Prudential
Allocation Fund
(formerly
Prudential
FlexiFund)
---------
Conservatively
Managed Portfolio
Strategy Portfolio
ANNUAL REPORT July 31, 1994 (LOGO)
<PAGE>
LETTER TO
SHAREHOLDERS
-------------------------------
September 1, 1994
Dear Shareholder:
The Prudential Allocation Fund (formerly, the Prudential FlexiFund) is
comprised of the Conservatively Managed Portfolio and the Strategy Portfolio.
Each Portfolio invests in a combination of stocks and bonds, as well as cash
and money market instruments. They allocate assets according to prevailing
market conditions. Both Portfolios seek a high total return, but
with different degrees of risk.
Allocation Fund Total Returns
Fund Performance
<TABLE>
<CAPTION>
HISTORICAL RETURNS1 AVERAGE ANNUAL RETURNS2
As of 7/31/94 As of 6/30/94
Since Since
1 Year 5 Years Incep.* 1 Year 5 Years Incep.*
<S> <C> <C> <C> <C> <C> <C>
Cons. Man
Class A +2.4% N/A +58.0% -4.3% N/A +9.1%
Class B
+1.6% +53.1% +69.0% -4.8% +9.1% +7.7%
Strategy
Class A +2.9% N/A +52.9% -4.3% N/A +8.2%
Class B +2.1% +45.4% +67.4% -4.7% +8.2% +7.6%
</TABLE>
Past performance is no guarantee of future results. Principal value and
investment return will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
1 Source: Lipper Analytical Services, Inc. These figures do not take into
account sales charges. The Fund charges a maximum front-end sales load of 5.25%
(Class A). Class B shares are subject to a declining contingent deferred sales
charge of 5%, 4%, 3%, 2%, 1% and 1% for the first 6 years.
2 Source: Prudential Mutual Fund Management Inc. These averages take into
account applicable sales charges. The Fund charges a maximum front-end sales
load of 5.25% for Class A shares and a contingent deferred sales charge of 5%,
4%, 3%, 2%, 1% and 1% for six years, for Class B shares. Commencing February
1995, Class B shares will automatically convert to Class A shares seven years
after the date of purchase.
*Inception dates: 1/22/90 Class A; 9/15/87 Class B.
Good Times, Bad Times
For the year ended July 31, 1994, U.S. stocks were up 5.2%, as measured by
the Standard & Poor's 500 Index. Both stocks and bonds closed out 1993 with
some of the strongest gains reported in many years. Even fixed income investors
saw double-digit returns as investors rode a wave of good news in the markets:
low inflation, modest growth and a falling federal deficit.
-1-
<PAGE>
What a difference six months makes. In 1994, rising interest rates and the
declining dollar dominated the financial news as both the stock and bond
markets reversed course to produce negative total returns for the first seven
months of the year. The Federal Reserve moved to raise short-term rates in
February for the first time in five years, and then increased rates three more
times in as many months, attempting to dampen economic growth and stave off
inflation. The spike in rates sent bond prices plunging and upset the stock
market, sending it down sharply for the first quarter.
The Dollar's Impact on Financial Markets
U.S. stocks rebounded slightly during the second quarter of 1994, once
investors felt the Federal Reserve's actions were keeping inflation under
control and there could be stability in rates going forward. The stock market
stumbled again in mid-June, however, as the growing U.S. trade deficit and
faltering worldwide confidence in trade talks triggered a steep decline in the
U.S. dollar against other currencies.
(CHART)
The decline of the dollar led to speculation the Federal Reserve would raise
interest rates to support the falling currency, which hurt U.S. stocks and sent
the dollar even lower. In this environment, corporate, mortgage-backed and
government bonds all suffered negative total returns.
The Conservatively Managed Portfolio
The Conservatively Managed Portfolio seeks a high total return consistent
with moderate risk. The weighted average maturity of the Portfolio's debt
securities is usually shorter than that of the Strategy Portfolio. In addition,
the equity and debt securities are generally those of larger, more mature
companies and are subject to less price volatility than those held in the
Strategy Portfolio.
The Portfolio paid dividends and distributions totalling $0.91 per Class A
share and $0.82 per Class B share, in the past year.
Balancing Caution and Gain
During the first six months of the reporting period, we looked for times when
bond prices were rising and used those opportunities to sell bonds that had
appreciated. The proceeds went into stocks, because strong and improving
corporate earnings lead us to believe that stocks were undervalued. By the end
of January, however, we adopted a slightly more cautious stance, raising the
Portfolio's cash level to 15%. This reduced the stock position to 47% of net
assets (from over 50% earlier in the year), and our bond exposure stood at
about 38% of net assets.
-2-
<PAGE>
As rates continued to climb in 1994, we let our cash holdings move even
higher to 24% of net assets on July 31, 1994. On that date, the percentage of
net assets in stocks was down to 46% and bonds had been reduced to 30%, since
the bond market also fell victim to rising rates and the dollar's woes. And
after rates increased about 130 basis points across the board, we continued to
expect more action from the Federal Reserve.
(CHART)
We under performed funds that were more fully invested in stocks and those
that had foreign exposure (where some markets like Japan have done well this
year). But our investment process is based on sound fundamentals and we believe
many of our key holdings should show good gains as the economy kicks into high
gear. We rely on our disciplined process in an attempt to add value over the
long haul.
The Strategy Portfolio
The Strategy Portfolio seeks high total return with relatively higher risk
than the Conservatively Managed Portfolio. This Portfolio invests in equity
securities of major established corporations and smaller, faster-growing
companies, and a combination of investment grade, high yield and foreign
securities. Please note there are also special risks associated with foreign
investing such as economic, political and social developments, along with
currency fluctuations. Greg A. Smith, chief investment strategist of Prudential
Securities Inc., provides sector allocation advice and furnishes economic
commentary on the equity and fixed income markets to the Prudential Investment
Corp., the Portfolio's investment adviser, pursuant to a consulting agreement.
The Portfolio paid dividends and distributions totalling $0.57 per Class A
share and $0.51 per Class B share, in the past year.
A More Cautious Approach
Because short-term interest rates rose this year, the Portfolio's cash
allocation was raised even further, to 38% of net assets on July 31, 1994, up
significantly from 11% on January 31, 1994. During the same period, the stock
allocation was reduced to 58% of net assets from 68%. As Greg Smith's outlook
turned more bearish in the face of rising rates, his recommended bond
allocation for the Portfolio fell to 4% of net assets, as of July 31, 1994.
During this period, we reduced the Portfolio's telecommunications position
(selling TeleCommunications Inc. and IBM, for example), taking profits in
stocks that had risen in anticipation of the coming information superhighway.
This sector's growth prospects may have stalled as several key industry mergers
collapsed, making it apparent the highway was farther off in the future than
originally anticipated. We also began adding to financial holdings, including
insurance, financial services and regional bank stocks, which had become
attractively priced after recent price weakness brought on by rising rates
early in the year. Some of our favorite holdings include Salomon, Inc. and
Fannie Mae (Federal National Mortgage Association).
-3-
<PAGE>
Name Change
Effective August 1, 1994 the name of your Fund was changed to the Prudential
Allocation Fund Conservatively Managed Portfolio and Prudential Allocation
Fund Strategy Portfolio by the Board of Trustees. This was done to more
accurately reflect the Fund's investment strategy of allocating assets
primarily among common stocks, bonds and money market instruments.
The investment objectives and direction of each Portfolio remain unchanged.
Outlook
After this year's market volatility, Greg Smith remains optimistic that the
U.S. economy will grow and U.S. stocks will rebound. It seems unlikely the Fed
will act to significantly raise rates as a way of supporting the U.S. dollar,
which may make world currency markets unhappy -- perhaps hurting the U.S.
dollar in the near future. Economic signs in the U.S. seem to point to
inflation being under control, which means slowly rising interest rates and a
stable or slightly higher U.S. stock market for the remainder of the year.
As always, it is a pleasure to have you as a Prudential Allocation Fund
shareholder and we remain committed to managing the Portfolios for your
benefit.
Sincerely,
Lawrence C. McQuade
President
-4-
<PAGE>
PRUDENTIAL ALLOCATION FUND* Portfolio of Investments
CONSERVATIVELY MANAGED PORTFOLIO July 31, 1994
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--76.4%
COMMON STOCKS--45.8%
Aerospace/Defense--2.4%
225,000 Banner Aerospace, Inc.*...... $ 1,096,875
121,900 Gencorp, Inc................. 1,538,987
67,300 General Motors Corp., Class
H.......................... 2,515,337
35,500 Litton Industries, Inc....... 1,317,938
62,800 Loral Corp................... 2,339,300
48,400 Martin Marietta Corp......... 2,196,150
142,800 UNC, Inc.*................... 785,400
------------
11,789,987
------------
Automotive--1.5%
38,200 Coltec Inds., Inc.*.......... 721,025
27,500 Danaher Corp................. 1,196,250
52,000 Ford Motor Co................ 1,651,000
25,000 General Motors Corp.......... 1,284,375
58,000 General Motors Corp., Class
E.......................... 2,044,500
------------
6,897,150
------------
Chemicals--2.9%
35,000 Dexter Corp.................. 870,625
119,500 Ferro Corp................... 2,868,000
19,200 FMC Corp.*................... 1,128,000
35,000 Grace (W.R.) & Co............ 1,452,500
81,000 Hanna (M. A.) Co............. 2,146,500
68,400 Imperial Chemical Ind.
(ADR)...................... 3,505,500
50,000 Om Group Inc................. 987,500
35,100 Vigoro Corp.................. 1,140,750
------------
14,099,375
------------
Computer & Related Equipment--0.9%
32,900 Ceridian Corp.*.............. 843,063
78,200 Diebold, Inc................. 3,519,000
------------
4,362,063
------------
Consumer Products--1.0%
700 Bush Boake Allen, Inc.*...... $ 13,038
65,000 Eastman Kodak Co............. 3,144,375
108,000 Whitman Corp................. 1,782,000
------------
4,939,413
------------
Containers & Packaging--0.6%
64,500 Ball Corp.................... 1,701,187
90,100 Owens-Illinois Holdings
Corp.*..................... 957,313
------------
2,658,500
------------
Data Processing & Reproduction--0.2%
20,000 First Financial Management
Corp....................... 1,115,000
------------
Drugs & Health Care--4.4%
70,000 Columbia Healthcare Corp..... 2,835,000
103,600 Healthtrust, Inc.*........... 2,887,850
16,800 Johnson & Johnson Co......... 789,600
160,000 National Medical Enterprises,
Inc........................ 2,720,000
52,700 Schering Plough Corp......... 3,379,388
50,000 Universal Health Services,
Inc., Class B*............. 1,387,500
50,000 Warner Lambert Co............ 3,250,000
117,766 Zeneca Group PLC............. 4,048,206
------------
21,297,544
------------
Electronics--1.7%
97,400 Belden, Inc.................. 1,753,200
113,500 Mark IV Industries, Inc...... 2,184,875
63,800 Motorola Inc................. 3,381,400
24,100 Perkin Elmer Corp............ 677,813
------------
7,997,288
------------
Financial Services--5.6%
55,600 American Express Co.......... 1,473,400
130,400 Dean Witter Discover & Co.... 5,232,300
52,100 Financial Security
Assured*................... 1,100,613
83,200 First Bank System, Inc....... 3,036,800
16,700 First Interstate Bank
Corp....................... 1,254,587
22,000 ITT Corp..................... 1,886,500
</TABLE>
* See Note 8. -5- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND*
CONSERVATIVELY MANAGED PORTFOLIO
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
Financial Services--(cont'd)
156,650 Keycorp...................... $ 5,091,125
200,000 Norwest Corp................. 5,225,000
100,000 Washington Mutual Savings
Bank....................... 2,012,500
52,200 Western National Corp........ 802,575
------------
27,115,400
------------
Food & Beverage--1.3%
61,800 CKE Restaurants, Inc......... 579,375
82,500 Morrison Restaurants, Inc.... 1,825,312
41,400 Sbarro, Inc.................. 1,480,050
75,000 Shoney's, Inc.*.............. 1,059,375
47,100 Universal Foods Corp......... 1,560,188
------------
6,504,300
------------
Freight Transportation--0.4%
74,000 Ryder System, Inc............ 1,933,250
------------
Home Improvements--1.2%
100,000 Owens Corning Fiberglass*.... 3,325,000
125,000 Ply Gem Indiana, Inc......... 2,390,625
------------
5,715,625
------------
Hotels & Leisure--0.3%
54,000 Marriott International,
Inc........................ 1,498,500
------------
Insurance--3.7%
33,600 Berkley (W. R.) Corp......... 1,268,400
60,000 Emphesys Financial Group,
Inc........................ 1,830,000
80,000 Equitable of Iowa Cos........ 2,820,000
46,200 Life Re...................... 993,300
40,000 NAC Re Corp.................. 1,120,000
63,400 National Re Corp............. 1,672,175
96,000 Penncorp Financial Group,
Inc........................ 1,590,000
83,300 Reinsurance Group America,
Inc........................ 2,134,562
124,700 Tig Holdings, Inc............ $ 2,369,300
51,200 Trenwick Group, Inc.......... 2,003,200
------------
17,800,937
------------
Machinery & Equipment--2.0%
99,200 Donaldson Co., Inc........... 2,442,800
45,000 IDEX Corp.*.................. 1,760,625
38,000 Kaydon Corp.................. 807,500
100,000 Regal Beloit Corp............ 2,787,500
48,400 Smith A O Corp............... 1,355,200
20,000 Trimas Corp.................. 462,500
------------
9,616,125
------------
Media--3.4%
90,000 American Publishing Co.,
Class A*................... 1,282,500
50,000 Comcast Corp., Class A....... 812,500
11,500 Comcast Corp. Class A SPL.... 191,187
31,700 Houghton Mifflin Co.......... 1,176,862
90,000 Media General, Inc........... 2,565,000
80,000 Multimedia, Inc.*............ 2,420,000
6,100 Pulitzer Publishing Co....... 231,800
160,000 Tele-Communications, Inc.*... 3,730,000
105,400 Time Warner, Inc............. 3,912,975
------------
16,322,824
------------
Mining--0.4%
144,000 INDRESCO, Inc.*.............. 1,692,000
------------
Miscellaneous--0.9%
64,400 BWIP Holding, Inc............ 1,062,600
77,800 Titan Wheel International,
Inc........................ 2,013,075
34,300 York International Corp...... 1,346,275
------------
4,421,950
------------
Oil & Gas--3.9%
99,800 Basin Exploration, Inc.*..... 860,775
31,600 British Petroleum PLC
(ADR)...................... 2,401,600
111,200 Cabot Oil & Gas Corp......... 2,154,500
</TABLE>
* See Note 8. -6- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND*
CONSERVATIVELY MANAGED PORTFOLIO
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
Oil & Gas--(cont'd)
52,200 Enron Oil & Gas Co........... $ 1,037,475
100,000 Mascotech, Inc............... 1,400,000
155,000 Mesa, Inc.*.................. 833,125
35,000 Murphy Oil Corp.............. 1,557,500
164,700 Oryx Energy Co............... 2,532,262
92,700 Seagull Energy Corp.*........ 2,282,737
99,200 Societe Nationale Elf
Aquitaine, ADR............. 3,794,400
7,100 USX -Delhi Group............. 93,188
------------
18,947,562
------------
Paper & Forest Products--1.4%
87,600 Mead Corp.................... 3,909,150
79,950 Pentair, Inc................. 3,008,119
------------
6,917,269
------------
Petroleum Services--0.1%
35,000 Enterra Corp.*............... 700,000
------------
Railroad--0.9%
95,000 Chicago & North Western
Holdgs. Co.*............... 2,066,250
70,400 Illinois Central Corp........ 2,244,000
------------
4,310,250
------------
Retail--1.4%
170,700 Best Products, Inc.*......... 1,301,587
60,000 Caldor Corp.*................ 1,747,500
36,600 Harcourt General, Inc........ 1,313,025
46,300 Rite Aid Corp................ 937,575
33,000 Sears Roebuck & Co........... 1,559,250
1,500 Stride Rite Corp............. 19,313
------------
6,878,250
------------
Steel & Metals--0.7%
112,500 Material Sciences Corp.*..... 1,800,000
63,100 Wolverine Tube, Inc.*........ 1,538,063
------------
3,338,063
------------
Telecommunications--1.9%
77,000 AirTouch Communications*..... 2,002,000
58,000 Century Telephone Enterprises
Inc........................ 1,508,000
100,000 MCI Communications Corp...... $ 2,275,000
24,900 Northern Telecom Ltd......... 803,025
101,000 Rochester Telephone Corp..... 2,436,625
------------
9,024,650
------------
Textiles--0.7%
65,000 Jones Apparel Group, Inc.*... 1,535,625
32,000 VF Corp...................... 1,640,000
------------
3,175,625
------------
Total common stocks
(cost $198,825,427).......... 221,068,900
------------
</TABLE>
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) DEBT OBLIGATIONS--30.6%
- - ------------ ---------
<S> <C> <C> <C>
Corporate Bonds--10.6%
Airlines--0.7%
AMR Corp.,
Baa3 $ 1,000 7.75%, 12/1/97....... 994,450
Delta Air Lines,
Inc.,
Ba1 1,300 7.71%, 5/14/97....... 1,274,221
Ba1 700 10.375%, 2/1/11...... 711,739
Ba1 500 9.75%, 5/15/21....... 480,770
Southwest Airlines
Co.,
Baa1 100 9.40%, 7/1/01........ 109,133
------------
3,570,313
------------
Cement--0.2%
Cemex S.A.,
NR 750 6.25%, 10/25/95...... 743,438
------------
Conglomerate--0.1%
Grupo Condumex S.A.
de C.V., M.T.N.,
NR 700 6.25%, 7/27/96....... 658,000
------------
Electronics--0.1%
Westinghouse Electric
Corp.,
Ba1 450 8.70%, 6/20/96....... 461,984
------------
</TABLE>
* See Note 8. -7- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND*
CONSERVATIVELY MANAGED PORTFOLIO
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (Note 1)
<S> <C> <C> <C>
Financial Services--4.4%
Associates Corp. of
North America,
A1 $ 750 6.875%, 1/15/97...... $ 753,757
A1 200 8.375%, 1/15/98...... 207,960
Auburn Hills Trust,
Inc.,
A3 1,000 12.375%, 5/1/20...... 1,377,990
Australia & New
Zealand Banking
Group Ltd.,
A2 1,100 6.25%, 2/1/04........ 983,620
Banco Del Estado
Chile,
Baa2 700 8.39%, 8/1/01........ 698,250
Chrysler Financial
Corp.,
Baa2 1,100 5.39%, 8/27/96....... 1,074,931
Baa2 3,300 5.25%, 11/15/96...... 3,305,148
First Union Corp.,
A3 1,000 9.45%, 6/15/99....... 1,073,660
General Motors
Acceptance Corp.,
Baa1 2,000 6.50%, 6/10/96....... 1,996,120
Baa1 1,750 7.80%, 11/7/96....... 1,785,630
Baa1 2,000 7.50%, 11/4/97....... 2,021,260
Kansallis-Osake-Pankki Bank,
A3 1,000 6.125%, 5/15/98...... 969,320
Korea Development Bank,
A1 800 6.75%, 12/1/05....... 690,352
PT Alatief Freeport
Finance,
Ba2 1,400 9.75%, 4/15/01....... 1,400,000
Union Bank Finland,
A3 2,600 5.25%, 6/15/96....... 2,530,086
Westinghouse Credit
Corp.,
Ba1 400 8.75%, 6/3/96........ 411,048
------------
21,279,132
------------
Food & Beverage--0.9%
Coca Cola
Enterprises, Inc.
A3 500 6.50%, 11/15/97...... 494,440
Fomento Economico
Mexicano S.A.,
NR $ 850 9.50%, 7/22/97....... $ 858,500
Procter & Gamble Co.,
Aa2 1,700 9.36%, 1/1/21........ 1,936,980
Ralston Purina Co.
Baa1 850 9.30%, 5/1/21........ 895,348
------------
4,185,268
------------
Insurance--0.2%
New York Life
Insurance Co.,
NR 1,250 6.40%, 12/15/03...... 1,132,350
------------
Media--0.5%
Grupo Televisa, Sa De
Euro,
M.T.N.,
Ba2 1,500 10.00%, 11/9/97...... 1,543,125
News America Holdings, Inc.,
Ba1 850 9.50%, 7/15/24....... 875,381
------------
2,418,506
------------
Miscellaneous--0.1%
Federal Express
Corp.,
Baa3 500 10.05%, 6/15/99...... 546,075
------------
Oil & Gas--1.3%
Arkla, Inc.,
Ba2 1,000 9.30%, 1/15/98....... 1,038,350
Oryx Energy Co.,
Ba2 2,000 6.05%, 2/1/96........ 1,943,520
USX Corp.,
Baa3 1,250 7.19%, 9/16/99....... 1,229,875
USX Marathon Group,
Baa3 750 9.625%, 8/15/03...... 792,637
Baa3 750 7.20%, 2/15/04....... 683,378
Baa3 750 9.375%, 2/15/12...... 762,787
------------
6,450,547
------------
</TABLE>
* See Note 8. -8- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND*
CONSERVATIVELY MANAGED PORTFOLIO
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (Note 1)
<S> <C> <C> <C>
Paper Products--0.2%
Boise Cascade Corp.,
Baa3 $ 1,000 6.81%, 2/1/99........ $ 944,820
------------
Retail--0.1%
K Mart Corp.,
A3 400 7.95%, 2/1/23........ 369,572
------------
Shipping--0.3%
Compania SudAmericana
De Vapores,
NR 1,750 7.375%, 12/8/03...... 1,524,688
------------
Sovereign Bonds--0.3%
Columbia Republic,
Ba1 1,000 7.25%, 2/23/04....... 877,500
Quebec Province
Canada,
A1 800 7.125%, 2/9/24....... 677,768
------------
1,555,268
------------
Tobacco--0.1%
RJR Nabisco, Inc.
Baa3 400 8.625%, 12/1/02...... 367,544
------------
Utilities--1.1%
Commonwealth Edison
Co.
Baa2 700 8.25%, 10/1/06....... 690,179
Baa2 700 8.00%, 5/15/08....... 660,912
Hydro Quebec Corp.,
A1 500 4.25%, 9/30/49....... 417,500
Korea Electric Power
Corp.,
A1 400 7.75%, 4/1/13........ 350,356
Pennsylvania Power &
Light Co.,
A2 450 9.375%, 7/1/21....... 486,373
Philadelphia Electric
Co.,
Baa1 1,000 7.125%, 9/1/02....... 959,660
Tenaga Nasional
Berhad,
A2 1,000 7.88%, 6/15/04....... 992,900
Transco Energy Co.,
Ba3 $ 700 11.25%, 7/1/99....... $ 749,000
------------
5,306,880
------------
Total corporate bonds
(cost
$52,525,624)....... 51,514,385
------------
Asset Backed Securities--1.2%
Bank of New York
Master Credit Card
Trust,
Aaa 400 7.95%, 4/15/96....... 401,000
Standard Credit Card
Trust,
A2 1,000 9.375%, 3/10/96...... 1,023,750
Aaa 4,000 8.00%, 10/7/97....... 4,120,000
------------
Total asset backed
securities
(cost
$5,797,609)........ 5,544,750
------------
U. S. Government
Securities--18.8%
United States Treasury Bonds,
7,300 10.38%, 11/15/12..... 9,101,056
3,450 12.00%, 8/15/13...... 4,812,750
31,450 11.25%, 2/15/15...... 43,843,187
United States Treasury Notes,
16,400 6.00%, 11/30/97...... 16,192,376
12,500 5.13%, 3/31/98....... 11,949,250
900 7.88%, 11/15/99...... 944,298
1,600 7.88%, 8/15/01....... 1,680,992
1,000 7.25%, 5/15/04....... 1,009,840
United States Treasury Strips,
4,500 Zero Coupon,
2/15/11............ 1,292,895
------------
Total U. S.
Government
Securities
(cost
$94,642,493)....... 90,826,644
------------
Total debt
obligations
(cost
$152,965,726)...... 147,885,779
------------
Total long-term
investments
(cost
$351,791,153)...... 368,954,679
------------
</TABLE>
* See Note 8. -9- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND*
CONSERVATIVELY MANAGED PORTFOLIO
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (Note 1)
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS--25.7%
Corporate Notes--5.3%
Banco Internacional
SA
NR $ 8,500 Zero Coupon,
8/24/94............ $ 8,458,350
Multibanco Comermex
Zcp
NR 8,000 Zero Coupon,
9/1/94............. 7,949,600
Comdisco, Inc.,
Baa2 3,000 8.95%, 5/15/95....... 3,064,920
Citicorp,
A3 1,000 7.80%, 3/24/95....... 1,013,160
Nordiska Investerings
banke,
Aaa 3,000 9.50%, 12/15/94...... 3,045,690
Philip Morris Co.,
Inc.,
A2 250 8.70%, 8/1/94........ 250,000
Time Warner, Inc.,
Ba1 1,000 6.05%, 7/1/95........ 996,970
Texas Utilities
Electric Co.,
Baa2 800 9.625%, 9/30/94...... 805,200
------------
Total corporate notes
(cost
$25,811,026)....... 25,583,890
------------
Repurchase Agreement--20.4%
Joint Repurchase
Agreement Account,
$ 98,502 4.19%, 8/1/94, (Note 5)............ $ 98,502,000
------------
Total short-term investments
(cost $124,313,026)................ 124,085,890
------------
Total Investments--102.1%
(cost $476,104,179; Note 4)........ 493,040,569
Liabilities in excess of
other assets--(2.1%)............... (9,920,395)
------------
Net Assets--100%................... $483,120,174
------------
</TABLE>
------------
---------
* Non-income producing security.
(a) Par value U.S. dollar denominated.
ADR--American Depository Receipt.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Prospectus contains a description of
Moody's ratings.
* See Note 8. -10- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND*
CONSERVATIVELY MANAGED PORTFOLIO
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
July 31,
Assets 1994
------------
<S> <C>
Investments, at value (cost $476,104,179)................................................. $493,040,569
Cash...................................................................................... 172,445
Dividends and interest receivable......................................................... 4,082,864
Receivable for investments sold........................................................... 3,926,531
Receivable for Fund shares sold........................................................... 837,657
Deferred expenses and other assets........................................................ 9,636
------------
Total assets.......................................................................... 502,069,702
------------
Liabilities
Payable for investments purchased......................................................... 16,838,273
Payable for Fund shares reacquired........................................................ 1,033,924
Accrued expenses.......................................................................... 431,350
Distribution fee payable.................................................................. 382,389
Management fee payable.................................................................... 263,592
------------
Total liabilities..................................................................... 18,949,528
------------
Net Assets................................................................................ $483,120,174
------------
------------
Net assets were comprised of:
Common stock, at par.................................................................... $ 435,510
Paid-in capital in excess of par........................................................ 461,120,698
------------
461,556,208
Undistributed net investment income..................................................... 1,867,647
Accumulated net realized gains on investsments.......................................... 2,759,929
Net unrealized appreciation on investments.............................................. 16,936,390
------------
Net Assets, July 31, 1994................................................................. $483,120,174
------------
------------
Class A:
Net asset value and redemption price per share
($37,511,663 / 3,372,119 shares of common stock issued and outstanding)............... $11.12
Maximum sales charge (5.25% of offering price).......................................... 0.62
------------
Maximum offering price to public........................................................ $11.74
------------
------------
Class B:
Net asset value, offering price and redemption price per share
($445,608,511 / 40,178,928 shares of common stock issued and outstanding)............. $11.09
------------
------------
</TABLE>
* See Note 8. See Notes to Financial Statements.
-11-
<PAGE>
PRUDENTIAL ALLOCATION FUND*
CONSERVATIVELY MANAGED PORTFOLIO
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
July 31,
Net Investment Income 1994
------------
<S> <C>
Income
Dividends (net of foreign withholding taxes of $77,122)................................... $ 3,341,833
Interest (net of foreign withholding taxes of $12,122).................................... 13,871,237
------------
Total income............................................................................ 17,213,070
------------
Expenses
Distribution fee--Class A................................................................. 69,380
Distribution fee--Class B................................................................. 3,921,335
Management fee............................................................................ 2,743,056
Transfer agent's fees and expenses........................................................ 795,000
Reports to shareholders................................................................... 300,000
Custodian's fees and expenses............................................................. 220,000
Registration fees......................................................................... 90,000
Trustees' fees............................................................................ 22,300
Legal fees................................................................................ 20,000
Audit fee................................................................................. 14,000
Insurance................................................................................. 10,400
Miscellaneous............................................................................. 8,748
------------
Total expenses.......................................................................... 8,214,219
------------
Net investment income....................................................................... 8,998,851
------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on:
Investment transactions................................................................... 8,825,011
Financial futures contracts............................................................... 29,426
------------
8,854,437
Net change in unrealized depreciation on Investments........................................ (13,575,563)
------------
Net loss on investments..................................................................... (4,721,126)
------------
Net Increase in Net Assets Resulting from Operations........................................ $ 4,277,725
------------
------------
</TABLE>
* See Note 8. See Notes to Financial Statements.
-12-
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND*
CONSERVATIVELY MANAGED PORTFOLIO
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended July 31,
----------------------------
Increase (Decrease) in Net Assets 1994 1993
------------ ------------
<S> <C> <C>
Operations
Net investment income....................................................... $ 8,998,851 $ 8,734,542
Net realized gain on investments............................................ 8,854,437 13,033,133
Net change in unrealized appreciation/depreciation of investments........... (13,575,563) 16,803,076
------------ ------------
Net increase in net assets resulting from operations........................ 4,277,725 38,570,751
------------ ------------
Net equalization credits...................................................... 1,077,644 325,868
------------ ------------
Dividends and distributions (Note 1)
Dividends to shareholders from net investment income
Class A................................................................... (970,829) (490,533)
Class B................................................................... (9,728,864) (6,742,292)
------------ ------------
(10,699,693) (7,232,825)
------------ ------------
Distributions to shareholders from net realized gains on investment
transactions
Class A................................................................... (1,247,471) (557,629)
Class B................................................................... (16,812,829) (10,528,236)
------------ ------------
(18,060,300) (11,085,865)
------------ ------------
Fund share transactions (Note 6)
Net proceeds from shares subscribed......................................... 216,417,990 115,375,179
Net asset value of shares issued to shareholders in reinvestment of
dividends and distributions............................................... 26,617,480 16,869,402
Cost of shares reacquired................................................... (80,947,022) (45,324,359)
------------ ------------
Net increase in net assets from Fund transactions........................... 162,088,448 86,920,222
------------ ------------
Total increase................................................................ 138,683,824 107,498,151
Net Assets
Beginning of year............................................................. 344,436,350 236,938,199
------------ ------------
End of year................................................................... $483,120,174 $344,436,350
------------ ------------
------------ ------------
</TABLE>
* See Note 8. See Notes to Financial Statements.
-13-
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND* Portfolio of Investments
STRATEGY PORTFOLIO July 31, 1994
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--61.9%
COMMON STOCKS--58.0%
Advertising--0.2%
64,500 American Business
Information*............... $ 903,000
------------
Aerospace/Defense--1.3%
28,700 Boeing Co.................... 1,280,737
33,700 Loral Corp................... 1,255,325
24,600 Martin Marietta Corp.*....... 1,116,225
70,000 Martin Marietta, Inc......... 1,540,000
------------
5,192,287
------------
Automotive--1.9%
13,200 Danaher Corp................. 574,200
91,600 Ford Motor Co................ 2,908,300
78,800 Goodyear Tire & Rubber Co.... 2,807,250
33,700 Modine Manufacturing Co...... 905,687
------------
7,195,437
------------
Building & Related Industries--0.1%
38,500 Toll Brothers, Inc.*......... 462,000
------------
Chemicals--2.7%
51,700 Air Products & Chemicals,
Inc........................ 2,481,600
17,500 Dow Chemical Co.............. 1,217,919
27,000 Eastman Chemical Co.......... 1,393,875
36,200 IMC Fertlizer Group, Inc..... 1,411,800
25,200 Imperial Chemical Ind.
(ADR)...................... 1,291,500
49,700 Potash Corp.................. 1,590,400
30,100 Valspar Corp................. 1,023,400
------------
10,410,494
------------
Commercial Services--0.4%
67,500 ServiceMaster L. P........... 1,695,938
------------
Computer & Related Equipment--3.3%
35,400 American Management Systems,
Inc.*...................... 885,000
62,200 Automatic Data Processing,
Inc........................ 3,203,300
54,300 First Data Corp.............. 2,429,925
16,320 First Financial Management
Corp....................... 909,840
21,300 International Business
Machines Corp.............. $ 1,315,275
28,800 Microsoft Corp.*............. 1,483,200
31,500 National Data Corp........... 519,750
25,100 Policy Management Systems
Corp.*..................... 837,712
18,000 SPS Transaction Services,
Inc.*...................... 985,500
------------
12,569,502
------------
Consumer Products--3.0%
85,800 Agency Rent-A-Car, Inc....... 1,136,850
58,600 Cross A T Co................. 930,275
47,600 Eastman Kodak Co............. 2,302,650
23,500 First Brands Corp............ 807,813
12,900 Gillette Co.................. 896,550
31,300 Libbey, Inc.................. 524,275
42,000 Maybelline, Inc.............. 1,186,500
65,818 Newell Co.................... 2,937,128
29,300 The Rival Co................. 596,988
------------
11,319,029
------------
Drugs & Health Care--3.1%
46,500 Abbott Laboratories.......... 1,307,812
50,000 Baxter International, Inc.... 1,318,750
63,035 Columbia Healthcare Corp..... 2,552,917
60,000 Health Care & Retirement
Corp.*..................... 1,492,500
42,100 Healthtrust, Inc.*........... 1,173,538
32,300 Kendall International,
Inc.*...................... 1,691,712
63,400 National Medical Enterprises,
Inc........................ 1,077,800
17,900 Schering Plough Corp......... 1,147,838
------------
11,762,867
------------
Electronics--3.0%
111,200 ADT, Ltd.*................... 1,153,700
25,200 Anthem Electronics, Inc.*.... 560,700
49,600 Baldor Electric Co........... 1,202,800
50,600 Belden, Inc.................. 910,800
61,500 Emerson Electric Co.......... 3,736,125
78,800 General Electric Co.......... 3,969,550
------------
11,533,675
------------
</TABLE>
* See Note 8. -14- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND*
STRATEGY PORTFOLIO
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
Entertainment--1.7%
88,000 Carnival Cruise Lines,
Inc........................ $ 4,158,000
37,900 Disney (Walt) Co............. 1,610,750
45,700 Sothebys Holdings, Inc....... 576,963
------------
6,345,713
------------
Environmental Services--0.7%
51,650 Thermo Electron Corp.*....... 2,059,544
38,550 Thermotrex Corp.*............ 496,331
------------
2,555,875
------------
Financial Services--7.9%
52,100 Banc One Corp................ 1,738,837
164,000 Bank of New York, Inc........ 5,186,500
46,000 Block (H&R), Inc............. 1,794,000
104,800 Dean Witter Discover & Co.... 4,205,100
59,900 Federal Home Loan Mortgage
Corp....................... 3,564,050
35,000 GFC Financial Corp........... 1,325,625
31,400 John Nuveen Co............... 679,025
92,700 Norwest Corp................. 2,421,787
91,400 Riggs National Corp.*........ 936,850
48,900 Salomon, Inc................. 2,108,812
41,700 State Street Boston Corp..... 1,600,238
19,700 T. Rowe Price & Associates,
Inc........................ 552,831
31,500 Union Planters Corp.......... 799,313
45,000 Washington Mutual Savings
Bank....................... 905,625
15,800 Wells Fargo & Co............. 2,454,925
------------
30,273,518
------------
Food & Beverage--1.7%
190,000(D) Archer-Daniels-Midland Co.... 4,678,750
46,400 Dr Pepper/Seven Up Cos.,
Inc.*...................... 1,055,600
27,400 Sbarro, Inc.................. 979,550
------------
6,713,900
------------
Freight Transportation--0.2%
34,700 Expeditors Int'l. Washington,
Inc........................ $ 624,600
------------
Hotels & Leisure--0.2%
33,000 Marriott International,
Inc........................ 915,750
------------
Insurance--2.9%
30,000 American Int'l. Group,
Inc........................ 2,827,500
32,600 CCP Insurance, Inc........... 782,400
27,300 Chubb Corp................... 2,044,087
38,500 Equitable of Iowa Cos........ 1,357,125
26,000 General Reinsurance Corp..... 3,006,250
30,000 NAC Re Corp.................. 840,000
26,200 Penncorp Financial Group,
Inc........................ 433,938
------------
11,291,300
------------
Machinery & Equipment--1.7%
50,500 Donaldson Co., Inc........... 1,243,563
34,600 Fisher Scientific
International, Inc......... 1,167,750
81,900 Illinois Tool Works, Inc..... 3,286,237
25,200 Lindsay Manufacturing Co.*... 774,900
------------
6,472,450
------------
Media--3.5%
34,000 Capital Cities ABC, Inc...... 2,626,500
56,600 Enquirer Star Group, Inc..... 933,900
21,000 Grupo Televisa S.A........... 1,176,000
50,100 Liberty Media Corp.*......... 1,120,987
75,800 Rogers Communications,
Inc.*...................... 1,083,210
28,900 Scholastic Corp.*............ 1,275,212
69,200 Shaw Communications.......... 563,294
45,000 TCA Cable TV, Inc............ 1,001,250
337,000 Television Broadcasts,
Ltd........................ 1,496,227
42,400 Tribune Co................... 2,215,400
------------
13,491,980
------------
Mining--0.5%
87,800 Placer Dome, Inc............. 1,821,850
------------
</TABLE>
* See Note 8. -15- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND*
STRATEGY PORTFOLIO
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
Oil & Gas--1.0%
100,500 Baker Hughes, Inc............ $ 2,123,062
18,300 Cabot Corp................... 979,050
118,900 Mesa, Inc.*.................. 639,088
------------
3,741,200
------------
Paper & Forest Products--1.5%
28,700 Caraustar Inds., Inc......... 516,600
57,900 Thermo Fibertek, Inc.*....... 806,981
89,400 Willamette Industries,
Inc........................ 4,447,650
------------
5,771,231
------------
Petroleum Services--4.7%
37,000 Amoco Corp................... 2,215,375
47,400 Broken Hill Proprietary Ltd.
(ADR)...................... 2,660,325
67,900 Cross Timbers Oil Co......... 1,001,525
48,200 Exxon Corp................... 2,867,900
56,000 Royal Dutch Petroleum Co..... 6,328,000
28,900 Schlumberger, Ltd............ 1,705,100
58,800 Seagull Energy Corp.*........ 1,447,950
------------
18,226,175
------------
Railroad--0.4%
13,300 Kansas City Southern
Industries, Inc............ 517,038
33,700 Illinois Central Corp........ 1,074,188
------------
1,591,226
------------
Realty Investment Trust--1.9%
7,900 Charles E. Smith Residential
Realty, Inc.*.............. 198,488
40,000 Crescent Real Estate
Equities*.................. 1,080,000
35,700 Duke Reality Investments,
Inc........................ 963,900
40,000 Equity Residential Property
Trust...................... 1,310,000
32,300 Federal Reality Investment
Trust...................... 803,462
6,100 Vornado Reality Trust........ 224,175
64,900 Manufactured Home Community,
Inc........................ $ 1,330,450
35,700 Weingarten Realty
Investors.................. 1,338,750
------------
7,249,225
------------
Retail--1.1%
16,200 Edison Brothers Stores,
Inc........................ 405,000
35,000 Harcourt General, Inc........ 1,255,625
30,700 Penney (J.C.), Inc........... 1,519,650
3,855 Thermolase Corp*............. 35,659
23,600 Tiffany & Co................. 864,350
------------
4,080,284
------------
Steel & Metals--2.0%
38,100 Aluminum Co. of America...... 2,981,325
20,000 Carpenter Technology Corp.... 1,207,500
10,200 Rouge Steel Co............... 311,100
161,500 Worthington Industries,
Inc........................ 3,310,750
------------
7,810,675
------------
Technology--0.2%
35,050 McWhorter Technologies,
Inc.*...................... 587,088
------------
Telecommunications--2.9%
55,000 AirTouch Communications*..... 1,430,000
66,000 AT & T Corp.................. 3,605,250
12,400 ITT Corp..................... 1,063,300
84,700 Telefonos de Mexico, Series
A. (ADR)................... 5,145,525
------------
11,244,075
------------
Textiles--1.5%
12,600 Galey & Lord, Inc.*.......... 259,875
41,400 Kellwood Co.................. 941,850
19,400 Russell Corp................. 586,850
32,000 Unifi, Inc................... 796,000
30,000 VF Corp...................... 1,537,500
57,600 Wellman, Inc................. 1,656,000
------------
5,778,075
------------
</TABLE>
* See Note 8. -16- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND*
STRATEGY PORTFOLIO
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C> <C>
Tobacco--0.4%
8,900 Philip Morris Cos., Inc............ $ 489,500
40,300 UST, Inc........................... 1,163,663
------------
1,653,163
------------
Utilities--0.2
39,050 AES Corp........................... 683,375
------------
Waste Management--0.2%
25,800 WMX Technologies, Inc.............. 751,425
------------
Total common stocks
(cost $208,189,470)................ 222,718,382
------------
Moody's Principal DEBT OBLIGATIONS--3.9%
Rating Amount Corporate Bonds--3.6%
(Unaudited) (000) Automotive--0.4%
- - ------------ ---------
Harvard Inds., Inc.,
B2 $ 1,500 12.00%, 7/15/04...... 1,500,000
------------
Building & Related Industries--0.7%
Intermediate City
Products. Corp.,
Sr. Sec'd. Notes,
Ba3 2,000 9.75%, 3/1/00........ 1,820,000
Ryland Group, Inc.,
Ba3 1,000 9.625%, 6/1/04....... 900,000
------------
2,720,000
------------
Finance--0.4%
GB Property Funding
Corp.,
B2 1,000 10.88%, 1/15/04...... 805,000
Reliance Group
Holdings, Inc.,
B1 1,000 9.75%, 11/15/03...... 885,000
------------
1,690,000
------------
Food & Beverage--0.4%
Fresh Del Monte
Produce, N.V.,
B1 1,500 10.00%, 5/1/03....... 1,387,500
------------
Hotels & Leisure--0.1%
Host Marriott
Hospitality, Inc.,
B1 $ 500 10.50%, 5/1/06, Ser.
M,................. $ 500,000
------------
Media--0.7%
Adelphia
Communications
Corp.,
NR 1,000 9.50%, 2/15/04....... 785,000
Cablevision
Industries Corp.,
Ba3 2,000 10.75%, 1/30/02...... 1,980,000
------------
2,765,000
------------
Paper & Forest Products--0.5%
Fort Howard Paper
Corp.,
B2 1,100 9.00%, 2/1/06........ 924,000
Malette, Inc.,
Ba3 1,000 12.25%, 7/15/04...... 1,000,000
------------
1,924,000
------------
Restaurants--0.4%
Flagstar Corp.,
B2 1,500 10.88%, 12/1/02...... 1,402,500
------------
Total corporate bonds
(cost
$15,116,332)....... 13,889,000
------------
Collateralized Mortgage
Obligations--0.3%
Federal National
Mortgage
Association, REMIC,
Aaa 1,000 9.00%, 3/25/20....... 1,068,120
------------
Total debt
obligations
(cost
$16,094,193)....... 14,957,120
------------
Total long-term
investments
(cost
$224,283,663)...... 237,675,502
------------
SHORT-TERM INVESTMENTS--38.7%
Sovereign Bonds--2.7%
Mexican Tesobonos
NR 10,500 Zero Coupon, 11/10/94
(cost
$10,266,697)....... 10,284,594
------------
</TABLE>
* See Note 8. -17- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND*
STRATEGY PORTFOLIO
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
<C> <S> <C>
U. S. Government & Agency
Securities--9.1%
Federal National Mortgage
Association,
$ 25,000 4.26%, 8/23/94............... $ 24,934,917
United States Treasury Notes,
10,000 4.125%, 5/31/95.............. 9,906,200
------------
Total U.S. Government
and Agency Securities
(cost $34,822,355)......... 34,841,117
------------
Repurchase Agreement--26.9%
Joint Repurchase Agreement
Account,
103,185 4.19%, 8/1/94, (Note 5)...... 103,185,000
------------
Total short-term investments
(cost $148,274,052)........ 148,310,711
------------
Total Investments--100.6%
(cost $372,557,715; Note
4)......................... 385,986,213
Liabilities in excess of
other
assets--(0.6%)............. (2,361,669)
------------
Net Assets--100%............. $383,624,544
------------
------------
</TABLE>
- - ------------------
* Non-income producing security.
ADR--American Depository Receipt.
REMIC--Real Estate Mortgage Investment Conduit.
L.P.--Limited Partnership.
(D) Partial amount pledged as initial margin on financial futures contracts.
* See Note 8. -18- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND*
STRATEGY PORTFOLIO
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
July 31,
Assets 1994
------------
<S> <C>
Investments, at value (cost $372,557,715)................................................. $385,986,213
Foreign currency, at value (cost $2,054,475).............................................. 2,054,449
Cash...................................................................................... 76,783
Receivable for investments sold........................................................... 3,856,279
Interest and dividends receivable......................................................... 748,054
Receivable for Fund shares sold........................................................... 386,682
Forward contracts--amount receivable from counterparties.................................. 347,135
Deferred expenses and other assets........................................................ 20,882
------------
Total assets.......................................................................... 393,476,477
------------
Liabilities
Payable for investments purchased......................................................... 8,004,180
Payable for Fund shares reacquired........................................................ 703,480
Due to broker--variation margin payable................................................... 315,400
Distribution fee payable.................................................................. 306,091
Accrued expenses.......................................................................... 296,753
Management fee payable.................................................................... 221,323
Withholding taxes payable................................................................. 1,431
Forward contracts--amount payable to counterparties....................................... 3,275
------------
Total liabilities..................................................................... 9,851,933
------------
Net Assets................................................................................ $383,624,544
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at par................................................... $ 332,289
Paid-in capital in excess of par........................................................ 358,280,006
------------
358,612,295
Undistributed net investment income..................................................... 1,547,219
Accumulated net realized gain on investments............................................ 10,160,450
Net unrealized appreciation on investments.............................................. 13,304,580
------------
Net Assets, July 31,1994.................................................................. $383,624,544
------------
------------
Class A:
Net asset value and redemption price per share
($32,484,966 / 2,799,550 shares of beneficial interest issued and outstanding)........ $11.60
Maximum sales charge (5.25% of offering price).......................................... 0.64
------------
Maximum offering price to public........................................................ $12.24
------------
------------
Class B:
Net asset value, offering price and redemption price per share
($351,139,578 / 30,429,329 shares of beneficial interest issued and outstanding)...... $11.54
------------
------------
</TABLE>
* See Note 8.
See Notes to Financial Statements.
-19-
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND*
STRATEGY PORTFOLIO
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
July 31,
Net Investment Income 1994
------------
<S> <C>
Income
Dividends (net of foreign withholding taxes of $54,294)................................... $ 4,897,587
Interest (net of foreign withholding taxes of $459)....................................... 10,028,623
------------
Total income............................................................................ 14,926,210
------------
Expenses
Distribution fee--Class A................................................................. 70,370
Distribution fee--Class B................................................................. 3,625,792
Management fee............................................................................ 2,555,883
Transfer agent's fees and expenses........................................................ 830,000
Custodian's fees and expenses............................................................. 265,000
Reports to shareholders................................................................... 305,200
Registration fees......................................................................... 26,000
Trustees' fees............................................................................ 22,300
Legal fees................................................................................ 20,000
Audit fee................................................................................. 14,000
Miscellaneous............................................................................. 19,821
------------
Total expenses.......................................................................... 7,754,366
------------
Net investment income....................................................................... 7,171,844
------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions................................................................... 15,964,132
Financial futures contracts............................................................... (1,039,395)
Foreign currency transactions............................................................. (46,117)
------------
14,878,620
------------
Net change in unrealized appreciation (depreciation)
Investments............................................................................... (13,557,587)
Financial futures contracts............................................................... (467,750)
Foreign currencies........................................................................ 343,222
------------
(13,682,115)
------------
Net gain on investments..................................................................... 1,196,505
------------
Net Increase in Net Assets Resulting from Operations........................................ $ 8,368,349
------------
------------
</TABLE>
* See Note 8.
See Notes to Financial Statements.
-20-
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND*
STRATEGY PORTFOLIO
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended July 31,
--------------------------------
Increase (Decrease) in Net Assets 1994 1993
---------------- ------------
<S> <C> <C>
Operations
Net investment income....................................................... $ 7,171,844 $ 10,348,326
Net realized gain on investments............................................ 14,878,620 10,954,676
Net change in unrealized appreciation of investments........................ (13,682,115) 11,275,901
---------------- ------------
Net increase in net assets resulting from operations........................ 8,368,349 32,578,903
---------------- ------------
Net equalization credits...................................................... 48,191 57,175
---------------- ------------
Dividends and distributions (Note 1)
Dividends to shareholders from net investment income
Class A................................................................... (549,810) (762,246)
Class B................................................................... (4,811,597) (8,432,955)
---------------- ------------
(5,361,407) (9,195,201)
---------------- ------------
Dividends to shareholders in excess of net investment income
Class A................................................................... (40,192) --
Class B................................................................... (351,923) --
---------------- ------------
(392,115) --
---------------- ------------
Distributions to shareholders from net realized gains on investments and
foreign curencies
Class A................................................................... (815,586) (1,779,498)
Class B................................................................... (10,082,411) (26,359,313)
---------------- ------------
(10,897,997) (28,138,811)
---------------- ------------
Fund share transactions (Note 5)
Proceeds from shares sold................................................... 76,851,235 95,403,980
Net asset value of shares issued in reinvestment of dividends and
distributions............................................................. 15,914,742 35,885,867
Cost of shares reacquired................................................... (86,835,010) (75,812,344)
---------------- ------------
Net increase in net assets from Fund share transactions..................... 5,930,967 55,477,503
---------------- ------------
Total increase (decrease)..................................................... (2,304,012) 50,779,569
Net Assets
Beginning of year............................................................. 385,928,556 335,148,987
---------------- ------------
End of year................................................................... $ 383,624,544 $385,928,556
---------------- ------------
---------------- ------------
</TABLE>
* See Note 8.
See Notes to Financial Statements.
-21-
<PAGE>
<PAGE>
PRUDENTIAL FLEXIFUND
Notes to Financial Statements
Prudential FlexiFund, (the ``Fund''), is registered under the Investment
Company Act of 1940, as a diversified, open-end management investment company.
The Fund was organized as an unincorporated business trust in Massachusetts on
February 23, 1987 and consists of two series, the Conservatively Managed
Portfolio and the Strategy Portfolio. The investment objective of the
Conservatively Managed Portfolio is to achieve a high total investment return
consistent with moderate risk by investing in a diversified portfolio of money
market instruments, debt obligations and equity securities. The investment
objective of the Strategy Portfolio is to achieve a high total investment return
consistent with relatively higher risk than the Conservatively Managed Portfolio
through varying the proportions of investments in debt and equity securities,
the quality and maturity of debt securities purchased and the price volatility
and the type of issuer of equity securities purchased. The ability of issuers of
debt securities held by the Fund to meet their obligations may be affected by
economic developments in a specific country, industry or region.
Note 1. Accounting The following is a summary
Policies of significant accounting poli-
cies followed by the Fund in the preparation of
its financial statements.
Securities Valuation: Any security for which the primary market is on an
exchange (including NASDAQ National Market System equity securities) is valued
at the last sale price on such exchange on the day of valuation or, if there was
no sale on such day, the mean between the last bid and asked prices quoted on
such day. Corporate bonds (other than convertible debt securities) and U.S.
Government and agency securities that are actively traded in the
over-the-counter market, including listed securities for which the primary
market is believed to be over-the-counter, are valued on the basis of valuations
provided by a pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, agency ratings, market
transactions in comparable securities and various relationships between
securities in determining value. Convertible debt securities that are actively
traded in the over-the-counter market, including listed securities for which the
primary market is believed to be over-the-counter, are valued at the mean
between the most recently quoted bid and asked prices provided by principal
market makers. Forward currency exchange contracts are valued at the current
cost of offsetting the contract on the day of valuation. Other securities
(including options and futures contracts) are valued at the mean between the
most recently quoted bid and asked prices.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, take
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction, including accrued interest.
To the extent that any repurchase transaction exceeds one business day, the
value of the collateral is marked-to-market on a daily basis to ensure the
adequacy of the collateral. 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.
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 long-term securities held at the end of the fiscal 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
long-term portfolio securities sold during the fiscal period. Accordingly,
realized foreign currency gains (losses) are included in the reported net
realized gains on investment transactions.
Net realized gains on foreign currency transactions represent net foreign
exchange gains from the holding of foreign currencies, currency gains or losses
realized between
-22-
<PAGE>
<PAGE>
the trade and settlement dates on securities transactions, and the difference
between the amounts of dividends, interest and foreign taxes recorded on the
Fund's books and the U.S. dollar equivalent amounts actually received or paid.
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 or
the level of governmental supervision and regulation of foreign securities
markets.
Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities at a set price
for delivery on a future date. Upon entering into a financial futures contract,
the Fund is required to pledge to the broker an amount of cash and/or other
assets equal to a certain percentage of the contract amount. This amount is
known as the ``initial margin''. Subsequent payments, known as ``variation
margin'', are made or received by the Fund each day, depending on the daily
fluctuations in the value of the underlying security. Such variation margin is
recorded for financial statement purposes on a daily basis as unrealized gain or
loss until the contracts expire or are closed, at which time the gain or loss is
reclassified to realized gain or loss. The Fund invests in financial futures
contracts solely for the purpose of hedging its existing portfolio securities or
securities the Fund intends to purchase against fluctuations in value caused by
changes in prevailing market interest rates. Should interest rates move
unexpectedly, the Fund may not achieve the anticipated benefits of the financial
futures contracts and may realize a loss. The use of futures transactions
involves the risk of imperfect correlation in movements in the price of futures
contracts, interest rates and the underlying hedged assets.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income is recorded on the accrual basis. Net
investment income (other than distribution fees) and unrealized and realized
gains or losses are allocated daily to each class of shares of each series based
upon the relative proportion of net assets at the beginning of the day of each
class.
Equalization: The Fund follows the accounting practice known as equalization by
which a portion of the proceeds from sales and costs of reacquisitions of Fund
shares, equivalent on a per share basis to the amount of distributable net
investment income on the date of the transaction, is credited or charged to
undistributed net investment income. As a result, undistributed net investment
income per share is unaffected by sales or reacquisitions of the Fund's shares.
Federal Income Taxes: For federal income tax purposes, each series in the Fund
is treated as a separate taxpaying entity. It is the intent of each series 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 interest and dividends have been provided for in
accordance with the Fund's understanding of the applicable country's tax rates.
Dividends and Distributions: The Fund expects to pay dividends of net investment
income quarterly and make distributions at least annually of any net capital
gains. Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gains distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments of wash sales and foreign currencies transactions.
Reclassification of Capital Accounts: Effective August 1, 1993, the Fund began
accounting and reporting for distributions to shareholders in accordance with
Statement of Position 93-2: Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital Distributions by
Investment Companies. As a result of this statement, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined in
accordance with income tax regulations. The effect of adopting this statement
was to decrease paid-in capital for the Conservatively Managed Portfolio and the
Strategy Portfolio by $21,132 and $6,769, respectively, increase (decrease)
undistributed net investment income for the Conservatively Managed Portfolio and
the Strategy Portfolio by $214,969 and $(329,527), respectively, and increase
(decrease) accumulated net realized gains on investments for the Conservatively
Managed Portfolio and the Strategy Portfolio by $(193,837) and $336,296,
respectively, as compared to amounts previously reported through July 31, 1993.
For the year ended July 31, 1994, the Conservatively Managed Portfolio and the
Strategy Portfolio each decreased accumulated net investment income and
increased accumulated gains by $431,923 and $2,750,630, respectively. 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
-23-
<PAGE>
Mutual Fund Management, Inc. (``PMF''). Pursuant to this agreement, PMF has
responsibility for all investment advisory services and supervises the
subadviser's performance of such services. PMF has entered into a subadvisory
agreement with The Prudential Investment Corporation (``PIC''); PIC furnishes
investment advisory services in connection with the management of the Fund. PMF
pays for the services of PIC, the compensation of officers of the Fund,
occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears
all other costs and expenses.
The management fee paid PMF is computed daily and payable monthly at an
annual rate of .65 of 1% of the average daily net assets of each of the series.
PMF has agreed that, in any fiscal year, it will reimburse the Fund for each
of the series' expenses (including the fees of PMF but excluding interest,
taxes, brokerage commissions, distribution fees, litigation and indemnification
expenses and other extraordinary expenses) in excess of the most restrictive
expense limitation imposed by state securities commissions. The most restrictive
expense limitation is presently believed to be 2.5% of the series' average daily
net assets up to $30 million, 2.0% of the next $70 million of average daily net
assets and 1.5% of the series' average daily net assets in excess of $100
million. Such expense reimbursement, if any, will be estimated and accrued daily
and payable monthly. No reimbursement was required for the year ended July 31,
1994.
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), who acts as the distributor of the Class A shares
of the Fund, and PSI, who acts as distributor of the Class B shares of the Fund
(collectively the ``Distributors''). To reimburse the Distributors for their
expenses incurred in distributing and servicing the Fund's Class A and B shares,
the Fund, pursuant to plans of distribution, pays the Distributors a
reimbursement, accrued daily and payable monthly.
Pursuant to the Class A Plan, the Fund reimburses PMFD for its
distribution-related expenses with respect to Class A shares at an annual rate
of up to .30 of 1% of the average daily net assets of the Class A shares. Such
expenses under the Class A Plan were .23 of 1% of the average daily net assets
of the Class A shares for the fiscal year ended July 31, 1994. Such Class A Plan
distribution expenses are currently being assessed at a rate of .25 of 1% of the
average daily net assets. PMFD pays various broker-dealers, including PSI and
Pruco Securities Corporation (``Prusec''), affiliated broker-dealers, for
account servicing fees and other expenses incurred by such broker-dealers.
Pursuant to the Class B Plan, the Fund reimburses PSI for its
distribution-related expenses with respect to the Class B shares at an annual
rate of up to 1% of the average daily net assets of the Class B shares. Unlike
the Class A Plan, there are carryforward amounts under the Class B Plan, and
interest expenses are incurred under the Class B Plan.
The Class B distribution expenses include commission credits for payments of
commissions and account servicing fees to financial advisers and an allocation
for overhead and other distribution-related expenses, interest and/or carrying
charges, the cost of printing and mailing prospectuses to potential investors
and of advertising incurred in connection with the distribution of shares.
The Distributors recover the distribution expenses and service fees incurred
through the receipt of reimbursement payments from the Fund under the plans and
the receipt of initial sales charges (Class A only) and contingent deferred
sales charges (Class B only) from shareholders.
PMFD has advised the Fund that it has received approximately $781,000
($561,000--Conservatively Managed Portfolio and $220,000--Strategy Portfolio) in
front-end sales charges resulting from sales of Class A shares during the year
ended July 31, 1994. From these fees, PMFD paid such sales charges to dealers
(PSI and Prusec) which in turn paid commissions to salespersons and incurred
other distribution costs.
With respect to the Class B Plan, at any given time the amount of expenses
incurred by PSI in distributing the Fund's shares and not recovered through the
imposition of contingent deferred sales charges in connection with certain
redemptions of shares may exceed the total reimbursement made by the Fund
pursuant to the Class B Plan. PSI advised the Fund that for the year ended July
31, 1994, it received approximately $1,245,000 ($641,000--Conservatively Managed
Portfolio and $604,000--Strategy Portfolio) in contingent deferred sales charges
imposed upon certain redemptions by investors. PSI, as distributor, has also
advised the Fund that at July 31, 1994, the amount of distribution expenses
incurred by PSI and not yet reimbursed by the Fund or recovered through
contingent deferred sales charges approximated $20,890,000
($13,353,000--Conservatively Managed Portfolio and $7,537,000--Strategy
Portfolio). This amount may be recovered through future payments under the Class
B Plan or contingent deferred sales charges.
In the event of termination or noncontinuation of the Class B Plan, the Fund
would not be contractually obligated to pay PSI, as distributor, for any
expenses not previously
-24-
<PAGE>
<PAGE>
reimbursed or recovered through contingent deferred sales charges.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS''), a
With Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During
the year ended July 31, 1994, the Fund incurred fees of approximately $1,323,000
($606,000--Conservatively Managed Portfolio and $717,000--Strategy Portfolio)
for the services of PMFS. As of July 31, 1994, approximately $124,000 ($59,000--
Conservatively Managed Portfolio and $65,000--Strategy Portfolio) of such fees
were due to PMFS. Transfer agent fees and expenses in the Statement of
Operations also include certain out of pocket expenses paid to non-affiliates.
For the year ended July 31, 1994, PSI received approximately $49,800
($7,800--Conservatively Managed Portfolio and $42,000--Strategy Portfolio) in
brokerage commissions from portfolio transactions executed on behalf of the
Fund.
Note 4. Portfolio Purchases and sales of invest-
Securities ment securities, other than
short-term investments, for the year ended July
31, 1994, were as follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
- - ----------------------------- ------------- -------------
<S> <C> <C>
Conservatively Managed
Portfolio $ 478,603,631 $ 395,399,970
Strategy Portfolio........... $ 310,625,638 $ 396,838,310
</TABLE>
At July 31, 1994, the Strategy Portfolio had outstanding forward currency
contracts to buy and sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Foreign Currency Value at Current Appreciation/
Sale Contracts Settlement Date Value (Depreciation)
- - --------------------- --------------- ----------- --------------
<S> <C> <C> <C>
Swiss Francs......... $ 8,343,807 $ 7,996,725 $ 347,082
--------------- ----------- --------------
--------------- ----------- --------------
<CAPTION>
Foreign Currency Value at Current Appreciation/
Purchase Contracts Settlement Date Value (Depreciation)
- - --------------------- --------------- ----------- --------------
<S> <C> <C> <C>
Swiss Francs......... $ 8,000,000 $ 7,996,725 $ (3,275)
Hong Kong Dollars.... 2,054,403 2,054,456 53
--------------- ----------- --------------
$ 10,054,403 $10,051,181 $ (3,222)
--------------- ----------- --------------
--------------- ----------- --------------
</TABLE>
The cost basis of investments for federal income tax purposes as of July 31,
1994 was $476,285,909 and $372,790,188 for the Conservatively Managed Portfolio
and the Strategy Portfolio, respectively, and net and gross unrealized
appreciation of investments for federal income tax purposes was as follows:
<TABLE>
<CAPTION>
Conservatively
Managed Strategy
Portfolio Portfolio
-------------- -----------
<S> <C> <C>
Gross unrealized
appreciation................ $ 33,383,121 $20,011,159
Gross unrealized
depreciation................ (16,628,521) (6,815,134)
-------------- -----------
Net unrealized appreciation... $ 16,754,660 $13,196,025
-------------- -----------
-------------- -----------
</TABLE>
At July 31, 1994, the Strategy Portfolio sold 830 financial futures contracts
on the S&P 500 Index expiring in October 1994. The value at disposition of such
contracts is $38,088,700. The value of such contracts on July 31, 1994 was
$37,620,950, thereby resulting in an unrealized loss of $467,750.
Note 5. Joint The Fund, along with other
Repurchase affiliated registered invest-
Agreement ment companies, transfers
Account uninvested cash balances into
a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Government or federal agency obligations. As of July 31, 1994, the Fund
had a 26.3% (Conservatively Managed Portfolio--12.8% and Strategy
Portfolio--13.5%) undivided interest in the repurchase agreements in the joint
account. The undivided interest for the Fund represented $201,687,000,
(Conservatively Managed Portfolio--$98,502,000 and Strategy
Portfolio--$103,185,000) in the principal amount. As of such date, each
repurchase agreement in the joint account and the value of the collateral
therefor was as follows:
BT Securities Corp., 4.21%, dated 7/29/94, in the principal amount of
$175,000,000, repurchase price $175,061,396, due 8/1/94. The value of the
collateral including accrued interest is $179,326,613.
CS First Boston Corp., 4.15%, dated 7/29/94,
in the principal amount of $196,000,000, repurchase
price $196,067,783, due 8/1/94. The value of the collateral including accrued
interest is $200,263,934.
J.P. Morgan Securities, Inc., 4.20%, dated 7/23/94,
in the principal amount of $200,000,000, repurchase
price $200,070,000, due 8/1/94. The value of the collateral including accrued
interest is $204,307,217.
-25-
<PAGE>
<PAGE>
Kidder, Peabody & Co., Inc., 4.20%, dated 7/29/93, in the principal amount of
$150,000,000, repurchase price $150,052,500, due 8/1/94. The value of the
collateral including accrued interest is $154,761,581.
Lehman Inc., 4.20%, dated 7/29/94, in the principal amount of $46,053,000,
repurchase price $46,069,119, due 8/1/94. The value of the collateral including
accrued interest is $47,036,000.
Note 6. Capital Class A shares are sold with a
front-end sales charge of up to 5.25%. Class B
shares are sold with a contingent deferred sales charge which declines from 5%
to zero depending on the period of time the shares are held. Both classes of
shares have equal rights as to earnings, assets and voting privileges except
that each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan.
The Fund has authorized an unlimited number of shares of beneficial interest
of each class at $.01 par value per share, divided into two classes, designated
Class A and Class B.
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Conservatively Managed Portfolio:
Class A Class B
------------------------- ---------------------------
Shares Amount Shares Amount
---------- ----------- ----------- ------------
Year ended July 31, 1994:
<S> <C> <C> <C> <C>
Shares sold.................................................... 1,936,121 $22,068,844 17,006,359 $194,349,146
Shares issued in reinvestment of dividends
and distributions............................................ 185,818 2,104,551 2,171,273 24,512,929
Shares reacquired.............................................. (673,143) (7,607,829) (6,463,788) (73,339,193)
---------- ----------- ----------- ------------
Increase in shares outstanding................................. 1,448,796 $16,565,566 12,713,844 $145,522,882
---------- ----------- ----------- ------------
---------- ----------- ----------- ------------
<CAPTION>
Class A Class B
------------------------- ---------------------------
Shares Amount Shares Amount
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Year ended July 31, 1993:
Shares sold.................................................... 1,111,058 $12,515,640 9,197,549 $102,859,539
Shares issued in reinvestment of dividends
and distributions............................................ 90,896 994,506 1,459,840 15,874,896
Shares reacquired.............................................. (273,750) (3,079,784) (3,783,156) (42,244,575)
---------- ----------- ----------- ------------
Increase in shares outstanding................................. 928,204 $10,430,362 6,874,233 $ 76,489,860
---------- ----------- ----------- ------------
---------- ----------- ----------- ------------
Strategy Portfolio:
<CAPTION>
Class A Class B
------------------------- ---------------------------
Shares Amount Shares Amount
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Year ended July 31, 1994:
Shares sold.................................................... 954,118 $11,209,754 5,564,589 $ 65,641,481
Shares issued in reinvestment of dividends
and distributions............................................ 115,925 1,362,807 1,243,606 14,551,935
Shares reacquired.............................................. (693,445) (8,199,850) (6,693,142) (78,635,160)
---------- ----------- ----------- ------------
Increase in shares outstanding................................. 376,598 $ 4,372,711 115,053 $ 1,558,256
---------- ----------- ----------- ------------
---------- ----------- ----------- ------------
<CAPTION>
Class A Class B
------------------------- ---------------------------
Shares Amount Shares Amount
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Year ended July 31, 1993:
Shares sold.................................................... 948,490 $11,062,181 7,245,790 $ 84,341,799
Shares issued in reinvestment of dividends
and distributions............................................ 219,562 2,486,431 2,958,707 33,399,436
Shares reacquired.............................................. (439,023) (5,122,055) (6,093,273) (70,690,289)
---------- ----------- ----------- ------------
Increase in shares outstanding................................. 729,029 $ 8,426,557 4,111,224 $ 47,050,946
---------- ----------- ----------- ------------
---------- ----------- ----------- ------------
</TABLE>
-26-
<PAGE>
<PAGE>
Note 7. Dividends On September 14, 1994, the
Board of Trustees of the Fund declared a dividend
from undistributed net investment income to Class A shareholders of $.065 per
share and to Class B shareholders of $.045 per share for the Conservatively
Managed Portfolio and a dividend from undistributed net investment income to
Class A shareholders of $.0525 per share and to Class B shareholders of $.03
per share for the Strategy Portfolio. All dividends are payable on September
30, 1994 to shareholders of record on September 23, 1994.
Note 8. Subsequent On July 19, 1994, a meeting
Event of the shareholders of the
Fund was held at which time the shareholders
approved among other things: a) amendments to the Fund's Articles of
Incorporation to permit a conversion feature for Class B shares to Class A
shares after 7 years, and b) amendments to the Class A and Class B Distribution
Plans, under which the Distribution Plans become compensation rather than
reimbursement plans. In addition, the Trustees of the Fund approved a change in
the Fund's name from Prudential FlexiFund to Prudential Allocation Fund. These
changes were effective August 1, 1994.
-27-
<PAGE>
<PAGE>
PRUDENTIAL FLEXIFUND CONSERVATIVELY MANAGED PORTFOLIO
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated:
<TABLE>
<CAPTION>
Class A Class B
---------------------------------------------------- ----------------------------------------------------
January 22,
1990@
Year Ended July 31, through Year Ended July 31,
PER SHARE OPERATING ------------------------------------- July 31, ----------------------------------------------------
PERFORMANCE: 1994 1993 1992 1991 1990 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------- ------- ------- ------- ------------ -------- -------- -------- -------- --------
Net asset value,
beginning of
period............ $ 11.75 $ 11.00 $ 10.73 $ 10.23 $ 9.83 $ 11.72 $ 10.98 $ 10.71 $ 10.22 $ 10.21
------- ------- ------- ------- ------ -------- -------- -------- -------- --------
Income from
investment
operations
Net investment
income............ .33 .43 .44 .44 .26 .24 .34 .35 .36 .45
Net realized and
unrealized gain
(loss) on
investment
transactions...... (.05) 1.16 .81 .73 .38 (.05) 1.16 .82 .73 .18
------- ------- ------- ------- ------ -------- -------- -------- -------- -------
Total from
investment
operations...... .28 1.59 1.25 1.17 .64 .19 1.50 1.17 1.09 .63
------- ------- ------- ------- ------ -------- -------- -------- -------- --------
Less distributions
Dividends from net
investment
income............ (.37) (.37) (.44) (.44) (.24) (.28) (.29) (.36) (.37) (.52)
Distributions paid
to shareholders
from net realized
gains on
investment
transactions...... (.54) (.47) (.54) (.23) -- (.54) (.47) (.54) (.23) (.10)
------- ------- ------- ------- ------ -------- -------- -------- -------- --------
Total
distributions..... (.91) (.84) (.98) (.67) (.24) (.82) (.76) (.90) (.60) (.62)
------- ------- ------- ------- ------ -------- -------- -------- -------- --------
Net asset value, end
of period......... $ 11.12 $ 11.75 $ 11.00 $ 10.73 $10.23 $ 11.09 $ 11.72 $ 10.98 $ 10.71 $ 10.22
------- ------- ------- ------- ------ -------- -------- -------- -------- --------
------- ------- ------- ------- ------ -------- -------- -------- -------- --------
TOTAL RETURN#:...... 2.39% 15.15% 12.29% 11.99% 6.59% 1.61% 14.27% 11.48% 11.13% 6.44%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000)...... $37,512 $22,605 $10,944 $ 4,408 $1,944 $445,609 $321,831 $225,995 $162,281 $154,917
Average net assets
(000)............. $29,875 $15,392 $ 7,103 $ 2,747 $1,047 $392,133 $267,340 $189,358 $149,907 $143,241
Ratios to average
net assets:
Expenses,
including
distribution
fees............ 1.23% 1.17% 1.29% 1.38% 1.29%* 2.00% 1.97% 2.09% 2.16% 2.07%
Expenses,
excluding
distribution
fees............ 1.00% .97% 1.09% 1.18% 1.09%* 1.00% .97% 1.09% 1.16% 1.08%
Net investment
income.......... 2.84% 3.88% 3.97% 4.44% 5.04%* 2.08% 3.04% 3.25% 3.55% 4.42%
Portfolio turnover
rate.............. 108% 83% 105% 137% 106% 108% 83% 105% 137% 106%
</TABLE>
- - ---------------
@ Commencement of offering of Class A shares.
* Annualized.
# Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
See Notes to Financial Statements.
-28-
<PAGE>
<PAGE>
PRUDENTIAL FLEXIFUND STRATEGY PORTFOLIO
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated:
<TABLE>
<CAPTION>
Class A Class B
---------------------------------------------------- -----------------------------------------------------
January 22,
1990@
Year Ended July 31, through Year Ended July 31,
PER SHARE OPERATING ------------------------------------- July 31, ----------------------------------------------------
PERFORMANCE: 1994 1993 1992 1991 1990 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------- ------- ------- ------- ------------ -------- -------- -------- -------- --------
Net asset value,
beginning of
period............ $ 11.82 $ 12.03 $ 11.45 $ 10.50 $10.16 $ 11.79 $ 12.01 $ 11.43 $ 10.49 $ 10.85
------- ------- ------- ------- ------ -------- -------- -------- -------- --------
Income from investment
operations
Net investment
income............ .30 .42 .35 .38 .25 .21 .34 .26 .30 .37
Net realized and
unrealized gain on
investment and
foreign currency
transactions...... .05 .70 1.02 .98 .33 .05 .70 1.02 .97 .03
------- ------- ------- ------- ------ -------- -------- -------- -------- --------
Total from
investment
operations...... .35 1.12 1.37 1.36 .58 .26 1.04 1.28 1.27 .40
------- ------- ------- ------- ------ -------- -------- -------- -------- --------
Less distributions
Dividends from net
investment
income............ (.22) (.37) (.37) (.35) (.24) (.16) (.30) (.28) (.27) (.40)
Dividends in excess
of net investment
income............ (.01) -- -- -- -- (.01) -- -- -- --
Distributions paid
to shareholders
from net realized
gains on
investment and
foreign currency
transactions...... (.34) (.96) (.42) (.06) -- (.34) (.96) (.42) (.06) (.36)
------- ------- ------- ------- ------ -------- -------- -------- -------- --------
Total
distributions..... (.57) (1.33) (.79) (.41) (.24) (.51) (1.26) (.70) (.33) (.76)
------- ------- ------- ------- ------ -------- -------- -------- -------- --------
Net asset value, end
of period......... $ 11.60 $ 11.82 $ 12.03 $ 11.45 $10.50 $ 11.54 $ 11.79 $ 12.01 $ 11.43 $ 10.49
------- ------- ------- ------- ------ -------- -------- -------- -------- --------
------- ------- ------- ------- ------ -------- -------- -------- -------- --------
TOTAL RETURN#:...... 2.88% 10.02% 12.36% 13.42% 5.83% 2.11% 9.21% 11.53% 12.49% 3.59%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000)...... $32,485 $28,641 $20,378 $10,765 $5,073 $351,140 $357,287 $314,771 $219,983 $176,078
Average net assets
(000)............. $30,634 $24,216 $15,705 $ 6,694 $2,928 $362,579 $339,225 $267,525 $190,913 $127,360
Ratios to average
net assets:
Expenses,
including
distribution
fees............ 1.26% 1.21% 1.26% 1.33% 1.51%* 2.03% 2.01% 2.06% 2.11% 2.10%
Expenses,
excluding
distribution
fees............ 1.03% 1.01% 1.06% 1.13% 1.26%* 1.03% 1.01% 1.06% 1.11% 1.14%
Net investment
income.......... 2.52% 3.61% 3.05% 3.89% 4.58%* 1.77% 2.79% 2.27% 2.95% 3.61%
Portfolio turnover
rate.............. 96% 145% 241% 189% 159% 96% 145% 241% 189% 159%
</TABLE>
- - ---------------
(D) Net of expense subsidy or reimbursement.
* Annualized.
@ Commencement of offering of Class A shares.
# Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
See Notes to Financial Statements.
-29-
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees
Prudential FlexiFund (consisting of the Conservatively Managed Portfolio and
the Strategy Portfolio)
We have audited the accompanying statements of assets and liabilities of
Prudential FlexiFund, including the portfolios of investments, as of July 31,
1994, the related statements of operations for the year then ended and of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
July 31, 1994 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Prudential FlexiFund
as of July 31, 1994, the results of its operations, the changes in its net
assets and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
September 14, 1994
FEDERAL INCOME TAX INFORMATION
We are required by the Internal Revenue Code to advise you within 60 days of
the Fund's fiscal year end (July 31, 1994) as to the federal tax status of
dividends and distributions paid by the Fund during such fiscal year.
Accordingly, during its fiscal year ended July 31, 1994, the Fund paid
aggregate dividends and distributions as follows:
<TABLE>
<CAPTION>
Conservatively
Managed Portfolio Strategy Portfolio
------------------- -------------------
<S> <C> <C> <C> <C>
Class A Class B Class A Class B
-------- -------- -------- --------
Dividends from ordinary income.................................... $ .37 $ .28 $ .23 $ .17
Distributions from long-term
capital gains.................................................. .54 .54 .34 .34
</TABLE>
Dividends paid from long-term capital gains are taxable as such. We also
wish to advise you that 32.3%--Conservatively Managed Portfolio and 89.4%--
Strategy Portfolio of the dividends paid from ordinary income in the fiscal
year ended July 31, 1994 qualified for the corporate dividends received
deduction available to corporate taxpayers.
In January 1995, you will be advised on IRS Form 1099 DIV or substitute 1099
DIV as to the federal tax status of the dividends and distributions received by
you in calendar year 1994.
-30-
<PAGE>
<PAGE>
Past performance is not predictive of future performance and an investor's
shares may be worth more or less than their original cost.
These graphs are furnished to you in accordance with SEC regulations. They
compare a $10,000 investment in the Prudential Allocation Fund (Conservative and
Strategy Portfolios; Class A and Class B) with similar investments in the Lehman
Government/Corporate Index (Gov't/Corp. Bond Index) and the Standard & Poor's
500 Index (S&P 500) by portraying the initial account values at the commencement
of operations of each class and subsequent account values at the end of each
fiscal year (July 31), on a quarterly basis, beginning in 1990 for Class A
shares and in 1987 for Class B shares. For purposes of the graphs and, unless
otherwise indicated, the accompanying tables, it has been assumed that (a) the
maximum sales charge was deducted from the initial $10,000 investment in Class A
Shares; (b) the maximum applicable contingent deferred sales charge was deducted
from the value of the investment in Class B shares assuming full redemption on
July 31, 1994; (c) all recurring fees (including management fees) were deducted;
and (d) all dividends and distributions were reinvested.
The Gov't/Corp. Bond Index is a weighted index comprised of public, fixed
rate, non-convertible domestic corporate debt securities that are rated at least
investment grade (BBB/Baa or higher) and public obligations of the U.S.
Treasury. The S&P 500 is a capital-weighted index, representing the aggregate
market value of the common equity of 500 stocks primarily traded on the New York
Stock Exchange. The Gov't/Corp. Bond Index and the S&P 500 are unmanaged indices
and both include the reinvestment of all dividends. The securities in these
indices may differ substantially from the securities in each of the Fund's
portfolios. The Gov't/Corp. Index and the S&P 500 are not the only indexes which
may be used to characterize performance of balanced funds and other indexes may
portray different comparative performance. The graph does not reflect the
conversion feature applicable to Class B shares, as described in the August 1,
1994 prospectus.
-31-
<PAGE>
<PAGE>
Directors
Edward D. Beach
Donald D. Lennox
Douglas H. McCorkindale
Lawrence C. McQuade
Thomas C. Mooney
Richard A. Redeker
Louis A. Weil, III
Officers
Lawrence C. McQuade, President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
S. Jane Rose, Secretary
Marguerite E. H. Morrison, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Deloitte & Touche LLP
1633 Broadway
New York, NY 10019
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll free (800) 225-1852
Collect (908) 417-7555
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
744326109
744326208
744326307 MF134E
744326406 (LOGO) 642032D
