<PAGE>
PRUDENTIAL JENNISON GROWTH FUND
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PROSPECTUS DATED JANUARY 23, 1998
(REVISED AS OF JUNE 1, 1998)
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Prudential Jennison Growth Fund (the Fund) is a series of The Prudential
Investment Portfolios, Inc., formerly Prudential Jennison Series Fund, Inc.
(the Company), a diversified, open-end, management investment company.
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL. The Fund seeks
to achieve its objective by investing primarily in equity securities (common
stock, preferred stock and securities convertible into common stock) of
established companies with above-average growth prospects. Current income, if
any, is incidental. Under normal market conditions, the Fund intends to invest
at least 65% of its total assets in equity securities of companies that exceed
$1 billion in market capitalization.
The Fund may engage in various derivative transactions such as using options
on stocks, stock indices and foreign currencies, entering into foreign
currency exchange contracts and the purchase and sale of futures contracts on
stock indices and foreign currencies and options thereon 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 "How the Fund Invests--
Investment Objective and Policies." The Company's address is Gateway Center
Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, and its telephone
number is (800) 225-1852.
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 January 23, 1998,
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.
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INVESTORS ARE ADVISED TO READ THE PROSPECTUS AND RETAIN IT FOR FUTURE
REFERENCE.
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AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF ANY BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
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.
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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 JENNISON GROWTH FUND?
The Fund 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 objectives.
Technically, the Fund is a series of The Prudential Investment Portfolios,
Inc., 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 securities (common
stock, securities convertible into common stock and preferred stock) of
established companies with above-average growth prospects. Current income, if
any, is incidental. 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 7.
WHAT ARE THE FUND'S RISK FACTORS AND SPECIAL CHARACTERISTICS?
Securities of the kinds of companies in which the Fund invests may be subject
to significant price fluctuation and above-average risk. Thus, the Fund may be
considered subject to greater investment risks than are assumed by certain
other investment companies. In addition, companies achieving an earnings growth
rate higher than that of S&P 500 companies tend to reinvest their earnings
rather than distribute them. As a result, the Fund is not likely to receive
significant dividend income on its portfolio securities. Accordingly, an
investment in the Fund should not be considered as a complete investment
program and may not be appropriate for all investors.
Under normal market conditions, the Fund intends to invest at least 65% of
its total assets in equity securities of companies that exceed $1 billion in
market capitalization. See "How the Fund Invests--Investment Objective and
Policies" at page 7. The Fund may also invest in (i) other equity securities
including up to 20% of its total assets in securities of foreign issuers, (ii)
investment grade fixed-income securities and (iii) obligations issued or
guaranteed by the U.S. Government, its agencies and instrumentalities,
including mortgage-backed securities. Investing in securities of foreign
companies and countries involves certain risks and considerations not typically
associated with investments in domestic companies. See "How the Fund Invests--
Risk Factors and Special Considerations of Investing in Foreign Securities" at
page 12. The Fund may also engage in various hedging and return enhancement
strategies including using 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 the 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
.60 of 1% of the Fund's average daily net assets. As of December 31, 1997, PIFM
served as manager or administrator to 64 investment companies, including 42
mutual funds, with aggregate assets of approximately $62 billion. Jennison
Associates LLC (Jennison, 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 16 and "How the Fund is Managed--Subadviser" at page 16.
2
<PAGE>
WHO DISTRIBUTES THE FUND'S SHARES?
Prudential Investment Management Services LLC (the Distributor) acts as the
Distributor of the Fund's Class A, Class B, Class C and Class Z shares and is
paid a distribution and service fee with respect to Class A shares 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 is paid a distribution and service fee
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
Distributor incurs the expense of distributing the Fund's Class Z shares under
a Distribution Agreement with the Company, none of which is reimbursed or paid
for by the Fund. See "How the Fund is Managed--Distributor" at page 17.
WHAT IS THE MINIMUM INVESTMENT?
The minimum initial investment is $1,000 for Class A and Class B shares and
$5,000 for Class C shares. The minimum subsequent investment is $100 for Class
A, Class B and Class C shares. Class Z shares are not subject to any minimum
investment requirements. 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 23 and "Shareholder Guide--Shareholder
Services" at page 32.
HOW DO I PURCHASE SHARES?
You may purchase shares of the Fund through the Distributor or brokers or
dealers that have entered into agreements to act as participating or
introducing brokers for the Distributor (Dealers) or directly from the Fund
through its transfer agent, Prudential Mutual Fund Services LLC (PMFS or the
Transfer Agent). In each case, sales are made at the net asset value per share
(NAV) next determined after receipt of your purchase order by the Transfer
Agent, a Dealer or the Distributor, 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 NAV without any sales charge. Dealers may charge their customers a
separate fee for handling purchase transactions. See "How the Fund Values its
Shares" at page 19 and "Shareholder Guide--How to Buy Shares of the Fund" at
page 23.
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 but, for one year after
purchase, are subject to a CDSC of 1% 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 an initial sales charge or CDSC to a limited
group of investors. Class Z shares are not subject to any
ongoing service or distribution expenses.
See "Shareholder Guide--Alternative Purchase Plan" at page 24.
3
<PAGE>
HOW DO I SELL MY SHARES?
You may redeem your shares at any time at the NAV next determined after your
Dealer, the Distributor or the Transfer Agent receives your sell order. The
proceeds of redemptions of Class B and Class C shares may be subject to a CDSC.
Dealers may charge their customers a separate fee for handling sale
transactions. See "Shareholder Guide--How to Sell Your Shares" at page 27.
HOW ARE DIVIDENDS AND DISTRIBUTIONS PAID?
The Fund expects to pay dividends of net investment income, if any, semi-
annually 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 20.
4
<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
Imposed on Reinvested
Dividends............. None None None None
Maximum Deferred Sales
Load (as a percentage
of original purchase None 5% during the first year, 1% on redemptions None
price or redemption decreasing by 1% annually to 1% made within one
proceeds, whichever is in the fifth and the sixth years year of purchase
lower)................ and 0% in the seventh year*
Redemption Fees........ None None None None
Exchange Fee........... None None None None
<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 av-
erage net assets)
Management Fees........ .60% .60% .60% .60%
12b-1 Fees (After Re-
duction)............. .25%++ 1.00% 1.00% None
Other Expenses......... .24% .24% .24% .24%
--- --- --- ---
Total Fund Operating
Expenses (After
Reduction)........... 1.09% 1.84% 1.84% .84%
==== ==== ==== ===
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
EXAMPLE ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual re-
turn and (2) redemption at the end of each time
period:
Class A....................................... $61 $83 $107 $176
Class B....................................... $69 $88 $110 $187
Class C....................................... $29 $58 $100 $216
Class Z....................................... $ 9 $27 $ 47 $104
You would pay the following expenses on the
same investment, assuming no redemption:
Class A....................................... $61 $83 $107 $176
Class B....................................... $19 $58 $100 $187
Class C....................................... $19 $58 $100 $216
Class Z....................................... $ 9 $27 $ 47 $104
</TABLE>
The above example is based on data for the Fund's fiscal year ended September
30, 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 estimated
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).
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* Class B shares will automatically convert to Class A shares approximately
seven years after purchase. See "Shareholder Guide--Conversion Feature--
Class B Shares."
+ Dealers may independently charge additional fees for shareholder
transactions or advisory services. Pursuant to rules of the National
Association of Securities Dealers, Inc., the aggregate initial sales
charges, deferred sales charges and asset-based sales charges (12b-1 fees)
on shares of the Fund may not exceed 6.25% of total gross sales, subject to
certain exclusions. This 6.25% limitation is imposed on the Fund rather than
on a per shareholder basis. Therefore, long-term Class B and Class C
shareholders of the Fund may pay more in total sales charges than the
economic equivalent of 6.25% of such shareholders' investment in such
shares. See "How the Fund is Managed--Distributor."
++ Although the Class A Distribution and Service Plan provides that the Fund
may pay up to an annual rate of .30 of 1% of the average daily net assets of
the Class A shares, the Distributor has agreed to limit its distribution
fees with respect to Class A shares of the Fund to .25 of 1% of the average
daily net assets of the Class A shares for the fiscal year ending September
30, 1998. See "How the Fund is Managed--Distributor." Total Fund Operating
Expenses would be 1.14% absent this limitation with respect to Class A
shares.
5
<PAGE>
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the periods indicated)
(CLASS A, CLASS B, CLASS C AND CLASS Z SHARES)
The following financial highlights for the year ended September 30, 1997 have
been audited by Price Waterhouse LLP, independent accountants, and for the
periods through September 30, 1996 have been audited by Deloitte & Touche LLP,
independent auditors, whose reports thereon were 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, Class B, Class C and Class Z
share of common stock of the Fund outstanding, total return, ratios to average
net assets and other supplemental data for the periods indicated. 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 CLASS B CLASS C
--------------------- --------------------- --------------------
NOV. 2, NOV. 2, NOV. 2,
YEAR 1995(A) YEAR 1995(A) YEAR 1995(A)
ENDED THROUGH ENDED THROUGH ENDED THROUGH
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1997 1996 1997 1996 1997 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period..... $ 10.97 $ 10.00 $ 10.89 $ 10.00 $ 10.89 $ 10.00
-------- ------- -------- -------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss)(d)............... (.03) (.03) (.12) (.10) (.12) (.10)
Net realized and
unrealized gain on
investment transactions. 4.45 1.00 4.41 .99 4.41 .99
-------- ------- -------- -------- ------- -------
Total from investment
operations............. 4.42 .97 4.29 .89 4.29 .89
-------- ------- -------- -------- ------- -------
Net asset value, end of
period.................. $ 15.39 $ 10.97 $ 15.18 $ 10.89 $ 15.18 $ 10.89
======== ======= ======== ======== ======= =======
TOTAL RETURN(C): ........ 40.29 % 9.70 % 39.39 % 8.90 % 39.39 % 8.90 %
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)................... $145,022 $85,440 $419,405 $231,541 $25,134 $15,281
Average net assets (000). $105,982 $70,667 $299,476 $162,412 $18,248 $12,550
Ratios to average net
assets:
Expenses, including
distribution fees...... 1.09 % 1.23 %(b) 1.84 % 1.98 %(b) 1.84 % 1.98 %(b)
Expenses, excluding
distribution fees...... .84 % .98 %(b) .84 % .98 %(b) .84 % .98 %(b)
Net investment income
(loss)................. (.25)% (.37)%(b) (1.00)% (1.12)%(b) (1.00)% (1.12)%(b)
Portfolio turnover rate.. 63 % 42 % 63 % 42 % 63 % 42 %
Average commission rate
paid per share.......... $ .0596 $ .0611 $ .0596 $ .0611 $ .0596 $ .0611
<CAPTION>
CLASS Z
--------------------------
APRIL 15,
YEAR 1996(A)
ENDED THROUGH
SEPT. 30, SEPT. 30,
1997 1996
----------- ---------
<S> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period..... $ 10.98 $ 10.32
----------- --------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss)(d)............... -- (.02)
Net realized and
unrealized gain on
investment transactions. 4.47 .68
----------- --------------
Total from investment
operations............. 4.47 .66
----------- --------------
Net asset value, end of
period.................. $ 15.45 $ 10.98
=========== ==============
TOTAL RETURN(C): ........ 40.71 % 6.40 %
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)................... $609,869 $362,416
Average net assets (000). $455,684 $ 26,829
Ratios to average net
assets:
Expenses, including
distribution fees...... .84 % .98 %(b)
Expenses, excluding
distribution fees...... .84 % .98 %(b)
Net investment income
(loss)................. -- (.12)%(b)
Portfolio turnover rate.. 63 % 42 %
Average commission rate
paid per share.......... $ .0596 $ .0611
</TABLE>
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(a) Commencement of investment operations and offering of Class Z shares.
(b) Annualized.
(c) 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) Calculated based upon weighted average shares outstanding during the
period.
6
<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
(COMMON STOCK, PREFERRED STOCK AND SECURITIES CONVERTIBLE INTO COMMON STOCK)
OF ESTABLISHED COMPANIES WITH ABOVE-AVERAGE GROWTH PROSPECTS. CURRENT INCOME,
IF ANY, IS INCIDENTAL. THERE CAN BE NO ASSURANCE THAT THE FUND'S OBJECTIVE
WILL BE ACHIEVED. See "Investment Objectives and Policies" in the Statement of
Additional Information.
UNDER NORMAL MARKET CONDITIONS, THE FUND INTENDS TO INVEST AT LEAST 65% OF
ITS TOTAL ASSETS IN EQUITY SECURITIES OF COMPANIES THAT EXCEED $1 BILLION IN
MARKET CAPITALIZATION. COMPANIES WITH MARKET CAPITALIZATIONS IN EXCESS OF
$1 BILLION ARE GENERALLY CONSIDERED MEDIUM TO LARGE CAPITALIZATION COMPANIES.
Stocks will be selected on a company-by-company basis primarily through the
use of fundamental analysis. The Fund's investment adviser looks for companies
that have demonstrated growth in earnings and sales, high returns on equity
and assets, or other strong financial characteristics and, in the judgment of
the investment adviser, are attractively valued. These companies tend to have
a unique market niche, a strong new product profile or superior management.
The Fund may also invest up to 35% of its total assets in (i) equity
securities of other companies that are undergoing changes in management or
product and marketing dynamics that have not yet been reflected in reported
earnings but that are expected to impact earnings in the intermediate-term--
these securities often lack investor recognition and are often favorably
valued, (ii) other equity-related securities, (iii) equity securities of
foreign issuers (with respect to 20% of its total assets), (iv) obligations
issued or guaranteed by the U.S. Government, its agencies and
instrumentalities, including mortgage-backed securities and (v) investment
grade fixed-income securities.
The effort to achieve superior investment return necessarily involves a risk
of exposure to declining values. Securities in which the Fund may primarily
invest have historically been more volatile than the S&P 500 Index.
Accordingly, during periods when stock prices decline generally, it can be
expected that the value of the Fund will decline more than market indices.
Securities of the kinds of companies in which the Fund invests may be
subject to significant price fluctuation and above-average risk. In addition,
companies achieving an earnings growth rate higher than that of S&P 500
companies tend to reinvest their earnings rather than distribute them. As a
result, the Fund is not likely to receive significant dividend income on its
portfolio securities. Accordingly, an investment in the Fund should not be
considered as a complete investment program and may not be appropriate for all
investors.
The Fund may purchase and sell put and call options on equity securities,
stock indices and foreign currencies, purchase and sell futures contracts on
stock indices and foreign currencies and options thereon and enter into
forward foreign currency exchange contracts to hedge its portfolio and to
attempt to enhance return. The Fund may also lend its portfolio securities,
enter into repurchase agreements and purchase securities on a when-issued and
delayed delivery basis.
The Fund reserves the right as a defensive measure to hold temporarily other
types of securities without limit, including high quality commercial paper,
bankers' acceptances, non-convertible debt securities (corporate and
government) or government and high quality money market securities of U.S. and
non-U.S. issuers, or cash (foreign currencies or U.S. dollars), in such
proportions as, in the opinion of its investment adviser, prevailing market,
economic or political conditions warrant. The Fund also may temporarily hold
cash and invest in high quality foreign or domestic money market instruments
pending investment of proceeds from new sales of Fund shares or to meet
ordinary daily cash needs. See "Other Investments and Policies" below.
7
<PAGE>
As with an investment in any mutual fund, an investment in the Fund can
decrease in value and you can lose money.
THE FUND'S INVESTMENT OBJECTIVE IS A FUNDAMENTAL POLICY AND MAY NOT BE
CHANGED WITHOUT THE APPROVAL OF THE HOLDERS OF A MAJORITY OF THE FUND'S
OUTSTANDING VOTING SECURITIES, AS DEFINED IN THE INVESTMENT COMPANY ACT OF
1940 (INVESTMENT COMPANY ACT). INVESTMENT POLICIES THAT ARE NOT FUNDAMENTAL
MAY BE MODIFIED BY THE BOARD OF DIRECTORS.
U.S. GOVERNMENT SECURITIES
The Fund may invest in securities issued or guaranteed by the U.S. Treasury
or by an agency or instrumentality of the U.S. Government. Not all U.S.
Government securities are backed by the full faith and credit of the United
States. Some are supported only by the credit of the issuing agency. See
"Investment Objectives and Policies--U.S. Government Securities" in the
Statement of Additional Information.
MORTGAGE-BACKED SECURITIES. The Fund may invest in mortgage-backed
securities and other derivative mortgage products, including those
representing an undivided ownership interest in a pool of mortgages, e.g.,
Government National Mortgage Association (GNMA), Federal National Mortgage
Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC)
certificates where the U.S. Government or its agencies or instrumentalities
guarantees the payment of interest and principal of these securities. These
guarantees do not extend to the securities' yield or value, which are likely
to vary inversely with fluctuations in interest rates, nor do these guarantees
extend to the yield or value of the Fund's shares. See "Investment Objectives
and Policies--U.S. Government Securities" in the Statement of Additional
Information. These certificates are in most cases "pass-through" instruments,
through which the holder receives a share of all interest and principal
payments from the mortgages underlying the certificate, net of certain fees.
Mortgage-backed securities are subject to the risk that the principal on the
underlying mortgage loans may be prepaid at any time. Although the extent of
prepayments on a pool of mortgage loans depends on various economic and other
factors, as a general rule prepayments on fixed rate mortgage loans will
increase during a period of falling interest rates and decrease during a
period of rising interest rates. Accordingly, amounts available for
reinvestment by the Fund are likely to be greater during a period of declining
interest rates and, as a result, likely to be reinvested at lower interest
rates than during a period of rising interest rates. Mortgage-backed
securities may decrease in value as a result of increases in interest rates
and may benefit less than other fixed-income securities from declining
interest rates because of the risk of prepayment.
COLLATERALIZED MORTGAGE OBLIGATIONS. The Fund may purchase collateralized
mortgage obligations (CMOs) issued by agencies or instrumentalities of the
U.S. Government. A CMO is backed by a portfolio of mortgages or mortgage-
backed securities. The issuer's obligation to make interest and principal
payments is secured by the underlying portfolio of mortgages or mortgage-
backed securities. The issuer of a series of CMOs may elect to be treated as a
Real Estate Mortgage Investment Conduit (REMIC). All future references to CMOs
include REMICs.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche," is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the underlying mortgage assets may cause the
CMOs to be retired substantially earlier than their stated maturities or final
distribution dates. Interest is paid or accrues on all classes of the CMOs on
a monthly, quarterly or semi-annual basis. The principal of and interest on
the underlying mortgage assets may be allocated among the several classes of a
CMO series in a number of different ways. Generally, the purpose of the
allocation of the cash flow of a CMO to the various classes is to obtain a
more predictable cash flow to the individual tranches than exists with the
underlying collateral of the CMO. As a general rule, the more predictable the
cash flow is on a CMO tranche, the lower the anticipated yield will be on that
tranche at the time of issuance relative to prevailing market yields on
mortgage-backed securities.
The Fund also may invest in mortgage-backed security strips (MBS strips)
issued by the U.S. Government or its agencies or instrumentalities. MBS strips
are usually structured with two classes that receive different proportions of
the interest and
8
<PAGE>
principal distributions on a pool of mortgage assets. A common type of
stripped mortgage security will have one class receiving some of the interest
and most of the principal from the mortgage assets, while the other class will
receive most of the interest and the remainder of the principal. In the most
extreme case, one class will receive all of the interest (the interest-only or
"IO" class), while the other class will receive all of the principal (the
principal-only or "PO" class). The yields to maturity on IOs and POs are
sensitive to the expected or anticipated rate of principal payments (including
prepayments) on the related underlying mortgage assets, and principal payments
may have a material effect on yield to maturity. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, the Fund
may not fully recoup its initial investment in IOs. Conversely, if the
underlying mortgage assets experience less than anticipated prepayments of
principal, the yield on POs could be materially adversely affected.
In reliance on rules and interpretations of the Securities and Exchange
Commission (SEC), the Fund's investments in certain qualifying CMOs and REMICs
are not subject to the Investment Company Act's limitation on acquiring
interests in other investment companies. See "Investment Objectives and
Policies--Mortgage-Related Securities" in the Statement of Additional
Information.
CORPORATE AND OTHER DEBT OBLIGATIONS
The Fund may invest in investment grade corporate and other debt obligations
of domestic and foreign issuers, including convertible securities and money
market instruments. Bonds and other debt securities are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or variable
rate of interest and must repay the amount borrowed at maturity. Investment
grade debt securities are rated within the four highest quality grades as
determined by Moody's Investors Service (Moody's) (currently Aaa, Aa, A and
Baa for bonds), or Standard & Poor's Ratings Group (S&P) (currently AAA, AA, A
and BBB for bonds), or comparably rated by another nationally recognized
statistical rating organization (NRSRO) or in unrated securities which are of
equivalent quality in the opinion of Jennison. If a security (or issuer) held
by the Fund is assigned a rating below investment grade (or, in the view of
Jennison, if a security has declined in credit quality so that it is
comparable to a security rated below investment grade), Jennison will seek to
dispose of the security as soon as reasonably practicable. Securities rated
Baa by Moody's, although considered to be investment grade, lack outstanding
investment characteristics and, in fact, have speculative characteristics.
Changes in economic conditions or other circumstances are more likely to lead
to a weakened capacity to make interest and principal payments than is the
case with higher grade bonds. Such lower rated securities are subject to a
greater risk of loss of principal and interest.
EQUITY-RELATED SECURITIES. The Fund may invest in equity-related securities.
Equity-related securities include common stocks, preferred stocks, securities
convertible or exchangeable for common stocks or preferred stocks, equity
investments in partnerships, joint ventures and other forms of non-corporate
investments, American Depositary Receipts, and warrants and rights exercisable
for equity securities. See "Convertible Securities, Warrants and Rights"
below.
American Depositary Receipts (ADRs) are U.S. dollar-denominated certificates
issued by a U.S. bank or trust company and represent the right to receive
securities of a foreign issuer deposited in a domestic bank or foreign branch
of a U.S. bank and traded on a U.S. exchange or in an over-the-counter market.
Generally, ADRs are in registered form. There are no fees imposed on the
purchase or sale of ADRs when purchased from the issuing bank or trust company
in the initial underwriting, although the issuing bank or trust company may
impose charges for the collection of dividends and the conversion of ADRs into
the underlying securities. Investment in ADRs has certain advantages over
direct investment in the underlying foreign securities since: (i) ADRs are
U.S. dollar-denominated investments that are registered domestically, easily
transferable, and for which market quotations are readily available; and (ii)
issuers whose securities are represented by ADRs are usually subject to
comparable auditing, accounting and financial reporting standards as domestic
issuers.
CONVERTIBLE SECURITIES, WARRANTS AND RIGHTS
A CONVERTIBLE SECURITY IS A BOND, DEBENTURE, CORPORATE NOTE, PREFERRED STOCK
OR OTHER SIMILAR SECURITY WHICH MAY BE CONVERTED AT A STATED PRICE WITHIN A
SPECIFIED PERIOD OF TIME INTO A CERTAIN QUANTITY OF THE COMMON STOCK OR OTHER
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EQUITY SECURITIES OF THE SAME OR A DIFFERENT ISSUER. A warrant or right
entitles the holder to purchase equity securities at a specific price for a
specific period of time. Convertible securities are senior to common stocks 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.
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.
In recent years, convertible securities have been developed which combine
higher or lower current income with options and other features. The Fund may
invest in these types of convertible securities.
SECURITIES OF FOREIGN ISSUERS
The Fund may invest a portion of its assets in equity securities and fixed-
income securities of foreign issuers (denominated in either U.S. or foreign
currency). ADRs and American Depositary Shares (both of which are U.S. dollar-
denominated certificates issued by a U.S. bank or trust company that represent
the right to receive securities of a foreign issuer deposited in a domestic
bank or foreign branch of a U.S. bank) are not deemed to be foreign
securities.
MONEY MARKET INSTRUMENTS
The Fund may invest in high quality money market instruments, including
commercial paper of a U.S. or non-U.S. company, foreign government securities,
certificates of deposit, bankers' acceptances and time deposits of domestic
and foreign banks, and obligations issued or guaranteed by the U.S.
Government, its agencies and instrumentalities. These obligations will be U.S.
dollar denominated or denominated in a foreign currency. Money market
instruments typically have a maturity of one year or less as measured from the
date of purchase. The Fund may invest in money market instruments without
limit for temporary defensive and cash management purposes. To the extent the
Fund otherwise invests in money market instruments, it is subject to the
limitations described above.
OTHER INVESTMENTS AND POLICIES
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's asset coverage for borrowings falls below 300%, the Fund will take
prompt action to reduce its borrowings. The Fund will not purchase portfolio
securities when borrowings exceed 5% of the value of its total assets. See
"Investment Objectives and Policies--Borrowing" in the Statement of Additional
Information.
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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
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 repurchase
price, the Fund will suffer a loss. See "Investment Objectives and Policies--
Repurchase Agreements" 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 investment adviser will monitor the liquidity of such
restricted securities under the supervision of the Board of Directors. The
Fund's investment in Rule 144A securities could have the effect of increasing
illiquidity to the extent that qualified institutional buyers become, for a
limited time, uninterested in purchasing Rule 144A securities. Repurchase
agreements subject to demand are deemed to have a maturity equal to the
applicable notice period.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate is not expected to exceed 100%. 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 (including equity 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/or yield to the Fund at the time of
entering into the transaction. While the Fund will only purchase securities on
a when-issued or delayed delivery basis with the intention of acquiring the
securities, the Fund may sell the securities before the settlement date, if it
is deemed advisable. At the time the Fund makes the commitment to purchase
securities on a when-issued or delayed delivery basis, the Fund will record
the transaction and thereafter reflect the value, each day, of such security
in determining the net asset value of the Fund. At the time of delivery of the
securities, the value may be more or less than the purchase price. The Fund's
Custodian will segregate for the Fund cash or other liquid assets having a
value equal to or greater than the Fund's purchase commitments. Subject to
this requirement, the Fund may purchase securities on such basis without
limit. See "Investment Objectives and Policies--When-Issued and Delayed
Delivery Securities" in the Statement of Additional Information.
SECURITIES LENDING
The Fund may lend its portfolio securities to brokers or dealers, banks or
other recognized institutional borrowers of securities, provided that the
borrower at all times maintains cash or equivalent collateral (which may
include a secured letter
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of credit) in an amount equal to at least 100%, determined daily, of the
market value of the securities loaned which is 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 may not lend more than 30% of the value of its
total assets. See "Investment Objectives 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.
SHORT SALES AGAINST-THE-BOX
The Fund may make short sales "against-the-box." A short sale is against-
the-box when the Fund enters into a short sale of a security which the Fund
owns or has the right to obtain at no added cost. No more than 25% of the
Fund's net assets (determined at the time of the short sale against-the-box)
may be subject to such sales.
RISK FACTORS 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 POSSIBLE IMPOSITION OF EXCHANGE
CONTROLS AND THE RISK OF CURRENCY FLUCTUATIONS. Such securities may be subject
to greater fluctuations in price than securities issued by U.S. corporations
or issued or guaranteed by the U.S. Government, its instrumentalities or
agencies. In addition, there may be less publicly available information about
a foreign company than about a domestic company. Foreign companies generally
are not subject to uniform accounting, auditing and financial reporting
standards comparable to those applicable to domestic companies. There is
generally less government regulation of securities exchanges, brokers and
listed companies abroad than in the United States and there is a possibility
of expropriation, confiscatory taxation or diplomatic developments which could
affect investment.
ADDITIONAL COSTS COULD BE INCURRED IN CONNECTION WITH THE FUND'S
INTERNATIONAL INVESTMENT ACTIVITIES. Foreign brokerage commissions are
generally higher than U.S. brokerage commissions. 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 forward foreign currency
exchange contracts, options on foreign currencies and futures contracts on
foreign currencies and related options, 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
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.
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SHAREHOLDERS SHOULD BE AWARE THAT INVESTING IN THE EQUITY MARKETS OF
DEVELOPING COUNTRIES INVOLVES EXPOSURE TO ECONOMIES THAT ARE GENERALLY LESS
DIVERSE AND MATURE, AND TO POLITICAL SYSTEMS WHICH CAN BE EXPECTED TO HAVE
LESS STABILITY, THAN THOSE OF DEVELOPED COUNTRIES. HISTORICAL EXPERIENCE
INDICATES THAT THE MARKETS OF DEVELOPING COUNTRIES HAVE BEEN MORE VOLATILE
THAN THE MARKETS OF DEVELOPED COUNTRIES. THE RISKS ASSOCIATED WITH INVESTMENTS
IN FOREIGN SECURITIES, DESCRIBED ABOVE, MAY BE GREATER WITH RESPECT TO
INVESTMENTS IN DEVELOPING COUNTRIES.
HEDGING AND RETURN ENHANCEMENT STRATEGIES
THE FUND MAY ALSO ENGAGE IN VARIOUS PORTFOLIO STRATEGIES TO REDUCE CERTAIN
RISKS OF ITS INVESTMENTS AND TO ATTEMPT TO ENHANCE RETURN. THE FUND, AND THUS
ITS INVESTORS, MAY LOSE MONEY IF THE FUND IS UNSUCCESSFUL IN ITS USE OF THESE
STRATEGIES. These strategies currently include the use of derivatives, such as
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
Objectives and Policies" and "Taxes, Dividends and Distributions" in the
Statement of Additional Information. Jennison does not intend to buy all of
these instruments or use all of these strategies to the full extent permitted
unless it believes that doing so will help the Fund achieve its objectives.
New financial products and risk management techniques continue to be developed
and the Fund may use these new investments and techniques to the extent
consistent with its investment objective and policies.
OPTIONS TRANSACTIONS
THE FUND MAY PURCHASE AND WRITE (I.E., SELL) PUT AND CALL OPTIONS ON
SECURITIES, STOCK INDICES AND CURRENCIES THAT ARE TRADED ON U.S. OR FOREIGN
SECURITIES EXCHANGES OR IN THE OVER-THE-COUNTER (OTC) MARKET TO ENHANCE RETURN
OR TO HEDGE ITS PORTFOLIO. These options will be on equity securities, stock
indices (e.g., S&P 500) and foreign currencies. The Fund may write put and
call options to generate additional income through the receipt of premiums,
purchase put options in an effort to protect the value of securities (or
currencies) 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 Objectives and Policies--Options on Securities" in the
Statement of Additional Information.
A CALL OPTION GIVES THE PURCHASER, IN EXCHANGE FOR A PREMIUM PAID, THE RIGHT
FOR A SPECIFIED PERIOD OF TIME TO PURCHASE THE SECURITIES OR CURRENCY SUBJECT
TO THE OPTION AT A SPECIFIED PRICE (THE EXERCISE PRICE OR STRIKE PRICE). The
writer of a call option, in return for the premium, has the obligation, upon
exercise of the option, to deliver, depending upon the terms of the option
contract, the underlying securities or a specified amount of cash to the
purchaser upon receipt of the exercise price. When the Fund writes a call
option, the Fund gives up the potential for gain on the underlying securities
or currency in excess of the exercise price of the option during the period
that the option is open. The Fund will write only "covered" call options for
which it (i) owns an offsetting position in the underlying security or
currency or (ii) maintains in a segregated account cash or other liquid assets
with a value sufficient at all times to cover its obligations.
A PUT OPTION GIVES THE PURCHASER, IN RETURN FOR A PREMIUM, THE RIGHT, FOR A
SPECIFIED PERIOD OF TIME, TO SELL THE SECURITIES OR CURRENCY SUBJECT TO THE
OPTION TO THE WRITER OF THE PUT AT THE SPECIFIED EXERCISE PRICE. The writer of
the put option, in return for the premium, has the obligation, upon exercise
of the option, to acquire the securities or currency underlying the option at
the exercise price. The Fund might, therefore, be obligated to purchase the
underlying securities or currency for more than their current market price.
The Fund will write only put options for which it (i) owns an offsetting
position in the underlying security or currency or (ii) maintains in a
segregated account cash or other liquid assets with a value sufficient at all
times to cover its obligations.
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FORWARD CURRENCY EXCHANGE CONTRACTS
THE FUND MAY ENTER INTO FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS TO
PROTECT THE VALUE OF ITS ASSETS AGAINST FUTURE CHANGES IN THE LEVEL OF
CURRENCY EXCHANGE RATES. The Fund may enter into such contracts on a spot,
i.e., cash, basis at the rate then prevailing in the currency exchange market
or on a forward basis, by entering into a forward contract to purchase or sell
currency. A forward contract on foreign currency is an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days agreed upon by the parties from the date of the contract at a price set
on the date of the contract.
THE FUND'S DEALINGS IN FORWARD CONTRACTS WILL BE LIMITED TO HEDGING
INVOLVING EITHER SPECIFIC TRANSACTIONS OR PORTFOLIO POSITIONS. Transaction
hedging is the purchase or sale of a forward contract with respect to specific
receivables or payables of the Fund generally arising in connection with the
purchase or sale of its portfolio securities and accruals of interest or
dividends receivable and Fund expenses. Position hedging is the sale of a
foreign currency with respect to portfolio security positions denominated or
quoted in that currency or in a different currency (cross hedge). Although
there are no limits on the number of forward contracts which the Fund may
enter into, the Fund may not position hedge (including cross hedges) with
respect to a particular currency for an amount greater than the aggregate
market value (determined at the time of making any sale of foreign currency)
of the securities being hedged. See "Investment Objectives 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 ANY
UNSUCCESSFUL USE OF THESE STRATEGIES. These futures contracts and related
options will be on stock indices and foreign currencies. 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 to purchase or sell 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
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
requirements of the SEC and coverage requirements of the CFTC. If the Fund
does not hold the security or currency underlying the futures contract, it
will be required to segregate on an ongoing basis with its Custodian cash or
other liquid assets having an amount at least equal to its 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 is
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imperfect and there is a risk that the value of the securities or 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 ANY 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 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 out an option or futures transaction.
The inability to close out 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.
INVESTMENT RESTRICTIONS
The Fund is subject to certain investment restrictions which, like its
investment objective, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities as defined in the Investment Company Act.
See "Investment Restrictions" in the Statement of Additional Information.
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HOW THE FUND IS MANAGED
THE COMPANY 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 September 30, 1997, the Fund's total expenses as a
percentage of average net assets for Class A, Class B, Class C and Class Z
shares were 1.09%, 1.84%, 1.84% and .84%, respectively. See "Financial
Highlights."
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
.60 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 September 30,
1997, the Fund paid management fees to PIFM of .60% of the Fund's average net
assets. See "Manager and Subadvisers" in the Statement of Additional
Information.
As of December 31, 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 $62 billion.
Under a Management Agreement with the Company, PIFM manages the investment
operations of the Fund and also administers the Fund's corporate affairs. See
"Manager and Subadvisers" in the Statement of Additional Information.
SUBADVISER
JENNISON ASSOCIATES LLC (JENNISON, THE SUBADVISER OR THE INVESTMENT
ADVISER), 466 LEXINGTON AVENUE, NEW YORK, NEW YORK 10017, IS THE SUBADVISER TO
THE FUND. As of December 31, 1997, Jennison had over $37 billion in assets
under management for institutional and mutual fund clients, including over $19
billion in "growth stock" assets.
PURSUANT TO A SUBADVISORY AGREEMENT WITH PIFM, JENNISON FURNISHES INVESTMENT
ADVISORY SERVICES IN CONNECTION WITH THE MANAGEMENT OF THE FUND AND IS
COMPENSATED BY PIFM FOR ITS SERVICES AT AN ANNUAL RATE OF .30 OF 1% OF THE
FUND'S AVERAGE DAILY NET ASSETS UP TO AND INCLUDING $300 MILLION AND .25 OF 1%
OF THE FUND'S AVERAGE DAILY NET ASSETS IN EXCESS OF $300 MILLION.
Under the Subadvisory Agreement, Jennison, subject to the supervision of
PIFM, is responsible for managing the assets of the Fund in accordance with
the Fund's investment objective, investment program and policies. Jennison
determines what securities and other instruments are purchased and sold for
the Fund and is responsible for obtaining and evaluating financial data
relevant to the Fund.
DAVID POIESZ IS THE PORTFOLIO MANAGER OF THE FUND AND PETER REINEMANN IS THE
ASSOCIATE PORTFOLIO MANAGER OF THE FUND. Mr. Poiesz is responsible for the
day-to-day management of the Fund. They are both Senior Vice Presidents of
Jennison and have been involved with the Fund since its inception in 1995. Mr.
Poiesz, also a Director of Jennison, joined Jennison in 1983 as an equity
research analyst and has been an equity portfolio manager since 1991. Mr.
Poiesz also serves as the Portfolio Manager of the Prudential Jennison
Portfolio of the Prudential Series Fund, Inc., a registered investment
company. Mr. Reinemann has been with Jennison since 1992 as an associate
portfolio manager. Prior to that time, he served as a Vice President at
Paribas Asset Management, Inc.
PIFM and Jennison are wholly-owned subsidiaries of The Prudential Insurance
Company of America (Prudential), a major diversified insurance and financial
services company.
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DISTRIBUTOR
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC (THE DISTRIBUTOR), GATEWAY
CENTER THREE, 100 MULBERRY STREET, NEWARK, NEW JERSEY 07102-4077, IS A LIMITED
LIABILITY COMPANY 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 A WHOLLY-OWNED SUBSIDIARY OF PRUDENTIAL. Prudential Securities
Incorporated, One Seaport Plaza, New York, New York 10292, previously served
as the exclusive distributor of Fund shares and will serve as a co-distributor
of the Fund for shares sold through its financial advisors until approximately
July 1, 1998. Thereafter, Prudential Investment Management Services LLC will
serve as the exclusive distributor of Fund shares. Prudential Securities
Incorporated 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), THE DISTRIBUTOR 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 account servicing fees paid to, or on account
of, Dealers or financial institutions 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 the
Distributor associated with the sale of the Fund's 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.
The distribution and/or service fees may also be used by the Distributor to
compensate on a continuing basis Dealers in consideration for the
distribution, marketing, administrative and other services and activities
provided by Dealers with respect to the promotion of the sale of the Fund's
shares and the maintenance of related shareholder accounts.
UNDER THE CLASS A PLAN, THE FUND MAY PAY THE DISTRIBUTOR FOR ITS
DISTRIBUTION-RELATED EXPENSES WITH RESPECT TO CLASS A SHARES AT AN ANNUAL RATE
OF UP TO .30 OF 1% OF THE AVERAGE DAILY NET ASSETS OF THE CLASS A SHARES. The
Class A Plan provides that (i) up to .25 of 1% of the average 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. The Distributor 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 September 30, 1998.
UNDER THE CLASS B AND CLASS C PLANS, THE FUND PAYS THE DISTRIBUTOR FOR ITS
DISTRIBUTION-RELATED EXPENSES WITH RESPECT TO CLASS B AND CLASS C SHARES AT AN
ANNUAL RATE OF 1% OF THE AVERAGE DAILY NET ASSETS OF EACH OF THE CLASS B AND
CLASS C SHARES. The Class B and Class C Plans provide for the payment to the
Distributor of (i) an asset-based sales charge of .75 of 1% of the average
daily net assets of the Class B and Class C shares, respectively, 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. The Distributor 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 September 30, 1997, the Fund paid distribution
expenses of .25%, 1.00% and 1.00% of the average daily 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.
See "Distributor" in the Statement of Additional Information.
17
<PAGE>
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 of the Fund 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 Company, including a
majority of the Directors who are not "interested persons" of the Company (as
defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related to
the Plan (the Rule 12b-1 Directors), vote annually to continue the Plan. Each
Plan may be terminated at any time by vote of a majority of the Rule 12b-1
Directors or of a majority of the outstanding shares of the applicable class
of the Fund. The Fund will not be obligated to pay expenses incurred under any
Plan if it is terminated or not continued.
In addition to distribution and service fees paid by the Fund under the
Class A, Class B and Class C Plans, the Manager (or one of its affiliates) may
make payments to Dealers and other persons which distribute shares of the Fund
(including Class Z shares). Such payments may be calculated by reference to
the net asset value of shares sold by such persons or otherwise.
The Distributor is subject to the rules of the National Association of
Securities Dealers, Inc. governing maximum sales charges. See "Distributor" in
the Statement of Additional Information.
FEE WAIVERS
The Distributor has agreed to limit its distribution fee for the Class A
shares as described above under "Distributor." Fee waivers will increase the
Fund's total return. See "Performance Information" in the Statement of
Additional Information and "Fund Expenses" above.
PORTFOLIO TRANSACTIONS
Affiliates of the Distributor may act as brokers or futures commission
merchants for the Fund provided that the commissions, fees or other
remuneration they receive 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 Company. 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 for the
Fund and in those capacities maintains certain books and records for the
Company. PMFS is a wholly-owned subsidiary of PIFM. Its mailing address is
P.O. Box 15035, New Brunswick, New Jersey 08906-5005.
YEAR 2000
The services provided to the Fund and the shareholders by the Manager, the
Distributor, the Transfer Agent and the Custodian depend on the smooth
functioning of their computer systems and those of their outside service
providers. Many computer software systems in use today cannot distinguish the
year 2000 from the year 1900 because of the way dates are encoded and
calculated. Such event could have a negative impact on handling securities
trades, payments of interest and dividends, pricing and account services.
Although, at this time, there can be no assurance that there will be no
adverse impact on the Fund, the Manager, the Distributor, the Transfer Agent
and the Custodian have advised the Fund that they have been actively working
on necessary changes to their computer systems to prepare for the year 2000
and expect that their systems, and those of their outside service providers,
will be adapted in time for that event.
18
<PAGE>
HOW THE FUND VALUES ITS SHARES
THE FUND'S NET ASSET VALUE PER SHARE OR NAV IS DETERMINED BY SUBTRACTING ITS
LIABILITIES FROM THE VALUE OF ITS ASSETS AND DIVIDING THE REMAINDER BY THE
NUMBER OF OUTSTANDING SHARES. NAV IS CALCULATED SEPARATELY FOR EACH CLASS. For
valuation purposes, quotations of foreign securities in a foreign currency are
converted to U.S. dollar equivalents. THE BOARD OF DIRECTORS HAS FIXED THE
SPECIFIC TIME OF DAY FOR THE COMPUTATION OF THE FUND'S NAV TO BE AS OF 4:15
P.M., NEW YORK TIME.
Portfolio securities are valued based on market quotations or, if not
readily available, at fair value as determined in good faith under procedures
established by the Company's Board of Directors. 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 its
NAV.
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 Class
Z shares will generally be higher than the NAV of the other three 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 distribution and/or service fee expense accrual
differential among the classes.
HOW THE FUND CALCULATES PERFORMANCE
FROM TIME TO TIME THE FUND MAY ADVERTISE ITS 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 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., and other industry
publications, business periodicals and market indices. See "Performance
Information" in the Statement of Additional Information. Further performance
information will be 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."
19
<PAGE>
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 INTERNAL REVENUE CODE). ACCORDINGLY, THE FUND WILL NOT BE SUBJECT
TO FEDERAL INCOME TAXES ON NET INVESTMENT INCOME AND NET CAPITAL GAINS, IF
ANY, THAT IT DISTRIBUTES TO ITS SHAREHOLDERS.
The Fund may, from time to time, invest in Passive Foreign Investment
Companies (PFICs). PFICs are foreign corporations which derive a majority of
their income from passive sources. For tax purposes, the Fund's investments in
PFICs are subject to special tax provisions that may result in the taxation of
certain gains realized by the Fund. See "Taxes, Dividends and Distributions"
in the Statement of Additional Information.
In addition, under the Internal Revenue Code, special rules apply to the
treatment of certain options and futures contracts (Section 1256 contracts).
At the end of each year, such investments held by the Fund will be required to
be "marked-to-market" for federal income tax purposes; that is, treated as
having been sold at market value. Sixty percent of any gain or loss recognized
on these "deemed sales" and on actual dispositions may be treated as long-term
capital gain or loss, and the remainder will be treated as short-term capital
gain or loss. See "Taxes, Dividends and Distributions" in the Statement of
Additional Information.
Gains or losses on disposition of debt securities denominated in a foreign
currency attributable to fluctuations in the value of foreign currency between
the date of acquisition of the security and the date of disposition are
treated as ordinary gain or loss. These gains or losses increase or decrease
the amount of the Fund's investment company taxable income available to be
distributed to shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund's net capital gain. If currency fluctuation
losses exceed other investment company taxable income during a taxable year,
distributions made by the Fund during the year would be characterized as a
return of capital to shareholders, reducing the shareholder's basis in his or
her Fund shares.
The Fund may incur foreign income taxes in connection with some of its
foreign investments. See "Taxes, Dividends and Distributions" in the Statement
of Additional Information.
TAXATION OF SHAREHOLDERS
All dividends out of net investment income, together with distributions of
net short-term capital gains, will be taxable as ordinary income to the
shareholder whether or not reinvested. Any net long-term capital gains
distributed to shareholders will be taxable as such to the shareholder,
whether or not reinvested and regardless of the length of time a shareholder
has owned his or her shares. The maximum long-term capital gains rate for
corporate shareholders is currently the same as the maximum tax rate for
ordinary income. The maximum long-term capital gains rate for individual
shareholders 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 currently is 35%.
Any gain or loss realized upon a sale or redemption of shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held more than one year and
otherwise as short-term capital gain or loss. Any such loss, however, on
shares that are held for six months or less, will be treated as a long-term
capital loss to the extent of any capital gain distributions received by the
shareholder with respect to those shares. With respect to non-corporate
shareholders, gain or loss on shares held more than 18 months will be
considered in determining a holder's adjusted net capital gain subject to a
maximum statutory tax rate of 20%.
20
<PAGE>
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 of 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 advisers.
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.
WITHHOLDING TAXES
Under U.S. Treasury Regulations, the Fund is required to withhold and remit
to the U.S. Treasury 31% of dividend, capital gain income and redemption
proceeds on the accounts of those shareholders who fail to furnish their tax
identification numbers on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) with the required certifications regarding the
shareholder's status under the federal income tax law.
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.
DIVIDENDS AND DISTRIBUTIONS
THE FUND EXPECTS TO PAY DIVIDENDS OF NET INVESTMENT INCOME, IF ANY, SEMI-
ANNUALLY AND TO MAKE DISTRIBUTIONS OF ANY CAPITAL GAINS IN EXCESS OF NET LONG-
TERM CAPITAL LOSSES AT LEAST ANNUALLY. 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 and/or service fee 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 SHARES OF THE FUND,
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, P.O. Box
15035, New Brunswick, New Jersey 08906-5015. The Fund will notify its
shareholders 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 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.
21
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF COMMON STOCK
THE COMPANY WAS INCORPORATED IN MARYLAND ON AUGUST 10, 1995. THE COMPANY IS
AUTHORIZED TO ISSUE 3 BILLION SHARES OF COMMON STOCK, $.001 PAR VALUE PER
SHARE, DIVIDED INTO THREE SERIES OR PORTFOLIOS, PRUDENTIAL ACTIVE BALANCED
FUND, PRUDENTIAL JENNISON GROWTH FUND AND PRUDENTIAL JENNISON GROWTH & INCOME
FUND. EACH SERIES IS FURTHER DIVIDED INTO FOUR CLASSES OF SHARES, DESIGNATED
CLASS A, CLASS B, CLASS C AND CLASS Z. THERE ARE 250 MILLION AUTHORIZED SHARES
ALLOCATED TO EACH OF THE FOUR CLASSES OF SHARES IN EACH SERIES OF THE COMPANY.
Each class of common stock of each Fund represents an interest in the same
assets of such 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 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. In
accordance with the Company's Articles of Incorporation, the Board of
Directors may authorize the creation of additional series of common stock and
classes within such series, with such preferences, privileges, limitations and
voting and dividend rights as the Board may determine.
The Company's expenses generally are allocated among the series on the basis
of relative net assets at the time of allocation, except that expenses
directly attributable to a series are charged to such series.
The Board of Directors may increase or decrease the number of authorized
shares without the approval of 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
Shares." Each share of each class of common stock is equal as to earnings,
assets and voting privileges, except as noted above, and each class bears the
expenses related to the distribution of its shares (with the exception of
Class Z shares, which are not subject to any distribution or service fees).
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 Company's shares do not have cumulative voting rights for
the election of Directors.
THE COMPANY DOES NOT INTEND TO HOLD ANNUAL MEETINGS OF SHAREHOLDERS UNLESS
OTHERWISE REQUIRED BY LAW. THE COMPANY 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 COMPANY'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 Company with the
Commission under the Securities Act of 1933, as amended. Copies of the
Registration Statement may be obtained at a reasonable charge from the
Commission or may be examined, without charge, at the office of the Commission
in Washington, D.C.
22
<PAGE>
SHAREHOLDER GUIDE
HOW TO BUY SHARES OF THE FUND
YOU MAY PURCHASE SHARES OF THE FUND THROUGH THE DISTRIBUTOR, THROUGH
DEALERS, 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 15035, NEW BRUNSWICK, NEW JERSEY 08906-5020. The purchase
price is the NAV next determined following receipt of an order in proper form
by the Distributor, your Dealer or the Transfer Agent, 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 NAV without any
sales charge. Dealers may charge their customers a separate fee for handling
purchase transactions. Payment may be made by cash, wire, check or through
your brokerage account. See "Alternative Purchase Plan" below. See also "How
the Fund Values its Shares."
In order to receive that day's NAV, your order must be received before the
Fund's NAV is computed (currently 4:15 P.M., New York time). If you purchase
shares through your Dealer, the Dealer must receive your order before the
Fund's NAV is computed that day and must transmit the order to the Distributor
that same day for you to receive that day's NAV.
The minimum initial investment for the Fund is $1,000 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 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.
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.
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 in street name with their Dealer will not receive stock
certificates.
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 placement of the
order.
Transactions in shares of the Fund may be subject to postage and handling
charges imposed by your Dealer. Any such charge is retained by the Dealer and
is not remitted to the Fund.
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 Jennison Growth Fund, 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 Jennison Growth
Fund, 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.
23
<PAGE>
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 DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
------------ ------------------------ -----------------
<S> <C> <C> <C>
CLASS A Maximum initial sales charge .30 of 1% Initial sales charge waived
of 5% of the public offering (currently being or reduced for certain
price charged at a rate purchases
of .25 of 1%)
CLASS B Maximum contingent deferred 1% Shares convert to Class A
sales charge or CDSC of 5% shares approximately seven
of the lesser of the amount years after purchase
invested or the redemption
proceeds; declines to zero
after six years
CLASS C Maximum CDSC of 1% of the 1% Shares do not convert to
lesser of the amount another class
invested or the redemption
proceeds on redemptions made
within one year of purchase.
CLASS Z None Sold to a limited group of
None investors
</TABLE>
Each class of shares of the Fund represents an interest in the same
portfolio of investments of the Fund and has the same rights, 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 "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 expenses of a higher distribution fee which will
generally cause them to have higher expense ratios and to pay lower dividends
than the Class A 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).
24
<PAGE>
The following is provided to assist you in determining which method of
purchase best suits your individual circumstances and is based on current fees
and expenses being charged to the Fund.
If you intend to hold your investment in the Fund for less than 7 years and
do not qualify for a reduced sales charge on Class A shares, since Class A
shares are subject to an initial sales charge of 5% and Class B shares are
subject to a CDSC of 5% which declines to zero over a 6-year period, you
should consider purchasing Class C shares over either Class A or Class B
shares.
If you intend to hold your investment for 7 years or more and do not qualify
for a reduced sales charge on Class A shares, since Class B shares convert to
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 A or Class B shares over 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 fees on
Class A shares. This does not take into account the time value of money, which
further reduces the impact of the higher Class B or Class C distribution-
related fee on the investment, fluctuations in net asset value, the effect of
the return on the investment over this period of time or redemptions during
which the CDSC is applicable.
ALL PURCHASES OF $1 MILLION OR MORE, EITHER AS PART OF A SINGLE INVESTMENT
OR UNDER RIGHTS OF ACCUMULATION OR LETTERS OF INTENT, MUST BE FOR CLASS A
SHARES, UNLESS THE PURCHASER IS ELIGIBLE TO PURCHASE CLASS Z SHARES. See
"Reduction and Waiver of Initial Sales Charges" and "Class Z Shares" below.
CLASS A SHARES
The offering price of Class A shares for investors choosing the initial
sales charge alternative is the next determined NAV plus a sales charge
(expressed as a percentage of the offering price and of the amount invested)
as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS DEALER CONCESSION
PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
--------------- --------------- -----------------
<S> <C> <C> <C>
Less than $25,000 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 sales charge to Dealers. Dealers may
be deemed to be underwriters, as that term is defined in the Securities Act.
The Distributor reserves the right, without prior notice to any Dealer, to
suspend or eliminate Dealer concessions or commissions.
25
<PAGE>
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 Internal Revenue Code and deferred
compensation and annuity plans under Sections 457 or 403(b)(7) of the Internal
Revenue Code (collectively, Benefit Plans), provided that the plan has
existing assets of at least $1 million invested in shares of Prudential Mutual
Funds (excluding money market funds other than those acquired pursuant to the
exchange privilege) or 250 eligible employees or participants. In the case of
Benefit Plans whose accounts are held directly with the Transfer Agent and for
which the Transfer Agent does individual account recordkeeping (Direct Account
Benefit Plans), Class A shares may be purchased at NAV by participants who are
repaying loans made from such plans to the participant.
SPECIAL RULES APPLICABLE TO RETIREMENT PLANS. After a Benefit 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
the Transfer Agent, by the following persons: (a) officers of the Prudential
Mutual Funds (including the Fund), (b) employees of the Distributor and PIFM
and their subsidiaries and members of the families of such persons who
maintain an "employee related" account at 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 provided that purchases at
NAV are permitted by such person's employer, (f) investors in Individual
Retirement Accounts, provided the purchase is made with proceeds of a tax-free
rollover of assets from a Benefit Plan for which Prudential Investments serves
as the recordkeeper or administrator, (g) investors previously eligible to
purchase Class A shares at NAV because of their participation in programs
sponsored by an affiliate of the Distributor for certain retirement plan or
deferred compensation plan participants, (h) orders placed by broker-dealers,
investment advisers or financial planners who have entered into an agreement
with the Distributor, who place trades for their own accounts or the accounts
of their clients and who charge a management, consulting or other fee for
their services (e.g., mutual fund "wrap" or asset allocation programs), and
(i) orders placed by clients of broker-dealers, investment advisers or
financial planners who place trades for their own accounts if the accounts are
linked to the master account of such broker-dealer, investment adviser or
financial planner on the books and records of such broker-dealer, investment
adviser or financial planner (e.g., mutual fund "supermarket" programs).
For an investor to obtain any reduction or waiver of the initial sales
charges, at the time of the sale, either the Transfer Agent must be notified
directly by the investor or the Distributor must be notified by the Dealer
facilitating the transaction that the sale qualifies for the reduced or waived
sales charge. The reduction or waiver will be granted subject to confirmation
of your entitlement. No initial sales charges are imposed upon Class A shares
purchased upon the reinvestment of dividends and distributions. See "Purchase
and Redemption of Fund Shares--Reduction and Waiver of Initial Sales Charges--
Class A Shares" in the Statement of Additional Information.
CLASS B AND CLASS C SHARES
The offering price of Class B and Class C shares for investors choosing one
of the deferred sales charge alternatives is the NAV next determined following
receipt of an order by the Transfer Agent, a Dealer or the Distributor.
Although there is
26
<PAGE>
no sales charge imposed at the time of purchase, redemptions 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 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. 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 "How the Fund is Managed--Distributor." 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 currently are available for purchase by: (i) pension, profit-
sharing or other employee benefit plans qualified under Section 401 of the
Internal Revenue Code, deferred compensation and annuity plans under Sections
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 any affiliate of the Distributor 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 an affiliate of the Distributor for whom Class Z
shares of the Prudential Mutual Funds are an available option; (iv) Benefit
Plans for which an affiliate of the Distributor serves as recordkeeper 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) current and former Directors/Trustees of the
Prudential Mutual Funds (including the Fund); and (vi) employees of an
affiliate of the Distributor who participate in an employer-sponsored employee
savings plan. After a Benefit Plan qualifies to purchase Class Z shares, all
subsequent purchases will be for Class Z shares.
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.
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, THE DISTRIBUTOR OR YOUR DEALER. 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 are redeeming your shares through a Dealer, your
Dealer must receive your sell order before the Fund computes its NAV for that
day (i.e., 4:15 P.M., New York time) in order to receive that day's NAV. Your
Dealer will be responsible for furnishing all necessary documentation to the
Distributor and may charge you for its services in connection with redeeming
shares of the Fund.
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, THE DISTRIBUTOR OR YOUR
DEALER IN ORDER FOR THE REDEMPTION REQUEST TO BE PROCESSED. IF REDEMPTION IS
REQUESTED BY A CORPORATION, PARTNERSHIP, TRUST OR FIDUCIARY, WRITTEN EVIDENCE
OF AUTHORITY ACCEPTABLE TO THE TRANSFER AGENT MUST BE SUBMITTED BEFORE SUCH
REQUEST WILL BE ACCEPTED. All correspondence and documents concerning
redemptions should be sent to the Fund in care of its Transfer Agent,
Prudential Mutual Fund Services LLC, Attention: Redemption Services, P.O. Box
15035, New Brunswick, New Jersey 08906-5010, the Distributor or to your
Dealer.
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,
27
<PAGE>
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.
PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE MADE BY CHECK WITHIN
SEVEN DAYS AFTER RECEIPT BY THE TRANSFER AGENT, THE DISTRIBUTOR OR YOUR DEALER
OF THE CERTIFICATE AND/OR WRITTEN REQUEST EXCEPT AS INDICATED BELOW. Such
payment may be postponed or the right of redemption suspended at times (a)
when the New York Stock Exchange is closed for other than customary weekends
and holidays, (b) when trading on such Exchange is restricted, (c) when an
emergency exists as a result of which disposal by the Fund of securities owned
by it is not reasonably practicable or it is not reasonably practicable for
the Fund fairly to determine the value of its net assets, or (d) during any
other period when the Commission, by order, so permits; provided that
applicable rules and regulations of the Commission 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 THE TRANSFER AGENT HAS BEEN ADVISED THAT THE PURCHASE CHECK HAS
BEEN HONORED, WHICH MAY TAKE UP TO 10 CALENDAR DAYS FROM THE TIME OF RECEIPT
OF THE PURCHASE CHECK BY THE FUND OR 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 Commission. 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 Company has,
however, elected to be governed by Rule 18f-1 under the Investment Company
Act, under which the Fund is obligated to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of the Fund during the 90-
day period for any one shareholder.
INVOLUNTARY REDEMPTION. In order to reduce expenses of the Fund, the Board
of Directors may redeem all of the shares of any shareholder, other than a
shareholder which is an IRA or other tax-deferred retirement plan, whose
account has a NAV 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 redemption. Any 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 your Dealer or the Distributor, at the time
the repurchase privilege is exercised to adjust your account for the CDSC you
previously paid. Thereafter, any redemptions will be subject to the CDSC
applicable at the time of the redemption. See "Contingent Deferred Sales
Charges" below. Exercise of the repurchase privilege will generally not affect
the 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.
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
28
<PAGE>
by you which reduces the current value of your Class B or Class C shares to an
amount which is lower than the amount of all payments by you for shares during
the preceding six years, in the case of Class B shares, and one year, in the
case of Class C shares. A CDSC will be applied on the lesser of the original
purchase price or the current value of the shares being redeemed. Increases in
the value of your shares or shares purchased through reinvestment of dividends
or distributions are not subject to 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" below.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of your 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 generally 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 the Fund's 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 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 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 or disability, provided that the shares were purchased
prior to death or disability.
29
<PAGE>
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; 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 as a waiver as described above. 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 or, for shares purchased
prior to March 1, 1997, on March 1 of the current year. The CDSC will be
waived (or reduced) on redemptions until this threshold 12% is reached.
In addition, the CDSC will be waived on redemptions of shares held by a
Director of the Company.
You must notify the Transfer Agent either directly or through your Dealer,
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.
CONVERSION FEATURE--CLASS B SHARES
Class B shares will automatically convert to Class A shares on a quarterly
basis 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 then 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 or 47.62% multiplied by 200 shares or 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.
30
<PAGE>
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 is 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, OF ANOTHER SERIES OF THE COMPANY OR
ANOTHER FUND ON THE BASIS OF THE RELATIVE NAV. No sales charge will be imposed
at the time of 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. 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.
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.
31
<PAGE>
You may also exchange shares by mail by writing to Prudential Mutual Fund
Services LLC, Attention: Exchange Processing, P.O. Box 15035, 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 such a shareholder's account will be automatically
exchanged for Class A shares for shareholders who qualify to purchase Class A
shares at NAV 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 their Dealer that they
are eligible for this special exchange privilege.
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 join the 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 NAV.
The exchange privilege is not a right and may be suspended, terminated or
modified upon 60 days' 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, 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 engaging 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 of the Fund are
automatically reinvested in full and fractional shares of the Fund at NAV
without
32
<PAGE>
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.
. 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. For additional information about this
service, you may contact the Transfer Agent directly.
. TAX-DEFERRED RETIREMENT PLANS. Various tax-deferred retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
"tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue Code
are available through the Distributor. These plans are for use by both self-
employed individuals and corporate employers. These plans permit either self-
direction of accounts by participants, or a pooled account arrangement.
Information regarding the establishment of these plans, the administration,
custodial fees and other details is available from 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, 9th Floor, 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 Company at
Gateway Center Three, 100 Mulberry Street, 9th Floor, Newark, New Jersey
07102-4077, or by telephone, at (800) 225-1852 (toll-free) or, from outside
the U.S.A. at (732) 417-7555 (collect).
For additional information regarding the services and privileges described
above, see "Shareholder Investment Account" in the Statement of Additional
Information.
33
<PAGE>
APPENDIX A--INFORMATION ABOUT JENNISON ASSOCIATES LLC
Jennison has been engaged in the equity investment management business since
1969. As of December 31, 1997, Jennison managed $37.8 billion in assets for
182 clients, including approximately $6.6 billion (17%) in mutual funds. Of
the $37.8 billion in assets, $20.9 billion in assets were in equity portfolios
for 96 clients, with an average account size of $174.1 million. Approximately
30% of Jennison's equity clients are "Fortune 500" companies (as defined by
Fortune Magazine in the issue dated April 28, 1997). As of December 31, 1997,
Jennison also managed $394 billion in growth and income portfolios, $1.8
billion in balanced portfolios, $4.0 billion in international equity
portfolios, and $10.7 billion in fixed-income portfolios.
Jennison has an experienced team of investment professionals. The following
chart shows the total number of equity professionals employed by Jennison, as
of December 31, 1997, including the total number of portfolio managers and the
total number of equity research analysts.
<TABLE>
<CAPTION>
AVERAGE YEARS
AVERAGE YEARS OF EXPERIENCE
NUMBER OF EXPERIENCE WITH JENNISON
------ ------------- -------------
<C> <S> <C> <C>
15 Total Equity Professionals 20 15
5 Equity Portfolio Managers 26 21
7 Equity Research Analysts 13 7
</TABLE>
JENNISON'S GROWTH STRATEGY:
Growth stocks are stocks of companies that have long-term growth rates in
sales and earnings that are higher than those of the overall economy. Growth
stocks are generally more expensive than the average stock (sell at a higher
price/earnings ratio) because investors are often willing to pay a premium in
order to participate in the superior growth they expect from these companies.
Consequently, these stocks also entail somewhat higher risk if expectations
are not met.
Growth stock investing is subject to market risk. The returns from the S&P
500 Index for the past fifteen years have been particularly favorable from a
historical standpoint and there can be no assurance that this growth in the
overall stock market will continue. Securities in which the Fund may primarily
invest have historically been more volatile than the S&P 500 Index.
Accordingly, during periods when stock prices are declining generally, it can
be expected that the value of the Fund will decline more than market indices.
Jennison seeks to select attractive growth companies. The Jennison portfolio
managers' challenge is to select about 60 stocks that are believed to have the
potential to be the best performers among the larger universe of growth
stocks. Consequently, a growth stock portfolio managed by Jennison normally
consists of companies that the firm believes will experience superior earnings
growth over the next 12 to 18 months, on both an absolute and relative basis,
and which appear reasonably valued relative to growth expectations. Of course,
there can be no assurance that these stocks will achieve their growth
potential.
A-1
<PAGE>
APPENDIX B--HISTORICAL PERFORMANCE INFORMATION OF JENNISON ASSOCIATES LLC
GROWTH EQUITY CHARTS
The chart below demonstrates the total return of $10,000 invested separately
from July 1969 through December 31, 1997 in the Jennison Growth Equity
Composite and the S&P 500 Index. Total return reflects actual performance over
a stated period. Total return shows how much an investment has increased
(decreased) over a specified period of time assuming the reinvestment of
dividends and interest, as appropriate.
TOTAL RETURN OF $10,000 INVESTED FROM JULY 1969*-DECEMBER 1997
[LINE GRAPH APPEARS HERE]
All Jennison composite information, index information, and asset class
performance information rely on data provided by Jennison or from statistical
services, reports, or other sources believed by Jennison to be reliable,
including data from Standard & Poor's and The Wall Street Journal. Such
information, however, has not been verified and is unaudited. Of course, past
performance should not be interpreted as indicative of future performance.
The Jennison composite historical rates of return are time-weighted rates of
total return calculated in accordance with Performance Presentation Standards
of the Association for Investment Management and Research (AIMR). They are
calculated by dividing the period of time under study into subperiods whose
boundaries are the dates of cash and other asset flows into and from the
accounts constituting a given composite and by computing the internal rate of
return for each subperiod. The time-weighted rate of return is the average of
the rates for these subperiods with each rate being given a weight
proportionate to the length of time of its subperiod.
Jennison's results are based on the time-weighted rate of return achieved for
"Growth Equity" accounts managed by Jennison. As of December 31, 1997, Jennison
managed 107 accounts representing approximately $19.9 billion in assets using a
"Growth Equity" strategy. These accounts include the Prudential Jennison Growth
Fund and institutional and other mutual fund accounts whose investment
objectives and techniques are similar to the Prudential Jennison Growth Fund.
The institutional accounts are not registered investment companies and are not
subject to the investment limitations, diversification requirements, and other
restrictions that are imposed on mutual funds by the Investment Company Act and
Subchapter M of the Internal Revenue Code, which, if applicable, may have
adversely affected the performance results of the Jennison Growth Equity
Composite. Performance results are net of Jennison advisory fees and assume the
reinvestment of dividends and distributions. The figures do not reflect the
deduction of operating expenses of mutual funds, such as distribution (Rule
12b-1) fees, or any applicable sales charges. The net effect of the operating
expenses of the funds on annualized performance, including the compounded
effect over time, will vary by the size of the fee and the accounts investment
performance, and may be substantial. The accounts reflected in the "Growth
Equity" performance data have been determined by Jennison based on the manner
in which it prepares performance data generally.
(footnotes continued on next page)
B-1
<PAGE>
As of December 31, 1997, the "Growth Equity" accounts represented 95% of all
equity assets (approximately $20.9 billion) managed by Jennison, and 53% of
the aggregate assets (approximately $37.8 billion) managed by Jennison. The
only accounts using the "Growth Equity" investment strategy not included in
the composite are not fully discretionary (for example, do not permit certain
types of investments in the account), and individual taxable accounts which
represented approximately 0.1% of Jennison's equity assets under management,
as of December 31, 1997. The performance shown above for the "Growth Equity"
composite is not the performance of the Fund and should not be considered
indicative of the past or future performance of the Fund. The "Growth Equity"
composite is not a substitute for the Fund's own past performance.
The performance of an investment in the S&P 500 Index was measured on a
calendar monthly basis. The S&P 500 Index is a capital-weighted index
representing the aggregate market value of the common equity of 500 stocks
primarily traded on the NYSE. These 500 stocks are composed of 400 industrial,
40 utility, 40 financial, and 20 transportation companies. The weight of each
stock in the index is proportional to its price times the number of shares
outstanding. The S&P 500 Index is an unmanaged index and includes the
reinvestment of all dividends. Investors cannot invest directly in an index.
Common stocks represent the ownership of a corporation, which can fluctuate in
value.
ANNUALIZED TOTAL RETURN DATA
The chart below demonstrates annualized total returns as of the fiscal year
ended December 31, 1997 of the Jennison Growth Equity Composite and the S&P
500 Index. Annualized total return is a hypothetical rate of return that if
achieved annually would have produced the same aggregate total return if
performance had been consistent over the period.
ANNUALIZED TOTAL RETURNS AS OF DECEMBER 31, 1997*
<TABLE>
<CAPTION>
JENNISON GROWTH
EQUITY S&P 500
PERIOD COMPOSITE (/1/)** INDEX (/2/)
------ ----------------- -----------
<S> <C> <C>
Since July 31, 1969 (inception)-1997........ 13.88% 12.84%
25 Years (1972-1997)........................ 13.80 13.06
20 Years (1977-1997)........................ 19.03 16.65
15 Years (1982-1997)........................ 17.47 17.51
10 Years (1987-1997)........................ 18.26 18.03
7 Years (1990-1997)........................ 20.66 19.74
5 Years (1992-1997)........................ 18.28 20.25
3 Years (1994-1997)........................ 28.68 31.12
1 Year (1996-1997)......................... 31.37 33.35
</TABLE>
Sources: Jennison Associates LLC for Jennison Growth Equity Composite and S&P
500 Index.
(/1/) Jennison's results are based on the time-weighted rate of return
achieved for "Growth Equity" accounts managed by Jennison. As of
December 31, 1997, Jennison managed 107 accounts representing
approximately $19.9 billion in assets using a "Growth Equity" strategy.
These accounts include Prudential Jennison Growth Fund and institutional
and other mutual fund accounts whose investment objectives and
techniques are similar to the Prudential Jennison Growth Fund. The
institutional accounts are not registered investment companies and are
not subject to the investment limitations, diversification requirements,
and other restrictions that are imposed on mutual funds by the
Investment Company Act and Subchapter M of the Internal Revenue Code,
which, if applicable, may have adversely affected the performance
results of the Jennison Growth Equity Composite. Performance results are
net of Jennison advisory fees only and assume the reinvestment of
dividends and distributions. The Composite performance figures do not
reflect the deduction of operating expenses of mutual funds, such as
distribution (Rule 12b-1) fees, or any applicable sales charges. The net
effect of the operating expenses of the funds on annualized performance,
including the compounded effect over time, will vary by the size of the
fee and the accounts investment performance, and may be substantial. As
of December 31, 1997, the "Growth Equity" accounts represented 95% of
equity assets (approximately $20.9 billion) managed by Jennison and 53%
of the aggregate assets (approximately $37.8 billion) managed by
Jennison. The only accounts using the "Growth Equity" investment
strategy not included in the composite are not fully discretionary (for
example, do not permit certain types of investments in the account), and
individual taxable accounts which represented approximately 0.1% of
Jennison's equity assets under management, as of December 31, 1997. The
accounts reflected in the "Growth Equity" performance data have been
determined by Jennison based on the manner in which it prepares
performance data generally. Of course, past performance should not be
interpreted as indicative of future results. The performance shown above
for the "Growth Equity" composite is not the performance of the Fund and
should not be considered indicative of the past or future performance of
the Fund. The "Growth Equity" composite is not a substitute for the
Fund's own past performance.
(/2/) The S&P 500 is a capital-weighted index representing the aggregate
market value of the common equity of 500 stocks primarily traded on the
NYSE. These 500 stocks are composed of 400 industrial, 40 utility, 40
financial, and 20 transportation companies. The weight of each stock in
the index is proportional to its price times the number of shares
outstanding. The S&P 500 Index is an unmanaged index and includes the
reinvestment of all dividends. Investors cannot invest directly in an
index. Common stocks represent the ownership of a corporation, which can
fluctuate in value.
* These results are unaudited. Past performance should not be interpreted as
indicative of future performance.
** Preliminary data.
B-2
<PAGE>
Class A, B and C shares of the Fund commenced investment operations on
November 2, 1995; Class Z shares of the Fund commenced investment operations
on April 15, 1996. Aggregate total returns for the one year and from inception
periods ended September 30, 1997 were 40.29%, 39.39%, 39.39% and 40.71%, and
53.9%, 51.8%, 51.8% and 49.71% for Class A, B, C and Z shares, respectively,
and average annual total returns for the one year and since inception periods
ended September 30, 1997 were 33.28%, 34.39%, 38.39% and 40.71% and 21.99%,
22.68%, 24.41% and 31.85% for Class A, B, C and Z shares, respectively.
On September 20, 1996, the assets and liabilities of Growth Stock Fund (a
series of Prudential Index Series Fund, formerly Prudential Dryden Fund, and
formerly The Prudential Institutional Fund) were transferred to the Fund in
exchange solely for Class Z shares of the Fund (the Reorganization). The
investment objectives and policies of the Growth Stock Fund were substantially
similar to those of the Fund and both funds had the same investment adviser.
Accordingly, if you purchased shares of Growth Stock Fund at its inception on
November 5, 1992, owned such shares through September 20, 1996 (thereby
participating in the Reorganization), and continued to own Class Z shares
received in the Reorganization through September 30, 1997, your average annual
total returns (after fees and expenses) for the one, three and since inception
(November 5, 1992) periods ended September 30, 1997 would have been 40.71%,
28.90% and 21.37%, respectively. In addition, the aggregate total returns for
such periods would have been 40.71%, 114.22% and 158.39%, respectively.
ANNUAL TOTAL RETURN DATA
The chart below demonstrates annual total returns as of December 31, 1997 of
the Jennison Growth Equity Composite and the S&P 500 Index for the listed
calendar year. Total return reflects actual performance over a stated period.
Annual total return shows how much an investment has increased (or decreased)
over a one year period assuming the reinvestment of dividends and interest, as
appropriate.
ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1997*
<TABLE>
<CAPTION>
JENNISON
GROWTH EQUITY S&P 500
YEAR COMPOSITE(/1/) INDEX(/2/)
---- -------------- ----------
<S> <C> <C>
1969 (7/31/69 through 12/31/69)....................... 10.05% 1.99%
1970.................................................. (.76) 3.91
1971.................................................. 20.06 14.19
1972.................................................. 21.26 18.96
1973.................................................. (20.57) (14.68)
1974.................................................. (31.94) (26.46)
1975.................................................. 28.42 37.23
1976.................................................. 15.10 23.85
1977.................................................. (2.88) (7.28)
1978.................................................. 15.73 6.64
1979.................................................. 32.29 18.55
1980.................................................. 56.72 32.50
1981.................................................. (3.80) (4.97)
1982.................................................. 26.32 21.61
1983.................................................. 17.20 22.51
1984.................................................. (2.82) 6.30
1985.................................................. 37.01 31.84
1986.................................................. 18.63 18.71
1987.................................................. 13.10 5.23
1988.................................................. 6.54 16.59
1989.................................................. 37.00 31.69
1990.................................................. (1.56) (3.13)
1991.................................................. 49.10 30.46
1992.................................................. 7.96 7.62
1993.................................................. 9.24 10.07
1994.................................................. (.58) 1.31
1995.................................................. 34.17 37.58
1996.................................................. 20.98 22.96
1997.................................................. 31.37** 33.35
</TABLE>
- -------
Sources: Jennison Associates LLC for Jennison Growth Equity Composite and S&P
500 Index.
(footnotes continued on next page)
B-3
<PAGE>
(/1/) Jennison's results are based on the time-weighted rate of return
achieved for "Growth Equity" accounts managed by Jennison. As of December 31,
1997, Jennison managed 107 accounts representing approximately $19.9 billion
in assets using a "Growth Equity" strategy. These accounts include the Fund,
and institutional and other mutual fund accounts whose investment objectives
and techniques are similar to the Fund. The institutional accounts are not
registered investment companies and are not subject to the investment
limitations, diversification requirements, and other restrictions that are
imposed on mutual funds by the Investment Company Act and Subchapter M of the
Internal Revenue Code, which, if applicable, may have adversely affected the
performance results of the Jennison Growth Equity Composite. Performance
results are net of Jennison advisory fees only and assume the reinvestment of
dividends and distributions. The Composite performance figures do not reflect
the deduction of operating expenses of mutual funds, such as distribution
(Rule 12b-1) fees, or any applicable sales charges. The net effect of the
operating expenses of the funds on annualized performance, including the
compounded effect over time, will vary by the size of the fee and the
accounts' investment performance, and may be substantial. As of September 30,
1997, the "Growth Equity" accounts represented 95% of equity assets
(approximately $20.9 billion) managed by Jennison and 53% of the aggregate
assets (approximately $37.8 billion) managed by Jennison. The only accounts
using the "Growth Equity" investment strategy not included in the composite
are not fully discretionary (for example, do not permit certain types of
investments in the account), and individual taxable accounts which
represented approximately 0.1% of Jennison's equity assets under management,
as of September 30, 1997. The accounts reflected in the "Growth Equity"
performance data have been determined by Jennison based on the manner in
which it prepares performance data generally. Of course, past performance
should not be interpreted as indicative of future results. The performance
shown above for the "Growth Equity" composite is not the performance of the
Fund and should not be considered indicative of the past or future
performance of the Fund. The "Growth Equity" composite is not a substitute
for the Fund's own past performance.
(/2/)The S&P 500 is a capital-weighted index representing the aggregate market
value of the common equity of 500 stocks primarily traded on the NYSE.
These 500 stocks are composed of 400 industrial, 40 utility, 40 financial,
and 20 transportation companies. The weight of each stock in the index is
proportional to its price times the number of shares outstanding. The S&P
500 index is an unmanaged index and includes the reinvestment of all
dividends. Investors cannot invest directly in an index. Common stocks
represent the ownership of a corporation, which can fluctuate in value.
* These results are unaudited. Past performance should not be interpreted as
indicative of future performance.
** Preliminary data.
On September 20, 1996, the assets and liabilities of Growth Stock Fund (a
series of Prudential Index Series Fund, formerly Prudential Dryden Fund, and
formerly The Prudential Institutional Fund) were transferred to the Fund in
exchange solely for Class Z shares of the Fund. The investment objectives and
policies of the Growth Stock Fund were substantially similar to those of the
Fund and both funds had the same investment adviser. Accordingly, if you
purchased shares of Growth Stock Fund at its inception on November 5, 1992,
owned such shares through September 20, 1996 (thereby participating in the
Reorganization), and continued to own such Class Z shares received in the
Reorganization through September 30, 1997, your annual total returns (after
fees and expenses) would have been:
ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
<S> <C>
11/5/92-9/30/93.................................................. 21.22 %
9/30/94.......................................................... (0.50)%
9/30/95.......................................................... 35.14 %
9/30/96.......................................................... 12.65 %
9/30/97.......................................................... 40.71 %
</TABLE>
B-4
<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............ 5
FINANCIAL HIGHLIGHTS..... 6
HOW THE FUND INVESTS..... 7
Investment Objective and 7
Policies...............
Other Investments and 10
Policies...............
Risk Factors and Special
Considerations of
Investing in Foreign
Securities............. 12
Hedging and Return En- 13
hancement Strategies...
Investment Restrictions. 15
HOW THE FUND IS MANAGED.. 16
Manager................. 16
Subadviser.............. 16
Distributor............. 17
Fee Waivers............. 18
Portfolio Transactions.. 18
Custodian and Transfer
and Dividend Disbursing
Agent.................. 18
Year 2000............... 18
HOW THE FUND VALUES ITS 19
SHARES..................
HOW THE FUND CALCULATES 19
PERFORMANCE.............
TAXES, DIVIDENDS AND DIS- 20
TRIBUTIONS..............
GENERAL INFORMATION...... 22
Description of Common 22
Stock..................
Additional Information.. 22
SHAREHOLDER GUIDE........ 23
How to Buy Shares of the 23
Fund...................
Alternative Purchase 24
Plan...................
How to Sell Your Shares. 27
Conversion Feature-- 30
Class B Shares.........
How to Exchange Your 31
Shares.................
Shareholder Services.... 32
APPENDIX A--INFORMATION
ABOUT JENNISON ASSOCI-
ATES LLC................ A-1
APPENDIX B--HISTORICAL
PERFORMANCE INFORMATION
OF JENNISON ASSOCIATES
LLC..................... B-1
</TABLE>
- --------------------------------------------------------------------------------
MF 172P
<TABLE>
<S> <C>
CUSIP Nos.:
Class A: 74437E 10 7
Class B: 74437E 20 6
Class C: 74437E 30 5
Class Z: 74437E 40 4
</TABLE>
PRUDENTIAL
JENNISON
GROWTH
FUND
PROSPECTUS
[GRAPHIC]
January 23,1998
(Revised June 1, 1998)
LOGO Prudential
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