ANNUAL REPORT September 30, 1994
Prudential
Growth
Opportunity
Fund
(ICON)
(LOGO)
<PAGE>
Letter to Shareholders
November 11, 1994
Dear Shareholder:
Over the last 12 months, continuing economic recovery, favorable earnings
reports and merger activity produced positive results for the Prudential Growth
Opportunity Fund. However, rising interest rates during the early part of 1994,
and the resulting market downturn, helped keep the Fund's returns modest.
Fund Performance
During the period, your Fund was invested in a combination of small- and
mid-sized companies, which generally did not perform as well as stocks of the
smallest companies. For the fiscal year ended September 30, 1994, your Fund's
total returns were 1.1% for Class A, 0.3% for Class B and 3.2% for Class C
shares. This compares with a return of 2.7% for the Russell 2000, an index of
the smallest 2,000 stocks out of the largest 3,000 equity-capitalized
corporations in terms of market value in the United States, and 2.1% for the
Lipper Small Company Growth Fund Average, an average of small company stock
mutual funds.
Small Stocks Generally Outpace Large Stocks
Small company stocks tend to rise earlier in an economic recovery than their
large company counterparts and fall later during economic downturns.
Consequently, over the last 12 months, as the U.S. economy began to rebound,
small company stocks generally showed slightly greater returns than larger
company stocks.
For the year ended September 30, 1994, the Russell 2000 gained 2.7% while the
S&P 500, the large stock benchmark, rose 3.7%. Small stocks outpaced mid-sized
stocks by a much wider margin, as evidenced by the S&P Mid-Cap Index's gain of
1.6% for the last 12 months.
Seeking Value Investment Opportunities
We employ a "value" oriented, bottom-up approach to portfolio management,
which is unusual among small stock investors. As a result, we tend to hold a
fairly eclectic group of stocks across many industries.
-1-
<PAGE>
The Fund focuses on lower-priced issues that have the potential to rise in
price as investors realize the discrepancy between the stocks' intrinsic value
and their current price. This strategy generally leads us to favor market
sectors where stocks are attractively priced and to avoid high-priced stocks.
Worldwide Recovery Favors Industriales
The current worldwide economic recovery favors stocks of companies with
increasing pricing power and earnings growth potential, rather than
interest-sensitive stocks whose performance may suffer in an uncertain interest
rate environment, and consumer stocks, which face sluggish demand and
contracting profit margins. Consequently, the Fund emphasizes stocks in the
industrial and technology sectors, concentrating on industries such as railcar
construction, air freight forwarding, aerospace and manufacturing.
In railcar construction, an industry showing recent revival after more than a
decade of decline caused primarily by inventory oversupply, we have increased
our positions in Trinity Industries, the Fund's largest holding as of September
30, 1994, and Johnstown America. In air freight forwarding, an industry we
believe will benefit from increased import/export volumes, we made additions to
Expediters International, Air Express and American Presidents. We expect
aerospace companies, which generally prosper later in the upturn of economic
cycles, to begin to benefit soon, as well; Precision Castparts, a manufacturer
of castings for aircraft engines, is one of our largest holdings. We also
sought manufacturing companies with the market position and operating leverage
to benefit from an economic upswing. In this industry, we favor Regal Beloit,
a power transmission and tools manufacturer, and Measurex.
Reduced Finance Emphasis
While the Fund reduced its emphasis on bank stocks over the last year, this
sector still accounts for 8.3% of portfolio assets. Within the group, the Fund
continues to concentrate on regional banks, which show attractive earnings
growth potential and are well-positioned to benefit from further consolidation
in the industry. Holdings include Community First Bankshares, Riggs National
and Bank South.
The Fund has also added to its holdings in Real Estate Investment Trusts, or
REITs. We believe these present conservative opportunities for compound returns
of dividends and annual growth relative to a stock market whose total returns
may be lower than those seen in recent years. Largest holdings in this area
include Equity Residential, Kimco Realty, Weingarten Realty and Vornado.
-2-
<PAGE>
Merger & Acquisitions Activity Benefits Fund
In the last year, our "bottom-up" selection process helped the Fund benefit
from increased merger activity across many industries as companies seek
takeover candidates with similar fundamentals. Holdings (some of which we no
longer own) which benefitted from merger activity included regional bank
Citizens First, insurance firm Statesmen Group, Reliance Electic, Mr. Coffee
and software retailers Babbages and Software, Etc. The Fund profited from
consolidation in the oil industry after separate deals involving Wheatley TXT,
Western Company of North America and American Oil & Gas. We expect
consolidation activity to continue and believe the Fund is well-positioned to
take advantage of such opportunities.
Investment Activity
During the period, we sold several issues which we felt reached full
valuation. We eliminated our position in former top holding Kansas City
Southern, the railroad and financial services conglomerate, after its price
appreciated. Similarly, we sold our position in Foundation Health and reduced
our exposure to financial security firm Diebold after good performance.
We also held some underperformers during the past 12 months. These included
security and protection systems firms Pinkerton's and Borg Warner, which
suffered from competitive pricing pressures in the industry. We decided to exit
these positions and use the assets to investigate other opportunities. Other
disappointing performers included Piper Jaffray, hurt by a weak securities
brokerage industry and regulatory problems, and pharmaceutical firm Carter
Wallace, which was forced to withdraw one of its drugs from the market.
Outlook
We remain optimistic about the outlook for small company stocks, believing
that the conservative gains of the last three years represent an interruption
in a longer cycle in which small company stocks outperform large company
stocks. We believe that, relative to larger company stocks, small company
stocks contain the above-average earnings growth potential and favorable market
valuations which will help them benefit from sustained strength in economic
activity.
-3-
<PAGE>
As always, it is a pleasure to have you as a shareholder of the Prudential
Growth Opportunity Fund and to take the opportunity to report our activities to
you.
Sincerely,
Lawrence C. McQuade
President
Robert P. Fetch
Portfolio Manager
Investment Update
On November 14, 1994, your Board of Directors approved a change in the Fund's
investment policies which would permit the Fund to invest up to 15% of total
assets in foreign securities. Foreign securities are subject to special risks,
including currency fluctuations and political, social and economic instability.
This policy change is not expected to be implemented until February 1995; prior
thereto an updated prospectus will include more details on the new policy and
its associated risks.
-4-
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND, INC. Portfolio of Investments
September 30, 1994
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
LONG-TERM INVESTMENTS
Common Stocks--95.1%
Aerospace/Defense--2.7%
553,600 Precision Castparts
Corp.................... $ 14,186,000
------------
Automobiles--1.1%
250,000(D) Jason, Inc.*
(cost $2,200,000; purchase
date--1/21/94).......... 1,912,500
31,700 Mascotech, Inc............ 376,437
115,100 Standard Products Co...... 2,877,500
46,000 Tower Automotive, Inc.*... 534,750
------------
5,701,187
------------
Banking--8.0%
153,000 Bank South Corp........... 2,830,500
50,000 Charter One Financial,
Inc..................... 1,025,000
8,700 Citfed Bancorp, Inc....... 282,750
155,000 Commercial Federal
Corp.*.................. 3,836,250
270,000 Community First
Bankshares, Inc......... 4,252,500
135,000 Dauphin Deposit Corp...... 3,375,000
100,000 First Commerce Corp....... 2,675,000
95,000 First Security Corp....... 2,755,000
36,400 First Virginia Banks,
Inc..................... 1,396,850
120,000 Hawkeye Bancorporation.... 2,535,000
360,000 Riggs National Corp.*..... 3,667,500
200,000 Rochester Community
Savings Bank*........... 3,875,000
86,050 SouthTrust Corp........... 1,721,000
30,000 TCF Financial Corp........ 1,181,250
225,000 Washington Mutual Savings
Bank.................... 4,584,375
80,000 West One Bancorp.......... 2,240,000
------------
42,232,975
------------
Cable & Pay Television Systems--1.3%
91,700 Comcast Corp. (voting).... 1,398,425
45,800 Comcast Corp.
(non-voting)............ 701,312
192,300 TCA Cable TV, Inc......... 4,687,313
------------
6,787,050
------------
Commercial Services--1.8%
124,100 AAR Corp.................. 1,613,300
40,000 Banner Aerospace, Inc.*... $ 225,000
66,800 Flightsafety
International, Inc...... 2,588,500
190,000 SafeCard Services,
Inc.*................... 2,992,500
62,300 Sterling Software,
Inc.*................... 1,931,300
------------
9,350,600
------------
Computer Hardware--2.7%
190,000 Electronics for Imaging,
Inc.*................... 4,987,500
70,600 Quixote Corp.............. 1,235,500
380,000 Telxon Corp............... 5,225,000
130,000 VeriFone, Inc.*........... 3,038,750
------------
14,486,750
------------
Computer Software & Services--3.4%
277,300 American Management
Systems, Inc.*.......... 6,516,550
235,000 Continuum, Inc.*.......... 5,316,875
148,000 INTERLINQ Software
Corp.*.................. 740,000
12,000 Learning Co.*............. 237,000
275,000 Primark Corp.*............ 3,506,250
18,300 SunGard Data Systems*..... 649,650
89,200 Westcott Communications,
Inc.*................... 1,220,925
------------
18,187,250
------------
Construction--0.4%
55,000 Centex Corp............... 1,271,875
123,500 Willcox & Gibbs, Inc.*.... 895,375
------------
2,167,250
------------
Consumer Products--1.8%
275,000 Fedders Corp.*............ 1,306,250
550,000 Fedders USA, Inc.*........ 2,887,500
100,000 Helene Curtis Industries,
Inc..................... 3,437,500
84,500 Russ Berrie & Co., Inc.... 1,204,125
19,600 Sealright Co., Inc........ 303,800
44,600 Windmere Corp............. 485,024
------------
9,624,199
------------
</TABLE>
-5- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
Consumer Services--0.8%
205,300 Aviall, Inc............... $ 2,104,325
161,300 Regis Corp.*.............. 2,379,175
------------
4,483,500
------------
Drugs & Medical Supplies--1.2%
113,800 Endosonics Corp.*......... 796,600
30,500 Medex, Inc................ 423,187
150,000 Sybron Corp.*............. 5,175,000
------------
6,394,787
------------
Electrical Equipment--0.5%
120,000 Belden, Inc............... 2,490,000
------------
Electronics--7.3%
49,500 Anthem Electronics,
Inc.*................... 1,596,375
100,000 Augat, Inc................ 2,200,000
196,100 Cirrus Logic, Inc.*....... 5,490,800
365,000 Kemet Corp.*.............. 7,665,000
280,200 Laser Precision Corp.*.... 1,646,175
410,000 Marshall Industries,
Inc.*................... 10,301,250
400,000 Methode Eletronics,
Inc..................... 7,900,000
125,000 Woodhead Industries,
Inc..................... 1,875,000
------------
38,674,600
------------
Environmental Services--0.9%
61,800 Applied Bioscience
International, Inc.*.... 324,450
216,000 BHA Group, Inc............ 2,808,000
100,000 USA Waste Services,
Inc.*................... 1,500,000
------------
4,632,450
------------
Financial Services--0.9%
40,000 GFC Financial Corp........ 1,425,000
165,000 McDonald & Co.
Investments, Inc........ 2,124,375
120,000 Piper Jaffray, Inc........ 1,185,000
------------
4,734,375
------------
Food & Beverages--2.5%
257,500 Michaels Foods, Inc....... $ 2,832,500
392,000 Rykoff - Sexton, Inc.*.... 7,546,000
136,200 Sanderson Farms, Inc...... 2,621,850
------------
13,000,350
------------
Forest Products--2.3%
275,000 Mercer International,
Inc.*................... 3,334,375
150,000 Mosinee Paper Corp........ 4,593,750
107,500 Pentair, Inc.............. 4,246,250
------------
12,174,375
------------
Health Care Services--2.3%
90,000 Living Centers of America,
Inc.*................... 2,846,250
107,500 National Health Labs
Holdings, Inc........... 1,384,062
14,700 Safeguard Health
Enterprises*............ 147,919
175,700 Salick Health Care,
Inc.*................... 3,777,550
36,800 Sofamor/Danek Group,
Inc.*................... 713,000
215,600 Unilab Corp.*............. 1,158,850
68,500 Universal Health Services,
Inc.*................... 1,935,125
------------
11,962,756
------------
Hotels & Leisure--0.5%
54,700 Caesars World, Inc.*...... 2,372,613
------------
Household Products--0.9%
265,400 Libbey, Inc............... 4,578,150
------------
Industriales--7.4%
145,000 Amcast Industrial Corp.... 3,353,125
181,600 Carlisle Companies,
Inc..................... 5,902,000
50,000 Diebold, Inc.............. 2,056,250
40,100 ESSEF Corp.*.............. 591,475
18,000 Harmon Industries, Inc.... 373,500
135,000 Johnstown America
Industries, Inc.*....... 3,611,250
250,000 Mark IV Industries,
Inc..................... 5,687,500
14,300 Matrix Service Co.*....... 91,163
205,000 Medalist Industries,
Inc.*................... 1,435,000
</TABLE>
-6- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
Industriales (cont'd)
48,600 Park Ohio Industries,
Inc.*................... $ 631,800
96,700 Rogers Corp.*............. 3,287,800
153,800 Schulman, Inc............. 4,152,600
260,000 Shorewood Packaging
Corp.*.................. 5,590,000
15,700 SPS Technologies, Inc..... 412,125
109,250 Varlen Corp............... 2,540,063
------------
39,715,651
------------
Information Services--0.3%
111,300 American Business
Information, Inc........ 1,641,675
------------
Insurance--2.6%
166,000 Amvestors Financial
Corp.*.................. 1,660,000
84,000 CCP Insurance, Inc........ 1,921,500
104,600 Life Re Corp.............. 2,222,750
221,400 Philadelphia Consolidated
Holding Corp.*.......... 3,099,600
200,000 SCOR U.S. Corp............ 2,250,000
450,000 Southwestern Life
Corp.*.................. 2,587,500
------------
13,741,350
------------
Leisure--0.9%
88,800 Johnson Worldwide
Associates, Inc.*....... 2,353,200
380,000 Topps Co.................. 2,351,250
------------
4,704,450
------------
Machinery & Equipment--6.7%
132,800 Bearings, Inc............. 4,100,200
335,700 Brenco, Inc............... 4,238,213
126,100 GATX Corp................. 5,107,050
309,300 Gerber Scientific, Inc.... 4,678,162
210,200 Lamson & Sessions Co.*.... 1,471,400
140,600 Lufkin Industries, Inc.... 2,636,250
111,600 Maverick Tube Corp*....... 1,129,950
280,000 Measurex Corp............. $ 5,950,000
400,000 Regal Beloit Corp......... 6,100,000
------------
35,411,225
------------
Media--0.6%
115,000 Scripps (E.W.) Co......... 3,378,125
------------
Natural Resources--0.1%
117,500 Nord Resources Corp.*..... 778,438
------------
Office Equipment--0.5%
110,000 Miller Herman, Inc........ 2,729,374
------------
Oil & Gas Exploration/Production--7.5%
128,500 Basin Exploration,
Inc.*................... 1,445,625
55,000 Belden & Blake Corp.*..... 770,000
7,500 Cabot Oil & Gas Corp...... 137,813
120,000 Diamond Shamrock, Inc..... 3,090,000
243,000 Dreco Energy Services
Ltd.*................... 2,247,750
170,000 Energy Service, Inc.*..... 2,528,750
30,000 Enterra Corp.*............ 667,500
54,000 Evergreen Resources,
Inc.*................... 391,500
240,000 International Colin Energy
Co...................... 1,890,000
346,014 KN Energy, Inc............ 9,039,616
320,000 Lomak Petroleum, Inc.*.... 2,600,000
525,000 Mesa, Inc.*............... 2,887,500
120,000 Mitchell Energy & Dev.
Corp., Class A.......... 2,115,000
168,550 Mitchell Energy & Dev.
Corp., Class B.......... 2,907,488
232,300 Weatherford International,
Inc.*................... 2,874,712
175,000 Western Gas Resources,
Inc..................... 3,806,250
------------
39,399,504
------------
Oil Services--0.6%
300,000 Pride Petroleum Services,
Inc.*................... 1,518,750
94,600 Western Co. of North
America*................ 1,679,150
------------
3,197,900
------------
Packaging--0.1%
24,200 AptarGroup, Inc........... 653,400
------------
</TABLE>
-7- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
Publishing--2.4%
125,000 Central Newspapers,
Inc..................... $ 3,562,500
120,000 Lee Enterprises, Inc...... 4,140,000
170,000 McClatchy Newspapers,
Inc.*................... 4,037,500
61,700 Pages, Inc.*.............. 431,900
30,900 Western Publishing Group,
Inc.*................... 397,838
------------
12,569,738
------------
Realty--3.2%
100,000 Duke Reality Investments,
Inc..................... 2,500,000
170,000 Equity Residential
Property Trust.......... 5,397,500
80,300 Kimco Realty Corp......... 2,910,875
79,200 Manufactured Home
Community, Inc.......... 1,584,000
64,100 Vornado Realty Trust...... 2,195,425
70,000 Weingarten Realty
Investors............... 2,502,500
------------
17,090,300
------------
Restaurants--1.1%
40,200 Buffets, Inc.*............ 633,150
27,600 Rock Bottom Restaurants,
Inc.*................... 358,800
180,000 Sbarro, Inc............... 4,590,000
------------
5,581,950
------------
Retail--4.2%
262,000 Babbage's, Inc.*.......... 3,275,000
55,700 Michael Anthony Jewelers,
Inc.*................... 320,275
389,000 Software Etc. Stores,
Inc.*................... 3,598,250
350,700 Stride Rite Corp.......... 4,909,800
172,700 Tiffany & Co.............. 6,389,900
185,000 Younkers, Inc.*........... 3,515,000
------------
22,008,225
------------
Specialty Chemicals--4.2%
130,200 Brush Wellman, Inc........ 2,083,200
340,000 Cabot Corp................ 9,265,000
25,200 Mississippi Chemical
Corp.................... 478,800
80,000 Potash Corp............... 3,270,000
36,100 Raychem Corp.............. 1,480,100
166,000 Vigoro Corp............... 5,872,250
------------
22,449,350
------------
Steel--4.2%
179,000 Quanex Corp............... $ 4,698,750
36,600 Reliance Steel & Aluminum
Co.*.................... 576,450
532,600 Trinity Industries,
Inc..................... 16,910,050
------------
22,185,250
------------
Telecommunications--1.4%
114,200 Intermediate Telephone,
Inc.*................... 1,084,900
230,000 Intertrans Corp........... 2,932,500
157,700 National Data Corp........ 3,390,550
------------
7,407,950
------------
Transportation--3.8%
155,000 Air Express International
Corp.................... 4,281,875
275,000 American President Cos.,
Ltd..................... 6,943,750
340,000 Expeditors International
of
Washington, Inc......... 6,800,000
119,000 Harper Group, Inc......... 1,785,000
66,700 WorldCorp, Inc.*.......... 450,225
------------
20,260,850
------------
Total common stocks
(cost $464,064,893)....... 503,125,922
------------
Principal
Amount SHORT-TERM INVESTMENT
(000) Repurchase Agreement--1.5%
---------
$ 7,677 Joint Repurchase Agreement Account,
4.83%, 10/3/94 (Note 5)
(cost $7,677,000)....... 7,677,000
------------
Total Investments--96.6%
(cost $471,741,893; Note
4)...................... 510,802,922
Other assets in excess of
liabilities--3.4%....... 18,046,251
------------
Net Assets--100%.......... $528,849,173
------------
------------
</TABLE>
- ------------
* Non-income producing security.
(D) Private placement restricted as to resale; includes registration rights
under which the Fund may demand registration by the issuer.
-8- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Assets September 30, 1994
------------------
<S> <C>
Investments, at value (cost $471,741,893)............................................. $510,802,922
Receivable for Fund shares sold....................................................... 20,893,712
Receivable for investments sold....................................................... 10,080,422
Dividends and interest receivable..................................................... 795,510
Other assets.......................................................................... 8,490
------------------
Total assets........................................................................ 542,581,056
------------------
Liabilities
Payable for investments purchased..................................................... 11,334,171
Payable for Fund shares reacquired.................................................... 1,488,697
Distribution fee payable.............................................................. 359,030
Management fee payable................................................................ 294,748
Accrued expenses and other liabilities................................................ 255,237
------------------
Total liabilities................................................................... 13,731,883
------------------
Net Assets............................................................................ $528,849,173
------------------
------------------
Net assets were comprised of:
Common stock, at par................................................................ $ 438,339
Paid-in capital in excess of par.................................................... 454,437,821
------------------
454,876,160
Accumulated net investment income................................................... 444,381
Accumulated net realized gain on investments........................................ 34,467,603
Net unrealized appreciation on investments.......................................... 39,061,029
------------------
Net assets, September 30, 1994........................................................ $528,849,173
------------------
------------------
Class A:
Net asset value and redemption price per share
($103,078,061 / 8,311,301 shares of common stock issued and outstanding).......... $12.40
Maximum sales charge (5.0% of offering price)....................................... .65
------------------
Maximum offering price to public.................................................... $13.05
------------------
------------------
Class B:
Net asset value, offering price and redemption price per share
($425,502,483 / 35,500,194 shares of common stock issued and outstanding)......... $11.99
------------------
------------------
Class C:
Net asset value, offering price and redemption price per share
($268,629 / 22,412 shares of common stock issued and outstanding)................. $11.99
------------------
------------------
</TABLE>
See Notes to Financial Statements.
-9-
<PAGE>
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
September 30,
Net Investment Loss 1994
-------------
<S> <C>
Income
Dividends............................ $ 5,698,990
Interest............................. 934,384
-------------
Total income....................... 6,633,374
-------------
Expenses
Distribution fee--Class A............ 229,425
Distribution fee--Class B............ 4,002,398
Distribution fee--Class C............ 292
Management fee....................... 3,484,730
Transfer agent's fees and expenses... 970,000
Reports to shareholders.............. 345,000
Custodian's fees and expenses........ 285,000
Registration fees.................... 175,000
Franchise taxes...................... 50,000
Audit fee............................ 46,000
Legal fees........................... 35,000
Directors' fees...................... 30,200
Miscellaneous........................ 22,058
-------------
Total expenses..................... 9,675,103
-------------
Net investment loss.................... (3,041,729)
-------------
Realized and Unrealized Gain (Loss)
on Investments
Net realized gain (loss) on
investment transactions.............. 44,673,230
Net change in unrealized
appreciation of investments.......... (38,737,408)
-------------
Net gain on investments................ 5,935,822
-------------
Net Increase in Net Assets
Resulting from Operations.............. $ 2,894,093
-------------
-------------
</TABLE>
PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended September 30,
Increase (Decrease) ----------------------------
in Net Assets 1994 1993
------------ ------------
<S> <C> <C>
Operations
Net investment loss.... $ (3,041,729) $ (1,311,418)
Net realized gain on
investments.......... 44,673,230 23,835,926
Net change in
unrealized
appreciation of
investments.......... (38,737,408) 64,901,994
------------ ------------
Net increase in net
assets resulting from
operations........... 2,894,093 87,426,502
------------ ------------
Net equalization
credits................ 70,234 90,512
------------ ------------
Distributions from net
capital gain (Note 1)
Class A................ (5,775,787) (5,979,973)
Class B................ (24,227,795) (24,035,427)
------------ ------------
(30,003,582) (30,015,400)
------------ ------------
Fund share transactions
(Note 6)
Net proceeds from
shares subscribed.... 433,710,426 453,141,309
Net asset value of
shares issued in
reinvestment of
distributions........ 28,758,329 28,283,287
Cost of shares
reacquired........... (377,490,019) (284,879,535)
------------ ------------
Net increase in net
assets from Fund
share transactions... 84,978,736 196,545,061
------------ ------------
Total increase........... 57,939,481 254,046,675
Net Assets
Beginning of year........ 470,909,692 216,863,017
------------ ------------
End of year.............. $528,849,173 $470,909,692
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-10-
<PAGE>
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
Notes to Financial Statements
Prudential Growth Opportunity Fund, Inc. (the ``Fund'') is registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company. The investment objective of the Fund is to achieve capital
growth, consistent with reasonable risk, by investing in a carefully selected
portfolio of common stocks having prospects of a high return on equity,
increasing earnings, increasing dividends and price-earnings ratios which are
not excessive.
Note 1. Accounting The following is a summary
Policies of significant accounting poli-
cies followed by the Fund in the preparation of
its financial statements.
Securities Valuations: Investments traded on a national securities exchange 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 at the mean between the last reported bid and asked prices. Any
security for which a reliable market quotation is unavailable is valued at fair
value as determined in good faith by or under the direction of the Fund's Board
of Directors.
Short-term securities which mature in more than 60 days are valued based upon
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, take
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction, including accrued interest.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
All securities are valued as of 4:15 P.M., New York time.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income is recorded on the accrual basis.
Net investment income (loss), other than distribution fees, and unrealized
and realized gains or losses are allocated daily to each class of shares of the
Fund based upon the relative proportion of net assets of each class at the
beginning of the day.
Federal Income Taxes: It is the Fund's policy to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable net income to its shareholders.
Therefore, no federal income tax provision is required.
Equalization: The Fund follows the accounting practice known as equalization, by
which a portion of the proceeds from sales and costs of reacquisitions of Fund
shares, equivalent on a per share basis to the amount of distributable net
investment income on the date of the transaction, is credited or charged to
undistributed net investment income. As a result, undistributed net investment
income per share is unaffected by sales or reacquisitions of the Fund's shares.
Dividends and Distributions: The Fund expects to pay dividends of net investment
income, if any, semi-annually and make distributions at least annually of any
net capital gains. 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.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies.
During the fiscal year ended September 30, 1994, the reclassification of
$4,353,147 of current and prior fiscal year net operating losses increased
paid-in capital by $1,311,418, increased undistributed net investment income by
$3,041,729, and decreased net accumulated realized gains by $4,353,147. Net
investment income, net realized gains, and net assets were not affected by this
change.
Note 2. Agreements The Fund has a management
agreement with Prudential Mutual Fund Management,
Inc. (``PMF''). Pursuant to this agreement, PMF has responsibility for all
investment advisory services and supervises the subadviser's performance of
such services. PMF has entered into a subadvisory agreement
-11-
<PAGE>
<PAGE>
with The Prudential Investment Corporation (``PIC''); PIC furnishes investment
advisory services in connection with the management of the Fund. PMF 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 PMF is computed daily and payable monthly, at an
annual rate of .70 of 1% of the Fund's average daily net assets.
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as the distributor of the Class A
shares of the Fund, and with Prudential Securities Incorporated (``PSI''), which
acts as distributor of the Class B and Class C shares of the Fund (collectively
the ``Distributors''). The Fund compensates the Distributors 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''). The distribution fees are
accrued daily and payable monthly.
On July 19, 1994, shareholders of the Fund approved amendments to the Class A
and Class B distribution plans under which the distribution plans became
compensation plans, effective August 1, 1994. Prior thereto, the distribution
plans were reimbursement plans under which PMFD and PSI were reimbursed for
expenses actually incurred by them up to the amount permitted under the Class A
and Class B Plans, respectively. The Fund is not obligated to pay any prior or
future excess distribution costs (costs incurred by the Distributors in excess
of distribution fees paid by the Fund and contingent deferred sales charges
received by the Distributors). The rate of the distribution fees charged to
Class A and Class B shares of the Fund did not change under the amended plans of
distribution. The Fund began offering Class C shares on August 1, 1994.
Pursuant to the Class A, B and C Plans, the Fund compensates the Distributors
for distribution-related activities at an annual rate of up to .30 of 1%, 1% and
1%, of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Class A Plan were .20 of 1% of the average
daily net assets of the Class A shares for the three months ended December 31,
1993. Effective January 1, 1994, the Class A Plan distribution expenses were
increased to .25 of 1% of the average daily net assets. Such expenses under the
Plans were 1% of the average daily net assets of both the Class B and C shares
for the fiscal year ended September 30, 1994.
PMFD has advised the Fund that it has received approximately $498,400 in
front-end sales charges resulting from sales of Class A shares during the fiscal
year ended September 30, 1994. From these fees, PMFD paid such sales charges to
PSI and Pruco Securities Corporation, affiliated broker-dealers, which in turn
paid commissions to salespersons and incurred other distribution costs.
PSI has advised the Fund that for the fiscal year ended September 30, 1994,
it received approximately $796,400 in contingent deferred sales charges imposed
upon certain redemptions by Class B shareholders.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect
wholly-owned subsidiaries of The Prudential Insurance Company of America.
Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS''), a
with Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During
the year ended September 30, 1994, the Fund incurred fees of approximately
$800,000 for the services of PMFS. As of September 30, 1994, approximately
$62,000 of such fees were due to PMFS.
For year ended September 30, 1994, PSI earned approximately $11,000 in
brokerage commissions from portfolio transactions executed on behalf of the
Fund.
Note 4. Portfolio Purchases and sales of invest-
Securities ment securities, other than
short-term investments, for the year ended
September 30, 1994 were $435,176,534 and $389,300,903, respectively.
The federal income tax basis of the Fund's investments at September 30, 1994
was $472,413,928 and, accordingly, net unrealized appreciation for federal
income tax purposes was $38,388,994 (gross unrealized appreciation--$58,715,195
gross unrealized depreciation--$20,326,201).
Note 5. Joint The Fund, along with other
Repurchase affiliated registered invest-
Agreement ment companies, transfers
Account 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 September 30, 1994, the
Fund had a 1.1% undivided interest in the repurchase agreements in the joint
account. The undivided interest for the Fund represented $7,677,000 in principal
amount. As of such date, each repurchase agreement in the joint account and the
collateral therefor were as follows:
-12-
<PAGE>
<PAGE>
Goldman, Sachs & Co., 4.85%, in the principal amount of $237,000,000,
repurchase price $237,095,787, due 10/3/94. The value of the collateral
including accrued interest is $242,478,687.
Nomura Securities International, 4.75%, in the principal amount of
$237,000,000, repurchase price $237,093,812, due 10/3/94. The value of the
collateral including accrued interest is $241,948,993.
Smith Barney, Inc., 4.88%, in the principal amount of $237,000,000,
repurchase price $237,096,380, due 10/3/94. The value of the collateral
including accrued interest is $241,950,829.
Note 6. Capital The Fund currently offers
Class A, Class B and Class C shares. Class A
shares are sold with a front-end sales charge of up to to 5%. Class B shares
are sold with a contingent deferred sales charge which declines from 5% to zero
depending on the period of time the shares are held. Class C shares are sold
with a contingent deferred sales charge of 1% during the first year. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately seven years after purchase commencing in or about February 1995.
There are 750 million shares of common stock, $.01 par value per share,
divided into three classes, designated Class A, Class B and Class C common
stock, each of which consists of 250 million authorized shares.
Transactions in shares of common stock for the fiscal years ended September
30, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------- ----------- -------------
<S> <C> <C>
Year ended September 30,
1994:
Shares sold................. 9,370,171 $ 115,130,689
Shares issued in
reinvestment of
distributions............. 467,222 5,644,046
Shares reacquired........... (8,789,620) (108,081,971)
----------- -------------
Net increase in shares
outstanding............... 1,047,773 $ 12,692,764
----------- -------------
----------- -------------
Year ended September 30,
1993:
Shares sold................. 7,753,935 $ 136,609,388
Shares issued in
reinvestment of
distributions............. 350,531 5,794,272
Shares issued as a result of
3 for 2 stock split....... 2,387,650 --
Shares reacquired........... (5,886,921) (104,383,394)
----------- -------------
Net increase in shares
outstanding............... 4,605,195 $ 38,020,266
<CAPTION>
----------- -------------
----------- -------------
Class B Shares Amount
- ---------------------------- ----------- -------------
Year ended September 30,
1994:
Shares sold................. 26,537,335 $ 318,270,570
Shares issued in
reinvestment of
distributions............. 1,960,499 23,114,283
Shares reacquired........... (22,525,818) (269,363,510)
----------- -------------
Net increase in shares
outstanding............... 5,972,016 $ 72,021,343
----------- -------------
----------- -------------
Year ended September 30,
1993:
Shares sold................. 18,585,281 $ 316,531,921
Shares issued in
reinvestment of
distributions............. 1,382,238 22,489,015
Shares issued as a result of
3 for 2 stock split....... 9,826,606 --
Shares reacquired........... (10,612,911) (180,496,141)
----------- -------------
Net increase in shares
outstanding............... 19,181,214 $ 158,524,795
----------- -------------
----------- -------------
Class C
- ----------------------------
August 1, 1994* through Sep-
tember 30, 1994:
Shares sold................. 26,125 $ 309,167
Shares reacquired........... (3,713) (44,538)
----------- -------------
Net increase in shares
outstanding............... 22,412 $ 264,629
----------- -------------
----------- -------------
- ---------------
* Commencement of offering of Class C shares.
</TABLE>
Note 7. Dividends On November 15, 1994 the
and Distributions Board of Directors of the
Fund declared dividends from net capital gains to
Class A, B and C shareholders of $.835 per share, payable on November 29, 1994
to shareholders of record on November 22, 1994.
-13-
<PAGE>
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
Class A Class B
--------------------------------------------------------------------------- ----------------------
January 22,
1990(D) Year Ended September
Year Ended September 30, Through 30,
----------------------------------------------------------- September 30, ----------------------
1994** 1993**(D)(D) 1992**(D)(D) 1991(D)(D) 1990(D)(D) 1994** 1993**(D)(D)
----------- ------- ------- ------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period............... $ 13.06 $ 11.25 $ 10.16 $ 7.36 $ 8.55 $ 12.74 $ 11.08
----------- ------- ------- ------- ------------- ----------- --------
Income from investment
operations
Net investment income
(loss)............... -- .03 .02 .05 .09 (.09) (.06)
Net realized and
unrealized gain
(loss) on investment
transactions......... .13 3.14 1.47 2.82 (1.20) .13 3.08
----------- ------- ------- ------- ------------- ----------- --------
Total from investment
operations......... .13 3.17 1.49 2.87 (1.11) .04 3.02
----------- ------- ------- ------- ------------- ----------- --------
Less distributions
Dividends from net
investment income.... -- -- -- (.07) (.08) -- --
Distributions from net
realized capital
gain................. (.79) (1.36) (.40) -- -- (.79) (1.36)
----------- ------- ------- ------- ------------- ----------- --------
Total distributions.... (.79) (1.36) (.40) (.07) (.08) (.79) (1.36)
----------- ------- ------- ------- ------------- ----------- --------
Net asset value, end of
period............... $ 12.40 $ 13.06 $ 11.25 $ 10.16 $ 7.36 $ 11.99 $ 12.74
----------- ------- ------- ------- ------------- ----------- --------
----------- ------- ------- ------- ------------- ----------- --------
TOTAL RETURN#:......... 1.13% 30.42% 15.39% 39.39% (13.19)% .34% 29.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000)......... $ 103,078 $ 94,842 $ 44,845 $25,165 $ 17,222 $ 425,502 $376,068
Average net assets
(000)................ $ 97,877 $ 69,801 $ 36,011 $20,650 $ 132,627 $ 399,920 $278,659
Ratios to average net
assets:##
Expenses, including
distribution
fees............... 1.33% 1.17% 1.33% 1.50% 1.61%* 2.09% 1.97%
Expenses, excluding
distribution
fees............... 1.09% .97% 1.13% 1.30% 1.42%* 1.09% .97%
Net investment income
(loss)............... .00% .26% .19% .59% 1.54%* (.76)% (.54)%
Portfolio turnover..... 82% 68% 99% 111% 79% 82% 68%
<CAPTION>
Class C
--------------
August 1,
1994@
Through
September 30,
1992**(D)(D) 1991(D)(D) 1990(D)(D) 1994**
-------- -------- -------- ------
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period............... $ 10.11 $ 7.34 $ 9.11 $11.61
-------- -------- -------- ------
Income from investment
operations
Net investment income
(loss)............... (.07) (.02) .07 (.01)
Net realized and
unrealized gain
(loss) on investment
transactions......... 1.44 2.82 (1.75) .39
-------- -------- -------- ------
Total from investment
operations......... 1.37 2.80 (1.68) .38
-------- -------- -------- ------
Less distributions
Dividends from net
investment income.... -- (.03) (.09) --
Distributions from net
realized capital
gain................. (.40) -- -- --
-------- -------- -------- ------
Total distributions.... (.40) (.03) (.09) --
-------- -------- -------- ------
Net asset value, end of
period............... $ 11.08 $ 10.11 $ 7.34 $11.99
-------- -------- -------- ------
-------- -------- -------- ------
TOTAL RETURN#:......... 14.27% 38.33% (18.63)% 3.19%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (000)......... $172,018 $118,660 $ 86,440 $ 269
Average net assets
(000)................ $154,601 $104,508 $132,622 $ 179
Ratios to average net
assets:##
Expenses, including
distribution
fees............... 2.13% 2.30% 2.18% 2.22%*
Expenses, excluding
distribution
fees............... 1.13% 1.30% 1.28% 1.22%*
Net investment income
(loss)............... (.61)% (.21)% .91% (.31)%*
Portfolio turnover..... 99% 111% 79% 82%
</TABLE>
- ---------------
* Annualized.
** Calculated based upon weighted average shares outstanding during the
period.
(D) Commencement of offering of Class A shares.
@ Commencement of offering of Class C shares.
(D)(D) Restated to reflect 3 for 2 stock split paid to shareholders of record
on September 17, 1993.
# 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.
## Because of the event referred to in @ and the timing of such, the ratios
for Class C shares are not necessarily comparable to that of Class A or
B shares and are not necessarily indicative of future ratios.
See Notes to Financial Statements.
-14-
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Prudential Growth Opportunity
Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential Growth Opportunity Fund
(the ``Fund'') at September 30, 1994, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
``financial statements'') are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 1994 by correspondence with the custodian and brokers, and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
November 15, 1994
FEDERAL INCOME TAX INFORMATION
(UNAUDITED)
We are required by the Internal Revenue Code to advise you within 60 days of
the Fund's fiscal year end (September 30, 1994) as to the federal tax status of
distributions paid by the Fund during such fiscal year. Accordingly, during its
fiscal year ended September 30, 1994, the Fund paid distributions from net
realized short-term capital gains of $.33 per Class A and Class B share, which
are fully taxable as ordinary income, and $.46 per Class A and Class B share
from net realized long-term capital gains, which are taxable as such. Further,
we wish to advise you that 79% of the ordinary income dividends paid in the
fiscal year ended September 30, 1994 qualified for the corporate dividends
received deduction available to corporate taxpayers.
In January 1995, you will be advised on Internal Revenue Service Form 1099
DIV or substitute 1099 as to the federal tax status of the dividends received
by you in calendar year 1994. The amounts that will be reported on such Form
1099 DIV or substitute will be the amounts to use on your 1994 federal income
tax return and probably will differ from the amounts which we must report for
the Fund's fiscal year ended September 30, 1994.
-15-
<PAGE>
<PAGE>
These graphs are furnished to you in accordance with SEC regulations. They
compare a $10,000 investment in Prudential Growth Opportunity Fund, Inc. (Class
A, Class B, and Class C) with a similar investment in the Russell 2000 Index by
portraying the initial account values at the commencement of operations of each
class and subsequent account values at the end of each fiscal year (September
30) beginning in 1990 for Class A, in 1984 for Class B shares and 1994 for Class
C shares. For purposes of the graphs and, unless otherwise indicated, the
accompanying tables, it has been assumed that (a) the maximum current sales
charge was deducted from the initial $10,000 investment in Class A shares; (b)
the maximum applicable contingent deferred sales charge was deducted from the
value of the investment in Class B shares and Class C shares, assuming full
redemption on September 30, 1994; (c) all recurring fees (including management
fees) were deducted; and (d) all dividends and distributions were reinvested.
Class B shares will automatically convert to Class A shares on a quarterly basis
approximately seven years after purchase. This conversion feature is expected to
be implemented on or about February 1995 and is not reflected in the graph.
The Russel 2000 is a stock market index comprising the smallest 2,000 stocks
of the largest 3,000 equity-capitalized U.S. corporations and represents
approximately 10% of their aggregate market value. The Russell 2000 is an
unmanaged index and includes the reinvestment of all dividends, but does not
reflect the payment of transaction costs and advisory fees associated with an
investment in the Fund. The securities which comprise the Russell 2000 may
differ substantially from the securities in the Fund's portfolio. The Russell
2000 is not the only index which may be used to characterize performance of
growth funds and other indexes may portray different comparative performance.
-16-
<PAGE>
Directors
Delayne Dedrick Gold
Arthur Hauspurg
Harry A. Jacobs, Jr.
Thomas J. McCormack
Lawrence C. McQuade
Stephen P. Munn
Richard A. Redeker
Louis A. Weil III
Officers
Lawrence C. McQuade, President
David W. Drasnin, Vice President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
S. Jane Rose, Secretary
Ronald Amblard, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906-5000
Independent Accountants
Price Waterhouse
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852,
Collect (908) 417-7555
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a current
prospectus.
74435E109 MF109E
74435E208 (LOGO) Cat.#6420001I
