<PAGE>
(ICON)
Prudential
20/20 Focus
Fund
SEMI
ANNUAL
REPORT
July 31, 1999
(LOGO)
<PAGE>
A Message from the Fund's President September 17, 1999
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(PHOTO)
Dear Shareholder,
In a sharp change from the previous few years, both value and growth investing
styles had periods of superior results recently. For the six months ended July
31, 1999, our Prudential 20/20 Focus Fund's return of 7.66% for Class A shares
was significantly higher than the Lipper Capital Appreciation Average and more
than three percentage points ahead of the S&P 500. This superior performance
was a result of the catch-up drive of its value stocks. It is also important to
note that while this is a focused portfolio (40 or fewer stocks), the Fund
still had winners in diverse industries, including retail, paper, oil,
technology, and media.
Sticking with a diversified asset allocation strategy
Prudential 20/20 Focus Fund is one of several mutual funds we offer that
combine the expertise of two or more portfolio managers who have different
investment styles or specialize in different areas of the financial markets.
We do this to make it easier for investors to create a properly diversified
portfolio and achieve more consistent returns over time.
With value and growth styles vying in 1999 for superior returns and stock and
bond markets seldom performing in lock step, it has become increasingly
important to have a well-diversified asset allocation strategy in place. Such
a strategy helps lessen the effects of market volatility--provided the strategy
remains in place. Therefore, while 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, investors should avoid making rash
decisions. Generally speaking, long-term investment success comes from
maintaining an established strategy during both market highs and market lows.
Thank you for your continued confidence in Prudential mutual funds.
Sincerely,
John R. Strangfeld
President
Prudential 20/20 Focus Fund
<PAGE>
Portfolio Managers' Report
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(PHOTO) (PHOTO)
Thomas R. Jackson and
Spiros "Sig" Segalas
Fund Managers
Investment Goals and Style
The Prudential 20/20 Focus Fund's two investment managers each invest primarily
in up to 20 stocks, selected for their superior potential for long-term capital
growth. Thomas R. Jackson looks for bargains. He uses a strict value investment
style to buy stocks whose prices he believes are too low, given their
underlying earnings, assets, cash flow, dividends or book value. Spiros "Sig"
Segalas uses a growth investment style, concentrating on stocks of established
companies that he believes will have superior absolute and relative earnings
growth. There can be no assurance that the Fund's investment objective will be
achieved.
Performance Review
A growing global economy
After Brazil devalued its currency in January, the impact both internally and
elsewhere was much less damaging than many investors had expected. By April, it
was generally accepted that global economic growth was on a positive path. We
had invested in some companies whose share prices were depressed because of the
concern about the world economy. Tandy, in particular, benefited dramatically,
rising 91% over our reporting period.
We also had strong performances from technology manufacturing companies that
have been on long growth streaks: Texas Instruments (up 46% during the period)
makes computer chips and Cisco Systems (up 11%) makes networking equipment. On
the negative side, Autodesk and 3Com had disappointing results and were sold
from the portfolio.
Overall, a value market
The global recovery created a classic value market. Cyclical stocks--those of
companies whose earnings are greatest in a rapidly growing economy--
historically are a value theme. Their share prices typically fall when
investors think an economy is going to contract, and rise rapidly in the early
stages of an expansion. Although the U.S. economy has been growing since 1991,
commodity companies that were supplying the Asian economy suffered when it
contracted sharply. As we began to see signs of a bottoming in Asia, these
stocks came roaring back. Generally, prices of value stocks will rise before
their earnings do because astute investors can forecast the impact of
recovering markets.
For example, paper companies had suffered from the collapse of their large
Asian markets and also from overcapacity. These stocks recovered strongly in
1999. Our shares of Mead and Temple Inland, both inexpensively acquired, shared
in the gains. Mead had a particularly strong showing, with a 45% return for our
six-month reporting period. Energy stocks had suffered from two warm winters in
addition to the Asian recession. As energy prices rose in 1999, our holdings of
Atlantic Richfield and Elf Aquitaine both rose almost 60% in the period. The
metals company Freeport-McMoran Copper and Gold returned 66%. These industrial
cyclicals powered our value holdings to a very strong half year.
<PAGE>
Broadcasting and retail reflected economic growth
Our broadcasting stocks included Univision Communications, the leading
Spanish-language broadcaster in the United States, and CBS. We had particularly
large gains on Univision, which rose 54% in our reporting period. It has very
strong revenue growth and dominates its market. CBS, up 29%, also did well.
Among retailers, we owned Dillard's and Tiffany in addition to Tandy.
Dillard's, which rose 25% in our reporting period, dropped sharply in August
on news of an earnings disappointment related to its acquisition of the
Mercantile stores in 1998. The company has grown by acquisition in the past;
we think its current digestion difficulties are short range. Comparable store
sales rose over last year, and the stock is very inexpensive for its cash flow
and earnings potential. We purchased Tiffany as a growth stock late in our
reporting period; it had gained 15% already by our period end. The company has
very strong earnings momentum, reflecting both strength in the U.S. economy and
recovering Asian markets.
Performance at a Glance
Cumulative Total Returns1 As of 7/31/99
<TABLE>
<CAPTION>
Six One Since
Months Year Inception2
<S> <C> <C> <C>
Class A 7.66% 25.52% 24.02%
Class B 7.24 24.66 22.91
Class C 7.24 24.66 22.91
Class Z 7.75 25.89 24.25
Lipper Capital Appreciation Fund Avg.3 6.15 21.16 17.66
</TABLE>
Average Annual Total Returns1 As of 6/30/99
<TABLE>
<CAPTION>
One Since
Year Inception2
<S> <C> <C>
Class A 21.34% 21.34%
Class B 21.71 21.71
Class C 24.45 24.45
Class Z 27.96 27.96
</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 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 and service (12b-1) fees.
2 Inception date: Class A, B, C, and Z, 7/1/98.
3 The Lipper Since Inception return is for all funds in each share class in
the Capital Appreciation Fund category.
Looking Ahead
Should world economic growth accelerate too rapidly, shortages of industrial
commodities may push the profits of the cyclical companies, whose products are
in short supply, to extraordinary levels, while shortages or higher costs could
hurt other firms. On the other hand, if economic growth remains smooth,
cyclicals' earnings may peak, while companies with long-term growth of demand
can increase their profits for a long time to come. In the first scenario,
value stocks should beat the market; in the latter, growth stocks.
Opinions differ about what will happen. Neither economists nor investors are
notably successful at predicting the future. They are particularly poor at
telling precisely when an anticipated event will
1
<PAGE>
Review Cont'd.
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happen. In 1999, the uncertainty has led to a mixed performance, with
investment styles alternating in leadership almost monthly. As investors with
long track records, we each know that there have been sustained periods when
economic conditions were unfavorable for any single investment style. In the
20/20 Focus Fund, shareholders will benefit whether value or growth has the
advantage.
Additional Performance Tracking Tools
You can access comprehensive information about the performance of your
Prudential mutual fund 24 hours a day through our Web site and automated phone
service. At www.prudential.com/investing, you'll find the daily closing values,
changes from the previous day, and quarterly performance for all of our retail
mutual funds. Other available resources include daily, monthly and quarterly
market commentary.
Prudential is committed to meeting shareholders' needs. That is why we
continue to upgrade and make improvements to our Web site. Please send us your
comments about how we can continue to improve our site to meet your needs.
Daily fund values are also a toll-free call away from any touch-tone phone.
Call (800) 225-1852 and follow the voice prompts to obtain mutual fund closing
values and yields. You can even set up a personalized "watch list" to track
specific Prudential mutual funds.
Mutual Fund Automated Service (800) 225-1852
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Main Menu Submenus
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1. Account Information 1. Account Balance
2. Transactions
3. Order Forms
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2. Prices and Yields
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3. Transactions
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4. Order Checks and Statements
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5. PIN Change
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Five Largest Value Holdings
Expressed as a percentage of net assets as of 7/31/99
Tandy Corp. 4.2%
Retail
Wellpoint Health Networks, Inc. 3.1
Hospital Management
Eastman Kodak Co. 2.7
Diversified Consumer Products
Dillard's, Inc. 2.5
Retail
Tenet Healthcare 2.5
Hospital Management
Five Largest Growth Holdings
Expressed as a percentage of net assets as of 7/31/99
Cisco Systems, Inc. 4.8%
Communications Equipment
EMC Corp. Mass. 3.9
Computer Hardware
American Home Products 3.7
Drug & Medical Supplies
Microsoft Corp. 3.7
Computer Software & Svcs.
Texas Instruments, Inc. 3.7
Electronic Components
Portfolio Composition
Expressed as a percentage of net assets as of 7/31/99
Consumer Growth 29.0%
Technology 25.3
Industrial 13.5
Finance 9.6
Consumer Cyclical 8.6
Energy 4.0
Utility 3.5
Cash & Equivalents 6.5
2
<PAGE>
Portfolio of Investments as of
July 31, 1999 (Unaudited) PRUDENTIAL 20/20 FOCUS FUND
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<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
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LONG-TERM INVESTMENTS--93.5%
COMMON STOCKS--93.5%
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Airlines--3.3%
466,300 AMR Corp. $ 30,251,212
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Banks & Financial Services--3.9%
144,200 Morgan (J.P.) & Co., Inc. 18,439,575
193,100 Morgan Stanley Dean Witter & Co. 17,403,138
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35,842,713
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Chemicals--2.0%
362,900 Eastman Chemical Co. 18,757,394
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Commercial Services--1.6%
769,000 Convergys Corp.(a) 14,995,500
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Computer Hardware--7.2%
420,000 Compaq Computer Corp. 10,080,000
617,900 Dell Computer Corp.(a) 25,256,663
447,500 Intel Corp. 30,877,500
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66,214,163
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Computer Software & Services--12.3%
708,200 Cisco Systems, Inc.(a) 43,996,925
593,700 EMC Corp.(a) 35,955,956
396,800 Microsoft Corp.(a) 34,050,400
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114,003,281
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Diversfied Consumer Products--4.4%
290,000 Loews Corp. 20,336,250
552,900 Philip Morris Companies, Inc. 20,595,525
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40,931,775
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Drugs & Medical Supplies--1.9%
330,700 Glaxo Wellcome PLC (ADR)
(United Kingdom) 17,258,406
Electronic Components--3.7%
236,100 Texas Instruments, Inc. $ 33,998,400
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Entertainment--0.2%
218,000 Park Place Entertainment Corp.(a) 2,220,875
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Forest Products--4.3%
542,100 Mead Corp. 22,226,100
278,300 Temple-Inland, Inc. 17,602,475
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39,828,575
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Health Care--8.0%
977,800 Columbia/HCA Healthcare Corp. 21,756,050
1,305,900 Tenet Healthcare Corp.(a) 23,424,581
349,000 Wellpoint Health Networks, Inc. 28,661,625
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73,842,256
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Hotels--1.5%
1,034,700 Hilton Hotels Corp. 13,515,769
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Household Products--5.5%
673,100 American Home Products Corp. 34,328,100
270,100 Kimberly-Clark Corp. 16,476,100
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50,804,200
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Insurance--3.6%
168,100 American International Group, Inc. 19,520,612
354,400 SAFECO Corp. 13,489,350
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33,009,962
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Media--3.5%
740,400 CBS Corp. 32,531,325
</TABLE>
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See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of July 31, 1999 (Unaudited) PRUDENTIAL 20/20 FOCUS
FUND
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<TABLE>
<CAPTION>
Principal
Amount Description Value
Shares Description Value (Note 1) (000) (Note 1)
<C> <S> <C> <C> <C>
------------------------------------------------------------ -------------------------------------------------
<CAPTION>
Shares
<C> <C>
----------------------------------
</TABLE>
Office Equipment & Supplies--2.1%
645,300 Harris Corp. $ 19,560,656
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Oil & Gas--1.7%
179,800 Atlantic Richfield Co. 16,193,238
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Oil Services--2.1%
232,600 Elf Aquitaine S.A. (ADR) (France) 19,901,838
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Photography--2.7%
366,700 Eastman Kodak Co. 25,348,137
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Retail--8.6%
760,200 Dillards Department Stores, Inc. 23,423,663
761,100 Tandy Corp. 39,053,944
340,600 Tiffany & Co. 17,136,437
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79,614,044
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Precious Metals--2.3%
1,337,000 Freeport-McMoRan Copper & Gold,
Inc.(a) 21,224,875
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Telecommunications--7.1%
391,100 MCI WorldCom, Inc.(a) 32,265,750
480,400 Univision Communications, Inc.(a) 33,267,700
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65,533,450
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Total long-term investments
(cost $756,904,103) 865,382,044
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SHORT-TERM INVESTMENTS--4.0%
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Commercial Paper--1.2%
$ 11,553 American Express Co.
5.06%, 8/2/99
(cost $11,533,000) $ 11,553,000
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Repurchase Agreement--2.8%
26,012 Joint Repurchase Agreement Account,
5.06%, 8/2/99
(cost $26,012,000; Note 5) 26,012,000
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Total short-term investments
(cost $37,565,000) 37,565,000
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Total Investments--97.5%
(cost $794,469,103; Note 4) 902,947,044
Other assets in excess of
liabilities--2.5% 22,903,346
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Net Assets--100% $925,850,390
------------
------------
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(a) Non-income producing security.
ADR--American Depository Receipt.
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See Notes to Financial Statements. 4
<PAGE>
Statement of Assets and Liabilities (Unaudited) PRUDENTIAL 20/20 FOCUS FUND
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<TABLE>
<S> <C>
Assets July 31, 1999
Investments, at value (cost $794,469,103)................................................................... $ 902,947,044
Receivable for investments sold............................................................................. 90,440,636
Receivable for Fund shares sold............................................................................. 5,066,349
Dividends and interest receivable........................................................................... 326,302
Tax receivable.............................................................................................. 36,451
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Total assets............................................................................................. 998,816,782
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Liabilities
Payable for investments purchased........................................................................... 68,906,123
Payable for Fund shares reacquired.......................................................................... 2,677,595
Distribution fee payable.................................................................................... 636,283
Management fee payable...................................................................................... 603,760
Accrued expenses............................................................................................ 142,631
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Total liabilities........................................................................................ 72,966,392
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Net Assets.................................................................................................. $ 925,850,390
--------------
--------------
Net assets were comprised of:
Shares of beneficial interest, at par.................................................................... $ 75,174
Paid-in capital in excess of par......................................................................... 778,149,105
--------------
778,224,279
Net investment loss...................................................................................... (2,648,868)
Accumulated net realized gain on investments............................................................. 41,797,038
Net unrealized appreciation on investments............................................................... 108,477,941
--------------
Net assets, July 31, 1999................................................................................... $ 925,850,390
--------------
--------------
Class A:
Net asset value and redemption price per share
($197,201,801 / 15,931,488 shares of beneficial interest issued and outstanding)...................... $12.38
Maximum sales charge (5% of offering price).............................................................. .65
--------------
Maximum offering price to public......................................................................... $13.03
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($572,380,918 / 46,558,411 shares of beneficial interest issued and outstanding)...................... $12.29
--------------
--------------
Class C:
Net asset value and redemption price per share
($110,573,698 / 8,994,329 shares of beneficial interest issued and outstanding)....................... $12.29
Sales charge (1% of offering price)...................................................................... .12
--------------
Offering price to public................................................................................. $12.41
--------------
--------------
Class Z:
Net asset value, offering price and redemption price per share
($45,693,973 / 3,689,687 shares of beneficial interest issued and outstanding)........................ $12.38
--------------
--------------
</TABLE>
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See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL 20/20 FOCUS FUND PRUDENTIAL
20/20 FOCUS FUND
Statement of Operations (Unaudited) Statement of
Changes in Net Assets (Unaudited)
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<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income July 31, 1999
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $4,050)......................... $ 3,635,840
Interest.................................... 889,823
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Total income............................. 4,525,663
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Expenses
Management fee.............................. 3,056,257
Distribution fee--Class A................... 222,037
Distribution fee--Class B................... 2,543,506
Distribution fee--Class C................... 471,358
Transfer agent's fees and expenses.......... 495,000
Registration fees........................... 129,000
Custodian's fees and expenses............... 97,000
Amortization of prepaid offering cost....... 62,000
Reports to shareholders..................... 57,000
Legal fees and expenses..................... 15,000
Audit fees and expenses..................... 13,000
Directors' fees and expenses................ 9,000
Miscellaneous............................... 4,373
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Total expenses........................... 7,174,531
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Net investment loss............................ (2,648,868)
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Realized and Unrealized Gain
on Investments
Net realized gain on:
Investment transactions..................... 47,447,003
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Net change in unrealized appreciation on
investments.............................. 12,965,508
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Net gain on investments........................ 60,412,511
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Net Increase in Net Assets
Resulting from Operations...................... $ 57,763,643
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
Six Months July 1, 1998(a)
Increase in Ended Through
Net Assets July 31, 1999 January 31, 1999
<S> <C> <C>
Operations
Net investment loss............. $ (2,648,868) $ (1,316,014)
Net realized gain (loss) on
investments.................. 47,447,003 (5,548,276)
Net change in unrealized
appreciation on
investments.................. 12,965,508 95,512,433
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Net increase in net assets
resulting from operations.... 57,763,643 88,648,143
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Dividends and distributions (Note
1)
Tax return of capital
distribution
Class A...................... -- (349,450)
Class B...................... -- (35,325)
Class C...................... -- (6,617)
Class Z...................... -- (44,675)
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-- (436,067)
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Fund share transactions
Proceeds from shares sold....... 259,054,794 689,777,037
Net asset value of shares issued
in reinvestment of dividends
and distributions............ -- 422,572
Cost of shares reacquired....... (98,525,277) (70,954,455)
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Net increase in net assets from
Fund share transactions...... 160,529,517 619,245,154
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Total increase..................... 218,293,160 707,457,230
Net Assets
Beginning of period................ 707,557,230 100,000
------------- ----------------
End of period...................... $ 925,850,390 $707,557,230
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</TABLE>
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(a) Commencement of investment operations.
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See Notes to Financial Statements. 6
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL 20/20 FOCUS FUND
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Prudential 20/20 Focus Fund (the 'Fund') is registered under the Investment
Company Act of 1940 as a non-diversified, open-end management investment
company. The investment objective of the Fund is long-term growth of capital.
The Fund invests primarily in up to 40 equity securities of U.S. companies that
are selected by the Fund's two investment advisers (up to 20 by each) as having
strong capital appreciation potential. The Fund issued 2,500 shares each of
Class A, Class B, Class C and Class Z shares of beneficial interest for $100,000
on April 14, 1998 to Prudential Investments Fund Management LLC ('PIFM').
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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, including options, traded on a national
securities or commodities exchange and Nasdaq National Market equity securities
are valued at the last reported sales price on the primary exchange on which
they are traded. Securities traded in the over-the-counter market (including
securities listed on exchanges whose primary market is believed to be
over-the-counter) and listed securities for which no sale was reported on that
date are valued on the basis of valuations provided by an independent pricing
agent or principal market maker.
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 which approximates market value.
Repurchase Agreement: In connection with transactions in repurchase agreements
with United States financial institutions, 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. 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.
Foreign Currency Translation: The books and records of the Fund are maintained
in United States dollars. Foreign currency amounts are translated into United
States dollars on the following basis:
(i) market value of investment securities, other assets and liabilities--at the
current rate of exchange.
(ii) purchases and sales of investment securities, income and expenses--at the
rates of exchange prevailing on the respective dates of such transactions.
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 and 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 (other than distribution fees) and unrealized and realized
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 semi-annually. The Fund will distribute at least annually net capital
gains in excess of capital 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 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.
Offering and Organization Expenses: Approximately $96,000 were incurred and
expensed in connection with the organization of the Fund. Offering cost of
approximately $101,000 are being amortized ratably over a period of twelve
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 responsibility for all
investment advisory services and supervises the subadvisers' performance of such
services. PIFM has entered into subadvisory agreements with The Prudential
Investment Corporation
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7
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL 20/20 FOCUS FUND
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('PIC') and Jennison Associates LLC ('Jennison'). Each subadviser 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. Each of the two Subadvisers manages
approximately 50% of the assets of the Fund. In general, in order to maintain an
approximately equal division of assets between the two Subadvisers, all daily
cash inflows (i.e., subscriptions and reinvested distributions) and outflows
(i.e., redemptions and expense items) will be divided between the two
Subadvisers as PIFM deems appropriate. In addition, there will be periodic
rebalancing of the portfolio's assets to take account of market fluctuations in
order to maintain the approximately equal allocation. As a consequence, the
portfolio will allocate assets from the better performing of the two Subadvisers
to the other.
The management fee paid to PIFM is computed daily and payable monthly, at an
annual rate of .75 of 1% of the Fund's average daily net assets. PIC is
reimbursed by PIFM for its reasonable costs and expenses incurred in providing
services to a portion of the Fund's assets. Jennison is compensated by PIFM for
its services at the rate of .30 of 1% of the average daily net assets of the
portion of the Fund that Jennison manages up to and including $300 million and
.25 of 1% of such average daily net assets in excess of $300 million.
<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>
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
David R. Odenath
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
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
Jennison Associates LLC
466 Lexington Avenue
New York, NY 10017
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 July 31, 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>
(LOGO)
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
Class NASDAQ Cusip
A PTWAX 743979106
B PTWBX 743979205
C PTWCX 743979304
Z PTWZX 743979403 MF 188E2
