(ICON)
Prudential
Growth
Opportunity
Fund, Inc.
SEMI
ANNUAL
REPORT
March 31, 1996
(LOGO)
<PAGE>
Prudential Growth Opportunity Fund, Inc.
Performance At A Glance.
Moderate economic growth, subdued inflation and falling, short-term interest
rates pushed most small company stocks higher over the last six months. While
the Prudential Growth Opportunity Fund posted gains over the reporting period,
we are disappointed to report that it trailed the average small company growth
fund as measured by Lipper Analytical Services.Your Fund's sizeable investment
in "value" small company stocks at a time when the market favored "growth" small
company stocks, was a reason for our disappointing performance. The Fund's cash
position also hindered performance.
<TABLE>
<CAPTION>
Cumulative Total Returns1 As of 3/31/96
Six One Five Ten Since
Months Year Years Years
Inception2
<S> <C> <C> <C> <C> <C>
Class A 3.3% 21.3% 107.5% N/A 134.7%
Class B 2.9 20.4 99.4 177.3% 464.3
Class C 2.9 20.4 N/A N/A 30.0
Class Z N/A N/A N/A N/A 1.9
Lipper Small Co.
Growth Avg3 7.9 31.3 119.5 236.2 412.6
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns1 As of 3/31/96
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 15.2% 14.5% N/A 13.9%
Class B 15.4 14.7 10.7% 11.9
Class C 19.4 N/A N/A 17.1
Class Z N/A N/A N/A 1.9
</TABLE>
Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
1Source: Prudential Mutual Fund Management and Lipper Analytical Services. The
cumulative total returns do not take into account sales charges. The average
annual returns do take into account applicable sales charges. The Fund charges
a maximum front-end sales load of 5% for Class A shares and a declining
contingent deferred sales charge (CDSC) of 5%, 4%, 3%, 2%, 1% and 1% for six
years, for Class B shares. Class C shares have a 1% CDSC for one year. Class B
shares will automatically convert to Class A shares on a quarterly basis,
approximately seven years after purchase.
2Inception dates: 1/22/90 Class A; 11/13/80 Class B; 8/1/94 Class C; 3/1/96
Class Z.
3Lipper average returns are for 355 funds for six months, 324 funds for one
year, 84 funds for five years, 40 funds for 10 years and 29 funds since
inception of the Class B shares on 11/13/80.
How Investments Compared.
(As of 3/31/96)
(CHART)
Source: Lipper Analytical Services. Financial markets change, so a mutual fund's
past performance should never be used to predict future results. The risks to
each of the investments listed above are different -- we provide 12-month total
returns for several Lipper mutual fund categories to show you that reaching for
higher yields means tolerating more risk. The greater the risk, the larger the
potential reward or loss. In addition, we've included historical 20-year average
annual returns. These returns assume the reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Investors have received higher
historical total returns from stocks than from most other investments. Smaller
capitalization stocks offer greater potential for long-term growth but may be
more volatile than larger capitalization stocks.
General Bond Funds provide more income than stock funds, which can help smooth
out their total returns year by year. But their prices still fluctuate
(sometimes significantly) and their returns historically have been lower than
those of stock funds.
General Municipal Debt Funds invest in bonds issued by state governments,
state agencies and/or municipalities. This investment provides income that is
usually exempt from federal and state income taxes.
Money Market Funds attempt to preserve a constant share value; they don't
fluctuate much in price but historically their returns have been generally
among the lowest of the major investment categories.
* 19 Years for Muni Debt Funds.
<PAGE>
Roger Ford and Jay S. Kaplan, Fund Managers (PHOTO)
Portfolio
Managers' Report (PHOTO)
The Prudential Growth Opportunity Fund invests in stocks of small- and mid-sized
companies (generally less than $1 billion in market capitalization), primarily
in the U.S. We follow a strict value investment style, looking for small company
stocks selling at attractive prices with prospects of higher earnings. There can
be no assurance that the Fund's investment objective will be achieved.
Strategy Session.
As stock prices rose, we sold some that had reached our price targets, like
Tiffany, the jewelry retailer, and trimmed our positions in others, locking in
gains in Precision Castparts, an aircraft metal fabricator, and Cabot Corp., a
specialty chemical company.
As a result, our cash position rose to 12% from 11% on September 30, 1995. Our
strategy is to be fully invested in stocks, so we were working hard to find new,
attractive investment alternatives. We did find several stocks with potential,
including: Ball Corp., which makes food and beverage con-tainer packaging;
Furniture Brands International, which recently acquired the Thomasville line
to add to its existing highly-regarded brands, Broyhill and Lane; and Santa Fe
Energy, a domestic oil producer.
Over the past six months, we did not significantly change our allocations nor
our focus on value-oriented small company stocks because we continue to believe
that they will benefit from an economy that is slowly but steadily expanding.
Industrial stocks (such as machinery and chemicals) continue to be our largest
group, at 35%, followed by technology at 20% and consumer goods and services at
16% (all as a percentage of total net assets on 3/31/96).
We did make some changes in our technology industry holdings by selling some of
these stocks after they appreciated. But prices of many stocks in this group
fell later in the year, so early in 1996 we selectively purchased some
attractive technology-related companies. These included Continental Circuits,
a circuit-board manu-facturer and Pioneer Standard, an electronics distributor.
Those we sold included Zilog and Opti, two semiconductor manufacturers.
Industrial Stocks Dominate.
Sectors expressed as a percentage
of total net assets as of 3/31/96.
(CHART)
New Co-Manager.
Jay Kaplan joined Roger Ford as Portfolio Co-Manager of the Prudential Growth
Opportunity Fund in January. For the last three years, Jay was a senior analyst
and assistant portfolio manager of value-oriented stock portfolios with assets
totaling $4.5 billion. He joined Prudential in 1988 as an analyst. With Roger,
he is continuing the Fund's disciplined value investment style in selecting
small company stocks by focusing on those selling at or near their historical
lows.
<PAGE>
What Went Well.
Catalysts For Change.
We search for change, because it usually brings opportunity for capital
appreciation. Here are two ways this worked for us:
We held Sterling Software, a computer software company, that gained more than
50% in the last six months. Why? When it sold its Sterling Commerce subsidiary
in a public offering, the market realized the parent company had been
undervalued.
We also owned Vigoro, a fertilizer company, which rose by more than 50% as well,
in part because it was purchased by IMC Global. When we bought it, Vigoro was
inexpensive compared to the cash it generated. In addition, a significant
portion of its stock was owned by an investor who engineered the sale.
The Unloved And Ignored.
We also seek out unloved and ignored companies. Here are a few:
U.S. Can is a producer of aerosol cans. It successfully acquired a number of
companies, but stumbled last year. Investors penalized it by knocking its stock
price down. We believed the problems were only temporary, so we bought the
stock. It has now risen 40%.
Universal Health Services is a hospital management company. Its stock price
never fully recovered from the health care reform debate fallout. Investors
thought Universal couldn't grow through acquisition like other hospital
companies, so they ignored its stock. We disagreed. Universal's stock price is
up more than 50% in the last six months.
And Not So Well.
Your Fund's sizeable investment in "value" small company stocks at a time when
the market favored "growth" small company stocks, was a reason for our
disappointing performance. It was not the only one, though.
Too Much Cash.
We held some cash over the past six months, ending with 12% of total net assets.
Holding cash when stock prices rise holds back performance. Had we invested
these funds, we would have performed better. However, we will continue to follow
our value strategy; we will only buy stocks that in our view are attractive and
undervalued.
Consumer Stocks Hurt Us.
We were also hurt by our consumer stocks. For example, Neostar (computer
software and game retailer) had a disappointing holiday season; Rykoff-Sexton
(food distributor) announced an acquisition that reduced its earnings per share,
and American Business Information Systems (telephone directory listings
provider) announced disappointing earnings.
Looking Ahead.
We're cautiously optimistic. Stocks have risen substantially for more than
five years without a major retreat, and that is a cause for concern. But
interest rates are still relatively low, compared to recent history. And it
seems like the Federal Reserve has engineered a soft economic landing -- a
slowdown of economic growth without rising inflation and recession. As investors
become more certain that economic growth will continue, we believe that small
company stocks can perform better than large company stocks, reversing the
trend we saw last year and early this year.
Five Largest Issuers.
2.3% Methode Electronics
Electronics
2.3% Precision Castparts
Aerospace/Defense
2.3% Finova Group, Inc.
Financial Services
2.2% Marshall Industries
Electronics
1.8% Expeditors International
of Washington
Transportation
Expressed as a percentage of total net assets as of 3/31/96.
1
<PAGE>
Meet Jay Kaplan.
This Bargain Hunter Looks Beyond The Numbers For "Hidden Value."
We wanted to introduce our new portfolio co-manager, Jay Kaplan, who is now
managing the Prudential Growth Opportunity Fund with Roger Ford. Jay sat down
the other day after the markets closed and chatted about his investment
philosophy.
Q: Jay, how would you describe your investment style?
A. I look for bargains in the stock market. I try to find the misunderstood,
misanalyzed, out-of-favor companies that are attractively priced. My analysis
hinges on several techniques I use to value a company. These include: the
relationship between a stock's price and 1) its earnings; 2) the cash it
generates, and 3) the value of its assets. I've been doing this analysis for
Prudential for eight years now.
Q. Why is cash so important?
A. Smart management can increase the value of a company's stock by using its
cash flow. Some cash will be reinvested in the business, but what's left over
can be used to increase dividends, buy back stock (we like that even better)
or acquire other businesses. So we're looking not only for companies that can
generate good cash flow, but also for companies that will use the cash wisely.
Q. So you also look beyond the numbers?
A. Yes. Roger and I want to see quality management, as well as a sound business
plan. We assess the quality of a company's management and its plan by meeting
with senior executives and evaluating their strategies. We believe this is very
important. When you buy a small company, you are really investing in its
management's ability to increase the value of your investment.
Q. What kind of situations do you look for?
A. We're always looking for a catalyst -- an event causing change. Changes can
often help other investors see the hidden, underlying value in a stock.
Catalysts we like to see are changes in senior management, an acquisition, or
the selling off or spinning off of a subsidiary.
(PHOTO)
2
<PAGE>
President's Letter May 1, 1996
(PHOTO)
Dear Shareholder:
Last year, stocks and bonds generally posted extraordinary returns. Investors
celebrated this performance by putting record amounts of new money into mutual
funds in the first few months of 1996. According to figures released by the
Investment Company Institute, a mutual fund industry trade group, new
investments in mutual funds reached an all-time monthly high of $33 billion in
January of 1996. An additional $47 billion was invested in February and March.
While we are pleased that mutual funds are attracting new investors, we're
concerned that some of them may be "buying last year's returns." Few expect
1995's virtual non-stop returns from the stock and bond markets. In fact,
1996's markets have been volatile so far (stock and bond prices go down just as
they go up). There's no better time than now to be talking with your Financial
Advisor or Registered Representative. She or he can help you determine
reasonable expectations about both the potential performance and risks
associated with your investments.
Board of Directors Election.
Late this summer, we'll be sending you a notice about a special shareholder
meeting to elect new Prudential mutual fund boards of directors. Your Board of
Directors has approved a proposal to place a common board of experienced
directors across many of Prudential's mutual funds to improve business
efficiency and reduce costs to your fund(s). The materials you'll receive this
summer will contain more complete information about this proposal.
Changes at Prudential.
Finally, there have been some important changes recently at Prudential that were
made with you in mind. Prudential Mutual Funds has moved under the umbrella of
Prudential's newly created "Money Management Group." This group manages and
administers nearly $190 billion in client assets and provides mutual funds,
annuities, defined benefit and defined contribution plans to our individual and
institutional investors. We plan to improve the range and quality of investment
products and services that we can provide you by better leveraging Prudential's
strengths. There will, however, be no change in the service you receive from
your Financial Advisor, Registered Representative or our Customer Service unit.
We're excited about our future and hope that you are, too. Thank you for your
continued support and confidence in Prudential Mutual Funds.
Sincerely,
Richard A. Redeker
President
3
<PAGE>
Portfolio of Investments as of March 31, 1996 PRUDENTIAL GROWTH OPPORTUNITY
(Unaudited) FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--87.9%
COMMON STOCKS--87.9%
- ------------------------------------------------------------
Aerospace / Defense--2.3%
358,000 Precision Castparts Corp. $ 14,320,000
- ------------------------------------------------------------
Automobiles--0.3%
94,300 Walbro Corp. 1,921,363
- ------------------------------------------------------------
Banking--0.7%
190,000 Community First Bankshares, Inc. 4,227,500
- ------------------------------------------------------------
Cable & Pay Television Systems--0.7%
82,900 Century Communications Corp.
Cl. A (a) 803,094
116,600 TCA Cable TV, Inc. 3,395,975
------------
4,199,069
- ------------------------------------------------------------
Computer Hardware--4.0%
529,700 Black Box Corp. (a) 9,004,900
456,400 Telxon Corp. 9,698,500
327,700 Western Digital Corp. (a) 6,308,225
------------
25,011,625
- ------------------------------------------------------------
Computer Software & Services--4.8%
92,000 Analysts International Corp. 3,128,000
253,200 Continuum Co., Inc. (a) 10,539,450
10,500 Software Spectrum, Inc. (a) 212,625
152,400 Sterling Software, Inc. (a) 10,744,200
287,800 Westcott Communications, Inc. (a) 5,108,450
------------
29,732,725
- ------------------------------------------------------------
Consumer Products--1.6%
300,700 Libbey, Inc. 6,577,813
180,400 Russ Berrie & Co., Inc. 3,066,800
------------
9,644,613
- ------------------------------------------------------------
Consumer Services--1.6%
170,100 Pittston Brinks Group 4,550,175
176,900 Regis Corp. 5,439,675
------------
9,989,850
Containers & Packaging--2.0%
350,900 Applied Extrusion Technologies (a) $ 3,816,037
104,400 Ball Corp. 3,236,400
300,800 U.S. Can Corp. (a) 5,113,600
------------
12,166,037
- ------------------------------------------------------------
Drug Stores--2.0%
499,100 Big B, Inc. 5,178,162
82,000 Eckerd, Jack Corp. 3,946,250
409,200 Fays, Inc. 2,966,700
------------
12,091,112
- ------------------------------------------------------------
Drugs & Medical Supplies--2.0%
70,300 Block Drug Co., Inc. Cl. A 2,908,663
412,081 Healthdyne, Inc. (a) 5,125,257
122,300 Sofamor/Danek Group, Inc. (a) 4,142,912
------------
12,176,832
- ------------------------------------------------------------
Electrical Equipment--1.6%
221,100 Belden, Inc. 6,522,450
245,000 Woodhead Industries, Inc. 3,583,125
------------
10,105,575
- ------------------------------------------------------------
Electronics--9.1%
221,100 Augat, Inc. 3,869,250
92,900 Berg Electronics Corp. (a) 2,183,150
197,500 Burr-Brown Corp. (a) 3,110,625
250,900 Continental Circuits Corp. (a) 3,763,500
221,600 GTI Corp. (a) 1,973,625
303,300 ITI Technologies, Inc. (a) 8,227,012
87,200 Kemet Corp. (a) 1,972,900
440,000 Marshall Industries (a) 13,420,000
883,800 Methode Electronics, Inc. Cl. A 14,361,750
219,800 Pioneer Standard Electronics, Inc. 3,379,425
4,700 Wyle Electronics 162,738
------------
56,423,975
- --------------------------------------------------------------------------------
- -----4 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments as of March 31, 1996 PRUDENTIAL GROWTH OPPORTUNITY
(Unaudited) FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Engineering--0.1%
150,000 Baker (Michael) Corp. (a) $ 806,250
- ------------------------------------------------------------
Environmental Services--1.4%
216,000 BHA Group, Inc. Cl. A 2,754,000
236,900 USA Waste Services, Inc. (a) 6,040,950
------------
8,794,950
- ------------------------------------------------------------
Fertilizers & Chemicals--1.1%
280,800 Agrium, Inc. (Canada) 3,606,525
56,000 Potash Corp. of Saskatchewan, Inc.
(Canada) 3,500,000
------------
7,106,525
- ------------------------------------------------------------
Financial Services--3.0%
49,000 Capital Re Corp. 1,764,000
261,800 Finova Group, Inc. 14,300,825
124,000 McDonald & Co. Investments, Inc. 2,387,000
------------
18,451,825
- ------------------------------------------------------------
Food & Beverage--1.4%
559,300 Michaels Foods, Inc. 5,872,650
240,900 Sanderson Farms, Inc. 2,951,025
------------
8,823,675
- ------------------------------------------------------------
Food Distribution--2.8%
531,100 JP Foodservice, Inc. (a) 9,958,125
474,200 Rykoff-Sexton, Inc. 7,527,925
------------
17,486,050
- ------------------------------------------------------------
Forest Products--0.8%
71,720 Mosinee Paper Corp. 2,259,180
113,375 Wausau Paper Mills Co. 2,607,625
------------
4,866,805
- ------------------------------------------------------------
Furniture--0.5%
342,500 Furniture Brands International,
Inc. (a) 3,168,125
- ------------------------------------------------------------
Gas Distribution--1.1%
228,614 KN Energy, Inc. 7,115,611
Health Care Services--0.2%
523,600 Unilab Corp. (a) $ 1,047,200
- ------------------------------------------------------------
HMO's--1.6%
215,700 Physician Corp. of America (a) 3,451,200
200,000 Sierra Health Services, Inc. (a) 6,525,000
------------
9,976,200
- ------------------------------------------------------------
Hospital Management--0.5%
57,500 Universal Health Services, Inc. Cl.
B (a) 3,054,687
- ------------------------------------------------------------
Housing Related--1.1%
591,900 Fedders Corp. 3,847,350
560,050 Fedders Corp. Cl. A non-voting 3,220,288
------------
7,067,638
- ------------------------------------------------------------
Insurance--2.7%
108,500 Allmerica Financial Corp. 2,861,687
194,900 AmVestors Financial Corp. 2,484,975
245,700 Philadelphia Consolidated Holding
Corp. (a) 5,098,275
262,000 Poe & Brown, Inc. 6,419,000
------------
16,863,937
- ------------------------------------------------------------
Leisure--0.8%
348,800 Topps Company, Inc. (a) 1,918,400
165,300 WMS Industries, Inc. (a) 2,872,088
------------
4,790,488
- ------------------------------------------------------------
Lodging--0.3%
124,300 Red Roof Inns, Inc. (a) 1,848,963
- ------------------------------------------------------------
Machinery & Equipment--1.4%
160,000 Gerber Scientific, Inc. 2,400,000
211,100 Measurex Corp. 6,121,900
------------
8,521,900
- ------------------------------------------------------------
Metals - Non Ferrous--1.8%
628,500 Brush Wellman, Inc. 11,234,437
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5 -----
<PAGE>
Portfolio of Investments as of March 31, 1996 PRUDENTIAL GROWTH OPPORTUNITY
(Unaudited) FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Miscellaneous Industrials--9.5%
19,200 Apogee Enterprises, Inc. $ 417,600
337,725 Bearings, Inc. 9,582,947
164,500 Blount International, Inc. Cl. A 5,058,375
100,000 Carlisle Companies, Inc. 4,337,500
232,700 Figgie International, Inc. Cl. A
(a) 3,141,450
250,000(b) Jason, Inc. (a)
(cost $2,200,000;
purchase date-1/21/94) 1,692,187
138,700 Mark IV Industries, Inc. 3,051,400
214,200 Pentair, Inc. 5,408,550
302,300 Regal Beloit Corp. 6,348,300
1,400 Robbins & Myers, Inc. 47,950
119,300 Roper Industries 5,487,800
278,700 United Dominion Industries, Ltd. 6,758,475
88,000 Valmont Industries, Inc. 2,640,000
187,900 Waters Corp. (a) 4,556,575
------------
58,529,109
- ------------------------------------------------------------
Nursing Homes--1.0%
338,000 GranCare, Inc. (a) 6,084,000
- ------------------------------------------------------------
Oil & Gas Exploration/Production--2.2%
139,600 Diamond Shamrock, Inc. 4,537,000
157,100 Mitchell Energy & Development Corp.
Cl. A 2,709,975
285,650 Mitchell Energy & Development Corp.
Cl. B 4,927,462
169,300 Santa Fe Energy Resources, Inc. (a) 1,777,650
------------
13,952,087
- ------------------------------------------------------------
Oil & Gas Services--1.6%
323,000 Newpark Resources, Inc. (a) 9,609,250
- ------------------------------------------------------------
Realty Investment Trust--0.6%
116,300 Duke Reality Investments, Inc. 3,503,538
- ------------------------------------------------------------
Savings & Loan--0.5%
140,000 RCSB Financial, Inc. 3,307,500
- ------------------------------------------------------------
Specialty Chemicals--3.6%
286,000 Cabot Corp. 8,723,000
237,700 Lilly Industries, Inc. Cl. A 3,238,663
247,500 Rogers Corp. (a) $ 5,723,437
204,200 Schulman (A.), Inc. 4,313,725
------------
21,998,825
- ------------------------------------------------------------
Steel--2.3%
231,200 Huntco, Inc. Cl. A 4,479,500
75,200 Lukens, Inc. 1,870,600
348,700 Quanex Corp. 7,627,812
------------
13,977,912
- ------------------------------------------------------------
Transportation--11.3%
420,950 Air Express International Corp. 10,839,462
237,700 Brenco, Inc. 3,000,963
431,500 Expeditors International of
Washington, Inc. 11,326,876
146,700 GATX Capital Corp. 6,748,200
409,900 Harper Group, Inc. 7,480,675
350,200 Interpool, Inc. 6,128,500
204,200 Kansas City Southern Industries,
Inc. 9,495,300
320,950 Pittston Burlington Group 6,298,644
243,300 Trinity Industries, Inc. 8,485,088
------------
69,803,708
------------
Total Long-Term Investments
(cost $438,503,580) 543,801,471
------------
Principal
Amount
(000)
SHORT-TERM INVESTMENT
- ------------------------------------------------------------
Repurchase Agreement--12.2%
$ 75,236 Joint Repurchase Agreement Account,
5.35%, 4/1/96,
(cost $75,236,000; Note 5) 75,236,000
- ------------------------------------------------------------
Total Investments--100.1%
(cost $513,739,580; Note 4) 619,037,471
Liabilities in excess of other
assets--(0.1%) (351,078)
------------
Net Assets--100% $618,686,393
------------
------------
- ---------------
(a) Non-income producing security.
(b) Private placement restricted as to resale; includes registration rights
under which the Fund may demand registration by the issuer.
- --------------------------------------------------------------------------------
- -----6 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY
Statement of Assets and Liabilities (Unaudited) FUND, INC.
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Assets
March 31, 1996
--------------
<S>
<C>
Investments, at value (cost
$513,739,580)..................................................................
$619,037,471
Cash.........................................................................
.............................. 49,691
Receivable for Fund shares
sold............................................................................
5,034,635
Dividends and interest
receivable...................................................................
....... 423,794
Other
assets.......................................................................
........................ 5,239
--------------
Total
assets.......................................................................
..................... 624,550,830
--------------
Liabilities
Payable for investments
purchased....................................................................
...... 3,606,020
Payable for Fund shares
reacquired...................................................................
...... 1,280,157
Management fee
payable......................................................................
............... 357,960
Distribution fee
payable......................................................................
............. 338,754
Accrued
expenses.....................................................................
...................... 281,546
--------------
Total
liabilities..................................................................
..................... 5,864,437
--------------
Net
Assets.......................................................................
.......................... $618,686,393
--------------
--------------
Net assets were comprised of:
Common stock, at
par..........................................................................
.......... $ 456,856
Paid-in capital in excess of
par........................................................................
479,632,314
--------------
480,089,170
Accumulated net investment
loss.........................................................................
(345,906)
Accumulated net realized gain on
investments............................................................
33,645,238
Net unrealized appreciation on
investments..............................................................
105,297,891
--------------
Net assets, March 31,
1996.........................................................................
........ $618,686,393
--------------
--------------
Class A:
Net asset value and redemption price per share
($201,738,382 / 14,468,591 shares of common stock issued and
outstanding)............................ $13.94
Maximum sales charge (5.0% of offering
price)...........................................................
.73
--------------
Maximum offering price to
public........................................................................
$14.67
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($350,210,059 / 26,421,754 shares of common stock issued and
outstanding)............................ $13.25
--------------
--------------
Class C:
Net asset value, offering price and redemption price per share
($2,638,620 / 199,066 shares of common stock issued and
outstanding)................................. $13.25
--------------
--------------
Class Z:
Net asset value, offering price and redemption price per share
($64,099,332 / 4,596,221 shares of common stock issued and
outstanding).............................. $13.95
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7 -----
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY
FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Six Months
Ended
Net Investment Income March 31, 1996
Income
Dividends (net of foreign withholding
taxes of $11,060)...................... $ 2,891,152
Interest.................................. 1,712,648
-----------------
Total income........................... 4,603,800
-----------------
Expenses
Distribution fee--Class A................. 291,084
Distribution fee--Class B................. 1,728,412
Distribution fee--Class C................. 9,585
Management fee............................ 2,063,708
Transfer agent's fees and expenses........ 525,000
Registration fees......................... 105,000
Custodian's fees and expenses............. 77,000
Reports to shareholders................... 68,000
Audit fee and expenses.................... 23,000
Franchise taxes........................... 20,000
Legal fees and expenses................... 16,000
Directors' fees........................... 15,000
Miscellaneous............................. 7,917
-----------------
Total expenses......................... 4,949,706
-----------------
Net investment loss.......................... (345,906)
-----------------
Realized and Unrealized Gain (Loss)
on Investments
Net realized gain on investment
transactions.............................. 36,168,317
Net change in unrealized appreciation of
investments............................... (17,272,470)
-----------------
Net gain on investments...................... 18,895,847
-----------------
Net Increase in Net Assets
Resulting from Operations.................... $ 18,549,941
-----------------
-----------------
</TABLE>
PRUDENTIAL GROWTH OPPORTUNITY
FUND, INC.
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
<S> <C> <C>
Ended Year Ended
Increase (Decrease) March 31, September 30,
in Net Assets 1996 1995
Operations
Net investment loss.......... $ (345,906) $ (1,279,828)
Net realized gain on
investments............... 36,168,317 29,417,664
Net change in unrealized
appreciation of
investments............... (17,272,470) 83,509,332
------------ -------------
Net increase in net assets
resulting from
operations................ 18,549,941 111,647,168
------------ -------------
Net equalization credits........ -- 1,510,164
------------ -------------
Distributions from net realized
capital gains (Note 1)
Class A...................... (11,343,132) (6,672,537)
Class B...................... (17,645,142) (28,252,159)
Class C...................... (93,369) (23,735)
------------ -------------
(29,081,643) (34,948,431)
------------ -------------
Fund share transactions (net of
conversion) (Note 6)
Net proceeds from shares
sold...................... 314,255,195 369,521,600
Net asset value of shares
issued in reinvestment of
dividends and
distributions............. 27,854,955 33,299,692
Cost of shares reacquired.... (318,541,490) (404,229,931)
------------ -------------
Net increase (decrease) in
net assets from Fund share
transactions.............. 23,568,660 (1,408,639)
------------ -------------
Total increase.................. 13,036,958 76,800,262
Net Assets
Beginning of period............. 605,649,435 528,849,173
------------ -------------
End of period................... $618,686,393 $ 605,649,435
------------ -------------
------------ -------------
</TABLE>
- --------------------------------------------------------------------------------
- -----8 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY
Notes to Financial Statements (Unaudited) FUND, INC.
- --------------------------------------------------------------------------------
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 Policies
The following is a summary of significant accounting policies 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 Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income is recorded on the accrual basis. Expenses are
recorded on the accrual basis which may require the use of certain estimates by
management.
Net investment income (loss), other than distribution fees, and 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.
Withholding taxes on foreign dividends have been provided for in accordance with
the Fund's understanding of the applicable country's tax rules and rates.
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.
Equalization: Effective October 1, 1995, the Fund discontinued the accounting
practice of equalization. Equalization is a practice whereby a portion of the
proceeds from sales and costs of repurchases of capital 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. The balance of $1,954,545 of undistributed net investment income at
September 30, 1995, resulting from equalization was transferred to paid-in
capital in excess of par. Such reclassification has no effect on net assets,
results of operations, or net asset value per share.
- ------------------------------------------------------------
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 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
- --------------------------------------------------------------------------------
9 -----
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY
Notes to Financial Statements (Unaudited) FUND, INC.
- --------------------------------------------------------------------------------
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 had a distribution agreement with Prudential Mutual Fund Distributors,
Inc. (``PMFD''), which acted as the distributor of the Class A shares of the
Fund through January 1, 1996. Effective January 2, 1996 Prudential Securities
Incorporated (``PSI'') became the distributor of the Class A shares of the Fund
and is serving the Fund under the same terms and conditions as under the
arrangement with PMFD. PSI is also distributor of the Class B, Class C and Class
Z shares of the Fund. The Fund compensated PMFD and PSI for distributing and
servicing the Fund's Class A, Class B and Class C shares, pursuant to plans of
distribution (the ``Class A, B and C Plans''), regardless of expenses actually
incurred by them. The distribution fees are accrued daily and payable monthly.
Pursuant to the Class A, B and C Plans, the Fund compensates PSI, and PMFD for
the period September 1, 1995 through January 1, 1996 with respect to Class A
shares, 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 .25 of 1% of the average
daily net assets of Class A shares and 1% of the average daily net assets under
the Class B and C Plans of both the Class B and Class C shares, respectively,
for the six months ended March 31, 1996.
PMFD and PSI have advised the Fund that they have received approximately
$175,100 in front-end sales charges resulting from sales of Class A shares
during the six months ended March 31, 1996. From these fees, PMFD and PSI paid
such sales charges to Pruco Securities Corporation, an affiliated broker-dealer,
which in turn paid commissions to sales persons and incurred other distribution
costs.
PSI has advised the Fund that for the six months ended March 31, 1996, it
received approximately $401,400 in contingent deferred sales charges imposed
upon certain redemptions by Class B and C shareholders.
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 Transactions with Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During the six months ended March 31,
1996, the Fund incurred fees of approximately $476,000 for the services of PMFS.
As of March 31, 1996, approximately $87,000 of such fees were due to PMFS.
- ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the six months ended March 31, 1996 were $90,139,772 and $108,449,566,
respectively.
The federal income tax basis of the Fund's investments at March 31, 1996 was
$513,741,537 and, accordingly, net unrealized appreciation for federal income
tax purposes was $105,295,934 (gross unrealized appreciation--$118,911,521 gross
unrealized depreciation--$13,615,587).
- ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or federal agency obligations. As of March 31, 1996, the Fund
had a 5.2% undivided interest in the repurchase agreements in the joint account.
The undivided interest for the Fund represented $75,236,000 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., 5.30%, in the principal amount of $387,000,000,
repurchase price $387,170,925, due 4/1/96. The value of the collateral including
accrued interest was $395,137,122.
CS First Boston Corp., 5.50%, in the principal amount of $150,000,000,
repurchase price $150,068,750, due 4/1/96. The value of the collateral including
accrued interest was $153,001,819.
Goldman Sachs & Co., 5.40%, in the principal amount of $463,000,000, repurchase
price $463,208,350, due 4/1/96. The value of the collateral including accrued
interest was $472,260,747.
Nomura Securities, Inc., 5.375%, in the principal amount of $100,000,000,
repurchase price $100,044,792, due 4/1/96. The value of the collateral including
accrued interest was $102,398,695.
- --------------------------------------------------------------------------------
- -----10
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY
Notes to Financial Statements (Unaudited) FUND, INC.
- --------------------------------------------------------------------------------
Smith Barney, Inc., 5.284%, in the principal amount of $355,886,000, repurchase
price $356,042,708, due 4/1/96. The value of the collateral including accrued
interest was $363,004,234.
- ------------------------------------------------------------
Note 6. Capital
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. A special exchange privilege is also
available for shareholders who qualified to purchase Class A shares at net asset
value. Effective March 1, 1996, the Fund commenced offering Class Z shares.
Class Z shares are not subject to any sales or redemption charge and are offered
exclusively for sale to the participants of the Prudential Securities 401(K)
Plan, a defined contribution plan sponsored by Prudential Securities.
There are 1 billion shares of common stock, $.01 par value per share, divided
into four classes, designated Class A, Class B, Class C and Class Z common
stock, each of which consists of 250 million authorized shares.
Transactions in shares of common stock for the six months ended March 31, 1996
and fiscal year ended September 30, 1995 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ----------------------------------- ----------- -------------
<S> <C> <C>
Six months ended March 31, 1996:
Shares sold........................ 12,539,149 $ 169,532,415
Shares issued in reinvestment of
distributions.................... 835,885 10,983,528
Shares reacquired.................. (16,699,962) (226,586,049)
----------- -------------
Net decrease in shares outstanding
before conversion................ (3,324,928) (46,070,106)
Shares issued upon conversion from
Class B into Class A............. 709,683 9,427,613
----------- -------------
Net decrease in shares
outstanding...................... (2,615,245) $ (36,642,493)
----------- -------------
----------- -------------
<CAPTION>
Class A Shares Amount
- ----------------------------------- ----------- -------------
<S> <C> <C>
Year ended September 30, 1995:
Shares sold........................ 16,264,230 $ 199,059,220
Shares issued in reinvestment of
distributions.................... 614,029 6,502,568
Shares reacquired.................. (16,750,855) (207,402,318)
----------- -------------
Net increase in shares outstanding
before conversion................ 127,404 (1,840,530)
Shares issued upon conversion from
Class B.......................... 8,645,131 97,904,973
----------- -------------
Net increase in shares
outstanding...................... 8,772,535 $ 96,064,443
----------- -------------
----------- -------------
<CAPTION>
Class B
- -----------------------------------
<S> <C> <C>
Six months ended March 31, 1996:
Shares sold........................ 6,046,275 $ 77,781,284
Shares issued in reinvestment of
distributions.................... 1,340,848 16,779,529
Shares reacquired.................. (6,903,575) (88,939,067)
----------- -------------
Net increase in shares outstanding
before conversion................ 483,548 5,621,746
Shares issued upon conversion from
Class B into Class A............. (745,350) (9,427,613)
----------- -------------
Net decrease in shares
outstanding...................... (261,802) $ (3,805,867)
----------- -------------
----------- -------------
Year ended September 30, 1995:
Shares sold........................ 14,302,262 $ 168,922,003
Shares issued in reinvestment of
distributions.................... 2,601,937 26,773,935
Shares reacquired.................. (16,720,969) (196,352,189)
----------- -------------
Net increase in shares outstanding
before conversion................ 183,230 (656,251)
Shares reacquired upon conversion
into Class A..................... (8,999,868) (97,904,973)
----------- -------------
Net decrease in shares
outstanding...................... (8,816,638) $ (98,561,224)
----------- -------------
----------- -------------
</TABLE>
- --------------------------------------------------------------------------------
11 -----
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY
Notes to Financial Statements (Unaudited) FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Shares Amount
- ----------------------------------- ----------- -------------
<S> <C> <C>
Six months ended March 31, 1996:
Shares sold........................ 165,030 $ 2,110,268
Shares issued in reinvestment of
distributions.................... 7,340 91,898
Shares reacquired.................. (87,252) (1,100,238)
----------- -------------
Net increase in shares
outstanding...................... 85,118 $ 1,101,928
----------- -------------
----------- -------------
Year ended September 30, 1995:
Shares sold........................ 129,738 $ 1,540,377
Shares issued in reinvestment of
distributions.................... 2,254 23,189
Shares reacquired.................. (40,456) (475,424)
----------- -------------
Net increase in shares
outstanding...................... 91,536 $ 1,088,142
----------- -------------
----------- -------------
<CAPTION>
Class Z
- -----------------------------------
<S> <C> <C>
March 1, 1996(a) through March 31,
1996:
Shares sold........................ 4,735,757 $ 64,831,228
Shares reacquired.................. (139,536) (1,916,136)
----------- -------------
Net increase in shares
outstanding...................... 4,596,221 $ 62,915,092
----------- -------------
----------- -------------
</TABLE>
- ---------------
(a) Commencement of offering of Class Z shares.
- --------------------------------------------------------------------------------
- -----12
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY
Financial Highlights (Unaudited) FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
- ------------------------------------------------------------------------
<S> <C> <C> <C>
<C> <C> <C>
Six Months
Ended
Year Ended September 30,
March 31,
- ---------------------------------------------------------
1996(a) 1995(a)
1994(a) 1993(a) 1992(a) 1991
---------- --------
- -------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 14.18 $ 12.40 $
13.06 $ 11.25 $ 10.16 $ 7.36
---------- --------
- -------- ------- ------- -------
Income from investment operations
Net investment income..................... .02 .05 --
.03 .02 .05
Net realized and unrealized gain on
investment transactions................ .41 2.57
.13 3.14 1.47 2.82
---------- --------
- -------- ------- ------- -------
Total from investment operations....... .43 2.62
.13 3.17 1.49 2.87
---------- --------
- -------- ------- ------- -------
Less distributions
Dividends from net investment income...... -- -- --
-- -- (.07)
Distributions from net realized capital
gains.................................. (.67) (.84)
(.79) (1.36) (.40) --
---------- --------
- -------- ------- ------- -------
Total distributions.................... (.67) (.84)
(.79) (1.36) (.40) (.07)
---------- --------
- -------- ------- ------- -------
Net asset value, end of period............ $ 13.94 $ 14.18 $
12.40 $ 13.06 $ 11.25 $ 10.16
---------- --------
- -------- ------- ------- -------
---------- --------
- -------- ------- ------- -------
TOTAL RETURN(b):.......................... 3.31% 23.29%
1.13% 30.42% 15.39% 39.39%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $201,738 $242,231
$103,078 $94,842 $44,845 $25,165
Average net assets (000).................. $232,867 $174,449 $
97,877 $69,801 $36,011 $20,650
Ratios to average net assets:
Expenses, including distribution
fees................................ 1.24%(c) 1.33%
1.33% 1.17% 1.33% 1.50%
Expenses, excluding distribution
fees................................ .99%(c) 1.08%
1.09% .97% 1.13% 1.30%
Net investment income.................. .32%(c) .30%
.00% .26% .19% .59%
For Class A, B, C and Z shares:
Portfolio turnover..................... 17% 64%
82% 68% 99% 111%
Average commission rate paid per
share............................... $ .0563 N/A
N/A N/A N/A N/A
</TABLE>
- ---------------
(a) Calculated based upon weighted average shares outstanding during the
period.
(b) Total return does not consider the effects of sales loads. Total return
is calculated assuming a purchase of shares on the first day and a sale on
the last day of each period reported and includes reinvestment of dividends
and distributions. Total returns for periods of less than a full year are
not annualized.
(c) Annualized
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13 -----
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY
Financial Highlights (Unaudited) FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
<C> <C> <C>
Six Months
Ended
Year Ended September 30,
March 31,
- ------------------------------------------------------------
1996(a) 1995(a)
1994(a) 1993(a) 1992(a) 1991
---------- --------
- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 13.56 $ 11.99 $
12.74 $ 11.08 $ 10.11 $ 7.34
---------- --------
- -------- -------- -------- --------
Income from investment operations
Net investment loss....................... (.03) (.06)
(.09) (.06) (.07) (.02)
Net realized and unrealized gain on
investment transactions................ .39 2.47
.13 3.08 1.44 2.82
---------- --------
- -------- -------- -------- --------
Total from investment operations....... .36 2.41
.04 3.02 1.37 2.80
---------- --------
- -------- -------- -------- --------
Less distributions
Dividends from net investment income...... -- -- --
-- -- (.03)
Distributions from net realized capital
gains.................................. (.67) (.84)
(.79) (1.36) (.40) --
---------- --------
- -------- -------- -------- --------
Total distributions.................... (.67) (.84)
(.79) (1.36) (.40) (.03)
---------- --------
- -------- -------- -------- --------
Net asset value, end of period............ $ 13.25 $ 13.56 $
11.99 $ 12.74 $ 11.08 $ 10.11
---------- --------
- -------- -------- -------- --------
---------- --------
- -------- -------- -------- --------
TOTAL RETURN(b):.......................... 2.93% 22.37%
.34% 29.40% 14.27% 38.33%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $350,210 $361,873
$425,502 $376,068 $172,018 $118,660
Average net assets (000).................. $345,682 $349,929
$399,920 $278,659 $154,601 $104,508
Ratios to average net assets:
Expenses, including distribution
fees................................ 1.99%(c) 2.08%
2.09% 1.97% 2.13% 2.30%
Expenses, excluding distribution
fees................................ .99%(c) 1.08%
1.09% .97% 1.13% 1.30%
Net investment loss.................... (.43)%(c) (.51)%
(.76)% (.54)% (.61)% (.21)%
</TABLE>
- ---------------
(a) Calculated based upon weighted average shares outstanding during the
period.
(b) Total return does not consider the effects of sales loads. Total return
is calculated assuming a purchase of shares on the first day and a sale
on the last day of each period reported and includes reinvestment of
dividends and distributions. Total returns for periods of less than a
full year are not annualized.
(c) Annualized.
- --------------------------------------------------------------------------------
- -----14 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL GROWTH OPPORTUNITY
Financial Highlights (Unaudited) FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
Class Z
- ----------------------------------------------------- -----------------
<S> <C> <C>
<C> <C>
August 1,
Year
1994(d)
Six Months Ended
Through March 1, 1996(e)
Ended September
30, September 30, Through
March 31, 1996(a) 1995(a)
1994(a) March 31, 1996
-----------------
- ------------- ------------- -----------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 13.56 $ 11.99
$ 11.61 $ 13.69
----- -----
----- ------
Income from investment operations
Net investment income (loss).............. (.03) (.06)
(.01) .01
Net realized and unrealized gain on
investment transactions................ .39 2.47
.39 .25
----- -----
----- ------
Total from investment operations....... .36 2.41
.38 .26
----- -----
----- ------
Less distributions
Dividends from net investment income...... -- --
-- --
Distributions from net realized capital
gains.................................. (.67) (.84)
-- --
----- -----
----- ------
Total distributions.................... (.67) (.84)
-- --
----- -----
----- ------
Net asset value, end of period............ $ 13.25 $ 13.56
$ 11.99 $ 13.95
----- -----
----- ------
----- -----
----- ------
TOTAL RETURN(b):.......................... 2.93% 22.37%
3.19% 1.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $ 2,639 $ 1,545
$ 269 $64,099
Average net assets (000).................. $ 1,917 $ 784
$ 179 $59,894
Ratios to average net assets:
Expenses, including distribution
fees................................ 1.99%(c) 2.08%
2.22%(c) .99%(c)
Expenses, excluding distribution
fees................................ .99%(c) 1.08%
1.22%(c) .99%(c)
Net investment income (loss)........... (.43)%(c) (.46)%
(.31)%(c) .57%(c)
</TABLE>
- ---------------
(a) Calculated based upon weighted average shares outstanding during the
period.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(c) Annualized.
(d) Commencement of offering of Class C shares.
(e) Commencement of offering of Class Z shares.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 15 -----
<PAGE>
Getting
The Most
From Your
Prudential
Mutual Fund
Change Your Mind.
You can exchange your shares in most Prudential Mutual Funds for shares in most
other Prudential Mutual Funds, without charges. This may be most helpful if your
investment needs change.
Reinvest Dividends Free Of Charge.
Reinvest your dividends and/or capital gains distributions automatically --
without charge.
Invest For Retirement.
There is no minimum investment for an IRA. Plus, you defer taxes on your
investment earnings by investing in an IRA.
If you'd like, you can contribute up to $2,000 a year in an IRA. If you are
married, you and your spouse (if not working outside the home) can contribute
up to $2,250 a year. (Withdrawals are taxed as ordinary income and may be
subject to a 10% penalty prior to age 59 1/2.)
Change Your Job.
You can take your pension with you. Use a rollover IRA to manage your
company-sponsored retirement plan while retaining the special tax-deferred
advantages.
Invest In Your Children.
There's no fee to open a custodial account for a child's education or other
needs.
Take Income.
Would you like to receive monthly or quarterly checks in any amount from your
fund account? Just let us know. We'll take care of it. Of course, there are
minimum amounts. And shares redeemed may be subject to tax, and Class B and C
shares may be subject to contingent deferred sales charges. We'll gladly answer
your questions.
Keep Informed.
We want to keep you up-to-date. Of course, you receive account activity
statements every quarter. But you also receive annual and semi-annual fund
reports, as well as other important updates on events that affect your
investments, including tax information.
This material is only authorized for distribution when preceded or accompanied
by a current prospectus. Read the prospectus carefully before you invest or send
money.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
(800) 225-1852
http:\\www.prudential.com
Directors
Delayne Dedrick Gold
Arthur Hauspurg
Harry A. Jacobs, Jr.
Stephen P. Munn
Richard A. Redeker
Louis A. Weil, III
Officers
Richard A. Redeker, President
David W. Drasnin, Vice President
Robert F. Gunia, Vice President
Eugene S. Stark, Treasurer
Stephen M. Ungerman, Assistant 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
Distributor
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
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
The views expressed in this report and information about the Fund's portfolio
holdings are for the period covered by this report and are subject to change
thereafter.
The accompanying financial statements as of March 31, 1996 were not audited and,
accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
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(LOGO)
BULK RATE
Prudential Mutual Funds U.S. POSTAGE
One Seaport Plaza PAID
New York, NY 10292 Permit 6807
(800) 225-1852 New York, NY
74435E109
74435E208 MF109E2
74435E307 Cat# 642000K
74435E406
