PRUDENTIAL EMERGING GROWTH FUND INC, N-30D, 1999-07-07

PRUDENTIAL EMERGING GROWTH FUND INC
N-30D, 1999-07-07

Previous: STYLE SELECT SERIES INC, 497, 1999-07-07

Next: FOUR MEDIA CO, 8-K, 1999-07-07

<PAGE>

(ICON)
Prudential
Emerging
Growth
Fund, Inc.

SEMI
ANNUAL
REPORT
April 30, 1999
(LOGO)

<PAGE>
Prudential Emerging Growth Fund, Inc.
Performance At A Glance
In the six months ended April 30, 1999, stocks bounced back sharply from the
mid-1998 panic. Even in the strong market, the Prudential Emerging Growth
Fund's performance stood out--45%, or more than 20 percentage points ahead
of the Lipper Average. Of our 10 largest positions at the beginning of the
period, half gained 60% or better; over one-tenth of our holdings more than
doubled in value. Technology companies provided most of the high-powered
performance, but media, telecommunications, and financial companies also
made substantial contributions.

Cumulative Total Returns1 As of 4/30/99
<TABLE>
<CAPTION>
Six One Since
Months Year Inception2
<S> <C> <C> <C>
Class A 45.11% 28.24% 77.53%
Class B 44.61 27.19 74.28
Class C 44.61 27.19 74.28
Class Z 45.18 28.36 78.35
Lipper Mid-Cap Fund Avg.3 23.15 5.00 43.13
</TABLE>

Average Annual Total Returns1 As of 3/31/99
<TABLE>
<CAPTION>
One Since
Year Inception2
<S> <C> <C>
Class A 13.45% 21.26%
Class B 13.38 22.06
Class C 16.20 22.54
Class Z 19.57 24.34
</TABLE>

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

1 Source: Prudential Investments Fund Management and Lipper, Inc. The
cumulative total returns do not take into account sales charges. The average
annual total returns do take into account applicable sales charges. The Fund
charges a maximum front-end sales charge of 5% for Class A shares. Class B
shares are subject to a declining contingent deferred sales charge (CDSC) of
5%, 4%, 3%, 2%, 1%, and 1% for six years. Class B shares will automatically
convert to Class A shares, on a quarterly basis, approximately seven years
after purchase. Class C shares are subject to a front-end sales charge of 1%
and a CDSC of 1% for 18 months. Class C shares bought before November 2, 1998,
have a 1% CDSC if sold within one year. Class Z shares are not subject to a
sales charge or distribution fee.

2 Inception date: Class A, B, C, and Z, 12/31/96.

3 Lipper average returns are for all funds in each share class for the six-
month and one-year periods in the Mid-Cap Fund category.

How Investments Compared.
(As of 4/30/99)
(GRAPH)

Source: Lipper, Inc. Financial markets change, so a mutual fund's past
performance should never be used to predict future results. The risks to
each of the investments listed above are different--we provide 12-month
total returns for several Lipper mutual fund categories to show you that
reaching for higher returns means tolerating more risk. The greater the risk,
the larger the potential reward or loss. In addition, we've included
historical 20-year average annual returns. These returns assume the
reinvestment of dividends.

U.S. Growth Funds will fluctuate a great deal. Investors have received higher
historical total returns from stocks than from most other investments. Smaller
capitalization stocks offer greater potential for long-term growth, but may
be more volatile than larger capitalization stocks.

General Bond Funds provide more income than stock funds, which can help
smooth out their total returns year by year. But their prices still fluctuate
(sometimes significantly), and their returns have been historically lower than
those of stock funds.

General Municipal Debt Funds invest in bonds issued by state governments,
state agencies and/or municipalities. This investment provides income
that is usually exempt from federal and state income taxes.

U.S. Taxable Money Funds attempt to preserve a constant share value; they
don't fluctuate much in price but, historically, their returns have been
generally among the lowest of the major investment categories.

<PAGE>
Portfolio Manager's Report
(PHOTO)
Susan Hirsch
Fund Manager

Investment Goals and Style
The Prudential Emerging Growth Fund provides an opportunity for long-term
capital appreciation by investing in stocks of small and medium-sized U.S.
companies with the potential for above-average growth. Stocks of small and
medium-sized companies--those with market capitalizations (the price of all
outstanding stock) between $500 million and $4.5 billion--may offer greater
growth potential than those of larger companies, but also may fluctuate more
in price from day to day. There can be no assurance that the Fund will achieve
its investment objective.

Performance Review
Our largest positions paid off
We'd love to pretend that a 45% six-month return is business as usual, but
this was an exceptionally good period. It is a good time to remind you that
even in the best of times, not everything goes well. We take positions in
many companies that we believe are on the cusp of rapid growth or stock
appreciation. Some don't work out. But in this reporting period, more did
than didn't, and those that did had very substantial gains.

Of our 10 largest positions at the beginning of this reporting period, three
declined significantly--Metzler Group, Policy Management Systems, and Total
Renal Care. Two--Synopsis and Symbol Technologies--had modest gains. But the
other half returned 60% or more apiece. Jabil Circuits, our second largest
holding going into the period, doubled. It is an outsourcing supplier to the
electronics industry and has been in our portfolio for some time. We took
some of our profits on it, but it remains among our largest holdings. We
think it will continue to grow rapidly. Solectron, another electronics
contract manufacturer, gained 60%. Our top 10 holdings at the beginning of
November were filled out by three media companies--Cablevision Systems, AT&T
Corp.-Liberty Media, and USA Networks. Media companies are a focus of our
portfolio (14% of our assets on April 30). Our holdings averaged an 80%
return over our reporting period, including a 165% gain by TV Guide.

We played the Internet a little
It is clear that the Internet is going to transform our economy, but it is
less clear which companies will benefit. For some time, we have owned
Checkfree Holdings, which is classified as a consumer service company. It
enables consumers to pay their bills via the Internet--one of the earliest
and better conceived services. It tripled in the past six months. We also had
substantial contributions to our performance from Netscape Communications
(acquired by America Online, up 355%), Real Network (up 364%), and Go2Net
(up 181%). Overall, computer software and service companies averaged 22% of
our portfolio over the period and generated a 75% return. In addition, our
financial services holdings included CMGI, a venture capital firm specializing
in Internet investments. Its shares almost quadrupled in value.

<PAGE>
We do not want you to infer that this industry is doing well universally. It
is a risky area. Even with our high average return, we also owned stocks that
dropped substantially in price, such as Iturf (down 32%), Network Solutions
(down 33%), and Softnet Systems (down 33%). There were more. As Prudential
Securities analyst Ralph Acampora noted, "Internet stocks soared to levels
unmatched by anything in Wall Street history...between October 1998 and
April 1999." We exercised good judgment and may also have had good luck.
We're not pushing it. We are reducing our Internet holdings to move into
companies with visible profits, such as additional technical services
companies.

We had a few exceptional financial stocks
In addition to CMGI, we had a significant investment in Knight/Trimark Group
(a securities broker) and Metris companies (credit cards and related fee-based
services). The former almost tripled while the latter rose 86%. Overall,
financial services companies made up 6% of our holdings and returned 134%.

Looking Ahead
A focus on technical services and industrials
We continue to focus on technology, which we believe is driving the current
cycle of U.S. economic growth. We also believe that the industrial sector will
benefit from the resurgence of growth in Asia. This sector has been neglected
for a few years, and prices are low. We are looking for growth opportunities
there.

Portfolio Composition
Expressed as a percentage of net assets
as of 4/30/99

Consumer Growth & Stable 39%
Technology 33
Cash & Equivalents 6
Finance 6
Consumer Cyclical 5
Energy 4
Utility 4
Industrial 3

Five Largest Holdings
Expressed as a percentage of net assets
as of 4/30/99

AT&T Corp.-Liberty Media 2.5%
Telecommunications

Safeguard Scientifics, Inc. 2.3
Computer Software & Services

Lexmark Int'l Group, Inc. 2.3
Electronics

Cablevision Systems Corp. 2.1
Cable & Pay Television Systems

Solectron Corp. 2.1
Electronics
- -------------------------------------------------------------------------------
1

<PAGE>
A Message to Our Shareholders June 18, 1999
(PHOTO)
Dear Shareholder:
In the last couple of years, the recurring possibility of a global economic
crisis caused investors to focus on securities they perceived to be safe. In
the equity market, they focused on the stocks of a handful of very large
companies that were perceived to be well-buffeted from an economic slowdown.
These stocks became very expensive--out of proportion to their earnings
expectations. As a result, there was a substantial disparity in value between
large and small companies and between growth and value stocks.

Since earlier this year, however, that gap has narrowed significantly amid
news of strong U.S. economic growth and faster-than-expected global stability.
While the long-term prospects of U.S. growth stocks are still very good, many
of the smaller and economically sensitive companies favored by our value
managers now are posting very attractive returns.

In the bond market, U.S. Treasuries and select European government bonds were
the major beneficiaries of the flight to quality that occurred in recent
years. When this trend reversed itself toward the end of 1998, other sectors
of the bond market rebounded. However, with a strong U.S. economy comes the
threat of higher inflation, which erodes the value of bonds' fixed interest
payments. The recent inflation concerns jolted the bond market and helped
send long-term interest rates to a 19-month high.

The winds of change in the equity market and the recent turbulence in the bond
market not only highlight the value of professional portfolio management, they
illustrate why investors should have a well-diversified asset allocation
strategy. It is also a good practice to rebalance your holdings, when
necessary, to keep your asset allocation consistent with your long-term
objectives and risk tolerance. A properly diversified portfolio of value- and
growth-oriented equity funds, international bond funds, and money market funds
could help you weather inevitable market turbulence and achieve more
consistent returns over time. Prudential offers a wide range of mutual funds
to help our shareholders diversify, as well as several balanced and
diversified funds to allow one-decision diversification.

Thank you for your continued confidence in Prudential mutual funds.

Sincerely,

John R. Strangfeld
President
Prudential Emerging Growth Fund, Inc.
- -------------------------------------------------------------------------------
2

<PAGE>
Portfolio of Investments
as of April 30, 1999 (Unaudited) PRUDENTIAL EMERGING GROWTH FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--93.1%
COMMON STOCKS
- ------------------------------------------------------------
Advertising--1.6%
14,000 TMP Worldwide, Inc.(a) $ 941,500
58,400 Young & Rubicam, Inc. 2,325,050
------------
3,266,550
- ------------------------------------------------------------
Aerospace--0.4%
37,400 Orbital Sciences Corp.(a) 787,738
- ------------------------------------------------------------
Apparel--1.2%
7,400 Gucci Group N.V. 558,237
29,700 Jones Apparel Group, Inc.(a) 980,100
13,200 Tommy Hilfiger Corp.(a) 922,350
------------
2,460,687
- ------------------------------------------------------------
Biotechnology--1.3%
24,000 Perkin-Elmer Corp. 2,595,000
- ------------------------------------------------------------
Broadcasting--5.6%
8,000 Gemstar International Group Ltd.(a) 843,000
43,500 Pegasus Communications Corp.(a) 1,783,500
65,700 Sinclair Broadcast Group, Inc.(a) 919,800
70,200 TV Guide, Inc.(a) 2,957,175
29,700 Univision Communications, Inc.(a) 1,718,887
81,600 USA Networks, Inc.(a) 3,049,800
------------
11,272,162
- ------------------------------------------------------------
Broadcasting & Publishing--1.1%
62,200 Reader's Digest Association, Inc. 2,211,988
- ------------------------------------------------------------
Cable & Pay Television Systems--3.2%
32,300 Adelphia Communications Corp.(a) 2,204,475
55,400 Cablevision Systems Corp.(a) 4,286,575
------------
6,491,050
Commercial Services--3.1%
23,600 ACNielson Corp.(a) $ 657,850
47,500 Lason Holdings, Inc.(a) 1,879,219
58,500 Metzler Group, Inc.(a) 1,630,687
57,700 Profit Recovery Group Int'l.,
Inc.(a) 2,106,050
------------
6,273,806
- ------------------------------------------------------------
Computer Software & Services--22.3%
28,110 America Online, Inc.(a) 4,012,702
13,100 C-NET, Inc.(a) 1,683,350
66,000 Checkfree Holdings Corp.(a) 3,168,000
23,300 Citrix Systems, Inc.(a) 990,250
2,500 CMGI, Inc.(a) 636,406
59,000 Compuware Corp.(a) 1,438,125
45,926 DST Systems, Inc.(a) 2,675,189
31,300 EarthLink Network, Inc.(a) 2,157,744
12,800 Exodus Communications, Inc.(a) 1,153,600
6,100 Go2Net, Inc.(a) 936,350
36,300 Infoseek Corp.(a) 1,853,569
9,800 Inktomi Corp.(a) 1,173,550
7,200 Marimba, Inc.(a) 437,400
11,700 MarketWatch.Com, Inc.(a) 839,475
19,500 MindSpring Enterprises, Inc.(a) 1,890,281
6,500 Network Solutions, Inc.(a) 505,375
73,200 Novell, Inc.(a) 1,628,700
47,400 Pixar, Inc.(a) 1,967,100
73,200 Policy Management Systems Corp.(a) 2,301,225
4,100 RealNetworks, Inc.(a) 908,150
58,300 Safeguard Scientifics, Inc.(a) 4,722,300
32,900 Silicon Graphics, Inc.(a) 419,475
43,800 Sterling Commerce, Inc.(a) 1,371,488
57,800 Synopsys, Inc.(a) 2,723,825
19,300 Ticketmaster Online-CitySearch,
Inc.(a) 610,363
25,600 USWeb Corp.(a) 574,400
39,400 WorldGate Communications, Inc.(a) 1,122,900
26,000 Ziff-Davis, Inc.(a) 916,500
------------
44,817,792
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3

<PAGE>
Portfolio of Investments
as of April 30, 1999 (Unaudited) PRUDENTIAL EMERGING GROWTH FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Data Processing & Reproduction--2.8%
37,500 American Management Systems,
Inc.(a) $ 1,289,063
141,700 Informix Corp.(a) 1,027,325
52,100 National Data Corp. 2,403,112
41,100 Security Dynamics Technologies,
Inc.(a) 893,925
------------
5,613,425
- ------------------------------------------------------------
Diversified Industries--3.1%
62,900 Heidrick & Struggles International,
Inc.(a) 876,669
100,200 Parexel International Corp. 2,411,062
29,400 Stillwater Mining Co.(a) 832,388
20,500 Waters Corp.(a) 2,155,063
------------
6,275,182
- ------------------------------------------------------------
Electronics--14.0%
18,400 Altera Corp.(a) 1,329,400
49,900 Analog Devices, Inc.(a) 1,752,738
51,900 Celestica, Inc.(a) 2,030,587
87,200 Cognex Corp.(a) 2,528,800
45,500 Dallas Semiconductor Corp. 1,933,750
19,900 Etec Systems, Inc.(a) 614,413
73,300 Jabil Circuit, Inc.(a) 3,413,031
18,200 KLA Tencor Corp.(a) 903,175
36,900 Lexmark International Group,
Inc.(a) 4,557,150
38,400 LSI Logic Corp.(a) 1,305,600
85,300 Solectron Corp.(a) 4,137,050
12,200 Symbol Technologies, Inc. 582,550
21,100 Teradyne, Inc.(a) 995,656
57,100 Unitrode Corp. 1,009,956
24,900 Xilinx, Inc.(a) 1,136,063
------------
28,229,919
- ------------------------------------------------------------
Financial Services--6.6%
6,500 Bank United Corp. 262,438
11,800 Capital One Financial 2,049,512
65,400 Federated Investors, Class B 1,050,488
30,300 H&R Block, Inc. 1,458,188
24,900 Knight/Trimark Group, Inc.(a) 3,814,369
44,900 Metris Companies, Inc. 2,744,512
59,400 Webster Financial Corp. 1,826,550
------------
13,206,057
Manufacturing--2.0%
63,700 Hasbro, Inc. $ 2,173,763
51,400 WestPoint Stevens, Inc.(a) 1,760,450
------------
3,934,213
- ------------------------------------------------------------
Medical Products & Services--1.1%
28,700 Gilead Sciences, Inc.(a) 1,321,994
39,100 IDEXX Laboratories, Inc.(a) 884,637
------------
2,206,631
- ------------------------------------------------------------
Medical Technology--2.2%
16,610 Bergen Brunswig Corp. 315,590
42,400 Centocor, Inc.(a) 1,881,500
29,200 Incyte Pharmaceuticals, Inc.(a) 527,425
58,700 Mylan Laboratories 1,331,756
18,800 STERIS Corp.(a) 333,700
------------
4,389,971
- ------------------------------------------------------------
Oil & Gas Equipment--0.7%
39,200 Cooper Cameron Corp.(a) 1,514,100
- ------------------------------------------------------------
Oil & Gas Services--3.7%
26,400 Anadarko Petroleum Corp. 1,001,550
36,300 Apache Corp. 1,113,956
37,800 Devon Energy Corp. 1,256,850
21,300 Montana Power Co. 1,588,181
41,400 Smith International, Inc.(a) 1,857,825
65,200 Varco International, Inc. 737,575
------------
7,555,937
- ------------------------------------------------------------
Pharmaceuticals--3.9%
34,900 Alpharma Inc. 1,029,550
15,700 Elan Corp. PLC (Ireland)(ADR)(a) 808,550
19,600 NeXstar Pharmaceuticals, Inc.(a) 339,325
101,700 Schein Pharmaceutical, Inc.(a) 1,303,031
52,400 Teva Pharmaceutical Industries Ltd.
(Israel) (ADR) 2,397,300
51,600 Watson Pharmaceuticals, Inc.(a) 2,089,800
------------
7,967,556
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4

<PAGE>
Statement of Assets and Liabilities (Unaudited)
PRUDENTIAL EMERGING GROWTH FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets April 30, 1999
<S> <C>
Investments, at value (cost $147,147,642)................................................................... $198,501,082
Cash........................................................................................................ 100,862
Receivable for investments sold............................................................................. 7,286,977
Receivable for Fund shares sold............................................................................. 1,123,509
Deferred expenses and other assets.......................................................................... 65,439
Dividends and interest receivable........................................................................... 22,473
--------------
Total assets............................................................................................. 207,100,342
--------------
Liabilities
Payable for investments purchased........................................................................... 4,115,497
Payable for Fund shares reacquired.......................................................................... 1,380,562
Distribution fee payable.................................................................................... 122,519
Management fee payable...................................................................................... 94,859
Accrued expenses............................................................................................ 32,419
--------------
Total liabilities........................................................................................ 5,745,856
--------------
Net Assets.................................................................................................. $201,354,486
--------------
--------------
Net assets were comprised of:
Common stock, at par..................................................................................... $ 12,010
Paid-in capital in excess of par......................................................................... 127,952,335
--------------
127,964,345
Accumulated net investment loss.......................................................................... (1,135,512)
Accumulated net realized gain on investments............................................................. 23,172,213
Net unrealized appreciation on investments............................................................... 51,353,440
--------------
Net assets, April 30, 1999.................................................................................. $201,354,486
--------------
--------------
Class A:
Net asset value and redemption price per share
($52,323,604 / 3,080,459 shares of common stock issued and outstanding)............................... $16.99
Maximum sales charge (5% of offering price).............................................................. .89
--------------
Maximum offering price to public......................................................................... $17.88
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($132,114,530 / 7,924,957 shares of common stock issued and outstanding).............................. $16.67
--------------
--------------
Class C:
Net asset value and redemption price per share
($11,365,618 / 681,738 shares of common stock issued and outstanding)................................. $16.67
Maximum sales charge (1% of offering price).............................................................. .17
--------------
Maximum offering price to public......................................................................... $16.84
--------------
--------------
Class Z:
Net asset value, offering price and redemption price per share
($5,550,734 / 325,105 shares of common stock issued and outstanding).................................. $17.07
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6

<PAGE>
PRUDENTIAL EMERGING GROWTH FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Loss April 30, 1999
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $2,569)....................... $ 103,971
Interest.................................. 144,643
--------------
Total income........................... 248,614
--------------
Expenses
Management fee............................ 467,549
Distribution fee--Class A................. 50,639
Distribution fee--Class B................. 514,946
Distribution fee--Class C................. 43,007
Transfer agent's fees and expenses........ 130,000
Custodian's fees and expenses............. 51,000
Legal fees and expenses................... 40,000
Reports to shareholders................... 37,000
Registration fees......................... 17,000
Amortization of deferred organizational
costs.................................. 12,096
Audit fees and expenses................... 10,000
Directors' fees and expenses.............. 9,000
Miscellaneous............................. 1,889
--------------
Total expenses......................... 1,384,126
--------------
Net investment loss.......................... (1,135,512)
--------------
Realized and Unrealized
Gain on Investments
Net realized gain on investment
transactions.............................. 23,752,735
Net change in unrealized appreciation on
investments............................... 35,503,259
--------------
Net gain on investments...................... 59,255,994
--------------
Net Increase in Net Assets
Resulting from Operations.................... $ 58,120,482
--------------
--------------
</TABLE>

PRUDENTIAL EMERGING GROWTH FUND, INC.
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------

<TABLE>
<CAPTION>
Six Months Year
Ended Ended
Increase (Decrease) April 30, October 31,
in Net Assets 1999 1998
<S> <C> <C>
Operations
Net investment loss............ $ (1,135,512) $ (1,826,309)
Net realized gain on
investments................. 23,752,735 3,541,253
Net change in unrealized
appreciation (depreciation)
on investments.............. 35,503,259 (446,047)
------------ ------------
Net increase in net assets
resulting from operations... 58,120,482 1,268,897
------------ ------------
Distributions from net realized
gains (Note 1)
Class A..................... (871,485) (590,230)
Class B..................... (2,298,027) (1,495,124)
Class C..................... (187,922) (125,163)
Class Z..................... (67,704) (11,569)
------------ ------------
(3,425,138) (2,222,086)
------------ ------------
Fund share transactions (net of
share conversion) (Note 6)
Net proceeds from shares
sold........................ 42,626,200 47,455,553
Net asset value of shares
issued in reinvestment of
dividends and
distributions............... 3,294,708 2,134,825
Cost of shares reacquired...... (24,064,315) (46,065,529)
------------ ------------
Net increase in net assets from
Fund share transactions..... 21,856,593 3,524,849
------------ ------------
Total increase.................... 76,551,937 2,571,660
Net Assets
Beginning of period............... 124,802,549 122,230,889
------------ ------------
End of period..................... $201,354,486 $124,802,549
------------ ------------
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7

<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EMERGING GROWTH FUND, INC.
- --------------------------------------------------------------------------------
Prudential Emerging Growth Fund, Inc. (the 'Fund') is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Fund was incorporated in Maryland on August 23, 1996. The Fund
issued 2,500 shares each of Class A, Class B, Class C and Class Z common stock
for $100,000 on October 21, 1996 to Prudential Investments Fund Management LLC
('PIFM'). Investment operations commenced on December 31, 1996.

The Fund's investment objective is to achieve long-term capital appreciation by
investing primarily in equity securities of small and medium sized U.S.
companies, ranging from $500 million to $4.5 billion in market capitalization,
with the potential for above-average growth.
- ------------------------------------------------------------
Note 1. Accounting Policies

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

Securities Valuation: Securities listed on a securities exchange (other than
options on stock and stock indices) are valued at the last sales price on the
day of valuation, or, if there was no sale on such day, at the mean between the
closing bid and asked prices on such day, or at the bid price in the absence of
an asked price as provided by a pricing service. Securities that are actively
traded in the over-the-counter market, including listed securities for which the
primary market is believed to be over-the-counter, are valued by an independent
pricing service. Securities that are actively traded in the over-the-counter
market, including listed securities for which the primary market is believed to
be over-the-counter, are valued by a principal market maker or independent
pricing agent. Options on securities and indices traded on an exchange are
valued at the mean between the most recently quoted bid and asked prices
provided by the respective 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 or
methodology or provides a valuation or methodology that does not represent fair
value are valued in accordance with procedures adopted by 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, as the case may be, take possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. 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.

All securities are valued as of 4:15 p.m., New York time.

Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of securities are
calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income is recorded on the accrual basis. Expenses are
recorded on the accrual basis which may require the use of certain estimates by
management.

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

Dividends and Distributions: Dividends from net investment income are declared
and paid annually. The Fund will distribute at least annually net capital gains
in excess of loss carryforwards, if any. 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.

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 and net capital gains, if any, to its
shareholders. Therefore, no federal income tax provision is required.

Withholding taxes on foreign dividends have been provided for in accordance with
the Fund's understanding of the applicable country's tax rules and rates.

Deferred Organization Expenses: Approximately $122,000 of expenses were incurred
in connection with the organization of the Fund. These costs have been deferred
and are being amortized ratably over a period of sixty months from the date the
Fund commenced investment operations.
- ------------------------------------------------------------
Note 2. Agreements

The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has
- --------------------------------------------------------------------------------
8

<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EMERGING GROWTH FUND, INC.
- --------------------------------------------------------------------------------
responsibility for all investment advisory services and supervises the
subadviser's performance of such services. Pursuant to a subadvisory agreement
between PIFM and The Prudential Investment Corporation ('PIC'), PIC furnishes
investment advisory services in connection with the management of the Fund. PIFM
pays for the cost of the subadviser's services, the compensation of officers of
the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The
Fund bears all other costs and expenses.

The management fee paid PIFM is computed daily and payable monthly, at an annual
rate of .60 of 1% of the average daily net assets of the Fund.

The Fund has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS'), which acts as the distributor of the Class A, Class B,
Class C and Class Z 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 by them. The distribution fees are accrued daily and
payable monthly. No distribution or service fees are paid to PIMS as distributor
for the Class Z shares of the Fund.

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 assets of the Class A, B and C shares, respectively.
Such expenses under the Plans were charged at an annual rate of .25 of 1%, 1%
and 1% of the average daily net assets of the Class A, B and C shares,
respectively, for the six months ended April 30, 1999.

PIMS has advised the Fund that they received approximately $96,600 in front-end
sales charges resulting from sales of Class A shares and after November 2, 1998
Class C shares for the six months ended April 30, 1999. From these fees, PIMS
paid such sales charges to affiliated broker-dealers, which in turn paid
commissions to salespersons and incurred other distribution costs.

PIMS has advised the Fund that for the six months ended April 30, 1999, they
received approximately $155,100 and $1,500 in contingent deferred sales charges
imposed upon certain redemptions by certain Class B and Class C shareholders,
respectively.

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

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. 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 six months ended April 30, 1999. The purpose of the
agreements are 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 six months ended April 30, 1999,
the Fund incurred fees of approximately $116,000 for the services of PMFS. As of
April 30, 1999, approximately $23,300 of such fees were due to PMFS. Transfer
agent fees and expenses in the Statement of Operations also include certain
out-of-pocket expenses paid to nonaffiliates.

For the six months ended April 30, 1999, Prudential Securities Incorporated
('PSI') received approximately $1,700 in brokerage commissions from portfolio
transactions executed on behalf of the Fund.
- ------------------------------------------------------------
Note 4. Portfolio Securities

Purchases and sales of investment securities, other than short-term investments,
for the six months ended April 30, 1999 were $140,021,412 and $131,895,448,
respectively.

The cost basis of investments for federal income tax purposes at April 30, 1999
was $147,849,104 and, accordingly, net unrealized appreciation of investments
for federal income tax purposes was $50,651,978 (gross unrealized
appreciation--$54,477,686; gross unrealized depreciation--$3,825,708).
- ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account

The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or Federal agency obligations. As of April 30, 1999, the Fund
had a 1.93% undivided interest in the repurchase agreements in the joint
account. The undivided interest for the Fund represented $11,024,000 in
principal amount. As of such date, each repurchase agreement in the joint
account and the value of the collateral therefor were as follows:
- --------------------------------------------------------------------------------
9

<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EMERGING GROWTH FUND, INC.
- --------------------------------------------------------------------------------
Bear, Stearns & Co., Inc., 4.90%, in the principal amount of $150,000,000,
repurchase price $150,061,250, due 5/3/99. The value of the collateral including
accrued interest was $153,641,618.

Merrill Lynch, Pierce, Fenner & Smith, Inc., 4.90%, in the principal amount of
$121,448,000, repurchase price $121,497,591, due 5/3/99. The value of the
collateral including accrued interest was $123,877,485.

Salomon Smith Barney Inc., 4.90%, in the principal amount of $150,000,000,
repurchase price $150,061,250, due 5/3/99. The value of the collateral including
accrued interest was $153,037,359.

Warburg Dillon Read LLC, 4.90%, in the principal amount of $150,000,000,
repurchase price $150,061,250, due 5/3/99. The value of the collateral including
accrued interest was $153,001,025.
- ------------------------------------------------------------
Note 6. Capital

The Fund offers Class A, Class B, Class C and Class Z shares. Class A shares are
sold with a front-end sales charge of up to 5%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Prior to November 2, 1998 Class C shares are
sold with a contingent deferred sales charge of 1% during the first year.
Effective November 2, 1998, 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. Class B shares will automatically convert to Class A shares on a
quarterly basis approximately seven years after purchase. A special exchange
privilege is also available for shareholders who qualify to purchase Class A
shares at net asset value. Class Z shares are not subject to any sales or
redemption charge and are offered exclusively for sale to a limited group of
investors.

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, each of
which consists of 1 billion, 500 million, 300 million and 200 million authorized
shares, respectively.

Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------------- ---------- ------------
<S> <C> <C>
Six months ended April 30, 1999:
Shares sold.......................... 994,974 $ 14,646,238
Shares issued in reinvestment of
distributions...................... 67,007 844,294
Shares reacquired.................... (737,154) (10,912,196)
---------- ------------
Net increase in shares outstanding
before conversion.................. 324,827 4,578,336
Shares issued upon conversion from
Class B............................ 75,980 1,060,749
---------- ------------
Net increase in shares outstanding... 400,807 $ 5,639,085
---------- ------------
---------- ------------
Year ended October 31, 1998:
Shares sold.......................... 1,456,524 $ 18,249,777
Shares issued in reinvestment of
distributions...................... 50,213 576,443
Shares reacquired.................... (1,662,596) (20,468,264)
---------- ------------
Net decrease in shares outstanding
before conversion.................. (155,859) (1,642,044)
Shares issued upon conversion from
Class B............................ 56,954 708,635
---------- ------------
Net decrease in shares outstanding... (98,905) $ (933,409)
---------- ------------
---------- ------------
<CAPTION>
Class B
- -------------------------------------
Six months ended April 30, 1999:
Shares sold.......................... 1,546,342 $ 22,621,719
Shares issued in reinvestment of
distributions...................... 177,561 2,201,763
Shares reacquired.................... (769,498) (10,909,369)
---------- ------------
Net increase in shares outstanding
before conversion.................. 954,405 13,914,113
Shares reacquired upon conversion
into
Class A............................ (77,319) (1,060,749)
---------- ------------
Net increase in shares outstanding... 877,086 $ 12,853,364
---------- ------------
---------- ------------
Year ended through October 31, 1998:
Shares sold.......................... 1,908,638 $ 23,615,032
Shares issued in reinvestment of
distributions...................... 125,018 1,425,202
Shares reacquired.................... (1,855,918) (22,284,596)
---------- ------------
Net increase in shares outstanding
before conversion.................. 177,738 2,755,638
Shares reacquired upon conversion
into
Class A............................ (57,537) (708,635)
---------- ------------
Net increase in shares outstanding... 120,201 $ 2,047,003
---------- ------------
---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
10

<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EMERGING GROWTH FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Shares Amount
- ------------------------------------- ---------- ------------
<S> <C> <C>
Six months ended April 30, 1999:
Shares sold.......................... 175,560 $ 2,558,343
Shares issued in reinvestment of
distributions...................... 14,914 184,941
Shares reacquired.................... (81,135) (1,146,080)
---------- ------------
Net increase in shares outstanding... 109,339 $ 1,597,204
---------- ------------
---------- ------------
Year ended October 31, 1998:
Shares sold.......................... 254,644 $ 3,157,537
Shares issued in reinvestment of
distributions...................... 10,741 122,442
Shares reacquired.................... (239,687) (2,875,061)
---------- ------------
Net increase in shares outstanding... 25,698 $ 404,918
---------- ------------
---------- ------------
<CAPTION>
Class Z
- -------------------------------------
Six months ended April 30, 1999:
Shares sold.......................... 192,504 $ 2,799,900
Shares issued in reinvestment of
distributions...................... 5,036 63,710
Shares reacquired.................... (74,733) (1,096,670)
---------- ------------
Net increase in shares outstanding... 122,807 $ 1,766,940
---------- ------------
---------- ------------
Year ended October 31, 1998:
Shares sold.......................... 190,511 $ 2,433,207
Shares issued in reinvestment of
distributions...................... 935 10,738
Shares reacquired.................... (36,134) (437,608)
---------- ------------
Net increase in shares outstanding... 155,312 $ 2,006,337
---------- ------------
---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
11

<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL EMERGING GROWTH FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B
-------------------------------------------- -----------
December 31,
Six Months 1996(a) Six Months
Ended Year Ended Throuth Ended
April 30, October 31, October 31, April 30,
1999 1998 1997 1999
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................... $ 12.01 $ 11.92 $ 10.00 $ 11.83
----------- ----------- ------ -----------
Income from investment operations
Net investment loss.................................... (.06) (.11) (.08) (.11)
Net realized and unrealized gain on investment
transactions........................................ 5.37 .41 2.00 5.28
----------- ----------- ------ -----------
Total from investment operations.................... 5.31 .30 1.92 5.17
----------- ----------- ------ -----------
Less distributions
Distributions from net realized gains on investment
transactions........................................ (.33) (.21) -- (.33)
----------- ----------- ------ -----------
Net asset value, end of period......................... $ 16.99 $ 12.01 $ 11.92 $ 16.67
----------- ----------- ------ -----------
----------- ----------- ------ -----------
TOTAL RETURN(c):....................................... 45.11% 2.63% 19.20% 44.61%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................ $52,323 $32,183 $ 33,124 $ 132,114
Average net assets (000)............................... $40,846 $33,831 $ 28,141 $ 103,843
Ratios to average net assets:
Expenses, including distribution fees............... 1.25%(b) 1.25% 1.46%(b) 2.00%(b)
Expenses, excluding distribution fees............... 1.00%(b) 1.00% 1.21%(b) 1.00%(b)
Net investment loss................................. (.93)%(b) (.88)% (.92)%(b) (1.68)%(b)
Portfolio turnover rate............................. 86% 177% 107% 86%

<CAPTION>
December 31,
1996(a)
Year Ended Throuth
October 31, October 31,
1998 1997
----------- ------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................... $ 11.85 $ 10.00
----------- ------
Income from investment operations
Net investment loss.................................... (.20) (.14)
Net realized and unrealized gain on investment
transactions........................................ .39 1.99
----------- ------
Total from investment operations.................... .19 1.85
----------- ------
Less distributions
Distributions from net realized gains on investment
transactions........................................ (.21) --
----------- ------
Net asset value, end of period......................... $ 11.83 $ 11.85
----------- ------
----------- ------
TOTAL RETURN(c):....................................... 1.71% 18.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................ $83,407 $ 82,070
Average net assets (000)............................... $86,713 $ 67,420
Ratios to average net assets:
Expenses, including distribution fees............... 2.00% 2.21%(b)
Expenses, excluding distribution fees............... 1.00% 1.21%(b)
Net investment loss................................. (1.63)% (1.67)%(b)
Portfolio turnover rate............................. 177% 107%
</TABLE>
- ---------------
(a) Commencement of investment operations.
(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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 12

<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL EMERGING GROWTH FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Class Z
-------------------------------------------- -----------
December 31,
Six Months 1996(a) Six Months
Ended Year Ended Throuth Ended
April 30, October 31, October 31, April 30,
1999 1998 1997 1999
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................... $ 11.83 $ 11.85 $10.00 $ 12.06
----------- ----- ----- -----
Income from investment operations
Net investment loss.................................... (.11) (.20) (.14) (.04)
Net realized and unrealized gain on investment
transactions........................................ 5.28 .39 1.99 5.38
----------- ----- ----- -----
Total from investment operations.................... 5.17 .19 1.85 5.34
----------- ----- ----- -----
Less distributions
Distributions from net realized gains on investment
transactions........................................ (.33) (.21) -- (.33)
----------- ----- ----- -----
Net asset value, end of period......................... $ 16.67 $ 11.83 $11.85 $ 17.07
----------- ----- ----- -----
----------- ----- ----- -----
TOTAL RETURN(c):....................................... 44.61% 1.71% 18.50% 45.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................ $11,366 $ 6,774 $6,477 $ 5,551
Average net assets (000)............................... $ 8,673 $ 6,949 $5,526 $ 3,779
Ratios to average net assets:
Expenses, including distribution fees............... 2.00%(b) 2.00% 2.21%(b) 1.00%(b)
Expenses, excluding distribution fees............... 1.00%(b) 1.00% 1.21%(b) 1.00%(b)
Net investment loss................................. (1.68)%(b) (1.63)% (1.69)%(b) (.68)%(b)
Portfolio turnover rate............................. 86% 177% 107% 86%

<CAPTION>
December 31,
1996(a)
Year Ended Throuth
October 31, October 31,
1998 1997
----------- ------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................... $ 11.93 $10.00
----- -----
Income from investment operations
Net investment loss.................................... (.04) (.03)
Net realized and unrealized gain on investment
transactions........................................ .38 1.96
----- -----
Total from investment operations.................... .34 1.93
----- -----
Less distributions
Distributions from net realized gains on investment
transactions........................................ (.21) --
----- -----
Net asset value, end of period......................... $ 12.06 $11.93
----- -----
----- -----
TOTAL RETURN(c):....................................... 2.97% 19.30%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................ $ 2,439 $ 561
Average net assets (000)............................... $ 1,283 $ 261
Ratios to average net assets:
Expenses, including distribution fees............... 1.00% 1.21%(b)
Expenses, excluding distribution fees............... 1.00% 1.21%(b)
Net investment loss................................. (.63)% (.73)%(b)
Portfolio turnover rate............................. 177% 107%
</TABLE>
- ---------------
(a) Commencement of investment operations.
(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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13

<PAGE>

Getting The Most From Your Prudential Mutual Fund.

Some mutual fund shareholders won't ever read this--they don't read annual
and semi-annual reports. It's quite understandable. These annual and semi-
annual reports are prepared to comply with Federal regulations. They are often
written in language that is difficult to understand. So, when most people run
into those particularly daunting sections of these reports, they don't read
them.

We think that's a mistake.

At Prudential Mutual Funds, we've made some changes to our report to make it
easier to understand and more pleasant to read, in hopes you'll find it
profitable to spend a few minutes familiarizing yourself with your investment.
Here's what you'll find in the report:

At A Glance
Since an investment's performance is often a shareholder's primary concern,
we present performance information in two different formats. You'll find it
first on the "At A Glance" page where we compare the Fund and the comparable
average calculated by Lipper Analytical Services, a nationally recognized
mutual fund rating agency. We report both the cumulative total returns and
the average annual total returns. The cumulative total return is the total
amount of income and appreciation the Fund has achieved in various time
periods. The average annual total return is an annualized representation
of the Fund's performance--it generally smoothes out returns and gives you
an idea how much the Fund has earned in an average year, for a given time
period. Under the performance box, you'll see legends that explain the
performance information, whether fees and sales charges have been included
in returns, and the inception dates for the Fund's share classes.

See the performance comparison charts at the back of the report for more
performance information. And keep in mind that past perfor-mance is not
indicative of future results.

Portfolio Manager's Report
The portfolio manager who invests your money for you reports on successful--
and not-so-successful--strategies in this section of your report. Look for
recent purchases and sales here, as well as information about the sectors
the portfolio manager favors and any changes that are on the drawing board.

Portfolio Of Investments
This is where the report begins to look technical, but it's really just a
listing of each security held at the end of the reporting period, along with
valuations and other information. Please note that sometimes we discuss a
security in the Portfolio Manager's Report that doesn't appear in this
listing because it was sold before the close of the reporting period.

<PAGE>
Statement Of Assets And Liabilities
The balance sheet shows the assets (the value of the Fund's holdings),
liabilities (how much the Fund owes) and net assets (the Fund's equity, or
holdings after the Fund pays its debts) as of the end of the reporting period.
It also shows how we calculate the net asset value per share for each class of
shares. The net asset value is reduced by payment of your dividend, capital
gain, or other distribution, but remember that the money or new shares are
being paid or issued to you. The net asset value fluctuates daily along with
the value of every security in the portfolio.

Statement Of Operations
This is the income statement, which details income (mostly interest and
dividends earned) and expenses (including what you pay us to manage your
money). You'll also see capital gains here -- both realized and unrealized.

Statement Of Changes In Net Assets
This schedule shows how income and expenses translate into changes in net
assets. The Fund is required to pay out the bulk of its income to shareholders
every year, and this statement shows you how we do it--through dividends and
distributions--and how that affects the net assets. This statement also shows
how money from investors flowed into and out of the Fund.

Notes To Financial Statements
This is the kind of technical material that can intimidate readers, but it
does contain useful information. The Notes provide a brief history and
explanation of your Fund's objectives. In addition, they also outline how
Prudential Mutual Funds prices securities. The Notes also explain who manages
and distributes the Fund's shares and, more importantly, how much they are
paid for doing so. Finally, the Notes explain how many shares are outstanding,
and the number issued and redeemed over the period.

Financial Highlights
This information contains many elements from prior pages, but on a per share
basis. It is designed to help you understand how the Fund performed, and to
compare this year's performance and expenses to those of prior years.

Independent Auditor's Report
Once a year, an outside auditor looks over our books and certifies that the
information is fairly presented and complies with generally accepted
accounting principles.

Tax Information
This is information which we report annually about how much of your total
return is taxable. Should you have any questions, you may want to consult a
tax advisor.

Performance Comparison
These charts are included in the annual report and are required by the
Securities Exchange Commission. Performance is presented here as a
hypothetical $10,000 investment in the Fund since its inception or for
10 years (whichever is shorter). To help you put that return in context,
we are required to include the performance of an unmanaged, broad-based
securities index, as well. The index does not reflect the cost of buying
the securities it contains or the cost of managing a mutual fund. Of course,
the index holdings do not mirror those of the fund --the index is a broadly
based reference point commonly used by investors to measure how well they
are doing. A definition of the selected index is also provided. Investors
generally cannot invest directly in an index.

<PAGE>
Getting The Most From Your Prudential Mutual Fund.
How many times have you read these letters -- 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 products 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 on equity. 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 mutual fund) 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 for" prices of a security.

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

<PAGE>

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

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

Trustees
Edward D. Beach
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
Thomas T. Mooney
Stephen P. Munn
Richard A. Redeker
Robin B. Smith
John R. Strangfeld
Louis A. Weil, III
Clay T. Whitehead

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

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

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

Distributor
Prudential 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 Street
Chicago, IL 60610-4795

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.

The accompanying financial statements as of April 30, 1999, were not audited
and, accordingly, no opinion is expressed on them.

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

<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852

BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY

74431L107
74431L206 MF173E2
74431L305
74431L404

<PAGE>