PRUDENTIAL DISTRESSED SECURITIES FUND INC, N-30D, 2000-02-08

PRUDENTIAL DISTRESSED SECURITIES FUND INC
N-30D, 2000-02-08

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<PAGE>

(ICON)

Prudential
Distressed
Securities
Fund, Inc.

ANNUAL
REPORT

Nov. 30, 1999

(LOGO)

<PAGE>

A Message from the Fund's President January 7, 2000
- -------------------------------------------------------------------------------
(PHOTO)

Dear Shareholder,
Prudential Distressed Securities Fund's Class A shares posted a negative return
of 6.05% for its fiscal year ended November 30, 1999, that lagged well behind
the 5.17% return provided by the average small-cap value fund as tracked by
Lipper Inc.

Our benchmark reflects the new categories for mutual funds introduced by Lipper
Inc. in September 1999. The Prudential Distressed Securities Fund trailed its
benchmark Lipper Average primarily because our 'deep value' investing style
emphasized riskier stocks than those held by the average small-cap value fund,
and these stocks performed poorly. Our approach focused on stocks of companies
with operational or financial difficulties that we believe are undervalued or
temporarily out of favor, despite their long-term potential for price
appreciation.

Fund to merge in January 2000
In late December 1999, the Fund's shareholders approved its merger with the
Prudential High Yield Total Return Fund, Inc., which is expected to take place
on January 18, 2000. The stocks in the Prudential Distressed Securities
portfolio are mostly equities of high-yield bond issuers. The merger should
enable shareholders to participate in a larger fund with lower expense ratios.
Shareholders will receive additional information after the merger has occurred.

One integrated and expanded team
I would also like to take this opportunity to tell you about some changes we've
made to our Fixed Income Group. In 1999, we combined our fixed-income areas
into one integrated group that will manage money for Prudential's investors and
policyholders. This group now manages approximately $135 billion in assets,
making it one of the three largest fixed-income money managers in the country.
Our expanded depth, breadth, and scale also allow us to tap the best talent and
share investment ideas, proprietary research, and analytical tools.

To utilize these resources effectively, we recently organized the group into
teams, each specializing in a different sector of the fixed-income market. The
High Yield Sector team, headed by Casey Walsh, will now be responsible for the
day-to-day management of the Prudential High Yield Total Return Fund, Inc.
Many of the investment professionals who supported the management of the Fund
in the past--including George Edwards and Paul Price--will work together to
share their knowledge and strive to enhance performance.

Thank you for your continued confidence in Prudential mutual funds.

Sincerely,

John R. Strangfeld
President
Prudential Distressed Securities Fund, Inc.

<PAGE>

Performance Review
- -------------------------------------------------------------------------------
(PHOTO)

George Edwards and Paul Price
Fund Managers

Investment Goals and Style
The Prudential Distressed Securities Fund seeks capital appreciation by
investing in stocks and bonds of companies with operational or financial
difficulties. Some of these companies may be in default or bankruptcy. The
Fund will purchase securities that we believe are undervalued or temporarily
out of favor despite the long-term appreciation we expect. Investment in these
types of securities may be considered speculative. As a result, the Fund will
assume greater risk than other Prudential mutual funds. There can be no
assurance that the Fund will achieve its investment objective.

Merger set for January 2000
In December 1999, shareholders approved the proposal to merge the Fund into
the Prudential High Yield Total Return Fund, which is also managed by
the High Yield Sector team. The merger is expected to take place January 18,
2000.

Declines in its stock portfolio hurt the Fund
During its fiscal year that ended November 30, 1999, the Prudential Distressed
Securities Fund provided negative returns that trailed the positive return of
its benchmark Lipper Average. The Fund's returns lagged because of the poor
performance of its common stock portfolio, which accounted for approximately
50% of its holdings.

The Fund employed a "deep value" investing style that targeted what we believe
are underpriced stocks of companies with very small market capitalizations.
Although many of these corporations have emerged from bankruptcy or have
undergone restructuring, we still believe their stocks have solid potential for
price appreciation in the long run. These stocks are far riskier than those
held by the average small-cap value fund, which typically looks for good
businesses with sound management whose stocks are selling for substantially
less than a fair price.

Many market participants have largely shunned value investing in small-cap
equities, preferring stocks of large companies, growth stocks, and technology
shares. For example, the Russell 2000 Value Index, which focuses on small-cap
stocks, gained in April to mid-May 1999, only to finish down 1.43% for the 12
months that ended November 30, 1999. This negative return contrasted sharply
with the nearly 33% gain for the same period by the Russell 2000 Growth Index.
In this environment, our "deep value" approach proved a liability.

Our largest equity holding embroiled in a lawsuit
Among the equities that hurt the Fund's performance was its largest
position--the common stock of Dr. Pepper Bottling Holdings. As expected, the
company sold its bottling subsidiary located in Texas to another corporation.
However, some stockholders, investment groups, and mutual funds are suing Dr.
Pepper Bottling Holdings and its directors because they believe the buyout
undervalues the company's stock.

Another drag on the Fund's performance came from the shares of Electronic
Retailing Systems International, Inc., a developer of

Five Largest Holdings
Expressed as a percentage of net assets as of 11/30/99

Dr. Pepper Bottling Holdings, Inc. 12.9%
Beverages

Packaging Resources, Inc. 12.6
Packaging

Anker Coal Group, Inc. 9.0
Mining

Waste Systems International, Inc. 8.9
Waste Managements

Baycorp Holdings, Ltd. 8.6
Energy

<PAGE>

electronic shelf labeling systems for stores. The price of its stock declined
as few retailers bought its systems prior to the beginning of the year 2000.
Electronic Retailing Systems needs to realize strong sales in 2000 or its cash
resources could run out. Its stock comprised 2.5% of the Fund's net assets as
of November 30, 1999.

The shares of Firearms Training Systems also sold off, detracting from the
Fund's returns. This producer of interactive simulation systems that provide
training in the handling and use of small firearms failed to book as many new
contracts as expected by investors. Therefore, the company's stock price slid.
While our cost approximates the current stock price, the Fund suffered a loss
in market value over the past 12 months because we failed to sell the position
and thus lock-in profits when the price of the stock temporarily moved higher.
Firearms Training Systems' shares accounted for 2.9% of the Fund's net assets
at the end of its fiscal year.

Bond portfolio gains failed to offset stock losses
Meanwhile, the Fund's fixed-income portfolio performed relatively well during
the 12-month reporting period, but the improvement was not enough to offset
losses on the Fund's equity portfolio. In particular, the bonds of People's
Choice TV rallied strongly after Sprint agreed to acquire the wireless cable
company. We had purchased these bonds at a substantial discount to their face
value.

The Fund also held bonds of Color Spot Nurseries, which we purchased at a
price well below their face value after the company had reported dismal
earnings in 1998. The company's problems proved to be temporary; therefore, we
were able to sell the security and record profits on the bonds in the spring
of 1999.

Performance at a Glance

Cumulative Total Returns1 As of 11/30/99
<TABLE>
<CAPTION>
One Three Since
Year Years Inception2
<S> <C> <C> <C>
Class A -6.05% (-20.64) 8.15% (-30.61) 2.52% (-42.23)
Class B -6.40 (-20.98) 6.11 (-32.03) 0.08 (-43.74)
Class C -6.40 (-20.98) 6.11 (-32.03) 0.08 (-43.74)
Lipper Small-Cap Value Fund Avg. 3 5.17 21.65 38.99
</TABLE>

Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.

1 Source: Prudential Investments Fund Management LLC and Lipper Inc. The
cumulative total returns do not take into account sales charges. Without waiver
of management fees and/or expense subsidization, the Fund's cumulative total
returns would have been lower, as indicated in parentheses ( ).

2 Inception date: Class A, B, and C, 3/26/96.

3 Lipper average returns are for all funds in each share class for the
one-year, three-year, and since inception periods in the Small-Cap Value Fund
category. The Lipper average is unmanaged. Small-Cap Value funds, by portfolio
practice, invest at least 75% of their equity assets in companies with market
capitalizations (on a three-year weighted basis) of less than 250% of the
dollar-weighted median market capitalization of the S&P(R) Small-Cap 600 Index.
These funds have latitude with respect to the valuations (price-to-earnings,
price-to-book, and three-year earnings growth) of the securities in their
portfolio and may alter their portfolio style over time.

"Standard & Poor'(R)" and "S&P(R)" are registered trademarks of The McGraw-Hill
Companies, Inc.

***Lipper Since Inception returns are 62.82% for Class A, B, and C, based on
all funds in each share class.
1

<PAGE>

Portfolio of Investments as of PRUDENTIAL DISTRESSED
November 30, 1999 SECURITIES FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--99.4%
COMMON STOCKS(c)--51.4%
- ------------------------------------------------------------
Consumer Goods & Services--2.9%
122,000 Firearms Training Systems, Inc. $ 64,812
- ------------------------------------------------------------
Electronics--2.5%
50,000 Electronic Retailing Systems
International, Inc. 56,250
- ------------------------------------------------------------
Energy--11.2%
24,000 Baycorp Holdings, Ltd. 192,000
28,675 Grant Geophysical, Inc. 57,350
------------
249,350
- ------------------------------------------------------------
Food & Beverages--12.9%
50 AmeriKing, Inc. 500
11,500 Dr. Pepper Bottling Holdings, Inc. 287,500
25 Specialty Foods Acquisition Corp. 0
------------
288,000
- ------------------------------------------------------------
Retail--11.9%
11,251 Grand Union Co. 119,542
23,750 Samuels Jewelers, Inc. 142,500
------------
262,042
- ------------------------------------------------------------
Telecommunications--1.1%
1,250 Jordan Telecommunications Products 25,000
- ------------------------------------------------------------
Textiles & Apparel
13,304 Forstmann & Co., Inc. 426
Waste Management--9.0%
44,260 Waste Systems International, Inc. $ 199,170
------------
Total common stocks
(cost $1,864,175) 1,145,050
------------
PREFERRED STOCKS--7.7%
- ------------------------------------------------------------
Metals
2,000 Geneva Steel Co.,(c)
Conv. Exch.,14.00%, Ser.B 500
- ------------------------------------------------------------
Telecommunications--7.7%
170 Jordan Telecommunications
Products,(c)
Conv. Exch., 13.25%, Ser.B 170,364
------------
Total preferred stocks
(cost $349,326) 170,864
------------
WARRANTS(c)
Units
- ------------
- ------------------------------------------------------------
Casinos
2,968 Isle Capri Casinos, Inc.,
expiring 3/5/01 30
- ------------------------------------------------------------
Mining
9 Anker Coal Group, Inc.,
expiring 10/30/03 0
- ------------------------------------------------------------
Recreation
250 TVN Entertainment Corp.,
expiring 8/1/08 0
------------
Total warrants
(cost $0) 30
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 2

<PAGE>

Portfolio of Investments as of PRUDENTIAL DISTRESSED
November 30, 1999 SECURITIES FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Description Value (Note 1
(Unaudited) (000)
<S> <C> <C> <C>
- ------------------------------------------------------------
CORPORATE BONDS--39.3%
- ------------------------------------------------------------
Building & Related Industries--6.3%
Caa $ 300 DeGeorge Home Alliance,
Inc.,(a)(b)
Sr. Notes,
12.00%, 4/1/01
(cost $277,657, purchased
2/3/97) $ 15,000
B3 250 ICF Kaiser International,
Inc.,
Sr. Sub. Notes,
13.00%, 12/31/03 125,000
----------
140,000
- ------------------------------------------------------------
Food & Beverage--4.9%
Specialty Foods Acquisition
Corp.,
NR 27 Sr. Sub. Disc. Deb.,
11.00%, 12/15/09 2
NR 460 Sr. Sec'd. Disc. Deb., Ser.
B,
13.00%, 8/15/09 27,586
CCC(d) 150 Sr. Sub. Notes,
13.25%, 8/15/03 82,500
----------
110,088
- ------------------------------------------------------------
Mining--9.0%
NR 400 Anker Coal Group, Inc.,
Sr. Notes, PIK Notes,
14.25%, 9/1/07 200,000
- ------------------------------------------------------------
Packaging--12.6%
NR 322 Packaging Resources, Inc.,
Sr. Notes, PIK Notes,
13.00%, 6/30/03 279,806
- ------------------------------------------------------------
Recreation--3.9%
NR 250 TVN Entertainment Corp.,
Sr. Notes,
14.00%, 8/1/08 87,500
Telecommunications--0.2%
NR $ 18 Scott Cable Communications,
Inc.,(a)
Jr. Sub. PIK Notes,
16.00%, 7/18/02 $ 4,530
- ------------------------------------------------------------
Trucking & Shipping--2.4%
Caa3 250 TRISM, Inc.,(a)(e)
Sr. Sub. Notes,
10.75%, 12/15/00 52,500
----------
Total corporate bonds
(cost $1,901,611) 874,424
----------
- ------------------------------------------------------------
TRADE CLAIM--1.0%
- ------------------------------------------------------------
Retail
306 Montgomery Ward Trade
Claim(c),
expires 1/1/49
(cost $46,280) 21,442
----------
Total long-term investments
(cost $4,161,392) 2,211,810
----------
- ------------------------------------------------------------
Total Investments--99.4%
(cost $4,161,392; Note 4) 2,211,810
Assets in excess of other
liabilities--0.6% 13,855
----------
Net Assets--100% $2,225,665
----------
----------
</TABLE>
- ---------------
(a) Represents issuer in default on interest payments; non-income producing
security.
(b) Indicates a restricted security; the cost is $277,657. The aggregate value
($15,000) is approximately 0.7% of net assets.
(c) Non-income producing securities.
(d) Standard & Poor's rating.
(e) When-issued security.
NR--Not rated by Moody's or Standard & Poor's.
PIK--Payment in kind securities.
The Fund's current Statement of Additional Information contains a description
of Moody's and Standard & Poor's ratings.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3

<PAGE>
PRUDENTIAL DISTRESSED
Statement of Assets and Liabilities SECURITIES FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets November 30, 1999
<S> <C>
Investments, at value (cost $4,161,392)................................................................. $ 2,211,810
Cash.................................................................................................... 19,092
Receivable for investments sold......................................................................... 63,973
Due from Manager........................................................................................ 44,488
Dividend and interest receivable........................................................................ 40,720
Deferred expenses and other assets...................................................................... 18,316
-----------------
Total assets......................................................................................... 2,398,399
-----------------
Liabilities
Payable for Fund shares reacquired...................................................................... 86,794
Accrued expenses........................................................................................ 85,451
Distribution fee payable................................................................................ 489
-----------------
Total liabilities.................................................................................... 172,734
-----------------
Net Assets.............................................................................................. $ 2,225,665
-----------------
-----------------
Net assets were comprised of:
Common stock, at par................................................................................. $ 218
Paid-in capital in excess of par..................................................................... 3,867,610
-----------------
3,867,828
Undistributed net investment income.................................................................. 204,346
Accumulated net realized gain on investments......................................................... 103,073
Net unrealized depreciation on investments........................................................... (1,949,582)
-----------------
Net assets, November 30, 1999........................................................................... $ 2,225,665
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($480,977 / 46,989 shares of common stock issued and outstanding)................................. $10.24
Maximum sales charge (5% of offering price).......................................................... .54
-----------------
Maximum offering price to public..................................................................... $10.78
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per share
($1,445,518 / 141,569 shares of common stock issued and outstanding).............................. $10.21
-----------------
-----------------
Class C:
Net asset value, and redemption price per share
($299,170 / 29,301 shares of common stock issued and outstanding)................................. $10.21
Sales charge (1% of offering price).................................................................. .10
-----------------
Offering price to public............................................................................. $10.31
-----------------
-----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4

<PAGE>
PRUDENTIAL DISTRESSED
SECURITIES FUND, INC.
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income November 30, 1999
<S> <C>
Income
Interest.............................. $ 398,008
Dividends............................. 69,020
-----------------
467,028
-----------------
Expenses
Management fee........................ 32,637
Distribution fee--Class A............. 3,565
Distribution fee--Class B............. 15,487
Distribution fee--Class C............. 4,285
Reports to shareholders............... 111,000
Custodian's fees and expenses......... 90,000
Legal fees and expenses............... 55,000
Registration fees..................... 30,000
Audit fees and expenses............... 20,000
Amortization of deferred
organizational costs............... 17,890
Directors' fees and expenses.......... 9,000
Transfer agent's fees and expenses.... 4,000
Miscellaneous......................... 4,465
-----------------
Total expenses..................... 397,329
Less: expense reimbursement (Note
2)................................. (330,472)
-----------------
Net expenses....................... 66,857
-----------------
Net investment income.................... 400,171
-----------------
Realized and Unrealized Gain (Loss)
on Investments
Net realized gain on investment
transactions.......................... 210,550
Net change in unrealized
appreciation/depreciation on
investments........................... (755,111)
-----------------
Net loss on investments.................. (544,561)
-----------------
Net Decrease in Net Assets
Resulting from Operations................ $(144,390)
-----------------
-----------------
</TABLE>

PRUDENTIAL DISTRESSED
SECURITIES FUND, INC.
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended November 30,
in Net Assets 1999 1998
<S> <C> <C>
Operations
Net investment income......... $ 400,171 $ 457,735
Net realized gain on
investments................ 210,550 291,504
Net change in unrealized
appreciation (depreciation)
of investments............. (755,111) (2,167,375)
----------------- -----------
Net decrease in net assets
resulting from
operations................. (144,390) (1,418,136)
----------------- -----------
Dividends and distributions (Note
1)
Dividends from net investment
income
Class A....................... -- (254,266)
Class B....................... -- (376,002)
Class C....................... -- (81,439)
----------------- -----------
-- (711,707)
----------------- -----------
Distributions in excess of net
investment income
Class A....................... -- (43,045)
Class B....................... -- (63,654)
Class C....................... -- (13,787)
----------------- -----------
-- (120,486)
----------------- -----------
Distributions from net realized
gains
Class A....................... (95,142) (26,850)
Class B....................... (125,242) (59,158)
Class C....................... (39,054) (11,798)
----------------- -----------
(259,438) (97,806)
----------------- -----------
Fund share transactions
Net proceeds from shares
sold....................... 487,077 3,402,960
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions.......... 245,149 832,629
Cost of shares reacquired..... (5,061,545) (2,764,519)
----------------- -----------
Net increase (decrease) in net
assets from Fund share
transactions............... (4,329,319) 1,471,070
----------------- -----------
Total decrease................... (4,733,147) (877,065)
Net Assets
Beginning of year................ 6,958,812 7,835,877
----------------- -----------
End of year(a)................... $ 2,225,665 $ 6,958,812
----------------- -----------
----------------- -----------
- ---------------
(a) Includes undistributed net
investment income of.......... $ 204,346 $ --
----------------- -----------
----------------- -----------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5

<PAGE>

Notes to Financial Statements PRUDENTIAL DISTRESSED SECURITIES FUND, INC.
- -------------------------------------------------------------------------------
Prudential Distressed Securities Fund, Inc. (the 'Fund') is registered under the
Investment Company Act of 1940, as a diversified, open-end management company.
The Fund was incorporated in Maryland on November 30, 1995. The Fund had no
significant operations other than the issuance of 2,667 shares of Class A, 2,667
shares of Class B and 2,666 shares of Class C common stock for $100,000 on
February 8, 1996 to Prudential Investments Fund Management LLC ('PIFM').
Investment operations commenced on March 26, 1996.

The investment objective of the Fund is capital appreciation. The Fund seeks to
achieve this objective by investing primarily in debt and equity securities
issued by financially troubled or bankrupt companies (financially troubled
issuers) and in equity securities of companies that in the view of its
investment adviser are currently undervalued, out-of-favor or price-depressed
relative to their long-term potential for growth and income (operationally
troubled issuers). Securities of financially and operationally troubled issuers
are less liquid and more volatile than securities of companies not experiencing
financial difficulties. Investment in such securities may be considered
speculative and may present potential for substantial loss.

- ------------------------------------------------------------
Note 1. Accounting Policies

The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.

Securities Valuation: Investments listed on a securities exchange are valued at
the last sales price on the day of valuation, or, if there was no sale on such
day, the mean between the last bid and asked prices on such day or at the bid
price in the absence of an asked price. Corporate bonds and U.S. Government
securities that are actively traded in the over-the-counter market are valued by
an independent pricing service. Convertible debt securities that are traded in
the over-the-counter market are valued at the mean between the most recently
quoted bid and asked prices provided by principal market makers. Debt and equity
securities issued in private placements shall be valued at the bid prices
provided by primary market dealers. Securities for which market quotations are
not available, other than private placements, shall each be valued at a price
supplied by an independent pricing agent. Options on stock and stock indices
traded on an exchange are valued at the mean between the most recently quoted
bid and asked prices provided by the exchange. Futures contracts and options
thereon are valued at the last sales price as of the close of business of the
exchange. Securities for which reliable market quotations are not available or
for which the pricing agent or principal market maker does not provide a
valuation will be valued at fair value determined in good faith by or under the
direction of the Board of Directors of the Fund.

Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.

In connection with transactions in repurchase agreements, it is the Fund's
policy that its custodian or designated subcustodians under triparty repurchase
agreements take possession of the underlying collateral securities, the value of
which exceeds the principal amount of the repurchase transaction, including
accrued interest. If the seller defaults and the value of the collateral
declines or if bankruptcy proceedings are commenced with respect to the seller
of the security, realization of the collateral by the Fund may be delayed or
limited.

The Fund may hold up to 15% of its net assets in illiquid securities, including
those which are restricted as to disposition under securities law ('restricted
securities'). The restricted security held by the Fund at November 30, 1999 did
not include registration rights under which the Fund may demand registration by
the issuer.

Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income is recorded on the accrual basis. The Fund
amortizes premiums and discounts paid on purchases of portfolio securities as
adjustments to interest income. Expenses are recorded on the accrual basis which
may require the use of certain estimates by management.

Net investment income (other than distribution fees) and unrealized and realized
gains or losses are allocated daily to each class of shares of the Fund based
upon the relative proportion of net assets of each class at the beginning of the
day.

Taxes: It is the Fund's policy to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable net income to its shareholders. Therefore, no
federal income tax provision is required.

Dividends and Distributions: The Fund expects to pay dividends out of net
investment income and make distributions of any net capital gains, at least
annually. Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
- --------------------------------------------------------------------------------
6

<PAGE>

Notes to Financial Statements PRUDENTIAL DISTRESSED SECURITIES FUND, INC.
- -------------------------------------------------------------------------------
Deferred Organization Costs: The Fund incurred approximately $96,000 in
connection with the organization of the Fund. Of these costs, approximately
$79,000 were deferred and amortized over a period of 46 months ending January
2000. Approximately $17,000 of the remaining organizational costs will be
reimbursed by PIFM.

Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants (AICPA) Statement of Position 93-2: Determination,
Disclosure, and Financial Statement of Presentation of Income; Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to increase accumulated net realized gains on investments by
$74,672, decrease undistributed net investment income by $195,825 and increase
paid-in capital in excess of par by $121,153. This is a result of redemptions
utilized as distributions for federal income tax purposes and excise taxes paid
during the year ended November 30, 1999. Net investment income, net realized
gains and net assets were not affected by these changes.

- ------------------------------------------------------------
Note 2. Agreements

The Fund has a management agreement with PIFM. Pursuant to this agreement, PIFM
has responsibility for all investment advisory services and supervises the
subadviser's performance of such services. PIFM has entered into a subadvisory
agreement with The Prudential Investment Corporation ('PIC'), doing business as
Prudential Investments ('PI'); PI furnishes investment advisory services in
connection with the management of the Fund and is reimbursed by PIFM for its
reasonable cost and expenses incurred providing such services. The Fund bears
all other costs and expenses.

The management fee paid PIFM is computed daily and payable monthly, at an annual
rate of .75 of 1% of the average daily net assets of the Fund.

PIFM voluntarily agreed to reimburse the Fund in order to reduce total expenses
so as not to exceed 1.25%, 2.00% and 2.00% of the average daily net assets of
the Class A, Class B and Class C shares, respectively, on an annualized basis.
Effective May 27, 1999, such reimbursements to the Fund were modified in order
to reduce total expenses so as not to exceed 1.25% of the average daily net
assets of the Class A, Class B and Class C shares on an annualized basis. For
the year ended November 30, 1999, such reimbursements amounted to $330,472
(7.59% of average net assets; $1.52 per share for Class A, B and C shares).
The Fund has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS'), which acts as the distributor of the Class A, Class B and
Class C shares of the Fund. The Fund compensates PIMS for distributing and
servicing the Fund's Class A, Class B and Class C shares, pursuant to plans of
distribution (the 'Class A, B and C Plans'), regardless of expenses actually
incurred. The distribution fees are accrued daily and payable monthly.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS for
distribution related activities at an annual rate of up to .30 of 1%, 1% and 1%
of the average daily net asset values of the Class A, B and C shares,
respectively. Such expenses under the Plans were .25 of 1%, 1% and 1% of the
average daily net assets of the Class A, Class B and Class C shares,
respectively for the period December 1, 1998 through May 26, 1999. Effective May
27, 1999 such expenses under the Plans were .25 of 1% of the average daily net
assets of the Class A, B and C shares.

PIMS has advised the Fund that it has received approximately $100 and $20 in
front-end sales charges resulting from sales of Class A and Class C shares,
respectively, for the year ended November 30, 1999. From these fees, PIMS paid
such sales charges to dealers, which in turn paid commissions to salespersons
and incurred other distribution costs.

PIMS has advised the Fund that for the year ended November 30, 1999, it received
approximately $19,600 and $600 in contingent deferred sales charges imposed upon
redemptions by Class B and Class C shareholders, respectively.

PIFM, PIC and PIMS are wholly owned subsidiaries of The Prudential Insurance
Company of America ('Prudential').

As of March 11, 1999, the Fund along with other affiliated registered investment
companies (the 'Funds'), entered into a syndicated credit agreement ('SCA') with
an unaffiliated lender. The maximum commitment under the SCA is $1 billion.
Interest on any borrowing will be at market rates. The Funds pay a commitment
fee at an annual rate of .065 of 1% on the unused portion of the credit
facility, which is accrued and paid quarterly on a pro rata basis by the Funds.
The SCA expires on March 9, 2000. Prior to March 11, 1999, the Funds had a
credit agreement with a maximum commitment of $200,000,000. The commitment fee
was .055 of 1% on the unused portion of the credit facility. The Fund did not
borrow any amounts pursuant to either agreement during the year ended November
30, 1999. The purpose of the agreements is to serve as an alternative source of
funding for capital share redemptions.

- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates

Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the year ended November 30, 1999,
the Fund incurred fees of approximately $3,500 for the
- --------------------------------------------------------------------------------
7

<PAGE>

Notes to Financial Statements PRUDENTIAL DISTRESSED SECURITIES FUND, INC.
- -------------------------------------------------------------------------------
services of PMFS. As of November 30, 1999, approximately $200 of such fees were
due to PMFS. Transfer agent fees and expenses in the Statement of Operations
include certain out-of-pocket expenses paid to nonaffiliates.

- ------------------------------------------------------------
Note 4. Portfolio Securities

Purchases and sales of investment securities, other than short-term investments,
for the year ended November 30, 1999 were $1,406,348 and $5,615,786,
respectively.

The federal income tax basis of the Fund's investments at November 30, 1999 was
substantially the same as for financial reporting purposes and, accordingly, net
unrealized depreciation for federal income tax purposes was $1,949,582 (gross
unrealized appreciation--$147,240; gross unrealized depreciation--$2,096,822).

- ------------------------------------------------------------
Note 5. Capital

The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge of up to 5%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Class C shares are sold with a front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18 months. A special exchange privilege is also available for shareholders who
qualify to purchase Class A shares at net asset value.

There are 2 billion shares of $.001 par value common stock authorized divided
into four classes, designated Class A, Class B, Class C and Class Z, which each
consist of 500 million authorized shares. At November 30, 1999, there were no
Class Z shares issued. Of the 217,859 shares of common stock issued and
outstanding at November 30, 1999, Prudential owned 14,443.

Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------------- -------- -----------
<S> <C> <C>
Year ended November 30, 1999:
Shares sold.......................... 18,727 $ 218,873
Shares issued in reinvestment of
dividends
and distributions.................. 8,511 89,792
Shares reacquired.................... (208,683) (2,375,414)
-------- -----------
Net decrease in shares outstanding
before conversion.................. (181,445) (2,066,749)
Shares issued upon conversion from
Class B............................ 1,236 13,978
-------- -----------
Net decrease in shares outstanding... (180,209) $(2,052,771)
-------- -----------
-------- -----------
<CAPTION>
Class A Shares Amount
- ------------------------------------- -------- -----------
<S> <C> <C>
Year ended November 30, 1998:
Shares sold.......................... 142,139 $ 2,290,931
Shares issued in reinvestment of
dividends
and distributions.................. 22,081 277,784
Shares reacquired.................... (68,517) (956,778)
-------- -----------
Net increase in shares outstanding
before conversion.................. 95,703 1,611,937
Shares issued upon conversion from
Class B............................ 1,381 21,582
-------- -----------
Net increase in shares outstanding... 97,084 $ 1,633,519
-------- -----------
-------- -----------
<CAPTION>
Class B
- -------------------------------------
<S> <C> <C>
Year ended November 30, 1999:
Shares sold.......................... 18,470 $ 217,598
Shares issued in reinvestment of
dividends
and distributions.................. 11,280 118,781
Shares reacquired.................... (187,221) (2,099,485)
-------- -----------
Net decrease in shares outstanding
before conversion.................. (157,471) (1,763,106)
Shares reacquired upon conversion
into Class A....................... (1,232) (13,978)
-------- -----------
Net decrease in shares outstanding... (158,703) $(1,777,084)
-------- -----------
-------- -----------
Year ended November 30, 1998:
Shares sold.......................... 45,545 $ 706,611
Shares issued in reinvestment of
dividends
and distributions.................. 35,420 464,104
Shares reacquired.................... (110,916) (1,612,703)
-------- -----------
Net decrease in shares outstanding
before conversion.................. (29,951) (441,988)
Shares reacquired upon conversion
into Class A....................... (1,383) (21,582)
-------- -----------
Net decrease in shares outstanding... (31,334) $ (463,570)
-------- -----------
-------- -----------
<CAPTION>
Class C
- -------------------------------------
<S> <C> <C>
Year ended November 30, 1999:
Shares sold.......................... 4,328 $ 50,606
Shares issued in reinvestment of
dividends
and distributions.................. 3,473 36,576
Shares reacquired.................... (52,179) (586,646)
-------- -----------
Net decrease in shares outstanding... (44,378) $ (499,464)
-------- -----------
-------- -----------
Year ended November 30, 1998:
Shares sold.......................... 26,451 $ 405,418
Shares issued in reinvestment of
dividends
and distributions.................. 7,033 90,741
Shares reacquired.................... (14,583) (195,038)
-------- -----------
Net increase in shares outstanding... 18,901 $ 301,121
-------- -----------
-------- -----------
</TABLE>
- --------------------------------------------------------------------------------
8

<PAGE>

Notes to Financial Statements PRUDENTIAL DISTRESSED SECURITIES FUND, INC.
- -------------------------------------------------------------------------------
Note 6. Merger

On August 25, 1999, the Board of Directors of the Fund approved an Agreement and
Plan of Merger (the 'Merger Plan') which provides for the merger of the Fund
into Prudential High Yield Total Return Fund, Inc. (the 'High Yield Total Return
Fund') whereupon the separate existence of the Fund will cease and High Yield
Total Return Fund will be the surviving Fund, and each whole and fractional
share of each class of the Fund shall be converted into and become whole and
fractional shares of equal net asset value of the same class as High Yield Total
Return Fund.

The Merger Plan was approved by the shareholders of the Fund at a shareholder
meeting held on December 23, 1999. The merger is expected to take place on
January 18, 2000.
- --------------------------------------------------------------------------------
9

<PAGE>

Financial Highlights PRUDENTIAL DISTRESSED SECURITIES FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------
March 26,
1996(d)
Year Ended November 30, Through
---------------------------------------- November 30,
1999(e) 1998(e) 1997(e) 1996
-------- -------- ---------- ------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..................... $11.57 $15.19 $ 11.85 $ 12.50
-------- -------- ---------- ------
Income from investment operations
Net investment income(a)................................. 1.07 .87 .49 .25
Net realized and unrealized gain (loss) on investment
transactions.......................................... (1.79) (2.69) 3.23 (.90)
-------- -------- ---------- ------
Total from investment operations...................... (.72) (1.82) 3.72 (.65)
-------- -------- ---------- ------
Less distributions
Dividends from net investment income..................... -- (1.39) (.38) --
Distributions in excess of net investment income......... -- (.24) -- --
Distributions from net realized gains.................... (.61) (.17) -- --
-------- -------- ---------- ------
Total distributions................................... (.61) (1.80) (.38) --
-------- -------- ---------- ------
Net asset value, end of period........................... $10.24 $11.57 $ 15.19 $ 11.85
-------- -------- ---------- ------
-------- -------- ---------- ------
TOTAL RETURN(b):......................................... (6.05)% (13.19)% 32.35% (5.20)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).......................... $ 481 $2,629 $ 1,976 $ 3,404
Average net assets (000)................................. $1,426 $2,783 $ 2,167 $ 4,391
Ratios to average net assets(a):
Expenses, including distribution fees................. 1.25% 1.25% 2.04% 2.76%(c)
Expenses, excluding distribution fees................. 1.00% 1.00% 1.79% 2.51%(c)
Net investment income................................. 10.08% 5.80% 3.73% 2.37%(c)
For Class A, B and C shares:
Portfolio turnover rate............................... 34% 188% 175% 61%
</TABLE>
- ---------------
(a) Net of expense reimbursement. Effective June 2, 1997, PIFM had contractually
agreed to subsidize the Fund's operating expenses so that total Fund
operating expenses do not exceed 1.25%, 2.00% and 2.00% of the average net
assets for Class A, Class B and Class C shares, respectively. Effective May
27, 1999, such reimbursements to the Fund were modified in order to reduce
total expenses so as not to exceed 1.25% of the average daily net assets of
the Class A, Class B and Class C shares on an annualized basis.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(c) Annualized.
(d) Commencement of investment operations.
(e) Calculated based upon weighted average shares outstanding during the year.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 10

<PAGE>

<S> <C>
March 26,
1996(d)
Through
November 30,
1996
------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............................................... $ 12.50
------
Income from investment operations
Net investment income(a)........................................................... .16
Net realized and unrealized gain (loss) on investment transactions................. (.87)
------
Total from investment operations................................................ (.71)
------
Less distributions
Dividends from net investment income............................................... --
Distributions in excess of net investment income................................... --
Distributions from net realized gains.............................................. --
------
Total distributions............................................................. --
------
Net asset value, end of period..................................................... $ 11.79
------
------
TOTAL RETURN(b):................................................................... (5.68)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).................................................... $ 5,387
Average net assets (000)........................................................... $ 6,650
Ratios to average net assets(a):
Expenses, including distribution fees........................................... 3.51%(c)
Expenses, excluding distribution fees........................................... 2.51%(c)
Net investment income........................................................... 1.59%(c)
</TABLE>
- ---------------
(a) Net of expense reimbursement. Effective June 2, 1997, PIFM had contractually
agreed to subsidize the Fund's operating expenses so that total Fund
operating expenses do not exceed 1.25%, 2.00% and 2.00% of the average net
assets for Class A, Class B and Class C shares, respectively. Effective May
27, 1999, such reimbursements to the Fund were modified in order to reduce
total expenses so as not to exceed 1.25% of the average daily net assets of
the Class A, Class B and Class C shares on an annualized basis.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(c) Annualized.
(d) Commencement of investment operations.
(e) Calculated based upon weighted average shares outstanding during the year.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 11

<PAGE>

<S> <C>
March 26,
1996(d)
Through
November 30,
1996
------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............................................. $12.50
-----
Income from investment operations
Net investment income(a)......................................................... .16
Net realized and unrealized gain (loss) on investment transactions............... (.87)
-----
Total from investment operations.............................................. (.71)
-----
Less distributions
Dividends from net investment income............................................. --
Distributions in excess of net investment income................................. --
Distributions from net realized gains............................................ --
-----
Total distributions........................................................... --
-----
Net asset value, end of period................................................... $11.79
-----
-----
TOTAL RETURN(b):................................................................. (5.68)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).................................................. $1,485
Average net assets (000)......................................................... $1,678
Ratios to average net assets(a):
Expenses, including distribution fees......................................... 3.51%(c)
Expenses, excluding distribution fees......................................... 2.51%(c)
Net investment income......................................................... 1.71%(c)
</TABLE>
- ---------------
(a) Net of expense reimbursement. Effective June 2, 1997, PIFM had contractually
agreed to subsidize the Fund's operating expenses so that total Fund
operating expenses do not exceed 1.25%, 2.00% and 2.00% of the average net
assets for Class A, Class B and Class C shares, respectively. Effective May
27, 1999, such reimbursements to the Fund were modified in order to reduce
total expenses so as not to exceed 1.25% of the average daily net assets of
the Class A, Class B and Class C shares on an annualized basis.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(c) Annualized.
(d) Commencement of investment operations.
(e) Calculated based upon weighted average shares outstanding during the year.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 12

<PAGE>

Report of Independent Accountants PRUDENTIAL DISTRESSED SECURITIES FUND, INC.
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Prudential Distressed Securities Fund, Inc.

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential Distressed Securities
Fund, Inc. (the 'Fund') at November 30, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the three years
in the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as 'financial statements') are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at November 30, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above. The
accompanying financial highlights for the period March 26, 1996 through November
30, 1996 were audited by other independent accountants, whose opinion dated
January 10, 1997 was unqualified.

As more fully described in Note 6, on August 25, 1999, the Board of Directors of
the Fund approved an Agreement and Plan of Merger to merge the Fund into
Prudential High Yield Total Return Fund, Inc. This agreement and plan were
approved at a shareholder meeting held on December 23, 1999.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
January 14, 2000
- --------------------------------------------------------------------------------
13

<PAGE>

Tax Information (Unaudited) PRUDENTIAL DISTRESSED SECURITIES FUND, INC.
- --------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days of the
Fund's fiscal year end (November 30, 1999) as to the federal tax status of
dividends and distributions paid by the Fund during such fiscal year end.
Accordingly, we are advising you that during the fiscal year, the Fund paid
distributions for Class A, B and C shares totaling $0.61 per share of long-term
capital gains which is taxable as such. The Fund utilized redemptions as
distributions in the amount of $0.909 per share of ordinary income and $0.478
per share of short-term capital gains for each class of shares. Furthermore, we
wish to advise you that your dividend received deduction is zero.

In January 2000, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV
as to the federal tax status of the dividends and distributions received by you
in calendar year 1999.
- --------------------------------------------------------------------------------
14
<PAGE>

Getting the Most from Your Prudential Mutual Fund

How many times have you read these reports--or other financial materials--and
stumbled across a word that you don't understand?

Many shareholders have run into the same problem. We'd like to help. So we'll
use this space from time to time to explain some of the words you might have
read, but not understood. And if you have a favorite word that no one can
explain to your satisfaction, please write to us.

Basis Point: 1/100th of 1%. For example, one-half of one percent is 50 basis
points.

Collateralized Mortgage Obligations (CMOs): Mortgage-backed bonds that separate
mortgage pools into different maturity classes, called tranches. These
instruments are sensitive to changes in interest rates and homeowner
refinancing activity. They are subject to prepayment and maturity extension
risk.

Derivatives: Securities that derive their value from other securities. The
rate of return of these financial instruments rises and falls--sometimes very
suddenly--in response to changes in some specific interest rate, currency,
stock, or other variable.

Discount Rate: The interest rate charged by the Federal Reserve on loans to
member banks.

Federal Funds Rate: The interest rate charged by one bank to another on
overnight loans.

Futures Contract: An agreement to purchase or sell a specific amount of a
commodity or financial instrument at a set price at a specified date in the
future.

Leverage: The use of borrowed assets to enhance return. The expectation is that
the interest rate charged on borrowed funds will be lower than the return on
the investment. While leverage can increase profits, it can also magnify
losses.

Liquidity: The ease with which a financial instrument (or product) can be
bought or sold (converted into cash) in the financial markets.

Price/Earnings Ratio: The price of a share of stock divided by the earnings per
share for a 12-month period.

Option: An agreement to purchase or sell something, such as shares of stock, by
a certain time for a specified price. An option need not be exercised.
'
Spread: The difference between two values; often used to describe the
difference between "bid" and "asked" prices of a security, or between the
yields of two similar maturity bonds.

Yankee Bond: A bond sold by a foreign company or government in the U.S. market
and denominated in U.S. dollars.

<PAGE>

Comparing a $10,000 Investment
- -------------------------------------------------------------------------------
Prudential Distressed Securities Fund, Inc. vs.
the Lehman Brothers High Yield Bond Index

Class A
(GRAPH)

Average Annual Total Returns

With Sales Load As of 11/30/99
Since Inception -0.71% (-15.05%)
Three Years 0.90% (-12.97%)
One Year -10.75% (-24.61%)

Without Sales Load As of 11/30/99
Since Inception 0.68% (-13.85%)
Three Years 2.64% (-11.47%)
One Year -6.05% (-20.64%)

Class B
(GRAPH)

Average Annual Total Returns

With Sales Load As of 11/30/99
Since Inception -0.53% (-15.31%)
Three Years 1.03% (-13.39%)
One Year -11.40% (-25.98%)

Without Sales Load As of 11/30/99
Since Inception 0.02% (-14.47%)
Three Years 2.00% (-12.08%)
One Year -6.40% (-20.98%)

Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost. The information beneath the graphs is
designed to give you an idea of how much the Fund's returns can fluctuate from
year to year by measuring the best and worst calendar years in terms of total
annual return since inception of each share class.

These graphs compare a $10,000 investment in the Prudential Distressed
Securities Fund, Inc. (Class A, B, and C shares) with a similar investment in
the Lehman Brothers High Yield Bond Index (the Index) by portraying the initial
account values of Class A, B, and C shares at the commencement of operations
(March 26, 1996), and at the end of the fiscal year (November 30), as measured
on a quarterly basis. For purposes of the graphs, and unless otherwise
indicated, it has been assumed that (a) the maximum applicable front-end sales
charge was deducted from the initial $10,000 investment in Class A and Class C
shares; (b) the maximum applicable contingent deferred sales charges were
deducted from the value of the investment in Class B and Class C shares,
assuming full redemption on November 30, 1999; (c) all recurring fees
(including management fees) were deducted; and (d) all dividends and
distributions were reinvested.

<PAGE>

Class C
(GRAPH)

Average Annual Total Returns

With Sales Load As of 11/30/99
Since Inception -0.25% (-14.70%)
Three Years 1.65% (-12.37%)
One Year -8.34% (-22.77%)

Without Sales Load As of 11/30/99
Since Inception 0.02% (-14.47%)
Three Years 2.00% (-12.08%)
One Year -6.40% (-20.98%)

Without waiver of management fees and/or expense subsidization, the Fund's
average annual total returns would have been lower, as indicated in parentheses
( ).

The Index is an unmanaged weighted index that covers the universe of
fixed-rate, noninvestment-grade debt. The securities must be dollar-denominated
and nonconvertible, and must have at least one year remaining to maturity and
an outstanding par value of at least $100 million. The Index returns include
the reinvestment of all dividends, but do not include the effect of sales
charges or operating expenses of a mutual fund. The securities in the Index may
differ substantially from the securities in the Fund. The Index is not the only
one that may be used to characterize performance of equity and/or bond funds,
and other indexes may portray different comparative performance. Investors
cannot invest directly in an index.

These graphs are furnished to you in accordance with SEC regulations.

<PAGE>

Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077

(800) 225-1852
http://www.prudential.com

Class Cusip
A 743966103
B 743966202
C 743966301

Directors
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead

Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Marguerite E.H. Morrison, Secretary
Stephen M. Ungerman, Assistant Treasurer

Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street, Newark, NJ 07102-4077

Investment Adviser
The Prudential Investment Corporation
Prudential Plaza, Newark, NJ 07102-3777

Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street, Newark, NJ 07102-4077

Custodian
State Street Bank and Trust Company
One Heritage Drive, North Quincy, MA 02171

Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005, New Brunswick, NJ 08906

Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas, New York, NY 10036

Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark St., Chicago, IL 60610-4795

Prudential Investments is a unit of The Prudential Insurance Company of
America, 751 Broad Street, Newark, NJ 07102.

The views expressed in this report and information about the Fund's portfolio
holdings are for the period covered by this report and are subject to change
thereafter.

This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.

MF171E