(ICON)
Prudential
Utility
Fund, Inc.
SEMI
ANNUAL
REPORT
June 30, 1998
(LOGO)
<PAGE>
Prudential
Utility
Fund, Inc.
Performance At A Glance.
For the first half of 1998, the Prudential Utility Fund
posted a return that
was strong by historical standards and in line with the
performance of the
average utility fund, as measured by Lipper Analytical
Services. However, the
utility sector as a whole trailed the broader stock market
average. Utilities
didn't keep up with the very strong market gains because the
warm winter kept
energy consumption low. Moreover, investors' attention was
focused on the
stocks of very large growth companies.
Cumulative Total Returns1 As of
6/30/98
<TABLE>
<CAPTION>
Six One Five
Ten Since
Months Year Years
Years Inception2
<S> <C> <C> <C>
<C> <C>
Class A 8.40% 27.40%
99.67% N/A 199.82%
Class B 8.01 26.43 92.32
290.86% 1324.07
Class C 8.01 26.43 N/A
N/A 94.10
Class Z 8.52 27.77 N/A
N/A 67.04
Lipper Utility
Fund Average3 8.44 25.93 78.57
252.82 ***
</TABLE>
Average Annual Total Returns1
As of 6/30/98
<TABLE>
<CAPTION>
One Five
Ten Since
Year Years
Years Inception2
<C> <C> <C>
<C>
Class A 21.03% 13.66%
N/A 13.21%
Class B 21.43 13.86
14.61% 17.03
Class C 25.43 N/A
N/A 18.47
Class Z 27.77 N/A
N/A 24.63
</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 total 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 B shares will
automatically convert to
Class A shares, on a quarterly basis, approximately seven
years after purchase.
Class C shares have a 1% CDSC for one year. Class Z shares
are not subject to
a sales charge or distribution fee.
2Inception dates: Class A, 1/22/90; Class B, 8/10/81; Class
C, 8/1/94; and
Class Z, 3/1/96.
3Lipper average returns are for all funds in each share
class for the
six-month, one-, five-, and ten-year periods.
***Lipper Since Inception returns are 179.79% for Class A;
787.22% for Class
B; 84.28% for Class C; and 47.49% for Class Z for all funds
in each share
class.
How Investments Compared.
(As of 6/30/98)
(CHART)
Source: Lipper Analytical Services. Financial markets
change, so a mutual
fund's past performance should never be used to predict
future results. The
risks to each of the investments listed above are different
- -- we provide
12-month total returns for several Lipper mutual fund
categories to show you
that reaching for higher 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.
U.S. Taxable Money 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
(PHOTO)
Portfolio
Manager's Report
The Prudential Utility Fund invests in the stock 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 potential illiquidity. There can be no assurance that
the Fund's
investment objective of total return through a combination
of current income
and capital appreciation will be achieved.
Benefiting from Change.
Utility stocks used to be thought of as an unglamorous
source of dividend
income. Times have changed. In the U.S. and abroad,
utilities that had been
monopolies are being forced to compete, presenting good
profit growth
opportunities for companies that invest wisely. We can't
look only at dividend
yield. We look for well-run companies, priced attractively,
that can generate
the best total return by increasing profits and dividends.
Strategy Session.
- ------------------------------------------------------------
- -------------------
Gas and Electric Stocks Cook.
We are becoming enthusiastic about the prospects of U.S.
natural gas and
electricity utility stocks. We are seeing signs of slowing
economic growth
worldwide. The Asian economic contraction is gradually
affecting growth even
in the U.S. and Europe, as seen in the weak second quarter
earnings reports of
the S&P 500 companies. But investors justify paying higher
multiples of a
company's earnings for its stock by assuming those earnings
will grow rapidly.
As investors in the broad market begin to wonder why they
are paying such a
premium for profits that are growing so slowly, we believe
they may return to
the electric and gas stocks, with their stable profit
growth.
Currently, utilities are priced at lower multiples of their
earnings than the
broad market, so they represent good value. We believe the
gap in price to
earnings multiples will close, even as the earnings
themselves of the
utilities also look more competitive. This is a formula for
superior stock
performance.
Portfolio Composition.
Sectors expressed as a percentage of
net assets as of 6/30/98.
(CHART)
<PAGE>
What Went Well.
- -------------------------------------------------
European Utilities Shared in Surging Markets.
A little more than 12% of our holdings as of June 30, 1998
were invested in
European utilities, such as BG PLC, Telefonica de Espana,
Tele Danmark, and
Hellenic Telecommunication (the largest Greek telephone
company). These
provided an excellent return in the first half of 1998.
Investor enthusiasm
for economic recovery in Europe led to dramatic gains in
European markets
overall, and in our stocks, in particular.
U.S. Electric Industry Restructures.
The U.S. electric industry is becoming competitive.
Agreements are being made
on a state-by-state basis on how to allocate the costs of
existing facilities
in the transition to a freer electricity market. We bought
several large
positions when they were very inexpensive because investors
thought that
utilities would be overly penalized in this process. But
good company
management and fair regulators have produced reasonable
agreements for many of
our companies, and the market has bid up the price of our
holdings.
Our performance was supported during the reporting period by
our emphasis on
companies that could benefit from such restructuring plans.
Niagara Mohawk (up
42%), Northeast Utilities (up 43%), and Energy East (up 20%)
were companies in
which we had significant positions and whose stock
performance reflected good
agreements.
And Not So Well.
- -------------------------------------------------
El Nino's Last Blows.
Our substantial holdings of natural gas utilities suffered
because the warm El
Nino winter in North America led to profits that were lower
than expected.
Although our stock selection within the group was good, gas
companies generally
had a poor half year. El Nino is over, and a return to
normal winter weather
should put these stocks back on their strong earnings path.
We expect a
recovery of this sector.
Caught in Another Storm.
Our return also suffered from the four to five percent of
our assets that were
invested in Latin America. Emerging market stocks generally
were out of favor
as investors reacted to the Asian financial crisis by moving
funds to the U.S.
and European markets. The impact on our return was
constrained by our prudent
weighting of emerging market stocks. We will continue to
hold comparable
amounts because the tremendous growth potential of these
economies -- given
recent trends to privatization, deregulation, and freer
international
trade -- provides much greater potential for gain than risk.
Five Largest Holdings.
3.8% Williams Cos., Inc.
Gas Pipelines
3.8% Coastal Corp.
Gas Pipelines
3.6% Columbia Energy Corp.
Gas Pipelines
3.3% Duke Energy Co.
Electric Power
3.0% Sonat, Inc.Oil & Gas
Expressed as a percentage of net assetsas of 6/30/98.
Looking Ahead.
- -------------------------------------------------
We've seen dramatic price gains for some European utilities,
as European stock
markets led the world. The cost for a dollar of a European
utility's earning
power is approaching or surpassing the cost for a U.S.
company's. We are
monitoring the situation carefully. We may take some profits
in Europe and use
the proceeds to buy more inexpensive U.S. electric and
natural gas stocks,
which recently have lagged the overall U.S. stock market.
1
<PAGE>
Utility Stocks: The Heat Is On.
- ------------------------------------------------------------
- -------------------
Portfolio manager Dave Kiefer talks about hot summers,
deregulation, the AT&T
acquisition of TCI and what it all means to your Fund.
Q. This summer, the price electricity companies paid for
short-term supplies
spiked higher several times. Will this affect what
consumers pay at home,
and do we have to worry about electricity trading
affecting the financial
stability of utilities?
A. The high prices you read about in the papers were paid by
some large
industrial customers and utilities to secure power during
the Midwest heat
wave. In general, regulators will not allow the utilities
to pass these
costs through to consumers in most circumstances. No
utilities should go
bankrupt due to losses sustained during this summer. The
experience
actually should be beneficial because it showed the
industry the enormous
risks involved in trading electricity. In fact, it should
make the gas
companies more attractive takeover candidates because
they have shown an
ability to make money in periods of volatility like this.
Q. What are the implications of AT&T's proposed acquisition
of
Tele-Communications Inc. (TCI), the second largest cable
television
operator in the U.S.?
A. In our view, the proposed combination confirms the fears
that led us to
avoid the U.S. telephone industry. Long distance, cable,
and local
telephone companies are entering a round of vicious
competition against
each other. As they battle for customers, profit growth
will suffer. We
expect increasing demand for telephone services, but not
much money to be
made until the crowd thins out.
As holders of AT&T stock, we think the merger is a good
strategic move,
although we wish the company hadn't paid so much. We
continue to own AT&T
because we believe its strong brand name and new
management team will make
it a powerful competitor. The acquisition of TCI
strengthens AT&T's
management even further.
(PHOTO)
2
<PAGE>
President's Letter August 4, 1998
(PHOTO)
Managing Expectations.
Dear Shareholder:
For nearly eight years we've enjoyed above-average, double-
digit returns from
stocks--a bull market of unprecedented duration. As a
result, many of us have
grown accustomed to seeing the Dow Jones Industrial Average,
the S&P 500 and
other market indexes set new records. That's why the
fluctuations normally
seen in financial markets may take investors by surprise.
Although the media has given ample coverage to the factors
that have caused
concern in 1998, we'd like to remind you that there is also
good news to
report: the US economy is healthy and continues to grow.
Inflation remains
subdued and employment is strong.
Even with a sound economy, it isn't easy to maintain your
investment
discipline when the market is fluctuating. Here are some
thoughts that may
help:
- - Manage Your Expectations. Experienced mutual fund
investors understand that
financial markets rise and fall. Over time, however,
stocks and bonds have
produced attractive returns that have kept ahead of
inflation.
- - Don't Invest Emotionally. If you have long-term (several
years or longer)
investment goals, it may be counter-productive to sell an
investment in
reaction to short-term market fluctuation. Over the course
of several years,
it's not unusual for stocks and bonds to experience
several periods of market
uncertainty.
- - Diversification Lessens Risk. Market sectors seldom move
in tandem. A
well-diversified portfolio that includes stock, bond, and
money market mutual
funds can lessen the effects of market volatility over
time.
- - We're On Your Side. Your Prudential professional can help
you understand
what's happening in the markets. He or she can assist you
in making informed
decisions based upon a thorough knowledge of your
financial needs and
long-term goals. Call your Prudential professional 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
<PAGE>
Portfolio of Investments as of
June 30, 1998 (Unaudited) PRUDENTIAL
UTILITY FUND, INC.
- ------------------------------------------------------------
- -------------------
- ------------------------------------------------------------
- -------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--98.2%
COMMON STOCKS--95.8%
- ------------------------------------------------------------
Electrical Power--43.7%
546,000 AES Corp. (a) $
28,699,125
1,045,400 BEC-Energy
43,384,100
1,010,000 Electrobras (ADR) (Brazil)
30,805,000
1,179,500 Central Maine Power Co.
23,000,250
2,432,685 CINergy Corporation
85,143,975
981,300 Cleco Corporation
29,193,675
2,300,000 CMS Energy Corporation
101,200,000
1,160,381 Companhia Energetica de Minas
Gerais-Cemig (ADR) (Brazil)
36,552,007
3,000,000 DPL, Inc.
54,375,000
2,785,111 Duke Energy Co.
165,017,827
803,100 Eastern Utilities Associates
21,081,375
3,435,000 Edison International
101,547,187
83,540 El Paso Electric Co.(a)
767,524
2,797,700 Energy East Corporation
116,454,262
100,000 Entergy Corp.
2,875,000
3,325,000 FirstEnergy Corp.
102,243,750
5,000,000 Iberdrola (Spain)
81,083,722
2,798,500 Illinova Corp.
83,955,000
2,211,792 Marketspan Corporation
66,215,523
7,250,000 National Power PLC (United
Kingdom)
69,718,289
906,800 New Century Energies, Inc.
41,202,725
6,475,600 Niagara Mohawk Power Corp.(a)
96,729,275
1,934,000 NIPSCO Industries, Inc.
54,152,000
8,161,400 Northeast Utilities Co.
138,233,712
2,200,000 PacifiCorp
49,775,000
1,978,600 PECO Energy Co.
57,750,388
2,003,400 Pinnacle West Capital Corp.
90,153,000
2,557,000 Public Service Company of New
Mexico
58,011,938
1,470,800 Rochester Gas & Electric Corp.
46,973,675
3,548,366 Sempra Energy
98,467,156
973,200 Teco Energy Incorporated
26,093,925
1,928,367 Texas Utilities Co.
80,268,276
2,511,800 Unicom Corp.
88,069,988
1,720,740 Unisource Energy Corp.
27,101,655
-----------
- ----
2,196,295,304
Gas Distribution--5.6%
283,650 Bay State Gas Co. $
10,867,341
3,938,104 BG PLC (ADR) (United Kingdom)
113,220,490
706,400 Energen Corp.
14,216,300
783,600 MCN Corporation
19,492,050
810,600 NICOR, Inc.
32,525,325
117,600 Providence Energy Corp.
2,476,950
3,956,400 Questar Corp.
77,644,350
205,400 Southwest Gas Corporation
5,019,462
161,150 Yankee Energy System, Inc.
3,968,319
-----------
- ----
279,430,587
- ------------------------------------------------------------
Gas Pipelines--20.3%
2,709,275 Coastal Corp.
189,141,261
3,225,000 Columbia Energy Corp.
179,390,625
407,200 Consolidated Natural Gas Co.
23,973,900
237,700 Eastern Enterprises, Inc.
10,191,388
2,598,200 El Paso Energy
99,381,150
909,900 Enron Corp.
49,191,469
2,061,800 Equitable Resources, Inc.
62,884,900
890,300 KN Energy, Inc.
48,243,131
4,500,000 TransCanada Pipelines, Ltd.
(Canada)
99,833,271
2,200,000 Westcoast Energy, Inc. (Canada)
49,087,500
1,372,000 Western Gas Resources, Inc.
20,065,500
5,647,022 Williams Cos., Inc.
190,586,992
-----------
- ----
1,021,971,087
- ------------------------------------------------------------
Manufacturing--2.2%
1,155,400 RWE AG (Germany)
68,299,508
62,350 Viag AG (Germany)
42,861,958
-----------
- ----
111,161,466
- ------------------------------------------------------------
Media--0.2%
1,135,971 Ascent Entertainment Group,
Inc.(a)
12,637,677
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as of
June 30, 1998 (Unaudited) PRUDENTIAL
UTILITY FUND, INC.
- ------------------------------------------------------------
- -------------------
- ------------------------------------------------------------
- -------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Oil & Gas--3.5%
1,000,000 Alberta Energy Co., Ltd. (Canada) $
23,500,000
375,000 RAO Gazprom (ADR) (Russia)
4,148,438
3,848,800 Sonat, Inc.
148,659,900
-----------
- ----
176,308,338
- ------------------------------------------------------------
Oil & Gas Exploration/Production--1.7%
4,906,830 EEX Corporation
46,001,531
700,000 Oryx Energy Co.(a)
15,487,500
1,014,800 Pioneer Natural Resources Co.
24,228,350
-----------
- ----
85,717,381
- ------------------------------------------------------------
Realty Investment Trust--1.5%
89,580 Crescent Operating, Inc.(a)
1,522,860
895,800 Crescent Real Estate Equities,
Inc.
30,121,275
969,900 Equity Residential Property Trust
46,009,631
-----------
- ----
77,653,766
- ------------------------------------------------------------
Telecommunications--17.1%
1,402,200 AT&T Corp.
80,100,675
1,939,600 BCE, Inc. (Canada)
82,796,675
2,173,000 Comsat Corp.
61,523,063
2,126,100 Frontier Corporation
66,972,150
3,555,555 Hellenic Telecommunication
Organization S.A. (GDR)
(Greece)
45,688,884
1,170,000 Millicom International Cellular S.
A. (Luxembourg) (a)
51,187,500
1,169,200 Southern New England
Telecommunications Corp.
76,582,600
1,000,000 Sprint Corp.
70,500,000
1,991,700 Tele Danmark (ADR) (Denmark)
93,858,862
371,400 Telebras (ADR) (Brazil)
40,552,238
720,000 Telefonica de Espana, S.A. (ADR)
(Spain)
100,125,000
1,441,500 Telefonica del Peru, S.A. (ADR)
(Peru)
29,460,656
1,211,500 Telefonos de Mexico, S.A. (ADR)
(Mexico)
58,227,719
11,000 U.S. West Inc.(a) $
517,000
-----------
- ----
858,093,022
-----------
- ----
Total common stocks
(cost $2,868,659,858)
4,819,268,628
-----------
- ----
PREFERRED STOCKS--1.0%
- ------------------------------------------------------------
Natural Gas--0.1%
359,100 Enron Corp., 6.25%
7,182,000
- ------------------------------------------------------------
Telecommunications--0.9%
475,000 Nortel Inversora S. A.,
Convertible, 10.00% (Argentina)
25,709,375
398,000 Philippine Long Distance Telephone
Co., Convertible (GDR) (The
Philippines)
18,308,000
-----------
- ----
44,017,375
-----------
- ----
Total preferred stocks
(cost $47,770,654)
51,199,375
-----------
- ----
Principal
Amount
(000)
BONDS--1.4%
- ------------------------------------------------------------
Electrical Power--0.3%
$ 10,000 Niagara Mohawk Power Corp.,
9.50%, 3/1/21
10,631,200
5,000 Texas Utilities Co.,
9.75%, 5/1/21
5,594,800
-----------
- ----
16,226,000
- ------------------------------------------------------------
Natural Gas--0.1%
Oryx Energy Co.,
2,000 9.50%, 11/1/99
2,074,540
1,000 7.50%, 5/15/14
1,002,500
-----------
- ----
3,077,040
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL UTILITY FUND, INC.
Portfolio of Investments as of June 30, 1998 (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--1.0%
$ 43,000 United States Treasury Bond,
6.375%, 8/15/27 $
47,219,160
-----------
- ----
Total bonds
(cost $60,843,540)
66,522,200
-----------
- ----
Total long-term investments
(cost $2,977,274,052)
4,936,990,203
-----------
- ----
SHORT-TERM INVESTMENT--1.6%
- ------------------------------------------------------------
Repurchase Agreement
81,860 Joint Repurchase Agreement
Account,
5.72%, 7/1/98
(cost $81,860,000)
81,860,000
-----------
- ----
- ------------------------------------------------------------
Total Investments--99.8%
(cost $3,059,134,052)
5,018,850,203
Other assets in excess of
liabilities--0.2%
9,955,926
-----------
- ----
Net Assets--100% $
5,028,806,129
-----------
- ----
-----------
- ----
</TABLE>
- ---------------
(a) Non-income producing securities.
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 6
<PAGE>
Statement of Assets and Liabilities (Unaudited)
PRUDENTIAL UTILITY FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Assets
June 30, 1998
<S>
<C>
Investments, at value (cost
$3,059,134,052).............................................
.................... $5,018,850,203
Foreign currency, at value (cost
$806,942)...................................................
............... 806,942
Cash........................................................
................................................
633,641
Dividends and interest
receivable..................................................
......................... 17,003,921
Receivable for Fund shares
sold........................................................
..................... 3,189,646
Deferred expenses and other
assets......................................................
.................... 61,332
- --------------
Total
assets......................................................
....................................... 5,040,545,685
- --------------
Liabilities
Payable for Fund shares
reacquired..................................................
........................ 5,745,909
Distribution fee
payable.....................................................
............................... 2,388,557
Management fee
payable.....................................................
................................. 1,611,389
Foreign withholding taxes
payable.....................................................
...................... 855,658
Accrued expenses and other
liabilities.................................................
..................... 1,138,043
- --------------
Total
liabilities.................................................
....................................... 11,739,556
- --------------
Net
Assets......................................................
............................................
$5,028,806,129
- --------------
- --------------
Net assets were comprised of:
Common stock, at
par.........................................................
............................ $ 3,859,329
Paid-in capital in excess of
par.........................................................
................ 2,979,387,240
- --------------
2,983,246,569
Undistributed net investment
income......................................................
................ 5,783,735
Accumulated net realized gain on
investments.................................................
............ 80,023,818
Net unrealized appreciation on investments and foreign
currencies........................................
1,959,752,007
- --------------
Net assets, June 30,
1998........................................................
........................... $5,028,806,129
- --------------
- --------------
Class A:
Net asset value and redemption price per share
($2,760,592,907 / 211,790,780 shares of common stock
issued and outstanding)..........................
$13.03
Maximum sales charge (5% of offering
price)......................................................
........ .69
- --------------
Maximum offering price to
public......................................................
................... $13.72
- --------------
- --------------
Class B:
Net asset value, offering price and redemption price per
share
($2,198,062,213 / 168,760,619 shares of common stock
issued and outstanding)..........................
$13.02
- --------------
- --------------
Class C:
Net asset value, offering price and redemption price per
share
($21,982,809 / 1,687,780 shares of common stock issued
and outstanding)...............................
$13.02
- --------------
- --------------
Class Z:
Net asset value, offering price and redemption price per
share
($48,168,200 / 3,693,762 shares of common stock issued
and outstanding)...............................
$13.04
- --------------
- --------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL UTILITY FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income June 30,
1998
<S> <C>
Income
Dividends (net of foreign withholding taxes
of $2,264,077).......................... $
70,590,198
Interest...................................
8,034,374
-----------
- --
Total income............................
78,624,572
-----------
- --
Expenses
Distribution fee--Class A..................
3,311,008
Distribution fee--Class B..................
10,901,544
Distribution fee--Class C..................
89,536
Management fee.............................
9,624,034
Transfer agent's fees and expenses.........
2,827,000
Custodian's fees and expenses..............
250,000
Reports to shareholders....................
217,000
Insurance..................................
79,000
Registration fees..........................
33,000
Legal fees.................................
22,000
Directors' fees............................
21,000
Audit fee..................................
16,000
Miscellaneous..............................
4,091
-----------
- --
Total expenses..........................
27,395,213
-----------
- --
Net investment income.........................
51,229,359
-----------
- --
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions....................
85,607,115
Foreign currency transactions..............
(374,073 )
-----------
- --
85,233,042
-----------
- --
Net change in unrealized appreciation
(depreciation) on:
Investments................................
253,587,506
Foreign currencies.........................
179,549
-----------
- --
253,767,055
-----------
- --
Net gain on investments and foreign
currencies.................................
339,000,097
-----------
- --
Net Increase in Net Assets
Resulting from Operations.....................
$390,229,456
-----------
- --
-----------
- --
</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 1998 1997
<S> <C> <C>
Operations
Net investment income....... $ 51,229,359 $
111,754,871
Net realized gain on
investments ............. 85,233,042
412,749,671
Net change in unrealized
appreciation of
investments.............. 253,767,055
539,842,910
-------------- ---------
- -----
Net increase in net assets
resulting from
operations............... 390,229,456
1,064,347,452
-------------- ---------
- -----
Dividends and distributions
(Note 1)
Dividends from net
investment income
Class A.................. (33,994,807)
(60,645,408)
Class B.................. (19,286,519)
(40,354,565)
Class C.................. (174,339)
(200,787)
Class Z.................. (649,259)
(1,038,271)
-------------- ---------
- -----
(54,104,924)
(102,239,031)
-------------- ---------
- -----
Distributions from net
realized capital gains
Class A.................. (35,912,949)
(211,158,424)
Class B.................. (29,285,550)
(182,907,714)
Class C.................. (241,521)
(998,463)
Class Z.................. (621,045)
(3,229,427)
-------------- ---------
- -----
(66,061,065)
(398,294,028)
-------------- ---------
- -----
Fund share transactions (net of
share conversions) (Note 6)
Proceeds from shares sold... 294,251,324
413,071,389
Net asset value of shares
issued in reinvestment of
dividends and
distributions............ 110,407,693
459,144,179
Cost of shares reacquired... (416,783,149)
(865,755,515)
-------------- ---------
- -----
Net increase (decrease) in
net assets from Fund
share transactions....... (12,124,132)
6,460,053
-------------- ---------
- -----
Total increase................. 257,939,335
570,274,446
Net Assets
Beginning of period............ 4,770,866,794
4,200,592,348
-------------- ---------
- -----
End of period(a)............... $5,028,806,129
$4,770,866,794
-------------- ---------
- -----
-------------- ---------
- -----
- ---------------
(a) Includes undistributed net
investment income of....... $ 5,783,735 $
9,335,543
-------------- ---------
- -----
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 8
<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-related 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, or
at the bid price in the absence of an asked price. 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 or losses on foreign currency
transactions represent net
foreign exchange gains or 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 U.S. 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
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
- ------------------------------------------------------------
- --------------------
9
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL UTILITY FUND, INC.
- ------------------------------------------------------------
- --------------------
net capital gains in excess of capital 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.
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 decrease undistributed net investment
income by $676,243
and increase accumulated net realized gain on investments by
$676,243 for
realized foreign currency losses during the six months ended
June 30, 1998. 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 had a distribution agreement with Prudential
Securities Incorporated
('PSI'), which acted as the distributor of the Class A,
Class B, Class C and
Class Z shares of the Fund. The Fund compensated 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 were accrued
daily and payable monthly. PSI also incurred the expenses of
distributing the
Fund's Class Z shares under the distribution agreement, none
of which was
reimbursed or paid by the Fund. Effective July 1, 1998,
Prudential Investment
Management Services LLC ('PIMS') became the distributor of
the Fund and is
serving the Fund under the same terms and conditions as
under the arrangement
with PSI.
Pursuant to the Class A, B and C Plans, the Fund compensated
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, 1998.
PSI has advised the Fund that it has received approximately
$717,000 in
front-end sales charges resulting from sales of Class A
shares during the six
months ended June 30, 1998. 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,
1998, it received
approximately $820,000 and $3,500 in contingent deferred
sales charges imposed
upon redemptions by certain Class B and Class C
shareholders, respectively.
PSI, PIFM, PIC and PIMS are indirect, wholly owned
subsidiaries of The
Prudential Insurance Company of America.
The Fund, along with other affiliated registered investment
companies (the
'Funds'), has a credit agreement (the 'Agreement') with an
unaffiliated lender.
The maximum commitment under the Agreement is $200,000,000.
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 did not borrow any amounts pursuant to the Agreement
during the six months
ended June 30, 1998. 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. The
Agreement expires on
December 29, 1998.
- ------------------------------------------------------------
- --------------------
10
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL UTILITY FUND, INC.
- ------------------------------------------------------------
- --------------------
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, 1998,
the Fund incurred fees of approximately $2,215,000 for the
services of PMFS. As
of June 30, 1998, approximately $372,000 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 nonaffiliates.
- ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than
short-term investments,
for the six months ended June 30, 1998, were $286,729,850
and $226,116,951,
respectively.
The federal income tax basis of the Fund's investments at
June 30, 1998 was
$3,064,546,349 and, accordingly, net unrealized appreciation
for federal income
tax purposes was $1,954,303,854 (gross unrealized
appreciation--$2,000,162,090;
gross unrealized depreciation--$45,858,236).
The Fund elected to treat approximately $302,200 of net
currency losses incurred
during the two month period ended December 31, 1997 as
having incurred in the
current fiscal year.
- ------------------------------------------------------------
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, 1998, the Fund
had a 6.59% undivided interest in the joint account. The
undivided interest for
the Fund represents $81,860,000 in the principal amount. As
of such date, each
repurchase agreement in the joint account and the collateral
therefor were as
follows:
Bear Stearns & Co., Inc., 5.85%, in the principal amount of
$345,000,000,
repurchase price $345,056,063, due 7/1/98. The value of the
collateral including
accrued interest was $353,215,323.
Goldman Sachs & Co. Inc., 5.20%, in the principal amount of
$206,264,000,
repurchase price $206,293,794, due 7/1/98. The value of the
collateral including
accrued interest was $210,389,609.
Warburg Dillon Read LLC, 5.93%, in the principal amount of
$345,000,000,
repurchase price $345,056,829, due 7/1/98. The value of the
collateral including
accrued interest was $352,174,874.
Salomon Smith Barney Inc., 5.70%, in the principal amount of
$345,000,000,
repurchase price $345,054,625, due 7/1/98. The value of the
collateral including
accrued interest was $352,383,850.
- ------------------------------------------------------------
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, 1998:
Shares sold..................... 8,794,151 $
113,016,893
Shares issued in reinvestment of
dividends and distributions... 4,909,902
64,018,005
Shares reacquired............... (14,662,504)
(187,905,729)
------------ ----------
- -----
Net decrease in shares
outstanding before
conversion.................... (958,451)
(10,870,831)
Shares issued upon conversion
from Class B.................. 3,279,785
42,502,210
------------ ----------
- -----
Net increase in shares
outstanding................... 2,321,334 $
31,631,379
------------ ----------
- -----
------------ ----------
- -----
Year ended December 31, 1997:
Shares sold..................... 18,710,671 $
214,780,201
Shares issued in reinvestment of
dividends and distributions... 21,742,349
248,368,140
Shares reacquired............... (41,618,692)
(478,448,444)
------------ ----------
- -----
Net decrease in shares
outstanding before
conversion.................... (1,165,672)
(15,300,103)
Shares issued upon conversion
from Class B.................. 24,639,335
284,415,438
------------ ----------
- -----
Net increase in shares
outstanding................... 23,473,663 $
269,115,335
------------ ----------
- -----
------------ ----------
- -----
</TABLE>
- ------------------------------------------------------------
- --------------------
11
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL UTILITY FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class B Shares Amount
- -------------------------------- ------------ ----------
- -----
Six months ended June 30, 1998:
<S> <C> <C>
Shares sold..................... 12,277,574 $
156,187,330
Shares issued in reinvestment of
dividends and distributions... 3,428,594
44,736,992
Shares reacquired............... (16,668,984)
(213,507,488)
------------ ----------
- -----
Net decrease in shares
outstanding before
conversion.................... (962,816)
(12,583,166)
Shares reacquired upon
conversion into Class A....... (3,287,396)
(42,502,210)
------------ ----------
- -----
Net decrease in shares
outstanding................... (4,250,212) $
(55,085,376)
------------ ----------
- -----
------------ ----------
- -----
Year ended December 31, 1997:
Shares sold..................... 14,991,815 $
170,422,061
Shares issued in reinvestment of
dividends and distributions... 18,013,110
205,416,554
Shares reacquired............... (31,804,005)
(362,886,857)
------------ ----------
- -----
Net increase in shares
outstanding before
conversion.................... 1,200,920
12,951,758
Shares reacquired upon
conversion into Class A....... (24,674,366)
(284,415,438)
------------ ----------
- -----
Net decrease in shares
outstanding................... (23,473,446) $
(271,463,680)
------------ ----------
- -----
------------ ----------
- -----
<CAPTION>
Class C Shares Amount
- -------------------------------- ------------ ----------
- -----
<S> <C> <C>
Six months ended June 30, 1998:
Shares sold..................... 669,758 $
8,512,615
Shares issued in reinvestment of
dividends and distributions... 29,390
383,277
Shares reacquired............... (105,968)
(1,362,379)
------------ ----------
- -----
Net increase in shares
outstanding................... 593,180 $
7,533,513
------------ ----------
- -----
------------ ----------
- -----
Year ended December 31, 1997:
Shares sold..................... 1,039,426 $
12,054,619
Shares issued in reinvestment of
dividends and distributions... 95,416
1,091,801
Shares reacquired............... (591,977)
(6,968,862)
------------ ----------
- -----
Net increase in shares
outstanding................... 542,865 $
6,177,558
------------ ----------
- -----
------------ ----------
- -----
<CAPTION>
Class Z
- --------------------------------
<S> <C> <C>
Six months ended June 30, 1998:
Shares sold..................... 1,293,987 $
16,534,486
Shares issued in reinvestment of
dividends and distributions... 97,333
1,269,419
Shares reacquired............... (1,094,164)
(14,007,553)
------------ ----------
- -----
Net increase in shares
outstanding................... 297,156 $
3,796,352
------------ ----------
- -----
------------ ----------
- -----
Year ended December 31, 1997:
Shares sold..................... 1,379,164 $
15,814,508
Shares issued in reinvestment of
dividends and distributions... 374,266
4,267,684
Shares reacquired............... (1,523,099)
(17,451,352)
------------ ----------
- -----
Net increase in shares
outstanding................... 230,331 $
2,630,840
------------ ----------
- -----
------------ ----------
- -----
</TABLE>
- ------------------------------------------------------------
- --------------------
12
<PAGE>
Financial Highlights (Unaudited)
PRUDENTIAL UTILITY FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class A
-
- ------------------------------------------------------------
- -------
Six Months
Ended Year Ended December 31,
June 30, ---------------------------------------------
- -------
1998(b) 1997(b) 1996(b) 1995 1994
1993
-
- ---------- ------- ------- ------ ------
- ------
<S>
<C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...................
$ 12.33 $10.88 $ 9.87 $ 8.27 $ 9.72
$ 8.97
- ----- ------- ------- ------ ------ --
- ----
Income from investment operations
Net investment income..................................
.15 .34 .32 .30 .31
.33
Net realized and unrealized gains (losses) on
investment and foreign currency transactions........
.88 2.53 1.80 1.79 (1.06)
1.12
- ----- ------- ------- ------ ------ --
- ----
Total from investment operations....................
1.03 2.87 2.12 2.09 (.75)
1.45
- ----- ------- ------- ------ ------ --
- ----
Less distributions
Dividends from net investment income...................
(.16) (.32 ) (.32 ) (.30) (.32)
(.29)
Distributions from net realized gains..................
(.17) (1.10 ) (.79 ) (.19) (.36)
(.41)
Distributions in excess of net realized gains..........
- -- -- -- -- (.02) -
- -
- ----- ------- ------- ------ ------ --
- ----
Total distributions.................................
(.33) (1.42 ) (1.11 ) (.49) (.70)
(.70)
- ----- ------- ------- ------ ------ --
- ----
Net asset value, end of period.........................
$ 13.03 $12.33 $10.88 $ 9.87 $ 8.27
$ 9.72
- ----- ------- ------- ------ ------ --
- ----
- ----- ------- ------- ------ ------ --
- ----
TOTAL RETURN(a)........................................
8.40% 27.77 % 22.09 % 25.74% (7.89)%
16.28%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000,000)....................
$2,760 $2,583 $2,023 $1,709 $254
$337
Average net assets (000,000)...........................
$2,671 $2,201 $1,786 $1,440 $294
$287
Ratios to average net assets:
Expenses, including distribution fees...............
.79%(c) .82 % .86 % .88% .88%
.80%
Expenses, excluding distribution fees...............
.54%(c) .57 % .61 % .63% .63%
.60%
Net investment income...............................
2.43%(c) 2.95 % 3.10 % 3.12% 3.37%
3.16%
For Class A, B, C and Z shares:
Portfolio turnover rate.............................
5% 15 % 17 % 14% 15%
24%
</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 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 B
-
- ------------------------------------------------------------
- -------
Six Months
Ended Year Ended December 31,
June 30, ---------------------------------------------
- -------
1998(b) 1997(b) 1996(b) 1995 1994
1993
-
- ---------- ------- ------- ------ ------
- ------
<S>
<C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...................
$ 12.32 $10.88 $ 9.87 $ 8.26 $ 9.69
$ 8.96
- ----- ------- ------- ------ ------ --
- ----
Income from investment operations
Net investment income..................................
.11 .25 .24 .22 .24
.24
Net realized and unrealized gains (losses) on
investment and foreign currency transactions........
.87 2.53 1.80 1.80 (1.05)
1.12
- ----- ------- ------- ------ ------ --
- ----
Total from investment operations....................
.98 2.78 2.04 2.02 (.81)
1.36
- ----- ------- ------- ------ ------ --
- ----
Less distributions
Dividends from net investment income...................
(.11) (.24 ) (.24 ) (.22) (.24)
(.22)
Distributions from net realized gains..................
(.17) (1.10 ) (.79 ) (.19) (.36)
(.41)
Distributions in excess of net realized gains..........
- -- -- -- -- (.02) -
- -
- ----- ------- ------- ------ ------ --
- ----
Total distributions.................................
(.28) (1.34 ) (1.03 ) (.41) (.62)
(.63)
- ----- ------- ------- ------ ------ --
- ----
Net asset value, end of period.........................
$ 13.02 $12.32 $10.88 $ 9.87 $ 8.26
$ 9.69
- ----- ------- ------- ------ ------ --
- ----
- ----- ------- ------- ------ ------ --
- ----
TOTAL RETURN(a)........................................
8.01% 26.80 % 21.16 % 24.80% (8.51)%
15.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000,000)....................
$2,198 $2,132 $2,137 $2,355 $3,526
$4,756
Average net assets (000,000)...........................
$2,198 $2,059 $2,184 $2,450 $4,152
$4,308
Ratios to average net assets:
Expenses, including distribution fees...............
1.54%(c) 1.57 % 1.61 % 1.63% 1.63%
1.60%
Expenses, excluding distribution fees...............
.54%(c) .57 % .61 % .63% .63%
.60%
Net investment income...............................
1.68%(c) 2.20 % 2.35 % 2.37% 2.62%
2.36%
</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 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. 14
<PAGE>
Financial Highlights (Unaudited)
PRUDENTIAL UTILITY FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class C
-
- ------------------------------------------------------------
- --
August 1,
Six Months 1994(d)
Ended Year Ended December 31, Through
June 30, ------------------------------ December
31,
1998(b) 1997(b) 1996(b) 1995 1994
-
- ---------- ------- ------- ------ ----------
- --
<S>
<C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...................
$ 12.32 $ 10.88 $ 9.87 $ 8.26 $ 9.30
-
- ---------- ------- ------- ------ -----
Income from investment operations
Net investment income..................................
.11 .25 .24 .22 .11
Net realized and unrealized gains (losses) on
investment and foreign currency transactions........
.87 2.53 1.80 1.80 (.69)
-
- ---------- ------- ------- ------ -----
Total from investment operations....................
.98 2.78 2.04 2.02 (.58)
-
- ---------- ------- ------- ------ -----
Less distributions
Dividends from net investment income...................
(.11) (.24) (.24 ) (.22) (.13)
Distributions from net realized gains..................
(.17) (1.10) (.79 ) (.19) (.31)
Distributions in excess of net realized gains..........
- -- -- -- -- (.02)
-
- ---------- ------- ------- ------ -----
Total distributions.................................
(.28) (1.34) (1.03 ) (.41) (.46)
-
- ---------- ------- ------- ------ -----
Net asset value, end of period.........................
$ 13.02 $ 12.32 $10.88 $ 9.87 $ 8.26
-
- ---------- ------- ------- ------ -----
-
- ---------- ------- ------- ------ -----
TOTAL RETURN(a)........................................
8.01% 26.80% 21.16 % 24.80% (6.27)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................
$21,983 $13,490 $6,001 $3,455 $787
Average net assets (000)...............................
$18,056 $9,424 $4,517 $2,181 $433
Ratios to average net assets:
Expenses, including distribution fees...............
1.54%(c) 1.57% 1.61 % 1.63% 1.70%(c)
Expenses, excluding distribution fees...............
.54%(c) .57% .61 % .63% .70%(c)
Net investment income...............................
1.72%(c) 2.20% 2.35 % 2.37% 2.65%(c)
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales
loads. Total returns is
calculated assuming a purchase of shares on the first
day and a sale on the
last day of each period reported and includes
reinvestment of dividends and
distributions. Total returns for periods of less than
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.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 15
<PAGE>
Financial Highlights (Unaudited)
PRUDENTIAL UTILITY FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class Z
--
- -------------------------------------------
March 1,
Six Months 1996(d)
Ended Year Ended Through
June 30, December 31, December 31,
1998(b) 1997(b) 1996(b)
--
- --------- ------------ ------------
<S>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...................
$ 12.34 $ 10.88 $ 10.05
--
- --------- ------ ------
Income from investment operations
Net investment income..................................
.17 .36 .29
Net realized and unrealized gains (losses) on
investment and foreign currency transactions........
.88 2.54 1.67
--
- --------- ------ ------
Total from investment operations....................
1.05 2.90 1.96
--
- --------- ------ ------
Less distributions
Dividends from net investment income...................
(.18) (.34) (.34)
Distributions from net realized gains..................
(.17) (1.10) (.79)
Distributions in excess of net realized gains..........
- -- -- --
--
- --------- ------ ------
Total distributions.................................
(.35) (1.44) (1.13)
--
- --------- ------ ------
Net asset value, end of period.........................
$ 13.04 $ 12.34 $ 10.88
--
- --------- ------ ------
--
- --------- ------ ------
TOTAL RETURN(a)........................................
8.52% 28.15% 20.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................
$48,168 $41,904 $34,446
Average net assets (000)...............................
$45,911 $35,994 $34,291
Ratios to average net assets:
Expenses, including distribution fees...............
.54%(c) .57% .61%(c)
Expenses, excluding distribution fees...............
.54%(c) .57% .61%(c)
Net investment income...............................
2.69%(c) 3.20% 3.35%(c)
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales
loads. Total returns is
calculated assuming a purchase of shares on the first
day and a sale on the
last day of each period reported and includes
reinvestment of dividends and
distributions. Total returns for periods of less than
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 Z shares.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 16
<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
Douglas H. McCorkindale
Mendel A. Melzer, CFA
Thomas T. Mooney
Stephen P. Munn
Richard A. Redeker
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
Officers
Richard A. Redeker, President
Robert F. Gunia, 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 Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
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
PricewaterhouseCoopers 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, 1998
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>
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Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
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