certificate is desired, it must be requested in writing for each
transaction. Certificates are issued only for full shares. Shareholders who hold
their shares through Prudential Securities will not receive stock certificates.

24
<PAGE>
The Fund reserves the right to reject any purchase order (including an
exchange into the Fund) or to suspend or modify the continuous offering of its
shares. See "How to Sell Your Shares" below.

Your dealer is responsible for forwarding payment promptly to the Fund. The
Distributor reserves the right to cancel any purchase order for which payment
has not been received by the third business day following the investment.

Transactions in Fund shares may be subject to postage and handling charges
imposed by your dealer.

PURCHASE BY WIRE. For an initial purchase of shares of the Fund by wire, you
must first telephone PMFS to receive an account number at (800) 225-1852
(toll-free). The following information will be requested: your name, address,
tax identification number, class election, dividend distribution election,
amount being wired and wiring bank. Instructions should then be given by you to
your bank to transfer funds by wire to State Street Bank and Trust Company
(State Street), Boston, Massachusetts, Custody and Shareholder Services
Division, Attention: Prudential Pacific Growth Fund, Inc., specifying on the
wire the account number assigned by PMFS and your name and identifying the class
in which you are eligible to invest (Class A, Class B, Class C or Class Z
shares).

If you arrange for receipt by State Street of federal funds prior to the
calculation of NAV (4:15 P.M., New York time), on a business day, you may
purchase shares of the Fund as of that day. See "Net Asset Value" in the
Statement of Additional Information.

In making a subsequent purchase order by wire, you should wire State Street
directly and should be sure that the wire specifies Prudential Pacific Growth
Fund, Inc., Class A, Class B, Class C or Class Z shares and your name and
individual account number. It is not necessary to call PMFS to make subsequent
purchase orders utilizing federal funds. The minimum amount which may be
invested by wire is $1,000.

ALTERNATIVE PURCHASE PLAN

THE FUND OFFERS FOUR CLASSES OF SHARES (CLASS A, CLASS B, CLASS C AND CLASS Z
SHARES) WHICH ALLOWS YOU TO CHOOSE THE MOST BENEFICIAL SALES CHARGE STRUCTURE
FOR YOUR INDIVIDUAL CIRCUMSTANCES GIVEN THE AMOUNT OF THE PURCHASE, THE LENGTH
OF TIME YOU EXPECT TO HOLD THE SHARES AND OTHER RELEVANT CIRCUMSTANCES
(ALTERNATIVE PURCHASE PLAN).

<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE
SALES CHARGE DAILY NET ASSETS) OTHER INFORMATION
----------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C> <C>
CLASS A Maximum initial sales charge of 5% .30 of 1% (Currently being charged Initial sales charge waived or
of the public offering price at a rate of .25 of 1%) reduced for certain purchases

CLASS B Maximum contingent deferred sales 1% Shares convert to Class A shares
charge or CDSC of 5% of the lesser approximately seven years after
of the amount invested or the purchase
redemption proceeds; declines to
zero after six years

CLASS C Maximum CDSC of 1% of the lesser of 1% Shares do not convert to another
the amount invested or the class
redemption proceeds on redemptions
made within one year of purchase

CLASS Z None None Sold to a limited group of
investors
</TABLE>

Each class represents an interest in the same assets of the Fund and is
identical in all respects except that (i) each class is subject to different
sales charges and distribution and/or service fees (except for Class Z shares,
which are not subject to any

25
<PAGE>
sales charge or distribution and/or service fee), which may affect performance,
(ii) each class has exclusive voting rights on any matter submitted to
shareholders that relates solely to its arrangements and has separate voting
rights on any matter submitted to shareholders in which the interests of one
class differ from the interest of any other class, (iii) each class has a
different exchange privilege, (iv) only Class B shares have a conversion feature
and (v) Class Z shares are offered exclusively for sale to a limited group of
investors. See "How to Exchange Your Shares" below. The income attributable to
each class and the dividends payable on the shares of each class will be reduced
by the amount of the distribution fee (if any) of each class. Class B and Class
C shares bear the expense of a higher distribution fee which will generally
cause them to have higher expense ratios and to pay lower dividends than the
Class A and Class Z shares.

Financial advisers and other sales agents who sell shares of the Fund will
receive different compensation for selling Class A, Class B, Class C and Class Z
shares and will generally receive more compensation initially for selling Class
A and Class B shares than for selling Class C or Class Z shares.

IN SELECTING A PURCHASE ALTERNATIVE, YOU SHOULD CONSIDER, AMONG OTHER THINGS,
(1) the length of time you expect to hold your investment, (2) the amount of any
applicable sales charge (whether imposed at the time of purchase or redemption)
and distribution-related fees, as noted above, (3) whether you qualify for any
reduction or waiver of any applicable sales charge, (4) the various exchange
privileges among the different classes of shares (see "How to Exchange Your
Shares" below) and (5) the fact that Class B shares automatically convert to
Class A shares approximately seven years after purchase (see "Conversion
Feature--Class B Shares" below).

The following is provided to assist you in determining which method of
purchase best suits your individual circumstances and is based on current fees
and expenses being charged to the Fund:

If you intend to hold your investment in the Fund for less than 7 years and do
not qualify for a reduced sales charge on Class A shares, since Class A shares
are subject to a maximum initial sales charge of 5% and Class B shares are
subject to a CDSC of 5% which declines to zero over a 6 year period, you should
consider purchasing Class C shares over either Class A or Class B shares.

If you intend to hold your investment for 7 years or more and do not qualify
for a reduced sales charge on Class A shares, since Class B shares convert to a
Class A shares approximately 7 years after purchase and because all of your
money would be invested initially in the case of Class B shares, you should
consider purchasing Class B shares over either Class A or Class C shares.

If you qualify for a reduced sales charge on Class A shares, it may be more
advantageous for you to purchase Class A shares over either Class B or Class C
shares regardless of how long you intend to hold your investment. However,
unlike Class B and Class C shares, you would not have all of your money invested
initially because the sales charge on Class A shares is deducted at the time of
purchase.

If you do not qualify for a reduced sales charge on Class A shares and you
purchase Class B or Class C shares, you would have to hold your investment for
more than 6 years in the case of Class B shares and Class C shares for the
higher cumulative annual distribution-related fee on those shares to exceed the
initial sales charge plus cumulative annual distribution-related fee on Class A
shares. This does not take into account the time value of money, which further
reduces the impact of the higher Class B or Class C distribution-related fee on
the investment, fluctuations in net asset value, the effect of the return on the
investment over this period of time or redemptions when the CDSC is applicable.

ALL PURCHASES OF $1 MILLION OR MORE EITHER AS PART OF A SINGLE INVESTMENT OR
UNDER RIGHTS OF ACCUMULATION OR LETTERS OF INTENT, MUST BE FOR CLASS A SHARES,
UNLESS THE PURCHASER IS ELIGIBLE TO PURCHASE CLASS Z SHARES. SEE "REDUCTION AND
WAIVER OF INITIAL SALES CHARGES" AND "CLASS Z SHARES" BELOW.

26
<PAGE>
CLASS A SHARES

The offering price of Class A shares for investors choosing the initial sales
charge alternative is the next determined NAV plus a sales charge (expressed as
a percentage of the offering price and of the amount invested) as shown in the
following table:

<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS DEALER CONCESSION
PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
------------------------ --------------- --------------- -----------------
<S> <C> <C> <C>
$0 to $24,999 5.00% 5.26% 4.75%
$25,000 to $49,999 4.50 4.71 4.25
$50,000 to $99,999 4.00 4.17 3.75
$100,000 to $249,999 3.25 3.36 3.00
$250,000 to $499,999 2.50 2.56 2.40
$500,000 to $999,999 2.00 2.04 1.90
$1,000,000 and above None None None
</TABLE>

The Distributor may reallow the entire initial sales charge to dealers.
Selling dealers may be deemed to be underwriters, as that term is defined in the
Securities Act.

In connection with the sale of Class A shares at NAV (without payment of an
initial sales charge), the Manager, the Distributor or one of their affiliates
will pay dealers, financial advisers and other persons which distribute shares a
finders' fee from its own resources based on a percentage of the net asset value
of shares sold by such persons.

REDUCTION AND WAIVER OF INITIAL SALES CHARGES. Reduced sales charges are
available through Rights of Accumulation and Letters of Intent. Shares of the
Fund and shares of other Prudential Mutual Funds (excluding money market funds
other than those acquired pursuant to the exchange privilege) may be aggregated
to determine the applicable reduction. See "Purchase and Redemption of Fund
Shares--Reduction and Waiver of Initial Sales Charges--Class A Shares" in the
Statement of Additional Information.

BENEFIT PLANS. Class A shares may be purchased at NAV, without payment of an
initial sales charge, by pension, profit-sharing or other employee benefit plans
qualified under Section 401 of the Code and deferred compensation and annuity
plans under Sections 457 and 403(b)(7) of the Code (collectively, Benefit
Plans), provided that the Benefit Plan has existing assets of at least $1
million invested in shares of Prudential Mutual Funds (excluding money market
funds other than those acquired pursuant to the exchange privilege) or 250
eligible employees or participants. In the case of Benefit Plans whose accounts
are held directly with the Transfer Agent or Prudential Securities and for which
the Transfer Agent or Prudential Securities does individual account
recordkeeping (Direct Account Benefit Plans) and Benefit Plans sponsored by PSI
or its subsidiaries (PSI or Subsidiary Prototype Benefit Plans), Class A shares
may be purchased at NAV by participants who are repaying loans made from such
plans to the participant.

PRUDENTIAL RETIREMENT PROGRAMS. Class A shares may be purchased at NAV by
certain savings, retirement and deferred compensation plans, qualified or
non-qualified under the Internal Revenue Code, for which Prudential serves as
the plan administrator or recordkeeper, provided that (i) the plan has at least
$1 million in existing assets or 250 eligible employees and (ii) the Fund is an
available investment option. These plans include pension, profit-sharing,
stock-bonus or other employee benefit plans under Section 401 of the Internal
Revenue Code, deferred compensation and annuity plans under Sections 457 or
403(b)(7) of the Internal Revenue Code and plans that participate in the
Transfer Agent's PruArray and SmartPath Programs (benefit plan recordkeeping
services) (hereafter referred to as a PruArray or SmartPath Plan). All plans of
a company for which Prudential serves as plan administrator or recordkeeper are
aggregated in meeting the $1 million threshold. The term "existing assets" as
used herein includes stock issued by a plan sponsor, shares of Prudential Mutual
Funds and shares of certain unaffiliated mutual funds that participate in the
PruArray or SmartPath Program (Participating Funds). "Existing assets" also

27
<PAGE>
include monies invested in The Guaranteed Interest Account (GIA), a group
annuity insurance product issued by Prudential, and units of The Stable Value
Fund (SVF), an unaffiliated bank collective fund. Class A shares may also be
purchased at NAV by plans that have monies invested in GIA and SVF, provided (i)
the purchase is made with the proceeds of a redemption from either GIA or SVF
and (ii) Class A shares are an investment option of the plan.

PRUARRAY ASSOCIATION BENEFIT PLANS. Class A shares are also offered at NAV to
Benefit Plans or non-qualified plans sponsored by employers which are members of
a common trade, professional or membership association (Association) that
participate in the PruArray Program provided that the Association enters into a
written agreement with Prudential. Such Benefit Plans or non-qualified plans may
purchase Class A shares at NAV without regard to the assets or number of
participants in the individual employer's qualified Plan(s) or non-qualified
plans so long as the employers in the Association (i) have retirement plan
assets in the aggregate of at least $1 million or 250 participants in the
aggregate and (ii) maintain their accounts with the Transfer Agent.

PRUARRAY SAVINGS PROGRAM. Class A shares are also offered at NAV to employees
of companies that enter into a written agreement with Prudential Retirement
Services to participate in the PruArray Savings Program. Under this Program, a
limited number of Prudential Mutual Funds are available for purchase at NAV by
Individual Retirement Accounts and Savings Accumulation Plans of the company's
employees. The Program is available only to (i) employees who open an IRA or
Savings Accumulation Plan account with the Transfer Agent and (ii) spouses of
employees who open an IRA account with the Transfer Agent. The program is
offered to companies that have at least 250 eligible employees.

SPECIAL RULES APPLICABLE TO RETIREMENT PLANS. After a Benefit Plan or PruArray
or SmartPath Plan qualifies to purchase Class A shares at NAV, all subsequent
purchases will be made at NAV.

OTHER WAIVERS. In addition, Class A shares may be purchased at NAV, through
Prudential Securities or the Transfer Agent, by the following persons: (a)
officers and current and former Directors/Trustees of the Prudential Mutual
Funds (including the Fund), (b) employees of Prudential Securities and PIFM and
their subsidiaries and members of the families of such persons who maintain an
"employee related" account at Prudential Securities or the Transfer Agent (c)
employees of subadvisers of the Prudential Mutual Funds provided that purchases
at NAV are permitted by such person's employer, (d) Prudential employees and
special agents of Prudential and its subsidiaries and all persons who have
retired directly from active service with Prudential or one of its subsidiaries,
(e) registered representatives and employees of dealers who have entered into a
selected dealer agreement with Prudential Securities provided that purchases at
NAV are permitted by such person's employer (f) investors who have a business
relationship with a financial adviser who joined Prudential Securities from
another investment firm, provided that (i) the purchase is made within 180 days
of the commencement of the financial adviser's employment at Prudential
Securities, or within one year in the case of Benefit Plans, (ii) the purchase
is made with proceeds of a redemption of shares of any open-end, non-money
market fund sponsored by the financial adviser's previous employer (other than a
fund which imposes a distribution or service fee of .25 of 1% or less) and (iii)
the financial adviser served as the client's broker on the previous purchases
and (g) investors in Individual Retirement Accounts, provided the purchase is
made with the proceeds of a tax-free rollover of assets from a Benefit Plan for
which Prudential Investments serves as the recordkeeper or administrator.

You must notify the Transfer Agent either directly or through your dealer that
you are entitled to the reduction or waiver of the sales charge. The reduction
or waiver will be granted subject to confirmation of your entitlement. No
initial sales charges are imposed upon Class A shares acquired upon the
reinvestment of dividends and distributions. See "Purchase and Redemption of
Fund Shares--Reduction and Waiver of Initial Sales Charges--Class A Shares" in
the Statement of Additional Information.

CLASS B AND CLASS C SHARES

The offering price of Class B and Class C shares for investors choosing one of
the deferred sales charge alternatives is the NAV next determined following
receipt of an order by the Transfer Agent, Prudential Securities or Prusec.
Although there is no sales charge imposed at the time of purchase, redemption of
Class B and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares--Contingent Deferred Sales Charges." The Distributor will pay, from its
own resources sales commissions of up to

28
<PAGE>
4% of the purchase price of Class B shares to dealers, financial advisers and
other persons who sell Class B shares at the time of sale from its own
resources. This facilitates the ability of the Fund to sell the Class B shares
without an initial sales charge being deducted at the time of purchase. The
Distributor anticipates that it will recoup its advancement of sales commissions
from the combination of the CDSC, and the distribution fee. See "Distributor in
the Statement of Additional Information". In connection with the sale of Class C
shares. The Distributor will pay, from its own resources dealers, financial
advisers and other persons which distribute Class C shares a sales commission of
up to 1% of the purchase price at the time of the sale.

CLASS Z SHARES

Class Z shares are currently available for purchase by the following
categories of investors: (i) pension, profit sharing or other employee benefit
plans qualified under Section 401 of the Internal Revenue Code, deferred
compensation plans and annuity plans under Section 457 and 403(b)(7) of the
Internal Revenue Code, and non-qualified plans for which the Fund is an
available option (collectively Benefit Plans), provided such Benefit Plans (in
combination with other plans sponsored by the same employer or group of related
employers) have at least $50 million in defined contribution assets; (ii)
participants in any fee-based program or trust program sponsored by Prudential
Securities, The Prudential Savings Bank, F.S.B. (or any affiliate) which
includes mutual funds as investment options and for which the Fund is an
available option; (iii) certain participants in the MEDLEY Program (group
variable annuity contracts) sponsored by The Prudential Insurance Company of
America (Prudential) for whom Class Z shares of the Prudential Mutual Funds are
an available investment option; (iv) Benefit Plans for which Prudential
Retirement Services serves as record keeper and as of September 20, 1996, (a)
were Class Z shareholders of the Prudential Mutual Funds, or (b) executed a
letter of intent to purchase Class Z shares of the Prudential Mutual Funds; (v)
the Prudential Securities Cash Balance Pension Plan, an employee defined benefit
plan sponsored by Prudential Securities (only applicable to Prudential Equity
Income Fund, Prudential Europe Growth Fund, Inc. and Prudential Pacific Growth
Fund, Inc.); (vi) current and former Directors/Trustees of the Prudential Mutual
Funds (including the Fund); and (vii) employees of Prudential and/or Prudential
Securities who participate in a Prudential-sponsored employee savings plan.

In connection with the sale of Class Z shares, the Manager, the Distributor or
one of their affiliates may pay dealers, financial advisers and other persons
which distribute shares a finders' fee from its own resources based on a
percentage of the net asset value of shares sold by such persons.

For more information about Class Z shares, contact your Prudential Securities
financial adviser or Prusec representative or telephone the Fund at (800)
225-1852. Participants in programs sponsored by Prudential Retirement Services
should contact their client representative for more information about Class Z
shares.

HOW TO SELL YOUR SHARES

YOU CAN REDEEM SHARES OF THE FUND AT ANY TIME FOR CASH AT THE NAV PER SHARE
NEXT DETERMINED AFTER THE REDEMPTION REQUEST IS RECEIVED IN PROPER FORM BY THE
TRANSFER AGENT OR PRUDENTIAL SECURITIES. See "How the Fund Values its Shares."
In certain cases, however, redemption proceeds will be reduced by the amount of
any applicable CDSC, as described below. See "Contingent Deferred Sales Charges"
below.

IF YOU HOLD SHARES OF THE FUND THROUGH PRUDENTIAL SECURITIES, YOU MUST REDEEM
YOUR SHARES THROUGH PRUDENTIAL SECURITIES. PLEASE CONTACT YOUR PRUDENTIAL
SECURITIES FINANCIAL ADVISOR. IF YOU HOLD SHARES IN NON-CERTIFICATE FORM, A
WRITTEN REQUEST FOR REDEMPTION SIGNED BY YOU EXACTLY AS THE ACCOUNT IS
REGISTERED IS REQUIRED. IF YOU HOLD CERTIFICATES, THE CERTIFICATES, SIGNED IN
THE NAME(S) SHOWN ON THE FACE OF THE CERTIFICATES, MUST BE RECEIVED BY THE
TRANSFER AGENT IN ORDER FOR THE REDEMPTION REQUEST TO BE PROCESSED. IF
REDEMPTION IS REQUESTED BY A CORPORATION, PARTNERSHIP, TRUST OR FIDUCIARY,
WRITTEN EVIDENCE OF AUTHORITY ACCEPTABLE TO THE TRANSFER AGENT MUST BE SUBMITTED
BEFORE SUCH REQUEST WILL

29
<PAGE>
BE ACCEPTED. All correspondence and documents concerning redemptions should be
sent to the Fund in care of its Transfer Agent, Prudential Mutual Fund Services
LLC, Attention: Redemption Services, P.O. Box 15010, New Brunswick, New Jersey
08906-5010.

If the proceeds of the redemption (a) exceed $50,000, (b) are to be paid to a
person other than the record owner, (c) are to be sent to an address other than
the address on the Transfer Agent's records, or (d) are to be paid to a
corporation, partnership, trust or fiduciary, the signature(s) on the redemption
request and on the certificates, if any, or stock power must be guaranteed by an
"eligible guarantor institution." An "eligible guarantor institution" includes
any bank, broker, dealer or credit union. The Transfer Agent reserves the right
to request additional information from, and make reasonable inquiries of, any
eligible guarantor institution. For clients of Prusec, a signature guarantee may
be obtained from the agency or office manager of most Prudential Insurance and
Financial Services or Prudential Preferred Financial Services offices. In the
case of redemptions from a PruArray or SmartPath Plan, if the proceeds of the
redemption are invested in another investment option of the plan, in the name of
the record holder and at the same address as reflected in the Transfer Agent's
records, a signature guarantee is not required.

PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE MADE BY CHECK WITHIN SEVEN
DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE CERTIFICATE AND/OR WRITTEN
REQUEST EXCEPT AS INDICATED BELOW. IF YOU HOLD SHARES THROUGH PRUDENTIAL
SECURITIES, PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE CREDITED TO YOUR
PRUDENTIAL SECURITIES ACCOUNT, UNLESS YOU INDICATE OTHERWISE. Such payment may
be postponed or the right of redemption suspended at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on such Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (d) during any other period when the SEC, by
order, so permits; provided that applicable rules and regulations of the SEC
shall govern as to whether the conditions prescribed in (b) (c) or (d) exist.

PAYMENT FOR REDEMPTION OF RECENTLY PURCHASED SHARES WILL BE DELAYED UNTIL THE
FUND OR ITS TRANSFER AGENT HAS BEEN ADVISED THAT THE PURCHASE CHECK HAS BEEN
HONORED, UP TO 10 CALENDAR DAYS FROM THE TIME OF RECEIPT OF THE PURCHASE CHECK
BY THE TRANSFER AGENT. SUCH DELAY MAY BE AVOIDED BY PURCHASING SHARES BY WIRE OR
BY CERTIFIED OR CASHIER'S CHECK.

REDEMPTION IN KIND. If the Board of Directors determines that it would be
detrimental to the best interests of the remaining shareholders of the Fund to
make payment wholly or partly in cash, the Fund may pay the redemption price in
whole or in part by a distribution in kind of securities from the investment
portfolio of the Fund, in lieu of cash, in conformity with applicable rules of
the SEC. Securities will be readily marketable and will be valued in the same
manner as a regular redemption. See "How the Fund Values its Shares." If your
shares are redeemed in kind, you would incur transaction costs in converting the
assets into cash. The Fund has, however, elected to be governed by Rule 18f-1
under the Investment Company Act, under which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the NAV of the Fund
during the 90-day period for any one shareholder.

INVOLUNTARY REDEMPTION. In order to reduce expenses of the Fund, the Board of
Directors may redeem all of the shares of any shareholder, other than a
shareholder which is an IRA or other tax-deferred retirement plan, whose account
has a net asset value of less than $500 due to a redemption. The Fund will give
any such shareholder 60 days' prior written notice in which to purchase
sufficient additional shares to avoid such redemption. No CDSC will be imposed
on any such involuntary redemption.

90-DAY REPURCHASE PRIVILEGE. If you redeem your shares and have not
previously exercised the repurchase privilege, you may reinvest any portion or
all of the proceeds of such redemption in shares of the Fund at the NAV next
determined after the order is received, which must be within 90 days after the
date of the redemption. Any contingent deferred sales charge or CDSC paid in
connection with such redemption will be credited (in shares) to your account. If
less than a full repurchase is made, the credit will be on a PRO RATA basis. You
must notify the Fund's Transfer Agent, either directly or through Prudential
Securities, at the time the repurchase privilege is exercised to adjust your
account for the CDSC you previously paid. Thereafter, any redemptions will be

30
<PAGE>
subject to the CDSC applicable at the time of the redemption. See "Contingent
Deferred Sales Charge" below. Exercise of the repurchase privilege may affect
federal tax treatment of any gain realized upon redemption. However, if the
redemption was made within a 30 day period of the repurchase and if the
redemption resulted in a loss, some or all of the loss, depending on the amount
reinvested, may not be allowed for federal income tax purposes. For more
information on the rule which disallows a loss on the sale or exchange of shares
of the Portfolio which are replaced, see "Taxes, Dividends and Distributions" in
the Statement of Additional Information.

CONTINGENT DEFERRED SALES CHARGES

Redemptions of Class B shares will be subject to a contingent deferred sales
charge or CDSC declining from 5% to zero over a six-year period. Class C shares
redeemed within one year of purchase will be subject to a 1% CDSC. The CDSC will
be deducted from the redemption proceeds and reduce the amount paid to you. The
CDSC will be imposed on any redemption by you which reduces the current value of
your Class B or Class C shares to an amount which is lower than the amount of
all payments by you for shares during the preceding six years, in the case of
Class B shares, and one year, in the case of Class C shares. A CDSC will be
applied on the lesser of the original purchase price or the current value of the
shares being redeemed. Increases in the value of your shares or shares acquired
through reinvestment of dividends or distributions are not subject to a CDSC.
The amount of any contingent deferred sales charge will be paid to and retained
by the Distributor. See "How the Fund is Managed--Distributor" and "Waiver of
the Contingent Deferred Sales Charges--Class B Shares."

The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of shares until the time of redemption
of such shares. Solely for purposes of determining the number of years from the
time of any payment for the purchase of shares, all payments during a month will
be aggregated and deemed to have been made on the last day of the month. The
CDSC will be calculated from the first day of the month after the initial
purchase, excluding the time shares were held in a money market fund. See "How
to Exchange Your Shares" below.

The following table sets forth the rates of the CDSC applicable to redemptions
of Class B shares:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE
YEAR SINCE PURCHASE OF DOLLARS INVESTED OR
PAYMENT MADE REDEMPTION PROCEEDS
- ------------------------------ -------------------------
<S> <C>
First......................... 5.0%
Second........................ 4.0
Third......................... 3.0
Fourth........................ 2.0
Fifth......................... 1.0
Sixth......................... 1.0
Seventh....................... None
</TABLE>

In determining whether a CDSC is applicable to a redemption, the calculation
will be made in a manner that results in the lowest possible rate. It will be
assumed that the redemption is made first of amounts representing shares
acquired pursuant to the reinvestment of dividends and distributions; then of
amounts representing the increase in net asset value above the total amount of
payments for the purchase of Class B shares made during the preceding six years;
then of amounts representing the cost of shares held beyond the applicable CDSC
period; and finally, of amounts representing the cost of shares held for the
longest period of time within the applicable CDSC period.

For example, assume you purchased 100 Class B shares at $10 per share for a
cost of $1,000. Subsequently, you acquired 5 additional Class B shares through
dividend reinvestment. During the second year after the purchase you decided to
redeem $500 of your investment. Assuming at the time of the redemption the NAV
had appreciated to $12 per share, the value of your Class B

31
<PAGE>
shares would be $1,260 (105 shares at $12 per share). The CDSC would not be
applied to the value of the reinvested dividend shares and the amount which
represents appreciation ($260). Therefore, $240 of the $500 redemption proceeds
($500 minus $260) would be charged at a rate of 4% (the applicable rate in the
second year after purchase) for a total CDSC of $9.60.

For federal income tax purposes, the amount of the CDSC will reduce the gain
or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.

WAIVER OF THE CONTINGENT DEFERRED SALES CHARGES--CLASS B SHARES. The CDSC will
be waived in the case of a redemption following the death or disability of a
shareholder or, in the case of a trust account, following the death or
disability of the grantor. The waiver is available for total or partial
redemptions of shares owned by a person, either individually or in joint tenancy
(with rights of survivorship), or a trust, at the time of death or initial
determination of disability, provided that the shares were purchased prior to
death or disability.

The CDSC will also be waived in the case of a total or partial redemption in
connection with certain distributions made without penalty under the Internal
Revenue Code from a tax-deferred retirement plan, an IRA or Section 403(b)
custodial account. These distributions include: (i) in the case of a
tax-deferred retirement plan, a lump-sum or other distribution after retirement;
(ii) in the case of an IRA or Section 403(b) custodial account, a lump-sum or
other distribution after attaining age 59 1/2; and (iii) a tax-free return of an
excess contribution or plan distributions following the death or disability of
the shareholder, provided that the shares were purchased prior to death or
disability. The waiver does not apply in the case of a tax-free rollover or
transfer of assets, other than one following a separation from service (I.E.,
following voluntary or involuntary termination of employment or following
retirement). Under no circumstances will the CDSC be waived on redemptions
resulting from the termination of a tax-deferred retirement plan, unless such
redemptions otherwise qualify for a waiver as described above. In the case of
Direct Account and PSI or Subsidiary Prototype Benefit Plans, the CDSC will be
waived on redemptions which represent borrowings from such plans. Shares
purchased with amounts used to repay a loan from such plans on which a CDSC was
not previously deducted will thereafter be subject to a CDSC without regard to
the time such amounts were previously invested. In the case of a 401(k) plan,
the CDSC will also be waived upon the redemption of shares purchased with
amounts used to repay loans made from the account to the participant and from
which a CDSC was previously deducted.

SYSTEMATIC WITHDRAWAL PLAN. The CDSC will be waived (or reduced) on certain
redemptions from a Systematic Withdrawal Plan. On an annual basis, up to 12% of
the total dollar amount subject to the CDSC may be redeemed without charge. The
Transfer Agent will calculate the total amount available for this waiver
annually on the anniversary date of your purchase. The CDSC will be waived (or
reduced) on redemptions until this threshold 12% amount is reached.

In addition, the CDSC will be waived on redemptions of shares held by
Directors of the Fund.

You must notify the Transfer Agent either directly or through Prudential
Securities or Prusec, at the time of redemption, that you are entitled to waiver
of the CDSC and provide the Transfer Agent with such supporting documentation as
it may deem appropriate. The waiver will be granted subject to confirmation of
your entitlement. See "Purchase and Redemption of Fund Shares--Waiver of the
Contingent Deferred Sales Charge--Class B Shares" in the Statement of Additional
Information.

A quantity discount may apply to redemptions of Class B shares purchased prior
to August 1, 1994. See "Purchase and Redemption of Fund Shares--Quantity
Discount--Class B Shares Purchased Prior to August 1, 1994" in the Statement of
Additional Information.

WAIVER OF CONTINGENT DEFERRED SALES CHARGES--CLASS C SHARES

PRUARRAY OR SMARTPATH PLANS. The CDSC will be waived on redemptions from
qualified and non-qualified retirement and deferred compensation plans that
participate in the Transfer Agent's PruArray and SmartPath Programs.

32
<PAGE>
CONVERSION FEATURE--CLASS B SHARES

Class B shares will automatically convert to Class A shares approximately
seven years after purchase. Conversions will be effected at relative net asset
value without the imposition of any additional sales charge.

Since the Fund tracks amounts paid rather than the number of shares bought on
each purchase of Class B shares, the number of Class B shares eligible to
convert to Class A shares (excluding shares acquired through the automatic
reinvestment of dividends and other distributions) (the Eligible Shares) will be
determined on each conversion date in accordance with the following formula; (i)
the ratio of (a) the amounts paid for Class B shares purchased at least seven
years prior to the conversion date to (b) the total amount paid for all Class B
shares purchased and then held in your account (ii) multiplied by the total
number of Class B shares purchased and then held in your account. Each time any
Eligible Shares in your account convert to Class A shares, all shares or amounts
representing Class B shares then in your account that were acquired through the
automatic reinvestment of dividends and other distributions will convert to
Class A shares.

For purposes of determining the number of Eligible Shares, if the Class B
shares in your account on any conversion date are the result of multiple
purchases at different net asset values per share, the number of Eligible Shares
calculated as described above will generally be either more or less than the
number of shares actually purchased approximately seven years before such
conversion date. For example, if 100 shares were initially purchased at $10 per
share (for a total of $1,000) and a second purchase of 100 shares was
subsequently made at $11 per share (for a total of $1,100), 95.24 shares would
convert approximately seven years from the initial purchase (I.E., $1,000
divided by $2,100 (47.62%) multiplied by 200 shares equals 95.24 shares). The
Manager reserves the right to modify the formula for determining the number of
Eligible Shares in the future as it deems appropriate on notice to shareholders.

Since annual distribution-related fees are lower for Class A shares than Class
B shares, the per share net asset value of the Class A shares may be higher than
that of the Class B shares at the time of conversion. Thus, although the
aggregate dollar value will be the same, you may receive fewer Class A shares
than Class B shares converted. See "How the Fund Values its Shares."

For purposes of calculating the applicable holding period for conversions, all
payments for Class B shares during a month will be deemed to have been made on
the last day of the month, or for Class B shares acquired through exchange, or a
series of exchanges, on the last day of the month in which the original payment
for purchases of such Class B shares was made. For Class B shares previously
exchanged for shares of a money market fund, the time period during which such
shares were held in the money market fund will be excluded. For example, Class B
shares held in a money market fund for one year will not convert to Class A
shares until approximately eight years from purchase. For purposes of measuring
the time period during which shares are held in a money market fund, exchanges
will be deemed to have been made on the last day of the month. Class B shares
acquired through exchange will convert to Class A shares after expiration of the
conversion period applicable to the original purchase of such shares.

The conversion feature may be subject to the continuing availability of
opinions of counsel or rulings of the Internal Revenue Service (i) that the
dividends and other distributions paid on Class A, Class B, Class C and Class Z
shares will not constitute "preferential dividends" under the Internal Revenue
Code and (ii) that the conversion of shares does not constitute a taxable event.
The conversion of Class B shares into Class A shares may be suspended if such
opinions or rulings are no longer available. If conversions are suspended, Class
B shares of the Fund will continue to be subject, possibly indefinitely, to
their higher annual distribution and service fee.

HOW TO EXCHANGE YOUR SHARES

AS A SHAREHOLDER OF THE FUND YOU HAVE AN EXCHANGE PRIVILEGE WITH CERTAIN OTHER
PRUDENTIAL MUTUAL FUNDS, INCLUDING ONE OR MORE SPECIFIED MONEY MARKET FUNDS,
SUBJECT TO THE MINIMUM INVESTMENT REQUIREMENTS OF SUCH FUNDS. CLASS A, CLASS B,
CLASS C AND CLASS Z SHARES MAY BE EXCHANGED FOR CLASS A, CLASS B, CLASS C AND
CLASS Z SHARES, RESPECTIVELY,

33
<PAGE>
OF ANOTHER FUND ON THE BASIS OF THE RELATIVE NAV. No sales charge will be
imposed at the time of the exchange. Any applicable CDSC payable upon the
redemption of shares exchanged will be that imposed by the fund in which shares
are initially purchased and will be calculated from the first day of the month
after the initial purchase, excluding the time shares were held in a money
market fund. Class B and Class C shares may not be exchanged into money market
funds other than Prudential Special Money Market Fund, Inc. For purposes of
calculating the holding period applicable to the Class B conversion feature, the
time period during which Class B shares were held in a money market fund will be
excluded. See "Conversion Feature--Class B Shares" above. An exchange will be
treated as a redemption and purchase for tax purposes. See "Shareholder
Investment Account-- Exchange Privilege" in the Statement of Additional
Information.

IN ORDER TO EXCHANGE SHARES BY TELEPHONE, YOU MUST AUTHORIZE TELEPHONE
EXCHANGES ON YOUR INITIAL APPLICATION FORM OR BY WRITTEN NOTICE TO THE TRANSFER
AGENT AND HOLD SHARES IN NON-CERTIFICATE FORM. Thereafter, you may call the Fund
at (800) 225-1852 to execute a telephone exchange of shares, on weekdays, except
holidays, between the hours of 8:00 A.M. and 6:00 P.M., New York time. For your
protection and to prevent fraudulent exchanges, your telephone call will be
recorded and you will be asked to provide your personal identification number. A
written confirmation of the exchange transaction will be sent to you. NEITHER
THE FUND NOR ITS AGENTS WILL BE LIABLE FOR ANY LOSS, LIABILITY OR COST WHICH
RESULTS FROM ACTING UPON INSTRUCTIONS REASONABLY BELIEVED TO BE GENUINE UNDER
THE FOREGOING PROCEDURES. (THE FUND OR ITS AGENTS COULD BE SUBJECT TO LIABILITY
IF THEY FAIL TO EMPLOY REASONABLE PROCEDURES.) ALL EXCHANGES WILL BE MADE ON THE
BASIS OF THE RELATIVE NAV OF THE TWO FUNDS NEXT DETERMINED AFTER THE REQUEST IS
RECEIVED IN GOOD ORDER. THE EXCHANGE PRIVILEGE IS AVAILABLE ONLY IN STATES WHERE
THE EXCHANGE MAY LEGALLY BE MADE.

IF YOU HOLD SHARES THROUGH PRUDENTIAL SECURITIES, YOU MUST EXCHANGE YOUR
SHARES BY CONTACTING YOUR PRUDENTIAL SECURITIES FINANCIAL ADVISER.

IF YOU HOLD CERTIFICATES, THE CERTIFICATES, SIGNED IN THE NAME(S) SHOWN ON THE
FACE OF THE CERTIFICATES, MUST BE RETURNED IN ORDER FOR THE SHARES TO BE
EXCHANGED. SEE "HOW TO SELL YOUR SHARES" ABOVE.

You may also exchange shares by mail by writing to Prudential Mutual Fund
Services LLC, Attention: Exchange Processing, P.O. Box 15010, New Brunswick, New
Jersey 08906-5010.

IN PERIODS OF SEVERE MARKET OR ECONOMIC CONDITIONS THE TELEPHONE EXCHANGE OF
SHARES MAY BE DIFFICULT TO IMPLEMENT AND YOU SHOULD MAKE EXCHANGES BY MAIL BY
WRITING TO PRUDENTIAL MUTUAL FUND SERVICES LLC, AT THE ADDRESS NOTED ABOVE.

SPECIAL EXCHANGE PRIVILEGES. A special exchange privilege is available for
shareholders who qualify to purchase Class A shares at NAV (see "Alternative
Purchase Plan--Class A Shares--Reduction and Waiver of Initial Sales Charges"
above), and for shareholders who qualify to purchase Class Z shares (see
"Alternative Purchase Plan--Class Z Shares" above). Under this exchange
privilege, amounts representing any Class B and Class C shares (which are not
subject to a CDSC) held in the account of a shareholder who qualifies to
purchase Class A shares at NAV will be automatically exchanged for Class A
shares on a quarterly basis, unless the shareholder elects otherwise. Similarly,
shareholders who qualify to purchase Class Z shares will have their Class B and
Class C shares which are not subject to a CDSC and their Class A shares
exchanged for Class Z shares on a quarterly basis. Eligibility for this exchange
privilege will be calculated on the business day prior to the date of the
exchange. Amounts representing Class B or Class C shares which are not subject
to a CDSC include the following: (1) amounts representing Class B or Class C
shares acquired pursuant to the automatic reinvestment of dividends and
distributions, (2) amounts representing the increase in the net asset value
above the total amount of payments for the purchase of Class B or Class C shares
and (3) amounts representing Class B or Class C shares held beyond the
applicable CDSC period. Class B and Class C shareholders must notify the
Transfer Agent either directly or through Prudential Securities or Prusec that
they are eligible for this special exchange privilege.

34
<PAGE>
Participants in any fee-based program for which the Fund is an available
option will have their Class A shares, if any, exchanged for Class Z shares when
they elect to have those assets become a part of the fee-based program. Upon
leaving the program (whether voluntarily or not), such Class Z shares (and, to
the extent provided for in the program, Class Z shares acquired through
participation in the program) will be exchanged for Class A shares at net asset
value.

The Prudential Securites Cash Balance Pension Plan may only exchange its Class
Z shares for Class Z shares of those Prudential Mutual Funds which permit
investment by the Prudential Securities Cash Balance Pension Plan.

The Fund reserves the right to reject any exchange order including exchanges
(and market timing transactions) which are of a size and/or frequency engaged in
by one or more accounts acting in concert or otherwise, that have or may have an
adverse effect on the ability of the Subadviser to manage the portfolio. The
determination that such exchanges or activity may have an adverse effect and the
determination to reject any exchange order shall be in the discretion of the
Manager and the Subadviser.

The Exchange Privilege is not a right and may be suspended, modified or
terminated at any time upon 60 days' written notice to shareholders.

FREQUENT TRADING. The Fund and the other Prudential Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market timing
investment strategies and excessive trading can have on efficient portfolio
management, each Prudential Mutual Fund, including the Fund, reserves the right
to refuse purchase orders and exchanges by any person, group or commonly
controlled accounts, if, in the Manager's sole judgment, such person, group or
accounts were following a market timing strategy or were otherwise engaged in
excessive trading ("Market Timers").

To implement this authority to protect the Fund and its shareholders from
excessive trading, the Fund will reject all exchanges and purchases from a
Market Timer unless the Market Timer has entered into a written agreement with
the Fund or its affiliates pursuant to which the Market Timer has agreed to
abide by certain procedures, which include a daily dollar limit on trading. The
Fund may notify the Market Timer of rejection of an exchange or purchase order
subsequent to the day on which the order was placed.

SHAREHOLDER SERVICES

In addition to the exchange privilege, as a shareholder in the Fund, you can
take advantage of the following additional services and privileges:

- AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS WITHOUT A SALES
CHARGE. For your convenience, all dividends and distributions are automatically
reinvested in full and fractional shares of the Fund at NAV without a sales
charge. You may direct the Transfer Agent in writing not less than 5 full
business days prior to the record date to have subsequent dividends and/or
distributions sent in cash rather than reinvested. If you hold shares through
Prudential Securities, you should contact your financial adviser.

- AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP). Under ASAP you may make regular
purchases of the Fund's shares in amounts as little as $50 via an automatic
debit to a bank account or Prudential Securities account (including a Command
Account). For additional information about this service, you may contact your
Prudential Securities financial adviser, Prusec representative or the Transfer
Agent directly.

- TAX-DEFERRED RETIREMENT PLANS. Various tax-deferred retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
"tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue Code
are available through the Distributor. These plans are for use by both
self-employed individuals and corporate employers. These plans permit either
self-direction of accounts by participants, or a pooled account arrangement.
Information regarding the establishment of these plans,

35
<PAGE>
the administration, custodial fees and other details is available from
Prudential Securities or the Transfer Agent. If you are considering adopting
such a plan, you should consult with your own legal or tax adviser with respect
to the establishment and maintenance of such a plan.

- SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available to
shareholders which provides for monthly or quarterly checks. Withdrawals of
Class B and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares-- Contingent Deferred Sales Charges." See also "Shareholder Investment
Account--Systematic Withdrawal Plan" in the Statement of Additional Information.

- REPORTS TO SHAREHOLDERS. The Fund will send you annual and semi-annual
reports. The financial statements appearing in annual reports are audited by
independent accountants. In order to reduce duplicate mailing and printing
expenses, the Fund will provide one annual and semi-annual shareholder report
and annual prospectus per household. You may request additional copies of such
reports by calling (800) 225-1852 (toll-free) or by writing to the Fund at
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. In
addition, monthly unaudited financial data are available upon request from the
Fund.

- SHAREHOLDER INQUIRIES. Inquiries should be addressed to the Fund at Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, or by
telephone at (800) 225-1852 (toll-free) or, from outside the U.S.A., at (908)
417-7555 (collect).

For additional information regarding the services and privileges described
above, see "Shareholder Investment Account" in the Statement of Additional
Information.

36
<PAGE>
DESCRIPTION OF SECURITY RATINGS

MOODY'S INVESTORS SERVICE, INC.

Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.

A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa: Bonds which are rated Baa are considered as medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

COMMERCIAL PAPER

Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months.

P-1: The designation "Prime-1" or "P-1" indicates the highest quality
repayment capacity of the rated issue.

P-2: The designation "Prime-2" or "P-2" indicates a strong capacity for
repayment.

STANDARD & POOR'S RATINGS GROUP

AAA: Debt rated AAA has the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.

A-1
<PAGE>
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.

BB, B, CCC, CC: Debt rated BB, B, CCC, and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligations. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties of major risk exposures to adverse
conditions.

COMMERCIAL PAPER

Standard & Poor's commercial paper ratings are current assessments of the
likelihood of timely payment of debt having an original maturity of no more than
270 days.

A-1: This highest category indicates that the degree of safety regarding
timely payment is very strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.

A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated A-1.

A-2
<PAGE>
THE PRUDENTIAL MUTUAL FUND FAMILY

Prudential offers a broad range of mutual funds designed to meet your
individual needs. We welcome you to review the investment options available
through our family of funds. For more information on the Prudential Mutual
Funds, including charges and expenses, contact your Prudential Securities
financial adviser or Prusec representative or telephone the Fund at (800)
225-1852 for a free prospectus. Read the prospectus carefully before you invest
or send money.

TAXABLE BOND FUNDS
--------------------------

Prudential Diversified Bond Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Mortgage Income Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
The BlackRock Government Income Trust

TAX-EXEMPT BOND FUNDS
-----------------------------

Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Intermediate Series
Prudential Municipal Series Fund
Florida Series
Maryland Series
Massachusetts Series
Michigan Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.

GLOBAL FUNDS
--------------------

Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Limited Maturity Fund, Inc.
Limited Maturity Portfolio
Prudential Intermediate Global Income Fund, Inc.
Prudential International Bond Fund, Inc.
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Global Series
International Stock Series
The Global Total Return Fund, Inc.
Global Utility Fund, Inc.

EQUITY FUNDS
--------------------

Prudential Balanced Fund
Prudential Distressed Securities Fund, Inc.
Prudential Index Series Fund
Prudential Stock Index Fund
Prudential Small-Cap Index Fund
Prudential Bond Market Index Fund
Prudential Pacific Index Fund
Prudential Europe Index Fund
Prudential Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Growth Opportunity Fund, Inc.
Prudential Jennison Series Fund, Inc.
Prudential Jennison Active Balanced Fund
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Multi-Sector Fund, Inc.
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund

MONEY MARKET FUNDS
--------------------------

- - TAXABLE MONEY MARKET FUNDS
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund, Inc.
Money Market Series
Prudential MoneyMart Assets, Inc.
- - TAX-FREE MONEY MARKET FUNDS
Prudential Tax-Free Money Fund
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
- - COMMAND FUNDS
Command Money Fund
Command Government Fund
Command Tax-Free Fund
- - INSTITUTIONAL MONEY MARKET FUNDS
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series

B-1
<PAGE>

B-2
<PAGE>
No dealer, sales representative or any other person has been authorized to give
any information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained herein, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund or the Distributor. This Prospectus does not
constitute an offer by the Fund or by the Distributor to sell, or a solicitation
of any offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such jurisdiction.

- -------------------------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---
<S> <C>
FUND HIGHLIGHTS................................. 2
What Are The Fund's Risk Factors and Special
Characteristics?............................. 2
FUND EXPENSES................................... 4
FINANCIAL HIGHLIGHTS............................ 5
HOW THE FUND INVESTS............................ 9
Investment Objective and Policies............. 9
Risks and Special Considerations of Investing
in Foreign Securities........................ 10
Hedging and Return Enhancement Strategies..... 13
Other Investments and Policies................ 16
Investment Restrictions....................... 17
HOW THE FUND IS MANAGED......................... 17
Manager....................................... 18
Distributor................................... 18
Fee Waivers and Subsidy....................... 20
Portfolio Transactions........................ 20
Custodian and Transfer and Dividend Disbursing
Agent........................................ 20
HOW THE FUND VALUES ITS SHARES.................. 20
HOW THE FUND CALCULATES PERFORMANCE............. 21
TAXES, DIVIDENDS AND DISTRIBUTIONS.............. 21
GENERAL INFORMATION............................. 23
Description of Common Stock................... 23
Additional Information........................ 24
SHAREHOLDER GUIDE............................... 24
How to Buy Shares of the Fund................. 24
Alternative Purchase Plan..................... 25
How to Sell Your Shares....................... 29
Conversion Feature--Class B Shares............ 33
How to Exchange Your Shares................... 33
Shareholder Services.......................... 35
DESCRIPTION OF SECURITY RATINGS................. A-1
THE PRUDENTIAL MUTUAL FUND FAMILY............... B-1
</TABLE>

- -------------------------------------------

MF157A

Class A: 743941 10 6
Class B: 743941 20 5
CUSIP Nos.: Class C: 743941 30 4
Class Z: 743941 40 3

Prudential
Pacific
Growth
Fund, Inc.

PROSPECTUS
December 31, 1997
www.prudential.com

-----------------

[LOGO]
<PAGE>
PRUDENTIAL PACIFIC GROWTH FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 31, 1997

Prudential Pacific Growth Fund, Inc. (the Fund) is an open-end, diversified
management investment company whose investment objective is long-term growth of
capital. The Fund seeks to achieve this objective by investing primarily in
equity related securities (common stock, preferred stock, rights, warrants and
debt securities or preferred stock which are convertible or exchangeable for
common stock or preferred stock and master limited partnerships, among others)
of companies doing business in or domiciled in the Pacific Basin region. Under
normal circumstances, the Fund intends to invest at least 65% of its total
assets in such securities. The Fund may invest in equity securities of other
companies and in convertible and non-convertible debt securities. The Fund may
also engage in various transactions involving derivatives, such as those
involving options on stock, stock indices, foreign currencies and futures
contracts on foreign currencies and groups of currencies so as to hedge its
portfolio and to attempt to enhance return. There can be no assurance that the
Fund's investment objective will be achieved. See "Investment Objective and
Policies."

The Fund's address is Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077, and its telephone number is (800) 225-1852.

This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's Prospectus dated December 31, 1997, a copy
of which may be obtained from the Fund upon request.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
CROSS-REFERENCE
TO PAGE IN
PAGE PROSPECTUS
------ ---------------
<S> <C> <C>
Investment Objective and Policies........................... B-2 9
Investment Restrictions..................................... B-12 17
Directors and Officers...................................... B-13 17
Manager..................................................... B-17 18
Distributor................................................. B-18 18
Portfolio Transactions and Brokerage........................ B-20 20
Purchase and Redemption of Fund Shares...................... B-21 24
Shareholder Investment Account.............................. B-24 35
Net Asset Value............................................. B-28 20
Taxes, Dividends and Distributions.......................... B-29 21
Performance Information..................................... B-31 21
Custodian, Transfer and Dividend Disbursing Agent and
Independent Accountants.................................... B-33 20
Financial Statements........................................ B-34 --
Report of Independent Accountants........................... B-47 --
Independent Auditors' Report................................ B-49 --
Appendix I--General Investment Information.................. Ap-I --
Appendix II--Historical Performance Data.................... Ap-II --
Appendix III--Information Relating to the Prudential........ Ap-VI --
</TABLE>

- --------------------------------------------------------------------------------

MF157B
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is long-term growth of capital. It seeks to
achieve this objective by investing primarily in equity related securities
(common stock, preferred stock, rights, warrants and debt securities or
preferred stock which are convertible or exchangeable for common stock or
preferred stock and master limited partnerships, among others) of companies
doing business in or domiciled in the Pacific Basin region, including, but not
limited to, Japan, Australia, Hong Kong, Singapore, South Korea, Malaysia,
Thailand, Indonesia, The Philippines and New Zealand. There can be no assurance
that the Fund's investment objective will be achieved. See "How the Fund
Invests--Investment Objective and Policies" in the Prospectus.

OPTIONS ON SECURITIES

The Fund may purchase and write (I.E., sell) put and call options on
securities that are traded on U.S. or foreign securities exchanges or that are
traded in the over-the-counter markets. A call option is a short-term contract
pursuant to which the purchaser, in return for a premium paid, has the right to
buy the security underlying the option at a specified exercise price at any time
during the term of the option. The writer of the call option, who receives the
premium, has the obligation, upon exercise of the option, to deliver the
underlying security against payment of the exercise price. A put option is a
similar contract which gives the purchaser, in return for a premium, the right
to sell the underlying security at a specified price during the term of the
option. The writer of the put, who receives the premium, has the obligation to
buy the underlying security upon exercise at the exercise price. The Fund will
write put options only when the investment adviser desires to invest in the
underlying security. The premium paid by the purchaser of an option will
reflect, among other things, the relationship of the exercise price to the
market price and volatility of the underlying security, the remaining term of
the option, supply and demand and interest rates.

A call option written by the Fund is "covered" if the Fund owns the security
underlying the option or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account by its Custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if the Fund holds on a share-for-share basis a call on the same security
as the call written where the exercise price of the call held is equal to or
less than the exercise price of the call written or greater than the exercise
price of the call written if the difference is maintained by the Fund in cash or
liquid assets in a segregated account with its Custodian. A put option written
by the Fund is "covered" if the Fund maintains cash or liquid assets with a
value equal to the exercise price in a segregated account with its Custodian, or
else holds on a share-for-share basis a put of the same security as the put
written where the exercise price of the put held is equal to or greater than the
exercise price of the put written. "Liquid assets," as used in the Fund's
Prospectus and this Statement of Additional Information, include U.S. Government
securities, equity securities, investment grade debt obligations or other liquid
unencumbered assets.

If the writer of an option wishes to terminate the obligation, he or she may
effect a "closing purchase transaction." This is accomplished by buying an
option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be cancelled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after he or she had been notified of the exercise of an option. Similarly, an
investor who is the holder of an option may liquidate his or her position by
effecting a "closing sale transaction." This is accomplished by selling an
option of the same series as the option previously purchased. There is no
guarantee that either a closing purchase or a closing sale transaction can be
effected. To secure the obligation to deliver the underlying security in the
case of a call option, the writer of the option is generally required to pledge
for the benefit of the broker the underlying security or other assets in
accordance with the rules of the relevant exchange or clearinghouse, such as The
Options Clearing Corporation (OCC), an institution created to interpose itself
between buyers and sellers of options in the United States. Technically, the
clearinghouse assumes the other side of every purchase and sale transaction on
an exchange and, by doing so, guarantees the transaction.

The Fund will realize a profit from a closing transaction if the price of
the transaction is less than the premium received from writing the option or is
more than the premium paid to purchase the option; the Fund will realize a loss
from a closing transaction if the price of the transaction is more than the
premium received from writing the option or is less than the premium paid to
purchase the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option may be offset in whole or in
part by any appreciation of the underlying security if the Fund holds the
underlying security in its portfolio.

The Fund may also purchase a "protective put," I.E. , a put option acquired
for the purpose of protecting a portfolio security from a decline in market
value. In exchange for the premium paid for the put option, the Fund acquires
the right to sell the underlying security at the exercise price of the put
regardless of the extent to which the underlying security declines in value. The

B-2
<PAGE>
loss to the Fund is limited to the premium paid for, and transaction costs in
connection with, the put plus the initial excess, if any, of the market price of
the underlying security over the exercise price. However, if the market price of
the security underlying the put rises, the profit the Fund realizes on the sale
of the security will be reduced by the premium paid for the put option less any
amount (net of transaction costs) for which the put may be sold. Similar
principles apply to the purchase of puts on stock indices, as described below.

OPTIONS ON SECURITIES INDICES. In addition to options on securities, the
Fund may also purchase and sell put and call options on securities indices
traded on U.S. or foreign securities exchanges or traded in the over-the-counter
markets. Options on securities indices are similar to options on securities
except that, rather than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the securities index upon which the option is based is greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
This amount of cash is equal to such difference between the closing price of the
index and the exercise price of the option expressed in dollars times a
specified multiple (the multiplier). The writer of the option is obligated, in
return for the premium received, to make delivery of this amount. Unlike for
equity securities options, all settlements are in cash, and gain or loss depends
on price movements in the securities market generally (or in a particular
industry or segment of the market) rather than price movements in individual
securities.

The multiplier for an index option performs a function similar to the unit
of trading for a stock option. It determines the total dollar value per contract
of each point in the difference between the exercise price of an option and the
current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices may have
different multipliers. Because exercises of index options are settled in cash, a
call writer cannot determine the amount of its settlement obligations in advance
and, unlike call writing on specific stocks, cannot provide in advance for, or
cover, its potential settlement obligations by acquiring and holding the
underlying securities. In addition, unless the Fund has other liquid assets
which are sufficient to satisfy the exercise of a call, the Fund would be
required to liquidate portfolio securities or borrow in order to satisfy the
exercise.

Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular security, whether the Fund will
realize a gain or loss on the purchase or sale of an option on an index depends
upon movements in the level of security prices in the market generally or in an
industry or market segment rather than movements in the price of a particular
security. Accordingly, successful use by the Fund of options on indices would be
subject to the investment adviser's ability to predict correctly movements in
the direction of the securities market generally or of a particular industry.
This requires different skills and techniques than predicting changes in the
price of individual stocks. The investment adviser currently uses such
techniques in conjunction with the management of other mutual funds.

RISKS OF TRANSACTIONS IN OPTIONS

An option position may be closed out only on an exchange, board of trade or
other trading facility which provides a secondary market for an option of the
same series. Although the Fund will generally purchase or write only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option, or at any particular time, and for some options no secondary
market on an exchange or otherwise may exist. In such event it might not be
possible to effect closing transactions in particular options, with the result
that the Fund would have to exercise its options in order to realize any profit
and would incur brokerage commissions upon the exercise of call options and upon
the subsequent disposition of underlying securities acquired through the
exercise of call options or upon the purchase of underlying securities for the
exercise of put options. If the Fund as a covered call option writer is unable
to effect a closing purchase transaction in a secondary market, it will not be
able to sell the underlying security until the option expires or it delivers the
underlying security upon exercise.

Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
a clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange that had been

B-3
<PAGE>
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at times, render certain of the facilities of any of the clearing
corporations inadequate, and thereby result in the institution by an exchange of
special procedures which may interfere with the timely execution of customers'
orders. The Fund intends to purchase and sell only those options which are
cleared by clearinghouses whose facilities are considered to be adequate to
handle the volume of options transactions.

RISKS OF OPTIONS ON INDICES

The Fund's purchase and sale of options on indices will be subject to risks
described above under "Risks of Transactions in Options." In addition, the
distinctive characteristics of options on indices create certain risks that are
not present with stock options.

Index prices may be distorted if trading of certain stocks included in the
index is interrupted. Trading in the index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
stocks included in the index. If this occurred, the Fund would not be able to
close out options which it had purchased or written and, if restrictions on
exercise were imposed, may be unable to exercise an option it holds, which could
result in substantial losses to the Fund. It is the Fund's policy to purchase or
write options only on indices which include a number of stocks sufficient to
minimize the likelihood of a trading halt in the index.

The ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop in all index option contracts. The
Fund will not purchase or sell any index option contract unless and until, in
the investment adviser's opinion, the market for such options has developed
sufficiently that the risk in connection with such transactions is not
substantially greater than the risk in connection with options on securities in
the index.

SPECIAL RISKS OF WRITING CALLS ON INDICES

Because exercises of index options are settled in cash, a call writer such
as the Fund cannot determine the amount of its settlement obligations in advance
and, unlike call writing on specific stocks, cannot provide in advance for, or
cover, its potential settlement obligations by acquiring and holding the
underlying securities. However, the Fund will write call options on indices only
under the circumstances described below under "Limitations on Purchase and Sale
of Stock Options and Options on Stock Indices, Foreign Currencies and Futures
Contracts on Foreign Currencies."

Price movements in the Fund's portfolio probably will not correlate
precisely with movements in the level of the index and, therefore, the Fund
bears the risk that the price of the securities held by the Fund may not
increase as much as the index. In such event, the Fund would bear a loss on the
call which is not completely offset by movements in the price of the Fund's
portfolio. It is also possible that the index may rise when the Fund's portfolio
of stocks does not rise. If this occurred, the Fund would experience a loss on
the call which is not offset by an increase in the value of its portfolio and
might also experience a loss in its portfolio. However, because the value of a
diversified portfolio will, over time, tend to move in the same direction as the
market, movements in the value of the Fund in the opposite direction as the
market would be likely to occur for only a short period or to a small degree.

Unless the Fund has other liquid assets which are sufficient to satisfy the
exercise of a call, the Fund would be required to liquidate portfolio securities
in order to satisfy the exercise. Because an exercise must be settled within
hours after receiving the notice of exercise, if the Fund fails to anticipate an
exercise, it may have to borrow from a bank (in amounts not exceeding 20% of the
Fund's total assets) pending settlement of the sale of securities in its
portfolio and would incur interest charges thereon.

When the Fund has written a call on an index, there is also a risk that the
market may decline between the time the Fund has a call exercised against it, at
a price which is fixed as of the closing level of the index on the date of
exercise, and the time the Fund is able to sell stocks in its portfolio to
generate cash to settle the exercise. As with stock options, the Fund will not
learn that an index option has been exercised until the day following the
exercise date but, unlike a call on stock where the Fund would be able to
deliver the underlying securities in settlement, the Fund may have to sell part
of its investment portfolio in order to make settlement in cash, and the price
of such investments might decline before they can be sold. This timing risk
makes certain strategies involving more than one option substantially more risky
with index options than with stock options. For example, even if an index call
which the Fund has written is "covered" by an index call held by the Fund with
the same strike price, the Fund will

B-4
<PAGE>
bear the risk that the level of the index may decline between the close of
trading on the date the exercise notice is filed with the clearing corporation
and the close of trading on the date the Fund exercises the call it holds or the
time the Fund sells the call which, in either case, would occur no earlier than
the day following the day the exercise notice was filed.

If the Fund holds an index option and exercises it before final
determination of the closing index value for that day, it runs the risk that the
level of the underlying index may change before closing. If such a change causes
the exercised option to fall out-of-the-money, the Fund will be required to pay
the difference between the closing index value and the exercise price of the
option (times the applicable multiplier) to the assigned writer. Although the
Fund may be able to minimize this risk by withholding exercise instructions
until just before the daily cutoff time or by selling rather than exercising an
option when the index level is close to the exercise price, it may not be
possible to eliminate this risk entirely because the cutoff times for index
options may be earlier than those fixed for other types of options and may occur
before definitive closing index values are announced.

RISKS OF OPTIONS ON FOREIGN CURRENCIES

Options on foreign currencies involve the currencies of two nations and
therefore, developments in either or both countries affect the values of such
options. Risks include those described in the Prospectus under "How the Fund
Invests--Risks and Special Considerations of Investing in Foreign Securities,"
including government actions affecting currency valuation and the movements of
currencies from one country to another. The quantity of currency underlying
option contracts represent odd lots in a market dominated by transactions
between banks; this can mean extra transaction costs upon exercise. Option
markets may be closed while round-the-clock interbank currency markets are open,
and this can create price and rate discrepancies.

RISKS RELATED TO FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

The Fund may enter into forward foreign currency exchange contracts in
several circumstances. When the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, or when the Fund
anticipates the receipt in a foreign currency of dividends or interest payments
on a security which it holds, the Fund may desire to "lock-in" the U.S. dollar
price of the security or the U.S. dollar equivalent of such dividend or interest
payment, as the case may be. By entering into a forward contract for a fixed
amount of dollars, for the purchase or sale of the amount of foreign currency
involved in the underlying transactions, the Fund may be able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the U.S. dollar and the foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.

Additionally, when the investment adviser believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, the Fund may enter into a forward contract for a fixed amount of
dollars, to sell the amount of foreign currency approximating the value of some
or all of the Fund's portfolio securities denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
securities denominated in foreign currencies will also change as a consequence
of market movements in the value of those securities between the date on which
the forward contract is entered into and the date it matures. The projection of
short-term currency market movement is extremely difficult, and the successful
execution of a short-term hedging strategy is highly uncertain. The Fund does
not intend to enter into such forward contracts to protect the value of its
portfolio securities on a regular or continuous basis. The Fund does not intend
to enter into such forward contracts or maintain a net exposure to such
contracts where the consummation of the contracts would obligate the Fund to
deliver an amount of foreign currency in excess of the value of the Fund's
portfolio securities or other assets denominated in that currency. However, the
Manager and Subadviser believe that it is important to have the flexibility to
enter into such forward contracts when they determine that the best interests of
the Fund will thereby be served. The Fund's Custodian will place cash or other
liquid assets into a segregated account of the Fund in an amount equal to the
value of the Fund's total assets committed to the consummation of forward
foreign currency exchange contracts. If the value of the securities placed in
the segregated account declines, additional cash or securities will be placed in
the account on a daily basis so that the value of the account will equal the
amount of the Fund's commitments with respect to such contracts.

The Fund generally will not enter into a forward contract with a term of
greater than one year. At the maturity of a forward contract, the Fund may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same
currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency.

B-5
<PAGE>
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the forward contract.
Accordingly, if a decision is made to sell the security and make delivery of the
foreign currency and if the market value of the security is less than the amount
of foreign currency that the Fund is obligated to deliver, then it would be
necessary for the Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase).

If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. Should forward contract prices decline
during the period between the Fund's entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Fund will realize a gain to the
extent that the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward contract prices increase,
the Fund will suffer a loss to the extent that the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.

The Fund's dealing in forward foreign currency exchange contracts will
generally be limited to the transactions described above. Of course, the Fund is
not required to enter into such transactions with regard to its foreign
currency-dominated securities. It also should be recognized that this method of
protecting the value of the Fund's portfolio securities against a decline in the
value of a currency does not eliminate fluctuations in the underlying prices of
the securities which are unrelated to exchange rates. Additionally, although
such contracts tend to minimize the risk of loss due to a decline in the value
of the hedged currency, at the same time they tend to limit any potential gain
which might result should the value of such currency increase.

Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend physically to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. It will do so from time to time, and investors should
be aware of the costs of currency conversion. Although foreign exchange dealers
do not charge a fee for conversion, they do realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.

RISKS OF TRANSACTIONS IN FUTURES CONTRACTS

There are several risks in connection with the use of futures contracts as a
hedging device. Due to the imperfect correlation between the price of futures
contracts and movements in the currency or group of currencies, the price of a
futures contract may move more or less than the price of the currencies being
hedged. In the case of futures contracts on securities indices, the correlation
between the price of the futures contract and the movements in the index may not
be perfect. Therefore, a correct forecast of currency rates, market trends or
international political trends by the investment adviser may still not result in
a successful hedging transaction.

Although the Fund will purchase or sell futures contracts only on exchanges
where there appears to be an adequate secondary market, there is no assurance
that a liquid secondary market on an exchange will exist for any particular
contract or at any particular time. Accordingly, there can be no assurance that
it will be possible, at any particular time, to close a futures position. In the
event the Fund could not close a futures position and the value of such position
declined, the Fund would be required to continue to make daily cash payments of
variation margin. There is no guarantee that the price movements of the
portfolio securities denominated in foreign currencies will, in fact, correlate
with the price movements in the futures contract and thus provide an offset to
losses on a futures contract. Currently, currency futures contracts are
available on various foreign currencies including the Australian Dollar, British
Pound, Canadian Dollar, Japanese Yen, Swiss Franc, West German Mark and
Eurodollars. Index futures contracts are available on various U.S. and foreign
securities indices.

Successful use of futures contracts by the Fund is also subject to the
ability of the Fund's investment adviser to predict correctly movements in the
direction of markets and other factors affecting currencies or the securities
market generally. For example, if the Fund had hedged against the possibility of
an increase in currency rates which would adversely affect the price of
securities in its portfolio and the price of such securities increases instead,
the Fund will lose part or all of the benefit of the increased value of its
securities because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash to meet daily
variation margin requirements, it may need to sell securities to meet such
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. The Fund may have to sell
securities at a time when it is disadvantageous to do so.

B-6
<PAGE>
The hours of trading of futures contracts may not conform to the hours
during which the Fund may trade the underlying securities. To the extent that
the futures markets close before the securities markets, significant price and
rate movements can take place in the securities markets that cannot be reflected
in the futures markets.

OPTIONS ON FUTURES CONTRACTS

An option on a futures contract gives the purchaser the right, but not the
obligation, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer of the
option is required upon exercise to assume an offsetting futures position (a
short position if the option is a call and a long position if the option is a
put). Upon exercise of the option, the assumption of offsetting futures
positions by the writer and holder of the option will be accompanied by delivery
of the accumulated cash balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option on the futures contract. Currently options can
be purchased or written with respect to futures contracts on various foreign
currencies, including the Australian Dollar, British Pound, Canadian Dollar,
Japanese Yen, Swiss Franc, West German Mark and Eurodollars. With respect to
stock indices, options are traded on futures contracts for various U.S. and
foreign stock indicies including the S&P 500 Stock Index and the NYSE Composite
Index.

The holder or writer of an option may terminate its position by selling or
purchasing an option of the same series. There is no guarantee that such closing
transactions can be effected.

LIMITATIONS ON PURCHASE AND SALE OF STOCK OPTIONS AND OPTIONS ON STOCK INDICES,
FOREIGN CURRENCIES AND FUTURES CONTRACTS ON FOREIGN CURRENCIES

The Fund may write put and call options on stocks only if they are covered,
and such options must remain covered so long as the Fund is obligated as a
writer. The Fund will write put options on stock indices and foreign currencies
and futures contracts on foreign currencies only if they are covered by
segregating with the Fund's Custodian an amount of cash, U.S. Government
securities, or other liquid assets equal to the aggregate exercise price of the
puts. The Fund will not enter into futures contracts or related options if the
aggregate initial margin and premiums exceed 5% of the liquidation value of the
Fund's total assets, taking into account unrealized profits and losses on such
contracts, provided, however, that in the case of an option that is in-the-
money, the in-the-money amount may be excluded in computing such 5%. The above
restriction does not apply to the purchase or sale of futures contracts and
related options for BONA FIDE hedging purposes within the meaning of regulations
of the Commodities Futures Trading Commission. The Fund does not intend to
purchase options on equity securities or securities indices if the aggregate
premiums paid for such outstanding options would exceed 10% of the Fund's total
assets.

Except as described below, the Fund will write call options on indices only
if on such date it holds a portfolio of stocks at least equal to the value of
the index times the multiplier times the number of contracts. When the Fund
writes a call option on a broadly-based stock market index, the Fund will
segregate or put into escrow with its Custodian, or pledge to a broker as
collateral for the option, cash, U.S. Government securities, or other liquid
assets with a market value at the time the option is written of not less than
100% of the current index value times the multiplier times the number of
contracts.

If the Fund has written an option on an industry or market segment index, it
will segregate or put into escrow with its Custodian, or pledge to a broker as
collateral for the option, at least ten "qualified securities," all of which are
stocks of issuers in such industry or market segment, with a market value at the
time the option is written of not less than 100% of the current index value
times the multiplier times the number of contracts. Such stocks will include
stocks which represent at least 50% of the weighting of the industry or market
segment index and will represent at least 50% of the Fund's holdings in that
industry or market segment. No individual security will represent more than 15%
of the amount so segregated, pledged or escrowed in the case of broadly-based
stock market index options or 25% of such amount in the case of industry or
market segment index options. If at the close of business on any day the market
value of such qualified securities so segregated, escrowed or pledged falls
below 100% of the current index value times the multiplier times the number of
contracts, the Fund will so segregate, escrow or pledge an amount in cash or
other liquid assets equal in value to the difference. In addition, when the Fund
writes a call on an index which is in-the-money at the time the call is written,
the Fund will segregate with its Custodian or pledge to the broker as collateral
cash or other liquid assets equal in value to the amount by which the call is
in-the-money times the multiplier times the number of contracts. Any amount
segregated pursuant to the foregoing sentence may be applied to the Fund's
obligation to segregate additional amounts in the event that the market value of
the qualified securities falls below 100% of the current index

B-7
<PAGE>
value times the multiplier times the number of contracts. A "qualified security"
is an equity security which is listed on a national securities exchange or
listed on NASDAQ against which the Fund has not written a stock call option and
which has not been hedged by the Fund by the sale of stock index futures.
However, if the Fund holds a call on the same index as the call written where
the exercise price of the call held is equal to or less than the exercise price
of the call written or greater than the exercise price of the call written if
the difference is maintained by the Fund in cash or other liquid assets in a
segregated account with its Custodian, it will not be subject to the
requirements described in this paragraph.

The Fund may engage in futures contracts and options on futures transactions
as a hedge against changes, resulting from market or political conditions, in
the value of the currencies to which the Fund is subject or to which the Fund
expects to be subject in connection with future purchases. The Fund may engage
in such transactions when they are economically appropriate for the reduction of
risks inherent in the ongoing management of the Fund. The Fund may write options
on futures contracts to realize through the receipt of premium income a greater
return than would be realized in the Fund's portfolio securities alone.

POSITION LIMITS. Transactions by the Fund in futures contracts and options
will be subject to limitations, if any, established by each of the exchanges,
boards of trade or other trading facilities (including NASDAQ) governing the
maximum number of options in each class which may be written or purchased by a
single investor or group of investors acting in concert, regardless of whether
the options are written on the same or different exchanges, boards of trade or
other trading facilities or are held or written in one or more accounts or
through one or more brokers. Thus, the number of futures contracts and options
which the Fund may write or purchase may be affected by the futures contracts
and options written or purchased by other investment advisory clients of the
investment adviser. An exchange, board of trade or other trading facility may
order the liquidations of positions found to be in excess of these limits, and
it may impose certain other sanctions.

DEFENSIVE STRATEGY AND SHORT-TERM INVESTMENTS

When conditions dictate a defensive strategy, the Fund may invest in money
market instruments, including commercial paper of corporations, certificates of
deposit, bankers' acceptances and other obligations of domestic and foreign
banks, obligations issued or guaranteed by the U.S. Government, its agencies or
its instrumentalities and repurchase agreements (described more fully below).
Such investments may be subject to certain risks, including future political and
economic developments, the possible imposition of withholding taxes on interest
income, the seizure or nationalization of foreign deposits and foreign exchange
controls or other restrictions.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

From time to time, in the ordinary course of business, the Fund may purchase
or sell securities on a when-issued or delayed delivery basis, that is, delivery
and payment can take place a month or more after the date of the transaction.
The Fund will make commitments for such when-issued transactions only with the
intention of actually acquiring the securities. The Fund's Custodian will
maintain, in a separate account of the Fund, cash or other liquid unencumbered
assets marked-to-market daily, having a value equal to or greater than such
commitments. If the Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition, it could, as with the disposition
of any other portfolio security, incur a gain or loss due to market
fluctuations. The Fund does not intend to have more than 5% of its net assets
(determined at the time of entering into the transaction) involved in
transactions on a when-issued or delayed delivery basis during the coming year.

SHORT SALES AGAINST-THE-BOX

The Fund may make short sales of securities or maintain a short position,
provided that at all times when a short position is open the Fund owns an equal
amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for an equal amount of the
securities of the same issuer as the securities sold short (a short sale
against-the-box), and that not more than 25% of the Fund's net assets
(determined at the time of the short sale) may be subject to such sales. Short
sales will be made primarily to defer realization of gain or loss for federal
tax purposes. As a matter of current operating policy, the Fund will not engage
in short-sales other than short sales against-the-box. The Fund does not intend
to have more than 5% of its net assets (determined at the time of the short
sale) subject to short sales against-the-box during the coming year.

B-8
<PAGE>
U.S. GOVERNMENT SECURITIES

U.S. TREASURY SECURITIES. The Fund is permitted to invest in U.S. Treasury
securities, including bills, notes, bonds and other debt securities issued by
the U.S. Treasury. These instruments are direct obligations of the U.S.
Government and, as such, are backed by the "full faith and credit" of the United
States. They differ primarily in their interest rates, the lengths of their
maturities and the dates of their issuances.

SECURITIES ISSUED OR GUARANTEED BY U.S. GOVERNMENT AGENCIES AND
INSTRUMENTALITIES. The Fund may invest in securities issued by agencies of the
U.S. Government or instrumentalities of the U.S. Government. These obligations,
including those which are guaranteed by Federal Agencies or instrumentalities,
may or may not be backed by the full faith and credit of the United States.
Obligations of the Government National Mortgage Association (GNMA), the Farmers
Home Administration and the Small Business Administration are backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, the Fund must look principally
to the agency issuing or guaranteeing the obligation for ultimate repayment and
may not be able to assert a claim against the United States if the agency or
instrumentality does not meets its commitments. Securities in which the Fund may
invest which are not backed by the full faith and credit of the United States
include obligations such as those issued by the Federal Home Loan Bank, the
Federal Home Loan Mortgage Corporation (FHLMC), the Federal National Mortgage
Association, the Student Loan Marketing Association, Resolution Funding
Corporation and the Tennessee Valley Authority, each of which has the right to
borrow from the U.S. Treasury to meet its obligations, and obligations of the
Farm Credit System, the obligations of which may be satisfied only by the
individual credit of the issuing agency. FHLMC investments may include
collateralized mortgage obligations.

Obligations issued or guaranteed as to principal and interest by the United
States Government may be acquired by the Fund in the form of custodial receipts
that evidence ownership of future interest payments, principal payments or both
on certain United States treasury notes or bonds. Such notes and bonds are held
in custody by a bank on behalf of the owners. These custodial receipts are
commonly referred to as Treasury strips.

MORTGAGE-RELATED SECURITIES ISSUED BY U.S. GOVERNMENT AGENCIES AND
INSTRUMENTALITIES. The Fund may invest in mortgage-backed securities, including
those which represent undivided ownership interest in pools of mortgages. The
U.S. Government or the issuing agency or instrumentality guarantees the payment
of interest on and principal of these securities. However, the guarantees do not
extend to the yield or value of the securities nor do the guarantees extend to
the yield or value of the Fund's shares. These securities are in most cases
pass-through instruments through which the holders receive a share of all
interest and principal payments from the mortgages underlying the securities,
net of certain fees. Because the prepayment characteristics of the underlying
mortgages vary, it is not possible to predict accurately the average life of a
particular issue of pass-through certificates. Mortgage-backed securities are
often subject to more rapid repayment than their maturity date would indicate as
a result of the pass-through of prepayments of principal on the underlying
mortgage obligations. During periods of declining interest rates, prepayment of
mortgages underlying mortgage-backed securities can be expected to accelerate.
The Fund's ability to invest in high-yielding mortgage-backed securities will be
adversely affected to the extent that prepayments of mortgages must be
reinvested in securities which have lower yields than the prepaid mortgages.
Moreover, prepayments of mortgages which underlie securities purchased at a
premium could result in capital losses. During periods of rising interest rates,
the rate of prepayment of mortgages underlying mortgage-backed securities can be
expected to decline, extending the projected average maturity of the
mortgage-backed securities. This maturity extension risk may effectively change
a security which was considered short- or intermediate-term at the time of
purchase into a long-term security. Long-term securities generally fluctuate
more widely in response to changes in interest rates than short- or
intermediate-term securities.

The Fund may invest in both Adjustable Rate Mortgage Securities (ARMs),
which are pass-through mortgage securities collateralized by adjustable rate
mortgages, and Fixed-Rate Mortgage Securities (FRMs), which are collateralized
by fixed-rate mortgages.

The values of U.S. Government securities (like those of other fixed-income
securities generally) will change as interest rates fluctuate. During periods of
falling U.S. interest rates, the values of U.S. Government securities generally
rise and, conversely, during periods of rising interest rates, the values of
such securities generally decline. The magnitude of these fluctuations will
generally be greater for securities with longer-term maturities.

B-9
<PAGE>
FOREIGN DEBT SECURITIES

The Fund is permitted to invest in foreign corporate and government
securities. "Foreign Government securities" include debt securities issued or
guaranteed, as to payment of principal and interest, by governments,
quasi-governmental entities, governmental agencies, supranational entities and
other governmental entities (collectively, Government Entities) of foreign
countries denominated in the currency of another such country.

A "supranational entity" is an entity constituted by the national
governments of several countries to promote economic development. Examples of
such supranational entities include, among others, the World Bank (International
Bank for Reconstruction and Development), the European Investment Bank and the
Asian Development Bank. Debt securities of quasi-governmental issuers include,
among others, the Province of Ontario and the City of Stockholm. Foreign
governments securities shall also include debt securities of Government Entities
denominated in European Currency Units. A European Currency Unit represents
specified amounts of the currencies of certain of the member states of the
European Community. Foreign government securities shall also include
mortgage-backed securities issued by foreign Government Entities including
quasi-governmental entities.

REPURCHASE AGREEMENTS

The Fund's repurchase agreements will be collateralized by U.S. Government
obligations. The Fund will enter into repurchase transactions only with parties
meeting creditworthiness standards approved by the Fund's Board of Directors.
The Fund's investment adviser will monitor the creditworthiness of such parties,
under the general supervision of the Board of Directors. In the event of a
default or bankruptcy by a seller, the Fund will promptly seek to liquidate the
collateral. To the extent that the proceeds from any sale of such collateral
upon a default in the obligation to repurchase are less than the repurchase
price, the Fund will suffer a loss.

The Fund participates in a joint repurchase agreement account with other
investment companies managed by Prudential Investments Fund Management LLC
(PIFM) pursuant to an order of the Securities and Exchange Commission (SEC). On
a daily basis, any uninvested cash balances of the Fund may be aggregated with
those of such investment companies and invested in one or more repurchase
agreements. Each fund participates in the income earned or accrued in the joint
account based on the percentage of its investment.

LENDING OF SECURITIES

Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and financial institutions, provided
that outstanding loans do not exceed in the aggregate 30% of the value of the
Fund's total assets and provided that such loans are callable at any time by the
Fund and are at all times secured by cash or equivalent collateral (or obtain a
letter of credit) that is equal to at least the market value, determined daily,
of the loaned securities. The advantage of such loans is that the Fund continues
to receive payments in lieu of the interest and dividends of the loaned
securities, while at the same time earning interest either directly from the
borrower or on the collateral which will be invested in short-term obligations.

A loan may be terminated by the borrower on one business day's notice or by
the Fund at any time. If the borrower fails to maintain the requisite amount of
collateral, the loan automatically terminates, and the Fund could use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over collateral. As with any extensions of credit,
there are risks of delay in recovery and in some cases loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms determined to be
creditworthy pursuant to procedures approved by the Board of Directors of the
Fund. On termination of the loan, the borrower is required to return the
securities to the Fund, and any gain or loss in the market price during the loan
would inure to the Fund.

Since voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loan, in whole or in
part as may be appropriate, to permit the exercise of such rights if the matters
involved would have a material effect on the Fund's investment in the securities
which are the subject of the loan. The Fund will pay reasonable finders',
administrative and custodial fees in connection with a loan of its securities or
may share the interest earned on collateral with the borrower.

B-10
<PAGE>
SEGREGATED ACCOUNTS

When the Fund is required to segregate assets in connection with certain
hedging transactions, it will maintain cash or liquid securities in a segregated
account with the Fund's Custodian. "Liquid assets" mean cash, U.S. Government
securities, equity securities (including foreign securities), debt obligations
or other liquid unencumbered assets, marked-to-market daily.

ILLIQUID SECURITIES

The Fund may not hold more than 15% of its net assets in repurchase
agreements which have a maturity of longer than seven days or in other illiquid
securities, including securities that are illiquid by virtue of the absence of a
readily available market (either within or outside of the United States) or
legal or contractual restrictions on resale. Historically, illiquid securities
have included securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of 1933, as
amended (Securities Act), securities which are otherwise not readily marketable
and repurchase agreements having a maturity of longer than seven days.
Securities which have not been registered under the Securities Act are referred
to as private placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.

Rule 144A of the Securities Act allows for a broader institutional trading
market for securities otherwise subject to restriction on resale to the general
public. Rule 144A establishes a "safe harbor" from the registration requirements
of the Securities Act for resales of certain securities to qualified
institutional buyers. The investment adviser anticipates that the market for
certain restricted securities such as institutional commercial paper and foreign
securities will expand further as a result of this regulation and the
development of automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc. (NASD).

Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act and commercial paper and municipal lease obligations for which
there is a readily available market will not be deemed to be illiquid. The
investment adviser will monitor the liquidity of such restricted securities
subject to the supervision of the Board of Directors. In reaching liquidity
decisions, the investment adviser will consider, INTER ALIA, the following
factors: (1) the frequency of trades and quotes for the security; (2) the number
of dealers wishing to purchase or sell the security and the number of other
potential purchasers; (3) dealer undertakings to make a market in the security;
and (4) the nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer). In addition, in order for commercial
paper that is issued in reliance on Section 4(2) of the Securities Act to be
considered liquid, (i) it must be rated in one of the two highest rating
categories by at least two nationally recognized statistical rating
organizations (NRSRO), or if only one NRSRO rates the securities, by that NRSRO,
or, if unrated, be of comparable quality in the view of the investment adviser;
and (ii) it must not be "traded flat" (I.E., without accrued interest) or in
default as to principal or interest. With respect to municipal lease
obligations, the investment adviser also considers: (1) the willingness of the
municipality to continue, annually or biannually, to appropriate funds for
payment of the lease; (2) the general credit quality of the municipality and the
essentiality to the municipality of the property covered by the lease; (3) in
the case of unrated municipal lease obligations, an analysis of factors similar
to that performed by nationally recognized statistical rating organizations in
evaluating the credit quality of a municipal lease obligation, including (i)
whether the lease can be cancelled; (ii) if applicable, what assurance there is
that the assets represented by the lease can be sold; (iii) the strength of the
lessee's general credit (E.G., its debt, administrative, economic and financial
characteristics); (iv) the likelihood that the municipality will discontinue
appropriating funding for the leased property because the property is no longer
deemed essential to the operations of the municipality (E.G., the potential for

B-11
<PAGE>
an event of nonappropriation); and (v) the legal recourse in the event of
failure to appropriate; and (4) any other factors unique to municipal lease
obligations as determined by the investment adviser. Repurchase agreements
subject to demand are deemed to have a maturity equal to the notice period.

The staff of the SEC has taken the position that purchased over-the-counter
options and the assets used as "cover" for written over-the-counter options are
illiquid securities unless the Fund and the counterparty have provided for the
Fund, at the Fund's election, to unwind the over-the-counter option. The
exercise of such an option ordinarily would involve the payment by the Fund of
an amount designed to reflect the counterparty's economic loss from an early
termination, but does allow the Fund to treat the assets used as "cover" as
"liquid."

SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest up to 10% of its total assets in securities of other
investment companies. The Fund does not intend to invest in such securities
during the coming fiscal year. If the Fund does invest in securities of other
investment companies, shareholders of the Fund may be subject to duplicate
management and advisory fees.

PORTFOLIO TURNOVER

As a result of the investment policies described above, the Fund may engage
in a substantial number of portfolio transactions, but the Fund's portfolio
turnover rate is not expected to exceed 200%. The portfolio turnover rate is
generally the percentage computed by dividing the lesser of portfolio purchases
or sales (excluding all securities, including options, whose maturities or
expiration date at acquisition were one year or less) by the monthly average
value of the portfolio. High portfolio turnover (over 100%) involves
correspondingly greater brokerage commissions and other transaction costs, which
are borne directly by the Fund. In addition, high portfolio turnover may also
mean that a proportionately greater amount of distributions to shareholders will
be taxed as ordinary income rather than long-term capital gains compared to
investment companies with lower portfolio turnover. See "Portfolio Transactions
and Brokerage" and "Taxes, Dividends and Distributions."

INVESTMENT RESTRICTIONS

The following restrictions are fundamental policies. Fundamental policies
are those which cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities. A "majority of the Fund's
outstanding voting securities," when used in this Statement of Additional
Information, means the lesser of (i) 67% of the voting shares represented at a
meeting at which more than 50% of the outstanding voting shares are present in
person or represented by proxy or (ii) more than 50% of the outstanding voting
shares.

The Fund may not:

1. Purchase securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of transactions);
provided that the deposit or payment by the Fund of initial or maintenance
margin in connection with futures or options is not considered the purchase
of a security on margin.

2. Make short sales of securities or maintain a short position if,
when added together, more than 25% of the value of the Fund's net assets
would be (i) deposited as collateral for the obligation to replace
securities borrowed to effect short sales and (ii) allocated to segregated
accounts in connection with short sales. Short sales "against-the-box" are
not subject to this limitation.

3. Issue senior securities, borrow money or pledge its assets, except
that the Fund may borrow from banks up to 20% of the value of its total
assets (calculated when the loan is made) for temporary, extraordinary or
emergency purposes or for the clearance of transactions. The Fund may pledge
up to 20% of the value of its total assets to secure such borrowings. For
purposes of this restriction, the purchase or sale of securities on a
when-issued or delayed delivery basis, forward foreign currency exchange
contracts and collateral and collateral arrangements relating thereto, and
collateral arrangements with respect to futures contracts and options
thereon and with respect to the writing of options and obligations of the
Fund to Directors pursuant to deferred compensation arrangements are not
deemed to be a pledge of assets or the issuance of a senior security.

B-12
<PAGE>
4. Purchase any security (other than obligations of the U.S.
Government, its agencies or instrumentalities) if as a result: (i) with
respect to 75% of the Fund's total assets, more than 5% of the Fund's total
assets (determined at the time of investment) would then be invested in
securities of a single issuer, or (ii) 25% or more of the Fund's total
assets (determined at the time of the investment) would be invested in a
single industry.

5. Buy or sell real estate or interests in real estate, except that
the Fund may purchase and sell securities which are
secured by real estate, securities of companies which invest or deal in real
estate and publicly traded securities of real estate investment trusts. The
Fund may not purchase interests in real estate limited partnerships which
are not readily marketable.

6. Buy or sell commodities or commodity contracts, except that the
Fund may purchase and sell financial futures contracts and options thereon.
(For purposes of this restriction, futures contracts on currencies and on
securities indices and forward foreign currency exchange contracts are not
deemed to be commodities or commodity contracts.)

7. Act as underwriter except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws. The Fund has not adopted
a fundamental investment policy with respect to investments in restricted
securities. See "Illiquid Securities."

8. Make investments for the purpose of exercising control or
management.

9. Invest in securities of other investment companies, except by
purchases in the open market involving only customary brokerage commissions
and as a result of which the Fund will not hold more than 3% of the
outstanding voting securities of any one investment company, will not have
invested more than 5% of its total assets in any one investment company and
will not have invested more than 10% of its total assets (determined at the
time of investment) in such securities of one or more investment companies,
or except as part of a merger, consolidation or other acquisition.

10. Invest in interests in oil, gas or other mineral exploration or
development programs, except that the Fund may invest in the securities of
companies which invest in or sponsor such programs.

11. Make loans, except through (i) repurchase agreements and (ii) loans
of portfolio securities limited to 30% of the Fund's total assets.

12. Purchase more than 10% of all outstanding voting securities of any
one issuer.

Whenever any fundamental investment policy or investment restriction states
a maximum percentage of the Fund's assets or net assets, it is intended that if
the percentage limitation is met at the time the investment is made, then a
later change in percentage resulting from changing total or net asset values
will not be considered a violation of such policy. However, in the event that
the Fund's asset coverage for borrowings falls below 300%, the Fund will take
prompt action to reduce its borrowings, as required by applicable law.

DIRECTORS AND OFFICERS

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE (1) THE FUND DURING PAST 5 YEARS
- ------------------------------ ------------------------------ -----------------------------------------------------------------
<S> <C> <C>
Edward D. Beach (73) Director President and Director of BMC Fund, Inc., a closed-end investment
company; previously, Vice Chairman of Broyhill Furniture
Industries, Inc.; Certified Public Accountant; Secretary and
Treasurer of Broyhill Family Foundation, Inc.; Member of the
Board of Trustees of Mars Hill College; and Director of The High
Yield Income Fund, Inc.
Stephen C. Eyre (75) Director Executive Director (May 1985 through December 1997) of The John
A. Hartford Foundation, Inc. (charitable foundation); Director
of Faircom, Inc.; and Trustee Emeritus of Pace University.
Delayne Dedrick Gold (59) Director Marketing and Management Consultant; Director of The High Yield
Income Fund, Inc.
</TABLE>

B-13
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE (1) THE FUND DURING PAST 5 YEARS
- ------------------------------ ------------------------------ -----------------------------------------------------------------
<S> <C> <C>
*Robert F. Gunia (51) Vice President and Director Vice President, Prudential Investments since September 1997;
Executive Vice President and Treasurer (since December 1996),
Prudential Investments Fund Management LLC (PIFM); Senior Vice
President (since March 1987) of Prudential Securities
Incorporated (Prudential Securities); formerly Chief
Administrative Officer (July 1990-September 1996), Director
(January 1989-September 1996), and Executive Vice President,
Treasurer and Chief Financial Officer (June 1987-September 1996)
of Prudential Mutual Fund Management, Inc. (PMF), Vice President
and Director (since May 1989) of The Asia Pacific Fund, Inc.;
Director of The High Yield Income Fund, Inc.
Don G. Hoff (62) Director Chairman and Chief Executive Officer (since 1980) of Intertec,
Inc. (investments); Chairman and Chief Executive Officer of The
Lamaur Corporation, Inc.; Director of Innovative Capital
Management Inc. and The Greater China Fund. Inc.; and Chairman
and Director. The Asia Pacific Fund, Inc.
Robert E. LaBlanc (63) Director President (since 1981) of Robert E. LaBlanc Associates, Inc.
(telecommunications); formerly General Partner at Salomon
Brothers and Vice Chairman of Continental Telecom; Director of
Storage Technology Corporation, Titan Corporation, Salient 3
Communications, Inc. and Tribune Company; and Trustee of
Manhattan College.
*Mendel A. Melzer (37) Director Chief Investment Officer (since October 1996) of Prudential
Mutual Funds; formerly Chief Financial Officer (November
1995-October 1996) of Prudential Investments; Senior Vice
President and Chief Financial Officer (April 1993-November 1995)
of Prudential Preferred Financial Services; Managing Director
(April 1991-April 1993) of Prudential Investment Advisors and
Senior Vice President (July 1989-April 1991) of Prudential
Capital Corporation; Chairman and Director of Prudential Series
Fund, Inc.; and Director of The High Yield Income Fund, Inc.
*Richard A. Redeker (54) President and Director Employee of Prudential Investments; formerly President, Chief
Executive Officer and Director (October 1993-September 1996),
Prudential Mutual Fund Management, Inc., Executive Vice
President, Director and Member of the Operating Committee
(October 1993-September 1996), Prudential Securities, Director
(October 1993-September 1996) of Prudential Securities Group,
Inc.; Executive Vice President (January 1994-September 1996),
The Prudential Investment Corporation, Director (January
1994-September 1996), Prudential Mutual Fund Distributors, Inc.
and Prudential Mutual Fund Services, Inc. and Senior Executive
Vice President and Director (September 1978-September 1993) of
Kemper Financial Services, Inc.; President and Director of The
High Yield Income Fund, Inc.
Robin B. Smith (58) Director Chairman and Chief Executive Officer (since August 1996), of
Publishers Clearing House; formerly President and Chief
Executive Officer (January 1989-August 1996) and President and
Chief Operating Officer (September 1981-December 1988) of
Publishers Clearing House; Director of BellSouth Corporation,
Texaco Inc., Springs Industries Inc. and Kmart Corporation.
</TABLE>

B-14
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE (1) THE FUND DURING PAST 5 YEARS
- ------------------------------ ------------------------------ -----------------------------------------------------------------
<S> <C> <C>
Stephen Stoneburn (54) Director President and Chief Executive Officer (since June 1996) of
Quadrant Media Corp. (a publishing company); formerly President
(June 1995-June 1996) of Argus Integrated Media, Inc.; Senior
Vice President and Managing Director (January 1993-1995), Cowles
Business Media; Senior Vice President (January 1991-1992) and
Publishing Vice President (May 1989-December 1990) of Gralla
Publications (a division of United Newspapers, U.K.); and Senior
Vice President of Fairchild Publications, Inc.
Nancy H. Teeters (67) Director Economist; formerly Vice President and Chief Economist (March
1986-June 1990) of International Business Machines Corporation;
member of the Board of Governors of the Horace H. Rackham School
of Graduate Studies of the University of Michigan; Director
(since July 1991) of Inland Steel Corporation, and Director of
The High Yield Income Fund, Inc.
Thomas A. Early (42) Vice President Vice President and General Counsel (since March 1997) of PMF & A;
Executive Vice President, Secretary and General Counsel (since
December 1996), PIFM; formerly Vice President and General
Counsel (March 1994-March 1997) of Prudential Retirement
Services and Associate General Counsel and Chief Financial
Services Officer (1988-1994) of Frank Russell Company.
S. Jane Rose (51) Secretary Senior Vice President (since December 1996), PIFM; Senior Vice
President and Senior Counsel (since July 1992) of Prudential
Securities; formerly Senior Vice President (January
1991-September 1996) and Senior Counsel (June 1987-September
1996) of Prudential Mutual Fund Management, Inc.
Grace C. Torres (38) Treasurer and Principal First Vice President (since December 1996) of PIFM; First Vice
Financial and Accounting President (since March 1994) of Prudential Securities; formerly
Officer First Vice President (March 1994-September 1996), Prudential
Mutual Fund Management, Inc. and Vice President (July 1989-March
1994) of Bankers Trust Corporation.
Robert C. Rosselot (37) Assistant Secretary Assistant General Counsel (since September 1997) of PIFM.
Formerly, partner with the firm of Howard & Howard, Bloomfield
Hills, Michigan (since December 1995) and, prior thereto,
Corporate Counsel, Federated Investors (1990-1995).
Stephen M. Ungerman (44) Assistant Treasurer Tax Director, (since March 1996) Prudential Investments and the
Private Asset Group of The Prudential Insurance Company of
America; formerly First Vice President, (February 1993-September
1996) Prudential Mutual Fund Management, Inc. and Senior Tax
Manager, (1981-January 1993) Price Waterhouse LLP.
</TABLE>

- ------------
(1) Unless otherwise noted the address for each of the above persons is c/o
Prudential Investments Fund Management LLC, Gateway Center Three, 100
Mulberry Street, 9th Floor, Newark, New Jersey 07102-4077.
* "Interested" director, as defined in the Investment Company Act, by reason of
his affiliation with Prudential Securities or PIFM.

B-15
<PAGE>
Directors and officers of the Fund are also trustees, directors and officers
of some or all of the other investment companies distributed by Prudential
Securities.

The officers conduct and supervise the daily business operations of the
Fund, while the Directors, in addition to their functions set forth under
"Manager" and "Distributor," oversee such actions and decide on general policy.

Pursuant to the terms of the Management Agreement with the Fund, the Manager
pays all compensation of officers and employees of the Fund as well as the fees
and expenses of all Directors of the Fund who are affiliated persons of the
Manager.

The Fund pays each of its Directors who is not an affiliated person of PIFM
annual compensation of $4,500, in addition to certain out-of-pocket expenses.
The amount of annual compensation paid to each director may change as a result
of the introduction of additional funds upon which the Director will be asked to
serve.

Directors may receive their Directors' fees pursuant to a deferred fee
agreement with the Fund. Under the terms of the agreement, the Fund accrues
daily the amount of Directors' fees which accrue interest at a rate equivalent
to the prevailing rate applicable to 90-day U.S. Treasury bills at the beginning
of each calendar quarter or, pursuant to an SEC exemptive order, at the daily
rate of return of the Fund (the Fund rate). Payment of the interest so accrued
is also deferred and accruals become payable at the option of the Director. The
Fund's obligation to make payments of deferred Directors' fees, together with
interest thereon, is a general obligation of the Fund.

The Directors have adopted a retirement policy which calls for the
retirement of Directors on December 31 of the year in which they reach the age
of 72, except that retirement is being phased in for Directors who were age 68
or older as of December 31, 1993. Under this phase-in provision, Messrs. Beach
and Eyre are scheduled to retire on December 31, 1999 and 1998, respectively.

The following table sets forth the aggregate compensation paid by the Fund
to the Directors who are not affiliated with the Manager for the fiscal year
ended October 31, 1997 and the aggregate compensation paid to such Directors for
service on the Fund's Board and that of all other investment companies managed
by PIFM (Fund Complex) for the calendar year ended December 31, 1996. Below are
listed the Directors who have served the Fund during its most recent fiscal
year.

COMPENSATION TABLE

<TABLE>
<CAPTION>
PENSION OR TOTAL
RETIREMENT COMPENSATION
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL FROM FUND AND FUND
COMPENSATION AS PART OF FUND BENEFITS UPON COMPLEX PAID
NAME AND POSITION FROM FUND@ EXPENSES RETIREMENT TO DIRECTORS(2)
- ---------------------------------------------------- ------------- ----------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Edward D. Beach--Director $ 3,750 None N/A $ 166,000(21/39)*
Stephen C. Eyre--Director $ 4,750 None N/A $ 34,250(4/5)*
Delayne D. Gold--Director $ 4,750 None N/A $ 175,308(21/42)*
Robert F. Gunia (1)--Director -- None N/A --
Don G. Hoff--Director $ 4,750 None N/A $ 50,042(5/7)*
Harry A. Jacobs, Jr.--Former Director -- None N/A --
Sidney R. Knafel--Former Director $ 1,000 None N/A $ 29,875(4/5)*
Robert F. LaBlanc--Director $ 4,750 None N/A $ 34,542(4/6)*
Mendel A. Melzer (1)--Director -- None N/A --
Thomas A. Owens, Jr.--Former Director $ 1,000 None N/A $ 86,333(9/11)*
Richard A. Redeker (1)--Director -- None N/A --
Robin B. Smith--Director $ 3,750 None N/A $ 109,294(11/20)*
Stephen Stoneburn--Director $ 3,750 None N/A $ 30,375(4/6)*
Nancy H. Teeters--Director $ 3,750 None N/A $ 103,583(11/28)*
Clay T. Whitehead--Former Director $ 1,000 None N/A $ 38,242(5/7)*
</TABLE>

- ------------------------
@ Effective January 1997, the annual compensation paid to Directors was
reduced to $4,500 in addition to certain out-of-pocket expenses.

* Indicates number of funds/portfolios in Fund Complex (including the Fund) to
which aggregate compensation relates.

(1) Directors who are "interested" do not receive compensation from Fund Complex
(including the Fund).

(2) Total compensation from all the funds in the Fund Complex for the calendar
year ended December 31, 1996, including amounts deferred at the election of
Directors under the funds' deferred compensation plans. Including accrued
interest, total deferred compensation amounted to $109,294 for Robin B.
Smith. Currently, Ms. Smith has agreed to defer some of her fees at the
T-Bill rate and other fees at the Fund rate.

B-16
<PAGE>
As of December 12, 1997, the Directors and officers of the Fund, as a group,
owned less than 1% of the outstanding common stock of the Fund.

As of December 12, 1997, the beneficial owners, directly or indirectly, of
more than 5% of the outstanding common stock of the Prudential Pacific Growth
Fund, Inc. were: Prudential Trust Co. FBO Cash Balance Pension Plan Benefits
Dept. 33rd Floor, One Seaport Plaza, New York, New York held 602,943 Class Z
shares (or approximately 39% of the outstanding Class Z shares).

As of December 12, 1997, Prudential Securities was the record holder for
other beneficial owners of 1,855,130 Class A shares (or approximately 68% of the
outstanding Class A shares), 7,700,590 Class B shares (or approximately 75% of
the outstanding Class B shares); 149,235 Class C shares (or approximately 86% of
the outstanding Class C shares) and 7,441 Class Z shares (less than 1% of the
outstanding Class Z shares) of the Fund. In the event of any meetings of
shareholders, Prudential Securities will forward, or cause the forwarding of,
proxy materials to the beneficial owners for which it is the record holder.

MANAGER

The manager of the Fund is Prudential Investments Fund Management LLC (PIFM
or the Manager) (formerly, Prudential Mutual Fund Management LLC), Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. PIFM serves as
manager to all of the other investment companies that, together with the Fund,
comprise the Prudential Mutual Funds. See "How the Fund is Managed--Manager" in
the Prospectus. As of November 30, 1997, PIFM managed and/or administered
open-end and closed-end management investment companies with assets of
approximately $60 billion. According to the Investment Company Institute, as of
August 31, 1997, the Prudential Mutual Funds were the 17th largest family of
mutual funds in the United States.

PIFM is a subsidiary of Prudential Securities. Prudential Mutual Fund
Services LLC (PMFS or the Transfer Agent), a wholly-owned subsidiary of PIFM
serves as the transfer agent for the Prudential Mutual Funds and, in addition,
provides customer service, recordkeeping and management and administration
services to qualified plans.

Pursuant to the Management Agreement with the Fund (the Management
Agreement), PIFM, subject to the supervision of the Fund's Board of Directors
and in conformity with the stated policies of the Fund, manages both the
investment operations of the Fund and the composition of the Fund's portfolio,
including the purchase, retention, disposition and loan of securities. In
connection therewith, PIFM is obligated to keep certain books and records of the
Fund. PIFM also administers the Fund's corporate affairs and, in connection
therewith, furnishes the Fund with office facilities, together with those
ordinary clerical and bookkeeping services which are not being furnished by
State Street Bank and Trust Company, the Fund's custodian, and (PMFS), the
Fund's transfer and dividend disbursing agent. The management services of PIFM
for the Fund are not exclusive under the terms of the Management Agreement and
PIFM is free to, and does, render management services to others.

For its services, PIFM receives, pursuant to the Management Agreement, a fee
at an annual rate of .75 of 1% of the Fund's average daily net assets. The fee
is computed daily and payable monthly. The Management Agreement also provides
that, in the event the expenses of the Fund (including the fees of PIFM, but
excluding interest, taxes, brokerage commissions, distribution fees and
litigation and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the Fund's business) for any fiscal year
exceed the lowest applicable annual expense limitation established and enforced
pursuant to the statutes or regulations of any jurisdiction in which the Fund's
shares are qualified for offer and sale, the compensation due to PIFM will be
reduced by the amount of such excess. Reductions in excess of the total
compensation payable to PIFM will be paid by PIFM to the Fund. No such
reductions were required during the fiscal year ended October 31, 1997.
Currently, the Fund believes that there are no such expense limitations.

In connection with its management of the corporate affairs of the Fund, PIFM
bears the following expenses:

(a) the salaries and expenses of all of its and the Fund's personnel
except the fees and expenses of Directors who are not affiliated persons of
PIFM or the Fund's investment adviser;

(b) all expenses incurred, by PIFM or by the Fund in connection with
managing the ordinary course of the Fund's business, other than those
assumed by the Fund as described below; and

(c) the costs and expenses payable to The Prudential Investment
Corporation, doing business as Prudential Investments (PI or the Subadviser)
pursuant to the Subadvisory Agreement between PIFM and PI (the Subadvisory
Agreement).

B-17
<PAGE>
Under the terms of the Management Agreement, the Fund is responsible for the
payment of the following expenses: (a) the fees payable to the Manager, (b) the
fees and expenses of Directors who are not affiliated persons of the Manager or
the Fund's investment adviser, (c) the fees and certain expenses of the
Custodian and Transfer and Dividend Disbursing Agent, including the cost of
providing records to the Manager in connection with its obligation of
maintaining required records of the Fund and of pricing the Fund's shares, (d)
the charges and expenses of legal counsel and independent accountants for the
Fund, (e) brokerage commissions and any issue or transfer taxes chargeable to
the Fund in connection with its securities transactions, (f) all taxes and
corporate fees payable by the Fund to governmental agencies, (g) the fees of any
trade associations of which the Fund may be a member, (h) the cost of stock
certificates representing shares of the Fund, (i) the cost of fidelity and
liability insurance, (j) certain organization expenses of the Fund and the fees
and expenses involved in registering and maintaining registration of the Fund
and of its shares with the SEC, registering the Fund and qualifying its shares
under state securities laws, including the preparation and printing of the
Fund's registration statements and prospectuses for such purposes, and paying
the fees and expenses of notice filings made in accordance with State securities
law, (k) allocable communications expenses with respect to investor services and
all expenses of shareholders' and Directors' meetings and of preparing, printing
and mailing reports, proxy statements and prospectuses to shareholders in the
amount necessary for distribution to the shareholders, (l) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business and (m) distribution fees.

The Management Agreement provides that PIFM will not be liable for any error
of judgment or for any loss suffered by the Fund in connection with the matters
to which the Management Agreement relates, except a loss resulting from willful
misfeasance, bad faith, gross negligence or reckless disregard of duty. The
Management Agreement provides that it will terminate automatically if assigned,
and that it may be terminated without penalty by either party upon not more than
60 days' nor less than 30 days' written notice. The Management Agreement will
continue in effect for a period of more than two years from the date of
execution only so long as such continuance is specifically approved at least
annually in conformity with the Investment Company Act.

For the fiscal years ended October 31, 1997, 1996 and 1995, PIFM received
management fees of $2,676,801, $3,682,994 and $3,542,363, respectively.

PIFM has entered into the Subadvisory Agreement with PI. The Subadvisory
Agreement provides that PI will furnish investment advisory services in
connection with the management of the Fund. In connection therewith, PI is
obligated to keep certain books and records of the Fund. PIFM continues to have
responsibility for all investment advisory services pursuant to the Management
Agreement and supervises PI's performance of such services. PI is reimbursed by
PIFM for the reasonable costs and expenses incurred by PI in furnishing those
services.

The Subadvisory Agreement provides that it will terminate in the event of
its assignment (as defined in the Investment Company Act) or upon the
termination of the Management Agreement. The Subadvisory Agreement may be
terminated by the Fund, PIFM or PI upon not more than 60 days', nor less than 30
days', written notice. The Subadvisory Agreement provides that it will continue
in effect for a period of more than two years from its execution only so long as
such continuance is specifically approved at least annually in accordance with
the requirements of the Investment Company Act.

DISTRIBUTOR

Prudential Securities Incorporated (Prudential Securities, PSI or the
Distributor), One Seaport Plaza, New York, New York 10292, acts as the
distributor of the Class A, Class B, Class C and Class Z shares of the Fund.

Pursuant to separate Distribution and Service Plans (the Class A Plan, the
Class B Plan and the Class C Plan, collectively, the Plans) adopted by the Fund
under Rule 12b-1 under the Investment Company Act and separate distribution
agreements (the Distribution Agreements), Prudential Securities (the
Distributor) incurs the expenses of distributing the Fund's Class A, Class B and
Class C shares. Prudential Securities serves as the Distributor of the Class Z
shares and incurs the expenses of distributing the Fund's Class Z shares under a
Distribution Agreement with the Fund, none of which are reimbursed or paid for
by the Fund. See "How the Fund is Managed--Distributor" in the Prospectus.

CLASS A PLAN. For the fiscal year ended October 31, 1997, Prudential
Securities received payments of $184,855 from the Fund, under the Class A Plan.
This amount was expended on commission credits to Prudential Securities and
Pruco Securities

B-18
<PAGE>
Corporation, an affiliated broker-dealer (Prusec), for payments of commissions
and account servicing fees to financial advisers and other persons who sell
Class A shares. For the fiscal year ended October 31, 1997, PSI also received
approximately $75,000 in initial sales charges.

CLASS B PLAN. For the fiscal year ended October 31, 1997, Prudential
Securities received $2,444,629 from the Fund under the Class B Plan and spent
approximately $1,028,700 in distributing the Class B shares of the Fund. It is
estimated that of the latter amount approximately $27,700 (2.7%) was spent on
printing and mailing of prospectuses to other than current shareholders; $98,200
(9.5%) on compensation to Prusec for commissions to its representatives and
other expenses, including an allocation on account of overhead and other branch
office distribution-related expenses incurred by it for distribution of Class B
shares; and $902,800 (87.8%) on the aggregate of (i) payments of commissions and
account servicing fees to its financial advisers ($424,000 or 41.2%) and (ii) an
allocation on account of overhead and other branch office distribution-related
expenses ($478,800 or 46.6%). The term "overhead and other branch office
distribution-related expenses" as used herein represents (a) the expenses of
operating Prusec's and Prudential Securities' branch offices in connection with
the sale of Fund shares, including lease costs, the salaries and employee
benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies, (b) the costs of
client sales seminars, (c) expenses of mutual fund sales coordinators to promote
the sale of Fund shares, and (d) other incidental expenses relating to branch
promotion of Fund sales.

Prudential Securities also receives the proceeds of contingent deferred
sales charges paid by holders of Class B shares upon certain redemptions of
Class B shares. See "Shareholder Guide--How to Sell Your Shares--Contingent
Deferred Sales Charges" in the Prospectus. For the fiscal year ended October 31,
1997, Prudential Securities received approximately $1,398,000 in contingent
deferred sales charges.

CLASS C PLAN. For the fiscal year ended October 31, 1997, Prudential
Securities received $65,568 from the Fund under the Class C Plan and spent
approximately $76,700 in distributing the Class C shares of the Fund. It is
estimated that of the latter amount approximately $12,700 (16.6%) was spent on
printing and mailing of prospectuses to other than current shareholders; $400
(.5%) on compensation to Prusec for commissions to its representatives and other
expenses, including an allocation on account of overhead and other branch office
distribution-related expenses incurred by it for distribution of Class C shares;
and $63,600 (82.9%) on the aggregate of (i) payments of commissions and account
servicing fees to its financial advisers ($47,500 or 61.9%) and (ii) an
allocation on account of overhead and other branch office distribution-related
expenses ($16,100 or 21%).

Prudential Securities also receives the proceeds of contingent deferred
sales charges paid by investors upon certain redemptions of Class C shares. See
"Shareholder Guide--How to Sell Your Shares--Contingent Deferred Sales Charges"
in the Prospectus. For the fiscal year ended October 31, 1997, Prudential
Securities received contingent deferred sales charges of approximately $40,000.

The Class A, Class B and Class C Plans will continue in effect from year to
year, provided that each such continuance is approved at least annually by a
vote of the Board of Directors, including a majority vote of the Rule 12b-1
Directors, cast in person at a meeting called for the purpose of voting on such
continuance. The Plans may each be terminated at any time, without penalty, by
the vote of a majority of the Rule 12b-1 Directors or by the vote of the holders
of a majority of the outstanding shares of the applicable class on not more than
30 days' written notice to any other party to the Plans. The Plans may not be
amended to increase materially the amounts to be spent for the services
described therein without approval by the shareholders of the applicable class
(by both Class A and Class B shareholders, voting separately, in the case of
material amendments to the Class A Plan), and all material amendments are
required to be approved by the Board of Directors in the manner described above.
Each Plan will automatically terminate in the event of its assignment. The Fund
will not be contractually obligated to pay expenses incurred under any Plan if
it is terminated or not continued.

Pursuant to each Plan, the Board of Directors will review at least quarterly
a written report of the distribution expenses incurred on behalf of each class
of shares of the Fund by the Distributor. The report includes an itemization of
the distribution expenses and the purposes of such expenditures. In addition, as
long as the Plans remain in effect, the selection and nomination of Rule 12b-1
Directors shall be committed to the Rule 12b-1 Directors.

NASD MAXIMUM SALES CHARGE RULE. Pursuant to rules of the NASD, the
Distributor is required to limit aggregate initial sales charges, deferred sales
charges and asset-based sales charges to 6.25% of total gross sales of each
class of shares. Interest charges on unreimbursed distribution expenses equal to
the prime rate plus one percent per annum may be added to the 6.25% limitation.
Sales from the reinvestment of dividends and distributions are not required to
be included in the calculation of

B-19
<PAGE>
the 6.25% limitation. The annual asset-based sales charge on shares of the Fund
may not exceed .75 of 1% per class. The 6.25% limitation applies to the Fund
rather than on a per shareholder basis. If aggregate sales charges were to
exceed 6.25% of total gross sales of any class, all sales charges on shares of
that class would be suspended.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Manager is responsible for decisions to buy and sell securities, futures
and options on securities and futures for the Fund, the selection of brokers,
dealers and futures commission merchants to effect the transactions and the
negotiation of brokerage commissions, if any. The term "Manager" as used in this
section includes the Subadviser. On a national securities exchange,
broker-dealers may receive negotiated brokerage commissions on Fund portfolio
transactions, including options and the purchase and sale of underlying
securities upon the exercise of options. On foreign securities exchanges,
commissions may be fixed. Orders may be directed to any broker or futures
commission merchant including, to the extent and in the manner permitted by
applicable law, Prudential Securities and its affiliates.

Equity securities traded in the over-the-counter market and bonds, including
convertible bonds, are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. On occasion, certain money market instruments and U.S.
Government agency securities may be purchased directly from the issuer, in which
case no commissions or discounts are paid. The Fund will not deal with
Prudential Securities or any affiliate in any transaction in which Prudential
Securities or any affiliate acts as principal. Thus, it will not deal with
Prudential Securities acting as market maker, and it will not execute a
negotiated trade with Prudential Securities if execution involves Prudential
Securities' acting as principal with respect to any part of the Fund's order.

In placing orders for portfolio securities of the Fund, the Manager is
required to give primary consideration to obtaining the most favorable price and
efficient execution. Within the framework of this policy, the Manager will
consider the research and investment services provided by brokers, dealers or
futures commission merchants who effect or are parties to portfolio transactions
of the Fund, the Manager or the Manager's other clients. Such research and
investment services are those which brokerage houses customarily provide to
institutional investors and include statistical and economic data and research
reports on particular companies and industries. Such services are used by the
Manager in connection with all of its investment activities, and some of such
services obtained in connection with the execution of transactions for the Fund
may be used in managing other investment accounts. Conversely, brokers, dealers
or futures commission merchants furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets are far
larger than the Fund's, and the services furnished by such brokers, dealers or
futures commission merchants may be used by the Manager in providing investment
management for the Fund. Commission rates are established pursuant to
negotiations with the broker, dealer or futures commission merchant based on the
quality and quantity of execution services provided by the broker in the light
of generally prevailing rates. The Manager's policy is to pay higher commissions
to brokers, other than Prudential Securities, for particular transactions than
might be charged if a different broker had been selected, on occasions when, in
the Manager's opinion, this policy furthers the objective of obtaining best
price and execution. In addition, the Manager is authorized to pay higher
commissions on brokerage transactions for the Fund to brokers other than
Prudential Securities in order to secure research and investment services
described above, subject to review by the Fund's Board of Directors from time to
time as to the extent and continuation of this practice. The allocation or
orders among brokers and the commission rates paid are reviewed periodically by
the Fund's Board of Directors. The Fund will not pay up for research in
principal transactions.

Portfolio securities may not be purchased from any underwriting or selling
syndicate of which Prudential Securities, or any affiliate, during the existence
of the syndicate, is a principal underwriter (as defined in the Investment
Company Act), except in accordance with rules of the SEC. This limitation, in
the opinion of the Fund, will not significantly affect the Fund's ability to
pursue its present investment objective. However, in the future in other
circumstances, the Fund may be at a disadvantage because of this limitation in
comparison to other funds with similar objectives but not subject to such
limitations.

Subject to the above considerations, Prudential Securities may act as a
securities broker or futures commission merchant for the Fund. In order for
Prudential Securities (or any affiliate) to effect any portfolio transactions
for the Fund, the commissions, fees or other remuneration received by Prudential
Securities (or any affiliate) must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers or futures
commission merchants in connection with comparable transactions involving
similar securities or futures being purchased or sold on an exchange during a
comparable period of time.

B-20
<PAGE>
This standard would allow Prudential Securities (or any affiliate) to receive no
more than the remuneration which would be expected to be received by an
unaffiliated broker or futures commission merchant in a commensurate
arm's-length transaction. Furthermore, the Board of Directors of the Fund,
including a majority of the noninterested Directors, has adopted procedures
which are reasonably designed to provide that any commissions, fees or other
remuneration paid to Prudential Securities (or any affiliate) are consistent
with the foregoing standard. In accordance with Section 11(a) of the Securities
Exchange Act of 1934, Prudential Securities may not retain compensation for
effecting transactions on a national securities exchange for the Fund unless the
Fund has expressly authorized the retention of such compensation. Prudential
Securities must furnish to the Fund at least annually a statement setting forth
the total amount of all compensation retained by Prudential Securities from
transactions effected for the Fund during the applicable period. Brokerage and
futures transactions with Prudential Securities (or any affiliate) are also
subject to such fiduciary standards as may be imposed upon Prudential Securities
(or such affiliate) by applicable law.

For the fiscal years ended October 31, 1997, 1996 and 1995 the Fund paid
brokerage commissions of $3,049,345, $3,489,060 and $2,136,278, respectively.
During the fiscal years ended October 31, 1997 and 1996, $4,475 and $85,679,
respectively, of such commissions were paid to Prudential Securities. No
commissions were paid to Prudential Securities in the fiscal year ended October
31, 1995.

The table presented below shows certain information regarding the payment of
commissions by Prudential Pacific Growth Fund, Inc., including the amount of
such commissions paid to Prudential Securities, for the three year period ended
October 31, 1997.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED OCTOBER 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Total brokerage commissions paid by the Fund............... $ 3,049,345 $ 3,489,060 $ 2,136,278
Total brokerage commissions paid to Prudential Securities.. $ 4,475 $ 85,679 $ 0
Percentage of total brokerage commissions paid to
Prudential Securites...................................... .1% 2.5% 0%
Percentage of total dollar amount of transactions involving
commissions that were effected through Prudential
Securities................................................ .2% 2.1% 0%
</TABLE>

Of the total brokerage commissions, $0 or 0% were paid to firms which
provided research, statistical or other services to PIFM during the fiscal year
ended October 31, 1997. PIFM has not separately identified a portion of such
brokerage commissions as allocable to the provision of such research,
statistical or other services.

PURCHASE AND REDEMPTION OF FUND SHARES

Shares of the Fund may be purchased at a price equal to the next determined
net asset value (NAV) per share plus a sales charge which, at the election of
the investor, may be imposed either (i) at the time of purchase (Class A shares)
or (ii) on a deferred basis (Class B or Class C shares). Class Z shares of the
Fund are offered to a limited group of investors at NAV without any sales
charge. See "Shareholder Guide--How to Buy Shares of the Fund" in the
Prospectus.

Each class of shares represents an interest in the same assets of the Fund
and is identical in all respects except that (i) each class is subject to
different sales charges and distribution and/or service fees (except for Class Z
shares, which are not subject to any sales charge or distribution and/or service
fee), which may affect performance, (ii) each class has exclusive voting rights
on any matter submitted to shareholders that relates solely to its arrangement
and has separate voting rights on any matter submitted to shareholders in which
the interests of one class differ from the interests of any other class, (iii)
each class has a different exchange privilege, (iv) only class B shares have a
conversion feature and (v) Class Z shares are offered exclusively for sale to a
limited group of investors. See "Distributor" and "Shareholder Investment
Account--Exchange Privilege."

ISSUANCE OF FUND SHARES FOR SECURITIES

Transactions involving the issuance of Fund shares for securities (rather
than cash) will be limited to (i) reorganizations, (ii) statutory mergers, or
(iii) other acquisitions of portfolio securities that: (a) meet the investment
objective and policies of the Fund, (b) are liquid and not subject to
restrictions on resale, and (c) have a value that is readily ascertainable via
listing on or trading in a recognized United States or international exchange or
market.

B-21
<PAGE>
SPECIMEN PRICE MAKE-UP

Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold at a maximum sales charge of 5% and Class
B*, Class C* and Class Z shares are sold at net asset value. Using the Fund's
net asset value at October 31, 1997, the maximum offering price of the Fund's
shares is as follows:

<TABLE>
<S> <C>
CLASS A
Net asset value and redemption price per Class A share...... $12.22
Maximum sales charge (5% of offering price)................. $ .64
------
Offering price to public.................................... $12.86
------
------
CLASS B
Net asset value, offering price and redemption price per
Class B share*............................................. $11.77
------
------
CLASS C
Net asset value, offering price and redemption price per
Class C share*............................................. $11.77
------
------
CLASS Z
Net asset value, offering price and redemption price per
Class Z share.............................................. $12.28
------
------
</TABLE>

-------------------
* Class B and Class C shares are subject to a contingent deferred sales
charge on certain redemptions. See "Shareholder Guide--How to Sell Your
Shares--Contingent Deferred Sales Charges" in the Prospectus.

REDUCTION OR WAIVER OF INITIAL SALES CHARGES--CLASS A SHARES

COMBINED PURCHASE AND CUMULATIVE PURCHASE PRIVILEGE. If an investor or
eligible group of related investors purchases Class A shares of the Fund
concurrently with Class A shares of other Prudential Mutual Funds, the purchases
may be combined to take advantage of the reduced sales charges applicable to
larger purchases. See the table of breakpoints under "Shareholder
Guide--Alternative Purchase Plan--Class A Shares" in the Prospectus.

An eligible group of related Fund investors includes any combination of the
following:

(a) an individual;

(b) the individual's spouse, their children and their parents;

(d) any company controlled by the individual (a person, entity or group
that holds 25% or more of the outstanding voting securities of a company
will be deemed to control the company, and a partnership will be deemed to
be controlled by each of its general partners);

(e) a trust created by the individual, the beneficiaries of which are
the individual, his or her spouse, parents or children;

(f) a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act
account created by the individual or the individual's spouse; and

(g) one or more employee benefit plans of a company controlled by an
individual.

In addition, an eligible group of related Fund investors may include an
employer (or group of related employers) and one or more qualified retirement
plans of such employer or employers (an employer controlling, controlled by or
under common control with another employer is deemed related to that employer).

The Distributor must be notified at the time of purchase that the investor
is entitled to a reduced sales charge. The reduced sales charge will be granted
subject to confirmation of the investor's holdings. The Combined Purchase and
Cumulative Purchase Privilege does not apply to individual participants in any
retirement or group plans.

RIGHTS OF ACCUMULATION. Reduced sales charges are also available through
Rights of Accumulation, under which an investor or an eligible group of related
investors, as described above under "Combined Purchase and Cumulative Purchase
Privilege," may aggregate the value of their existing holdings of shares of the
Fund and shares of other Prudential Mutual Funds (excluding money market funds
other than those acquired pursuant to the exchange privilege) to determine the
reduced sales charge. However, the value of shares held directly with the
Transfer Agent and through Prudential Securities will not be

B-22
<PAGE>
aggregated to determine the reduced sales charge. All shares must be held either
directly with the Transfer Agent or through Prudential Securities. The value of
existing holdings for purposes of determining the reduced sales charge is
calculated using the maximum offering price (NAV plus maximum sales charge) as
of the previous business day. See "How the Fund Values its Shares" in the
Prospectus. The Distributor must be notified at the time of purchase that the
investor is entitled to a reduced sales charge. The reduced sales charges will
be granted subject to confirmation of the investor's holdings. Rights of
Accumulation are not available to individual participants in any retirement or
group plans.

LETTERS OF INTENT. Reduced sales charges are available to investors (or an
eligible group of related investors), including retirement and group plans, who
enter into a written Letter of Intent providing for the purchase, within a
thirteen-month period, of shares of the Fund and shares of other Prudential
Mutual Funds (Investment Letter of Intent). Retirement and group plans may also
qualify to purchase Class A shares at NAV by entering into a Letter of Intent
whereby they agree to enroll, within a thirteen month period, a specified number
of eligible employees or participants (Participant Letter of Intent).

For purposes of the Investment Letter of Intent, all shares of a Fund and
shares of other Prudential Mutual Funds (excluding money market funds other than
those acquired pursuant to the exchange privilege) which were previously
purchased and are still owned are also included in determining the applicable
reduction. However, the value of shares held directly with the Transfer Agent
and through Prudential Securities will not be aggregated to determine the
reduced sales charge. All shares must be held either directly with the Transfer
Agent or through Prudential Securities.

A Letter of Intent permits a purchaser, in the case of an Investment Letter
of Intent, to establish a total investment goal to be achieved by any number of
investments over a thirteen-month period, and in the case of a Participant
Letter of Intent, to establish a minimum eligible employee or participant
enrollment goal over a thirteen-month period. Each investment made during the
period, in the case of an Investment Letter of Intent, will receive the reduced
sales charge applicable to the amount represented by the goal, as if it were a
single investment. In the case of a Participant Letter of Intent, each
investment made during the period will be made at net asset value. Escrowed
Class A shares totaling 5% of the dollar amount of the Letter of Intent will be
held by the Transfer Agent in the name of the purchaser, except in the case of
retirement and group plans where the employer or plan sponsor will be
responsible for paying any applicable sales charge. The effective date of an
Investment Letter of Intent (except in the case of retirement and group plans)
may be back-dated up to 90 days, in order that any investments made during this
90-day period, valued at the purchaser's cost, can be applied to the fulfillment
of the Letter of Intent goal.

The Investment Letter of Intent does not obligate the investor to purchase,
nor the Fund to sell, the indicated amount. Similarly, the Participant Letter of
Intent does not obligate the retirement or group plan to enroll the indicated
number of eligible employees or participants. In the event the Letter of Intent
goal is not achieved within the thirteen-month period, the purchaser (or the
employer or plan sponsor in the case of any retirement or group plan) is
required to pay the difference between the sales charge otherwise applicable to
the purchases made during this period and sales charges actually paid. Such
payment may be made directly to the Distributor or, if not paid, the Distributor
will liquidate sufficient escrowed shares to obtain such difference. Investors
electing to purchase Class A shares of a Fund pursuant to a Letter of Intent
should carefully read such Letter of Intent.

The Distributor must be notified at the time of purchase that the investor
is entitled to a reduced sales charge. The reduced sales charge will, in the
case of an Investment Letter of Intent, be granted subject to confirmation of
the investor's holdings or, in the case of a Participant Letter of Intent,
subject to confirmation of the number of eligible employees or participants in
the retirement or group plan. Letters of Intent are not available to individual
participants in any retirement or group plans.

B-23
<PAGE>
WAIVER OF THE CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES.

The contingent deferred sales charge is waived under circumstances described
in the Prospectus. See "Shareholder Guide--How to Sell Your Shares--Waiver of
Contingent Deferred Sales Charges--Class B Shares" in the Prospectus. In
connection with these waivers, the Transfer Agent will require you to submit the
supporting documentation set forth below.

<TABLE>
<CAPTION>
CATEGORY OF WAIVER REQUIRED DOCUMENTATION
<S> <C>
Death A copy of the shareholder's death certificate or,
in the case of a trust, a copy of the grantor's
death certificate, plus a copy of the trust
agreement identifying the grantor.
Disability--An individual will be A copy of the Social Security Administration award
considered disabled if he or she is letter or a letter from a physician on the
unable to engage in any substantial physician's letterhead stating that the shareholder
gainful activity by reason of any (or, in the case of a trust, the grantor) is
medically determinable physical or permanently disabled. The letter must also indicate
mental impairment which can be expected the date of disability.
to result in death or to be of
long-continued and indefinite duration.
Distribution from an IRA or 403(b) A copy of the distribution form from the custodial
Custodial Account firm indicating (i) the date of birth of the
shareholder and (ii) that the shareholder is over
age 59 1/2 and is taking a normal
distribution--signed by the shareholder.
Distribution from Retirement Plan A letter signed by the plan administrator/trustee
indicating the reason for the distribution.
Excess Contributions A letter from the shareholder (for an IRA) or the
plan administrator/ trustee on company letterhead
indicating the amount of the excess and whether or
not taxes have been paid.
</TABLE>

The Transfer Agent reserves the right to request such additional documents
as it may deem appropriate.

QUANTITY DISCOUNT--CLASS B SHARES PURCHASED PRIOR TO AUGUST 1, 1994. The
CDSC is reduced on redemptions of Class B shares of the Fund purchased prior to
August 1, 1994 if immediately after a purchase of such shares, the aggregate
cost of all Class B shares of the Fund owned by you in a single account exceeded
$500,000. For example, if you purchased $100,000 of Class B shares of the Fund
in one year and an additional $450,000 of Class B shares in the following year,
with the result that the aggregate cost of your Class B shares of the Fund
following the second purchase was $550,000, the quantity discount would be
available for the second purchase of $450,000 but not for the first purchase of
$100,000. The quantity discount will be imposed at the following rates depending
on whether the aggregate value exceeded $500,000 or $1 million:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF DOLLARS INVESTED
OR REDEMPTION PROCEEDS
YEAR SINCE PURCHASE ------------------------------------------
PAYMENT MADE $500,001 TO $1 MILLION OVER $1 MILLION
-------------------- ----------------------- -----------------
<S> <C> <C>
First........................................................... 3.0% 2.0%
Second.......................................................... 2.0% 1.0%
Third........................................................... 1.0% 0%
Fourth and thereafter........................................... 0% 0%
</TABLE>

You must notify the Fund's Transfer Agent either directly or through
Prudential Securities or Prusec, at the time of redemption, that you are
entitled to the reduced CDSC. The reduced CDSC will be granted subject to
confirmation of your holdings.

SHAREHOLDER INVESTMENT ACCOUNT

Upon the initial purchase of Fund shares, a Shareholder Investment Account
is established for each investor under which a record of the shares held is
maintained by the Transfer Agent. If a stock certificate is desired, it must be
requested in writing for

B-24
<PAGE>
each transaction. Certificates are issued only for full shares and may be
redeposited in the Account at any time. There is no charge to the investor for
the issuance of a certificate. The Fund makes available to its shareholders the
following privileges and plans.

AUTOMATIC REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. For the convenience
of investors, all dividends and distributions are automatically reinvested in
full and fractional shares of the Fund. An investor may direct the Transfer
Agent in writing not less than five full business days prior to the record date
to have subsequent dividends or distributions sent in cash rather than
reinvested. In the case of recently purchased shares for which registration
instructions have not been received on the record date, cash payment will be
made directly to the dealer. Any shareholder who receives a cash payment
representing a dividend or distribution may reinvest such dividend or
distribution at NAV by returning the check or the proceeds to the Transfer Agent
within 30 days after the payment date. Such investment will be made at the NAV
per share next determined after receipt of the check or proceeds by the Transfer
Agent. Such shareholder will receive credit for any CDSC paid in connection with
the amount of proceeds being reinvested.

EXCHANGE PRIVILEGE. The Fund makes available to its shareholders the
privilege of exchanging their shares of the Fund for shares of certain other
Prudential Mutual Funds, including one or more specified money market funds,
subject in each case to the minimum investment requirements of such funds.
Shares of such other Prudential Mutual Funds may also be exchanged for shares of
the Fund. All exchanges are made on the basis of the relative NAV next
determined after receipt of an order in proper form. An exchange will be treated
as a redemption and purchase for tax purposes. Shares may be exchanged for
shares of another fund only if shares of such fund may legally be sold under
applicable state laws. For retirement and group plans having a limited menu of
Prudential Mutual Funds, the Exchange Privilege is available for those funds
eligible for investment in the particular program.

It is contemplated that the Exchange Privilege may be applicable to new
mutual funds whose shares may be distributed by the Distributor.

CLASS A. Shareholders of the Fund may exchange their Class A shares for
Class A shares of certain other Prudential Mutual Funds, shares of Prudential
Structured Maturity Fund and Prudential Government Securities Trust
(Short-Intermediate Term Series) and shares of the money market funds specified
below. No fee or sales load will be imposed upon the exchange. Shareholders of
money market funds who acquired such shares upon exchange of Class A shares may
use the Exchange Privilege only to acquire Class A shares of the Prudential
Mutual Funds participating in the Exchange Privilege.

The following money market funds participate in the Class A Exchange
Privilege:

Prudential California Municipal Fund
(California Money Market Series)
Prudential Government Securities Trust
(Money Market Series)
(U.S. Treasury Money Market Series)
Prudential Municipal Series Fund
(Connecticut Money Market Series)
(Massachusetts Money Market Series)
(New Jersey Money Market Series)
(New York Money Market Series)
Prudential MoneyMart Assets, Inc. (Class A shares)
Prudential Tax-Free Money Fund, Inc.

CLASS B AND CLASS C. Shareholders of the Fund may exchange their Class B and
Class C shares for Class B and Class C shares, respectively, of certain other
Prudential Mutual Funds and shares of Prudential Special Money Market Fund,
Inc., a money market fund. No CDSC will be payable upon such exchange, but a
CDSC may be payable upon the redemption of Class B and Class C shares acquired
as a result of the exchange. The applicable sales charge will be that imposed by
the fund in which shares were initially purchased and the purchase date will be
deemed to be the date of the initial purchase, rather than the date of the
exchange.

B-25
<PAGE>
Class B and Class C shares of the Fund may also be exchanged for shares of
an eligible money market fund without imposition of any CDSC at the time of
exchange. Upon subsequent redemption from such money market fund or after re-
exchange into the Fund, such shares will be subject to the CDSC calculated
without regard to the time such shares were held in the money market fund. In
order to minimize the period of time in which shares are subject to a CDSC,
shares exchanged out of the money market fund will be exchanged on the basis of
their remaining holding periods, with the longest remaining holding periods
being transferred first. In measuring the time period shares are held in a money
market fund and "tolled" for purposes of calculating the CDSC holding period,
exchanges are deemed to have been made on the last day of the month. Thus, if
shares are exchanged into the Fund from a money market fund during the month
(and are held in the Fund at the end of the month), the entire month will be
included in the CDSC holding period. Conversely, if shares are exchanged into a
money market fund prior to the last day of the month (and are held in the money
market fund on the last day of the month), the entire month will be excluded
from the CDSC holding period. For purposes of calculating the seven year holding
period applicable to the Class B conversion feature, the time period during
which Class B shares were held in a money market fund will be excluded.

At any time after acquiring shares of other funds participating in the Class
B or Class C exchange privilege, a shareholder may again exchange those shares
(and any reinvested dividends and distributions) for Class B or Class C shares
of the Fund, respectively, without subjecting such shares to any CDSC. Shares of
any fund participating in the Class B or Class C exchange privilege that were
acquired through reinvestment of dividends or distributions may be exchanged for
Class B or Class C shares of other funds, respectively, without being subject to
any CDSC.

CLASS Z. CLASS Z SHARES MAY BE EXCHANGED FOR CLASS Z SHARES OF OTHER
PRUDENTIAL MUTUAL FUNDS.

Additional details about the Exchange Privilege and prospectuses for each of
the Prudential Mutual Funds are available from the Fund's Transfer Agent,
Prudential Securities or Prusec.

The Exchange Privilege may be modified, terminated or suspended on 60 days'
notice, and any fund, including the Fund, or the Distributor, has the right to
reject any exchange application relating to such fund's shares.

DOLLAR COST AVERAGING

Dollar cost averaging is a method of accumulating shares by investing a
fixed amount of dollars in shares at set intervals. An investor buys more shares
when the price is low and fewer shares when the price is high. The average cost
per share is lower than it would be if a constant number of shares were bought
at set intervals.

Dollar cost averaging may be used, for example, to plan for retirement, to
save for a major expenditure, such as the purchase of a home, or to finance a
college education. The cost of a year's education at a four-year college today
averages around $14,000 at a private college and around $6,000 at a public
university. Assuming these costs increase at a rate of 7% a year, as has been
projected, for the freshman class beginning in 2011, the cost of four years at a
private college could reach $210,000 and over $90,000 at a public university.(1)

The following chart shows how much you would need in monthly investments to
achieve specified lump sums to finance your investment goals.(2)

<TABLE>
<CAPTION>
PERIOD OF
MONTHLY INVESTMENTS: $100,000 $150,000 $200,000 $250,000
- ---------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
25 Years................................ $ 110 $ 165 $ 220 $ 275
20 Years................................ 176 264 352 440
15 Years................................ 296 444 592 740
10 Years................................ 555 833 1,110 1,388
5 Years................................ 1,371 2,057 2,742 3,428
</TABLE>

See "Automatic Savings Accumulation Plan."
- ------------

(1)Source information concerning the costs of education at public and
private universities is available from The College Board Annual Survey of
Colleges, 1993. Average costs for private institutions include tuition, fees,
room and board for the 1993-1994 academic year.

(2)The chart assumes an effective rate of return of 8% (assuming monthly
compounding). This example is for illustrative purposes only and is not intended
to reflect the performance of an investment in shares of the Fund. The
investment return and principal value of an investment will fluctuate so that an
investor's shares when redeemed may be worth more or less than their original
cost.

B-26
<PAGE>
AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP). Under ASAP, an investor may
arrange to have a fixed amount automatically invested in shares of the Fund
monthly by authorizing his or her bank account or Prudential Securities Account
(including a Command Account) to be debited to invest specified dollar amounts
in shares of the Fund. The investor's bank must be a member of the Automatic
Clearing House System. Stock certificates are not issued to ASAP participants.

Further information about this program and an application form can be
obtained from the Transfer Agent, Prudential Securities or Prusec.

SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available to
shareholders through Prudential Securities or the Transfer Agent. Such
withdrawal plan provides for monthly or quarterly checks in any amount, except
as provided below, up to the value of the shares in the shareholder's account.
Withdrawals of Class B or Class C shares may be subject to a CDSC. See
"Shareholder Guide--How to Sell Your Shares--Contingent Deferred Sales Charges"
in the Prospectus.

In the case of shares held through the Transfer Agent (i) a $10,000 minimum
account value applies, (ii) withdrawals may not be for less than $100 and (iii)
the shareholder must elect to have all dividends and/or distributions
automatically reinvested in additional full and fractional shares at NAV on
shares held under this plan. See "Shareholder Investment Account--Automatic
Reinvestment of Dividends and/or Distributions."

Prudential Securities and the Transfer Agent act as agents for the
shareholder in redeeming sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment. The systematic withdrawal plan may be
terminated at any time, and the Distributor reserves the right to initiate a fee
of up to $5 per withdrawal, upon 30 days' written notice to the shareholder.

Withdrawal payments should not be considered as dividends, yield or income.
If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.

Furthermore, each withdrawal constitutes a redemption of shares, and any
gain or loss realized must be recognized for federal income tax purposes. In
addition, withdrawals made concurrently with purchases of additional shares are
inadvisable because of the sales charges applicable to (i) the purchase of Class
A shares and (ii) the withdrawal of Class B and Class C shares. Each shareholder
should consult his or her own tax adviser with regard to the tax consequences of
the plan, particularly if used in connection with a retirement plan.

TAX-DEFERRED RETIREMENT PLANS. Various qualified retirement plans, including
a 401(k) plan, self-directed individual retirement accounts and "tax-deferred
accounts" under Section 403(b)(7) of the Internal Revenue Code are available
through the Distributor. These plans are for use by both self-employed
individuals and corporate employers. These plans permit either self-direction of
accounts by participants, or a pooled account arrangement. Information regarding
the establishment of these plans, and the administration, custodial fees and
other details are available fom Prudential Securities or the Transfer Agent.

Investors who are considering the adoption of such a plan should consult
with their own legal counsel or tax adviser with respect to the establishment
and maintenance of any such plan.

TAX-DEFERRED RETIREMENT ACCOUNTS

INDIVIDUAL RETIREMENT ACCOUNTS. An individual retirement account (IRA)
permits the deferral of federal income tax on income earned in the account until
the earnings are withdrawn. The following chart represents a comparison of the
earnings in a personal savings account with those in an IRA, assuming a $2,000
annual contribution, an 8% rate of return and a 39.6% federal income tax bracket
and shows how much more retirement income can accumulate within an IRA as
opposed to a taxable individual savings account.

B-27
<PAGE>
TAX-DEFERRED COMPOUNDING(1)

<TABLE>
<CAPTION>
CONTRIBUTIONS PERSONAL
MADE OVER: SAVINGS IRA
------------------ --------- ---------
<S> <C> <C>
10 years $ 26,165 $ 31,291
15 years 44,676 58,649
20 years 68,109 98,846
25 years 97,780 157,909
30 years 135,346 244,692
</TABLE>

- ------------
(1)The chart is for illustrative purposes only and does not represent the
performance of the Fund or any specific investment. It shows taxable versus
tax-deferred compounding for the periods and on the terms indicated. Earnings in
a traditional IRA account will be subject to tax when withdrawn from the
account. Distributions from a Roth IRA which meets the conditions required under
the Internal Revenue Code will not be subject to tax upon withdrawal from the
account.

MUTUAL FUND PROGRAMS

From time to time, the Fund may be included in a mutual fund program with
other Prudential Mutual Funds. Under such a program, a group of portfolios will
be selected and thereafter marketed collectively. Typically, these programs are
created with an investment theme, E.G., to seek greater diversification,
protection from interest rate movements or access to different management
styles. In the event such a program is instituted, there may be a minimum
investment requirement for the program as a whole. The Fund may waive or reduce
its minimum initial investment requirements in connection with such a program.

The mutual funds in the program may be purchased individually or as a part
of the program. Since the allocation of portfolios included in the program may
not be appropriate for all investors, investors should consult their Prudential
Securities Financial Adviser or Prudential/Pruco Securities Representative
concerning the appropriate blend of portfolios for them. If investors elect to
purchase the individual mutual funds that constitute the program in an
investment ratio different from that offered by the program, the standard
minimum investment requirements for the individual mutual funds will apply.

NET ASSET VALUE

Under the Investment Company Act, the Board of Directors is responsible for
determining in good faith the fair value of securities of the Fund. In
accordance with procedures adopted by the Board of Directors, the value of
investments listed on a securities exchange and NASDAQ National Market System
securities (other than options on stock and stock indices) are valued at the
last sales price on the day of valuation, or, if there was no sale on such day,
the mean between the last bid and asked prices on such day, as provided by a
pricing service. Corporate bonds (other than convertible debt securities) and
U.S. Government securities that are actively traded in the over-the-counter
market, including listed securities for which the primary market is believed to
be over-the-counter, are valued on the basis of valuations provided by a pricing
service which uses information with respect to transactions in bonds, quotations
from bond dealers, agency ratings, market transactions in comparable securities
and various relationships between securities in determining value. Convertible
debt securities that are actively traded in the over-the-counter market,
including listed securities for which the primary market is believed to be
over-the-counter, are valued at the mean between the last reported bid and asked
prices provided by principal market makers. Options on stock and stock indices
traded on an exchange are valued at the mean between the most recently quoted
bid and asked prices on the respective exchange and futures contracts and
options thereon are valued at their last sales prices as of the close of the
commodities exchange or board of trade. Quotations of foreign securities in a
foreign currency are converted to U.S. dollar equivalents at the current rate
obtained from a recognized bank or dealer and forward currency exchange
contracts are valued at the current cost of covering or offsetting such
contracts. Should an extraordinary event which is likely to affect the value of
the security occur after the close of an exchange on which a portfolio security
is traded, such security will be valued at fair value considering factors
determined in good faith by the investment adviser under procedures established
by and under the general supervision of the Fund's Board of Directors.

Securities or other assets for which reliable market quotations are not
readily available, or for which the pricing agent or principal market maker does
not provide a valuation or methodology or provides a valuation or methodology
that, in the judgment of the Manager or Subadviser (or Valuation Committee or
Board of Directors), does not represent fair value, are valued by the Valuation
Committee or Board in consultation with the Manager and Subadviser under
procedures established by the Fund's Board of Directors. Short-term debt
securities are valued at cost, with interest accrued or discount amortized to
the date of

B-28
<PAGE>
maturity, if their original maturity was 60 days or less, unless this is
determined by the Board of Directors not to represent fair value. Short-term
securities with remaining maturities of more than 60 days, for which market
quotations are readily available, are valued at their current market quotations
as supplied by an independent pricing agent or principal market maker. The Fund
will compute its NAV at 4:15 P.M., New York time, on each day the New York Stock
Exchange is open for trading except on days on which no orders to purchase, sell
or redeem Fund shares have been received or days on which changes in the value
of the Fund's portfolio securities do not affect NAV. In the event the New York
Stock Exchange closes early on any business day, the NAV of the Fund's shares
shall be determined at a time between such closing and 4:15 P.M., New York time.
The New York Stock Exchange is closed on the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

NAV is calculated separately for each class. The NAV of Class B and Class C
shares will generally be lower than the NAV of Class A shares as a result of the
larger distribution-related fee to which Class B and Class C shares are subject.
The net asset value of Class Z shares will generally be higher than the net
asset value of Class A, Class B or Class C shares as a result of the fact that
the Class Z shares are not subject to any distribution or service fee. It is
expected, however, that the net asset value per share of each class will tend to
converge immediately after the recording of dividends, which will differ by
approximately the amount of the distribution-related expense accrual
differential among the classes.

TAXES, DIVIDENDS AND DISTRIBUTIONS

The Fund has elected to qualify and intends to remain qualified as a
regulated investment company under the Internal Revenue Code for each taxable
year. Accordingly, the Fund must, among other things, (a) derive at least 90% of
its gross income from dividends, interest, proceeds from loans of securities and
gains from the sale or other disposition of securities or foreign currencies, or
other income (including, but not limited to, gains from options, futures or
forward contracts) derived with respect to its business of investing in such
securities or currencies; and (b) diversify its holdings so that, at the end of
each fiscal quarter, (i) at least 50% of the value of its assets is represented
by cash, U.S. Government securities, securities of other regulated investment
companies and other securities, with such other securities limited in respect of
any one issuer to an amount not greater than 5% of such Funds' assets, and not
greater than 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its assets is invested in the securities of
any one issuer (other than U.S. Government securities or the securities of other
regulated investment companies). These requirements may limit a Funds' ability
to invest in other types of assets.

As a regulated investment company, the Fund will not be subject to federal
income tax on its net investment income and capital gains, if any, that it
distributes to its shareholders, provided (among other things) that at least 90%
of the Funds' net investment income (including net short-term capital gains)
other than long-term capital gains earned in the taxable year is distributed.
The Fund intends to distribute annually to its shareholders all of its taxable
net investment income, which includes dividends, interest and any net short-term
capital gains in excess of net long-term capital losses. The Board of Directors
of the Fund will determine once a year whether to distribute any net long-term
capital gains in excess of any net short-term capital losses. In determining the
amount of capital gains to be distributed, any capital loss carryovers from
prior years will be offset against capital gains. A 4% nondeductible excise tax
will be imposed on the Fund to the extent such Fund does not meet certain
distribution requirements by the end of each calendar year.

Gains or losses attributable to foreign currency contracts, or to
fluctuations in exchange rates between the time a Fund accrues income, expenses
or other liabilities denominated in a foreign currency and the time such Series
actually collects such income or pays such liabilities, are treated as ordinary
income or ordinary loss for federal income tax purposes. Similarly, gains or
losses on the disposition of debt securities held by the Fund, if any,
denominated in a foreign currency, to the extent attributable to fluctuations in
exchange rates between the acquisition and its disposition dates are also
treated as ordinary income or loss.

Gains or losses on sales or securities by the Fund will generally be treated
as long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where a Fund acquires a put or writes
a call thereon. Other gains or losses on the sale of securities will be
short-term capital gains or losses. Gains and losses on the sale, lapse or other
termination of options on securities will generally be treated as gains and
losses from the sale of securities. If an option written by a Fund on securities
lapses or is terminated through a closing transaction, such as a purchase by a
Fund of the option from its holder, a Fund will generally realize short-term
capital gain or loss, depending on whether the premium income is greater or less
than the amount paid by such Fund in the closing transaction. If securities are
sold by a Fund pursuant to the

B-29
<PAGE>
exercise of a call option written by it, such Fund will include the premium
received in the sale proceeds of the securities delivered in determining the
amount of gain or loss on the sale. Certain of a Funds' transactions may be
subject to wash sale straddle, constructive sale and short sale provisions of
the Internal Revenue Code which may, among other things, require such Fund to
defer losses or recognize gain. In addition, debt securities acquired by a Fund
may be subject to original issue discount which may, among other things, cause
such Fund to accrue income in advance of the receipt of cash with respect to
interest and, market discount rules which may, among other things, cause gains
to be treated as ordinary income.

Special rules apply to most options on stock indices, futures contracts and
options thereon, and forward foreign currency exchange contracts in which the
Fund may invest. See "Investment Objectives and Policies." These investments
generally will constitute Section 1256 contracts and will be required to be
"marked to market" for federal income tax purposes at the end of the Funds'
taxable year, I.E., treated as having been sold at market value. Sixty percent
of any capital gain or loss recognized on such deemed sales and on actual
dispositions will be treated as long-term capital gain or loss, and the
remainder will be treated as short-term capital gain or loss.

Forward currency contracts, options and futures contracts entered into by
the Fund may create "straddles" for federal income tax purposes, which may
result in the deferral of losses in positions held by the Fund to the extent of
any unrecognized gain on offsetting positions held the Fund and limitation on
the deductibility of interest or other charges incurred to purchase or carry
such positions may be limited.

A "passive foreign investment company" ("PFIC") is a foreign corporation
that, in general, meets either of the following tests: (a) at least 75% of its
gross income is passive or (b) an average of at least 50% of its assets produce,
or are held for the production of, passive income. If a Fund acquires and holds
stock in a PFIC beyond the end of the year of its acquisition, such Fund will be
subject to federal income tax on a portion of any "excess distribution" received
on the stock or of any gain from disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if such Fund distributes the PFIC income
as a taxable dividend to its shareholders. If a Fund elects to treat any PFIC in
which it invests as a "qualified electing fund" then in lieu of the foregoing
tax and interest obligation, such Fund will be required to include in income
each year its pro rata share of the qualified electing funds' annual ordinary
earnings and net capital gain, even if they are not distributed to such Fund;
those amounts would be subject to the distribution requirements applicable to
such Fund described above. It may be very difficult, if not impossible, to make
this election because of certain requirements thereof. For taxable years of the
Fund beginning after December 31, 1997, if the Fund does not or cannot elect to
treat such a PFIC as a "qualified electing fund," such Fund can make a
"mark-to-market" election, I.E., treat the shares of the PFIC as sold on the
last day of such Funds' taxable year, and thus avoid the special tax and
interest charge. The gains a Fund recognizes from the mark-to-market election
would be included as ordinary income in the net investment income such Fund must
distribute to shareholders, notwithstanding that such Fund would receive no cash
in respect of such gains. Any loss from the mark-to-market election may be
recognized to the extent of previously reported mark-to-market gains.

Dividends of net investment income will be taxable to a U.S. shareholder as
ordinary income regardless of whether such shareholder receives such dividends
in additional shares or in cash. Dividends received from a Fund will be eligible
for the dividends-received deduction for corporate shareholders only to the
extent that a Fund's income is derived from certain dividends received from
domestic corporations. The amount of dividends qualifying for the
dividends-received deduction will be designated as such in a written notice to
shareholders mailed not later than 60 days after the end of a Fund's taxable
year. Distributions of net long-term capital gains, if any, will be taxable as
long-term capital gains regardless of whether the shareholder receives such
distribution in additional shares or in cash and regardless of how long the
shareholder has held a Fund's shares, and will not be eligible for the dividends
received deduction for corporations.

Any dividends or capital gains distributions received by a shareholder will
have the effect of reducing the net asset value of the Funds' shares by the
exact amount of the dividend or capital gains distribution. If the net asset
value of the shares should be reduced below a shareholder's cost as a result of
a dividend or capital gains distribution, such dividend or capital gains
distribution, although constituting a return of capital, will be taxable as
described above. Prior to purchasing shares of the Fund, therefore, the investor
should carefully consider the impact of dividends or capital gains distributions
which are expected to be or have been announced.

Distributions of net investment income made to a nonresident alien
individual, a nonresident alien fiduciary of a foreign estate or trust, foreign
corporation or foreign partnership (foreign shareholder) will be subject to U.S.
withholding tax at a rate of 30% (or lower treaty rate), unless the dividends
are effectively connected with the U.S. trade or business of the shareholder and
the shareholder complies with certain filing requirements. Gains realized upon
the sale or redemption of shares of the Fund by a

B-30
<PAGE>
foreign shareholder and distributions of net long-term capital gains to a
foreign shareholder will generally not be subject to U.S. income tax unless the
gain is effectively connected with a trade or business carried on by the
shareholder within the United States or, in the case of a shareholder who is a
nonresident alien individual, the shareholder is present in the United States
for more than 182 days during the taxable year and certain other conditions are
met. In the case of a foreign shareholder who is a nonresident alien individual,
the Fund may be required to withhold U.S. federal income tax at the rate of 31%
of distributions of net long-term capital gains unless IRS Form W-8 is provided.
If distributions are effectively connected with a U.S. trade or business carried
on by a foreign shareholder, distributions of net investment income and net
long-term capital gains will be subject to U.S. income tax at the graduated
rates applicable to U.S. citizens or domestic corporations. Transfers by gift of
shares of the Fund by a foreign shareholder who is a nonresident alien
individual will not be subject to U.S. federal gift tax, but the value of the
shares of the Fund held by such a shareholder at his death will be includable in
his gross estate for U.S. federal estate tax purposes. The tax consequences to a
foreign shareholder entitled to claim the benefits of an applicable tax treaty
may be different from those described herein. Foreign shareholders are advised
to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.

Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of the Funds' assets to be invested in
various countries is not known.

If the Fund is liable for foreign taxes, the Fund expects to meet the
requirements of the Internal Revenue Code for "passing-through" to its
shareholders foreign income taxes paid, but there can be no assurance that the
Fund will be able to do so. Under the Internal Revenue Code, if more than 50% of
the value of the Funds' total assets at the close of its taxable year consists
of stocks or securities of foreign corporations, the Fund will be eligible and
may file an election with the Internal Revenue Service to "pass-through" to the
Funds' shareholders the amount of foreign income taxes paid by the Fund.
Pursuant to this election shareholders will be required to: (i) include in gross
income (in addition to taxable dividends actually received) their pro rata share
of the foreign income taxes paid by the Fund; (ii) treat their pro rata share of
foreign income taxes as paid by them; and (iii) either deduct their pro rata
share of foreign income taxes in computing their taxable income or, subject to
certain limitations, use it as a foreign tax credit against U.S. income taxes
imposed on foreign source income. For this purpose, the portion of dividends
paid by the Fund from its foreign source income will be treated as such. No
deduction for foreign taxes may be claimed by a shareholder who does not itemize
deductions. A shareholder that is a nonresident alien individual or foreign
corporation may be subject to U.S. withholding tax on the income resulting from
the election described in this paragraph, but may not be able to claim a credit
or deduction against such tax for the foreign taxes treated as having been paid
by such shareholder. A tax-exempt shareholder will not ordinarily benefit from
this election. The amount of foreign taxes for which a shareholder may claim a
credit in any year will generally be subject to various limitations including a
separate limitation for "passive income," which includes, among other things,
dividends, interest and certain foreign currency gains.

Each shareholder will be notified within 60 days after the close of the
Funds' taxable year whether the foreign income taxes paid by the Fund will
"pass-through" for that year and , if so, such notification will designate (a)
the shareholder's portion of the foreign income taxes paid to each such country
and (b) the portion of the dividend which represents income derived from sources
within each such country.

The per share dividends on Class B and Class C shares will be lower than the
per share dividends on Class A or Class Z shares as a result of the higher
distribution-related fee applicable to the Class B and Class C shares and lower
on Class A shares in relation to Class Z shares. The per share distributions of
net capital gains, if any, will be paid in the same amount for Class A, Class B,
Class C and Class Z shares. See "Net Asset Value."

Distributions may be subject to additional state and local taxes.

PERFORMANCE INFORMATION

AVERAGE ANNUAL TOTAL RETURN. The Fund may from time to time advertise its
average annual total return. Average annual total return is determined
separately for Class A, Class B, Class C and Class Z shares. See "How the Fund
Calculates Performance" in the Prospectus.

B-31
<PAGE>
Average annual total return is computed according to the following formula:

P(1+T)to the power of n = ERV

Where: P = a hypothetical initial payment of $1000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value at the end of the 1, 5 or 10 year periods
(or fractional portion thereof) of a hypothetical $1000 payment
made at the beginning of the 1, 5 or 10 year periods.

Average annual total return takes into account any applicable initial or
deferred sales charges but does not take into account any federal or state
income taxes that may be payable upon redemption.

The average annual total return of the Class A shares for the one year and
five year periods ended October 31, 1997 and for the period from July 24, 1992
(commencement of investment operations) through October 31, 1997 was (25.25)%,
(2.91)% and 3.99%, respectively, and for the Class B shares, was (26.84)%,
(3.06)% and 4.11%, respectively, for the same period. The average annual total
return for Class C shares for the one year period ended October 31, 1997 and the
since inception period (August 1, 1994) ended October 31, 1997 was 22.84% and
(9.02)%, respectively. The average annual total return for Class Z shares for
the one year period ended October 31, 1997 and the period from inception (March
1, 1997) ended October 31, 1997 was (21.02)% and (15.35)%, respectively.

YIELD. The Fund may from time to time advertise its yield as calculated over
a 30-day period. Yield is calculated separately for Class A, Class B, Class C
and Class Z shares. This yield will be computed by dividing the Fund's net
investment income per share earned during this 30-day period by the maximum
offering price per share on the last day of this period. Yield is calculated
according to the following formula:

YIELD = 2[( a - b +1)to the power of 6 - 1]
-----
cd

Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.

Yield fluctuates and an annualized yield quotation is not a representation
by the Fund as to what an investment in the Fund will actually yield for any
given period. Yields for the Fund will vary based on a number of factors
including changes in net asset value, market conditions, the level of interest
rates and the level of Fund income and expenses.

AGGREGATE TOTAL RETURN. The Fund may also advertise its aggregate total
return. Aggregate total return is determined separately for Class A, Class B,
Class C and Class Z shares. See "How the Fund Calculates Performance" in the
Prospectus.

Aggregate total return represents the cumulative change in the value of an
investment in the Fund and is computed according to the following formula:

ERV - P
-------

Where: P = a hypothetical initial payment of $1000.
ERV = ending redeemable value at the end of the 1, 5 or 10 year periods
(or fractional portion thereof) of a hypothetical $1000 payment
made at the beginning of the 1, 5 or 10 year periods.

Aggregate total return does not take into account any federal or state
income taxes that may be payable upon redemption or any applicable initial or
contingent deferred sales charges.

The aggregate total return for Class A shares for the one year and five year
periods ended on October 31, 1997 and for the period from July 24, 1992
(commencement of operations) to October 31, 1997 was (21.32)%, 21.50% and
29.39%, respectively, and for Class B shares was (21.84) %, 17.28% and 24.66%,
respectively, for the same period. The aggregate total return for Class C shares
for the one year period ended on October 31, 1997 and for the since inception
period (August 1, 1994)

B-32
<PAGE>
ended October 31, 1997 was (21.84)% and (26.44)%, respectively. The aggregate
total return for Class Z shares for the one year period ended October 31, 1997
and the period from inception (March 1, 1996) ended October 31, 1997 was
(21.02)% and (24.26)%, respectively.

From time to time, the performance of the Fund may be measured against
various indices. Set forth below is a chart which compares the performance of
different types of investments over the long-term and the rate of inflation.(1)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
*

<S> <C> <C> <C>
PERFORMANCE
COMPARISON OF DIFFERENT
TYPES OF INVESTMENTS
OVER THE LONG TERM
(1/1926-09/1997)
Long-Term
Common Stocks Govt. Bonds Inflation
11.0% 5.1% 3.1%
</TABLE>

- ------------

(1)Source: Ibbotson Associates STOCKS, BONDS, BILLS AND INFLATION--1997
YEARBOOK (annually updates the work of Roger G. Ibbotson and Rex A.
Sinquefield). All rights reserved. Common stock returns are based on the
Standard & Poor's 500 Stock Index, a market-weighted, unmanaged index of 500
common stocks in a variety of industry sectors. It is a commonly used indicator
of broad stock price movements. This chart is for illustrative purposes only and
is not intended to represent the performance of any particular investment or
fund. Investors cannot invest directly in an index. Past performance is not a
guarantee of future results.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
AND INDEPENDENT ACCOUNTANTS

State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities and
cash and in that capacity maintains certain financial and accounting books and
records pursuant to an agreement with the Fund. Subcustodians provide custodial
services for the Fund's foreign assets held outside the United States. See "How
the Fund is Managed--Custodian and Transfer and Dividend Disbursing Agent" in
the Prospectus.

Prudential Mutual Fund Services LLC (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as the Transfer and Dividend Disbursing Agent of the Fund.
PMFS is a wholly-owned subsidiary of PIFM. PMFS provides customary transfer
agency services to the Fund, including the handling of shareholder
communications, the processing of shareholder transactions, the maintenance of
shareholder account records, payment of dividends and distributions and related
functions. For these services, PMFS receives an annual fee per shareholder
account, a new account set-up fee for each manually established account and a
monthly inactive zero balance account fee per shareholder account. PMFS is also
reimbursed for its out-of-pocket expenses, including, but not limited to,
postage, stationery, printing, allocable communication expenses and other costs.
For the fiscal year ended October 31, 1997, the Fund incurred fees of
approximately $675,500 for such services.

Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036,
serves as the Fund's independent accountants, and in that capacity audits the
Fund's annual reports.

B-33
<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. B-34

<PAGE>

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. B-35

<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. B-36

<PAGE>

<TABLE>
STATEMENT OF ASSETS AND LIABILITIES PRUDENTIAL PACIFIC GROWTH FUND, INC.
- ------------------------------------------------------------------------------------------------------------------------------

<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. B-37

<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>
YEAR ENDED OCTOBER 31,
INCREASE (DECREASE) -----------------------
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. B-38

<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

B-39

<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.

B-40

<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%.

B-41

<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>

B-42

<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.

B-43

<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS PRUDENTIAL PACIFIC GROWTH FUND, INC.
- -----------------------------------------------------------------------------------------------------------------------------------
<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. B-44

<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS PRUDENTIAL PACIFIC GROWTH FUND, INC.
- -----------------------------------------------------------------------------------------------------------------------------------
<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.

See Notes to Financial Statements. B-45

<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS PRUDENTIAL PACIFIC GROWTH FUND, INC.
- -----------------------------------------------------------------------------------------------------------------------------------
<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>

MARCH 1,
1996(e)
THROUGH
OCTOBER 31,
1996
-----------
<S> <C>
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.

(d) Commencement of offering of Class C shares.

(e) Commencement of offering of Class Z shares.

See Notes to Financial Statements. B-46

<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

B-47

<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.

B-48

<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 diclosures 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

B-49

<PAGE>
APPENDIX I--GENERAL INVESTMENT INFORMATION

The following terms are used in mutual fund investing.

ASSET ALLOCATION

Asset allocation is a technique for reducing risk, providing balance. Asset
allocation among different types of securities within an overall investment
portfolio helps to reduce risk and to potentially provide stable returns, while
enabling investors to work toward their financial goal(s). Asset allocation is
also a strategy to gain exposure to better performing asset classes while
maintaining investment in other asset classes.

DIVERSIFICATION

Diversification is a time-honored technique for reducing risk, providing
"balance" to an overall portfolio and potentially achieving more stable returns.
Owning a portfolio of securities mitigates the individual risks (and returns) of
any one security. Additionally, diversification among types of securities
reduces the risks (and general returns) of any one type of security.

DURATION

Debt securities have varying levels of sensitivity to interest rates. As
interest rates fluctuate, the value of a bond (or a bond portfolio) will
increase or decrease. Longer term bonds are generally more sensitive to changes
in interest rates. When interest rates fall, bond prices generally rise.
Conversely, when interest rates rise, bond prices generally fall.

Duration is an approximation of the price sensitivity of a bond (or a bond
portfolio) to interest rate changes. It measures the weighted average maturity
of a bond's (or a bond portfolio's) cash flows, I.E., principal and interest
rate payments. Duration is expressed as a measure of time in years--the longer
the duration of a bond (or a bond portfolio), the greater the impact of interest
rate changes on the bond's (or the bond portfolio's) price. Duration differs
from effective maturity in that duration takes into account call provisions,
coupon rates and other factors. Duration measures interest rate risk only and
not other risks, such as credit risk and, in the case of non-U.S. dollar
denominated securities, currency risk. Effective maturity measures the final
maturity dates of a bond (or a bond portfolio).

MARKET TIMING

Market timing--buying securities when prices are low and selling them when
prices are relatively higher--may not work for many investors because it is
impossible to predict with certainty how the price of a security will fluctuate.
However, owning a security for a long period of time may help investors offset
short-term price volatility and realize positive returns.

POWER OF COMPOUNDING

Over time, the compounding of returns can significantly impact investment
returns. Compounding is the effect of continuous investment on long-term
investment results, by which the proceeds of capital appreciation (and income
distributions, if elected) are reinvested to contribute to the overall growth of
assets. The long-term investment results of compounding may be greater than that
of an equivalent initial investment in which the proceeds of capital
appreciation and income distributions are taken in cash.

Ap-I
<PAGE>
APPENDIX II--HISTORICAL PERFORMANCE DATA

The historical performance data contained in this Appendix relies on data
obtained from statistical services, reports and other services believed by the
Manager to be reliable. The information has not been independently verified by
the Manager.

This chart shows the long-term performance of various asset classes and the
rate of inflation.

EACH INVESTMENT PROVIDES A DIFFERENT OPPORTUNITY

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
*
<S> <C> <C> <C> <C> <C>
VALUE OF $1.00 INVESTED ON
1/1/26 THROUGH 12/31/96.
SMALL STOCKS COMMON STOCKS LONG-TERM BONDS TREASURY BILLS INFLATION
1926
1936
1946
1956
1966
1976
1986
1996 $4,495.99 $1,370.95 $33.73 $13.54 $8.87
</TABLE>

Source: Stocks, Bonds, Bills and Inflation 1997 Yearbook, Ibbotson Associates,
Chicago, Illinois (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. This chart is for illustrative purposes only
and is not indicative of the past, present, or future performance of any asset
class or any Prudential Mutual Fund.

Generally, stock returns are due to capital appreciation and the reinvestment of
any gains. Bond returns are due mainly to reinvesting interest. Also, stock
prices are usually more volatile than bond prices over the long-term.

Small stock returns for 1926-1980 are those of stocks comprising the 5th
quintile of the New York Stock Exchange. Thereafter, returns are those of the
Dimensional Fund Advisors (DFA) Small Company Fund. Common stock returns are
based on the S&P 500 Composite index, a market-weighted, unmanaged index of 500
stocks (currently) in a variety of industries. It is often used as a broad
measure of stock market performance.

Long-term government bond returns are measured using a constant one-bond
portfolio with a maturity of roughly 20 years. Treasury bill returns are for a
one-month bill. Treasuries are guaranteed by the U.S. government as to the
timely payment of principal and interest; equities are not. Inflation is
measured by the consumer price index (CPI).

IMPACT OF INFLATION. The "real" rate of investment return is that which exceeds
the rate of inflation, the percentage change in the value of consumer goods and
the general cost of living. A common goal of long-term investors is to outpace
the erosive impact of inflation on investment returns.

Ap-II
<PAGE>
Set forth below is historical performance data relating to various sectors
of the fixed-income securities markets. The chart shows the historical total
returns of U.S. Treasury bonds, U.S. mortgage securities, U.S. corporate bonds,
U.S. high yield bonds and world government bonds on an annual basis from 1987
through 1996. The total returns of the indices include accrued interest, plus
the price changes (gains or losses) of the underlying securities during the
period mentioned. The data is provided to illustrate the varying historical
total returns and investors should not consider this performance data as an
indication of the future performance of the Fund or of any sector in which the
Fund invests.

All information relies on data obtained from statistical services, reports
and other services believed by the Manager to be reliable. Such information has
not been verified. The figures do not reflect the operating expenses and fees of
a mutual fund. See "Fund Expenses" in the Prospectus. The net effect of the
deduction of the operating expenses of a mutual fund on these historical total
returns, including the compounded effect over time, could be substantial.

HISTORICAL TOTAL RETURNS OF DIFFERENT BOND MARKET SECTORS

<TABLE>
<CAPTION>
'87 '88 '89 '90 '91 '92 '93 '94 '95 '96
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT
TREASURY
BONDS(1) 2.0% 7.0% 14.4% 8.5% 15.3% 7.2% 10.7% (3.4)% 18.4% 2.7%
- --------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT
MORTGAGE
SECURITIES(2) 4.3% 8.7% 15.4% 10.7% 15.7% 7.0% 6.8% (1.6)% 16.8% 5.4%
- --------------------------------------------------------------------------------------------------------------
U.S. INVESTMENT GRADE
CORPORATE
BONDS(3) 2.6% 9.2% 14.1% 7.1% 18.5% 8.7% 12.2% (3.9)% 22.3% 3.3%
- --------------------------------------------------------------------------------------------------------------
U.S.
HIGH YIELD
CORPORATE
BONDS(4) 5.0% 12.5% 0.8% (9.6)% 46.2% 15.8% 17.1% (1.0)% 19.2% 11.4%
- --------------------------------------------------------------------------------------------------------------
WORLD
GOVERNMENT
BONDS(5) 35.2% 2.3% (3.4)% 15.3% 16.2% 4.8% 15.1% 6.0% 18.6% 4.1%
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
DIFFERENCE BETWEEN HIGHEST
AND LOWEST RETURN PERCENT 33.2 10.2 18.8 24.9 30.9 11.0 10.3 9.9 5.5 8.7
</TABLE>

1 LEHMAN BROTHERS TREASURY BOND INDEX is an unmanaged index made up of over 150
public issues of the U.S. Treasury having maturities of at least one year.

2 LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX is an unmanaged index that
includes over 600 15- and 30-year fixed-rate mortgage-backed securities of
the Government National Mortgage Association (GNMA), Federal National
Mortgage Association (FNMA), and the Federal Home Loan Mortgage Corporation
(FHLMC).

3 LEHMAN BROTHERS CORPORATE BOND INDEX includes over 3,000 public fixed-rate,
nonconvertible investment-grade bonds. All bonds are U.S. dollar-denominated
issues and include debt issued or guaranteed by foreign sovereign
governments, municipalities, governmental agencies or international agencies.
All bonds in the index have maturities of at least one year.

4 LEHMAN BROTHERS HIGH YIELD BOND INDEX is an unmanaged index comprising over
750 public, fixed-rate, nonconvertible bonds that are rated Ba1 or lower by
Moody's Investors Service (or rated BB+ or lower by Standard & Poor's or
Fitch Investors Service). All bonds in the Index have maturities of at least
one year.

5 SALOMON BROTHERS WORLD GOVERNMENT INDEX (NON U.S.) includes over 800 bonds
issued by various foreign governments or agencies, excluding those in the
U.S., but including those in Japan, Germany, France, the U.K., Canada, Italy,
Australia, Belgium, Denmark, the Netherlands, Spain, Sweden, and Austria. All
bonds in the index have maturities of at least one year.

Ap-III
<PAGE>
This chart illustrates the performance of major world stock markets for the
period from December 31, 1986 through September 30, 1997. It does not represent
the performance of any Prudential Mutual Fund.

AVERAGE ANNUAL TOTAL RETURNS OF MAJOR WORLD STOCK MARKETS (12/31/86-9/30/97)(IN
U.S. DOLLARS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Hong Kong 23.7%
Sweden 22.0%
Netherland 21.3%
Spain 21.0%
Belgium 19.7%
Switzerland 17.5%
USA 17.1%
UK 17.0%
France 16.1%
Germany 12.3%
Austria 10.0%
Japan 8.8%
</TABLE>

Source: Morgan Stanley Capital International (MSCI) based on data retrieved from
Lipper Analytical New Application (LANA) as of
September 30, 1997. Used with permission. Morgan Stanley Country indices are
unmanaged indices which include those stocks making up the largest two-thirds of
each country's total stock market capitalization. Returns reflect the
reinvestment of all distributions. This chart is for illustrative purposes only
and is not indicative of the past, present or future performance of any specific
investment. Investors cannot invest directly in stock indices.

This chart shows the growth of a hypothetical $10,000 investment made in the
stocks representing the S&P 500 Stock Index with and without reinvested
dividends.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
CAPITAL APPRECIATION AND REINVESTING CAPITAL APPRECIATION
DIVIDENDS ONLY

Source: Stocks, Bonds, Bills, and Inflation 1997 Yearbook, Ibbotson Associates,
Chicago (annually updates work by Roger G. Ibbotson and Rex A. Sinquefield).
Used with permission. All rights reserved. This chart is used for illustrative
purposes only and is not intended to represent the past, present or future
performance of any Prudential Mutual Fund. Common stock total return is based on
the Standard & Poor's 500 Stock Index, a market-value-weighted index made up of
500 of the largest stocks in the U.S. based upon their stock market value.
Investors cannot invest directly in indices.

Ap-IV
<PAGE>
WORLD STOCK MARKET CAPITALIZATION BY REGION
WORLD TOTAL: $12.7 TRILLION

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
WORLD STOCK MARKET CAPITALIZATION BY WORLD TOTAL: 12.7
REGION TRILLION
<S> <C>
Canada 2.7%
Europe 42.6%
U.S. 34.6%
Pacific Rim 20.1%
</TABLE>

Source: Morgan Stanley Capital International, September 30, 1997. Used with
permission. This chart represents the capitalization of major world stock
markets as measured by the Morgan Stanley Capital International (MSCI) World
Index. The total market capitalization is based on the value of 1579 companies
in 22 countries (representing approximately 60% of the aggregate market value of
the stock exchanges). This chart is for illustrative purposes only and does not
represent the allocation of any Prudential Mutual Fund.

This chart below shows the historical volatility of general interest rates
as measured by the long U.S. Treasury Bond.

[CHART]

Source: Stocks, Bonds, Bills, and Inflation 1997 Yearbook, Ibbotson Associates,
Chicago (annually updates work by Roger G. Ibbotson and Rex A. Sinquefield).
Used with permission. All rights reserved. The chart illustrates the historical
yield of the long-term U.S. Treasury Bond from 1926-1996. Yields represent that
of an annually renewed one-bond portfolio with a remaining maturity of
approximately 20 years. This chart is for illustrative purposes and should not
be construed to represent the yields of any Prudential Mutual Fund.

Ap-V
<PAGE>
APPENDIX III--INFORMATION RELATING TO PRUDENTIAL

Set forth below is information relating to The Prudential Insurance Company
of America (Prudential) and its subsidiaries as well as information relating to
the Prudential Mutual Funds. See "How the Fund Is Managed--Manager" in the
Prospectus. The data will be used in sales materials relating to the Prudential
Mutual Funds. Unless otherwise indicated, the information is as of December 31,
1996 and is subject to change thereafter. All information relies on data
provided by The Prudential Investment Corporation (PIC) or from other sources
believed by the Manager to be reliable. Such information has not been verified
by the Fund.

INFORMATION ABOUT PRUDENTIAL

The Manager and PIC are subsidiaries of Prudential, which is one of the
largest diversified financial services institutions in the world and, based on
total assets, the largest insurance company in North America as of December 31,
1996. Principal products and services include life and health insurance, other
healthcare products, property and casualty insurance, securities brokerage,
asset management, investment advisory services and real estate brokerage.
Prudential (together with its subsidiaries) employs almost 81,000 persons
worldwide, and maintains a sales force of approximately 11,500 agents and nearly
6,400 financial advisors. Prudential is a major issuer of annuities, including
variable annuities. Prudential seeks to develop innovative products and services
to meet consumer needs in each of its business areas. Prudential uses the Rock
of Gibraltar as its symbol. The Prudential rock is a recognized brand name
throughout the world.

INSURANCE. Prudential has been engaged in the insurance business since 1875.
It insures or provides financial services to nearly 50 million people worldwide.
Long one of the largest issuers of individual life insurance, the Prudential has
22 million life insurance policies in force today with a face value of $1
trillion. Prudential has the largest capital base ($12.1 billion) of any life
insurance company in the United States. Prudential provides auto insurance for
approximately 1.6 million cars and insures approximately 1.2 million homes.

MONEY MANAGEMENT. Prudential is one of the largest pension fund managers in
the country, providing pension services to 1 in 3 Fortune 500 firms. It manages
$36 billion of individual retirement plan assets, such as 401(k) plans. As of
December 31, 1996, Prudential had more than $332 billion in assets under
management. Prudential's Investments, a business group of Prudential (of which
Prudential Mutual Funds is a key part) manages over $190 billion in assets of
institutions and individuals. In Pensions & Investments, May 12, 1997,
Prudential was ranked third in terms of total assets under management.

REAL ESTATE. The Prudential Real Estate Affiliates, the fourth largest real
estate brokerage network in the United States, has more than 37,000 brokers and
agents and more than 1,100 offices in the United States.(2)

HEALTHCARE. Over two decades ago, Prudential introduced the first
federally-funded, for-profit HMO in the country. Today, approximately 4.6
million Americans receive healthcare from a Prudential managed care membership.

FINANCIAL SERVICES. The Prudential Bank, a wholly-owned subsidiary of
Prudential, has over $1 billion in assets and serves nearly 1.5 million
customers across 50 states.

INFORMATION ABOUT THE PRUDENTIAL MUTUAL FUNDS

As of August 31, 1997 Prudential Investments Fund Management is the
seventeenth largest mutual fund company in the country, with over 2.5 million
shareholders invested in more than 50 mutual fund portfolios and variable
annuities with more than 3.7 million shareholder accounts.

The Prudential Mutual Funds have over 30 portfolio managers who manage over
$55 billion in mutual fund and variable annuity assets. Some of Prudential's
portfolio managers have over 20 years of experience managing investment
portfolios.

- ---------------
(1)Prudential Investments, a business group of PIC, serves as the Subadviser to
substantially all of the Prudential Mutual Funds. Wellington Management Company
serves as the subadviser to Global Utility Fund, Inc., Nicholas-Applegate
Capital Management as subadviser to Nicholas-Applegate Fund, Inc., Jennison
Associates Capital Corp. as the subadviser to Prudential Jennison Series Fund,
Inc. and Prudential Active Balanced Fund a portfolio of Prudential Dryden Fund
and Mercator Asset Management, L.P. as subadviser to International Stock Series
is a portfolio of Prudential World Fund, Inc. and BlackRock Financial
Management, Inc. as subadviser to The BlackRock Government Income Trust. There
are multiple subadvisers for The Target Portfolio Trust.
(2)As of December 31, 1996.

Ap-VI
<PAGE>
From time to time, there may be media coverage of portfolio managers and
other investment professionals associated with the Manager and the Subadviser in
national and regional publications, on television and in other media.
Additionally, individual mutual fund portfolios are frequently cited in surveys
conducted by national and regional publications and media organizations such as
THE WALL STREET JOURNAL, THE NEW YORK TIMES, BARRON'S and USA TODAY.

EQUITY FUNDS. FORBES magazine listed Prudential Equity Fund among twenty
mutual funds on its Honor Roll in its mutual fund issue of August 28, 1995.
Honorees are chosen annually among mutual funds (excluding sector funds) which
are open to new investors and have had the same management for at least five
years. FORBES considers, among other criteria, the total return of a mutual fund
in both bull and bear markets as well as a fund's risk profile. Prudential
Equity Fund is managed with a "value" investment style by PIC. In 1995,
Prudential Securities introduced Prudential Jennison Growth Fund, a growth-style
equity fund managed by Jennison Associates Capital Corp., a premier
institutional equity manager and a subsidiary of Prudential.

HIGH YIELD FUNDS. Investing in high yield bonds is a complex and research
intensive pursuit. A separate team of high yield bond analysts monitor the 167
issues held in the Prudential High Yield Fund (currently the largest fund of its
kind in the country) along with 100 or so other high yield bonds, which may be
considered for purchase.(3) Non-investment grade bonds, also known as junk bonds
or high yield bonds, are subject to a greater risk of loss of principal and
interest including default risk than higher-rated bonds. Prudential high yield
portfolio managers and analysts meet face-to-face with almost every bond issuer
in the High Yield Fund's portfolio annually, and have additional telephone
contact throughout the year.

Prudential's portfolio managers are supported by a large and sophisticated
research organization. Fourteen investment grade bond analysts monitor the
financial viability of approximately 1,750 different bond issuers in the
investment grade corporate and municipal bond markets--from IBM to small
municipalities, such as Rockaway Township, New Jersey. These analysts consider
among other things sinking fund provisions and interest coverage ratios.

Prudential's portfolio managers and analysts receive research services from
almost 200 brokers and market service vendors. They also receive nearly 100
trade publications and newspapers--from Pulp and Paper Forecaster to Women's
Wear Daily--to keep them informed of the industries they follow.

Prudential Mutual Funds' traders scan over 100 computer monitors to collect
detailed information on which to trade. From natural gas prices in the Rocky
Mountains to the results of local municipal elections, a Prudential portfolio
manager or trader is able to monitor it if it's important to a Prudential mutual
fund.

Prudential Mutual Funds trade approximately $31 billion in U.S. and foreign
government securities a year. PIC seeks information from government policy
makers. In 1995, Prudential's portfolio managers met with several senior U.S.
and foreign government officials, on issues ranging from economic conditions in
foreign countries to the viability of index-linked securities in the United
States.

Prudential Mutual Funds' portfolio managers and analysts met with over 1,200
companies in 1995, often with the Chief Executive Officer (CEO) or Chief
Financial Officer (CFO). They also attended over 250 industry conferences.

Prudential Mutual Fund global equity managers conducted many of their visits
overseas, often holding private meetings with a company in a foreign language
(our global equity managers speak 7 different languages, including Mandarin
Chinese).

TRADING DATA.(4) On an average day, Prudential Mutual Funds' U.S. and
foreign equity trading desks traded $77 million in securities representing over
3.8 million shares with nearly 200 different firms. Prudential Mutual Funds'
bond trading desks traded $157 million in government and corporate bonds on an
average day. That represents more in daily trading than most bond funds tracked
by Lipper even have in assets.(5) Prudential Mutual Funds' money market desk
traded $3.2 billion in money market securities on an average day, or over $800
billion a year. They made a trade every 3 minutes of every trading day. In 1994,
the Prudential Mutual Funds effected more than 40,000 trades in money market
securities and held on average $20 billion of money market securities.(6)

- ---------------
(3)As of December 31, 1995. The number of bonds and the size of the Fund are
subject to change.
(4)Trading data represents average daily transactions for portfolios of the
Prudential Mutual Funds for which PIC serves as the subadviser, portfolios of
the Prudential Series Fund and institutional and non-U.S. accounts managed by
Prudential Mutual Fund Investment Management LLC, a division of PIC, for the
year ended December 31, 1995.
(5)Based on 669 funds in Lipper Analytical Services categories of Short U.S.
Treasury, Short U.S. Government, Intermediate U.S. Treasury, Intermediate U.S.
Government, Short Investment Grade Debt, Intermediate Investment Grade Debt,
General U.S. Treasury, General U.S. Government and Mortgage funds.
(6)As of December 31, 1994.

Ap-VII
<PAGE>
Based on complex-wide data, on an average day, over 7,250 shareholders
telephoned Prudential Mutual Fund Services, Inc., the Transfer Agent of the
Prudential Mutual Funds, on the Prudential Mutual Funds' toll-free number. On an
annual basis, that represents approximately 1.8 million telephone calls
answered.

INFORMATION ABOUT PRUDENTIAL SECURITIES

Prudential Securities is the fifth largest retail brokerage firm in the
United States with approximately 6,400 financial advisors. It offers to its
clients a wide range of products, including Prudential Mutual Funds and
annuities. As of December 31, 1995, assets held by Prudential Securities for its
clients approximated $168 billion. During 1994, over 28,000 new customer
accounts were opened each month at PSI.(7)

Prudential Securities has a two-year Financial Advisor training program plus
advanced education programs, including Prudential Securities "university," which
provides advanced education in a wide array of investment areas. Prudential
Securities is the only Wall Street firm to have its own in-house Certified
Financial Planner (CFP) program. In the December 1995 issue of Registered Rep,
an industry publication, Prudential Securities Financial Advisor training
programs received a grade of A-(compared to an industry average of B+).

In 1995, Prudential Securities' equity research team ranked 8th in
INSTITUTIONAL INVESTOR magazine's 1995 "All America Research Team" survey. Five
Prudential Securities analysts were ranked as first-team finishers.(8)

In addition to training, Prudential Securities provides its financial
advisors with access to firm economists and market analysts. It has also
developed proprietary tools for use by financial advisors, including the
Financial ArchitectSM, a state-of-the-art asset allocation software program
which helps Financial Advisors to evaluate a client's objectives and overall
financial plan, and a comprehensive mutual fund information and analysis system
that compares different mutual funds.

For more complete information about any of the Prudential Mutual Funds,
including charges and expenses, call your Prudential Securities financial
adviser or Pruco/Prudential representative for a free prospectus. Read it
carefully before you invest or send money.

(7)As of December 31, 1994.
(8)On an annual basis, Institutional Investor magazine surveys more than 700
institutional money managers, chief investment officers and research directors,
asking them to evaluate analysts in 76 industry sectors. Scores are produced by
taking the number of votes awarded to an individual analyst and weighting them
based on the size of the voting institution. In total, the magazine sends its
survey to approximately 2,000 institutions and a group of European and Asian
institutions.

Ap-VIII