(ICON)
Prudential
Utility
Fund, Inc.
SEMI
ANNUAL
REPORT
June 30, 1997
(LOGO)
<PAGE>
Prudential Utility Fund, Inc.
Performance At A Glance.
For the six months ending June 30,
1997, the Prudential Utility Fund
once
again outperformed the average
utility mutual fund, as measured by
Lipper
Analytical Services. Our
substantial international holdings,
particularly
telephone companies in Europe and
Latin America, and the improving
business
climate for utilities in both
regions, helped us lead our peer
group.
<TABLE>
<CAPTION>
Cumulative
Total
Returns1
As of 6/30/97
Six One Five Ten
Since
Months Year Years
Years Inception2
<S> <C>
<C> <C> <C> <C>
Class A
8.7% 23.0% 93.9%
N/A 135.3%
Class B
8.3 22.1 86.8
222.6% 1072.2
Class C
8.3 22.1 N/A
N/A 53.5
Class Z
8.8 23.3 N/A
N/A 30.7
Lipper Utility
Fund Avg3
7.6 13.9 74.7
182.8 ***
</TABLE>
<TABLE>
<CAPTION>
Average
Annual Total
Returns1
As of 6/30/97
One Five Ten
Since
Year Years Years
Inception2
<S>
<C> <C> <C> <C>
Class A
16.8% 13.0% N/A
11.4%
Class B
17.1 13.2 12.4%
16.5
Class C
21.1 N/A N/A
15.9
Class Z
23.3 N/A N/A
22.3
</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 Investments
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. Class Z shares are not
subject to a
sales charge or a distribution fee.
2Inception dates: Class A: 1/22/90;
Class B: 8/10/81; Class C: 8/1/94;
Class Z:
3/1/96.
3This includes all funds in
Lipper's Utility Fund average for
six months, one-,
five-, and 10-year periods.
*** Lipper Since Inception returns
are: Class A, 120.5%; Class B,
523.6%;
Class C, 44.5% and Class Z, 17.6%
for all funds in each Lipper share
class.
How Investments Compared.
(As of 6/30/97)
(GRAPH)
U.S. General General
U.S.
Growth Bond Muni Debt
Taxable
Funds Funds Funds
Money Funds
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 returns 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 have been historically
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.
<PAGE>
David A. Kiefer, Fund Manager
(POTO)
Portfolio Manager's Report
The Prudential Utility Fund invests
in stocks of utility companies,
primarily
electric, natural 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, environmental
factors,
and interest rates. Foreign
investments are subject to
additional risks
including currency, political and
social risks, and illiquidity.
There can be
no assurance that the Fund's
investment objective will be
achieved.
We're Different..
The Prudential Utility Fund is a
bit different from other utility
funds. We
look for both current income and
capital appreciation, and we look
further
than many other funds. For example,
we have substantial investments in
natural
gas and in foreign utilities.
Utilities markets overseas are
among the most
dynamic in the world today.
Strategy Session.
Our overall strategy has not
changed much over the last six
months. We have
held a large natural gas position
for some time now and we still
consider the
industry outlook favorable,
although we are taking some profits
in the sector
to pursue attractive opportunities
in the U.S. electric and
international
sectors. Our largest sectors are
U.S. electric and natural gas
companies,
which together comprised more than
60% of total net assets on June 30,
1997.
We have about reached our maximum
allocation of 25% in foreign
securities,
largely with investments in Europe
and Latin America.
Domestic Power.
We still are focused on natural gas
- -- with four of our five largest
holdings
in this industry. They include
some strong performers. Demand
continues to
grow for clean-burning natural gas
and the industry remains
attractive.
However, it is an old story for us;
the electric industry, where we
began to
build our holdings a year ago, is
presenting fresh opportunities. We
added
to some of our electrical utility
holdings to take advantage of
companies that
are more likely to succeed in the
competitive environment or that are
undervalued in the market.
As we see opportunities such as
these, we finance them by taking
profits on
appreciated stock, diversifying our
positions in the gas and electric
industries more evenly.
Foreign Utilities.
Utilities in Europe and Latin
America are attractive but there is
an extra
factor working for the Latin
American companies. The stock
markets there
still are largely undeveloped.
Since investor interest in foreign
stocks is
growing, this appears to be a
factor bolstering the entire
sector.
Portfolio Breakdown.
Expressed as a percentage of
total net assets as of 6/30/97.
(PIE CHART)
<PAGE>
What Went Well.
Our global range served us well
during the six-month reporting
period,
particularly in telephone
companies. Some did spectacularly
well by any
standard: Shares in Telebras, the
Brazilian telephone company and
Telefonos
De Mexico both rose considerably.
The Italian telephone company Stet-
Societa
Finanziaria Telefonica also
delivered an exceptional return for
the half year.
In Europe, Greater Efficiency.
In Europe, utilities that had been
lethargic and complacent, and often
were
state-owned, now have the
opportunity to focus on profits for
shareholders.
The room for cost-cutting and
productivity improvements is
obvious.
Privatization of utilities, which
frees them to reorganize for
productivity,
give European utilities a golden
opportunity for earnings growth.
Almost 13%
of our portfolio was invested in
European utilities on June 30,
1997.
Latin America.
Many different factors are
converging to the benefit of
utility companies in
Latin America, which constituted
slightly less than 6% of our
portfolio on
June 30, 1997. Business conditions,
the regulatory environment, and
several
financial factors are powering
these stocks. The Latin American
public has
been underserved for a long time
because sole suppliers weren't
motivated to
supply enough. Consequently, the
potential market is large right
now, and it
also is expanding rapidly.
And Not So Well.
We could have done better if we had
owned local U.S. telephone
companies. They
performed well in the first half of
1997. Although these companies
still
generate high earnings, we continue
to be pessimistic about them. They
are
monopolies that haven't yet felt
the stress of competition.
Investors have
become accustomed to their high
earnings growth, but we expect
competition to
slow this considerably.
Furthermore, there may be a strong
market reaction
when earnings do slow. We think the
risk of the market reacting and
even
over-reacting to competition-caused
earnings disappointments is too
great.
Five Largest Holdings.
4.0% Duke Energy
Electric Power
3.9% Sonat, Inc.
Natural Gas
3.7% Williams Cos., Inc.
Natural Gas
3.6% Coastal Corp.
Natural Gas
3.4% Columbia Gas System,
Inc.
Natural Gas
Expressed as a percentage of total
net investments as of 6/30/97.
Looking Ahead.
We plan to continue with our
present strategy. We will also
continue to take
profits from appreciated positions
and reinvest the proceeds in
attractive
companies as opportunities present
themselves.
- -----------------------------------
- -----------------------------------
- ---------
1
<PAGE>
President's Letter
August 4, 1997
(PHOTO)
Dear Shareholder:
With the midpoint of 1997 behind
us, I'm pleased to report that the
recent
news from the financial markets has
been decidedly upbeat. The Dow
Jones
Industrial Average has gained more
than 20% through the end of June,
while
lower long-term interest rates have
made bonds an attractive
investment.
This stands in contrast to April
when the Dow fell 10% from a record
high on
fears of higher interest rates and
surging inflation. Interest rates
have
since fallen as the economy slowed
and the Dow has reached several new
highs.
The market swings we've seen this
year illustrate the importance of
"staying
the course" to your financial goal.
We realize that maintaining
investment
discipline when faced with market
uncertainty isn't easy. Here are
some
thoughts that may help:
- - Keep Your Expectations
Realistic. The best investors know
that financial
markets rise and fall -- and so
too, will the value of their
investments.
Over time, however, stocks have
been shown to produce very
attractive
returns that were well ahead of
inflation. And where income is the
primary
goal, bonds have also provided
attractive returns.
- - Remember Your Time Horizon. If
your investment goals are long term
(several
years or more), so should your
time horizon. During this period,
it's not
unusual for stocks and bonds to
experience several periods of
market
uncertainty.
- - We're On Your Side. Your
Prudential Securities Financial
Advisor or Pruco
Securities Registered
Representative can help you
understand what's
happening in the financial
markets. They can assist you in
making informed
decisions based upon a thorough
knowledge of your financial needs
and long-
term goals. Call him or her
today.
Thank you for your continued
confidence in Prudential mutual
funds. We'll do
everything we can to keep you
informed and to earn your trust.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds
& Annuities
- -----------------------------------
- -----------------------------------
- ---------
2
<PAGE>
Portfolio of Investments
as of June 30, 1997 (Unaudited)
PRUDENTIAL UTILITY FUND, INC.
- -----------------------------------
- -------------------------
<TABLE>
<CAPTION>
Shares Description
Value (Note 1)
<C> <S>
<C>
- -----------------------------------
- -------------------------
LONG-TERM INVESTMENTS--98.1%
COMMON STOCKS--94.2%
- -----------------------------------
- -------------------------
Communications--17.9%
1,135,971 Ascent Entertainment
Group, Inc.
(a)
$ 10,365,735
1,152,200 AT&T Corp.
40,399,012
2,339,600 BCE, Inc. (Canada)
65,508,800
2,324,000 Comsat Corp.
55,340,250
2,707,600 Frontier Corporation
53,982,775
3,200,000 Hellenic
Telecommunication
Organization S.A.
(GDR)
(Greece)
36,960,000
805,000 Millicom International
Cellular S.
A. (Luxembourg) (a)
38,438,750
18,575,000 Seat SpA Co. (Italy)
(a) 5,949,164
1,269,200 Southern New England
Telecommunications
Corp. 49,340,150
1,000,000 Sprint Corp.
52,625,000
13,875,000 Stet-Societa
Finanziaria
Telefonica, S.P.A.
(Italy) 80,909,578
1,991,700 Tele Danmark (ADR)
(Denmark) 52,033,162
421,400 Telebras (ADR) (Brazil)
63,947,450
800,000 Telefonica de Espana,
S.A. (ADR)
(Spain)
69,000,000
1,503,000 Telefonica del Peru,
S.A. (ADR)
(Peru)
39,359,813
1,211,500 Telefonos de Mexico,
S.A. (ADR)
(Mexico)
57,849,125
11,000 U.S. West, Inc. (a)
414,563
- ---------------
772,423,327
- -----------------------------------
- -------------------------
Electrical Power--39.0%
913,527 AES Corp. (a)
64,632,035
1,045,400 Boston Edison Co.
27,572,425
2,000,000 Centerior Energy Corp.
22,375,000
981,300 Central Louisiana
Electric
Company, Inc.
27,599,063
1,179,500 Central Maine Power Co.
14,596,313
2,632,685 CINergy Corporation
91,650,347
2,300,000 CMS Energy Corporation
$ 81,075,000
948,202 Companhia Energetica de
Minas
Gerais-Cemig (ADR)
(Brazil) 48,773,140
1,600,000 DTE Energy Co.
44,200,000
3,585,111 Duke Power Co.
171,861,259
803,100 Eastern Utilities
Associates 14,656,575
4,215,000 Edison International
104,848,125
83,540 El Paso Electric Co.
(a) 590,001
947,700 Empresa Nacional de
Electricidad
S.A. (ADR) (Spain)
80,613,731
330,001 Evn Energie -
Versorgung
Niederoesterreich AG
(Austria) 42,516,539
128,600 FPL Group, Inc.
5,923,638
6,000,000 Iberdrola (Spain)
75,696,945
2,798,500 Illinova Corp.
61,567,000
2,175,300 Long Island Lighting
Co. 50,031,900
7,250,000 National Power PLC
(United
Kingdom)
63,207,502
2,165,500 New York State Electric
& Gas
Corp.
45,204,812
4,322,800 Niagara Mohawk Power
Corp. (a) 37,013,975
967,000 NIPSCO Industries, Inc.
39,949,188
9,361,400 Northeast Utilities Co.
89,518,387
2,000,000 Ohio Edison Co.
43,625,000
1,978,600 PECO Energy Co.
41,550,600
2,003,400 Pinnacle West Capital
Corp. 60,227,212
906,800 Public Service Company
of Colorado 37,632,200
2,557,000 Public Service Company
of New
Mexico
45,706,375
1,670,800 Rochester Gas &
Electric Corp.
35,191,225
872,100 Texas Utilities Co.
30,032,944
1,490,740 Tuscon Electric Power
Co. (a) 21,615,730
2,879,900 Unicom Corp.
64,077,775
- ---------------
1,685,331,961
- -----------------------------------
- -------------------------
Natural Gas--35.6%
1,000,000 Alberta Energy Co.,
Ltd. (Canada) 25,125,000
283,650 Bay State Gas Co.
7,552,181
2,231,600 British Gas PLC (ADR)
(United
Kingdom)
82,290,250
22,316,000 Centrica PLC (United
Kingdom) (a) 27,091,397
2,960,275 Coastal Corp.
157,449,627
</TABLE>
- -----------------------------------
- -----------------------------------
- ----------
- -----
See Notes to Financial Statements.
3
<PAGE>
Portfolio of Investments
as of June 30, 1997 (Unaudited)
PRUDENTIAL UTILITY FUND, INC.
- -----------------------------------
- -------------------------
<TABLE>
<CAPTION>
Shares Description
Value (Note 1)
<C> <S>
<C>
- -----------------------------------
- -------------------------
Natural Gas (cont'd.)
2,250,000 Columbia Gas System,
Inc. $ 146,812,500
407,200 Consolidated Natural
Gas Co. 21,912,450
117,600 Eastern Enterprises,
Inc. 4,079,250
1,299,100 El Paso Natural Gas Co.
71,450,500
500,000 Energen Corp.
16,843,750
417,900 Enron Corp.
17,055,544
3,272,300 ENSERCH Corp.
72,808,675
1,500,000 Equitable Resources,
Inc. 42,562,500
690,300 KN Energy, Inc.
29,078,888
783,600 MCN Corporation
23,997,750
810,600 NICOR Inc.
29,080,275
3,148,000 NorAm Energy Corp.
48,007,000
700,000 Oryx Energy Co.(a)
14,787,500
3,144,300 Pacific Enterprises
105,727,087
514,800 Parker & Parsley
Petroleum Co. 18,211,050
117,600 Providence Energy Corp.
2,058,000
1,880,400 Questar Corp.
75,921,150
375,000 RAO Gazprom (ADR)
(Russia) (a) 6,375,000
3,248,800 Sonat, Inc.
166,501,000
205,400 Southwest Gas
Corporation
4,082,325
5,000,000 TransCanada Pipelines,
Ltd.
(Canada)
100,481,587
2,200,000 Westcoast Energy, Inc.
(Canada) 40,012,500
936,200 Western Gas Resources,
Inc. 17,787,800
3,623,511 Williams Cos., Inc.
158,528,606
161,150 Yankee Energy System,
Inc. 3,948,175
- ---------------
1,537,619,317
- -----------------------------------
- -------------------------
Realty Investment Trust--1.7%
89,580 Crescent Operating,
Inc. (a) 1,074,960
895,800 Crescent Real Estate
Equities,
Inc.
28,441,650
969,900 Equity Residential
Property Trust 46,070,250
- ---------------
75,586,860
- ---------------
Total common stocks
(cost
$2,785,804,866)
4,070,961,465
- ---------------
PREFERRED STOCKS--1.7%
- -----------------------------------
- -------------------------
Communications--1.5%
300,000 Compania de
Inversiones,
Convertible,
7.00% (Argentina)
$ 19,087,500
475,000 Nortel Inversora S.A.,
Convertible,
10.00% (Argentina)
23,334,375
398,000 Philippine Long
Distance Telephone
Co. Convertible
(GDR) (The
Philippines)
23,084,000
- ---------------
65,505,875
- -----------------------------------
- -------------------------
Natural Gas--0.2%
359,100 Enron Corp., 6.25%
6,867,788
- ---------------
Total preferred stocks
(cost $64,270,654)
72,373,663
- ---------------
Principal
Amount
(000)
BONDS--1.2%
- -----------------------------------
- -------------------------
Electrical Power--0.6%
$ 10,000 Cleveland Electric
Illumination
Co.,
9.375%, 3/1/17
10,428,900
10,000 Niagara Mohawk Power
Corp.,
9.50%, 3/1/21
10,252,900
5,000 Texas Utilities Co.,
9.75%, 5/1/21
5,576,750
- ---------------
26,258,550
- -----------------------------------
- -------------------------
Natural Gas--0.6%
Arkla, Inc.,
20,000 10.00%, 11/15/19
21,775,000
Oryx Energy Co.,
2,000 9.50%, 11/1/99
2,100,180
1,000 7.50%, 5/15/14
990,000
- ---------------
24,865,180
</TABLE>
- -----------------------------------
- -----------------------------------
- ----------
- -----
See Notes to Financial Statements.
4
<PAGE>
PRUDENTIAL UTILITY FUND, INC.
Portfolio of Investments as of June
30, 1997 (Unaudited)
- -----------------------------------
- -------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description
Value (Note 1)
<C> <S>
<C>
- -----------------------------------
- -------------------------
SOVEREIGN BONDS--1.0%
$ 45,000 United Mexican States,
Zero Coupon, (until
8/6/97),
7.875%, 8/6/01, FRN
$ 45,112,500
- ---------------
Total bonds
(cost $94,175,615)
96,236,230
- ---------------
Total long-term
investments
(cost
$2,944,251,135)
4,239,571,358
- ---------------
SHORT-TERM INVESTMENT--0.7%
- -----------------------------------
- -------------------------
Repurchase Agreement
30,599 Joint Repurchase
Agreement Account
5.96%, 7/1/97
(cost $30,599,000;
Note 5) 30,599,000
- ---------------
- -----------------------------------
- -------------------------
Total Investments--98.8%
(cost $2,974,850,135;
Note 4) 4,270,170,358
Other assets in excess
of
liabilities--1.2%
53,099,381
- ---------------
Net Assets--100%
$ 4,323,269,739
- ---------------
- ---------------
</TABLE>
- ---------------
(a) Non-income producing
securities.
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
FRN--Floating Rate Note.
- -----------------------------------
- -----------------------------------
- ----------
- -----
See Notes to Financial Statements.
5
<PAGE>
Statement of Assets and Liabilities
(Unaudited) PRUDENTIAL UTILITY
FUND, INC.
- -----------------------------------
- -----------------------------------
- ----------
<TABLE>
<CAPTION>
Assets
June 30, 1997
<S>
<C>
Investments, at value (cost
$2,974,850,135)....................
...................................
.......... $4,270,170,358
Foreign currency, at value (cost
$29,728,940).......................
...................................
..... 29,513,367
Cash...............................
...................................
...................................
... 436,788
Dividends and interest
receivable.........................
...................................
............... 20,859,016
Receivable for investments
sold...............................
...................................
........... 12,572,203
Receivable for Fund shares
sold...............................
...................................
........... 1,764,475
Deferred expenses and other
assets.............................
...................................
.......... 127,939
- --------------
Total
assets.............................
...................................
.............................
4,335,444,146
- --------------
Liabilities
Payable for Fund shares
reacquired.........................
...................................
.............. 6,607,941
Distribution fee
payable............................
...................................
.....................
2,156,728
Management fee
payable............................
...................................
.......................
1,423,431
Foreign withholding taxes
payable............................
...................................
............ 1,395,435
Accrued expenses and other
liabilities........................
...................................
........... 590,872
- --------------
Total
liabilities........................
...................................
.............................
12,174,407
- --------------
Net
Assets.............................
...................................
..................................
$4,323,269,739
- --------------
- --------------
Net assets were comprised of:
Common stock, at
par................................
...................................
.................. $
3,749,233
Paid-in capital in excess of
par................................
...................................
...... 2,860,291,718
- --------------
2,864,040,951
Undistributed net investment
income.............................
...................................
...... 4,439,638
Accumulated net realized gain on
investments and foreign currency
transactions.......................
.... 159,727,063
Net unrealized appreciation on
investments and foreign
currencies.........................
............... 1,295,062,087
- --------------
Net assets, June 30,
1997...............................
...................................
.................
$4,323,269,739
- --------------
- --------------
Class A:
Net asset value and redemption
price per share
($2,252,290,362 / 195,308,901
shares of common stock issued and
outstanding).......................
... $11.53
Maximum sales charge (5% of
offering
price).............................
.................................
.61
- --------------
Maximum offering price to
public.............................
...................................
......... $12.14
- --------------
- --------------
Class B:
Net asset value, offering price
and redemption price per share
($2,024,802,369 / 175,610,839
shares of common stock issued and
outstanding).......................
... $11.53
- --------------
- --------------
Class C:
Net asset value, offering price
and redemption price per share
($9,632,787 / 835,392 shares
of common stock issued and
outstanding).......................
........... $11.53
- --------------
- --------------
Class Z:
Net asset value, offering price
and redemption price per share
($36,544,221 / 3,168,201
shares of common stock issued and
outstanding).......................
........ $11.53
- --------------
- --------------
</TABLE>
- -----------------------------------
- -----------------------------------
- ----------
- -----
See Notes to Financial Statements.
6
<PAGE>
PRUDENTIAL UTILITY FUND, INC.
Statement of Operations (Unaudited)
- -----------------------------------
- -------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income
June 30, 1997
<S>
<C>
Income
Dividends (net of foreign
withholding taxes
of
$2,841,201)........................
.. $ 69,335,245
Interest...........................
........ 7,782,606
- -------------
Total
income............................
77,117,851
- -------------
Expenses
Distribution fee--Class
A.................. 2,542,433
Distribution fee--Class
B.................. 10,335,395
Distribution fee--Class
C.................. 38,397
Management
fee.............................
8,407,947
Transfer agent's fees and
expenses......... 2,738,000
Reports to
shareholders....................
361,000
Custodian's fees and
expenses..............
277,000
Registration
fees..........................
74,000
Insurance..........................
........ 46,000
Legal
fees...............................
.. 25,000
Directors'
fees............................
22,500
Audit
fees...............................
.. 16,000
Miscellaneous......................
........ 19,502
- -------------
Total
expenses..........................
24,903,174
- -------------
Net investment
income.........................
52,214,677
- -------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment
transactions....................
164,829,853
Foreign currency
transactions..............
(319,047)
- -------------
164,510,806
- -------------
Net change in unrealized
appreciation
(depreciation) on:
Investments........................
........ 129,258,914
Foreign
currencies.........................
(338,869)
- -------------
128,920,045
- -------------
Net gain on investments and foreign
currencies.........................
........ 293,430,851
- -------------
Net Increase in Net Assets
Resulting from
Operations.....................
$345,645,528
- -------------
- -------------
</TABLE>
PRUDENTIAL UTILITY FUND, INC.
Statement of Changes in Net Assets
(Unaudited)
- -----------------------------------
- -------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease)
June 30, December 31,
in Net Assets
1997 1996
<S> <C>
<C>
Operations
Net investment income...... $
52,214,677 $ 107,830,613
Net realized gain on
investment and foreign
currency transactions...
164,510,806 320,235,886
Net change in unrealized
appreciation of
investments and foreign
currencies..............
128,920,045 357,572,748
---
- ----------- -----------------
Net increase in net assets
resulting from
operations..............
345,645,528 785,639,247
---
- ----------- -----------------
Dividends and distributions
(Note 1)
Dividends from net
investment income
Class A.................
(27,939,841) (56,517,524)
Class B.................
(19,202,857) (49,728,071)
Class C.................
(82,201) (110,317)
Class Z.................
(512,740) (1,061,722)
---
- ----------- -----------------
(47,737,639) (107,417,634)
---
- ----------- -----------------
Distributions from net
realized capital gains
Class A.................
(24,903,821) (136,028,661)
Class B.................
(24,924,436) (151,218,004)
Class C.................
(95,180) (377,943)
Class Z.................
(437,364) (2,368,426)
---
- ----------- -----------------
(50,360,801) (289,993,034)
---
- ----------- -----------------
Fund share transactions (net of
share conversions) (Note 6)
Proceeds from shares
sold....................
204,025,090 334,072,755
Net asset value of shares
issued in reinvestment
of dividends and
distributions...........
89,615,790 363,055,255
Cost of shares
reacquired..............
(418,510,577) (952,090,398)
---
- ----------- -----------------
Net decrease in net assets
from Fund share
transactions............
(124,869,697) (254,962,388)
---
- ----------- -----------------
Total increase................
122,677,391 133,266,191
Net Assets
Beginning of period...........
4,200,592,348 4,067,326,157
---
- ----------- -----------------
End of period.................
$4,323,269,739 $ 4,200,592,348
---
- ----------- -----------------
---
- ----------- -----------------
</TABLE>
- -----------------------------------
- -----------------------------------
- ----------
- -----
See Notes to Financial Statements.
7
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL
UTILITY FUND, INC.
- -----------------------------------
- -----------------------------------
- ----------
Prudential Utility Fund, Inc. (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
total return, through a combination
of
income and capital appreciation.
The Fund seeks to achieve this
objective by
investing primarily in equity and
debt securities of utility
companies. Utility
companies include electric, gas,
gas pipeline, telephone,
telecommunications,
water, cable, airport, seaport and
toll road 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 fiscal 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 losses on foreign
currency transactions represent net
foreign
exchange losses 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 (other
than investments) at fiscal period
end
exchange rates are reflected as a
component of unrealized
appreciation or
depreciation on investments and
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 Net
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 and interest income
is recorded on
the accrual basis. The Fund
amortizes discounts on purchases of
debt securities
as adjustments to interest income.
Expenses are recorded on the
accrual basis
which may require the use of
certain estimates by management.
Net investment income (other than
distribution fees) and unrealized
and realized
gains or losses are allocated daily
to each class of shares based upon
the
relative proportion of net assets
of each class at the beginning of
the day.
Dividends and Distributions:
Dividends from net investment
income are declared
and paid 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.
- -----------------------------------
- -----------------------------------
- ----------
- -----
8
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL
UTILITY FUND, INC.
- -----------------------------------
- -----------------------------------
- ----------
Income distributions and capital
gain distributions are determined
in accordance
with income tax regulations which
may differ from generally accepted
accounting
principles.
Taxes: It is the Fund's policy to
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
accor-
dance 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 decrease
undistributed net investment income
by $595,376
and increase accumulated net
realized gain on investments by
$595,376 for
realized foreign currency losses
during the six months ended June
30, 1997. 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 Investments Fund
Management
LLC ('PIFM'). Pursuant to this
agreement, PIFM has responsibility
for all
investment advisory services and
supervises the subadviser's
performance of such
services. Pursuant to a subadvisory
agreement between PIFM and The
Prudential
Investment Corporation ('PIC'), PIC
furnishes investment advisory
services in
connection with the management of
the Fund. PIFM 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 PIFM 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 a distribution
agreement with Prudential
Securities Incorporated
('PSI'), which acts as the
distributor of the Class A, Class
B, Class C and
Class Z shares of the Fund. The
Fund compensates 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 PSI. The distribution
fees for Class A, B and C shares
are accrued
daily and payable monthly. PSI also
incurs the expenses of distributing
the
Fund's Class Z shares under the
distribution agreement, none of
which is
reimbursed or paid by the Fund.
Pursuant to the Class A, B and C
Plans, the Fund compensates PSI 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, 1997.
PSI has advised the Fund that it
has received approximately $401,000
in
front-end sales charges resulting
from sales of Class A shares during
the six
months ended June 30, 1997. From
these fees, PSI paid such sales
charges to
Pruco Securities Corporation, an
affiliated broker-dealer, which in
turn paid
commissions to salespersons and
incurred other distribution costs.
PSI advised the Fund that for the
six months ended June 30, 1997, it
received
approximately $1,266,200 and $1,600
in contingent deferred sales
charges imposed
upon redemptions by certain Class B
and Class C shareholders,
respectively.
PSI, PIFM and PIC are indirect,
wholly-owned subsidiaries of The
Prudential
Insurance Company of America.
The Fund, along with other
affiliated registered investment
companies (the
'Funds'), entered into a credit
agreement (the 'Agreement') on
December 31, 1996
with an unaffiliated lender. The
maximum commitment under the
Agreement is
$200,000,000. The Agreement expires
on December 30, 1997. Interest on
any such
borrowings outstanding will be at
market rates. The purpose of the
Agreement is
to serve as an alternative source
of funding for capital share
redemptions. The
Fund has not borrowed any amounts
pursuant to the Agreement as of
June 30, 1997.
The Funds pay a commitment fee at
an annual rate of .055 of 1% on the
unused
portion of the credit facility. The
commitment fee is accrued and paid
quarterly
on a pro-rata basis by the Funds.
- -----------------------------------
- -------------------------
Note 3. Other Transactions With
Affiliates
Prudential Mutual Fund Services LLC
('PMFS'), a wholly-owned subsidiary
of PIFM,
serves as the Fund's transfer
agent. During the six months ended
June 30, 1997,
the Fund incurred fees of
approximately $2,230,000 for the
services of PMFS. As
of June 30, 1997, approximately
$373,000 of
- -----------------------------------
- -----------------------------------
- ----------
- -----
9
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL
UTILITY FUND, INC.
- -----------------------------------
- -----------------------------------
- ----------
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,
1997, PSI earned approximately
$65,000 in
brokerage commissions from
portfolio transactions executed on
behalf of the
Fund.
- -----------------------------------
- -------------------------
Note 4. Portfolio Securities
Purchases and sales of investment
securities, other than short-term
investments,
for the six months ended June 30,
1997, were $354,878,694 and
$475,437,576,
respectively.
The federal income tax basis of the
Fund's investments at June 30, 1997
was
$2,980,262,432 and, accordingly,
net unrealized appreciation for
federal income
tax purposes was $1,289,907,926
(gross unrealized appreciation--
$1,385,297,565;
gross unrealized depreciation--
$95,389,639).
- -----------------------------------
- -------------------------
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 June 30, 1997,
the Fund
had a 4.49% undivided interest in
the joint account. The undivided
interest for
the Fund represents $30,599,000 in
the principal amount. As of such
date, each
repurchase agreement in the joint
account and the collateral therefor
were as
follows:
Dean Witter Reynolds, Inc., 5.90%,
in the principal amount of
$100,000,000,
repurchase price $100,016,389, due
7/1/97. The value of the collateral
including
accrued interest was $102,000,893.
Deutsche Bank Securities Corp.,
5.95%, in the principal amount of
$184,000,000,
repurchase price $184,030,411, due
7/1/97. The value of the collateral
including
accrued interest was $187,680,112.
J.P. Morgan Securities, 6.00%, in
the principal amount of
$170,000,000,
repurchase price $170,028,333, due
7/1/97. The value of the collateral
including
accrued interest was $173,400,988.
SBC Warburg, Ltd., 5.95%, in the
principal amount of $227,000,000,
repurchase
price $227,037,518, due 7/1/97. The
value of the collateral including
accrued
interest was $232,448,194.
Note 6. Capital
The Fund offers Class A, Class B,
Class C and Class Z 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. A special exchange
privilege is also available for
shareholders who
qualified to purchase Class A
shares at net asset value. Class Z
shares are not
subject to any sales or redemption
charge and are offered exclusively
for sale
to a limited group of investors.
There are 2 billion shares of $.01
par value per share common stock
authorized
which consists of 500 million
shares of Class A common stock, 700
million shares
of Class B common stock, 400
million shares of Class C common
stock and 400
million shares of Class Z common
stock. Transactions in shares of
common stock
were as follows:
<TABLE>
<CAPTION>
Class A
Shares Amount
- -------------------------------- -
- ----------- ---------------
<S>
<C> <C>
Six months ended June 30, 1997:
Shares sold.....................
8,561,665 $ 94,293,429
Shares issued in reinvestment of
dividends and distributions...
4,428,335 48,044,310
Shares reacquired...............
(19,583,256) (215,378,438)
-
- ----------- ---------------
Net decrease in shares
outstanding before
conversion....................
(6,593,256) (73,040,699)
Shares issued upon conversion
from Class B..................
15,906,374 180,068,468
-
- ----------- ---------------
Net increase in shares
outstanding...................
9,313,118 $ 107,027,769
-
- ----------- ---------------
-
- ----------- ---------------
Year ended December 31, 1996:
Shares sold.....................
15,308,482 $ 159,264,202
Shares issued in reinvestment of
dividends and distributions...
16,527,013 175,127,592
Shares reacquired...............
(41,901,121) (433,594,928)
-
- ----------- ---------------
Net decrease in shares
outstanding before
conversion....................
(10,065,626) (99,203,134)
Shares issued upon conversion
from Class B..................
26,433,307 269,740,107
Shares reacquired upon
conversion into Class Z.......
(3,501,686) (35,052,440)
-
- ----------- ---------------
Net increase in shares
outstanding...................
12,865,995 $ 135,484,533
-
- ----------- ---------------
-
- ----------- ---------------
</TABLE>
- -----------------------------------
- -----------------------------------
- ----------
- -----
10
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL
UTILITY FUND, INC.
- -----------------------------------
- -----------------------------------
- ----------
<TABLE>
<CAPTION>
Class B
Shares Amount
- -------------------------------- -
- ----------- ---------------
<S>
<C> <C>
Six months ended June 30, 1997:
Shares sold.....................
8,959,980 $ 98,173,751
Shares issued in reinvestment of
dividends and distributions...
3,743,615 40,456,796
Shares reacquired...............
(17,647,744) (193,577,199)
-
- ----------- ---------------
Net decrease in shares
outstanding before
conversion....................
(4,944,149) (54,946,652)
Shares reacquired upon
conversion into Class A.......
(15,929,289) (180,068,468)
-
- ----------- ---------------
Net decrease in shares
outstanding...................
(20,873,438) $ (235,015,120)
-
- ----------- ---------------
-
- ----------- ---------------
Year ended December 31, 1996:
Shares sold.....................
15,690,293 $ 161,351,912
Shares issued in reinvestment of
dividends and distributions...
17,344,216 184,033,919
Shares reacquired...............
(48,711,671) (500,182,084)
-
- ----------- ---------------
Net decrease in shares
outstanding before
conversion....................
(15,677,162) (154,796,253)
Shares reacquired upon
conversion into Class A.......
(26,471,144) (269,740,107)
-
- ----------- ---------------
Net decrease in shares
outstanding...................
(42,148,306) $ (424,536,360)
-
- ----------- ---------------
-
- ----------- ---------------
<CAPTION>
Class C
- --------------------------------
Six months ended June 30, 1997:
Shares sold.....................
341,016 $ 3,756,016
Shares issued in reinvestment of
dividends and distributions...
15,198 164,582
Shares reacquired...............
(72,557) (788,511)
-
- ----------- ---------------
Net increase in shares
outstanding...................
283,657 $ 3,132,087
-
- ----------- ---------------
-
- ----------- ---------------
<CAPTION>
Class C
Shares Amount
- -------------------------------- -
- ----------- ---------------
<S>
<C> <C>
Year ended December 31, 1996:
Shares sold.....................
282,613 $ 2,928,285
Shares issued in reinvestment of
dividends and distributions...
43,560 463,633
Shares reacquired...............
(124,537) (1,271,152)
-
- ----------- ---------------
Net increase in shares
outstanding...................
201,636 $ 2,120,766
-
- ----------- ---------------
-
- ----------- ---------------
<CAPTION>
Class Z
- --------------------------------
Six months ended June 30, 1997:
Shares sold.....................
711,094 $ 7,801,894
Shares issued in reinvestment of
dividends and distributions...
87,608 950,102
Shares reacquired...............
(796,776) (8,766,429)
-
- ----------- ---------------
Net increase in shares
outstanding...................
1,926 $ (14,433)
-
- ----------- ---------------
-
- ----------- ---------------
March 1, 1996(a) through
December 31, 1996:
Shares sold.....................
1,002,069 $ 10,528,356
Shares issued in reinvestment of
dividends and distributions...
324,254 3,430,111
Shares reacquired...............
(1,661,734) (17,042,234)
-
- ----------- ---------------
Net decrease in shares
outstanding
before conversion.............
(335,411) (3,083,767)
Shares issued upon conversion
from Class A..................
3,501,686 35,052,440
-
- ----------- ---------------
Net increase in shares
outstanding...................
3,166,275 $ 31,968,673
-
- ----------- ---------------
-
- ----------- ---------------
</TABLE>
- ---------------
(a) Commencement of offering of
Class Z shares.
- -----------------------------------
- -----------------------------------
- ----------
- -----
11
<PAGE>
Financial Highlights (Unaudited)
PRUDENTIAL UTILITY FUND, INC.
- -----------------------------------
- -----------------------------------
- ----------
<TABLE>
<CAPTION>
Class A
- -----------------------------------
- ----------------------
Six Months
Ended Year Ended
December 31,
June 30, --------------------
- ---------------------
1997(b) 1996(b) 1995
1994 1993
- ----------- -------- ------
- ------ ------
<S>
<C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.............................
..... $ 10.88 $ 9.87
$ 8.27 $ 9.72 $ 8.97
- ----- -------- ------
- ------ ------
Income from investment operations
Net investment
income.............................
.................... .16
.32 .30 .31
.33
Net realized and unrealized gains
(losses) on investment and foreign
currency
transactions.......................
.......................
.77 1.80 1.79
(1.06) 1.12
- ----- -------- ------
- ------ ------
Total from investment
operations.........................
.......... .93
2.12 2.09 (.75)
1.45
- ----- -------- ------
- ------ ------
Less distributions
Dividends from net investment
income.............................
..... (.15) (.32)
(.30) (.32) (.29)
Distributions from net realized
gains..............................
... (.13) (.79)
(.19) (.36) (.41)
Distributions in excess of net
realized
gains.........................
- -- -- --
(.02) --
- ----- -------- ------
- ------ ------
Total
distributions......................
..........................
(.28) (1.11) (.49)
(.70) (.70)
- ----- -------- ------
- ------ ------
Net asset value, end of
period.............................
........... $ 11.53
$10.88 $ 9.87 $ 8.27 $
9.72
- ----- -------- ------
- ------ ------
- ----- -------- ------
- ------ ------
TOTAL
RETURN(a)..........................
.............................
8.71% 22.09% 25.74%
(7.89)% 16.28%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000,000)..........................
......... $2,252
$2,023 $1,709 $254
$337
Average net assets
(000,000)..........................
................ $2,051
$1,786 $1,440 $294
$287
Ratios to average net assets:
Expenses, including distribution
fees..............................
.83%(c) .86% .88%
.88% .80%
Expenses, excluding distribution
fees..............................
.58%(c) .61% .63%
.63% .60%
Net investment
income.............................
................. 2.89%(c)
3.10% 3.12% 3.37%
3.16%
For Class A, B, C and Z shares:
Portfolio turnover
rate...............................
............. 9%
17% 14% 15%
24%
Average commission rate paid per
share.............................
$ .0505 $.0332 $.0302
N/A N/A
<CAPTION>
1992
- ------
<S>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.............................
..... $ 8.72
- ------
Income from investment operations
Net investment
income.............................
.................... .38
Net realized and unrealized gains
(losses) on investment and foreign
currency
transactions.......................
....................... .45
- ------
Total from investment
operations.........................
.......... .83
- ------
Less distributions
Dividends from net investment
income.............................
..... (.34)
Distributions from net realized
gains..............................
... (.24)
Distributions in excess of net
realized
gains.........................
- --
- ------
Total
distributions......................
.......................... (.58)
- ------
Net asset value, end of
period.............................
........... $ 8.97
- ------
- ------
TOTAL
RETURN(a)..........................
.............................
9.88%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000,000)..........................
......... $201
Average net assets
(000,000)..........................
................ $149
Ratios to average net assets:
Expenses, including distribution
fees..............................
.81%
Expenses, excluding distribution
fees..............................
.61%
Net investment
income.............................
................. 4.14%
For Class A, B, C and Z shares:
Portfolio turnover
rate...............................
............. 24%
Average commission rate paid per
share.............................
N/A
</TABLE>
- ---------------
(a) 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 year reported
and includes reinvestment of
dividends and
distributions. Total returns
for periods of less than a full
year are not
annualized.
(b) Calculated based upon weighted
average shares outstanding during
the period.
(c) Annualized.
- -----------------------------------
- -----------------------------------
- ----------
- -----
See Notes to Financial Statements.
12
<PAGE>
Financial Highlights (Unaudited)
PRUDENTIAL UTILITY FUND, INC.
- -----------------------------------
- -----------------------------------
- ----------
<TABLE>
<CAPTION>
Class B
- -----------------------------------
- ---------------------
Six Months
Ended Year Ended
December 31,
June 30, ---------------------
- --------------------
1997(b) 1996(b) 1995
1994 1993
- ---------- -------- ------
- ------ ------
<S>
<C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.............................
..... $10.88 $ 9.87
$ 8.26 $ 9.69 $ 8.96
- ----- -------- ------
- ------ ------
Income from investment operations
Net investment
income.............................
.................... .12
.24 .22 .24
.24
Net realized and unrealized gains
(losses) on investment and foreign
currency
transactions.......................
....................... .77
1.80 1.80 (1.05)
1.12
- ----- -------- ------
- ------ ------
Total from investment
operations.........................
.......... .89
2.04 2.02 (.81)
1.36
- ----- -------- ------
- ------ ------
Less distributions
Dividends from net investment
income.............................
..... (.11) (.24)
(.22) (.24) (.22)
Distributions from net realized
gains..............................
... (.13) (.79)
(.19) (.36) (.41)
Distributions in excess of net
realized
gains.........................
- -- -- --
(.02) --
- ----- -------- ------
- ------ ------
Total
distributions......................
..........................
(.24) (1.03) (.41)
(.62) (.63)
- ----- -------- ------
- ------ ------
Net asset value, end of
period.............................
........... $11.53
$10.88 $ 9.87 $ 8.26 $
9.69
- ----- -------- ------
- ------ ------
- ----- -------- ------
- ------ ------
TOTAL
RETURN(a)..........................
.............................
8.32% 21.16% 24.80%
(8.51)% 15.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000,000)..........................
......... $2,025 $2,137
$2,355 $3,526 $4,756
Average net assets
(000,000)..........................
................ $2,084
$2,184 $2,450 $4,152
$4,308
Ratios to average net assets:
Expenses, including distribution
fees..............................
1.58%(c) 1.61% 1.63%
1.63% 1.60%
Expenses, excluding distribution
fees..............................
.58%(c) .61% .63%
.63% .60%
Net investment
income.............................
................. 2.14%(c)
2.35% 2.37% 2.62%
2.36%
<CAPTION>
1992
- ------
<S>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.............................
..... $ 8.71
- ------
Income from investment operations
Net investment
income.............................
.................... .31
Net realized and unrealized gains
(losses) on investment and foreign
currency
transactions.......................
....................... .46
- ------
Total from investment
operations.........................
.......... .77
- ------
Less distributions
Dividends from net investment
income.............................
..... (.28)
Distributions from net realized
gains..............................
... (.24)
Distributions in excess of net
realized
gains.........................
- --
- ------
Total
distributions......................
.......................... (.52)
- ------
Net asset value, end of
period.............................
........... $ 8.96
- ------
- ------
TOTAL
RETURN(a)..........................
.............................
9.02%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000,000)..........................
......... $3,438
Average net assets
(000,000)..........................
................ $3,027
Ratios to average net assets:
Expenses, including distribution
fees..............................
1.61%
Expenses, excluding distribution
fees..............................
.61%
Net investment
income.............................
................. 3.34%
</TABLE>
- ---------------
(a) 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 year reported
and includes reinvestment of
dividends and
distributions. Total returns
for periods of less than a full
year are not
annualized.
(b) Calculated based upon weighted
average shares outstanding during
the period.
(c) Annualized.
- -----------------------------------
- -----------------------------------
- ----------
- -----
See Notes to Financial Statements.
13
<PAGE>
Financial Highlights (Unaudited)
PRUDENTIAL UTILITY FUND, INC.
- -----------------------------------
- -----------------------------------
- ----------
<TABLE>
<CAPTION>
Class C
- -----------------------------------
- ----------------
August 1,
Six Months Year Ended December
1994(d)
Ended 31,
Through
June 30, -------------------
December 31,
1997(b) 1996(b) 1995
1994
- ---------- -------- ------
- ------------
<S>
<C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.............................
..... $10.88 $ 9.87
$ 8.26 $ 9.30
- ----- -------- ------
- ------------
Income from investment operations
Net investment
income.............................
.................... .12
.24 .22 .11
Net realized and unrealized gains
(losses) on investment and foreign
currency
transactions.......................
....................... .77
1.80 1.80 (.69)
- ----- -------- ------
- ------------
Total from investment
operations.........................
.......... .89
2.04 2.02 (.58)
- ----- -------- ------
- ------------
Less distributions
Dividends from net investment
income.............................
..... (.11) (.24)
(.22) (.13)
Distributions from net realized
gains..............................
... (.13) (.79)
(.19) (.31)
Distributions in excess of net
realized
gains.........................
- -- -- --
(.02)
- ----- -------- ------
- ------------
Total
distributions......................
..........................
(.24) (1.03) (.41)
(.46)
- ----- -------- ------
- ------------
Net asset value, end of
period.............................
........... $11.53
$10.88 $ 9.87 $ 8.26
- ----- -------- ------
- ------------
- ----- -------- ------
- ------------
TOTAL
RETURN(a)..........................
.............................
8.32% 21.16% 24.80%
(6.27)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..............................
......... $9,633 $6,001
$3,455 $787
Average net assets
(000)..............................
................ $7,743
$4,517 $2,181 $433
Ratios to average net assets:
Expenses, including distribution
fees..............................
1.58%(c) 1.61% 1.63%
1.70%(c)
Expenses, excluding distribution
fees..............................
.58%(c) .61% .63%
.70%(c)
Net investment
income.............................
................. 2.14%(c)
2.35% 2.37%
2.65%(c)
<CAPTION>
Class Z
- ---------------------------
March 1,
Six Months 1996(e)
Ended Through
June 30, December 31,
1997(b) 1996(b)
- ---------- ------------
<S>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.............................
..... $10.88 $ 10.05
- ----- ------------
Income from investment operations
Net investment
income.............................
.................... .17
.29
Net realized and unrealized gains
(losses) on investment and foreign
currency
transactions.......................
....................... .77
1.67
- ----- ------------
Total from investment
operations.........................
.......... .94
1.96
- ----- ------------
Less distributions
Dividends from net investment
income.............................
..... (.16) (.34)
Distributions from net realized
gains..............................
... (.13) (.79)
Distributions in excess of net
realized
gains.........................
- -- --
- ----- ------------
Total
distributions......................
..........................
(.29) (1.13)
- ----- ------------
Net asset value, end of
period.............................
........... $11.53 $
10.88
- ----- ------------
- ----- ------------
TOTAL
RETURN(a)..........................
.............................
8.84% 20.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..............................
......... $36,544
$34,446
Average net assets
(000)..............................
................ $13,410
$34,291
Ratios to average net assets:
Expenses, including distribution
fees..............................
.58%(c) .61%(c)
Expenses, excluding distribution
fees..............................
.58%(c) .61%(c)
Net investment
income.............................
................. 3.14%(c)
3.35%(c)
</TABLE>
- ---------------
(a) 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.
(b) Calculated based upon weighted
average shares outstanding during
the period.
(c) Annualized.
(d) Commencement of offering of
Class C shares.
(e) Commencement of offering of
Class Z shares.
- -----------------------------------
- -----------------------------------
- ----------
- -----
See Notes to Financial Statements.
14
<PAGE>
Getting The Most From Your
Prudential Mutual Fund.
When you invest through Prudential
Mutual Funds, you receive financial
advice
through a Prudential Securities
financial advisor or
Prudential/Pruco
Securities registered
representative. Your advisor or
representative can
provide you with the following
services:
There's No Reward Without Risk; But
Is This Risk Worth It?
Your financial advisor or
registered representative can help
you match the
reward you seek with the risk you
can tolerate. And risk can be
difficult to
gauge -- sometimes even the
simplest investments bear
surprising risks. The
educated investor knows that
markets seldom move in just one
direction -- there
are times when a market sector or
asset class will lose value or
provide
little in the way of total return.
Managing your own expectations is
easier
with help from someone who
understands the markets and who
knows you!
Keeping Up With The Joneses.
A financial advisor or registered
representative can help you wade
through the
numerous mutual funds available to
find the ones that fit your own
individual
investment profile and risk
tolerance. While the newspapers and
popular
magazines are full of advice about
investing, they are aimed at
generic groups
of people or representative
individuals, not at you personally.
Your financial
advisor or registered
representative will review your
investment objectives
with you. This means you can make
financial decisions based on the
assets and
liabilities in your current
portfolio and your risk tolerance -
- - not just
based on the current investment
fad.
Buy Low, Sell High.
Buying at the top of a market cycle
and selling at the bottom are among
the
most common investor mistakes. But
sometimes it's difficult to hold on
to an
investment when it's losing value
every month. Your financial advisor
or
registered representative can
answer questions when you're
confused or worried
about your investment, and remind
you that you're investing for the
long haul.
<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. And
if you
are married and not covered by a
retirement plan at work, you and
your spouse
may each contribute $2,000 a year
to an IRA for a total of $4,000.
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
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Directors
Edward D. Beach
Delayne Dedrick Gold
Robert F. Gunia
Donald D. Lennox
Douglas H. McCorkindale
Mendel A. Melzer
Thomas T. Mooney
Stephen P. Munn
Richard A. Redeker
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
Officers
Richard A. Redeker, President
Thomas A. Early, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant
Treasurer
S. Jane Rose, Secretary
Marguerite E.H. Morrison, Assistant
Secretary
Manager
Prudential Investments Fund
Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment
Corporation
Prudential Plaza
Newark, NJ 07102-3777
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 LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
The views expressed in this report
and information about the Fund's
portfolio
holdings are for the period covered
by this report and are subject to
change
thereafter.
The accompanying financial
statements as of June 30, 1997 were
not audited
and, accordingly, no opinion is
expressed on them.
This report is not authorized for
distribution to prospective
investors unless
preceded or accompanied by a
current prospectus.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
743911208
743911109 MF105E2
743911307 Cat#4444515
743911406
