(ICON)
Prudential
Utility
Fund, Inc.
SEMI
ANNUAL
REPORT
June 30, 1995
Prudential Mutual Funds
Building Your Future
On Our StrengthSM (LOGO)
<PAGE>
Prudential Utility Fund, Inc.
Performance At A Glance.
Utility stocks posted impressive gains during the six months ended June 30,
1995. Like bonds, utility stocks generally react favorably to falling interest
rates. We are pleased to report that the Prudential Utility Fund performed in
line with the average utility mutual fund, as monitored by Lipper Analytical
Services, Inc.
<TABLE>
<CAPTION>
Cumulative Total Returns1 As of 6/30/95
Six One Five Ten Since
Months Year Years Years
Inception
<S> <C> <C> <C> <C> <C>
Class A 11.3% 11.0% 55.9% N/A 57.0%
Class B 11.0 10.4 50.0 216.9% 663.0
Class C 11.0 N/A N/A N/A 4.0
*Lipper Utility Fund Avg 11.1 12.1 57.9 159.3 694.9
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns1 As of 6/30/95
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 5.5% 8.2% 7.6%
Class B 5.4 8.3 15.8
Class C N/A N/A N/A
</TABLE>
1Source: Prudential Mutual Fund Management, Inc. and Lipper Analytical
Services, Inc. Past performance is not indicative of future results. Total
return and principal will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
The cumulative total returns do not take into account sales charges. The
average annual total returns do take into account sales charges. The Fund
charges a maximum front-end sales load of 5% for Class A shares. Class B shares
are subject to a declining contingent deferred sales charge of 5%, 4%, 3%, 2%,
1% and 1% during the first six years. Class C shares are subject to a 1-year
contingent deferred sales charge of 1%.
2Inception dates: 1/22/90, Class A; 8/10/81, Class B; 8/1/94, Class C.
*These are the average returns of 77 funds in the utility fund category for one
year; 19 funds for five years; and eight funds for ten years and five funds
since inception of the Class B shares, as determined by Lipper Analytical
Services, Inc.
(GRAPH)
Source: Lipper Analytical Services, Inc. Financial markets change, so a mutual
fund's past performance should never be used to predict future results. The
risks to each of the investments listed above are different -- we provide
12-month total returns for several Lipper mutual fund categories to show you
that reaching for higher yields means tolerating more risk. The greater the
risk, the larger the potential reward or loss. In addition, we've added
historical 20-year average annual returns to show that 1995's returns (so far)
are higher than normal. These returns assume the reinvestment of dividends.
Stock funds will fluctuate a great deal. Smaller capitalization stocks offer
greater potential for long term growth but may be more volatile than larger
capitalization stocks. Investors receive higher historical total returns from
stocks than from most other investments.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 a good deal) and their returns are
historically lower than those of stock funds.Sector or specialty stock funds
usually entail the greatest risks because they are not widely diversified. They
are designed for sophisticated investors who can tolerate additional risk in
exchange for higher potential rewards or losses.
Money market funds attempt to preserve a constant share value; they don't
fluctuate much in price but their returns are generally among the lowest of the
major investment categories.
<PAGE>
David Kiefer, Fund Manager
(PICTURE)
Portfolio
Manager's Report
The Prudential Utility Fund invests in securities of utility companies,
primarily electric, gas, gas pipeline, telephone and telecommunications, water
and cable companies, both in the U.S. and abroad. Utility investments can be
affected by government regulations, the price of fuel and environmental
factors. Foreign investments are subject to additional risks, including social,
political, economic and currency risks.
Overview
In selecting securities for the Fund, David looks for companies that he
believes will produce both above-average earnings and dividend growth over the
long term.He uses cash flow analysis as a guide for stock selection.
(GRAPH)
1. Strategy Session.
What We See Now.
Some of the most exciting investment opportunities in the utility market today
can be found in natural gas, telecommunications and non-U.S. utility stocks. We
believe these stocks have greater long-term appreciation potential than U.S.
electric utilities. Natural gas stocks present on-going opportunities as the
environmentally-popular fuel of the future -- about 33% of net assets are
invested here or in related industries. Telecommunications stocks (24.4% of net
assets) continue to show strong sales growth. Many non-U.S. utilities are
attractive because some overseas utilities markets are growing faster than in
the U.S. Approximately one-quarter of the Fund is invested in non-U.S.
utilities.
We believe increasing competition has made the outlook for U.S. electric
utilities less favorable than it is for these other areas. Therefore, less than
one-third of the Fund is invested in U.S. electric utilities. However, we do
believe some low-cost U.S. electric utilities will be able to do well in this
changing market, and we are seeking select opportunities here.
2. What Went Well.
Telecommunications
Ring True.
Telecommunications firms, including local, long distance and cellular telephone
companies, continue to enjoy explosive growth both in the U.S. and overseas, as
consumers and businesses demand more and better communication services.
Overseas, telecommunications firms are expanding rapidly as they bring
traditional phone services and cellular phone networks to previously
under-served areas of the world. Within the U.S., opportunities abound as
demand increases for data transfer and other services transporting information
over phone lines. The Fund's emphasis (24.4% of net assets) in
telecommunications paid off, especially in strong-performing U.S. regional
carriers BellSouth and Bell Atlantic and long-distance provider MCI
Communications.
Natural Gas Rises.
Last winter, natural gas prices were hurt by an oversupply after unusually warm
weather. Despite this temporary setback, we maintained our confidence in the
natural gas sector. Our patience was rewarded. Natural gas stocks recovered in
late spring as supply levels fell and gas prices rose. Particularly strong
performers included Panhandle Eastern, a natural gas pipeline company operating
in the Southeastern U.S., and Columbia Gas a U.S. gas pipeline company with a
positive turnaround story.
3. And Not So Well.
There's No Place Like Home.
The U.S. boasted the world's strongest stock market the first half of the year
and international stocks performed worse than their U.S. counterparts. In
addition to international stocks' generally weaker performance, some of our
non-U.S. holdings were further hurt by currency fluctuations and the rebound of
the U.S. dollar. Disappointments in this area included Empresa Nacional de
Electricidad S.A., the Spanish electric utility. The company struggled early in
the year, hurt by the Spanish peseta's weakness versus the strong German mark
and, to a lesser extent, the U.S. dollar. Recently, the peseta has stabilized
and the utility's performance has improved.
U.S. Electric Utilities Trailed the Market.
While U.S. electric utilities made
a significant turnaround after their poor performance last year, their
performance trailed the general market for the first half of 1995. The broad
market, as represented by the Standard & Poor's 500, gained 20.2%, compared to
the S&P Utility Index's gain of 15.1%. While the Fund maintains a smaller
position in U.S. electric utilities than many other utility funds, its 25%
position as of June 30, 1995, was still large enough to hold back performance.
4. Looking Ahead.
With the utility industry undergoing profound long-term changes, utility stocks
may face considerably tougher conditions than in the past. However, as long as
the world needs the electric, gas, and telephone services that utility
companies provide, utility stocks and utility mutual funds may continue to
offer additional current income for conservative investors.
Five Largest
Equity Holdings*
3.4% Sonat
Natural gas.
3.3% Panhandle Eastern
Natural gas.
3.0% Coastal
Natural gas.
2.9% Williams
Natural gas.
2.6% Transcanada Pipe
Natural gas.
* Expressed as a percentage of total net assets.
1
<PAGE>
President's Letter July 31, 1995
(PICTURE)
Dear Shareholder:
You've probably noticed your shareholder report looks different this month.
We've designed it to provide clear, concise and forthright information about
your investment, its performance, risks and potential rewards. And, from time
to time, I'll share some thoughts with you about the industry, mutual fund
trends and how we're responding to them at Prudential Mutual Funds.
On The Hill
One recent trend we like is part of the "Contract with America." It's called
the American Dream Savings Account and it was approved by the House of
Representatives earlier in the year. The Senate has now taken up the proposal,
which would improve the traditional Individual Retirement Account program by
allowing higher non-working spouse contributions. The proposed law would also
allow tax-free and penalty-free withdrawals from the account before age 59 1/2,
for certain expenses. Prudential Mutual Funds supports the proposal and we urge
you to share your opinion about it with your Senator. You can reach your
Senator's office by calling 202-224-3121.
In Closing
One final note: if you're a Class B shareholder, you'll begin noticing a change
on your statements once you've held your shares for seven years. At that time
they will automatically begin to convert to Class A shares on a quarterly
basis. Since Class A shares carry lower annual distribution charges than Class
B shares, your total returns will automatically rise after the conversion.
Conversions started earlier this year and will occur each calendar quarter --
beginning in December, 1995, they'll take place every March, June, September
and December.
I hope you'll find this information useful as you work with your financial
advisor or registered representative to develop your personal investment plan.
Thank you for choosing Prudential Mutual Funds for your mutual fund investment.
Sincerely,
Richard A. Redeker
President
2
<PAGE>
Portfolio of Investments as of PRUDENTIAL UTILITY FUND
June 30, 1995 (Unaudited)
------------------------------------------------------------
------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
LONG-TERM INVESTMENTS--96.9%
COMMON STOCKS--92.6%
------------------------------------------------------------
Communications--24.4%
1,500,000 AirTouch Communications, Inc.(a) $ 42,750,000
1,152,200 AT&T Corp. 61,210,625
469,800 BCE Inc. 15,092,325
360,000 Bell Atlantic Corp. 20,160,000
850,100 BellSouth Corp. 53,981,350
330,000 Frontier Corporation 7,920,000
3,060,900 MCI Communications Corp. 67,339,800
2,403,300 NYNEX Corp. 96,732,825
398,000 Philippine Long Distance Telephone
Co. (ADR) (The Philippines) 25,621,250
603,700 Portugal Telecommunications, S.A.
(ADR) (Portugal) 11,470,300
79,100 PT Indonesian Satellite (ADR)
(Indonesia)(a) 3,025,575
2,019,200 Southern New England
Telecommunications, Corp. 71,176,800
1,919,300 Sprint Corp. 64,536,462
19,500,000 Stet-Societa Finanziaria
Telefonica S.P.A. (Italy) 54,179,927
1,991,700 Tele Danmark (ADR) (Denmark) 55,767,600
573,400 Telebras (ADR) (Brazil) 18,922,200
17,700,000 Telecom Italia S.P.A. (Italy) 47,900,490
2,474,000 Telefonica de Espana, S.A. (ADR)
(Spain) 95,867,500
1,261,500 Telefonos de Mexico, S.A. (ADR)
(Mexico) 37,371,938
2,453,700 US West, Inc. 102,135,262
---------------
953,162,229
------------------------------------------------------------
Electric Power--34.0%
1,558,927 AES Corp.(a) 29,619,613
1,000,000 California Energy Company, Inc.(a) 16,375,000
1,033,400 Central Louisiana Electric
Company, Inc. 24,284,900
1,241,600 Central Maine Power Co. 14,744,000
3,532,685 Cinergy Corporation 92,732,981
3,058,000 CMS Energy Corporation $ 75,303,250
948,202 Companhia Energetica de Minas
Gerais-Cemig (ADR) (Brazil) (a) 18,726,990
17,779,000 Consolidated Electric Power (Hong
Kong) 41,243,383
63,200 Destec Energy, Inc.(a) 813,700
1,326,700 DPL Inc. 29,353,237
896,300 Eastern Utilities Associates 20,278,788
1,649,700 El Paso Electric Company (a)/(b) 927,956
1,247,700 Empresa Nacional de Electricidad
S.A. (ADR) (Spain) 61,449,225
3,170,702 Entergy Corporation 76,493,186
381,000 Evn Energie - Versorgung
Niederoesterreich AG (Austria) 53,238,296
1,330,300 General Public Utilities
Corporation 39,576,425
420,000 Huaneng Power International Inc.
(ADR) (China) (a) 7,717,500
9,831,000 Iberdrola (Spain) 74,159,404
3,313,200 Illinova Corp. 84,072,450
1,610,600 KENETECH Corp.(a) 18,924,550
344,300 Long Island Lighting Co. 5,336,650
6,000,000 National Power PLC (United
Kingdom) 42,509,444
1,622,600 New York State Electric & Gas
Corp. 37,928,275
1,385,600 Niagara Mohawk Power Corp. 20,437,600
967,000 NIPSCO Industries, Inc. 32,878,000
1,873,900 Northeast Utilities Co. 42,162,750
669,000 Oester Elektrizita (Austria) 49,041,684
2,651,200 Peco Energy Co. 73,239,400
2,303,400 Pinnacle West Capital Corp. 56,433,300
500,000 PowerGen PLC (United Kingdom) 3,841,311
2,057,000 Public Service Company of New
Mexico(a) 29,312,250
655,200 Public Service Enterprise Inc. 18,181,800
1,098,100 Sithe Energies, Inc.(a) 10,706,475
3,096,800 The Southern Company 69,290,900
7,453,700 Tucson Electric Power Company(a) 23,292,812
1,180,500 Unicom Corp. 31,430,812
---------------
1,326,058,297
--------------------------------------------------------------------------------
See Notes to Financial Statements.
3
<PAGE>
<PAGE>
Portfolio of Investments as of PRUDENTIAL UTILITY FUND
June 30, 1995 (Unaudited)
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
Natural Gas--32.6%
283,650 Bay State Gas Co. $ 6,984,881
2,231,600 British Gas PLC (ADR) (United
Kingdom) 102,653,600
450,000 Burlington Resources, Inc. 16,593,750
3,826,275 Coastal Corp. 116,223,103
2,500,000 Columbia Gas System, Inc.(a)/(b) 79,375,000
329,700 Consolidated Natural Gas Co. 12,446,175
117,600 Eastern Enterprises, Inc. 3,513,300
1,714,000 El Paso Natural Gas Co. 48,849,000
500,000 Energen Corp. 10,750,000
417,900 Enron Corp. 14,678,738
3,272,300 ENSERCH Corp. 56,038,137
1,500,000 Equitable Resources, Inc. 43,312,500
690,300 KN Energy, Inc. 17,516,363
703,600 MCN Corporation 13,896,100
810,600 NICOR Inc. 21,784,875
3,148,000 Noram Energy Corporation 20,462,000
700,000 Oryx Energy Co.(a) 9,625,000
3,544,300 Pacific Enterprises 86,835,350
5,322,800 Panhandle Eastern Corporation 129,743,250
117,600 Providence Energy Corp. 1,793,400
1,880,400 Questar Corp. 54,061,500
4,307,100 Sonat, Inc. 131,366,550
205,400 Southwest Gas Corporation 2,926,950
802,500 Talisman Energy, Inc. (Canada)(a) 14,902,778
521,800 Tejas Power Corp.(a) 5,022,325
7,700,000 TransCanada Pipelines, Ltd.
(Canada) 103,038,634
2,200,000 Westcoast Energy, Inc. 32,450,000
3,232,341 Williams Cos., Inc. 112,727,892
161,150 Yankee Energy System, Inc. 3,585,588
---------------
1,273,156,739
------------------------------------------------------------
Oil Services--0.7%
990,000 Sonat Offshore Drilling, Inc. 28,462,500
------------------------------------------------------------
Realty Investment Trust--0.5%
49,700 Charles E. Smith Residential
Realty, Inc. 1,180,375
700,000 Equity Residential Property Trust 19,512,500
---------------
20,692,875
Transportation--0.4%
257,800 Flughafen Wien AG (Austria) $ 13,710,513
---------------
Total common stocks
(cost $3,148,140,425) 3,615,243,153
---------------
PREFERRED STOCK--0.2%
------------------------------------------------------------
Electric Power--0.2%
440,000 KENETECH Corp., Convertible, $2.18
(cost $8,878,321) 6,160,000
---------------
Principal
Amount
(000)
BONDS--4.1%
------------------------------------------------------------
Electric Power--1.3%
$ 5,000 Arkansas Power & Light Co.,
10.00%, 2/1/20 5,166,500
10,000 Cincinnati Gas & Electric Co.,
10.20%, 12/1/20 10,077,300
10,000 Cleveland Electric Illumination
Co.,
9.375%, 3/1/17 9,318,700
10,000 Commonwealth Edison Co.,
9.625%, 7/1/19 11,045,400
10,000 Niagara Mohawk Power Corp.,
9.50%, 3/1/21 10,443,600
5,000 Texas Utilities Co.,
9.75%, 5/1/21 5,712,250
---------------
51,763,750
------------------------------------------------------------
Natural Gas--2.8%
20,000 Arkla, Inc.,
10.00%, 11/15/19 20,822,180
Burlington Resources, Inc.,
10,000 8.50%, 10/1/01 10,898,700
15,000 9.125%, 10/1/21 17,739,750
--------------------------------------------------------------------------------
4 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL UTILITY FUND
Portfolio of Investments as of June 30, 1995 (Unaudited)
------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
Natural Gas (cont'd.)
Coastal Corp.,
$ 5,000 8.125%, 9/15/02 $ 5,262,200
15,000 9.625%, 5/15/12 17,049,450
Columbia Gas System, Inc.,(a)/(b)
2,500 10.25%, 5/1/99 3,537,500
1,031 10.25%, 8/1/11 1,546,500
1,000 10.50%, 6/1/12 1,462,500
8,180 10.15%, 11/1/13 11,942,800
Oryx Energy Co.,
2,000 9.50%, 11/1/99 2,089,940
1,000 7.50%, 5/15/14 871,500
15,000 Williams Cos., Inc.,
8.875%, 9/15/12 16,523,550
---------------
109,746,570
---------------
Total bonds
(cost $151,530,929) 161,510,320
---------------
Total long-term investments
(cost $3,308,549,675) 3,782,913,473
---------------
SHORT-TERM INVESTMENT--2.1%
------------------------------------------------------------
Commercial Paper
80,559 Chemical Bank,
6.125%, 7/3/95
(cost $80,559,000) 80,559,000
---------------
------------------------------------------------------------
Total Investments--99.0%
(cost $3,389,108,675; Note 4) 3,863,472,473
Other assets in excess of
liabilities--1.0% 39,575,654
---------------
Net Assets--100% $ 3,903,048,127
---------------
---------------
</TABLE>
---------------
(a) Non-income producing securities.
(b) Issuer in bankruptcy.
ADR--American Depository Receipt.
--------------------------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
<PAGE>
Statement of Assets and Liabilities (Unaudited) PRUDENTIAL UTILITY FUND
-------------------------------------------------------------------------------
<TABLE>
<S>
<C>
Assets
June 30, 1995
Investments, at value (cost
$3,389,108,675).................................................................
$3,863,472,473
Foreign currency, at value (cost
$1,123,853)................................................................
1,134,751
Receivable for investments
sold.........................................................................
.... 32,772,843
Dividends and interest
receivable...................................................................
........ 21,383,242
Receivable for Fund shares
sold.........................................................................
.... 1,859,918
Deferred expenses and other
assets..........................................................................
119,896
--------------
Total
assets.......................................................................
...................... 3,920,743,123
--------------
Liabilities
Payable for Fund shares
reacquired...................................................................
....... 6,843,701
Payable for investments
purchased....................................................................
....... 4,982,359
Distribution fee
payable......................................................................
.............. 2,262,724
Withholding taxes
payable......................................................................
............. 1,434,362
Management fee
payable......................................................................
................ 1,327,445
Accrued expenses and other
liabilities..................................................................
.... 844,405
--------------
Total
liabilities..................................................................
...................... 17,694,996
--------------
Net
Assets.......................................................................
........................... $3,903,048,127
--------------
--------------
Net assets were comprised of:
Common stock, at
par..........................................................................
........... $ 4,313,171
Paid-in capital in excess of
par.........................................................................
3,207,303,998
--------------
3,211,617,169
Undistributed net investment
income......................................................................
215,988,811
Accumulated net realized gain on investment and foreign currency
transactions............................ 1,003,964
Net unrealized appreciation on investments and foreign
currencies........................................ 474,438,183
--------------
Net assets, June 30,
1995.........................................................................
.......... $3,903,048,127
--------------
--------------
Class A:
Net asset value and redemption price per share
($1,565,099,954 / 172,911,685 shares of common stock issued and
outstanding).......................... $9.05
Maximum sales charge (5.00% of offering
price)...........................................................
.48
Maximum offering price to
public.........................................................................
$9.53
Class B:
Net asset value, offering price and redemption price per share
($2,335,617,029 / 258,147,744 shares of common stock issued and
outstanding).......................... $9.05
Class C:
Net asset value, offering price and redemption price per share
($2,331,144 / 257,656 shares of common stock issued and
outstanding).................................. $9.05
</TABLE>
--------------------------------------------------------------------------------
6 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL UTILITY FUND
Statement of Operations (Unaudited)
------------------------------------------------------------
------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
Net Investment Income 1995
------------
<S> <C>
Income
Dividends (net of foreign withholding taxes
of $2,917,313).......................... $ 71,169,923
Interest................................... 11,696,502
------------
Total income............................ 82,866,425
------------
Expenses
Distribution fee--Class A.................. 1,577,203
Distribution fee--Class B.................. 12,771,060
Distribution fee--Class C.................. 7,588
Management fee............................. 7,858,350
Transfer agent's fees and expenses......... 3,350,000
Reports to shareholders.................... 490,000
Custodian's fees and expenses.............. 412,000
Registration fees.......................... 74,000
Insurance.................................. 64,000
Legal fees................................. 35,000
Audit fee.................................. 31,000
Directors' fees............................ 22,000
Miscellaneous.............................. 19,493
------------
Total expenses.......................... 26,711,694
------------
Net investment income......................... 56,154,731
------------
Realized and Unrealized Gain on Investments
and Foreign Currency Transactions
Net realized gain on:
Investment transactions.................... 8,740,950
Foreign currency transactions.............. 147,139
------------
8,888,089
------------
Net change in unrealized appreciation on:
Investments................................ 339,103,010
Foreign currencies......................... 64,566
------------
339,167,576
------------
Net gain on investments and foreign
currencies................................. 348,055,665
------------
Net Increase in Net Assets Resulting from
Operations.................................... $404,210,396
------------
------------
</TABLE>
PRUDENTIAL UTILITY FUND
Statement of Changes in Net Assets (Unaudited)
------------------------------------------------------------
------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Increase (Decrease) Ended Year Ended
in Net Assets June 30, 1995 December 31, 1994
<S> <C> <C>
Operations
Net investment income... $ 56,154,731 $ 118,842,157
Net realized gain on
investments and
foreign currency
transactions......... 8,888,089 138,119,307
Net change in unrealized
appreciation of
investments and
foreign currencies... 339,167,576 (647,224,068)
--------------- -----------------
Net increase (decrease)
in net assets
resulting from
operations........... 404,210,396 (390,262,604)
--------------- -----------------
Net equalization debits.... (147,142,612) (57,041,187)
--------------- -----------------
Dividends and distributions
(Note 1)
Dividends to
shareholders from net
investment income
Class A.............. (26,078,048) (9,948,533)
Class B.............. (29,114,164) (105,699,604)
Class C.............. (22,939) (7,937)
--------------- -----------------
(55,215,151) (115,656,074)
--------------- -----------------
Distributions to
shareholders from net
realized gains
Class A.............. -- (10,711,271)
Class B.............. -- (150,769,531)
Class C.............. -- (22,563)
--------------- -----------------
-- (161,503,365)
--------------- -----------------
Distributions to
shareholders in
excess of net
realized gains
Class A.............. -- (501,648)
Class B.............. -- (7,061,091)
Class C.............. -- (1,057)
--------------- -----------------
-- (7,563,796)
--------------- -----------------
Fund share transactions (net of
share conversions) (Note 5)
Proceeds from shares
sold................. 173,773,134 467,562,860
Net asset value of
shares issued in
reinvestment of
dividends and
distributions........ 47,379,248 237,969,009
Cost of shares
reacquired........... (301,031,833) (1,284,670,198)
--------------- -----------------
Net decrease in net
assets from Fund
share transactions... (79,879,451) (579,138,329)
--------------- -----------------
Total increase
(decrease).............. 121,973,182 (1,311,165,355)
Net Assets
Beginning of period........ 3,781,074,945 5,092,240,300
--------------- -----------------
End of period.............. $ 3,903,048,127 $ 3,781,074,945
--------------- -----------------
--------------- -----------------
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL UTILITY FUND
-------------------------------------------------------------------------------
Prudential Utility Fund (the ``Fund'') is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
Its investment objective is to seek high current income and moderate capital
appreciation through investment in equity and debt securities of utility
companies. Utility companies include electric, gas, gas pipeline, telephone,
telecommunications, water and cable companies. The ability of issuers of certain
debt securities held by the Fund to meet their obligations may be affected by
economic developments in a specific industry or region.
------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Securities Valuation: Investments 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.
Short-term securities which mature in more than 60 days are valued based on
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost.
In connection with 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, 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.
Foreign Currency Translation: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and liabilities--at the
closing daily rate of exchange;
(ii) purchases and sales of investment securities, income and expenses--at the
rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates
and market values at the close of the period, the Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of securities held at the end of the period. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of portfolio securities sold during
the period.
Net realized gains on foreign currency transactions represent net foreign
exchange gains from sales and maturities of short-term securities, disposition
of foreign currency, gains or losses realized between the trade and settlement
dates of security transactions, and the difference between amounts of dividends,
interest and foreign withholding taxes recorded on the Fund's books and the US
dollar equivalent amounts actually received or paid. Net currency gains and
losses from valuing foreign currency denominated assets, except portfolio
securities, and liabilities at period end exchange rates are reflected as a
component of unrealized appreciation or depreciation on foreign currencies.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin as a result of,
among other factors, the possibility of political and economic instability and
the level of governmental supervision and regulation of foreign securities
markets.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
and foreign currencies are calculated on the identified cost basis. Dividend
income is recorded on the ex-dividend date; interest income is recorded on the
accrual basis. The Fund amortizes discounts on purchases of portfolio securities
as adjustments to interest income.
Net investment income (other than distribution fees) and unrealized and realized
gains or losses are allocated daily to each class of shares based upon the
relative proportion of net assets of each class at the beginning of the day.
Dividends and Distributions: Dividends from net investment income are declared
and paid quarterly. The Fund will distribute at least annually any net capital
gains in excess of loss carryforwards. 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.
--------------------------------------------------------------------------------
8
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL UTILITY FUND
-------------------------------------------------------------------------------
Equalization: The Fund follows the accounting practice known as equalization by
which a portion of the proceeds from sales and costs of reacquisitions of shares
of common stock, equivalent on a per share basis to the amount of undistributed
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.
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.
Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to increase undistributed net investment income by $147,139
and decrease accumulated net realized gain on investments and foreign currency
transactions by $147,139 for realized foreign currency gains realized during the
six months ended June 30, 1995. 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.
Pursuant to a subadvisory agreement between PMF and 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 cost of 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 .60% of the Fund's average daily net assets up to $250 million, .50% of
the next $500 million, .45% of the next $750 million, .40% of the next $500
million, .35% of the next $2 billion, .325% of the next $2 billion and .30% of
the average daily net assets of the Fund in excess of $6 billion.
The Fund has distribution agreements with Prudential Mutual Fund Distributors,
Inc. (``PMFD''), which acts as the distributor of the Class A shares of the
Fund, and with Prudential Securities Incorporated (``PSI''), which acts as
distributor of the Class B and Class C shares of the Fund (collectively, the
``Distributors''). The Fund compensates the Distributors for distributing and
servicing the Fund's Class A, Class B and Class C shares, pursuant to plans of
distribution (the ``Class A, B and C Plans''), 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 the Distributors
for distribution-related activities at an annual rate of up to .30 of 1%, 1% and
1% of the average daily net assets of the Class A, B and C shares, respectively.
Such expenses under the Plans were .25 of 1%, 1% and 1% of the average daily net
assets of the Class A, B and C shares, respectively, for the six months ended
June 30, 1995.
PMFD has advised the Fund that it has received approximately $350,600 in
front-end sales charges resulting from sales of Class A shares during the six
months ended June 30, 1995. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salespersons and
incurred other distribution costs.
PSI advised the Fund that for the six months ended June 30, 1995, it received
approximately $3,679,900 in contingent deferred sales charges imposed upon
redemptions by certain Class B and Class C shareholders.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
------------------------------------------------------------
Note 3. Other 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 June 30,
1995, the Fund incurred fees of approximately $2,609,000 for the services of
PMFS. As of June 30, 1995, approximately $430,000 of such fees were due to PMFS.
Transfer agent fees and expenses in the Statement of Operations also include
certain out-of-pocket expenses paid to non-affiliates.
For the six months ended June 30, 1995, PSI earned approximately $71,700 in
brokerage commissions from portfolio transactions executed on behalf of the
Fund.
--------------------------------------------------------------------------------
9
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL UTILITY FUND
-------------------------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the six months ended June 30, 1995, were $280,062,528 and $471,745,445,
respectively.
The federal income tax basis of the Fund's investments at June 30, 1995 was
$3,391,100,389 and, accordingly, net unrealized appreciation for federal income
tax purposes was $472,372,084 (gross unrealized appreciation--$599,420,626;
gross unrealized depreciation--$127,048,542).
The Fund elected to treat approximately $6,919,000 of net capital losses and
approximately $11,800 of net currency losses incurred during the two month
period ended December 31, 1994 as having incurred in the current fiscal year.
------------------------------------------------------------
Note 5. Capital
The Fund currently offers Class A, Class B and Class C shares. Class A shares
are sold with a front-end sales charge of up to 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
automatically convert to Class A shares on a quarterly basis approximately seven
years after purchase.
There are 2 billion shares of $.01 par value per share common stock authorized
which consists of 566,666,666 shares of Class A common stock, 866,666,667 shares
of Class B common stock and 566,666,667 shares of Class C common stock.
Transactions in shares of common stock for the six months ended June 30, 1995
and the fiscal year ended December 31, 1994 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
-------------------------------- ------------ ---------------
<S> <C> <C>
Six months ended June 30, 1995:
Shares sold..................... 6,406,938 $ 55,399,687
Shares issued in reinvestment of
dividends..................... 2,704,786 23,508,065
Shares reacquired............... (17,925,924) (156,117,155)
------------ ---------------
Net decrease in shares
outstanding before
conversion.................... (8,814,200) (77,209,403)
Shares issued upon conversion
from Class B.................. 151,039,194 1,293,950,381
------------ ---------------
Net increase in shares
outstanding................... 142,224,994 $ 1,216,740,978
------------ ---------------
------------ ---------------
Year ended December 31, 1994:
Shares sold..................... 9,835,226 $ 90,667,332
Shares issued in reinvestment of
dividends and distributions... 2,285,997 19,666,231
Shares reacquired............... (16,079,665) (148,287,334)
------------ ---------------
Net decrease in shares
outstanding................... (3,958,442) $ (37,953,771)
------------ ---------------
------------ ---------------
Class B
--------------------------------
Six months ended June 30, 1995:
Shares sold..................... 15,112,710 $ 116,864,878
Shares issued in reinvestment of
dividends..................... 3,045,895 23,851,027
Shares reacquired............... (35,734,803) (144,789,362)
------------ ---------------
Net decrease in shares
outstanding before
conversion.................... (17,576,198) (4,073,457)
Shares reacquired upon
conversion into Class A....... (151,389,263) (1,293,950,381)
------------ ---------------
Net decrease in shares
outstanding................... (168,965,461) $(1,298,023,838)
------------ ---------------
------------ ---------------
Year ended December 31, 1994:
Shares sold..................... 44,735,679 $ 376,053,154
Shares issued in reinvestment of
dividends and distributions... 28,031,504 218,274,190
Shares reacquired............... (136,533,323) (1,136,361,083)
------------ ---------------
Net decrease in shares
outstanding................... (63,766,140) $ (542,033,739)
------------ ---------------
------------ ---------------
</TABLE>
--------------------------------------------------------------------------------
10
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL UTILITY FUND
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Shares Amount
-------------------------------- ------------ ---------------
<S> <C> <C>
Six months ended June 30, 1995:
Shares sold..................... 174,590 $ 1,508,569
Shares issued in reinvestment of
dividends..................... 2,299 20,156
Shares reacquired............... (14,523) (125,316)
------------ ---------------
Net increase in shares
outstanding................... 162,366 $ 1,403,409
------------ ---------------
------------ ---------------
August 1, 1994* through
December 31, 1994:
Shares sold..................... 94,343 $ 842,374
Shares issued in reinvestment of
dividends and distributions... 3,437 28,588
Shares reacquired............... (2,490) (21,781)
------------ ---------------
Net increase in shares
outstanding................... 95,290 $ 849,181
------------ ---------------
------------ ---------------
</TABLE>
---------------
* Commencement of offering of Class C shares.
------------------------------------------------------------
Note 6. Contingency
On October 12, 1993, a lawsuit was instituted against the Fund, PMF, PIC, PSI
and certain current and former directors of the Fund. The suit was brought on
behalf of the Fund and purportedly on behalf of a class of shareholders who
purchased their shares prior to 1985. The plaintiff sought damages on behalf of
the Fund under Section 36(b) of the Investment Company Act (the ``Act'') in an
unspecified amount for alleged excessive management and distribution fees paid
to PMF and PSI. The complaint also challenges the Alternative Purchase Plan (the
``Plan'') that was implemented in January 1990 pursuant to a shareholder vote
and that provided for the creation of two classes of Fund shares. The plaintiff,
on behalf of the purported class, sought damages and equitable relief under the
Act and state common law against the Fund, PMF, PSI and certain named directors
of the Fund to change the classification of the shares of the class and to
compel a further vote on the Plan. On August 5, 1994, the United States District
Court for the Southern District of New York dismissed all of the claims in the
complaint except 1) the claims under Section 36(b) of the Act for excessive fees
and 2) the state law claim for breach of fiduciary duty in connection with the
adoption of the Plan. On July 31, 1995, the District Court issued a Preliminary
Order approving the terms of a proposed settlement of this action. As part of
the settlement, the Fund will agree not to increase management fee rates and
Class B distribution fee rates for a period of two years. A hearing on the
proposed settlement is scheduled to take place on October 5, 1995.
--------------------------------------------------------------------------------
11
<PAGE>
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL UTILITY FUND
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------------------
January 22,
Six Months
1990(b)
Ended Year
Ended December 31, Through
June 30,
--------------------------------------- December 31,
1995 1994
1993 1992 1991 1990
<S> <C> <C> <C>
<C> <C> <C>
----------- ------
------ ------ ------ ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 8.27 $ 9.72 $
8.97 $ 8.72 $ 7.63 $ 8.65
----- ------
------ ------ ------ ------------
Income from investment operations
Net investment income......................... .16 .31
.33 .38 .39 .36
Net realized and unrealized gains (losses) on
investment and foreign currency
transactions................................ .77 (1.06)
1.12 .45 1.10 (.38)
----- ------
------ ------ ------ ------------
Total from investment operations............ .93 (.75)
1.45 .83 1.49 (.02)
----- ------
------ ------ ------ ------------
Less distributions
Dividends from net investment income.......... (.15) (.32)
(.29) (.34) (.39) (.40)
Distributions from net realized gains......... -- (.36)
(.41) (.24) (.01) (.60)
Distributions in excess of net realized
gains....................................... -- (.02)
-- -- -- --
----- ------
------ ------ ------ ------------
Total distributions......................... (.15) (.70)
(.70) (.58) (.40) (1.00)
----- ------
------ ------ ------ ------------
Net asset value, end of period................ $ 9.05 $ 8.27 $
9.72 $ 8.97 $ 8.72 $ 7.63
----- ------
------ ------ ------ ------------
----- ------
------ ------ ------ ------------
TOTAL RETURN(c)............................... 11.33% (7.89)%
16.28% 9.88% 19.95% (0.11)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000,000)........... $1,565 $254
$337 $201 $111 $73
Average net assets (000,000).................. $1,272 $294
$287 $149 $85 $51
Ratios to average net assets:
Expenses, including distribution fees....... .90%(a) .88%
.80% .81% .87% .97%(a)
Expenses, excluding distribution fees....... .65%(a) .63%
.60% .61% .67% .77%(a)
Net investment income....................... 3.44%(a) 3.37%
3.16% 4.14% 4.69% 4.78%(a)
Portfolio turnover rate....................... 8% 15%
24% 24% 38% 53%
</TABLE>
---------------
(a) Annualized.
(b) Commencement of offering of Class A shares.
(c) Total return does not consider the effects of sales loads. Total return
is calculated assuming a purchase of shares on the first day and a sale
on the last day of each period reported and includes reinvestment of
dividends and distributions. Total return for periods of less than one
full year are not annualized.
--------------------------------------------------------------------------------
12 See Notes to Financial Statements.
<PAGE>
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL UTILITY FUND
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
------------------------------------------------------------------
-----------
Six Months
Six Months
Ended Year
Ended December 31, Ended
June 30,
-------------------------------------------------- June 30,
1995 1994 1993
1992 1991 1990 1995
> <C> <C> <C>
<C> <C> <C> <C>
----------- ------ ------
------ ------ ------ -----------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 8.26 $ 9.69 $ 8.96
$ 8.71 $7.638 $ 9.17 $ 8.26
----- ------ ------
------ ------ ------ -----------
Income from investment operations:
Net investment income......................... .12 .24 .24
.31 .32 .31 .12
Net realized and unrealized gains (losses) on
investment and foreign currency
transactions................................ .78 (1.05) 1.12
.46 1.10 (.91) .78
----- ------ ------
------ ------ ------ -----------
Total from investment operations............ .90 (.81) 1.36
.77 1.42 (.60) .90
----- ------ ------
------ ------ ------ -----------
Less distributions:
Dividends from net investment income.......... (.11) (.24) (.22)
(.28) (.33) (.34) (.11)
Distributions from net realized gains......... -- (.36) (.41)
(.24) (.01) (.60) --
Distributions in excess of net realized
gains....................................... -- (.02) --
-- -- -- --
----- ------ ------
------ ------ ------ -----------
Total distributions......................... (.11) (.62) (.63)
(.52) (.34) (.94) (.11)
----- ------ ------
------ ------ ------ -----------
Net asset value, end of period................ $ 9.05 $ 8.26 $ 9.69
$ 8.96 $ 8.71 $ 7.63 $ 9.05
----- ------ ------
------ ------ ------ -----------
----- ------ ------
------ ------ ------ -----------
TOTAL RETURN(c)............................... 10.96% (8.51)% 15.27%
9.02% 19.01% (6.48)% 10.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000,000)........... $2,336 $3,526 $4,756
$3,438 $2,818 $2,395 $2,331(d)
Average net assets (000,000).................. $2,575 $4,152 $4,308
$3,027 $2,529 $2,315 $1,530(d)
Ratios to average net assets:
Expenses, including distribution fees....... 1.65%(a) 1.63% 1.60%
1.61% 1.67% 1.73% 1.65%(a)
Expenses, excluding distribution fees....... .65%(a) .63% .60%
.61% .67% .74% .65%(a)
Net investment income....................... 2.69%(a) 2.62% 2.36%
3.34% 3.89% 3.94% 2.69%(a)
Portfolio turnover rate....................... 8% 15% 24%
24% 38% 53% 8%
<CAPTION>
August 1,
1994(b)
Through
December
31,1994
<S> <C>
------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 9.30
------------
Income from investment operations:
Net investment income......................... .11
Net realized and unrealized gains (losses) on
investment and foreign currency
transactions................................ (.69)
------------
Total from investment operations............ (.58)
------------
Less distributions:
Dividends from net investment income.......... (.13)
Distributions from net realized gains......... (.31)
Distributions in excess of net realized
gains....................................... (.02)
------------
Total distributions......................... (.46)
------------
Net asset value, end of period................ $ 8.26
------------
------------
TOTAL RETURN(c)............................... (6.27)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000,000)........... $787(d)
Average net assets (000,000).................. $433(d)
Ratios to average net assets:
Expenses, including distribution fees....... 1.70%(a)
Expenses, excluding distribution fees....... .70%(a)
Net investment income....................... 2.65%(a)
Portfolio turnover rate....................... 15%
</TABLE>
---------------
(a) Annualized.
(b) Commencement of offering of Class C shares.
(c) Total return does not consider the effects of sales loads. Total return
is calculated assuming a purchase of shares on the first day and a sale
on the last day of each period reported and includes reinvestment of
dividends and distributions. Total return for periods of less than one
full year are not annualized.
(d) Figures are rounded to the nearest thousand.
--------------------------------------------------------------------------------
See Notes to Financial Statements.
13
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
Directors
Thomas R. Anderson
Robert R. Fortune
Delayne Dedrick Gold
Harry A. Jacobs, Jr.
Thomas A. Owens, Jr.
Richard A. Redeker
Merle T. Welshans
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Eugene S. Stark, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Marguerite E.H. Morrison, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
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 accompanying financial statements as of June 30, 1995 were not audited and,
accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
<PAGE>
<PAGE>
Prudential Utility Fund, Inc. S&P 500 Index
The Prudential Utility Fund, Inc. and the S&P 500 Index:
Comparing a $10,000 Investment.
(GRAPH)
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so an investor's shares, when redeemed, will
be worth more or less than their original cost. The charts on the right are
designed to give you an idea how much the Fund's returns can fluctuate from
year to year by measuring the best and worst years in terms of total annual
return since inception of each share class.
These graphs are furnished to you in accordance with SEC regulations. They
compare a $10,000 investment in the Prudential Utility Fund (Class A, Class B
and Class C) with a similar investment in the S&P 500 Index by portraying the
initial account values at the commencement of operations of the Class A and C
shares and for 10 years for the Class B shares, and subsequent account values
at the end of this reporting period (June 30), as measured on a quarterly basis,
beginning in 1990 for Class A shares, in 1985 for Class B shares and in 1994
for Class C shares. For purposes of the graphs, and unless otherwise indicated,
in the accompanying tables it has been assumed (a) that the maximum applicable
front-end sales charge was deducted from the initial $10,000 investment in Class
A shares; (b) the maximum applicable contingent deferred sales charge was
deducted from the value of the investment in Class B and Class C shares,
assuming full redemption on June 30, 1995; (c) all recurring fees (including
management fees) were deducted; and (d) all dividends and distributions were
reinvested. Class B shares will automatically convert to Class A shares, on a
quarterly basis, beginning approximately seven years after purchase. This
conversion feature is not reflected in the graph.
The S&P 500 is a capital-weighted index, representing the aggregate market value
of the common equity of 500 stocks primarily traded on the New York Stock
Exchange. The S&P 500 is an unmanaged index and includes the reinvestment of all
dividends, but does not reflect the payment of transaction costs and advisory
fees associated with an investment in the Fund. The securities in the S&P 500
may differ substantially from the securities in the Fund. The S&P 500 is not
the only index that may be used to characterize performance of convertible bond
funds and other indexes may portray different comparative performance.
<PAGE>
Prudential Mutual Funds
Building Your Future
On Our StrengthSM (LOGO)
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One Seaport Plaza
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