<PAGE>
Letter to
Shareholders
May 10, 1994
Dear Shareholder:
The past six months brought mixed news for the Prudential
Growth Opportunity Fund. The continuing economic recovery, corporate
restructurings and favorable earnings reports helped the Fund produce positive
returns during the fourth quarter. In the first three months of 1994, however,
Federal Reserve interest rate hikes spurred a market downturn, which was
reflected in the Fund's net asset value and returns.
Fund Performance
Your Fund's net asset value declined to $11.91 for Class A shares and $11.55
for Class B shares as of March 31, 1994, from $13.06 and $12.74, respectively,
on September 30, 1993. In addition, an annual capital gains distribution of
$.79 per share for both share classes was paid in December 1993.
For the six months ended March 31, 1994, cumulative total returns, not
including sales charges, were -2.9% for Class A and -3.3% for Class B shares.
During this time, the Russell 2000 stock market index returned -0.1%. The
Russell 2000 is comprised of the smallest 2,000 stocks out of the largest 3,000
equity-capitalized corporations in terms of market value in the United States.
During the period, the Prudential Growth Opportunity Fund was invested in a
blend of small and mid-sized companies, which generally did not perform as well
as the smallest equities.
Market Correction Impacts Small Stocks
Small company stocks declined during the recent market correction, though
not as much as their large company counterparts. There are three main reasons
small company stocks tended to perform better than those of larger companies in
the current market:
- Small companies tend to benefit earlier in an economic recovery and,
conversely, to be affected later by economic downturns.
- Most small companies have less exposure to foreign economies, which have
generally been weaker than the U.S. economy.
- Small companies comprise the largest sector of new job creation in the
growing U.S. economy.
-1-
<PAGE>
A Value Approach
We employ a "value" oriented, bottom-up approach to portfolio management.
As a result, the Fund tends to hold an eclectic group of stocks across many
industries.
We focus on inexpensive issues that have the potential for price increases.
This strategy generally leads the Fund toward market sectors where stock prices
are low. Currently, we are employing this strategy in the industrial,
technology, consumer growth and finance sectors-all of which present
opportunities after the recent market downturn. Within these sectors, the Fund
is holding stocks in the conglomerates, regional banking, electronics and
computer hardware industries.
Portfolio Activity
In the six months ended March 31, 1994, the Fund increased emphasis on
industrial stocks, making it the portfolio's second largest sector. Some of
the holdings that performed relatively well over the period include Cabot
Corporation (1.8% of the portfolio), which produces specialty chemicals and
materials, and Rykoff-Sexton (1.6% of the portfolio), one of the largest food
service distributors in the country that recently underwent reorganization. In
contrast, our largest holding, Trinity Industries (2.9% of the portfolio),
performed well in 1993 but declined 12% for this year's first quarter.
During the period, we reduced some of our largest holdings that we felt
had reached their price potential. For example, we decreased our positions
in railroad and financial conglomerate Kansas City Southern (1.8% of the
portfolio), industrial electronics producer Marshall Industries (2.0% of the
portfolio), and children's book publisher Western Publishing (0.6% of the
portfolio). The latter lost 29% in the first quarter, following rumors of a
complete sale or takeover of the firm. The Fund had taken advantage of the
stock's significant gains in the last quarter of 1993 and sold a portion of its
holdings.
The technology stocks offered opportunities in smaller niche companies with
greater earnings potential. New holdings in this area include Hutchinson
Technology (0.6% of the portfolio), which makes suspension assembly equipment
for computer disk drives and Legent (0.3% of the portfolio), which supplies
productivity enhancement system software for IBM. We believe both companies
have solid fundamentals but declined along with other technology stocks in the
first quarter. In addition, we believe Legent was undervalued as a result of
a merger last year. One miss in this category was engineering software maker
Structural Dynamics (0.8% of the portfolio), which declined 24%, and
contributed to the Fund's underperformance.
We think the financial sector has shown above-average growth potential
resulting from recent takeover activity. In this area, we added to regional
-2-
<PAGE>
bank issues such as Riggs National Corporation (0.5% of the portfolio), the
holding company for Washington D.C.'s largest commercial bank. Riggs' price
was especially attractive due to a one-time cost for a new program to overhaul
its operations.
Outlook
We are still optimistic about the outlook for small company stocks in the
coming months. The U.S. economy remains fundamentally strong, with continued
corporate restructuring and increased efficiency leading the way for economic
recovery. The rise in interest rates represents a temporary setback for
economic growth. In fact, we feel the market correction has actually made many
small stock prices more attractive. While there can be no assurance, we
believe small stocks may generally outpace those of larger companies for the
next several years.
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
-3-
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND Portfolio of Investments
March 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--97.7%
Common Stocks--97.7%
Aerospace/Defense--0.8%
114,800 Precision Castparts
Corp.................... $ 3,860,150
------------
Automotive--1.3%
200,000(D) Jason, Inc.*
(cost $2,200,000;
purchase date -
1/21/94)................ 1,997,500
220,000 Mascotech, Inc.*.......... 4,510,000
------------
6,507,500
------------
Banking--10.3%
217,100 Bank South Corp........... 3,934,937
99,750 Charter One Financial,
Inc..................... 1,870,312
75,000 Citfed Bancorp, Inc.*..... 1,856,250
92,300 Citizens First Bancorp,
Inc.*................... 807,625
85,000 Commerce Bancshares,
Inc..................... 2,539,375
172,300 Commercial Federal
Corp.*.................. 3,122,937
270,000 Community First
Bankshares, Inc......... 3,543,750
135,000 Dauphin Deposit Corp...... 3,172,500
100,000 First Commerce Corp....... 2,412,500
53,400 First Eastern Corp.*...... 1,398,413
95,000 First Security Corp....... 2,648,125
12,900 First Virginia Banks,
Inc..................... 466,013
120,000 Hawkeye Bancorporation.... 2,205,000
272,900 Riggs National Corp.*..... 2,643,719
108,000 Rochester Community
Savings Bank*........... 1,782,000
130,000 SouthTrust Corp........... 2,396,875
99,000 Summit Bancorporation..... 1,942,875
87,500 TCF Financial Corp........ 2,668,750
90,000 Union Planters Corp....... 2,238,750
225,000 Washington Mutual Savings
Bank.................... 4,331,250
85,000 West One Bancorp.......... 2,305,625
------------
50,287,581
------------
Cable & Pay TV Systems--1.3%
172,500 Comcast Corp.............. $ 3,105,000
145,000 TCA Cable TV, Inc......... 3,153,750
------------
6,258,750
------------
Commercial Services--2.4%
113,100 AAR Corp.................. 1,753,050
40,000 Banner Aerospace, Inc.*... 235,000
160,000 Borg Warner Security
Corp.*.................. 2,700,000
66,800 Flightsafety
International, Inc...... 2,488,300
215,000 Pinkertons, Inc.*......... 4,300,000
12,300 Sterling Software,
Inc.*................... 355,163
------------
11,831,513
------------
Computer Hardware--5.5%
243,700 Adaptec, Inc.*............ 4,401,831
275,000 Electronics for Imaging,
Inc.*................... 3,953,125
264,700 Exabyte Corp.*............ 5,062,387
90,500 Hutchinson Technology,
Inc.*................... 2,839,438
96,800 Norand Corp.*............. 3,037,100
15,900 Quixote Corp.............. 258,375
330,000 Telxon Corp............... 4,248,750
200,000 Verifone, Inc.*........... 3,450,000
------------
27,251,006
------------
Computer Software & Services--4.7%
325,000 American Management
Systems, Inc.*.......... 6,439,062
213,800 Continuum, Inc.*.......... 4,543,250
39,700 Control Data Systems,
Inc..................... 334,969
24,000 INTERLINQ Software
Corp.*.................. 189,000
64,300 LEGENT Corp.*............. 1,631,613
275,000 Primark Corp.*............ 3,712,500
</TABLE>
-4- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
Computer Software & Services (cont'd)
300,000 Structural Dynamics
Research Corp.*......... $ 3,975,000
67,000 SunGard Data Systems...... 2,378,500
------------
23,203,894
------------
Construction--1.3%
193,400 Calmat Co................. 3,940,525
60,000 Southdown, Inc.*.......... 1,545,000
148,000 Willcox & Gibbs Inc.*..... 999,000
------------
6,484,525
------------
Consumer Products--1.1%
200,900 Fedders Corp.*............ 1,556,975
104,800 Russell Corp.............. 2,973,700
62,800 Sealright Co., Inc........ 910,600
------------
5,441,275
------------
Consumer Services--0.5%
161,300 Regis Corp.*.............. 2,217,875
------------
Drugs & Medical Supplies--3.4%
274,900 Biomet, Inc.*............. 2,834,906
138,700 Carter Wallace, Inc....... 2,912,700
207,200 Endosonics Corp.*......... 1,605,800
75,000 Maxxim Medical, Inc.*..... 1,237,500
109,700 Medex, Inc................ 1,851,188
155,000 Nellcor, Inc.*............ 3,875,000
71,400 Sybron Corp.*............. 2,284,800
------------
16,601,894
------------
Electrical Equipment--0.9%
149,000 Reliance Electric Co.*.... 2,514,375
116,500 Thomas Industries, Inc.... 1,776,625
------------
4,291,000
------------
Electronics--6.1%
100,000 Augat, Inc.*.............. 2,000,000
263,100 Kemet Corp.*.............. 4,209,600
290,000 Laser Precision Corp.*.... 1,667,500
102,600 Lattice Semiconductor
Corp.*.................. 1,654,425
380,000 Marshall Industries,
Inc.*................... $ 9,452,500
440,000 Methode Eletronics,
Inc..................... 7,205,000
15,100 Robinson Nugent, Inc...... 96,263
62,300 Tektronix, Inc............ 1,900,150
102,100 Woodhead Industries,
Inc..................... 1,620,837
------------
29,806,275
------------
Environmental Services--0.2%
200 Air & Water Technologies
Corp.*.................. 1,775
91,500 BHA Group, Inc............ 937,875
------------
939,650
------------
Financial Services--2.0%
120,062 Edwards (A.G.), Inc....... 2,146,108
215,000 McDonald & Co.
Investments, Inc........ 3,198,125
309,300 Piper Jaffray, Inc........ 4,600,838
------------
9,945,071
------------
Food & Beverages--2.4%
67,200 Dreyers Grand Ice Cream,
Inc..................... 1,604,400
87,300 Performance Food Group
Co.*.................... 1,713,262
393,400 Rykoff-Sexton, Inc........ 7,572,950
69,800 Sanderson Farms, Inc...... 1,081,900
------------
11,972,512
------------
Forest Products--1.5%
270,000 Mercer International,
Inc.*................... 3,290,625
139,600 Mosinee Paper Corp........ 4,153,100
------------
7,443,725
------------
Health Care Services--2.8%
146,800 Living Centers of America,
Inc.*................... 3,780,100
188,800 Multicare Cos, Inc.*...... 3,233,200
215,000 Novacare, Inc.*........... 3,493,750
14,700 Safeguard Health
Enterprises............. 207,637
100,000 Salick Health Care,
Inc..................... 1,625,000
61,000 Universal Health Services,
Inc.*................... 1,433,500
------------
13,773,187
------------
Household Products--1.4%
265,400 Libbey, Inc.*............. 4,578,150
</TABLE>
-5- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
Household Products (cont'd)
145,600 Mr. Coffee, Inc.*......... $ 2,038,400
------------
6,616,550
------------
Industrials--7.7%
225,000 Amcast Industrial Corp.... 5,625,000
216,000 Carlisle Companies,
Inc..................... 6,912,000
200,550 Diebold, Inc.............. 7,320,075
40,100 ESSEF Corp.*.............. 646,613
36,200 Harmon Industries,
Inc.*................... 730,787
81,000 Insituform Mid-America,
Inc..................... 1,164,375
17,000 KENETECH Corp.*........... 393,125
145,000 Mark IV Industries,
Inc..................... 2,664,375
195,000 Medalist Inds., Inc.*..... 2,608,125
48,600 Park Ohio Inds., Inc.*.... 707,737
50,000 Schulman, Inc............. 1,587,500
160,000 Shorewood Packaging
Corp.*.................. 2,460,000
65,000 Thermotrex Corp.*......... 950,625
25,000 Tyco Labs, Inc............ 1,246,875
109,250 Varlen Corp............... 2,594,687
------------
37,611,899
------------
Information Services--0.6%
165,500 American Business
Information*............ 2,751,437
------------
Insurance--2.8%
135,400 Amvestors Financial
Corp.*.................. 1,354,000
75,000 CCP Insurance, Inc........ 1,631,250
110,000 First Colony Corp......... 2,667,500
500,000 I. C. H. Corp.*........... 2,937,500
221,400 Philadelphia Consolidated
Holding
Corp.*.................. 2,352,375
125,500 SCOR U.S. Corp............ 1,302,062
136,080 Statesman Group, Inc...... 1,496,880
------------
13,741,567
------------
Leisure--1.4%
86,000 American Recreation Co.
Hldgs, Inc.............. 1,161,000
82,300 Johnson Worldwide
Associates, Inc.*....... $ 1,944,338
525,000 Topps Co.................. 3,609,375
------------
6,714,713
------------
Machinery & Equipment--7.2%
52,300 Bearings, Inc............. 1,667,063
184,800 Brenco, Inc............... 1,778,700
64,500 GATX Corp................. 2,709,000
268,800 Gerber Scientific, Inc.... 3,998,400
160,000 Kaydon Corp............... 3,740,000
53,400 Lamson & Sessions Co.*.... 347,100
46,200 Lindsay Manufacturing
Co.*.................... 1,472,625
150,000 Lufkin Industries, Inc.... 2,737,500
255,000 Measurex Corp............. 4,653,750
199,400 Regal Beloit Corp......... 4,985,000
14,400 Speizman Industries,
Inc..................... 165,600
94,100 Thermo Electron Corp.*.... 3,658,138
130,000 Watts Industries, Inc..... 3,103,750
------------
35,016,626
------------
Media--0.8%
155,000 Scripps (E.W.) Co......... 3,875,000
------------
Natural Resources--0.2%
176,900 Nord Resources Corp.*..... 1,017,175
------------
Office Equipment & Supplies--0.7%
159,900 Interface, Inc............ 2,048,719
125,000 Tokheim Corp.*............ 1,531,250
------------
3,579,969
------------
Oil & Gas Exploration & Production--5.5%
447,000 American Oil & Gas
Corp.*.................. 4,470,000
128,500 Basin Exploration,
Inc.*................... 1,172,562
12,900 Belden & Blake Corp....... 161,250
15,000 Cabot Oil & Gas Corp...... 292,500
120,000 Diamond Shamrock, Inc..... 3,300,000
243,000 Dreco Energy Services
Ltd.*................... 2,217,375
900,000 Energy Service, Inc.*..... 3,262,500
</TABLE>
-6- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
Oil & Gas Exploration &
Production (cont'd)
20,600 Enterra Corp.*............ $ 401,700
39,400 Evergreen Resources,
Inc.*................... 320,125
145,000 International Colin Energy
Co...................... 1,866,875
148,000 Lomak Petroleum, Inc.*.... 1,063,750
56,700 Mitchell Energy & Dev.
Corp., Class A.......... 1,013,513
128,550 Mitchell Energy & Dev.
Corp., Class B.......... 2,313,900
200,000 Smith International,
Inc.*................... 2,125,000
87,000 USX -Delhi Group.......... 1,185,375
100,000 Weatherford
International*.......... 837,500
100,000 Wheatley TXT Corp......... 1,000,000
------------
27,003,925
------------
Publishing--1.6%
150,000 Lee Enterprises, Inc...... 5,268,750
195,700 Western Publishing Group,
Inc.*................... 2,727,569
------------
7,996,319
------------
Railroads--1.8%
169,700 Kansas City Southern
Industries, Inc......... 8,591,063
------------
Realty Investment Trust--0.3%
39,600 Manufactured Home
Community, Inc.......... 1,638,450
------------
Restaurants--0.6%
80,000 Sbarro, Inc............... 3,070,000
------------
Retail--3.8%
262,000 Babbage's, Inc.*.......... 2,816,500
63,000 Brauns Fashions Corp...... 476,437
89,900 Michael Anthony Jewelers,
Inc.*................... 561,875
389,000 Software Et Cetera Stores,
Inc..................... 4,570,750
220,000 Stride Rite Corp.......... 3,245,000
172,700 Tiffany & Co.............. 5,267,350
19,200 Today's Man, Inc.......... 326,400
70,200 Younkers, Inc.*........... $ 1,246,050
------------
18,510,362
------------
Specialty Chemicals--3.8%
165,800 Cabot Corp................ 8,953,200
63,400 Ferro Corp................ 1,965,400
60,000 Lesco, Inc................ 787,500
60,000 Potash Corp............... 1,522,500
170,000 Vigoro Corp............... 5,227,500
------------
18,456,100
------------
Steel--4.1%
155,000 Oregon Steel Mills,
Inc..................... 3,565,000
85,000 Quanex Corp............... 1,700,000
19,500 Rouge Steel Co............ 419,250
375,800 Trinity Industries,
Inc..................... 14,280,400
------------
19,964,650
------------
Telecommunications Equipment--2.6%
244,800 Digital Microwave
Corp.*.................. 3,641,400
120,000 Intermediate Telephone,
Inc..................... 1,117,500
175,000 Intertrans Corp........... 2,362,500
7,400 Keptel, Inc............... 72,150
135,000 LDDS Communications,
Inc.*................... 3,223,125
119,800 National Data Corp........ 2,246,250
------------
12,662,925
------------
Transportation--2.3%
75,000 Air Express International
Corp.................... 1,678,125
325,000 Expeditors International
of
Washington, Inc......... 5,850,000
205,000 OMI Corp.*................ 1,358,125
416,200 WorldCorp, Inc.*.......... 2,445,175
------------
11,331,425
------------
Total common stocks
(cost $454,392,412)..... 478,267,538
------------
</TABLE>
-7- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
<C> <S> <C>
SHORT-TERM INVESTMENTS--1.5%
Repurchase Agreement--1.4%
$ 6,673 Joint Repurchase Agreement Account,
3.46%, 4/4/94, (Note 5)
(cost $6,673,000)....... $ 6,673,000
------------
Time Deposit--0.1%
383 Chemical Bank, N.A.,
3.50%, 4/1/94
(cost $383,000)........... 383,000
------------
<CAPTION>
Contracts# Put Option Purchased
---------
2,500 S & P 100 Index,
expiring April 1994
(cost $19,137)............ 70,000
------------
Total short-term
investments
(cost $7,075,137)......... 7,126,000
------------
Total Investments--99.2%
(cost $461,467,549; Note
4)...................... 485,393,538
Other assets in excess of
liabilities--0.8%......... 3,723,186
------------
Net Assets--100%.......... $489,116,724
------------
------------
</TABLE>
- ------------
* Non-income producing security.
# One contract relates to 100 units.
(D) Private placement restricted as to resale. The value ($1,997,500) is 0.4%
of
net assets. The restricted security held by the Fund at March 31, 1994
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
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets
March 31, 1994
--------------
<S>
<C>
Investments, at value (cost
$461,467,549)................................................ $485,393,538
Cash.........................................................................
............ 16,164
Receivable for investments
sold.......................................................... 14,139,153
Receivable for Fund shares
sold.......................................................... 2,530,715
Dividends and interest
receivable........................................................
455,263
Deferred expenses and other
assets....................................................... 16,125
--------------
Total
assets.......................................................................
.... 502,550,958
--------------
Liabilities
Payable for investments
purchased........................................................
9,029,365
Payable for Fund shares
reacquired.......................................................
3,547,280
Distribution fee
payable.................................................................
380,281
Management fee
payable...................................................................
311,944
Accrued
expenses.....................................................................
.... 165,364
--------------
Total
liabilities..................................................................
.... 13,434,234
--------------
Net
Assets.......................................................................
........ $489,116,724
--------------
--------------
Net assets were comprised of:
Common stock, at
par................................................................... $
421,072
Paid-in capital in excess of
par....................................................... 434,135,342
--------------
434,556,414
Accumulated net investment
income...................................................... 419,374
Accumulated net realized gains on
investments.......................................... 30,214,947
Net unrealized appreciation on
investments............................................. 23,925,989
--------------
Net assets, March
31,1994................................................................
$489,116,724
--------------
--------------
Class A:
Net asset value and redemption price per share
($96,161,054 / 8,075,719 shares of common stock issued and
outstanding).............. $11.91
Maximum sales charge (5.25% of offering
price)......................................... .66
--------------
Maximum offering price to
public....................................................... $12.57
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($392,955,670 / 34,031,470 shares of common stock issued and
outstanding)............ $11.55
--------------
--------------
</TABLE>
See Notes to Financial Statements.
-9-
<PAGE>
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
March 31,
Net Investment Income 1994
------------
<S> <C>
Income
Dividends............................ $ 2,446,069
Interest............................. 434,693
------------
Total income....................... 2,880,762
------------
Expenses
Distribution fee--Class A............ 110,052
Distribution fee--Class B............ 1,993,972
Management fee....................... 1,737,529
Transfer agent's fees and expenses... 517,000
Custodian's fees and expenses........ 127,000
Registration fees.................... 125,000
Reports to shareholders.............. 41,000
Audit fee............................ 25,500
Franchise taxes...................... 20,000
Directors' fees...................... 15,000
Legal fees........................... 15,000
Miscellaneous........................ 11,199
------------
Total expenses..................... 4,738,252
------------
Net investment loss.................... (1,857,490)
------------
Realized and Unrealized Gain (Loss)
on Investments
Net realized gain on investment
transactions......................... 39,236,335
Net decrease in unrealized appreciation
of investments....................... (53,872,448)
------------
Net loss on investments................ (14,636,113)
------------
Net Decrease in Net Assets
Resulting from Operations.............. $(16,493,603)
------------
------------
</TABLE>
PRUDENTIAL GROWTH OPPORTUNITY FUND
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
Increase (Decrease) March 31, September 30,
in Net Assets 1994 1993
------------ -------------
<S> <C> <C>
Operations
Net investment loss.... $ (1,857,490) $ (1,311,418)
Net realized gain on
investment
transactions......... 39,236,335 23,835,926
Net change in
unrealized
appreciation of
investments.......... (53,872,448) 64,901,994
------------ -------------
Net increase (decrease)
in net assets
resulting from
operations........... (16,493,603) 87,426,502
------------ -------------
Net equalization
credits................ 45,227 90,512
------------ -------------
Distributions to
shareholders from
net realized 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.... 219,850,826 453,141,309
Net asset value of
shares issued in
reinvestment of
distributions........ 28,758,329 28,283,287
Cost of shares
reacquired........... (183,950,165) (284,879,535)
------------ -------------
Net increase in net
assets from Fund
share transactions... 64,658,990 196,545,061
------------ -------------
Total increase........... 18,207,032 254,046,675
Net Assets
Beginning of period...... 470,909,692 216,863,017
------------ -------------
End of period............ $489,116,724 $ 470,909,692
------------ -------------
------------ -------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-10-
<PAGE>
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND
Notes to Financial Statements
(Unaudited)
Prudential Growth Opportunity Fund (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 takes 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 six months ended March 31, 1994, the reclassification of $3,168,908
of net operating losses increased paid-in capital by $1,311,418, increased
undistributed net investment income by $1,857,490 and decreased accumulated net
realized gains by $3,168,908. 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>
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 shares of the Fund (collectively the
``Distributors''). To reimburse the Distributors for their expenses incurred in
distributing the Fund's Class A and B shares, the Fund, pursuant to plans of
distribution, pays the Distributors a reimbursement accrued daily and payable
monthly.
Pursuant to the Class A Plan, the Fund reimburses PMFD for its expenses with
respect to Class A shares, at an annual rate of up to .30 of 1% of the average
daily net assets of the Class A shares. 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. PMFD pays various broker-dealers including PSI and Pruco Securities
Corporation (``Prusec''), affiliated broker-dealers, for account servicing fees
and other expenses incurred by such broker-dealers.
Pursuant to the Class B Plan, the Fund reimburses PSI for its
distribution-related expenses with respect to Class B shares at an annual rate
of up to 1% of the average daily net assets of the Class B shares.
The Class B distribution expenses include commission credits for payment of
commissions and account servicing fees to financial advisers and an allocation
for overhead and other distribution-related expenses, interest and/or carrying
charges, the cost of printing and mailing prospectuses to potential investors
and of advertising incurred in connection with the distribution of shares.
The Distributors recover the distribution expenses and service fees incurred
through the receipt of reimbursement payments from the Fund under the plans and
the receipt of initial sales charges (Class A only) and contingent deferred
sales charges (Class B only) from shareholders.
PMFD has advised the Fund that it has received approximately $283,000 in
front-end sales charges resulting from sales of Class A shares during the six
months ended March 31, 1994. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salespersons.
With respect to the Class B Plan, at any given time the amount of expenses
incurred by PSI in distributing the Fund's shares and not recovered through the
imposition of contingent deferred sales charges in connection with certain
redemptions of shares may exceed the total payments made by the Fund pursuant
to
the Class B Plan. PSI advised the Fund that for the six months ended March 31,
1994, it received approximately $337,000 in contingent deferred sales charges
imposed upon certain redemptions by investors. PSI, as distributor, has also
advised the Fund that at March 31, 1994, the amount of distribution expenses
incurred by PSI and not yet reimbursed by the Fund or recovered through
contingent deferred sales charges approximated $4,910,000. This amount may be
recovered through future payments under the Class B Plan or contingent deferred
sales charges.
In the event of termination or noncontinuation of the Class B Plan, the Fund
would not be contractually obligated to pay PSI, as distributor, for any
expenses not previously reimbursed or recovered through contingent deferred
sales charges.
PMFD is a wholly-owned sudsidiary 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 six months ended March 31, 1994, the Fund incurred fees of approximately
$357,000 for the services of PMFS. As of March 31, 1994, approximately $64,000
of such fees were due to PMFS.
For six months ended March 31, 1994, PSI earned approximately $9,125 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 six months ended
March 31, 1994 were $244,176,398 and $201,112,320, respectively.
The federal income tax basis of the Fund's investments at March 31, 1994 was
$461,873,410 and, accordingly, net unrealized appreciation for federal income
tax purposes was
-12-
<PAGE>
$23,520,128 (gross unrealized appreciation--$52,098,670 gross unrealized
depreciation--$28,578,542).
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 March 31, 1994, the Fund
had a 0.7% undivided interest in the repurchase agreements in the joint account.
The undivided interest for the Fund represented $6,673,000 in principal amount.
As of such date, each repurchase agreement in the joint account and the
collateral therefor were as follows:
Bear, Stearns & Co., Inc., 3.30%, dated 3/31/94, in the principal amount of
$226,643,000, repurchase price $226,726,102, due 4/4/94; collateralized by
$7,965,000 U.S. Treasury Note, 7.625%, due 4/30/96; $89,000,000 U.S. Treasury
Note, 5.125%, due 6/30/98 and $140,230,000 U.S. Treasury Note, 5.125%, due
3/31/98; aggregate value including accrued interest--$231,552,457.
BT Securities, 3.55%, dated 3/31/94, in the prin-
cipal amount of $175,000,000, repurchase price $175,069,028, due 4/4/94;
collateralized by $37,860,000 U.S. Treasury Note, 7.875%, due 8/15/01;
$20,320,000 U.S. Treasury Note, 8.50%, due 2/15/00; $50,000,000 U.S. Treasury
Bond, 10.75%, due 2/15/03; and $39,569,000 U.S. Treasury Bond, 10.75%, due
5/15/03; aggregate value including accrued interest--$179,069,820.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 3.40%, dated 3/31/94, in the
principal amount of $280,000,000, repurchase price $280,105,778, due 4/4/94;
collateralized by $289,950,000 U.S. Treasury Note, 5.875%, due 3/31/99 and
$750,000 U.S. Treasury Note, 5.375%, due 4/30/94; aggregate value including
accrued interest--$286,345,112.
Morgan (J.P.) Securities, Inc., 3.45%, dated 3/31/94, in the principal amount
of $100,000,000, repurchase price $100,038,333, due 4/4/94; collateralized by
$3,268,000 U.S. Treasury Note, 5.00%, due 1/31/99 and $100,000,000 U.S. Treasury
Note, 5.125%, due 3/31/96; aggregate value, including accrued
interest--$103,036,460.
Morgan Stanley & Co., Inc., 3.45%, dated 3/31/94, in the principal amount of
$152,000,000 repurchase price $152,058,267, due 4/4/94 collateralized by
$155,615,000 U.S. Treasury Note, 4.25%, due 12/31/95; value including accrued
interest--$155,168,195.
Note 6. Capital The Fund offers both Class A
and Class B shares. Class A shares are sold with
a
front-end sales charge of up to 5.25%. 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. Both classes of shares have equal rights as to
earnings, assets and voting privileges except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan.
There are 500 million shares of common stock, $.01 par value per share,
divided into two classes, designated Class A and Class B common stock, each of
which consists of 250 million authorized shares.
-13-
<PAGE>
<PAGE>
Transactions in shares of common stock for the six months ended March 31,
1994 and for the fiscal year ended September 30, 1993 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------- ----------- -------------
<S> <C> <C>
Six months ended March 31,
1994:
Shares sold................. 4,682,093 $ 59,306,605
Shares issued in
reinvestment of
distributions............. 467,223 5,644,046
Shares reacquired............ (4,337,125) (55,012,684)
----------- -------------
Net increase in shares
outstanding............... 812,191 $ 9,937,967
----------- -------------
----------- -------------
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
----------- -------------
----------- -------------
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Amount
- ---------------------------- ----------- -------------
<S> <C> <C>
Six months ended March 31,
1994:
Shares sold................. 12,934,754 $ 160,544,221
Shares issued in
reinvestment of
distributions............. 1,960,499 23,114,283
Shares reacquired............ (10,391,961) (128,937,481)
----------- -------------
Net increase in shares
outstanding............... 4,503,292 $ 54,721,023
----------- -------------
----------- -------------
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
----------- -------------
----------- -------------
</TABLE>
-14-
<PAGE>
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY FUND
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A
Class B
- ---------------------------------------------------------
- ---------------------------------
January 22,
Six Months
1990(D) Six Months Year Ended
Ended Year Ended September 30,
Through Ended September 30,
March 31, ---------------------------
September 30, March 31, -------------------
1994 1993**(D)(D) 1992**(D)(D) 1991(D)(D)
1990(D)(D) 1994 1993**(D)(D) 1992**(D)(D)
----------- ------- ------- -------
- ------------- ----------- -------- --------
<S> <C> <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 $ 10.11
--------- ------- ------- -------
- --------- ---------- -------- --------
Income from investment
- ----------------------
operations
----------
Net investment income
(loss).................... -- .03 .02 .05
.09 (.05) (.06) (.07)
Net realized and unrealized
gain (loss) on investment
transactions.............. (.36) 3.14 1.47 2.82
(1.20) (.35) 3.08 1.44
--------- ------- ------- -------
- --------- ---------- -------- --------
Total from investment
operations.............. (.36) 3.17 1.49 2.87
(1.11) (.40) 3.02 1.37
--------- ------- ------- -------
- --------- ---------- -------- --------
Less distributions
- ------------------
Dividends from net
investment income......... -- -- -- (.07)
(.08) -- -- --
Distributions from net
realized capital gain..... (.79) (1.36) (.40) --
-- (.79) (1.36) (.40)
--------- ------- ------- -------
- --------- ---------- -------- --------
Total distributions......... (.79) (1.36) (.40) (.07)
(.08) (.79) (1.36) (.40)
--------- ------- ------- -------
- --------- ---------- -------- --------
Net asset value, end of
period.................... $ 11.91 $ 13.06 $ 11.25 $ 10.16 $
7.36 $ 11.55 $ 12.74 $ 11.08
--------- ------- ------- -------
- --------- ---------- -------- --------
--------- ------- ------- -------
- --------- ---------- -------- --------
TOTAL RETURN#:.............. (2.87)% 30.42% 15.39% 39.39%
(13.19)% (3.27)% 29.40% 14.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $96,161 $94,842 $44,845 $25,165 $
17,222 $ 392,956 $376,068 $172,018
Average net assets (000).... $97,911 $69,801 $36,011 $20,650 $
132,627 $ 399,890 $278,659 $154,601
Ratios to average net
assets:
Expenses, including
distribution fees....... 1.29%* 1.17% 1.33% 1.50%
1.61%* 2.06%* 1.97% 2.13%
Expenses, excluding
distribution fees....... 1.06%* .97% 1.13% 1.30%
1.42%* 1.06%* .97% 1.13%
Net investment income
(loss).................... (.13)%* .26% .19% .59%
1.54%* (.90)%* (.54)% (.61)%
Portfolio turnover.......... 43% 68% 99% 111%
79% 43% 68% 99%
</TABLE>
<TABLE>
<CAPTION>
1991(D)(D) 1990(D)(D) 1989(D)(D)
-------- -------- --------
<S> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period................. $ 7.34 $ 9.11 $ 7.47
-------- -------- --------
Income from investment
operations
Net investment income
(loss).................... (.02) .07 .06
Net realized and unrealized
gain (loss) on investment
transactions.............. 2.82 (1.75) 1.65
-------- -------- --------
Total from investment
operations.............. 2.80 (1.68) 1.71
-------- -------- --------
Less distributions
Dividends from net
investment income......... (.03) (.09) (.07)
Distributions from net
realized capital gain..... -- -- --
-------- -------- --------
Total distributions......... (.03) (.09) (.07)
-------- -------- --------
Net asset value, end of
period.................... $ 10.11 $ 7.34 $ 9.11
-------- -------- --------
-------- -------- --------
TOTAL RETURN#:.............. 38.33% (18.63)% 23.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $118,660 $ 86,440 $160,995
Average net assets (000).... $104,508 $132,622 $144,244
Ratios to average net
assets:
Expenses, including
distribution fees....... 2.30% 2.18% 1.79%
Expenses, excluding
distribution fees....... 1.30% 1.28% 1.17%
Net investment income
(loss).................... (.21)% .91% .74%
Portfolio turnover.......... 111% 79% 79%
</TABLE>
- ---------------
* Annualized.
** Calculated based upon weighted average shares outstanding during the
period.
(D) Commencement of offering of Class A 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.
See Notes to Financial Statements.
-15-
<PAGE>
Chart entitled Prudential Mutual Funds: Risk/Reward
Spectrum.
The chart shows a graphic representation of the spectrum of risks
of various categories of Prudential Mutual Funds including stock
funds, tax-exempt bond funds, taxable bond funds and global
taxable
bond funds. The chart rates the risk of individual Prudential
Mutual Funds relative to other Prudential Mutual Funds in each
category.
Under the category of stock funds, the chart lists from low risk
to
high risk the following funds (beginning at the low end of the
spectrum):
FlexiFund (The Conservatively Managed Portfolio)
IncomeVertible Fund
FlexiFund (The Strategy Portfolio)
Equity Income Fund
Utility Fund
Global Utility Fund
Equity Fund
Growth Fund
Global Fund
Nicholas-Applegate Growth Equity Fund
Growth Opportunity Fund
Multi-Sector Fund
Global Natural Resources Fund
Global Genesis Fund
Pacific Growth Fund
Under the category of tax-exempt bond funds, the chart lists from
low risk to high risk the following funds (beginning at the low
end
of the spectrum):
Municipal Bond Fund (Modified Term Series)
Municipal Bond Fund (Insured Series)
National Municipals Fund
Municipal Series Fund (State Series Fund)
California Municipal Fund (California Income Series)
Municipal Bond Fund (High Yield Series)
Under the category of taxable bond funds, the chart lists from
low
risk to high risk the following funds (beginning at the low end
of
the spectrum):
Adjustable Rate Securities Fund
The BlackRock Government Income Fund
Structured Maturity Fund (Income Portfolio)
Government Securities Trust (Intermediate Term Series)
GNMA Fund
Government Plus Fund
U.S. Government Fund
High Yield Fund
Under the category of global taxable bond funds, the chart lists
from low risk to high risk the following funds (beginning at the
low end of the spectrum):
Short-Term Global Income Fund (Global Assets Portfolio)
Short-Term Global Income Fund (Short-Term Global Income
Portfolio)
Intermediate Global Income Fund
Performance Charts
A. Historical Investment Results
The chart shows comparative historical investment results for the one-year,
five-year and since inception periods ended March 31, 1994 for the Class A
shares of the Fund, the Class B shares of the Fund, the Lipper Small Company
Growth Fund Average and the Russell 2000 Index, without taking into account
front-end or contingent deferred sales charges.
B. Average Annual Total Returns
The chart also shows the average annual total returns for the one-year, five-
year and since inception periods ended March 31, 1994 for Class A and Class B
shares taking into account any applicable sales charges.
Mountain Charts
Two mountain charts show the growth of an assumed investment of $10,000 in
the Prudential Growth Opportunity Fund. The charts represent historical
performance and are not a guarantee of future performance of Class A shares or
Class B shares.
A. Class A shares
The chart shows the growth of a $10,000 investment in Class A shares from
inception on January 22, 1990 through March 31, 1994, and assumes a front-end
sales charge of 5.25%. The chart shows the value of the investment as of January
22, 1990, (i) with the reinvestment of dividends and distributions in additional
shares of the Fund and (ii) with all dividends and distributions taken in cash.
B. Class B shares
The chart shows the growth of a $10,000 investment in Class B shares from
inception on November 30, 1980 through March 31, 1994, and does not assume the
effect of a contingent deferred sales charge on redemptions. The chart shows the
value of the investment as of November 30, 1980, (i) with the reinvestment of
dividends and distributions in additional shares of the Fund and (ii) with all
dividends and distributions taken in cash.
