(ICON)
Prudential
Balanced
Fund
SEMI
ANNUAL
REPORT
Jan. 31, 1999
(LOGO)
<PAGE>
Prudential Balanced Fund
Performance At A Glance.
In a period of extreme market turbulence, the
Prudential Balanced
Fund turned in a solidly positive six-month
return. Nonetheless, it
slightly trailed the average balanced fund,
primarily because part
of our stocks were invested with a value style.
During this uncertain
time, not only did investors strongly prefer
growth stocks, but they
focused sharply on large companies, whereas our
value holdings
included many companies that were somewhat
smaller. Our growth
investments, however, were beneficiaries of the
huge difference
in style performance and sustained our overall
return, while our
bonds helped stabilize our return through the
summer crisis of
confidence.
<TABLE>
Cumulative Total Returns1
As of 1/31/99
<CAPTION>
Six One Five
Ten Since
Months Year Years
Years Inception2
<S> <C> <C> <C>
<C> <C>
Class A 6.33% 12.32%
66.25% N/A 171.67%
Class B 5.92 11.48 60.25
176.83% 180.88
Class C 5.92 11.48 N/A
N/A 65.80
Class Z 6.46 12.67 N/A
N/A 43.35
Lipper Balanced Fund Avg.3 7.39 14.62 90.24
231.93 ***
</TABLE>
<TABLE>
Average Annual Total Returns1
As of 12/31/98
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 2.92% 9.39% N/A 10.90%
Class B 2.42 9.55 10.77% 9.35
Class C 5.35 N/A N/A 11.29
Class Z 8.50 N/A N/A 12.60
</TABLE>
Past performance is not indicative of future
results. Principal
and investment return will fluctuate so that an
investor's shares,
when redeemed, may be worth more or less than
their original cost.
1 Source: Prudential Investments Fund Management
and Lipper, Inc.
The cumulative total returns do not take into
account sales charges.
The average annual total returns do take into
account applicable
sales charges. The Fund charges a maximum front-
end sales charge
of 5% for Class A shares and a declining
contingent deferred sales
charge (CDSC) of 5%, 4%, 3%, 2%, 1% and 1% for six
years for Class
B shares. Class B shares will automatically
convert to Class A shares,
on a quarterly basis, approximately seven years
after purchase. Class
C shares are subject to a front-end sales charge
of 1% and a CDSC of
1% for 18 months. Class C shares bought before
November 2, 1998 have
a 1% CDSC if sold within one year. Class Z shares
are not subject to
a sales charge or distribution fee.
2 Inception dates: Class A, 1/22/90; Class B,
9/15/87; Class C,
8/1/94; Class Z, 3/1/96.
3 Lipper average returns are for all funds in each
share class
for the six-month, one-, five-, and ten-year
periods in the
Balanced Fund category.
***Lipper Since Inception returns are 203.57% for
Class A;
244.45% for Class B; 99.00% for Class C; and
54.19% for Class Z
based on all funds in each share class.
How Investments Compared.
(As of 1/31/99)
(GRAPH)
Source: Lipper, Inc. Financial markets change, so
a mutual fund's past
performance should never be used to predict future
results. The risks
to each of the investments listed above are
different -- we provide
12-month total returns for several Lipper mutual
fund categories to
show you that reaching for higher returns means
tolerating more risk.
The greater the risk, the larger the potential
reward or loss. In
addition, we've included historical 20-year
average annual returns.
These returns assume the reinvestment of
dividends.
U.S. Growth Funds will fluctuate a great deal.
Investors have received
higher historical total returns from stocks than
from most other
investments. Smaller capitalization stocks offer
greater potential
for long-term growth but may be more volatile than
larger
capitalization stocks.
General Bond Funds provide more income than stock
funds, which
can help smooth out their total returns year by
year. But their
prices still fluctuate (sometimes significantly)
and their returns
have been historically lower than those of stock
funds.
General Municipal Debt Funds invest in bonds
issued by state
governments, state agencies and/or municipalities.
This
investment provides income that is usually exempt
from
federal and state income taxes.
U.S. Taxable Money Funds attempt to preserve a
constant
share value; they don't fluctuate much in price
but,
historically, their returns have been generally
among
the lowest of the major investment categories.
<PAGE>
Warren Spitz, Jeff Rose, Barbara Kenworthy, Fund
Managers
Portfolio Managers' Report
The Balanced Fund invests in a diversified
portfolio of stocks,
bonds and money market instruments, with a target
range of 50%
to 60% stocks, 30% to 40% bonds, and 5% to 15%
cash. It buys
stocks and bonds primarily of larger, more mature
companies,
but also some smaller, faster-growing companies.
It may invest
up to 25% of its assets in bonds rated below
investment grade,
commonly known as "junk bonds." These are subject
to greater
credit risk, but also may provide greater returns.
There can
be no assurance that the Portfolio's investment
objective will
be achieved.
Strategy Session.
Growth Stocks. We focused the Fund's growth
holdings on companies
with earnings stability. Other investors also have
been willing
to pay more for stable earnings, so stocks with
strong growth
have risen in price markedly. Our returns reflect
these gains.
However, if these companies do not increase their
earnings fast
enough to justify their current premium prices, we
may reduce
our focus there. Should world economic activity
pick up in the
second half of 1999, economically sensitive stocks
- -- such as
those of capital goods and basic materials compa-
nies -- may
become more attractive. Such cyclical stocks have
become quite
inexpensive because events in Asia threatened a
major global
slowdown. We are watching these bargain stocks for
signs of
growth.
Value Stocks. Our value holdings already include
many cyclical
stocks, both industrials (such as metal and
chemical companies)
and consumer companies (such as autos and
retailers). They reflect
our confidence that the U.S. economy will continue
to expand.
Because of Asia-related uncertainties, companies
that tend to
do well in a growing economy have been priced as
though a
recession were imminent. This makes them bargains
in terms
of what we must pay for a dollar of their
earnings. Should
those earnings rise, we expect them to become
outstanding
performers.
Bonds. We believe that many investors are still
skittish despite
the continuing strength of the U.S. economy, so
the yield on
corporate bonds more than repays any additional
risk they
represent. We are continuing to buy the bonds of
U.S.-based
corporations.
Portfolio Composition.
Expressed as a percentage of
net assets as of 1/31/99.
(PIE CHART)
Style Diversification.
Growth investors look among the most rapidly
growing companies
for those with the best long-term prospects, while
value
investors look among inexpensive companies for
those
with the best earnings growth prospects or asset
values
for the dollar. Historically, returns of the two
styles
complement each other, so we divided our stock
holdings
between the two in hopes of stabilizing our
return. Over
our six-month reporting period, growth stocks
averaged a
16-percentage-point advantage; it shows the
importance of
style diversification.
<PAGE>
What Went Well.
A Few Large Gains.
The stock of Providian Financial -- one of our
largest holdings --
almost doubled in price in just six months. It is
a well-run,
aggressive bank that is using automation to
develop subtle sales
strategies to market to its large base of credit
card customers.
The technology sector was by far the best
performing during the six
months ending January 31, 1999, and we benefited
particularly from
our substantial holdings in Uniphase (an optical
information
technology component specialist, up 82%), Cisco
Systems (a
networking company, up 75%), and Intel (a
semiconductor company,
up 67%). Our somewhat smaller investment in
Microsoft (software,
up 59%) also made a significant contribution.
And Not So Well.
Value Trailed Markedly.
Overall, our stock holdings were somewhat light in
technology
companies, which generally were too expensive for
the value-style
portion of our portfolio. We would have performed
better had we
owned more. Our hospital management companies
turned in very poor
performances. In addition, we were somewhat
heavily represented
among industrial stocks, including the poor-
performing chemical
companies. These stocks tend to do better in
periods of economic
expansion, and investors were concerned about the
global economy.
As investors digest the news that the U.S. economy
picked up steam
in the last quarter of 1998, these stocks may
finally recover.
Corporate Bonds Weak In the Crisis.
Although we had reduced our exposure to corporate
bonds, we still
held many in August when investors retreated to
the greater
security of U.S. Treasury bonds. We would have
performed better
with fewer corporate bonds. However, after their
prices fell, the
yield on corporates was above that warranted by
their true risk,
in our opinion. We began to buy, which bolstered
our return in
December and January.
Five Largest
Equity Holdings.
1.5% Alcoa Inc.
Metals-Nonferrous
1.5% General Motors Co.
Automobiles
1.5% Providian Financial Corp.
Financial Services
1.3% Exxon Corp.
Oil & Gas
Equipment & Services
1.2% MBNA Corp.
Financial Services
Expressed as a percentage of net assets as of
1/31/99.
Looking Ahead.
The U.S. economy accelerated strongly to a 6.1%
annual pace
in the last quarter of 1998. Personal consumption
in the United
States grew much more rapidly than anticipated,
while home
purchases and business investment also were
strong. Now,
even if the economic pace slows, there is a good
chance
that the earnings of cyclical industrial and
consumer
companies will jump. Meanwhile, in our growth
holdings,
we own the companies that the market is currently
rewarding
for their history of continually rising earnings.
Our corporate bonds also should benefit as a
strong economy
increases investors' confidence in the ability of
corporations
to service their bonds.
1
<PAGE>
Warren Spitz, Jeff Rose, and Barbara Kenworthy
discuss balanced investing.
(PHOTO)
Warren E. Spitz
Portfolio Manager
Equities
(PHOTO)
Jeffrey T. Rose, CFA
Portfolio Manager
Equities
(PHOTO)
Barbara L. Kenworthy
Portfolio Manager
Equities
Q. Did the diversification of the Prudential
Balanced Fund provide
any protection in the market downturn?
Barbara Kenworthy: In the month of August 1998,
when stock markets
plummeted sharply, both our value and growth stock
holdings fell
more than 15%. Our bond holdings, however, were
essentially flat
through the month, reducing the volatility of the
Fund's asset
value. There was a flight to quality in both the
stock and bond
markets. United States Treasury bonds, the most
secure security
one could own, increased in value as almost all
stocks fell. As
it turned out, the markets stabilized pretty
quickly, but during
the crisis our bonds played an important role in
evening out our
return. That's the purpose of a balanced account.
Q. Did you change the balance among the different
asset classes?
Warren Spitz: We kept the ratio of the asset
classes about the
same, but that meant we had to shift money from
the leading classes
to the laggards. In the past six months, to keep
our risk profile
steady, we had to shift some profits from stocks
to bonds and from
growth stocks to value. Such rebalancing may
increase our return
over the long run because it forces us to sell
high and buy low.
Many investors find it difficult to sell something
that has been
doing well until they see signs of weakness, but
then it often is
too late because everyone is trying to sell and
the price of the
securities may plummet. Rebalancing is a
discipline that forces
investors to sell when prices are still high and
buy when they
are still low.
Q. What was unusual about the market over the past
six months?
Jeff Rose: The most dramatic event, of course, was
the steep
market correction for just about everything except
the most
tradable U.S. Treasury bonds. Investors had been
getting
skittish as Asia went into recession and Russia's
default
triggered a panic. But when the market recovered,
the greatest
increases were channeled to a very limited number
of stocks.
Only the very largest, most familiar growth stocks
did really
well. In 40 years of data, performance has never
before been
so concentrated. Because the Prudential Balanced
Fund is well
diversified, we owned some of those stocks and
they pulled up
our return. But it made these stocks much more
expensive for
each dollar of corporate earnings than the stocks
of smaller
companies and of companies more dependent upon
economic expansion.
Q. Does that bode well for value stocks?
Warren Spitz: Historically, value and growth
styles have each
had periods of superior performance that lasted
several years.
It would introduce greater risk to our Fund to try
to predict
when the switch will come. Instead, we ensure that
we have both
styles represented. We rebalance our holdings
periodically to
maintain the balance and to reduce the average
cost of our
portfolio -- when we rebalance, we sell the most
expensive
and buy the inexpensive. That's a sound long-term
strategy.
2
<PAGE>
A Message to Our Shareholders
March 26, 1999
(PHOTO)
Dear Shareholder,
When I think about how Prudential's clients can
benefit from
their investments, one of my recent concerns is
how misleading
today's equity markets have become. Major index
advances continue
to be driven by the stocks of a handful of very
large companies.
These stocks are getting more and more expensive,
out of proportion
to their earnings expectations. As a result, a
substantial disparity
in value continues to grow between large and small
companies and
between growth and value stocks.
Since not all stocks are benefiting from the
highly publicized
euphoria surrounding each record-breaking
milestone, it is
unlikely that these trends will continue. In fact,
history
shows that markets generally bring prices in line
with
earnings performance sooner or later.
Diversification Is Critical.
Instead of chasing recent market winners,
investors should
have a well-diversified asset allocation strategy
in place
and keep to it. It is also a good practice to
rebalance your
holdings when necessary to keep your asset
allocation consistent
with your long-term objectives and risk tolerance.
A properly
diversified portfolio of value- and growth-
oriented mutual funds,
bond funds and money market funds could help you
weather inevitable
market turbulence and receive more consistent
returns over time.
Prudential offers a wide range of mutual funds to
help our
shareholders diversify. We have also designed
several balanced
and diversified funds to allow one-decision
diversification.
Thank you for your continued confidence in
Prudential mutual funds.
Sincerely,
John R. Strangfeld
Chief Investment Officer
Prudential Investments
3
<PAGE>
Portfolio of Investments as
of January 31, 1999 (Unaudited)
PRUDENTIAL BALANCED FUND
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Shares Description
Value (Note 1)
<C> <S>
<C>
---------------------------------------------
- --------------
LONG-TERM INVESTMENTS--90.3%
COMMON STOCKS--60.4%
---------------------------------------------
- --------------
Advertising--1.1%
86,500 Interpublic Group of Companies, Inc.
$ 6,844,312
149,900 Young & Rubicam Inc.(a)
6,014,738
- -------------
12,859,050
- --------------------------------------------------
- ----------
Airlines--0.2%
37,100 US Airways Group, Inc.(a)
1,845,725
- --------------------------------------------------
- ----------
Automobiles--2.6%
203,100 Ford Motor Co.
12,477,956
188,600 General Motors Corp.
16,926,850
- -------------
29,404,806
- --------------------------------------------------
- ----------
Banks--0.2%
79,500 Wells Fargo Co.
2,777,531
- --------------------------------------------------
- ----------
Beverages--0.7%
190,800 PepsiCo, Inc.
7,453,125
- --------------------------------------------------
- ----------
Chemicals--2.6%
404,000 Agrium, Inc. (Canada)
3,655,022
142,000 Dow Chemical Co.
12,504,875
45,000 Du Pont (E.I.) De Nemours
2,303,437
431,900 Geon Co.
10,365,600
- -------------
28,828,934
- --------------------------------------------------
- ----------
Computer Software & Services--4.5%
26,900 America Online, Inc.(a)
4,725,994
77,300 BMC Software, Inc.(a)
3,608,944
218,300 Compaq Computer Corp.
10,396,537
88,500 EMC Corp.(a)
$ 9,635,437
41,800 Microsoft Corp.(a)
7,315,000
140,900 Oracle Corp.(a)
7,802,337
233,700 Unisys Corp.(a)
7,741,313
- -------------
51,225,562
- --------------------------------------------------
- ----------
Construction--2.2%
332,100 Hanson PLC (ADR)
10,876,275
268,500 J. Ray McDermott, S.A.(a)
6,376,875
229,500 U.S. Home Corp.(a)
8,147,250
- -------------
25,400,400
- --------------------------------------------------
- ----------
Diversfied Consumer Products--2.8%
113,400 Avon Products, Inc.
4,188,713
60,200 Colgate-Palmolive Co.
4,842,338
42,700 Estee Lauder Cos., Inc.
3,504,069
67,600 Gillette Co.
3,971,500
72,900 Illinois Tool Works, Inc.
4,396,781
69,900 Procter & Gamble Co.
6,352,162
178,100 The Dial Corp.
4,864,356
- -------------
32,119,919
- --------------------------------------------------
- ----------
Diversified Operations--2.1%
149,900 Applied Materials, Inc.(a)
9,471,806
97,950 General Electric Co.
10,272,506
238,800 UCAR International Inc.(a)
4,402,875
- -------------
24,147,187
- --------------------------------------------------
- ----------
Electrical Services--0.9%
231,100 Texas Utilities Co.
10,153,956
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as
of January 31, 1999 (Unaudited)
PRUDENTIAL BALANCED FUND
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Shares Description
Value (Note 1)
<C> <S>
<C>
---------------------------------------------
- ---------------
Electronics--3.1%
94,900 Altera Corp.(a)
$ 5,966,838
81,700 Intel Corp.
11,514,594
64,200 Motorola, Inc.
4,638,450
122,900 Uniphase Corp.(a)
11,199,262
182,200 VLSI Technology, Inc.(a)
2,163,625
- -------------
35,482,769
- --------------------------------------------------
- ----------
Entertainment--1.1%
157,000 Carnival Corp.
7,702,813
144,500 Park Place Entertainment Corp.(a)
984,406
104,200 The Walt Disney Co.
3,438,600
- -------------
12,125,819
- --------------------------------------------------
- ----------
Financial Services--5.1%
130,600 Bear Stearns Co., Inc.
6,154,525
103,400 Chase Manhattan Corp.
7,955,337
176,600 Federal National Mortgage Association
12,869,725
498,950 MBNA Corp.
13,939,416
167,700 Providian Financial Corp.
16,906,256
- -------------
57,825,259
- --------------------------------------------------
- ----------
Foods--0.6%
125,000 Bestfoods
6,289,063
- --------------------------------------------------
- ----------
Hospital Management--2.1%
392,700 Columbia/HCA Healthcare Corp.
7,117,688
390,300 HCR Manor Care, Inc.(a)
10,440,525
413,900 HEALTHSOUTH Corp.(a)
5,613,519
- -------------
23,171,732
- --------------------------------------------------
- ----------
Hotels & Leisure--0.2%
144,500 Hilton Hotels Corp.
2,086,219
Insurance--1.6%
104,025 American International Group, Inc.
$ 10,708,073
140,500 Provident Companies, Inc.
6,023,938
70,000 Selective Insurance Group, Inc.
1,277,500
- -------------
18,009,511
- --------------------------------------------------
- ----------
Media--1.5%
348,100 CBS Corp.(a)
11,835,400
173,100 Infinity Broadcasting Corp.(a)
4,792,706
- -------------
16,628,106
- --------------------------------------------------
- ----------
Medical Products & Services--1.7%
103,350 Cardinal Health, Inc.
7,641,441
54,390 McKesson HBOC, Inc.
4,086,049
104,000 Tyco International Ltd.
8,014,500
- -------------
19,741,990
- --------------------------------------------------
- ----------
Medical Technology--1.3%
156,900 Abbott Laboratories
7,286,044
188,200 IMS Health, Inc.
6,892,825
- -------------
14,178,869
- --------------------------------------------------
- ----------
Metals-NonFerrous--2.1%
205,700 Alcoa Inc.
17,201,663
144,400 Reynolds Metals Co.
7,057,550
- -------------
24,259,213
- --------------------------------------------------
- ----------
Mining--0.7%
341,000 Newmont Mining Corp.
6,031,438
65,800 Stillwater Mining Co.(a)
1,727,250
- -------------
7,758,688
- --------------------------------------------------
- ----------
Networking--1.1%
106,150 Cisco Systems, Inc.(a)
11,842,359
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as
of January 31, 1999 (Unaudited)
PRUDENTIAL BALANCED FUND
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Shares Description
Value (Note 1)
<C> <S>
<C>
---------------------------------------------
- ---------------
Oil & Gas Equipment & Services--4.6%
145,800 Enron Corp.
$ 9,622,800
214,900 Exxon Corp.
15,137,019
107,236 KeySpan Energy
2,902,074
514,800 McDermott International, Inc.
10,649,925
144,100 Noble Affiliates, Inc.
2,836,969
441,400 Pioneer Natural Resources Co.
3,641,550
482,900 Western Gas Resources, Inc.
2,655,950
135,200 Williams Companies, Inc.
4,461,600
- -------------
51,907,887
- --------------------------------------------------
- ----------
Paper & Forest Products--0.9%
227,300 Longview Fibre Co.
2,415,062
378,300 Louisiana-Pacific Corp.
7,589,644
- -------------
10,004,706
- --------------------------------------------------
- ----------
Pharmaceuticals--2.1%
76,700 Bristol- Myers Squibb Co.
9,831,981
65,850 Merck & Co., Inc.
9,663,488
33,800 Pfizer, Inc.
4,347,525
- -------------
23,842,994
- --------------------------------------------------
- ----------
Real Estate Investment Trust--1.8%
329,600 Crescent Real Estate Equities Co.
6,983,400
292,053 Patriot American Hospitality, Inc.
1,569,790
200,700 Prison Realty Corp.
4,114,350
218,800 Vornado Realty Trust
7,726,375
- -------------
20,393,915
- --------------------------------------------------
- ----------
Restaurants--0.5%
78,400 McDonald's Corp.
6,178,900
Retail--4.0%
296,700 American Stores Co.
$ 10,755,375
105,600 CVS Corp.
5,781,600
341,000 Kmart Corp.(a)
5,988,813
67,600 Rite Aid Corp.
3,320,850
215,100 Sears Roebuck & Co.
8,630,887
306,900 The Limited, Inc.
10,472,962
- -------------
44,950,487
- --------------------------------------------------
- ----------
Steel Producers--1.1%
232,900 AK Steel Holding Corp.
4,847,231
363,700 British Steel PLC (ADR) (United
Kingdom)
8,001,400
- -------------
12,848,631
- --------------------------------------------------
- ----------
Telecommunications--1.5%
172,900 MCI WorldCom, Inc.(a)
13,788,775
51,200 Telecomunicacoes Brasileiras S.A.
(ADR) (Brazil)(a)
3,222,400
- -------------
17,011,175
- --------------------------------------------------
- ----------
Tobacco--1.3%
119,300 Philip Morris Co., Inc.
5,607,100
335,200 RJR Nabisco Holdings Corp.
9,050,400
- -------------
14,657,500
- --------------------------------------------------
- ----------
Waste Management--0.5%
108,300 Waste Management, Inc.
5,408,231
- -------------
Total common stocks
(cost $610,588,971)
682,820,218
- -------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 6
<PAGE>
Portfolio of Investments as
of January 31, 1999 (Unaudited)
PRUDENTIAL BALANCED FUND
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description
Value (Note 1)
<S> <C> <C>
<C>
- --------------------------------------------------
- ----------
DEBT OBLIGATIONS--29.9%
CORPORATE BONDS--26.9%
- --------------------------------------------------
- ----------
Aerospace--0.4%
Raytheon Co., Sr. Notes,
Baa1 $ 3,000 6.40%, 12/15/18
$ 3,026,640
Baa1 1,050 7.00%, 11/1/28
1,129,086
- --------------
4,155,726
- --------------------------------------------------
- ----------
Airlines--0.8%
Continental Airlines,
Inc.,
Aa3 1,000 6.545%, 8/2/20
1,019,200
Ba2 2,000 8.00%, 12/15/05
1,967,660
Baa3 5,000 United Airlines, Inc.,
10.67%, 5/1/04
5,889,250
- --------------
8,876,110
- --------------------------------------------------
- ----------
Asset-Backed Securities--1.3%
Aaa 3,000 California Infrastructure,
PG&E,
6.32%, 9/25/05
3,095,625
Aa3 11,000 Team Fleet Financing
Corp.,
7.35%, 5/15/03
11,372,969
- --------------
14,468,594
- --------------------------------------------------
- ----------
Automobiles--0.2%
Ba1 2,000 Navistar International
Corp.,
Sr. Note,
7.00%, 2/1/03
2,025,000
- --------------------------------------------------
- ----------
Banks--1.8%
A1 3,900 Bank Nova Scotia NY,
6.50%, 7/15/07
3,876,300
Aaa 2,500 Bayerische Landesbank NY,
5.875%, 12/1/08
2,525,650
Baa3 3,000 Capital One Bank, Sr.
Note,
7.08%, 10/30/01
3,016,740
A2 4,000 Morgan (J.P.) & Co., Inc.,
6.00%, 1/15/09
3,976,400
A1 $ 2,100 National Australia Bank
Ltd.,
6.40%, 12/10/07
$ 2,163,000
Baa1 5,000 Skandinaviska Enskilda
Banken,
7.50%, 3/29/49
4,996,100
- --------------
20,554,190
- --------------------------------------------------
- ----------
Cable & Pay Television Systems--1.1%
Ba3 2,000 Century Communications
Corp., Sr. Note,
9.75%, 2/15/02
2,150,000
Baa3 2,000 Comcast Cable
Communications,
8.375%, 5/1/07
2,347,260
A2 7,000 Tele-Communications, Inc.,
Sr. Note,
9.25%, 4/15/02
7,779,800
- --------------
12,277,060
- --------------------------------------------------
- ----------
Chemicals--0.2%
Ba3 2,000 ISP Holdings, Inc.,
Sr. Note,
9.75%, 2/15/02
2,085,000
- --------------------------------------------------
- ----------
Financial Services--3.0%
B2 5,000 Advanta Corp.,
7.25%, 8/16/99
4,967,850
Aa3 2,600 Associates Corp., N.A.,
6.95%, 11/1/18
2,800,148
Baa3 2,000 AT&T Capital Corp.,
7.50%, 11/15/00
2,029,540
Contifinancial Corp.,
Sr. Notes,
B3 5,000 8.375%, 8/15/03
3,550,000
B3 3,300 8.125%, 4/1/08
2,079,000
Ford Motor Credit Co.,
Notes,
A1 6,000 7.32%, 5/23/02
6,030,000
A1 5,000 7.75%, 3/15/05
5,559,450
Household Finance Corp.,
A2 1,000 5.875%, 2/1/09
994,350
A2 3,000 6.50%, 11/15/08
3,151,500
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 7
<PAGE>
Portfolio of Investments as
of January 31, 1999 (Unaudited)
PRUDENTIAL BALANCED FUND
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description
Value (Note 1)
<S> <C> <C>
<C>
- --------------------------------------------------
- ----------
Financial Services (cont'd.)
Aa1 $ 3,000 Toyota Motor Credit Corp.,
Note,
5.625%, 11/13/03
$ 3,030,000
- --------------
34,191,838
- --------------------------------------------------
- ----------
Forest Products--0.5%
Scotia Pacific Co.,
A3 1,600 7.11%, 1/20/14
1,540,720
Baa2 4,800 7.71%, 1/20/14
4,478,496
- --------------
6,019,216
- --------------------------------------------------
- ----------
Hotels & Leisure--0.6%
Starwood Hotels & Resorts,
Inc., Notes,
Ba1 3,500 6.25%, 11/15/00
3,378,270
Ba1 3,500 6.75%, 11/15/03
3,225,285
- --------------
6,603,555
- --------------------------------------------------
- ----------
Insurance--0.2%
Ba3 3,200 Conseco Finance Trust,
8.796%, 4/1/27
2,989,792
- --------------------------------------------------
- ----------
Investment Banking--2.8%
Lehman Brothers Holdings,
Inc.,
Baa1 3,000 6.625%, 2/5/06
2,988,420
Baa1 9,800 6.33%, 8/1/00
9,864,484
Aa3 3,300 Merrill Lynch & Co., Inc.,
6.875%, 11/15/18
3,444,243
Aa3 15,000 Salomon Inc.,
Sr. Note,
7.30%, 5/15/02
15,820,050
- --------------
32,117,197
- --------------------------------------------------
- ----------
Leisure & Tourism--0.5%
Baa3 5,000 Royal Caribbean Cruises
Ltd.,
Sr. Note,
8.25%, 4/1/05
5,451,150
Manufacturing--0.4%
Baa1 $ 4,100 Tyco International Group
S.A.,
6.875%, 1/15/29
$ 4,318,243
- --------------------------------------------------
- ----------
Media--2.5%
Baa3 14,000 News America Holdings
Inc.,
6.703%, 5/21/34
14,455,000
Time Warner, Inc.,
Baa3 5,500 8.11%, 8/15/06
6,285,950
Baa3 6,000 6.625%, 5/15/29
6,111,000
Baa3 950 Viacom, Inc., Sr. Note,
7.75%, 6/1/05
1,042,330
- --------------
27,894,280
- --------------------------------------------------
- ----------
Oil & Gas Equipment & Services--0.8%
Baa2 3,500 BJ Service Co., Sr. Note,
7.00%, 2/1/06
3,564,540
R & B Falcon Corp.,
Sr. Notes,
Ba1 5,000 6.50%, 4/15/03
4,555,150
Ba1 1,500 7.375%, 4/15/18
1,147,500
- --------------
9,267,190
- --------------------------------------------------
- ----------
Packaging--0.3%
Owens Illinois Inc.,
Ba1 2,100 7.50%, 5/15/10
2,174,886
Ba1 1,000 7.35%, 5/15/08
1,032,060
- --------------
3,206,946
- --------------------------------------------------
- ----------
Paper & Forest Products--0.2%
Baa2 2,000 Fort James Corp., Note,
6.234%, 3/15/01
2,011,380
- --------------------------------------------------
- ----------
Real Estate Investment Trust--0.8%
Baa3 550 Colonial Realty, LP,
Sr. Note,
7.00%, 7/14/07
531,009
ERP Operating, LP,
A3 3,300 6.63%, 4/13/15
3,302,805
A3 5,000 6.15%, 9/15/00
4,980,500
- --------------
8,814,314
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 8
<PAGE>
Portfolio of Investments as
of January 31, 1999 (Unaudited)
PRUDENTIAL BALANCED FUND
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description
Value (Note 1)
<S> <C> <C>
<C>
- --------------------------------------------------
- ----------
Restaurants--0.6%
Darden Restaurants, Inc.,
Baa1 $ 2,500 6.375%, 2/1/06
$ 2,467,425
Baa1 4,500 7.125%, 2/1/16
4,367,475
- --------------
6,834,900
- --------------------------------------------------
- ----------
Retail--2.0%
Federated Dept. Stores,
Inc.,
Baa2 7,500 8.125%, 10/15/02
8,098,575
Baa2 2,500 8.50%, 6/15/03
2,767,150
Ba2 5,000 Kmart Corp.,
8.125%, 12/1/06
5,325,000
Baa3 4,200 Saks Inc.,
8.25%, 11/15/08
4,231,500
A2 3,000 Sears Roebuck & Co.,
Note,
6.50%, 12/1/28
2,938,500
- --------------
23,360,725
- --------------------------------------------------
- ----------
Supermarkets--0.5%
Ba2 2,000 Fred Meyer, Inc.,
7.375%, 3/1/05
2,126,920
Baa3 3,400 Kroger Co., Sr. Note,
6.375%, 3/1/08
3,519,340
- --------------
5,646,260
- --------------------------------------------------
- ----------
Telecommunications--1.7%
Baa1 1,200 Cable & Wireless
Communications, Note,
6.75%, 12/1/08
1,246,500
Cia de Telecomunicationes
de Chile S.A., Sr. Note,
8.375%, 1/1/06
906,750
Ba1 3,000 LCI International Inc.,
Sr. Note,
7.25%, 6/15/07
3,037,680
MCI WorldCom, Inc.,
Sr. Notes,
Baa2 $ 4,800 6.95%, 8/15/28
$ 5,213,088
Baa2 1,300 6.125%, 8/15/01
1,322,906
Ba1 3,000 Qwest Communications
Int'l., Inc., Sr. Note,
7.50%, 11/1/08
3,202,500
Baa1 4,750 Sprint Capital Corp.,
6.875%, 11/15/28
5,029,585
- --------------
19,959,009
- --------------------------------------------------
- ----------
Transportation/Trucking/Shipping--1.3%
Baa2 5,000 CSX Corp., Sub. Debs.,
6.25%, 10/15/08
5,110,050
Baa1 9,000 Norfolk Southern Corp.,
Note,
6.95%, 5/1/02
9,403,380
- --------------
14,513,430
- --------------------------------------------------
- ----------
Utilities--2.3%
Ba1 4,500 Calenergy Co., Inc.,
Sr. Note,
6.96%, 9/15/03
4,673,430
Cleveland Electric
Illuminating, Notes,
Ba1 3,000 7.19%, 7/1/00
3,045,000
Ba1 2,000 7.67%, 7/1/04
2,118,000
Niagara Mohawk Power
Corp.,
Baa3 2,875 6.875%, 4/1/03
2,978,212
Baa3 4,500 7.375%, 8/1/03
4,825,170
Baa3 2,000 8.00%, 6/1/04
2,224,400
Ba2 6,000 Western Massachusetts
Electric Co.,
7.375%, 7/1/01
6,117,600
- --------------
25,981,812
- --------------------------------------------------
- ----------
Waste Management--0.1%
Baa3 1,000 Waste Management, Inc.,
Note,
6.125%, 7/15/01
1,005,820
- --------------
Total corporate bonds
(cost $299,671,504)
304,628,737
- --------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 9
<PAGE>
PRUDENTIAL BALANCED FUND
Portfolio of Investments as of January 31, 1999
(Unaudited)
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description
Value (Note 1)
<S> <C> <C>
<C>
- --------------------------------------------------
- ----------
U.S. GOVERNMENT SECURITIES--3.0%
United States Treasury
Bonds,
$ 4,300 6.25%, 8/15/23
$ 4,830,792
1,300 5.50%, 8/15/28
1,363,167
5,000 7.25%, 8/15/22
6,238,281
14,500 8.125%, 8/15/19
19,454,940
United States Treasury
Notes,
1,200 6.50%, 5/15/05
1,317,192
500 4.75%, 11/15/08
503,985
- --------------
Total U.S. government
securities
(cost $32,639,798)
33,708,357
- --------------
Total debt obligations
(cost $332,311,302)
338,337,094
- --------------
Total long-term
investments
(cost $942,900,273)
1,021,157,312
- --------------
SHORT-TERM INVESTMENTS--8.9%
- --------------------------------------------------
- ----------
REPURCHASE AGREEMENT
101,148 Joint Repurchase Agreement
Account,
4.72%, 2/1/99,
(cost $101,148,000; Note
5) 101,148,000
- --------------
- --------------------------------------------------
- ----------
Total Investments--99.2%
(cost $1,044,048,273; Note
4)
1,122,305,312
Other assets in excess of
liabilities--0.8%
8,980,513
- --------------
Net Assets--100%
$1,131,285,825
- --------------
- --------------
</TABLE>
- ---------------
(a) Non-income producing security.
ADR--American Depository Receipt.
The Fund's current Prospectus contains a
description of Moody's and Standard &
Poor's ratings.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 10
<PAGE>
Statement of Assets and Liabilities (Unaudited)
PRUDENTIAL BALANCED FUND
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Assets
January 31, 1999
<S>
<C>
Investments, at value (cost
$1,044,048,273)...................................
............................ $ 1,122,305,312
Cash..............................................
..................................................
...... 116,184
Receivable for investments
sold..............................................
............................. 20,787,579
Dividends and interest
receivable........................................
.................................
7,144,574
Receivable for Fund shares
sold..............................................
............................. 633,122
Prepaid
expenses..........................................
................................................
37,677
Due from broker - variation
margin............................................
............................ 13,491
- ----------------
Total
assets............................................
...............................................
1,151,037,939
- ----------------
Liabilities
Payable for investments
purchased.........................................
................................
15,596,686
Payable for Fund shares
reacquired........................................
................................
2,534,331
Management fee
payable...........................................
.........................................
623,497
Distribution fee
payable...........................................
.......................................
542,529
Accrued
expenses..........................................
................................................
455,071
- ----------------
Total
liabilities.......................................
...............................................
19,752,114
- ----------------
Net
Assets............................................
..................................................
.. $ 1,131,285,825
- ----------------
- ----------------
Net assets were comprised of:
Shares of beneficial interest, at
par...............................................
................... $ 918,550
Paid-in capital in excess of
par...............................................
........................ 1,010,512,989
- ----------------
1,011,431,539
Undistributed net investment
income............................................
........................ 1,432,014
Accumulated net realized gain on
investments.......................................
.................... 40,344,951
Net unrealized appreciation on
investments.......................................
...................... 78,077,321
- ----------------
Net assets, January 31,
1999..............................................
................................ $
1,131,285,825
- ----------------
- ----------------
Class A:
Net asset value and redemption price per share
($499,948,797 / 40,516,025 shares of
beneficial interest issued and
outstanding)....................
$12.34
Maximum sales charge (5% of offering
price)............................................
................ .65
Maximum offering price to
public............................................
........................... $12.99
Class B:
Net asset value, offering price and redemption
price per share
($506,455,189 / 41,220,778 shares of
beneficial interest issued and
outstanding)....................
$12.29
Class C:
Net asset value and redemption price per share
($9,667,815 / 786,892 shares of beneficial
interest issued and
outstanding).........................
$12.29
Maximum sales charge (1% of offering
price)............................................
................ .12
Maximum offering price to
public............................................
........................... $12.41
Class Z:
Net asset value, offering price and redemption
price per share
($115,214,024 / 9,331,273 shares of
beneficial interest issued and
outstanding).....................
$12.35
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 11
<PAGE>
PRUDENTIAL BALANCED FUND
Statement of Operations (Unaudited)
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income
January 31, 1999
<S>
<C>
Income
Interest...................................
$ 14,997,066
Dividends (net of foreign withholding taxes
of $59,690).............................
5,367,185
-
- ---------------
Total income............................
20,364,251
-
- ---------------
Expenses
Management fee.............................
3,622,679
Distribution fee--Class A..................
598,434
Distribution fee--Class B..................
2,514,875
Distribution fee--Class C..................
46,384
Transfer agent's fees and expenses.........
1,331,000
Custodian's fees and expenses..............
97,000
Reports to shareholders....................
91,000
Registration fees..........................
50,000
Legal fees.................................
20,000
Audit fees.................................
15,000
Insurance..................................
14,000
Trustees' fees and expenses................
10,200
Miscellaneous..............................
2,020
-
- ---------------
Total expenses..........................
8,412,592
-
- ---------------
Net investment income.........................
11,951,659
-
- ---------------
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Net realized gain (loss) on:
Investment transactions....................
29,866,127
Financial futures transactions.............
(41,511)
Foreign currency transactions..............
(1,263)
-
- ---------------
29,823,353
-
- ---------------
Net change in unrealized appreciation
(depreciation) on:
Investments................................
23,930,057
Financial futures..........................
(179,719)
-
- ---------------
23,750,338
-
- ---------------
Net gain on investments.......................
53,573,691
-
- ---------------
Net Increase in Net Assets
Resulting from Operations.....................
$ 65,525,350
-
- ---------------
-
- ---------------
</TABLE>
PRUDENTIAL BALANCED FUND
Statement of Changes in Net Assets (Unaudited)
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Six Months
Ended
Year Ended
Increase (Decrease) January 31,
July 31,
in Net Assets 1999
1998
<S> <C>
<C>
Operations
Net investment income....... $ 11,951,659
$ 26,293,673
Net realized gain on
investments and foreign
currency transactions.... 29,823,353
155,549,803
Net change in unrealized
appreciation
(depreciation) of
investments.............. 23,750,338
(126,216,321)
--------------
- --------------
Net increase in net assets
resulting from
operations............... 65,525,350
55,627,155
--------------
- --------------
Dividends and distributions
(Note 1)
Dividends to shareholders
from net investment
income
Class A.................. (5,929,314)
(12,700,788)
Class B.................. (4,263,383)
(10,437,329)
Class C.................. (79,288)
(148,597)
Class Z.................. (1,632,472)
(3,608,837)
--------------
- --------------
(11,904,457)
(26,895,551)
--------------
- --------------
Distributions from net
realized gains on
investment transactions
Class A.................. (33,257,135)
(57,771,866)
Class B.................. (35,467,912)
(69,878,157)
Class C.................. (662,890)
(920,721)
Class Z.................. (7,756,318)
(14,427,869)
--------------
- --------------
(77,144,255)
(142,998,613)
--------------
- --------------
Fund share transactions (net of
share conversions) (Note 6)
Net proceeds from shares
sold..................... 76,903,216
195,965,154
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions........ 84,701,659
160,126,884
Cost of shares reacquired... (166,711,439)
(341,566,835)
--------------
- --------------
Net increase (decrease) in
net assets from Fund
shares transactions...... (5,106,564)
14,525,203
--------------
- --------------
Total decrease................. (28,629,926)
(99,741,806)
Net Assets
Beginning of period............ 1,159,915,751
1,259,657,557
--------------
- --------------
End of period(a)............... $1,131,285,825
$1,159,915,751
--------------
- --------------
--------------
- --------------
- ---------------
(a) Includes undistributed net
investment income of....... $ 1,432,014
$ 1,384,812
--------------
- --------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 12
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL BALANCED FUND
- --------------------------------------------------
- ------------------------------
Prudential Balanced 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. The investment objective of the Fund 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 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 generally accepted
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 which approximates market
value.
In connection with transactions in repurchase
agreements with U.S. financial
institutions, it is the Fund's policy that its
custodian or designated
subcustodians, under triparty repurchase
agreements, as the case may be, 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.
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 Net 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 and interest income is recorded
on the accrual basis. Expenses
are recorded on the accrual basis which may
require the use of certain estimates
by management.
- --------------------------------------------------
- ------------------------------
13
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL BALANCED FUND
- --------------------------------------------------
- ------------------------------
Net investment income (other than distribution
fees) and unrealized and realized
gains or losses are allocated daily to each class
of shares based upon the
relative proportion of net assets of each class at
the beginning of the day.
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. When
the contract expires or is closed, the gain or
loss is realized and is presented
in the statement of operations as net realized
gain (loss) on financial futures
contracts.
The Fund invests in financial futures contracts in
order to hedge its existing
portfolio securities, or securities the Fund
intends to purchase, against
fluctuations in value caused by changes in
prevailing 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.
Federal Income Taxes: It is the Fund's policy to
continue to meet the
requirements of the Internal Revenue Code
applicable to regulated investment
companies and to distribute all of its taxable net
income to its shareholders.
Therefore, no federal income tax provision is
required.
Withholding taxes on foreign 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
American Institute of Certified
Public Accountants, Statement of Position 93-2:
Determination, Disclosure, and
Financial Statement Presentation of Income,
Capital Gain, and Return of Capital
Distributions by Investment Companies. For the six
months ended January 31,
1999, the Fund decreased undistributed net
investment income and increased
accumulated net realized gain on investments by
$1,263. Net realized gains and
net assets were not affected by this change.
- --------------------------------------------------
- ----------
Note 2. Agreements
The Fund has a management agreement with
Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has
responsibility for all
investment advisory services and supervises the
subadviser's performance of such
services. PIFM 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. PIFM
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 PIFM is computed daily and
payable monthly at an annual
rate of .65 of 1% of the Fund's average daily net
assets.
The Fund has a distribution agreement with
Prudential Investment Management
Services LLC ('PIMS') which acts as the
distributor of the Class A, Class B,
Class C and Class Z shares. The Fund compensates
PIMS 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. The distribution fees were accrued daily
and payable monthly. No
distribution or service fees were paid to PIMS as
distributor of the Class Z
shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund
compensated PIMS 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 period ended
January 31, 1999.
PIMS has advised the Fund that it received
approximately $109,900 in front-end
sales charges resulting from sales of Class A
shares and after November 2, 1998
Class C shares during the period ended January 31,
1999. From these fees, PIMS
paid such sales charges to affiliated broker-
dealers, which in turn paid
commissions to salespersons and incurred other
distribution costs.
- --------------------------------------------------
- ------------------------------
14
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL BALANCED FUND
- --------------------------------------------------
- ------------------------------
PIMS has advised the Fund that for the period
ended January 31, 1999, it
received approximately $262,700 and $2,800 in
contingent deferred sales charges
imposed upon certain redemptions by Class B and C
shareholders, respectively.
PIC, PIFM and PIMS are indirect, wholly owned
subsidiaries of The Prudential
Insurance Company of America.
The Fund, along with other affiliated registered
investment companies (the
'Funds'), entered into a credit agreement (the
'Agreement') on December 31, 1996
with an unaffiliated lender. The maximum
commitment under the Agreement is
$200,000,000. Interest on any such borrowings
outstanding will be at market
rates. The purpose of the Agreement is to serve as
an alternative source of
funding for capital share redemptions. The Fund
did not borrow any amounts
pursuant to the Agreement during the period ended
January 31, 1999. The Funds
pay a commitment fee at an annual rate of .055 of
1% on the unused portion of
the credit facility. The commitment fee is accrued
and paid quarterly on a pro
rata basis by the Funds. The Agreement expired on
February 28, 1999 and has been
extended through March 12, 1999 under the same
terms.
- --------------------------------------------------
- ----------
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a
wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the
period ended January 31, 1999,
the Fund incurred fees of approximately $1,014,000
for the services of PMFS. As
of January 31, 1999, approximately $161,000 of
such fees were due to PMFS.
Transfer agent fees and expenses in the Statement
of Operations also include
certain out-of-pocket expenses paid to
nonaffiliates.
For the period ended January 31, 1999, PSI
received approximately $533,900 in
brokerage commissions from portfolio transactions
executed on behalf of the
Fund.
- --------------------------------------------------
- ----------
Note 4. Portfolio Securities
Purchases and sales of investment securities of
the Fund, other than short-term
investments, for the fiscal period ended January
31, 1999, were $440,819,366 and
$520,651,865, respectively, which includes
purchases and sales of U.S.
government obligations of $132,668,322 and
$173,431,378, respectively.
The cost basis of investments for federal income
tax purposes as of January 31,
1999 was $1,045,523,467 and accordingly, net
unrealized appreciation of
investments for federal income tax purposes was
$76,781,845 (gross unrealized
appreciation--$151,039,485; gross unrealized
depreciation--$74,257,640).
- --------------------------------------------------
- ----------
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 January 31, 1999, the
Fund had a 14.9% undivided interest in repurchase
agreements in the joint
account. The undivided interest for the Fund
represented $101,148,000 in
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., 4.75%, in the principal
amount of $200,000,000,
repurchase price $200,079,167, due 2/1/99. The
value of the collateral including
accrued interest is $206,615,704.
Salomon Brothers Inc., 4.73%, in the principal
amount of $200,000,000,
repurchase price $200,078,833, due 2/1/99. The
value of the collateral including
accrued interest is $204,209,880.
Morgan (J.P.) Securities Inc., 4.72%, in the
principal amount of $200,000,000,
repurchase price $200,078,667, due 2/1/99. The
value of the collateral including
accrued interest is $204,000,313.
Warburg Dillon Read LLC, 4.62%, in the principal
amount of $80,255,000,
repurchase price $80,285,898, due 2/1/99. The
value of the collateral including
accrued interest is $81,862,553.
- --------------------------------------------------
- ----------
Note 6. Capital
The Fund offers Class A, Class B, Class C and
Class Z shares. Class A shares are
sold with a front-end sales charge of up to 5%.
Class B shares are sold with a
contingent deferred sales charge which declines
from 5% to zero depending upon
the period of time the shares are held. Prior to
November 2, 1998, Class C
shares were sold with a contingent deferred sales
charge of 1% during the first
year. Effective November 2, 1998, Class C shares
are sold with a front-end sales
charge of 1% and a contingent deferred sales
charge of 1% during the first 18
months. Class B shares will automatically convert
to Class A shares on a
quarterly basis approximately seven years after
purchase. A special exchange
privilege is also available for shareholders who
qualified to purchase Class A
shares at net asset value. Class Z shares are not
subject to any sales or
redemption charge and are offered exclusively for
sale to a limited group of
investors.
- --------------------------------------------------
- ------------------------------
15
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL BALANCED FUND
- --------------------------------------------------
- ------------------------------
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 period ended January 31,
1999 and July 31, 1998 were as follows:
<TABLE>
<CAPTION>
Class A Shares
Amount
- ---------------------------------- -----------
- -------------
<S> <C>
<C>
Six months ended January 31, 1999:
Shares sold....................... 2,233,286
$ 26,682,571
Shares issued in reinvestment of
dividends and distributions..... 3,099,585
36,538,284
Shares reacquired................. (4,780,707)
(57,965,470)
-----------
- -------------
Net increase in shares outstanding
before conversion............... 552,164
5,255,385
Shares issued upon conversion from
Class B......................... 1,506,279
17,590,588
-----------
- -------------
Net increase in shares
outstanding..................... 2,058,443
$ 22,845,973
-----------
- -------------
-----------
- -------------
Year ended July 31, 1998:
Shares sold....................... 3,967,817
$ 52,091,809
Shares issued in reinvestment of
dividends and distributions..... 5,263,433
64,754,657
Shares reacquired................. (9,908,242)
(129,373,980)
-----------
- -------------
Net decrease in shares outstanding
before conversion............... (676,992)
(12,527,514)
Shares issued upon conversion from
Class B......................... 3,632,745
46,694,238
-----------
- -------------
Net increase in shares
outstanding..................... 2,955,753
$ 34,166,724
-----------
- -------------
-----------
- -------------
<CAPTION>
Class B
- ----------------------------------
<S> <C>
<C>
Six months ended January 31, 1999:
Shares sold....................... 2,385,725
$ 28,742,919
Shares issued in reinvestment of
dividends and distributions..... 3,243,018
38,079,721
Shares reacquired................. (5,310,305)
(63,530,256)
-----------
- -------------
Net increase in shares outstanding
before conversion............... 318,438
3,292,384
Shares reacquired upon conversion
into Class A.................... (1,512,518)
(17,590,588)
-----------
- -------------
Net decrease in shares
outstanding..................... (1,194,080)
$ (14,298,204)
-----------
- -------------
-----------
- -------------
Year ended July 31, 1998:
Shares sold....................... 5,179,076
$ 67,414,895
Shares issued in reinvestment of
dividends and distributions..... 6,244,089
76,307,531
Shares reacquired................. (10,219,280)
(133,027,987)
-----------
- -------------
Net increase in shares outstanding
before conversion............... 1,203,885
10,694,439
Shares reacquired upon conversion
into Class A.................... (3,615,791)
(46,694,238)
-----------
- -------------
Net decrease in shares
outstanding..................... (2,411,906)
$ (35,999,799)
-----------
- -------------
-----------
- -------------
<CAPTION>
Class C Shares
Amount
- ---------------------------------- -----------
- -------------
<S> <C>
<C>
Six months ended January 31, 1999:
Shares sold....................... 157,618
$ 1,911,720
Shares issued in reinvestment of
dividends and distributions..... 59,382
697,263
Shares reacquired................. (161,822)
(1,941,479)
-----------
- -------------
Net increase in shares
outstanding..................... 55,178
$ 667,504
-----------
- -------------
-----------
- -------------
Year ended July 31, 1998:
Shares sold....................... 323,478
$ 4,203,230
Shares issued in reinvestment of
dividends and distributions..... 84,293
1,030,457
Shares reacquired................. (178,945)
(2,326,256)
-----------
- -------------
Net increase in shares
outstanding..................... 228,826
$ 2,907,431
-----------
- -------------
-----------
- -------------
<CAPTION>
Class Z
- ----------------------------------
<S> <C>
<C>
Six months ended January 31, 1999:
Shares sold....................... 1,615,448
$ 19,566,006
Shares issued in reinvestment of
dividends and distributions..... 795,963
9,386,391
Shares reacquired................. (3,499,886)
(43,274,234)
-----------
- -------------
Net decrease in shares
outstanding..................... (1,088,475)
$ (14,321,837)
-----------
- -------------
-----------
- -------------
Year ended July 31, 1998:
Shares sold....................... 5,472,022
$ 72,255,220
Shares issued in reinvestment of
dividends and distributions..... 1,463,704
18,034,239
Shares reacquired................. (5,753,738)
(76,838,612)
-----------
- -------------
Net increase in shares
outstanding..................... 1,181,988
$ 13,450,847
-----------
- -------------
-----------
- -------------
</TABLE>
- --------------------------------------------------
- ----------
Note 7. Dividends
On March 29, 1999 the Board of Trustees of the
Fund declared the following
dividends per share, payable on March 31, 1999 to
shareholders of record on
March 30, 1999:
<TABLE>
<CAPTION>
Class B
Class A and
C Class Z
-------- ----
- ---- --------
<S> <C> <C>
<C>
Ordinary Income.................. $0.065 $
0.04 $0.0725
Long-Term Capital Gains.......... $ 0.01 $
0.01 $ 0.01
</TABLE>
- --------------------------------------------------
- ------------------------------
16
<PAGE>
Financial Highlights (Unaudited)
PRUDENTIAL BALANCED FUND
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class A
----------
- --------------------------------------------------
- ---------------
Six Months
Ended
Year Ended July 31,
January
31, ------------------------------------------
- -----------------
1999
1998 1997 1996 1995
1994
----------
- - -------- -------- -------- -----
- --- -------
PER SHARE OPERATING PERFORMANCE:
<S> <C>
<C> <C> <C> <C>
<C>
Net asset value, beginning of
period............................ $ 12.63
$ 14.01 $ 11.85 $ 12.04 $ 11.12
$ 11.75
----------
- - -------- -------- -------- -----
- --- -------
Income from investment operations
Net investment income................ .15
.33 .34 .31 .34
.33
Net realized and unrealized gain
(loss) on investment
transactions...................... .60
.29 2.96 .28 1.11
(.05)
----------
- - -------- -------- -------- -----
- --- -------
Total from investment
operations..................... .75
.62 3.30 .59 1.45
.28
----------
- - -------- -------- -------- -----
- --- -------
Less distributions
Dividends from net investment
income............................
(.16) (.34) (.36) (.29)
(.33) (.37)
Distributions from net realized gains
on investment and foreign currency
transactions......................
(.88) (1.66) (.78) (.49)
(.20) (.54)
----------
- - -------- -------- -------- -----
- --- -------
Total distributions...............
(1.04) (2.00) (1.14) (.78)
(.53) (.91)
----------
- - -------- -------- -------- -----
- --- -------
Net asset value, end of period....... $ 12.34
$ 12.63 $ 14.01 $ 11.85 $ 12.04
$ 11.12
----------
- - -------- -------- -------- -----
- --- -------
----------
- - -------- -------- -------- -----
- --- -------
TOTAL RETURN(a):.....................
6.33% 5.05% 29.09% 4.89%
13.67% 2.39%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...... $ 499,949
$485,690 $497,461 $262,096 $119,829
$37,512
Average net assets (000)............. $ 474,844
$493,828 $306,717 $246,609 $ 69,754
$29,875
Ratios to average net assets:
Expenses, including distribution
fees...........................
1.19%(b) 1.19% 1.17% 1.20%
1.22% 1.23%
Expenses, excluding distribution
fees...........................
.94%(b) .94% .92% .95%
.97% 1.00%
Net investment income.............
2.46%(b) 2.51% 2.84% 2.53%
2.90% 2.84%
For Class A, B, C and Z shares:
Portfolio turnover rate...........
44% 144% 140% 97%
201% 108%
</TABLE>
- ---------------
(a) Total return does not consider the effects of
sales loads. Total return is
calculated assuming a purchase of shares on
the first day and a sale on the
last day of each period reported and includes
reinvestment of dividends and
distributions. Total returns for periods of
less than a full year are not
annualized.
(b) Annualized.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 17
<PAGE>
Financial Highlights (Unaudited)
PRUDENTIAL BALANCED FUND
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class B
----------
- --------------------------------------------------
- ----------------
Six Months
Ended
Year Ended July 31,
January
31, ------------------------------------------
- ------------------
1999
1998 1997 1996 1995
1994
----------
- - -------- -------- -------- -----
- --- --------
PER SHARE OPERATING PERFORMANCE:
<S> <C>
<C> <C> <C> <C>
<C>
Net asset value, beginning of
period............................ $ 12.57
$ 13.96 $ 11.80 $ 12.00 $ 11.09
$ 11.72
----------
- - -------- -------- -------- -----
- --- --------
Income from investment operations
Net investment income................ .11
.24 .26 .21 .26
.24
Net realized and unrealized gain
(loss) on investment
transactions...................... .60
.27 2.95 .28 1.10
(.05)
----------
- - -------- -------- -------- -----
- --- --------
Total from investment
operations..................... .71
.51 3.21 .49 1.36
.19
----------
- - -------- -------- -------- -----
- --- --------
Less distributions
Dividends from net investment
income............................
(.11) (.24) (.27) (.20)
(.25) (.28)
Distributions from net realized gains
on investment and foreign currency
transactions......................
(.88) (1.66) (.78) (.49)
(.20) (.54)
----------
- - -------- -------- -------- -----
- --- --------
Total distributions...............
(.99) (1.90) (1.05) (.69)
(.45) (.82)
----------
- - -------- -------- -------- -----
- --- --------
Net asset value, end of period....... $ 12.29
$ 12.57 $ 13.96 $ 11.80 $ 12.00
$ 11.09
----------
- - -------- -------- -------- -----
- --- --------
----------
- - -------- -------- -------- -----
- --- --------
TOTAL RETURN(a):.....................
5.92% 4.28% 28.24% 4.05%
12.79% 1.61%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...... $ 506,455
$533,354 $625,715 $420,465 $392,291
$445,609
Average net assets (000)............. $ 498,875
$578,432 $431,425 $437,792 $409,419
$392,133
Ratios to average net assets:
Expenses, including distribution
fees...........................
1.94%(b) 1.94% 1.92% 1.95%
1.97% 2.00%
Expenses, excluding distribution
fees...........................
.94%(b) .94% .92% .95%
.97% 1.00%
Net investment income.............
1.71%(b) 1.76% 2.09% 1.78%
2.34% 2.08%
</TABLE>
- ---------------
(a) Total return does not consider the effects of
sales loads. Total return is
calculated assuming a purchase of shares on
the first day and a sale on the
last day of each period reported and includes
reinvestment of dividends and
distributions. Total returns for periods of
less than a full year are not
annualized.
(b) Annualized.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 18
<PAGE>
Financial Highlights (Unaudited)
PRUDENTIAL BALANCED FUND
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class C
Class Z
----------
- ------------------------------------------------
- ------------------------
August 1, Year
Six Months
1994(a) Six Months Ended
Ended
Year Ended July 31, through
Ended July 31,
January
31, ---------------------------- July 31,
January 31, --------
1999
1998 1997 1996 1995
1999 1998
----------
- - ------ ------ ------ ---------
- ----------- --------
PER SHARE OPERATING PERFORMANCE:
<S> <C>
<C> <C> <C> <C> <C>
<C>
Net asset value, beginning of
period............................ $ 12.57
$13.96 $11.80 $12.00 $ 11.12 $
12.64 $ 14.01
-----
- ------ ------ ------ --------- ---
- -------- --------
Income from investment operations
Net investment income................ .11
.24 .26 .21 .21
.18 .37
Net realized and unrealized gain
(loss) on investment
transactions...................... .60
.27 2.95 .28 1.12
.58 .29
-----
- ------ ------ ------ --------- ---
- -------- --------
Total from investment
operations..................... .71
.51 3.21 .49 1.33
.76 .66
-----
- ------ ------ ------ --------- ---
- -------- --------
Less distributions
Dividends from net investment
income............................ (.11)
(.24) (.27) (.20) (.25)
(.17) (.37)
Distributions from net realized gains
on investment and foreign currency
transactions...................... (.88)
(1.66) (.78) (.49) (.20)
(.88) (1.66)
-----
- ------ ------ ------ --------- ---
- -------- --------
Total distributions............... (.99)
(1.90) (1.05) (.69) (.45)
(1.05) (2.03)
-----
- ------ ------ ------ --------- ---
- -------- --------
Net asset value, end of period....... $ 12.29
$12.57 $13.96 $11.80 $ 12.00 $
12.35 $ 12.64
-----
- ------ ------ ------ --------- ---
- -------- --------
-----
- ------ ------ ------ --------- ---
- -------- --------
TOTAL RETURN(b):..................... 5.92%
4.28% 28.24% 4.05% 12.49%
6.46% 5.37%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...... $ 9,668
$9,201 $7,023 $3,525 $ 3,046 $
115,214 $131,671
Average net assets (000)............. $ 9,201
$8,175 $4,790 $2,444 $ 920 $
122,663 $128,358
Ratios to average net assets:
Expenses, including distribution
fees...........................
1.94%(d) 1.94% 1.92% 1.95%
2.04%(d) .94%(d) .94%
Expenses, excluding distribution
fees...........................
.94%(d) .94% .92% .95%
1.04%(d) .94%(d) .94%
Net investment income.............
1.71%(d) 1.76% 2.09% 1.78%
2.20%(d) 2.72%(d) 2.76%
<CAPTION>
March 1,
1996(c)
through
July 31,
1997
1996
--------
- --------
PER SHARE OPERATING PERFORMANCE:
<S> <C>
<C>
Net asset value, beginning of
period............................ $ 11.85
$12.16
--------
- --------
Income from investment operations
Net investment income................ .46
.13
Net realized and unrealized gain
(loss) on investment
transactions...................... 2.87
(.28)
--------
- --------
Total from investment
operations..................... 3.33
(.15)
--------
- --------
Less distributions
Dividends from net investment
income............................ (.39)
(.16)
Distributions from net realized gains
on investment and foreign currency
transactions...................... (.78)
- --
--------
- --------
Total distributions............... (1.17)
(.16)
--------
- --------
Net asset value, end of period....... $ 14.01
$11.85
--------
- --------
--------
- --------
TOTAL RETURN(b):..................... 29.39%
(1.24)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...... $129,459
$4,015
Average net assets (000)............. $ 99,391
$4,217
Ratios to average net assets:
Expenses, including distribution
fees........................... .92%
.95%(d)
Expenses, excluding distribution
fees........................... .92%
.95%(d)
Net investment income............. 3.12%
2.72%(d)
</TABLE>
- ---------------
(a) Commencement of offering of Class C shares.
(b) 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.
(c) Commencement of offering of Class Z shares.
(d) Annualized.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 19
<PAGE>
Getting The Most From Your Prudential Mutual Fund.
When you invest through Prudential Mutual Funds,
you receive financial
advice through a Prudential Securities financial
advisor or
Prudential/Pruco Securities registered
representative. Your
advisor or representative can provide you with the
following services:
There's No Reward Without Risk; But Is This Risk
Worth It?
Your financial advisor or registered
representative can help you
match the reward you seek with the risk you can
tolerate. And risk
can be difficult to gauge --sometimes even the
simplest investments
bear surprising risks. The educated investor knows
that markets
seldom move in just one direction -- there are
times when a market
sector or asset class will lose value or provide
little in the way
of total return. Managing your own expectations is
easier with help
from someone who understands the markets and who
knows you!
Keeping Up With The Joneses.
A financial advisor or registered representative
can help you wade
through the numerous mutual funds available to
find the ones that
fit your own individual investment profile and
risk tolerance.
While the newspapers and popular magazines are
full of advice
about investing, they are aimed at generic groups
of people or
representative individuals, not at you personally.
Your financial
advisor or registered representative will review
your investment
objectives with you. This means you can make
financial decisions
based on the assets and liabilities in your
current portfolio and
your risk tolerance -- not just based on the
current investment fad.
Buy Low, Sell High.
Buying at the top of a market cycle and selling at
the bottom are
among the most common investor mistakes. But
sometimes it's
difficult to hold on to an investment when it's
losing value
every month. Your financial advisor or registered
representative
can answer questions when you're confused or
worried about your
investment, and remind you that you're investing
for the long haul.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Trustees
Edward D. Beach
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
Thomas T. Mooney
Stephen P. Munn
Richard A. Redeker
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
Officers
Robert F. Gunia, President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Marguerite E.H. Morrison, Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
The views expressed in this report and information
about the Fund's
portfolio holdings are for the period covered by
this report and
are subject to change thereafter.
The accompanying financial statements as of
January 31, 1999
were not audited and, accordingly, no opinion is
expressed on them.
This report is not authorized for distribution to
prospective
investors unless preceded or accompanied by a
current prospectus.
<PAGE>
(LOGO) BULK
RATE
U.S.
POSTAGE
PAID
Permit 6807
New
York, NY
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
74431M105
74431M204 MF134E2
74431M303
74431M402
