<PAGE>
PRUDENTIAL ALLOCATION FUND
Portfolio of Investments as of July 31, 1995 BALANCED PORTFOLIO*
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- -------------------------------------------------------------------------
LONG-TERM INVESTMENTS--86.1%
COMMON STOCKS--55.0%
- --------------------------------------------------------------------------
Aerospace/Defense--1.1%
60,000 Boeing Co. $ 4,020,000
116,400 Gencorp, Inc. 1,353,150
-------------
5,373,150
- ------------------------------------------------------------
Automotive--0.8%
150,000 Ford Motor Co. 4,331,250
- ------------------------------------------------------------
Chemicals--0.9%
140,000 Agrium Inc. (Canada) 4,869,964
- ------------------------------------------------------------
Computer & Related Equipment--9.5%
135,000 Bay Networks* 6,058,125
80,000 Cisco Systems, Inc.* 4,450,000
50,000 Compaq Computer Corp.* 2,537,500
222,000 EMC Corp.* 5,078,250
100,000 Intel Corp. 6,500,000
85,000 Motorola, Inc. 6,513,125
172,500 Network Express, Inc.* 3,212,812
117,800 Quad Systems Corp.* 1,060,200
130,000 Seagate Technology* 5,768,750
160,000 Sun Microsystems, Inc.* 7,700,000
-------------
48,878,762
- ------------------------------------------------------------
Consumer Products--0.6%
158,500 Whitman Corp. 3,090,750
- ------------------------------------------------------------
Containers & Packaging--0.7%
160,000 Stone Container Corp.* 3,460,000
- ------------------------------------------------------------
Drugs & Health Care--5.3%
100,000 Columbia Healthcare Corp. 4,900,000
100,000 Forest Laboratories, Inc.* 4,437,500
35,000 Johnson & Johnson Co. 2,511,250
119,800 Physician Corp. of America* 1,957,981
70,000 St. Jude Medical, Inc. $ 3,832,500
50,100 Tenet Healthcare Corp. 764,025
133,800 U.S. HealthCare, Inc. 4,231,425
117,400 Ventritex, Inc.* 1,871,063
50,000 Zeneca Group PLC (United Kingdom) 2,668,750
-------------
27,174,494
- ------------------------------------------------------------
Electronics--5.4%
25,300 ADT Ltd.* 303,600
35,000 Applied Materials, Inc.* 3,622,500
77,000 Integrated Device Technology, Inc.* 4,822,125
51,000 KLA Instruments Corp.* 4,424,250
60,000 Loral Corp. 3,360,000
43,700 MEMC Electronic Materials, Inc.* 1,316,463
98,400 Tencor Instruments* 4,329,600
185,500 VLSI Technology, Inc.* 5,495,437
-------------
27,673,975
- ------------------------------------------------------------
Financial Services--6.5%
138,800 Ahmanson (H.F.) & Co. 3,105,650
70,000 Citicorp 4,366,250
124,500 Dean Witter Discover & Co. 6,287,250
60,900 Federal National Mortgage Association 5,701,762
85,000 NationsBank Corp. 4,770,625
47,300 Republic New York Corp. 2,648,800
130,000 Salomon, Inc. 4,793,750
166,600 Western National Corp. 1,978,375
-------------
33,652,462
- ------------------------------------------------------------
Home Improvements--1.2%
115,000 Owens-Corning Fiberglass* 4,513,750
119,400 Ply Gem Industries, Inc. 1,850,700
-------------
6,364,450
- ------------------------------------------------------------
Hotels & Leisure--0.6%
144,700 Carnival Corp. 3,273,838
</TABLE>
- --------------------------------------------------------------------------------
*See Note 8.
See Notes to Financial Statements.
5
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND
Portfolio of Investments as of July 31, 1995 BALANCED PORTFOLIO*
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- --------------------------------------------------------------
Insurance--6.1%
35,400 Berkley (W. R.) Corp. $ 1,358,475
26,900 Chubb Corp. 2,243,702
57,300 Emphesys Financial Group, Inc. 1,640,213
210,000 Equitable Cos., Inc. 4,698,750
90,000 Equitable of Iowa Cos. 2,925,000
75,800 PMI Group Inc. 3,524,700
163,600 SunAmerica, Inc. 9,366,100
119,400 Travelers Corp. 5,656,575
-------------
31,413,515
- ------------------------------------------------------------
Machinery & Equipment--0.9%
44,100 Regal Beloit Corp. 904,050
225,000 Smith International, Inc.* 3,825,000
-------------
4,729,050
- ------------------------------------------------------------
Mining--0.7%
300,000 Santa Fe Pacific Gold Corp.* 3,750,000
- ------------------------------------------------------------
Oil & Gas--3.3%
106,200 Cabot Corp. 1,486,800
148,000 Mesa, Inc.* 629,000
187,300 Noble Drilling Corp.* 1,217,450
157,300 Oryx Energy Co. 2,261,187
44,700 Parker & Parsley Petroleum Co. 866,063
143,600 Repsol S.A. (ADR) (Spain) 4,792,650
89,000 Seagull Energy Corp.* 1,590,875
222,000 YPF Sociedad Anonima (ADS)
(Argentina) 3,857,250
-------------
16,701,275
- ------------------------------------------------------------
Petroleum Services--2.2%
230,000 BJ Services Corp.* 5,721,250
75,000 Exxon Corp. 5,437,500
-------------
11,158,750
Realty Investment Trust--0.3%
92,200 Manufactured Home Community, Inc. $ 1,463,675
- ------------------------------------------------------------
Retail--1.0%
152,700 Caldor Corp.* 2,080,538
106,000 Dillard Department Stores, Inc. 3,286,000
-------------
5,366,538
- ------------------------------------------------------------
Software--2.5%
121,600 Baan Company N.V.* (Netherlands) 4,058,400
60,000 Computer Associates International,
Inc. 4,402,500
50,000 Microsoft Corp.* 4,525,000
-------------
12,985,900
- ------------------------------------------------------------
Steel & Metals--0.9%
150,000 National Steel Corp.* 2,400,000
70,000 Trinity Industries, Inc. 2,345,000
-------------
4,745,000
- ------------------------------------------------------------
Telecommunications--2.4%
62,100 AirTouch Communications* 1,956,150
200,000 NEXTEL Communications, Inc.* 3,875,000
152,800 Tele-Communications, Inc.* 3,820,000
75,000 Telefonos de Mexico, Series A (ADR)
(Mexico) 2,475,000
-------------
12,126,150
- ------------------------------------------------------------
Textiles--1.0%
220,000 Fruit of the Loom, Inc.* 5,087,500
- ------------------------------------------------------------
Tobacco--1.1%
200,000 RJR Nabisco Holdings Corp. 5,525,000
-------------
Total common stocks (cost
$245,361,408) 283,195,448
</TABLE>
- --------------------------------------------------------------------------------
*See Note 8.
See Notes to Financial Statements.
6
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND
Portfolio of Investments as of July 31, 1995 BALANCED PORTFOLIO*
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
<C> <C> <S> <C>
- --------------------------------------------------------------------------
DEBT OBLIGATIONS--31.1%
CORPORATE BONDS--6.6%
- ------------------------------------------------------------
Electronics--0.4%
Westinghouse Electric Corp.,
Ba1 $ 2,500 6.875%, 9/1/03 $ 2,280,825
- ------------------------------------------------------------
Financial Services--2.3%
Associates Corp. of North
America,
Aa3 750 6.875%, 1/15/97 756,172
Aa3 200 8.375%, 1/15/98, Sr. Note, 208,290
Financiera Energetica
Nacional (Columbia)
BBB-# 900 6.625%, 12/13/96 893,250
First Union Corp., Sub.
Note,
A3 1,000 9.45%, 6/15/99 1,082,240
Ford Motor Credit Co.,
A1 5,000 7.75%, 3/15/05 5,212,800
Kansallis-Osake-Pankki
Bank, (Finland)
A3 1,000 6.125%, 5/15/98 989,850
Ba1 1,000 8.65%, 12/29/49 1,042,500
PT Alatief Freeport
Finance, Sr. Note,
(Netherlands)
Ba2 1,400 9.75%, 4/15/01 1,414,000
------------
11,599,102
- ------------------------------------------------------------
Food & Beverage--0.1%
Coca Cola Enterprises,
Inc.,
A3 500 6.50%, 11/15/97 502,995
- ------------------------------------------------------------
Media--0.3%
Grupo Televisa, Sa De
Euro, (MTN) (Mexico)
Ba2 1,400 10.00%, 11/9/97 1,317,750
Oil & Gas--0.2%
Arkla, Inc., (MTN)
Ba1 $ 1,000 9.30%, 1/15/98 $ 1,038,270
- ------------------------------------------------------------
Petroleum Services--0.2%
Empresa De Petroleos,
(Columbia)
BBB-# 1,000 7.25%, 7/8/98 980,000
- ------------------------------------------------------------
Retail--1.0%
K Mart Corp.,
Baa1 5,000 8.125%, 12/1/06 5,084,650
- ------------------------------------------------------------
Shipping--0.2%
Compania SudAmericana
De Vapores, (Chile)
BBB-# 1,100 7.375%, 12/8/03 1,039,500
- ------------------------------------------------------------
Tobacco--0.9%
RJR Nabisco, Inc.,
Baa3 5,000 7.625%, 9/15/03 4,872,600
- ------------------------------------------------------------
Tourism/Resorts--1.0%
Royal Caribbean Cruises
Ltd.,
Baa3 5,000 8.25%, 4/1/05 5,187,750
------------
Total corporate bonds
(cost $33,379,339) 33,903,442
- ------------------------------------------------------------
SOVEREIGN BONDS--0.2%
- ------------------------------------------------------------
United Mexican States,
(Mexico)
Ba2 1,225 8.50%, 9/15/02
(cost $1,122,069) 1,022,875
</TABLE>
- --------------------------------------------------------------------------------
*See Note 8.
See Notes to Financial Statements.
7
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND
Portfolio of Investments as of July 31, 1995 BALANCED PORTFOLIO*
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
<C> <C> <S> <C>
- --------------------------------------------------------------
U.S. GOVERNMENT SECURITIES--24.3%
United States Treasury
Bonds,
$ 30,000 7.625%, 2/15/25 $ 32,901,600
United States Treasury
Notes,
40,000 6.125%, 7/31/00 39,943,600
20,000 6.50%, 5/15/05 20,090,600
30,100 7.50%, 2/15/05 32,263,287
------------
Total U. S. government
securities
(cost $124,551,018) 125,199,087
------------
Total debt obligations
(cost $159,052,426) 160,125,404
------------
Total long-term
investments (cost
$404,413,834) 443,320,852
------------
- ------------------------------------------------------------
SHORT-TERM INVESTMENTS--12.6%
CORPORATE NOTES--0.9%
- ------------------------------------------------------------
Cemex S.A., (Mexico)
NR 750 6.25%, 10/25/95 765,000
Grupo Condumex S.A. de
C.V., (Mexico) (MTN)
NR 400 6.25%, 7/27/96 372,000
Union Bank Finland, Ltd.,
(Finland)
A2 2,600 5.25%, 6/15/96 2,569,788
Westinghouse Credit Corp.,
(MTN)
Ba1 $ 400 8.75%, 6/3/96 $ 406,144
Westinghouse Electric
Corp.,
Ba1 450 8.70%, 6/20/96 457,196
------------
Total corporate notes
(cost $4,651,369) 4,570,128
- ------------------------------------------------------------
REPURCHASE AGREEMENT--11.7%
60,491 Joint Repurchase Agreement
Account,
5.82%, 8/1/95, (Note 5) 60,491,000
------------
Total short-term
investments (cost
$65,142,369) 65,061,128
- ------------------------------------------------------------
Total Investments--98.7%
(cost $469,556,203; Note
4) 508,381,980
Other assets in excess of
liabilities--1.3% 6,783,070
------------
Net Assets--100% $515,165,050
------------
------------
</TABLE>
- ---------------
* Non-income producing security.
# S&P rating.
ADR--American Depository Receipt.
ADS--American Depository Shares.
MTN--Medium Term Note.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Prospectus contains a description of Moody's and Standard &
Poor's ratings.
- --------------------------------------------------------------------------------
*See Note 8.
See Notes to Financial Statements.
8
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND
Statement of Assets and Liabilities BALANCED PORTFOLIO*
- --------------------------------------------------------------------------------
<TABLE>
<S>
<C>
Assets
July 31, 1995
Investments, at value (cost
$469,556,203)................................................................
.... $508,381,980
Receivable for investments
sold.........................................................................
..... 22,637,791
Receivable for Fund shares
sold.........................................................................
..... 5,289,720
Dividends and interest
receivable...................................................................
......... 3,431,481
Deferred
expenses.....................................................................
....................... 10,579
------------
Total
assets.......................................................................
....................... 539,751,551
------------
Liabilities
Bank
overdraft....................................................................
........................... 8,566
Payable for investments
purchased....................................................................
........ 23,092,390
Payable for Fund shares
reacquired...................................................................
........ 656,792
Distribution fee
payable......................................................................
............... 356,645
Management fee
payable......................................................................
................. 280,037
Accrued
expenses.....................................................................
........................ 192,071
------------
Total
liabilities..................................................................
....................... 24,586,501
------------
Net
Assets.......................................................................
............................ $515,165,050
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at
par.....................................................................
$ 429,002
Paid-in capital in excess of
par..........................................................................
454,815,020
------------
455,244,022
Undistributed net investment
income.......................................................................
1,914,605
Accumulated net realized gain on
investments..............................................................
19,180,646
Net unrealized appreciation on
investments................................................................
38,825,777
------------
Net Assets, July 31,
1995.........................................................................
........... $515,165,050
------------
------------
Class A:
Net asset value and redemption price per share
($119,828,557 / 9,951,069 shares of beneficial interest issued and
outstanding)........................ $12.04
Maximum sales charge (5% of offering
price)...............................................................
.63
------------
Maximum offering price to
public..........................................................................
$12.67
------------
------------
Class B:
Net asset value, offering price and redemption price per share
($392,290,710 / 32,695,277 shares of beneficial interest issued and
outstanding)....................... $12.00
------------
------------
Class C:
Net asset value, offering price and redemption price per share
($3,045,783 / 253,825 shares of beneficial interest issued and
outstanding)............................ $12.00
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
*See Note 8.
See Notes to Financial Statements.
9
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND
BALANCED PORTFOLIO*
Statement of Operations
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income July 31, 1995
<S> <C>
Income
Interest $ 16,851,017
Dividends (net of foreign withholding taxes
of $67,443).............................. 3,714,618
-------------
Total income............................. 20,565,635
-------------
Expenses
Distribution fee--Class A................... 174,385
Distribution fee--Class B................... 4,094,190
Distribution fee--Class C................... 9,153
Management fee.............................. 3,120,574
Transfer agent's fees and expenses.......... 972,000
Reports to shareholders..................... 264,000
Custodian's fees and expenses............... 159,000
Registration fees........................... 71,000
Legal fees.................................. 26,000
Trustees' fees and expenses................. 22,300
Audit fee and expenses...................... 16,500
Insurance................................... 13,700
Miscellaneous............................... 6,282
-------------
Total expenses........................... 8,949,084
-------------
Net investment income.......................... 11,616,551
-------------
Realized and Unrealized Gain (Loss)
on Investments
Net realized gain (loss) on:
Investment transactions..................... 24,868,871
Foreign currency transactions............... (13,031)
-------------
24,855,840
Net change in unrealized appreciation on
investments................................. 21,889,387
-------------
Net gain on investments........................ 46,745,227
-------------
Net Increase in Net Assets Resulting
from Operations................................ $ 58,361,778
-------------
-------------
</TABLE>
PRUDENTIAL ALLOCATION FUND
BALANCED PORTFOLIO*
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended July 31,
<S> <C> <C>
in Net Assets 1995 1994
Operations
Net investment income......... $ 11,616,551 $ 8,998,851
Net realized gain on
investments and foreign
currency transactions...... 24,855,840 8,854,437
Net change in unrealized
appreciation (depreciation)
of investments............. 21,889,387 (13,575,563)
------------- ------------
Net increase in net assets
resulting from
operations................. 58,361,778 4,277,725
------------- ------------
Net equalization credits
(debits)...................... (108,882) 1,077,644
------------- ------------
Dividends and distributions (Note
1)
Dividends to shareholders from
net investment income
Class A.................... (2,234,935) (970,829)
Class B.................... (9,204,130) (9,728,864)
Class C.................... (21,646) --
------------- ------------
(11,460,711) (10,699,693)
------------- ------------
Distributions to shareholders
from net realized gains on
investment transactions
Class A.................... (701,041) (1,247,471)
Class B.................... (7,720,336) (16,812,829)
Class C.................... (13,746) --
------------- ------------
(8,435,123) (18,060,300)
------------- ------------
Fund share transactions (net of
share conversions) (Note 6)
Net proceeds from shares
subscribed................. 177,082,017 216,417,990
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions.......... 18,598,887 26,617,480
Cost of shares reacquired..... (201,993,090) (80,947,022)
------------- ------------
Net increase (decrease) in net
assets from Fund shares
transactions............... (6,312,186) 162,088,448
------------- ------------
Total increase................... 32,044,876 138,683,824
Net Assets
Beginning of year................ 483,120,174 344,436,350
------------- ------------
End of year...................... $ 515,165,050 $483,120,174
------------- ------------
------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
*See Note 8.
See Notes to Financial Statements.
10
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND
Portfolio of Investments as of July 31, 1995 STRATEGY PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
-----------------------------------------------------------------
LONG-TERM INVESTMENTS--89.2%
COMMON STOCKS--60.1%
- ------------------------------------------------------------------
Aerospace/Defense--0.9%
51,000 Boeing Co. $ 3,417,000
- ------------------------------------------------------------
Automotive--1.1%
140,000 Ford Motor Co. 4,042,500
- ------------------------------------------------------------
Chemicals--1.3%
130,000 Agrium Inc. (Canada) 4,522,110
- ------------------------------------------------------------
Computer & Related Equipment--10.1%
100,000 Bay Networks* 4,487,500
70,000 Cisco Systems, Inc.* 3,893,750
45,000 Compaq Computer Corp.* 2,283,750
164,000 EMC Corp.* 3,751,500
75,000 Intel Corp. 4,875,000
65,000 Motorola, Inc. 4,980,625
135,500 Network Express, Inc.* 2,523,687
94,200 Quad Systems Corp.* 847,800
72,000 Seagate Technology* 3,195,000
130,000 Sun Microsystems, Inc.* 6,256,250
-------------
37,094,862
- ------------------------------------------------------------
Containers & Packaging--0.8%
140,000 Stone Container Corp.* 3,027,500
- ------------------------------------------------------------
Drugs & Health Care--6.3%
86,000 Columbia Healthcare Corp. 4,214,000
90,000 Forest Laboratories, Inc.* 3,993,750
63,900 Health Care & Retirement Corp.* 2,044,800
27,500 Johnson & Johnson Co. 1,973,125
102,100 Physician Corp. of America* 1,668,697
64,700 St. Jude Medical, Inc. 3,542,325
21,600 Tenet Healthcare Corp. 329,400
113,500 U.S. HealthCare, Inc. $ 3,589,437
102,900 Ventritex, Inc.* 1,639,969
-------------
22,995,503
- ------------------------------------------------------------
Electronics--6.3%
29,000 ADT Ltd.* 348,000
25,000 Applied Materials, Inc.* 2,587,500
40,000 General Electric Co. 2,360,000
59,000 Integrated Device Technology, Inc.* 3,694,875
40,000 KLA Instruments Corp.* 3,470,000
30,100 Loral Corp. 1,685,600
34,100 MEMC Electronic Materials, Inc.* 1,027,262
79,300 Tencor Instruments* 3,489,200
145,000 VLSI Technology, Inc.* 4,295,625
-------------
22,958,062
- ------------------------------------------------------------
Financial Services--7.4%
121,300 Ahmanson ( H.F.) & Co. 2,714,088
70,000 Citicorp 4,366,250
88,300 Dean Witter Discover & Co. 4,459,150
54,100 Federal National Mortgage Assn. 5,065,112
75,000 NationsBank Corp. 4,209,375
43,200 Republic New York Corp. 2,419,200
105,000 Salomon, Inc. 3,871,875
-------------
27,105,050
- ------------------------------------------------------------
Home Improvements--0.9%
65,000 Owens-Corning Fiberglass* 2,551,250
50,000 Ply Gem Industries, Inc. 775,000
-------------
3,326,250
- ------------------------------------------------------------
Hotels & Leisure--1.1%
179,800 Carnival Corp. 4,067,975
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 11
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND
Portfolio of Investments as of July 31, 1995 STRATEGY PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ----------------------------------------------------------------
Information Services--0.5%
59,900 American Business Information, Inc.* $ 1,849,413
- ------------------------------------------------------------
Insurance--5.7%
10,200 Berkley (W. R.) Corp. 391,425
21,400 Chubb Corp. 1,784,953
160,000 Equitable Cos., Inc. 3,580,000
65,700 PMI Group, Inc. 3,055,050
135,400 SunAmerica, Inc. 7,751,650
89,700 Travelers Corp. 4,249,537
-------------
20,812,615
- ------------------------------------------------------------
Mining--1.0%
300,000 Santa Fe Pacific Gold Corp.* 3,750,000
- ------------------------------------------------------------
Oil & Gas--2.7%
105,900 Mesa, Inc.* 450,075
159,000 Noble Drilling Corp.* 1,033,500
118,900 Repsol S.A. (ADR) (Spain) 3,968,287
52,400 Seagull Energy Corp.* 936,650
190,000 YPF Sociedad Anonima (ADS)
(Argentina) 3,301,250
-------------
9,689,762
- ------------------------------------------------------------
Petroleum Services--3.5%
176,000 BJ Services Corp.* 4,378,000
70,000 Exxon Corp. 5,075,000
200,000 Smith International, Inc.* 3,400,000
-------------
12,853,000
- ------------------------------------------------------------
Realty Investment Trust--0.4%
97,300 Manufactured Home Community, Inc. 1,544,638
Retail--1.3%
132,100 Caldor Corp.* $ 1,799,863
93,000 Dillard Department Stores, Inc. 2,883,000
-------------
4,682,863
- ------------------------------------------------------------
Software--2.9%
97,700 Baan Company* (Netherlands) 3,260,738
50,000 Computer Associates International,
Inc. 3,668,750
42,000 Microsoft Corp.* 3,801,000
-------------
10,730,488
- ------------------------------------------------------------
Steel--1.2%
150,000 National Steel Corp.* 2,400,000
60,000 Trinity Industries, Inc. 2,010,000
-------------
4,410,000
- ------------------------------------------------------------
Telecommunications--2.3%
58,500 AirTouch Communications* 1,842,750
150,000 NEXTEL Communications, Inc.* 2,906,250
52,779 Tele-Communications, Inc.* 1,319,475
75,000 Telefonos de Mexico, Series A (ADR)
(Mexico) 2,475,000
-------------
8,543,475
- ------------------------------------------------------------
Textiles--1.3%
200,000 Fruit of the Loom, Inc.* 4,625,000
- ------------------------------------------------------------
Tobacco--1.1%
150,000 RJR Nabisco Holdings Corp. 4,143,750
-------------
Total common stocks (cost
$185,945,464) 220,191,816
</TABLE>
- --------------------------------------------------------------------------------
12 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND
Portfolio of Investments as of July 31, 1995 STRATEGY PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Principal
Amount
(000) Description Value (Note 1)
<C> <C> <S> <C>
- ---------------------------------------------------------------------
DEBT OBLIGATIONS--29.1%
SOVEREIGN BONDS--3.3%
Argentina Gov't. Bond,
(Argentina)
$ 13,950 Zero Coupon, 9/1/97 $ 6,856,188
German Government Bonds,
(Germany)
7,000 7.375%, 1/3/05 5,259,382
------------
Total (cost $12,277,470) 12,115,570
- ------------------------------------------------------------
U.S. GOVERNMENT SECURITIES--25.8%
United States Treasury
Notes,
43,000 7.50%, 2/15/05 46,090,410
United States Treasury
Bonds,
44,000 7.625%, 2/15/25 48,255,680
------------
Total U.S. Government
Securities
(cost $94,448,437) 94,346,090
------------
Total debt obligations
(cost $106,725,907) 106,461,660
------------
Total long-term
investments
(cost $292,671,371) 326,653,476
------------
- ------------------------------------------------------------
SHORT-TERM INVESTMENTS--11.8%
SOVEREIGN BONDS--0.6%
- ------------------------------------------------------------
Mexican Tesobonos,
(Mexico)
2,348 Zero Coupon, 12/7/95 2,274,643
REPURCHASE AGREEMENT--11.2%
Joint Repurchase
Agreement Account,
5.82%, 8/1/95, (Note 5) $ 40,800,000
$ 40,800
------------
Total short-term
investments
(cost $43,078,628) 43,074,643
- ------------------------------------------------------------
Total Investments--101.0%
(cost $335,749,999; Note
4) 369,728,119
Liabilities in excess of
other assets--(1.0%) (3,644,178)
------------
Net Assets--100% $366,083,941
------------
------------
</TABLE>
- ---------------
* Non-income producing security.
ADR--American Depository Receipt.
ADS--American Depository Share.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND
Statement of Assets and Liabilities STRATEGY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S>
<C>
Assets
July 31, 1995
Investments, at value (cost
$335,749,999)................................................................
.... $369,728,119
Cash.........................................................................
................................ 34,950
Receivable for investments
sold.........................................................................
..... 16,703,011
Dividends and interest
receivable...................................................................
......... 3,379,850
Receivable for Fund shares
sold.........................................................................
..... 219,527
Deferred expenses and other
assets.......................................................................
.... 20,288
------------
Total
assets.......................................................................
...................... 390,085,745
------------
Liabilities
Payable for investments
purchased....................................................................
........ 22,560,918
Payable for Fund shares
reacquired...................................................................
........ 784,384
Distribution fee
payable......................................................................
............... 256,290
Management fee
payable......................................................................
................. 202,682
Accrued
expenses.....................................................................
........................ 197,530
------------
Total
liabilities..................................................................
...................... 24,001,804
------------
Net
Assets.......................................................................
............................ $366,083,941
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at
par.....................................................................
$ 294,618
Paid-in capital in excess of
par..........................................................................
315,051,415
------------
315,346,033
Undistributed net investment
income.......................................................................
1,539,281
Accumulated net realized gain on
investments..............................................................
15,225,530
Net unrealized appreciation on
investments................................................................
33,973,097
------------
Net Assets, July 31,
1995.........................................................................
........... $366,083,941
------------
------------
Class A:
Net asset value and redemption price per share
($87,081,211 / 6,978,363 shares of beneficial interest issued and
outstanding)......................... $12.48
Maximum sales charge (5.00% of offering
price)............................................................
.66
------------
Maximum offering price to
public..........................................................................
$13.14
------------
------------
Class B:
Net asset value, offering price and redemption price per share
($278,713,976 / 22,460,135 beneficial interest issued and
outstanding)................................. $12.41
------------
------------
Class C:
Net asset value, offer price and redemption price per share
($288,754 / 23,269 shares of beneficial interest issued and
outstanding)............................... $12.41
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
14 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND
STRATEGY PORTFOLIO
Statement of Operations
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income July 31, 1995
<S> <C>
Income
Interest.................................... $ 10,989,653
Dividends (net of foreign withholding taxes
of $58,427).............................. 3,814,245
-------------
Total income............................... 14,803,898
-------------
Expenses
Distribution fee--Class A................... 142,549
Distribution fee--Class B................... 3,074,388
Distribution fee--Class C................... 1,692
Management fee.............................. 2,370,080
Transfer agent's fees and expenses.......... 1,024,000
Reports to shareholders..................... 222,000
Custodian's fees and expenses............... 204,000
Registration fees........................... 56,500
Legal fees.................................. 26,000
Trustees' fees and expenses................. 22,300
Audit fee and expenses...................... 16,500
Insurance expenses.......................... 11,700
Miscellaneous............................... 985
-------------
Total expenses............................. 7,172,694
-------------
Net investment income.......................... 7,631,204
-------------
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Net realized gain (loss) on:
Investment transactions..................... 16,396,551
Financial futures contracts................. (1,010,688)
Foreign currency transactions............... 326,751
-------------
15,712,614
-------------
Net change in unrealized appreciation
(depreciation) on:
Investments................................. 20,549,622
Financial futures contracts................. 467,750
Foreign currency transactions............... (348,855)
-------------
20,668,517
-------------
Net gain on investments........................ 36,381,131
-------------
Net Increase in Net Assets Resulting from
Operations..................................... $ 44,012,335
-------------
-------------
</TABLE>
PRUDENTIAL ALLOCATION FUND
STRATEGY PORTFOLIO
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended July 31,
<S> <C> <C>
in Net Assets 1995 1994
Operations
Net investment income......... $ 7,631,204 $ 7,171,844
Net realized gain on
investments................ 15,712,614 14,878,620
Net change in unrealized
appreciation (depreciation)
of investments............. 20,668,517 (13,682,115)
------------- ------------
Net increase in net assets
resulting from
operations................. 44,012,335 8,368,349
------------- ------------
Net equalization credits
(debits)...................... (274,536) 48,191
------------- ------------
Dividends and distributions (Note
1)
Dividends to shareholders from
net investment income
Class A.................... (1,553,405) (549,810)
Class B.................... (5,542,190) (4,811,597)
Class C.................... (3,515) --
------------- ------------
(7,099,110) (5,361,407)
------------- ------------
Distributions to shareholders
from net realized gains on
investment transactions
Class A.................... (1,061,481) (815,586)
Class B.................... (9,845,692) (10,082,411)
Class C.................... (5,857) --
------------- ------------
(10,913,030) (10,897,997)
------------- ------------
Distributions to shareholders
in excess of net investment
income
Class A.................... -- (40,192)
Class B.................... -- (351,923)
Class C.................... -- --
------------- ------------
-- (392,115)
------------- ------------
Fund share transactions (net of
share conversions) (Note 6)
Net proceeds from shares
subscribed................. 87,194,600 76,851,235
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions.......... 17,309,043 15,914,742
Cost of shares reacquired..... (147,769,905) (86,835,010)
------------- ------------
Net increase (decrease) in net
assets from Fund share
transactions............... (43,266,262) 5,930,967
------------- ------------
Total decrease................... (17,540,603) (2,304,012)
Net Assets
Beginning of year................ 383,624,544 385,928,556
------------- ------------
End of year...................... $ 366,083,941 $383,624,544
------------- ------------
------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 15
<PAGE>
<PAGE>
Notes to Financial Statements PRUDENTIAL ALLOCATION FUND
- --------------------------------------------------------------------------------
Prudential Allocation Fund, (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 Balanced Portfolio* and the
Strategy Portfolio. The investment objective of the Balanced 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 Balanced 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 Policies
The following is a summary of significant accounting policies 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. Options are valued at
the mean between the most recently quoted bid and asked prices. Futures and
options thereon are valued at their last sales price as of the close of the
commodities exchange or board of trade.
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 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.
- --------------------------------------------------------------------------------
16 *See Note
8.
<PAGE>
<PAGE>
Notes to Financial Statements PRUDENTIAL ALLOCATION FUND
- --------------------------------------------------------------------------------
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.
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 currency transactions.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with the Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income;
Capital Gain, and Return of Capital Distributions by Investment Companies. For
the year ended July 31, 1995, the Strategy Portfolio decreased undistributed net
investment income and increased accumulated net realized gain on investments by
$265,496. Net realized gains and net assets were not affected by this change.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Mutual Fund Management, Inc.
(``PMF''). Pursuant to this agreement, PMF has responsibility for all investment
advisory services and supervises the subadviser's performance of such services.
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.
The Fund has distribution agreements with Prudential Mutual Fund Distributors,
Inc. (``PMFD''), which acts as the distributor of the Class A shares of the
Fund, and with Prudential Securities Incorporated (``PSI''), which acts as
distributor of the Class B and Class C shares of the Fund (collectively the
``Distributors''). The Fund compensates the Distributors for distributing and
servicing the Fund's Class A, Class B and Class C shares, pursuant to plans of
distribution (the ``Class A, B and C Plans'') regardless of expenses actually
incurred by them. The distribution fees are accrued daily and payable monthly.
Pursuant to the Class A, B and C Plans, the Fund compensates the Distributors
for distribution-related activities at an annual rate of up to .30 of 1%, 1% and
1% of the average daily net assets of the Class A, B and C shares, respectively.
Such expenses under the Plans were .25 of 1%, 1% and 1% of the average daily net
assets of the Class A, B and C shares, respectively, for the year ended July 31,
1995.
PMFD has advised the Fund that it has received approximately $440,000
($254,000--Balanced Portfolio* and $186,000--Strategy Portfolio) in front-end
sales charges resulting from sales of Class A shares during the
- --------------------------------------------------------------------------------
*See Note 8. 17
<PAGE>
<PAGE>
Notes to Financial Statements PRUDENTIAL ALLOCATION FUND
- --------------------------------------------------------------------------------
year ended July 31, 1995. From these fees, PMFD paid such sales charges to
dealers which in turn paid commissions to salespersons.
PSI advised the Fund that for the year ended July 31, 1995 it received
approximately $1,677,500 ($963,500--Balanced Portfolio* and $714,000--Strategy
Portfolio) in contingent deferred sales charges imposed upon certain redemptions
by Class B and C shareholders.
PMFD is a wholly-owned subsidiary of PMF. PSI, PIC and PMF are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
- ------------------------------------------------------------
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During the year ended July 31, 1995,
the Fund incurred fees of approximately $1,396,000 ($711,000--Balanced
Portfolio* and $685,000--Strategy Portfolio) for the services of PMFS. As of
July 31, 1995, approximately $118,000 ($62,000--Balanced Portfolio* and
$56,000--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, 1995, PSI received approximately $106,500
($47,400--Balanced Portfolio* and $59,100--Strategy Portfolio) in brokerage
commissions from portfolio transactions executed on behalf of the Fund.
- ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the year ended July 31, 1995, were as follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
- ---------------------------------- ------------- -------------
<S> <C> <C>
Balanced Portfolio*............... $ 806,898,931 $ 800,641,319
Strategy Portfolio................ $ 576,378,735 $ 532,216,646
</TABLE>
The cost basis of investments for federal income tax purposes as of July 31,
1995 was $469,592,939 and $335,765,352 for the Balanced Portfolio* and the
Strategy Portfolio, respectively, and net and gross unrealized appreciation of
investments for federal income tax purposes was as follows:
<TABLE>
<CAPTION>
Balanced Strategy
Portfolio* Portfolio
------------ -----------
<S> <C> <C>
Gross unrealized appreciation...... $ 49,713,371 $39,725,210
Gross unrealized depreciation...... (10,924,330) (5,762,443)
------------ -----------
Net unrealized appreciation........ $ 38,789,041 $33,962,767
------------ -----------
------------ -----------
</TABLE>
- ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Government or federal agency obligations. As of July 31, 1995, the Fund
had a 12.7% (Balanced Portfolio*--7.6% and Strategy Portfolio--5.1%) undivided
interest in the repurchase agreements in the joint account. The undivided
interest for the Fund represented $101,291,000 (Balanced Portfolio*--$60,491,000
and Strategy Portfolio--$40,800,000) 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:
Bear, Stearns & Co., Inc., 5.82%, dated 7/31/95, in the principal amount of
$265,000,000, repurchase price $265,042,842, due 8/1/95. The value of the
collateral including accrued interest is $270,429,672.
CS First Boston Corp., 5.82%, dated 7/31/95, in the principal amount of
$265,000,000, repurchase price $265,042,842, due 8/1/95. The value of the
collateral including accrued interest is $270,382,812.
Smith Barney Inc., 5.82%, dated 7/31/95, in the principal amount of $265,000,000
repurchase price $265,042,842 due 8/1/95. The value of the collateral including
accrued interest is $270,382,812.
- ------------------------------------------------------------
Note 6. Capital
Class A shares are sold with a front-end sales charge of up to 5%. Class B
shares are sold with a contingent deferred sales charge which declines from 5%
to zero depending on the period of time the shares are held. Class C shares are
sold with a contingent deferred sales charge of 1% during the first year. Class
B shares will automatically convert to Class A
- --------------------------------------------------------------------------------
18 *See Note
8.
<PAGE>
<PAGE>
Notes to Financial Statements PRUDENTIAL ALLOCATION FUND
- --------------------------------------------------------------------------------
shares on a quarterly basis approximately seven years after purchase commencing
in February 1995. All 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.
Transactions in shares of beneficial interest for the fiscal years ended July
31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Balanced
Portfolio*: Strategy Portfolio:
Class
A Class A
- ------------------------------- -------------------------------
Year Ended July 31, 1995 Shares
Amount Shares Amount
- --------------------------------------------------------- -----------
- ------------- ----------- -------------
<S> <C>
<C> <C> <C>
Shares issued............................................ 3,862,947
$ 44,308,109 1,390,817 $ 15,562,421
Shares issued in reinvestment of dividends and
distributions.......................................... 251,790
2,763,092 226,669 2,532,533
Shares reacquired........................................ (3,252,889)
(37,646,830) (1,480,078) (17,030,049)
-----------
- ------------- ----------- -------------
Net increase in shares outstanding before conversion..... 861,848
9,424,371 137,408 1,064,905
Shares issued upon conversion from Class B............... 5,717,102
62,038,822 4,041,405 45,163,786
-----------
- ------------- ----------- -------------
Net increase in shares outstanding....................... 6,578,950
$ 71,463,193 4,178,813 $ 46,228,691
-----------
- ------------- ----------- -------------
-----------
- ------------- ----------- -------------
<CAPTION>
Year Ended July 31, 1994
- ---------------------------------------------------------
<S> <C>
<C> <C> <C>
Shares issued............................................ 1,936,121
$ 22,068,844 954,118 $ 11,209,754
Shares issued in reinvestment of dividends and
distributions.......................................... 185,818
2,104,551 115,925 1,362,807
Shares reacquired........................................ (673,143)
(7,607,829) (693,445) (8,199,850)
-----------
- ------------- ----------- -------------
Net increase in shares outstanding....................... 1,448,796
$ 16,565,566 376,598 $ 4,372,711
-----------
- ------------- ----------- -------------
-----------
- ------------- ----------- -------------
<CAPTION>
Class
B Class B
- ------------------------------- -------------------------------
Year Ended July 31, 1995 Shares
Amount Shares Amount
- --------------------------------------------------------- -----------
- ------------- ----------- -------------
<S> <C>
<C> <C> <C>
Shares issued............................................ 5,899,203
$ 65,629,606 2,294,936 $ 26,157,592
Shares issued in reinvestment of dividends and
distributions.......................................... 1,480,760
15,800,410 1,357,022 14,767,213
Shares reacquired........................................ (9,125,344)
(100,071,801) (7,554,633) (85,523,598)
-----------
- ------------- ----------- -------------
Net decrease in shares outstanding before conversion..... (1,745,381)
(18,641,785) (3,902,675) (44,598,793)
Shares reacquired upon conversion into Class A........... (5,738,270)
(62,038,822) (4,066,519) (45,163,786)
-----------
- ------------- ----------- -------------
Net decrease in shares outstanding....................... (7,483,651)
$ (80,680,607) (7,969,194) $ (89,762,579)
-----------
- ------------- ----------- -------------
-----------
- ------------- ----------- -------------
</TABLE>
- --------------------------------------------------------------------------------
*See Note 8. 19
<PAGE>
<PAGE>
Notes to Financial Statements PRUDENTIAL ALLOCATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced
Portfolio*: Strategy Portfolio:
Class
B Class B
- ------------------------------- -------------------------------
Year Ended July 31, 1994 Shares
Amount Shares Amount
- --------------------------------------------------------- -----------
- ------------- ----------- -------------
<S> <C>
<C> <C> <C>
Shares issued............................................ 17,006,359
$ 194,349,146 5,564,589 $ 65,641,481
Shares issued in reinvestment of dividends and
distributions.......................................... 2,171,273
24,512,929 1,243,606 14,551,935
Shares reacquired........................................ (6,463,788)
(73,339,193) (6,693,142) (78,635,160)
-----------
- ------------- ----------- -------------
Net increase in shares outstanding....................... 12,713,844
$ 145,522,882 115,053 $ 1,558,256
-----------
- ------------- ----------- -------------
-----------
- ------------- ----------- -------------
<CAPTION>
Class
C Class C
- ------------------------------- -------------------------------
August 1, 1994* Through July 31, 1995 Shares
Amount Shares Amount
- --------------------------------------------------------- -----------
- ------------- ----------- -------------
<S> <C>
<C> <C> <C>
Shares issued............................................ 442,652
$ 5,105,480 26,928 $ 310,801
Shares issued in reinvestment of dividends and
distributions.......................................... 3,269
35,385 850 9,297
Shares reacquired........................................ (192,096)
(2,235,637) (4,509) (52,472)
-----------
- ------------- ----------- -------------
Net increase in shares outstanding....................... 253,825
$ 2,905,228 23,269 $ 267,626
-----------
- ------------- ----------- -------------
-----------
- ------------- ----------- -------------
- ---------------
* Commencement of offering of Class C shares.
</TABLE>
- ------------------------------------------------------------
Note 7. Dividends
On September 7, 1995, the Board of Trustees of the Fund declared a dividend from
undistributed net investment income of $.0675 per share to Class A shareholders
and $.0450 per share to Class B shareholders and Class C shareholders for the
Balanced Portfolio* and a dividend from undistributed net investment income of
$.0675 per share to Class A shareholders and $.0450 per share to Class B
shareholders, and Class C shareholders for the Strategy Portfolio. All dividends
are payable on September 15, 1995 to shareholders of record on September 12,
1995.
- ------------------------------------------------------------
Note 8. Subsequent Events
On May 3, 1995, the Board of Directors of the Prudential Allocation Fund has
approved a name change for the Conservatively Managed Portfolio to the Balanced
Portfolio. On September 6, 1995, the shareholders of the Prudential
Incomevertible Fund approved the merger into the Balanced Portfolio. Both
changes are effective September 29, 1995.
- --------------------------------------------------------------------------------
20 *See Note
8.
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND
Financial Highlights BALANCED PORTFOLIO*
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each of
the years indicated:
<TABLE>
<CAPTION>
Class
A
- -------------------------------------------------------
Year Ended
July 31,
- -------------------------------------------------------
1995 1994 1993
1992 1991
-------- -------
- ------- ------- ------
<S> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year............ $ 11.12 $ 11.75 $
11.00 $ 10.73 $10.23
-------- -------
- ------- ------- ------
Income from investment operations
Net investment income......................... .34 .33
.43 .44 .44
Net realized and unrealized gain (loss) on
investment transactions.................... 1.11 (.05)
1.16 .81 .73
-------- -------
- ------- ------- ------
Total from investment operations........... 1.45 .28
1.59 1.25 1.17
-------- -------
- ------- ------- ------
Less distributions
Dividends from net investment income.......... (.33) (.37)
(.37) (.44) (.44)
Distributions paid to shareholders from net
realized gains on investment
transactions............................... (.20) (.54)
(.47) (.54) (.23)
-------- -------
- ------- ------- ------
Total distributions........................ (.53) (.91)
(.84) (.98) (.67)
-------- -------
- ------- ------- ------
Net asset value, end of period................ $ 12.04 $ 11.12 $
11.75 $ 11.00 $10.73
-------- -------
- ------- ------- ------
-------- -------
- ------- ------- ------
TOTAL RETURN(a):.............................. 13.67% 2.39%
15.15% 12.29% 11.99%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................. $119,829 $37,512
$22,605 $10,944 $4,408
Average net assets (000)...................... $ 69,754 $29,875
$15,392 $ 7,103 $2,747
Ratios to average net assets:
Expenses, including distribution fees...... 1.22% 1.23%
1.17% 1.29% 1.38%
Expenses, excluding distribution fees...... 0.97% 1.00%
.97% 1.09% 1.18%
Net investment income...................... 2.90% 2.84%
3.88% 3.97% 4.44%
Portfolio turnover rate....................... 201% 108%
83% 105% 137%
</TABLE>
- ---------------
<TABLE>
<C> <S>
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions.
</TABLE>
- --------------------------------------------------------------------------------
*See Note 8.
See Notes to Financial Statements. 21
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND
Financial Highlights BALANCED PORTFOLIO*
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated:
<TABLE>
<CAPTION>
Class B Class C
- ------------------------------------------------------------ ---------
August 1,
1994(a)
Year Ended
July 31, through
- ------------------------------------------------------------ July 31,
1995 1994
1993 1992 1991 1995
-------- --------
- -------- -------- -------- ---------
<S> <C> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 11.09 $ 11.72 $
10.98 $ 10.71 $ 10.22 $ 11.12
-------- --------
- -------- -------- -------- ---------
Income from investment operations
Net investment income......................... .26 .24
.34 .35 .36 .21
Net realized and unrealized gain (loss) on
investment transactions.................... 1.10 (.05)
1.16 .82 .73 1.12
-------- --------
- -------- -------- -------- ---------
Total from investment operations........... 1.36 .19
1.50 1.17 1.09 1.33
-------- --------
- -------- -------- -------- ---------
Less distributions
Dividends from net investment income.......... (.25) (.28)
(.29) (.36) (.37) (.25)
Distributions paid to shareholders from net
realized gains on investment
transactions............................... (.20) (.54)
(.47) (.54) (.23) (.20)
-------- --------
- -------- -------- -------- ---------
Total distributions........................ (.45) (.82)
(.76) (.90) (.60) (.45)
-------- --------
- -------- -------- -------- ---------
Net asset value, end of period................ $ 12.00 $ 11.09 $
11.72 $ 10.98 $ 10.71 $ 12.00
-------- --------
- -------- -------- -------- ---------
-------- --------
- -------- -------- -------- ---------
TOTAL RETURN(d):.............................. 12.79% 1.61%
14.27% 11.48% 11.13% 12.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $392,291 $445,609
$321,831 $225,995 $162,281 $ 3,046
Average net assets (000)...................... $409,419 $392,133
$267,340 $189,358 $149,907 $ 920
Ratios to average net assets:(c)
Expenses, including distribution fees...... 1.97% 2.00%
1.97% 2.09% 2.16% 2.04%(b)
Expenses, excluding distribution fees...... .97% 1.00%
.97% 1.09% 1.16% 1.04%(b)
Net investment income...................... 2.34% 2.08%
3.04% 3.25% 3.55% 2.20%(b)
Portfolio turnover rate....................... 201% 108%
83% 105% 137% 201%
</TABLE>
- ---------------
<TABLE>
<C> <S>
(a) Commencement of offering of Class C shares.
(b) Annualized.
(c) Because of the recent commencement of its offering, the ratios for the
Class C shares are not necessarily comparable to
that of Class A or B shares and are not necessarily indicative of future
ratios.
(d) 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.
</TABLE>
- --------------------------------------------------------------------------------
*See Note 8.
22 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND
Financial Highlights STRATEGY PORTFOLIO
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each of
the years indicated:
<TABLE>
<CAPTION>
Class
A
- -------------------------------------------------------
Year Ended
July 31,
- -------------------------------------------------------
1995 1994 1993
1992 1991
------- -------
- ------- ------- -------
<S> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year............ $ 11.60 $ 11.82 $
12.03 $ 11.45 $ 10.50
------- -------
- ------- ------- -------
Income from investment operations
Net investment income......................... .38 .30
.42 .35 .38
Net realized and unrealized gain on investment
and foreign currency transactions.......... 1.14 .05
.70 1.02 .98
------- -------
- ------- ------- -------
Total from investment operations........... 1.52 .35
1.12 1.37 1.36
------- -------
- ------- ------- -------
Less distributions
Dividends from net investment income.......... (.30) (.22)
(.37) (.37) (.35)
Dividends in excess of net investment
income..................................... -- (.01)
- -- -- --
Distributions paid to shareholders from net
realized gains on investment and foreign
currency transactions...................... (.34) (.34)
(.96) (.42) (.06)
------- -------
- ------- ------- -------
Total distributions........................ (.64) (.57)
(1.33) (.79) (.41)
------- -------
- ------- ------- -------
Net asset value, end of year.................. $ 12.48 $ 11.60 $
11.82 $ 12.03 $ 11.45
------- -------
- ------- ------- -------
------- -------
- ------- ------- -------
TOTAL RETURN(a):.............................. 13.95% 2.88%
10.02% 12.36% 13.42%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................. $87,081 $32,485
$28,641 $20,378 $10,765
Average net assets (000)...................... $57,020 $30,634
$24,216 $15,705 $ 6,694
Ratios to average net assets:
Expenses, including distribution fees...... 1.33% 1.26%
1.21% 1.26% 1.33%
Expenses, excluding distribution fees...... 1.08% 1.03%
1.01% 1.06% 1.13%
Net investment income...................... 3.34% 2.52%
3.61% 3.05% 3.89%
Portfolio turnover rate....................... 180% 96%
145% 241% 189%
</TABLE>
- ---------------
<TABLE>
<C> <S>
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions.
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 23
<PAGE>
<PAGE>
PRUDENTIAL ALLOCATION FUND
Financial Highlights STRATEGY PORTFOLIO
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each of
the periods indicated:
<TABLE>
<CAPTION>
Class B Class C
- ------------------------------------------------------------ ---------
August 1,
1994(a)
Year Ended
July 31, through
- ------------------------------------------------------------ July 31,
1995 1994
1993 1992 1991 1995
-------- --------
- -------- -------- -------- ---------
<S> <C> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 11.54 $ 11.79 $
12.01 $ 11.43 $ 10.49 $ 11.57
-------- --------
- -------- -------- -------- ---------
Income from investment operations
Net investment income......................... .20 .21
.34 .26 .30 .25
Net realized and unrealized gain on investment
and foreign currency transactions.......... 1.22 .05
.70 1.02 .97 1.14
-------- --------
- -------- -------- -------- ---------
Total from investment operations........... 1.42 .26
1.04 1.28 1.27 1.39
-------- --------
- -------- -------- -------- ---------
Less distributions
Dividends from net investment income.......... (.21) (.16)
(.30) (.28) (.27) (.21)
Dividends in excess of net investment
income..................................... -- (.01)
-- -- -- --
Distributions paid to shareholders from net
realized gains on investment and foreign
currency transactions...................... (.34) (.34)
(.96) (.42) (.06) (.34)
-------- --------
- -------- -------- -------- ---------
Total distributions........................ (.55) (.51)
(1.26) (.70) (.33) (.55)
-------- --------
- -------- -------- -------- ---------
Net asset value, end of period................ $ 12.41 $ 11.54 $
11.79 $ 12.01 $ 11.43 $ 12.41
-------- --------
- -------- -------- -------- ---------
-------- --------
- -------- -------- -------- ---------
TOTAL RETURN(d):.............................. 13.05% 2.11%
9.21% 11.53% 12.49% 12.75%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $278,714 $351,140
$357,287 $314,771 $219,983 $ 289
Average net assets (000)...................... $307,439 $362,579
$339,225 $267,525 $190,913 $ 170
Ratios to average net assets:(c)
Expenses, including distribution fees...... 2.08% 2.03%
2.01% 2.06% 2.11% 2.10%(b)
Expenses, excluding distribution fees...... 1.08% 1.03%
1.01% 1.06% 1.11% 1.10%(b)
Net investment income...................... 1.77% 1.77%
2.79% 2.27% 2.95% 2.27%(b)
Portfolio turnover rate....................... 180% 96%
145% 241% 189% 180%
</TABLE>
- ---------------
<TABLE>
<C> <S>
(a) Commencement of offering of Class C shares.
(b) Annualized.
(c) Because of the recent commencement of its offering, the ratios for the
Class C shares are not necessarily comparable to
that of Class A or B shares and are not necessarily indicative of future
ratios.
(d) 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.
</TABLE>
- --------------------------------------------------------------------------------
24 See Notes to Financial Statements.
<PAGE>
<PAGE>
Report of Independent Accountants PRUDENTIAL ALLOCATION FUND
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees
Prudential Allocation Fund
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Prudential Allocation Fund (consisting of the
Balanced Portfolio (formerly the Conservatively Managed Portfolio) and the
Strategy Portfolio) as of July 31, 1995, 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, 1995 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 each of the
respective portfolios constituting Prudential Allocation Fund as of July 31,
1995, the results of their operations, the changes in their 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 7, 1995
Tax Information PRUDENTIAL ALLOCATION FUND
- --------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days of the
Fund's fiscal year end (July 31, 1995) 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, 1995, the Fund paid aggregate dividends and
distributions as follows:
<TABLE>
<CAPTION>
Balanced
Portfolio* Strategy Portfolio
- --------------------------------- ---------------------------------
<S> <C> <C>
<C> <C> <C> <C>
Class A Class B
Class C Class A Class B Class C
------- -------
------- ------- ------- -------
Dividends from ordinary income.......... $ .33 $ .25
$ .25 $ .30 $ .21 $ .21
Distributions from long-term capital
gains................................... .20 .20
.20 .34 .34 .34
</TABLE>
Dividends paid from long-term capital gains are taxable as such. We also wish
to
advise you that 18.4%--Balanced Portfolio* and 46.0%--Strategy Portfolio of the
dividends paid from ordinary income in the fiscal year ended July 31, 1995
qualified for the corporate dividends received deduction available to corporate
taxpayers.
In January 1996, 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 1995.
- --------------------------------------------------------------------------------
*See Note 8. 25
<PAGE>
