<PAGE>
(ICON)
SEMIANNUAL REPORT JANUARY 31, 2000
Prudential
Balanced Fund
- --------------------------------------------------------------------
Fund Type Stock and Bond
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Objective High total investment return consistent with moderate risk
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
(LOGO)
<PAGE>
INVESTMENT GOALS AND STYLE
Prudential Balanced Fund invests in a diversified portfolio of stocks, bonds,
and money market instruments, with a target range of 50% to 60% for stocks,
30% to 40% for bonds, and 5% to 15% for cash. It buys stocks and bonds
primarily of larger, more mature companies, but also of 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. The Fund's
objective is to achieve a high total investment return consistent with
moderate risk. There can be no assurance that the Fund's investment objective
will be achieved.
Contents
1 Message From the Fund's President
2 Performance Review
2 Portfolio Composition
3 Performance at a Glance
4 Five Largest Growth/Value Holdings
7 Financial Statements
<PAGE>
www.prudential.com (800) 225-1852
Message From the Fund's President As of March 16, 2000
(PHOTO)
Dear Shareholder,
The six months ended January 31, 2000, were very difficult for any investment
securities except technology stocks. The 2.86% return of Prudential Balanced
Fund's Class A shares was above the 2.09% Lipper Average of comparable funds.
Including sales charges, the Fund's Class A shares returned -2.28%. The Fund
benefited from a stock allocation somewhat above its benchmark. About half of
those stocks are managed in a growth style and half in a value style. The
Fund's advantage was in the strong performance of its growth stocks, which had
a technology focus, while the value holdings had negligible exposure to
technology. Since the S&P 500 technology stocks had almost 10 times the
average return of the next highest performing sector, the growth stocks in the
portfolio made the largest contribution to the Fund's performance.
Although the return on bonds over this period was low, it is important to
remember the stabilizing role bonds can play. During the financial crisis in
1997, bonds did fall in value, but they were far less volatile than stocks.
Diversification can dilute the extreme movements that occur occasionally in the
securities markets. Similarly, value stocks declined in value over this
reporting period, as did the average stock in most economic sectors of the S&P
500. The style diversification of Prudential Balanced Fund allowed you to share
the strong, but narrow, technology gains without being wholly exposed to this
volatile sector. Our reporting period included the falling markets in January
2000 as well as the exuberant technology stock surge at the end of 1999. In an
uncertain environment, diversification is particularly important.
Sincerely,
John R. Strangfeld
President
Prudential Balanced Fund
1
<PAGE>
Prudential Balanced Fund
Performance Review
(PHOTOS)
Equity Managers: Warren Spitz and Jeff Rose, CFA; Fixed Income Manager:
Steven Kellner, Team Leader of the Corporate Sector Team
MARKET TRENDS AND ASSET ALLOCATION
Our asset allocation helped our returns over the six months ended January 31,
2000, which were poor for bonds. Investors reacted to improving global economic
conditions by anticipating a rise in interest rates. This drove down the prices
of existing bonds. We benefited from having less invested in bonds than our
neutral allocation. We had somewhat more than our neutral allocation invested
in stocks; the S&P 500 returned 5.6% over this period. However, almost all of
this gain was by technology stocks. Stocks of basic materials companies,
consumer staples, financials, energy firms, utilities, and even communications
services declined, while S&P 500 technology stocks rose about 30%.
The extreme narrowness of this market was disconcerting to investment
professionals, as it was clearly disproportionate to differences in earnings
potential. Moreover, volatility in the market--the ups and downs of individual
stock prices--has been increasing for some time and is unusually high. This
increases the uncertainty about whether most investors will continue their
current enthusiasm for technology or search out the less expensive stocks in
the market. Prudential Balanced Fund, with its allocation to both growth and
value stock investment styles and to bonds, is wholly exposed to neither
alternative.
Portfolio Composition
Sectors expressed as a percentage of net assets as of 1/31/00
56.7% Stocks
33.2% Bonds
10.1% Cash & Equivalents
2
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
Cumulative Total Returns1 As of 1/31/00
<TABLE>
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A 2.86% 6.77% 85.37% 191.24% 190.05%
Class B 2.53 5.93 78.69 170.28 197.54
Class C 2.53 5.93 78.69 N/A 75.63
Class Z 2.99 7.02 N/A N/A 53.42
Lipper Balanced Fund Avg.3 2.09 4.09 104.82 214.01 ***
</TABLE>
Average Annual Total Returns1 As of 1/31/00\
<TABLE>
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 1.43% 11.98% 10.71% 10.64%
Class B 0.93 12.18 10.45 9.21
Class C 3.87 12.08 N/A 10.58
Class Z 7.02 N/A N/A 11.54
</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 LLC 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. Class B
shares are subject to a declining contingent deferred sales charge (CDSC) of
5%, 4%, 3%, 2%, 1%, and 1% for six years. 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 Z shares are not subject to a sales
charge or distribution and service (12b-1) fees.
2 Inception dates: Class A, 1/22/90; Class B, 9/15/87; Class C, 8/1/94; and
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.
The Lipper average is unmanaged. Balanced funds' primary strategy is to provide
high total investment return by maintaining a balanced portfolio of stocks,
bonds, and money market instruments at all times. Typically, the
stock/bond/cash ratio ranges around 60/30/10%.
***Lipper since inception returns are 214.01% for Class A, 253.31% for Class B,
108.44% for Class C, and 60.98% for Class Z, based on all funds in each share
class.
3
<PAGE>
Prudential Balanced Fund
Five Largest Holdings expressed as a percentage of the Fund's net assets
Growth Stock Holdings As of 1/31/00
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1.7% JDS Uniphase Corp./Diversified Operations
A leading provider of hardware for fiberoptic communications, its chips
increase the carrying capacity of optical fibers. Sales grew 53% in 1999.
The stock price rose 351% over our reporting period. It is one of the
drivers of S&P 500 technology sector performance.
1.3% Cisco Systems, Inc./Networking
Makes data networking products such as routers, switches, and relays.
Provides most of the Internet switching infrastructure for both carriers
and corporate entry points, as well as internal corporate networks. A
long-term, high-growth business, with a 28% operating margin and 22%
return on equity.
1.2% Enron Corp./Oil & Gas Equipment & Services
Largest buyer and seller of natural gas in the United States. Has
diversified energy exposure and is building a fiberoptic network as
well. Share price rose 59% in our reporting period.
1.1% Oracle Corp./Computer Software & Services
Leading developer of large database software systems, and provides
consulting and support services for the systems. Business-to-business
services for Internet use, such as integrated online data systems. Up
162% over our reporting period.
1.1% Intel Corp./Electronics
Leading manufacturer of the microprocessors that power personal
computers. Produces other semiconductor chips and information technology
products. Operating margins of 33%.
Value Stock Holdings As of 1/31/00
- -------------------------------------------------------------------------------
1.2% Lehman Brothers Inc./Financial Services
A leading investment bank, it is growing while maintaining good cost
control. Robust earnings gains over the past five years, including 14%
growth in the Asia-crash year of 1998. Still sells for less than nine
times earnings. Tremendous appreciation potential if it should approach
the industry price/earnings multiple.
1.2% Hanson PLC (ADR) (United Kingdom)/Construction
After recent acquisition, now the world's largest producer of aggregates.
Generating large quantities of free cash, much of which is used for
acquisitions. Should be a major beneficiary of the $173 billion for new
highway construction in the 1999 Transportation Bill.
1.0% Reynolds Metals Co./Metals-Nonferrous
The third largest aluminum producer in the world. The industry is now
going through consolidation, and Reynolds has agreed to be acquired by
Alcoa.
0.9% Columbia/HCA Healthcare Corp./Healthcare Services
Largest hospital chain in the United States. Stock suffered from federal
investigation into its Medicare and referral procedures. New management
stopped aggressive expansion to focus on getting its operations under
control. Pricing for the hospital industry appears to have bottomed.
Should benefit from growth in healthcare demand as the average age in the
United States rises.
0.9% Geon Co./Chemicals
A producer of PVC (polyvinyl chloride), a very common plastic.
4
<PAGE>
www.prudential.com (800) 225-1852
Performance Review
GROWTH STOCKS
Our technology holdings focused on firms with established businesses in the
computer industry, but whose markets are growing enormously with the rise of
the Internet and with new types of telecommunications service. We had
particularly large contributions to our return from JDS Uniphase, Oracle, and
Cisco Systems, all described in our table of Five Largest Growth Stock
Holdings. Among smaller positions, we benefited from EMC, the world's leading
supplier of intelligent enterprise storage and retrieval technology. We also
benefited from our media holdings, such as CBS and Clear Channel
Communications, and our shares in Enron, a diversified energy company.
VALUE STOCKS
Alcoa, the world's dominant aluminum producer, and our smaller holding (during
most of the period) of Reynolds Aluminum, continue to perform well for our
value holdings. We have begun to take our profits on Alcoa, where we think the
greatest part of its upward climb has been realized. Stillwater Mining, the
only significant platinum and palladium mine outside South Africa, also made a
large contribution to our return. General Motors and Lehman Brothers, an
investment bank, were other value stocks that managed substantial gains in
this market. In general, however, most of our value stocks had a negative
impact on our performance, with the oil service company McDermott International
hitting our return the hardest.
BONDS
Our bond benchmark was essentially flat over our reporting period, so our bond
holdings had only a small impact on our return despite their excellent
performance relative to their benchmark. We had focuses on U.S. corporate and
emerging market bonds. Their prices held up better than U.S. Treasury and
Agency bonds because they were already inexpensive when we bought them. As the
global financial system moved away from the crises of 1997-1998, investors no
longer required as large a yield premium to compensate for risk. Our good
selection of issuers and our focus on the lower-quality investment-grade
corporates also helped.
5
<PAGE>
Prudential Balanced Fund
Performance Review
LOOKING AHEAD
We are concerned about the volatility in the stock markets, and by the
extraordinary disparities in value. These are often signs of a shift in market
favor. Our growth holdings may shift somewhat toward cyclical companies--those
that are more responsive to the pace of economic growth--while our value
holdings may focus more on interest-rate-sensitive stocks, such as inexpensive
banks. Our bond holdings continue to emphasize corporate bonds, which yield
more than Treasuries--a spread that is unlikely to increase (which would reduce
their prices) in an expanding economy.
6
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- -------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 90.2%
Common Stocks 57.0%
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Advertising 1.0%
93,900 Interpublic Group of Companies, Inc. $ 4,319,400
105,300 Young & Rubicam, Inc. 5,673,037
--------------
9,992,437
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Airlines 0.8%
153,200 AMR Corp.(a) 8,244,075
- -------------------------------------------------------------------------------------
Automobiles 1.1%
125,309 Delphi Automotive Systems Corp. 2,169,412
61,500 Ford Motor Co. 3,059,625
79,900 General Motors Corp. 6,426,956
--------------
11,655,993
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Banks 1.1%
48,500 Chase Manhattan Corp. 3,901,219
21,600 Comerica, Inc. 954,450
255,200 Hanvit Bank(a) 1,276,000
60,900 PNC Bank Corp. 2,923,200
55,700 Wells Fargo Co. 2,228,000
--------------
11,282,869
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Beverages 0.7%
66,600 Coca-Cola Enterprises, Inc. 1,681,650
177,700 PepsiCo, Inc. 6,064,012
--------------
7,745,662
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Chemicals 2.0%
426,900 Agrium, Inc. (Canada) 3,828,700
52,500 Dow Chemical Co. 6,116,250
327,200 Geon Co. 9,509,250
89,300 Lyondell Chemical Co. 965,556
--------------
20,419,756
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- -------------------------------------------------------------------------------------
Computer Software & Services 4.9%
80,900 America Online, Inc.(a) $ 4,606,244
41,500 BMC Software, Inc.(a) 1,571,813
121,600 Cisco Systems, Inc.(a) 13,315,200
117,300 Compaq Computer Corp. 3,211,087
91,300 EMC Corp.(a) 9,723,450
78,500 Microsoft Corp.(a) 7,683,187
224,900 Oracle Corp.(a) 11,234,458
--------------
51,345,439
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Construction 1.8%
350,900 Hanson PLC (ADR) (United Kingdom) 12,632,400
242,500 U.S. Home Corp.(a) 5,804,844
--------------
18,437,244
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Containers 0.3%
140,300 Crown Cork & Seal Co., Inc. 2,849,844
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Diversfied Consumer Products 2.2%
53,700 Colgate-Palmolive Co. 3,181,725
129,500 Eastman Kodak Co. 8,012,812
47,600 Gillette Co. 1,790,950
71,700 Illinois Tool Works, Inc. 4,194,450
53,000 Procter & Gamble Co. 5,346,375
--------------
22,526,312
- -------------------------------------------------------------------------------------
Diversified Operations 3.4%
33,100 Corning, Inc. 5,105,675
60,150 General Electric Co. 8,022,506
87,300 JDS Uniphase Corp.(a) 17,803,744
389,600 Nabisco Group Holdings Corp. 3,360,300
141,700 Tomkins PLC (ADR) (United Kingdom) 1,744,681
--------------
36,036,906
</TABLE>
8 See Notes to Financial Statements
<PAGE>
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- -------------------------------------------------------------------------------------
Electrical Services 1.7%
106,400 AES Corp.(a) $ 8,525,300
76,800 PECO Energy Co. 3,196,800
164,200 Texas Utilities Co. 5,808,575
--------------
17,530,675
- -------------------------------------------------------------------------------------
Electronics 4.1%
80,400 Altera Corp.(a) 5,286,300
37,100 Applied Materials, Inc.(a) 5,091,975
15,800 Broadcom Corp.(a) 4,571,138
112,200 Intel Corp. 11,100,787
70,900 LSI Logic Corp.(a) 5,796,075
78,700 Motorola, Inc. 10,762,225
--------------
42,608,500
- -------------------------------------------------------------------------------------
Financial Services 4.0%
152,146 Bear, Stearns & Co. Inc. 6,276,023
57,400 Countrywide Credit Industries, Inc. 1,492,400
94,200 Edwards (A.G.), Inc. 3,120,375
14,400 Goldman, Sachs & Co. 1,319,400
182,800 Lehman Brothers Inc. 13,070,200
265,050 MBNA Corp. 6,692,512
84,000 Providian Financial Corp. 7,087,500
106,600 Washington Mutual, Inc. 2,704,975
--------------
41,763,385
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Foods 0.5%
132,100 Bestfoods 5,746,350
- -------------------------------------------------------------------------------------
Funeral Services 0.1%
259,500 Service Corp. International (a) 1,183,969
- -------------------------------------------------------------------------------------
Healthcare Services/Hospital Management 2.4%
360,600 Columbia/HCA Healthcare Corp. 9,848,887
408,500 Humana, Inc.(a) 3,268,000
412,400 Manor Care Inc. 5,490,075
299,700 Tenet Healthcare Corp.(a) 6,818,175
--------------
25,425,137
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- -------------------------------------------------------------------------------------
Insurance 2.3%
60,600 Aetna, Inc. $ 3,226,950
79,481 American International Group, Inc. 8,275,959
60,400 Chubb Corp. 3,397,500
143,800 SAFECO Corp. 3,523,100
197,500 Selective Insurance Group, Inc. 2,974,844
113,200 Torchmark Corp. 2,851,225
--------------
24,249,578
- -------------------------------------------------------------------------------------
Machinery 0.6%
31,300 Commercial Intertech Corp. 586,875
203,000 Flowserve Corp. 3,108,438
122,100 United Dominion Industries, Ltd. (Canada) 2,449,631
--------------
6,144,944
- -------------------------------------------------------------------------------------
Manufacturing 1.2%
87,900 Donaldson Co., Inc. 1,812,938
211,100 Tyco International Ltd. 9,024,525
61,600 York International Corp. 1,482,250
--------------
12,319,713
- -------------------------------------------------------------------------------------
Media 1.9%
156,200 CBS Corp.(a) 9,108,412
66,800 Clear Channel Communications, Inc.(a) 5,769,850
167,100 Infinity Broadcasting Corp.(a) 5,430,750
--------------
20,309,012
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Medical Products & Services 0.2%
47,450 Cardinal Health, Inc. 2,268,703
- -------------------------------------------------------------------------------------
Medical Technology 0.6%
121,100 Abbott Laboratories 3,950,888
119,900 IMS Health, Inc. 2,690,256
--------------
6,641,144
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- -------------------------------------------------------------------------------------
Metals-Non Ferrous 2.3%
111,400 Alcoa Inc. $ 7,763,187
152,500 Reynolds Metals Co. 10,179,375
252,300 UCAR International Inc.(a) 5,692,519
--------------
23,635,081
- -------------------------------------------------------------------------------------
Mining 1.0%
360,300 Newmont Mining Corp. 7,341,112
84,600 Stillwater Mining Co.(a) 3,013,875
--------------
10,354,987
- -------------------------------------------------------------------------------------
Oil & Gas Equipment & Services 5.3%
126,600 Anadarko Petroleum Corp. 4,154,063
105,900 Baker Hughes, Inc. 2,607,788
82,400 Burlington Resources, Inc. 2,641,950
187,400 Enron Corp. 12,637,787
16,500 Exxon Mobil Corporation 1,377,750
113,236 KeySpan Corp. 2,653,969
477,300 McDermott International, Inc. 4,713,337
245,600 Noble Affiliates, Inc. 4,927,350
1,066,300 Pioneer Natural Resources Co.(a) 9,130,194
468,600 Western Gas Resources, Inc. 5,974,650
115,900 Williams Companies, Inc. 4,491,125
--------------
55,309,963
- -------------------------------------------------------------------------------------
Paper & Forest Products 0.8%
240,100 Longview Fibre Co. 3,436,431
399,700 Louisiana-Pacific Corp. 5,146,138
--------------
8,582,569
- -------------------------------------------------------------------------------------
Pharmaceuticals 1.4%
90,200 Bristol-Myers Squibb Co. 5,953,200
74,500 Merck & Co., Inc. 5,871,531
71,100 Pfizer, Inc. 2,586,263
--------------
14,410,994
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- -------------------------------------------------------------------------------------
Publishing 0.4%
55,200 Donnelley (R.R.) & Sons Co. $ 1,210,950
56,100 New York Times Co. 2,563,069
--------------
3,774,019
- -------------------------------------------------------------------------------------
Real Estate Investment Trust 1.6%
348,300 Crescent Real Estate Equities Co. 6,269,400
659,300 Prison Realty Corp. 2,925,644
231,200 Vornado Realty Trust 7,239,450
--------------
16,434,494
- -------------------------------------------------------------------------------------
Restaurants 0.5%
126,800 McDonald's Corp. 4,715,375
- -------------------------------------------------------------------------------------
Retail 1.8%
99,600 CVS Corp. 3,479,775
345,300 Dillard's, Inc. 6,625,444
340,800 Kmart Corp.(a) 2,854,200
45,500 Sears Roebuck & Co. 1,407,656
122,400 The Limited, Inc. 3,756,150
68,300 Toys 'R' Us, Inc.(a) 704,344
--------------
18,827,569
- -------------------------------------------------------------------------------------
Steel - Producers 0.9%
183,500 AK Steel Holding Corp. 1,857,937
384,300 Corus Group PLC (ADR) (United Kingdom) 7,806,094
--------------
9,664,031
- -------------------------------------------------------------------------------------
Telecommunications 1.3%
21,300 Comverse Technology, Inc.(a) 3,053,888
39,500 Lucent Technologies, Inc. 2,182,375
166,750 MCI WorldCom, Inc.(a) 7,660,078
6,000 Telecomunicacoes Brasileiras SA (ADR) (Brazil) (a) 780,000
--------------
13,676,341
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- -------------------------------------------------------------------------------------
Tobacco 0.5%
138,700 Philip Morris Co., Inc. $ 2,904,031
129,866 R.J. Reynolds Tobacco Holdings, Inc. 2,232,072
--------------
5,136,103
- -------------------------------------------------------------------------------------
Tools 0.3%
124,300 Snap-on, Inc. 3,340,562
--------------
Total common stocks (cost $544,345,661) 594,589,735
</TABLE>
<TABLE>
<CAPTION>
DEBT OBLIGATIONS 33.2%
Corporate Bonds 24.3%
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Aerospace 0.2%
Litton Inds Inc., Notes,
Baa2 $ 400 8.00%, 10/15/09 397,280
Northrop-Grumman Corp.,
Baa3 900 7.875%, 3/1/26 840,114
Raytheon Co., Note,
Baa1 1,300 6.50%, 7/15/05 1,207,258
--------------
2,444,652
- -------------------------------------------------------------------------------------
Airlines 0.8%
Continental Airlines, Inc., Notes,
Ba2 1,730 8.00%, 12/15/05 1,564,768
Aa3 1,420 7.46%, 4/1/15 1,353,835
Delta Air Lines, Inc., Notes,
Baa3 500 7.90%, 12/15/09 483,965
United Airlines, Inc.,
Baa3 5,000 10.67%, 5/1/04 5,397,200
--------------
8,799,768
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Asset Backed Securities 2.2%
California Infrastructure, PG&E,
Aaa $ 3,000 6.32%, 9/25/05 $ 2,926,406
Citibank Credit Card Master Trust,
Aaa 5,000 6.10%, 5/15/08 4,675,500
MBNA Master Credit Card Trust,
Aaa 5,000 5.90%, 8/15/11 4,463,231
Team Fleet Financing Corp.,
Aa3 11,000 7.35%, 5/15/03 10,891,719
--------------
22,956,856
- -------------------------------------------------------------------------------------
Automobiles 1.7%
Cooper Tire And Rubber Co., Notes,
A3 3,000 7.75%, 12/15/09 2,909,100
Ford Motor Co.,
A1 3,000 6.375%, 2/1/29 2,455,290
A1 600 7.45%, 7/16/31 563,970
Lear Corp., Sr. Note,
Ba1 2,335 7.96%, 5/15/05 2,194,900
Navistar International Corp.,
Ba1 2,000 7.00%, 2/1/03 1,910,000
Ba2 370 8.00%, 2/1/08 342,250
TRW, Inc., Note,
Baa1 7,700 6.45%, 6/15/01 7,596,531
--------------
17,972,041
- -------------------------------------------------------------------------------------
Banks 2.1%
Bank Nova Scotia NY,
A1 3,900 6.50%, 7/15/07 3,811,031
Barclays Bank PLC, Note,
Aa3 500 7.40%, 12/15/09 485,325
Bayer Hypo-Vereinsbank,
Aa3 300 8.741%, 6/30/31 288,000
Bayerische Landesbank,
Aaa 1,950 5.875%, 12/1/08 1,711,573
Capital One Bank, Sr. Note,
Baa2 3,000 7.08%, 10/30/01 2,954,190
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Chon Hung Bank,
B1 $ 2,150 1.00%, 1/7/05 $ 2,193,000
Compass Bank,
A1 1,300 8.10%, 8/15/09 1,279,525
Dresdner Funding Trust,
A1 3,700 8.151%, 6/30/31 3,374,400
HVB Funding Trust,
Aa3 200 9.00%, 10/22/31 199,560
KBC Bank Funding Trust,
A1 2,500 9.86%, 11/29/49 2,576,475
Keycorp Capital,
A1 750 7.75%, 7/15/29 690,000
National Australia Bank Ltd.,
A1 2,100 6.40%, 12/10/07 2,089,172
--------------
21,652,251
- -------------------------------------------------------------------------------------
Beverages 0.1%
Coca Cola Bottling Co.,
Baa2 600 6.375%, 5/1/09 530,958
Coca Cola Enterprises Inc., Notes,
A2 900 7.125%, 9/30/09 864,990
--------------
1,395,948
- -------------------------------------------------------------------------------------
Broadcasting 0.1%
Liberty Media Corp., Notes,
Baa3 400 7.875%, 7/15/09 392,000
Baa3 700 8.50%, 7/15/29 707,700
--------------
1,099,700
- -------------------------------------------------------------------------------------
Cable & Pay Television Systems 0.8%
British Sky Broadcasting Group,
Baa2 2,000 6.875%, 2/23/09 1,766,120
Century Communications Corp., Sr.
Note,
Ba3 2,000 9.75%, 2/15/02 2,005,000
Comcast Cable Communications,
Baa2 2,000 8.375%, 5/1/07 2,054,040
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
CSC Holdings, Inc., Sr. Notes,
Ba2 $ 900 7.25%, 7/15/08 $ 843,660
Ba2 475 7.875%, 12/15/07 464,127
Rogers Cablesystems Ltd.,
B2 885 11.00%, 12/1/15 995,625
--------------
8,128,572
- -------------------------------------------------------------------------------------
Captive Finance 1.0%
Ford Motor Credit Co., Note,
A1 5,000 7.75%, 3/15/05 5,019,400
A1 400 7.375%, 10/28/09 390,680
Sears Roebuck Acceptance Corp.,
Note,
A2 5,000 6.38%, 10/7/02 4,806,650
--------------
10,216,730
- -------------------------------------------------------------------------------------
Cellular Communications 0.1%
Rogers Cantel, Inc.,
Ba3 790 9.375%, 6/1/08 809,750
- -------------------------------------------------------------------------------------
Chemicals 0.2%
Lyondell Chemical Co.,
Ba3 585 9.625%, 5/1/07 577,688
Monsanto Co.,
A2 245 6.50%, 12/1/18 214,926
A1 585 6.75%, 12/15/27 507,084
Rohm & Haas Co., Notes,
A3 800 6.95%, 7/15/04 781,504
--------------
2,081,202
- -------------------------------------------------------------------------------------
Computer Services 0.2%
Cendant Corp., Notes,
Baa1 1,400 7.75%, 12/1/03 1,384,894
Unisys Corp., Sr. Notes,
Ba1 1,075 12.00%, 4/15/03 1,147,563
--------------
2,532,457
- -------------------------------------------------------------------------------------
Containers 0.3%
Owens Illinois, Inc.,
Ba1 2,100 7.50%, 5/15/10 1,887,711
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Pactiv Corp.,
Baa3 $ 1,650 7.95%, 12/15/25 $ 1,493,184
--------------
3,380,895
- -------------------------------------------------------------------------------------
Diversified Operations 0.2%
Seagram (J.) & Sons Inc.,
Baa3 1,400 5.79%, 4/15/01 1,371,580
Tyco International Ltd.,
Baa1 400 7.00%, 6/15/28 346,308
Baa1 600 6.875%, 1/15/29 510,414
--------------
2,228,302
- -------------------------------------------------------------------------------------
Electrical Services 0.7%
AES Corp., Sr. Note,
Ba1 1,640 9.50%, 6/1/09 1,627,700
Calpine Corp., Sr. Notes,
Ba1 1,355 10.50%, 5/15/06 1,422,750
CMS Energy Corp., Sr. Note,
Ba3 1,300 8.00%, 7/1/01 1,287,390
Cogentrix Inc., Sr. Note,
Ba1 950 8.10%, 3/15/04 904,561
Edison Mission Energy Co., Sr.
Note,
A3 900 7.73%, 6/15/09 884,187
PSEG Energy Holdings, Inc., Sr.
Notes,
Ba1 870 10.00%, 10/1/09 887,944
Utilicorp United Inc., Sr. Note,
Baa3 800 7.00%, 7/15/04 764,320
--------------
7,778,852
- -------------------------------------------------------------------------------------
Entertainment 0.6%
Harrahs Operating Co., Inc.,
Ba2 95 7.875%, 12/15/05 89,538
Park Place Entertainment Corp.,
Ba2 815 7.875%, 12/15/05 768,137
Royal Caribbean Cruises Ltd., Sr.
Note,
Baa3 5,000 8.25%, 4/1/05 5,028,950
--------------
5,886,625
</TABLE>
See Notes to Financial Statements 17
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Equipment Rental
United Rentals Inc.,
B1 $ 310 8.80%, 8/15/08 $ 282,100
- -------------------------------------------------------------------------------------
Financial Services 1.2%
Capital One Financial Corp., Note,
Baa3 1,650 7.25%, 5/1/06 1,553,063
Heller Financial, Inc., Note,
A3 800 6.00%, 3/19/04 752,696
International Lease Finance Corp.,
Note,
A1 4,500 5.90%, 3/12/03 4,292,595
Osprey Trust Inc.,
Baa3 3,000 8.31%, 1/15/03 2,980,560
RBF Finance Co.,
Ba3 415 11.375%, 3/15/09 437,825
Sanwa Finance,
Baa1 1,250 8.35%, 7/15/09 1,242,500
--------------
11,259,239
- -------------------------------------------------------------------------------------
Foods 0.7%
Archer Daniels Midland Co.,
Aa3 1,600 6.625%, 5/1/29 1,353,584
Kroger Co., Sr. Notes,
Baa3 3,400 6.375%, 3/1/08 3,069,860
Baa3 1,800 6.34%, 6/1/01 1,774,125
Baa3 1,000 7.25%, 6/1/09 946,250
Baa3 250 7.70%, 6/1/29 238,125
--------------
7,381,944
- -------------------------------------------------------------------------------------
Healthcare Services/Hospital Management 0.2%
Columbia/HCA Healthcare Corp.,
Notes,
Ba2 825 6.91%, 6/15/05 738,375
Tenet Healthcare Corp., Sr. Notes,
Ba1 620 7.875%, 1/15/03 598,300
--------------
1,336,675
</TABLE>
18 See Notes to Financial Statements
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Hotels & Leisure 0.4%
HMH Properties Inc., Sr. Note,
Ba2 $ 1,080 7.875%, 8/1/05 $ 972,000
Marriott International Inc., Notes,
Baa1 100 7.875%, 9/15/09 97,789
Starwood Hotels & Resorts, Inc.,
Note,
Baa1 3,500 6.75%, 11/15/03 3,224,865
--------------
4,294,654
- -------------------------------------------------------------------------------------
Insurance 0.7%
Allstate Corp., Sr. Notes,
A1 200 7.20%, 12/1/09 191,406
Conseco Finance Trust,
Ba3 2,665 8.796%, 4/1/27 2,324,306
Ba3 5,000 8.70%, 11/15/26 4,399,750
Royal & Sun Alliance Insurance
Group, PLC,
A1 600 8.95%, 10/15/29 618,000
--------------
7,533,462
- -------------------------------------------------------------------------------------
Investment Banking 0.7%
Bear, Stearns & Co. Inc., Notes,
A2 190 7.625%, 12/7/09 184,781
Goldman, Sachs & Co., Note,
A1 2,500 7.80%, 1/28/10 2,482,812
Lehman Brothers, Inc. Notes,
Baa1 3,565 6.625%, 4/1/04 3,410,065
Baa1 1,370 6.625%, 2/5/06 1,287,321
--------------
7,364,979
- -------------------------------------------------------------------------------------
Media 0.9%
Cox Enterprises Inc.,
Baa1 900 6.625%, 6/14/02 880,659
News America Holdings Inc.,
Baa3 6,500 6.703%, 5/21/34 6,176,430
</TABLE>
See Notes to Financial Statements 19
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Time Warner, Inc.,
Baa3 $ 2,000 8.11%, 8/15/06 $ 2,034,020
United News & Media PLC, Note,
Baa2 550 7.25%, 7/1/04 529,100
--------------
9,620,209
- -------------------------------------------------------------------------------------
Miscellaneous Services
Comunidad Autonoma De Andalucia,
Notes,
Aa3 120 7.25%, 10/1/29 115,200
- -------------------------------------------------------------------------------------
Oil & Gas Equipment & Services 0.8%
Amerada Hess Corp., Notes,
Baa1 400 7.875%, 10/1/29 391,060
Baa1 150 7.375%, 10/1/09 145,194
Atlantic Richfield Co., Notes,
A2 1,760 5.90%, 4/15/09 1,570,501
BJ Services Co., Sr. Note,
Baa2 3,500 7.00%, 2/1/06 3,273,620
El Paso Energy Corp., Sr. Note,
Baa3 1,000 6.625%, 7/15/01 988,800
Eott Energy Partners LP, Sr. Notes,
Ba2 670 11.00%, 10/1/09 677,537
Sonat Inc., Note,
Baa2 1,400 7.625%, 7/15/11 1,364,888
--------------
8,411,600
- -------------------------------------------------------------------------------------
Oil & Gas Exploration/Production 0.2%
Parker & Parsley Petroleum Co.,
Note,
Ba1 500 8.875%, 4/15/05 492,505
Seagull Energy Corp, Sr. Note,
Ba1 615 7.875%, 8/1/03 599,625
Union Pacific Resources Group, Inc.
Sr. Note,
Baa3 450 7.375%, 9/15/09 468,652
Baa3 600 7.95%, 4/15/29 581,856
--------------
2,142,638
</TABLE>
20 See Notes to Financial Statements
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Paper & Forest Products 0.6%
Fort James Corp., Note,
Baa2 $ 2,000 6.234%, 3/15/01 $ 1,974,320
Georgia Pacific Corp.,
Baa2 225 7.75%, 11/15/29 216,799
Scotia Pacific Co.,
Baa2 4,800 7.71%, 7/20/28 3,888,000
--------------
6,079,119
- -------------------------------------------------------------------------------------
Printing 0.1%
World Color Press Inc.,
Baa3 260 8.375%, 11/15/08 249,600
Baa3 815 7.75%, 2/15/09 757,950
--------------
1,007,550
- -------------------------------------------------------------------------------------
Real Estate Investment Trust 0.8%
Duke Realty Ltd., Sr. Note,
Baa1 800 7.30%, 6/30/03 782,400
ERP Operating, LP, Notes,
A3 5,000 6.15%, 9/15/00 4,962,000
A3 400 7.10%, 6/23/04 386,916
A3 2,000 6.63%, 4/13/15 1,865,920
--------------
7,997,236
- -------------------------------------------------------------------------------------
Retail 0.9%
Dayton Hudson Corp., Note,
A3 3,525 6.40%, 2/15/03 3,418,792
Federated Dept. Stores, Inc., Sr.
Notes,
Baa2 2,500 8.125%, 10/15/02 2,531,550
Baa2 2,500 8.50%, 6/15/03 2,558,100
Saks Inc.,
Baa3 1,000 8.25%, 11/15/08 959,200
--------------
9,467,642
</TABLE>
See Notes to Financial Statements 21
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Savings & Loan 0.2%
Sovereign Bancorp Inc., Sr. Notes,
Ba3 $ 445 10.25%, 5/15/04 $ 442,499
Ba3 770 10.50%, 11/15/06 781,550
Washington Mutual Inc., Sr. Notes,
A3 1,000 7.50%, 8/15/06 977,260
--------------
2,201,309
- -------------------------------------------------------------------------------------
Telecommunications 2.1%
AT&T Canada Inc, Sr. Notes,
Baa3 500 7.65%, 9/15/06 493,340
AT&T Corp.,
A2 7,000 9.25%, 4/15/02 7,281,960
Cable & Wireless Communication,
Note,
Baa1 600 6.75%, 12/1/08 576,312
Electric Lightwave Inc., Note,
A2 900 6.05%, 5/15/04 837,270
Global Crossing Holdings, Ltd., Sr.
Notes,
Ba2 1,485 9.125%, 11/15/06 1,433,025
LCI International Inc.,
Ba1 3,550 7.25%, 6/15/07 3,369,731
Qwest Communications Int'l., Inc.,
Sr. Note,
Ba1 1,870 7.50%, 11/1/08 1,813,900
Sprint Capital Corp.,
Baa1 2,500 6.875%, 11/15/28 2,174,050
Telecomunicaciones de Puerto Rico,
Notes,
Baa2 1,800 6.65%, 5/15/06 1,672,308
Baa2 1,400 6.80%, 5/15/09 1,272,404
Williams Communications Group, Inc.
Sr. Notes,
B2 680 10.70%, 10/1/07 705,500
B2 120 10.875%, 10/1/09 123,600
--------------
21,753,400
</TABLE>
22 See Notes to Financial Statements
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Transportation 0.5%
Norfolk Southern Corp., Note,
Baa1 $ 5,000 6.95%, 5/1/02 $ 4,933,650
- -------------------------------------------------------------------------------------
Utilities 1.8%
Calenergy Co., Inc., Sr. Note,
Baa3 4,500 6.96%, 9/15/03 4,341,600
Cleveland Electric Illuminating,
Notes,
Ba1 3,000 7.19%, 7/1/00 2,994,000
Ba1 2,000 7.67%, 7/1/24 1,961,800
Hydro-Quebec,
A2 125 7.50%, 4/1/16 120,559
Niagara Mohawk Power Corp.,
Baa2 4,500 7.375%, 8/1/03 4,456,170
Baa2 2,000 8.00%, 6/1/04 2,017,900
Western Massachusetts Electric Co.,
Baa3 3,000 7.375%, 7/1/01 2,979,600
--------------
18,871,629
- -------------------------------------------------------------------------------------
Waste Management 0.2%
Allied Waste North America Inc.,
Sr. Notes,
Ba3 775 7.625%, 1/1/06 682,000
Waste Management Inc.,
Ba1 1,000 6.125%, 7/15/01 958,370
--------------
1,640,370
Total corporate bonds (cost
$263,492,111) 253,059,206
--------------
- -------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES 7.7%
United States Treasury Bonds,
10,000 8.125%, 8/15/19 11,517,200
7,400 8.125%, 8/15/21 8,601,316
3,600 6.75%, 8/15/26 3,661,308
2,700 6.375%, 8/15/27 2,623,644
5,320 5.25%, 2/15/29 4,431,400
</TABLE>
See Notes to Financial Statements 23
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
United States Treasury Notes,
$ 25 5.875%, 11/15/04 $ 24,168
49,500 6.50%, 10/15/06 48,780,765
390 6.00%, 8/15/09 371,717
--------------
Total U.S. government securities
(cost $81,965,416) 80,011,518
--------------
- -------------------------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS 1.2%
Republic of Columbia, (Columbia)
Ba2 700 9.75%, 4/23/09 618,625
Republic of Panama, (Panama)
Ba1 1,700 4.00%, 7/17/14 1,312,188
Republic of Philippines,
(Philippines)
Ba1 700 8.875%, 4/15/08 672,000
Republic of Poland, (Poland)
Baa3 1,950 4.00%, 10/27/24 1,265,063
Republic of Quebec, (Canada)
A2 2,050 7.50%, 7/15/23 1,994,363
A2 780 5.75%, 2/15/09 680,636
Republic of Saskatchewan, (Canada)
A2 500 9.125%, 2/15/21 579,705
United Mexican States, (Mexico)
Ba2 2,500 10.375%, 2/17/09 2,512,500
Ba2 3,500 5.875%, 12/31/19 3,257,187
--------------
Total foreign government
(cost $13,287,506) 12,892,267
--------------
Total debt obligations
(cost $358,745,033) 345,962,991
--------------
Units
- -------------------------------------------------------------------------------------
WARRANTS(a)
United Mexican States, (Mexico)
$ 5,384 expiring 12/13/03 0
--------------
Total long-term investments
(cost $903,090,694) 940,552,726
--------------
</TABLE>
24 See Notes to Financial Statements
<PAGE>
Prudential Balanced Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 9.9%
Repurchase Agreement
- -----------------------------------------------------------------------------------
Joint Repurchase Agreement Account,
5.713%, 2/1/00 (cost $102,913,000;
$ 102,913 Note 5) $ 102,913,000
--------------
Total Investments 100.1%
(cost $1,006,003,694; Note 4) 1,043,465,726
Liabilities in excess of other
assets (0.1%) (1,135,706)
--------------
Net Assets 100% $1,042,330,020
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
(a) Non-income producing security.
ADR--American Depository Receipt.
The Fund's current SAI contains a description of Moody's and Standard & Poor's
ratings.
See Notes to Financial Statements 25
<PAGE>
Prudential Balanced Fund As of January 31, 2000 (Unaudited)
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
January 31, 2000
<S> <C>
- ----------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $1,006,003,694) $1,043,465,726
Foreign currency at value (cost $19,958) 20,288
Cash 253,447
Receivable for investments sold 13,696,308
Dividends and interest receivable 7,389,813
Receivable for Fund shares sold 858,441
Prepaid expenses 38,288
----------------
Total assets 1,065,722,311
----------------
Liabilities
Payable for investments purchased 18,279,485
Payable for Fund shares reacquired 3,342,182
Management fee payable 588,235
Distribution fee payable 463,449
Withholding tax payable 16,398
Due to broker-variation margin 15,806
Accrued expenses 686,736
----------------
Total liabilities 23,392,291
----------------
Net Assets $1,042,330,020
----------------
----------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 870,080
Paid-in capital in excess of par 956,727,134
----------------
957,597,214
Undistributed net investment income 3,116,710
Accumulated net realized gain on investments 44,202,537
Net unrealized appreciation on investments 37,413,559
----------------
Net assets, January 31, 2000 $1,042,330,020
----------------
----------------
</TABLE>
26 See Notes to Financial Statements
<PAGE>
Prudential Balanced Fund As of January 31, 2000 (Unaudited) Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
January 31, 2000
- ----------------------------------------------------------------------------------------
<S> <C>
Class A:
Net asset value and redemption price per share
($519,959,368 / 43,339,085 shares of beneficial
interest issued and outstanding) $12.00
Maximum sales charge (5% of offering price) .63
Maximum offering price to public $12.63
Class B:
Net asset value, offering price and redemption price per
share
($390,213,461 / 32,657,200 shares of beneficial
interest issued and outstanding) $11.95
Class C:
Net asset value and redemption price per share
($10,295,188 / 861,618 shares of beneficial interest
issued and outstanding) $11.95
Sales charge (1% of offering price) .12
Offering price to public $12.07
Class Z:
Net asset value, offering price and redemption price per
share
($121,862,003 / 10,150,127 shares of beneficial
interest issued and outstanding) $12.01
</TABLE>
See Notes to Financial Statements 27
<PAGE>
Prudential Balanced Fund
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
January 31, 2000
<S> <C>
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest (net of foreign withholding taxes of $11,304) $ 14,556,300
Dividends (net of foreign withholding taxes of
$270,016) 6,168,005
--------------------
Total income 20,724,305
--------------------
Expenses
Management fee 3,471,630
Distribution fee--Class A 654,165
Distribution fee--Class B 2,094,105
Distribution fee--Class C 50,206
Transfer agent's fees and expenses 1,267,000
Custodian's fees and expenses 97,000
Reports to shareholders 91,000
Registration fees 50,000
Legal fees and expenses 20,000
Audit fees and expenses 15,000
Trustees' fees and expenses 11,000
Miscellaneous 28,258
--------------------
Total expenses 7,849,364
--------------------
Net investment income 12,874,941
--------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES
Net realized gain (loss) on:
Investment transactions 56,679,709
Financial futures transactions (4,039)
Foreign currency transactions 353
--------------------
56,676,023
--------------------
Net change in unrealized appreciation (depreciation) on:
Investments (41,209,240)
Financial futures (48,813)
Foreign currencies 340
--------------------
(41,257,713)
--------------------
Net gain on investments 15,418,310
--------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 28,293,251
--------------------
--------------------
</TABLE>
28 See Notes to Financial Statements
<PAGE>
Prudential Balanced Fund
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
January 31, 2000 July 31, 1999
<S> <C> <C>
- -----------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 12,874,941 $ 22,728,264
Net realized gain on investments and
foreign currency transactions 56,676,023 58,971,735
Net change in unrealized appreciation
(depreciation) of investments (41,257,713) 24,344,289
---------------- --------------
Net increase in net assets resulting from
operations 28,293,251 106,044,288
---------------- --------------
Dividends and distributions (Note 1)
Dividends to shareholders from net
investment income
Class A (6,372,308) (11,600,552)
Class B (3,469,534) (7,501,189)
Class C (83,283) (147,713)
Class Z (1,613,742) (3,085,601)
---------------- --------------
(11,538,867) (22,335,055)
---------------- --------------
Distributions from net realized gains on
investment transactions
Class A (34,600,438) (33,667,951)
Class B (27,903,897) (35,854,241)
Class C (676,969) (670,807)
Class Z (8,022,304) (7,850,486)
---------------- --------------
(71,203,608) (78,043,485)
---------------- --------------
Fund share transactions (net of share
conversions) (Note 6)
Net proceeds from shares sold 94,389,779 174,931,450
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions 78,963,724 95,452,760
Cost of shares reacquired (170,869,416) (341,670,552)
---------------- --------------
Net increase (decrease) in net assets from
Fund shares transactions 2,484,087 (71,286,342)
---------------- --------------
Total decrease (51,965,137) (65,620,594)
NET ASSETS
Beginning of period 1,094,295,157 1,159,915,751
---------------- --------------
End of period(a) $1,042,330,020 $1,094,295,157
---------------- --------------
---------------- --------------
- ------------------------------
(a) Includes undistributed net investment
income of: $ 3,116,710 $ 1,780,283
---------------- --------------
</TABLE>
See Notes to Financial Statements 29
<PAGE>
Prudential Balanced Fund
Notes to Financial Statements (Unaudited)
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. The Fund invests 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 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 or at the bid price in the absence of an asked price.
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 an
independent pricing service. 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
30
<PAGE>
Prudential Balanced Fund
Notes to Financial Statements (Unaudited) Cont'd.
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.
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.
31
<PAGE>
Prudential Balanced Fund
Notes to Financial Statements (Unaudited) Cont'd.
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.
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. The effect of applying this statement was
to increase undistributed net investment income by $353 and decrease accumulated
net realized gain
32
<PAGE>
Prudential Balanced Fund
Notes to Financial Statements (Unaudited) Cont'd.
on investments by $353 relating to net realized foreign currency gains. Net
investment income, net realized gains and net assets were not affected by this
change.
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. 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.
For the period August 1, 1999 through January 31, 2000 the management fee
paid PIFM was computed daily and payable monthly at an annual rate of .65 of 1%
of the Fund's average daily net assets. Effective January 1, 2000, 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 up to $1 billion and .60 of
1% of the average net assets of the Fund in excess of $1 billion.
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 six months ended
January 31, 2000.
PIMS has advised the Fund that it received approximately $72,600 and
$11,000 in front-end sales charges resulting from sales of Class A and Class C
shares, respectively, during the six months ended January 31, 2000. From these
33
<PAGE>
Prudential Balanced Fund
Notes to Financial Statements (Unaudited) Cont'd.
fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn
paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the six months ended January 31, 2000,
it received approximately $281,000 and $1,600 in contingent deferred sales
charges imposed upon certain redemptions by Class B and C shareholders,
respectively.
PIC, PIFM and PIMS are wholly owned subsidiaries of The Prudential
Insurance Company of America ('Prudential').
As of March 11, 1999, the Fund, along with other affiliated registered
investment companies (the 'Funds'), entered into a syndicated credit agreement
('SCA') with an unaffiliated lender. The maximum commitment under the SCA is $1
billion. The Funds pay a commitment fee at an annual rate of .065 of 1% on the
unused portion of the credit facility, which is accrued and paid quarterly on a
pro rata basis by the Funds. The SCA expires on March 9, 2000. Prior to March
11, 1999, the Funds had a credit agreement with a maximum commitment of
$200,000,000. The commitment fee was .055 of 1% on the unused portion of the
credit facility. The Fund did not borrow any amounts pursuant to either
agreement during the six months ended January 31, 2000. The purpose of the
agreements is to serve as an alternative source of funding for capital share
redemptions. The Fund, along with other affiliated registered investment
companies (the 'Funds'), entered into a syndicated credit agreement ('SCA') with
an unaffiliated lender. The maximum commitment under the SCA is $1 billion and
interest on any borrowings will be at market rates. For the period
3/11/99-3/9/00, the commitment fee on the unused portion of the credit facility
was .065 of 1%. Subsequent to March 9, 2000, the SCA was renewed with a maximum
commitment of $1 billion at a commitment fee of .080 of 1% of the unused portion
of the credit facility. The expiration date of the SCA is March 9, 2001. The
commitment fee is accrued and paid quarterly on a pro rata basis by the Funds.
Prior to March 11, 1999, the Funds had a credit agreement with a maximum
commitment of $200,000,000. The commitment fee was .055 of 1% on the unused
portion of the credit facility. The Fund did not borrow any amounts during the
six months ended January 31, 2000. The purpose of the credit agreements is to
serve as an alternative source of funding for capital share redemptions.
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the six months ended January 31,
2000, the Fund incurred fees of approximately $994,700 for the services of PMFS.
As of
34
<PAGE>
Prudential Balanced Fund
Notes to Financial Statements (Unaudited) Cont'd.
January 31, 2000, approximately $175,000 of such fees were due to PMFS. Transfer
agent fees and expenses in the Statement of Operations also include certain
out-of-pocket expenses paid to nonaffiliates.
Note 4. Portfolio Securities
Purchases and sales of investment securities of the Fund, other than short-term
investments, for the six months ended January 31, 2000, were $321,222,041 and
$397,153,786, respectively, which includes purchases and sales of U.S.
government obligations of $123,115,739 and $99,382,688, respectively.
The cost basis of investments for federal income tax purposes as of
January 31, 2000 was $1,006,092,807 and accordingly, net unrealized appreciation
of investments for federal income tax purposes was $37,372,919 (gross unrealized
appreciation--$137,251,262; gross unrealized depreciation--$99,878,343).
During the six months ended January 31, 2000, the Fund entered into
financial futures contracts. Details of open contracts at January 31, 2000 are
as follows:
<TABLE>
<CAPTION>
Value at Value at Unrealized
Number of Expiration Trade January 31, Appreciation/
Contracts Type Date Date 2000 (Depreciation)
- --------- ----------------- ----------- ---------- ----------- ---------------
<C> <C> <S> <C> <C> <C>
Long Positions:
22 U.S. Long Bond Mar. 2000 $2,077,625 $ 2,028,812 $ (48,813)
---------------
---------------
</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 January 31, 2000, the
Fund had a 14.6% undivided interest in repurchase agreements in the joint
account. The undivided interest for the Fund represented $102,913,000 in
principal amount. As of
35
<PAGE>
Prudential Balanced Fund
Notes to Financial Statements (Unaudited) Cont'd.
such date, each repurchase agreement in the joint account and the value of the
collateral therefor was as follows:
Bear, Stearns & Co. Inc., 5.72%, in the principal amount of $150,000,000,
repurchase price $150,023,833, due 02/01/00. The value of the collateral
including accrued interest was $153,133,078.
Credit Suisse First Boston Corporation, 5.74%, in the principal amount of
$75,000,000, repurchase price $75,011,958, due 02/01/00. The value of the
collateral including accrued interest was $77,491,043.
Credit Suisse First Boston Corporation, 5.73%, in the principal amount of
$125,000,000, repurchase price $125,019,895, due 02/01/00. The value of the
collateral including accrued interest was $129,169,641.
Greenwich Capital Markets, Inc., 5.72%, in the principal amount of
$100,000,000, repurchase price $100,015,888, due 02/01/00. The value of the
collateral including accrued interest was $102,001,008.
Goldman, Sachs & Co., 5.70%, in the principal amount of $230,536,000,
repurchase price $230,572,501, due 02/01/00. The value of the collateral
including accrued interest was $235,147,150.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 5.60%, in the principal
amount of $25,000,000, repurchase price $25,003,888, due 02/01/00. The value of
the collateral including accrued interest was $25,501,335.
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. 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.
The Fund has authorized an unlimited number of shares of beneficial
interest of each class at $.01 par value per share.
36
<PAGE>
Prudential Balanced Fund
Notes to Financial Statements (Unaudited) Cont'd.
Transactions in shares of beneficial interest for the period ended January
31, 2000 and July 31, 1999 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------------------------------------- ----------- -------------
<S> <C> <C>
Six months ended January 31, 2000:
Shares sold............................................... 4,143,844 $ 51,520,392
Shares issued in reinvestment of dividends and
distributions........................................... 3,231,991 38,333,155
Shares reacquired......................................... (6,135,202) (75,623,049)
----------- -------------
Net increase in shares outstanding before conversion...... 1,240,633 14,230,498
Shares issued upon conversion from Class B................ 1,307,089 16,058,015
----------- -------------
Net increase in shares outstanding........................ 2,547,722 $ 30,288,513
----------- -------------
----------- -------------
Year ended July 31, 1999:
Shares sold............................................... 5,888,331 $ 72,630,854
Shares issued in reinvestment of dividends and
distributions........................................... 3,548,537 42,190,816
Shares reacquired......................................... (10,211,802) (126,616,025)
----------- -------------
Net decrease in shares outstanding before conversion...... (774,934) (11,794,355)
Shares issued upon conversion from Class B................ 3,108,715 37,656,869
----------- -------------
Net increase in shares outstanding........................ 2,333,781 $ 25,862,514
----------- -------------
----------- -------------
<CAPTION>
Class B
- ----------------------------------------------------------
<S> <C> <C>
Six months ended January 31, 2000:
Shares sold............................................... 1,761,778 $ 21,743,481
Shares issued in reinvestment of dividends and
distributions........................................... 2,561,075 30,279,091
Shares reacquired......................................... (5,729,307) (70,545,737)
----------- -------------
Net decrease in shares outstanding before conversion...... (1,406,454) (18,523,165)
Shares reacquired upon conversion into Class A............ (1,312,229) (16,058,015)
----------- -------------
Net decrease in shares outstanding........................ (2,718,683) $ (34,581,180)
----------- -------------
----------- -------------
</TABLE>
37
<PAGE>
Prudential Balanced Fund
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B Shares Amount
- ---------------------------------------------------------- ----------- -------------
Year ended July 31, 1999:
<S> <C> <C>
Shares sold............................................... 4,593,047 $ 56,428,035
Shares issued in reinvestment of dividends and
distributions........................................... 3,520,532 41,558,742
Shares reacquired......................................... (12,029,878) (147,746,960)
----------- -------------
Net decrease in shares outstanding before conversion...... (3,916,299) (49,760,183)
Shares reacquired upon conversion into Class A............ (3,122,676) (37,656,869)
----------- -------------
Net decrease in shares outstanding........................ (7,038,975) $ (87,417,052)
----------- -------------
----------- -------------
<CAPTION>
Class C
- ----------------------------------------------------------
<S> <C> <C>
Six months ended January 31, 2000:
Shares sold............................................... 158,497 $ 1,953,381
Shares issued in reinvestment of dividends and
distributions........................................... 61,199 723,534
Shares reacquired......................................... (146,596) (1,802,161)
----------- -------------
Net increase in shares outstanding........................ 73,100 $ 874,754
----------- -------------
----------- -------------
Year ended July 31, 1999:
Shares sold............................................... 311,461 $ 3,843,335
Shares issued in reinvestment of dividends and
distributions........................................... 65,181 770,023
Shares reacquired......................................... (319,838) (3,923,655)
----------- -------------
Net increase in shares outstanding........................ 56,804 $ 689,703
----------- -------------
----------- -------------
<CAPTION>
Class Z
- ----------------------------------------------------------
<S> <C> <C>
Six months ended January 31, 2000:
Shares sold............................................... 1,551,816 $ 19,172,525
Shares issued in reinvestment of dividends and
distributions........................................... 811,584 9,627,944
Shares reacquired......................................... (1,855,596) (22,898,469)
----------- -------------
Net increase in shares outstanding........................ 507,804 $ 5,902,000
----------- -------------
----------- -------------
Year ended July 31, 1999:
Shares sold............................................... 3,393,149 $ 42,029,226
Shares issued in reinvestment of dividends and
distributions........................................... 918,694 10,933,179
Shares reacquired......................................... (5,089,268) (63,383,912)
----------- -------------
Net decrease in shares outstanding........................ (777,425) $ (10,421,507)
----------- -------------
----------- -------------
</TABLE>
38
<PAGE>
This page intentionally left blank
39
<PAGE>
Prudential Balanced Fund
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Class A
----------------
<CAPTION>
Six Months Ended
January 31, 2000
- ----------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.66
----------------
Income from investment operations
Net investment income .17
Net realized and unrealized gain on investment transactions .18
----------------
Total from investment operations .35
----------------
Less distributions
Dividends from net investment income (.16)
Distributions from net realized gains on investment and
foreign currency transactions (.85)
----------------
Total distributions (1.01)
----------------
Net asset value, end of period $ 12.00
----------------
----------------
TOTAL RETURN(a): 2.86%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $519,959
Average net assets (000) $520,488
Ratios to average net assets:
Expenses, including distribution fees 1.19%(b)
Expenses, excluding distribution fees .94%(b)
Net investment income 2.67%(b)
For Class A, B, C and Z shares:
Portfolio turnover rate 34%
</TABLE>
- ------------------------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Annualized.
40 See Notes to Financial Statements
<PAGE>
Prudential Balanced Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class A
- ----------------------------------------------------------------------------------------------------------
Year Ended July 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 12.63 $ 14.01 $ 11.85 $ 12.04 $ 11.12
- ---------------- ---------------- ---------------- ---------------- ----------------
.29 .33 .34 .31 .34
.92 .29 2.96 .28 1.11
- ---------------- ---------------- ---------------- ---------------- ----------------
1.21 .62 3.30 .59 1.45
- ---------------- ---------------- ---------------- ---------------- ----------------
(.29) (.34) (.36) (.29) (.33)
)
(.89 (1.66) (.78) (.49) (.20)
- ---------------- ---------------- ---------------- ---------------- ----------------
(1.18) (2.00) (1.14) (.78) (.53)
- ---------------- ---------------- ---------------- ---------------- ----------------
$ 12.66 $ 12.63 $ 14.01 $ 11.85 $ 12.04
- ---------------- ---------------- ---------------- ---------------- ----------------
- ---------------- ---------------- ---------------- ---------------- ----------------
10.37% 5.05% 29.09% 4.89% 13.67%
$516,281 $485,690 $497,461 $262,096 $119,829
$493,917 $493,828 $306,717 $246,609 $ 69,754
1.17% 1.19% 1.17% 1.20% 1.22%
.92% .94% .92% .95% .97%
2.34% 2.51% 2.84% 2.53% 2.90%
103% 144% 140% 97% 201%
</TABLE>
See Notes to Financial Statements 41
<PAGE>
Prudential Balanced Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
----------------
Six Months Ended
January 31, 2000
- ----------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.61
----------------
Income from investment operations
Net investment income .13
Net realized and unrealized gain on investment transactions .17
----------------
Total from investment operations .30
----------------
Less distributions
Dividends from net investment income (.11)
Distributions from net realized gains on investment and
foreign currency transactions (.85)
----------------
Total distributions (.96)
----------------
Net asset value, end of period $ 11.95
----------------
----------------
TOTAL RETURN(a): 2.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $390,213
Average net assets (000) $416,544
Ratios to average net assets:
Expenses, including distribution fees 1.94%(b)
Expenses, excluding distribution fees .94%(b)
Net investment income 1.92%(b)
</TABLE>
- ------------------------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Annualized.
42 See Notes to Financial Statements
<PAGE>
Prudential Balanced Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
- ----------------------------------------------------------------------------------------------------------
Year Ended July 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 12.57 $ 13.96 $ 11.80 $ 12.00 $ 11.09
- ---------------- ---------------- ---------------- ---------------- ----------------
.20 .24 .26 .21 .26
.92 .27 2.95 .28 1.10
- ---------------- ---------------- ---------------- ---------------- ----------------
1.12 .51 3.21 .49 1.36
- ---------------- ---------------- ---------------- ---------------- ----------------
(.19) (.24) (.27) (.20) (.25)
)
(.89 (1.66) (.78) (.49) (.20)
- ---------------- ---------------- ---------------- ---------------- ----------------
(1.08) (1.90) (1.05) (.69) (.45)
- ---------------- ---------------- ---------------- ---------------- ----------------
$ 12.61 $ 12.57 $ 13.96 $ 11.80 $ 12.00
- ---------------- ---------------- ---------------- ---------------- ----------------
- ---------------- ---------------- ---------------- ---------------- ----------------
9.44% 4.28% 28.24% 4.05% 12.79%
$445,946 $533,354 $625,715 $420,465 $392,291
$490,071 $578,432 $431,425 $437,792 $409,419
1.92% 1.94% 1.92% 1.95% 1.97%
.92% .94% .92% .95% .97%
1.60% 1.76% 2.09% 1.78% 2.34%
</TABLE>
See Notes to Financial Statements 43
<PAGE>
Prudential Balanced Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
----------------
Six Months Ended
January 31, 2000
- ----------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.61
----------------
Income from investment operations
Net investment income .12
Net realized and unrealized gain on investment transactions .18
----------------
Total from investment operations .30
----------------
Less distributions
Dividends from net investment income (.11)
Distributions from net realized gains on investment and
foreign currency transactions (.85)
----------------
Total distributions (.96)
----------------
Net asset value, end of period $ 11.95
----------------
TOTAL RETURN(b): 2.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 10,295
Average net assets (000) $ 9,987
Ratios to average net assets:
Expenses, including distribution fees 1.94%(c)
Expenses, excluding distribution fees .94%(c)
Net investment income 1.92%(c)
</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) Annualized.
44 See Notes to Financial Statements
<PAGE>
Prudential Balanced Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
- -----------------------------------------------------------------------------------------------------------
Year Ended July 31, August 1, 1994(a)
- ------------------------------------------------------------------------------- through
1999 1998 1997 1996 July 31, 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 12.57 $ 13.96 $ 11.80 $ 12.00 $ 11.12
- ---------------- ---------------- ---------------- ---------------- -----------------
.20 .24 .26 .21 .21
.92 .27 2.95 .28 1.12
- ---------------- ---------------- ---------------- ---------------- -----------------
1.12 .51 3.21 .49 1.33
- ---------------- ---------------- ---------------- ---------------- -----------------
(.19) (.24) (.27) (.20) (.25)
)
(.89 (1.66) (.78) (.49) (.20)
- ---------------- ---------------- ---------------- ---------------- -----------------
(1.08) (1.90) (1.05) (.69) (.45)
- ---------------- ---------------- ---------------- ---------------- -----------------
$ 12.61 $ 12.57 $ 13.96 $ 11.80 $ 12.00
- ---------------- ---------------- ---------------- ---------------- -----------------
9.44% 4.28% 28.24% 4.05% 12.49%
$ 9,939 $ 9,201 $ 7,023 $ 3,525 $ 3,046
$ 9,535 $ 8,175 $ 4,790 $ 2,444 $ 920
1.92% 1.94% 1.92% 1.95% 2.04%(c)
.92% .94% .92% .95% 1.04%(c)
1.60% 1.76% 2.09% 1.78% 2.20%(c)
</TABLE>
See Notes to Financial Statements 45
<PAGE>
Prudential Balanced Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
----------------
Six Months Ended
January 31, 2000
- ----------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.67
----------------
Income from investment operations
Net investment income .18
Net realized and unrealized gain (loss) on investment
transactions .18
----------------
Total from investment operations .36
----------------
Less distributions
Dividends from net investment income (.17)
Distributions from net realized gains on investment and
foreign currency transactions (.85)
----------------
Total distributions (1.02)
----------------
Net asset value, end of period $ 12.01
----------------
TOTAL RETURN(b): 2.99%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $121,862
Average net assets (000) $120,568
Ratios to average net assets:
Expenses, including distribution fees .94%(c)
Expenses, excluding distribution fees .94%(c)
Net investment income 2.9%(c)
</TABLE>
- ------------------------------
(a) Commencement of offering of Class Z shares.
(b) 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) Annualized.
46 See Notes to Financial Statements
<PAGE>
Prudential Balanced Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
- -------------------------------------------------------------------------------------
Year Ended July 31, March 1, 1996(a)
- ---------------------------------------------------------- through
1999 1998 1997 July 31, 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 12.64 $ 14.01 $ 11.85 $ 12.16
- ---------------- ---------------- ---------------- ----------------
.33 .37 .46 .13
.91 .29 2.87 (.28)
- ---------------- ---------------- ---------------- ----------------
1.24 .66 3.33 (.15)
- ---------------- ---------------- ---------------- ----------------
(.32) (.37) (.39) (.16)
)
(.89 (1.66) (.78) --
- ---------------- ---------------- ---------------- ----------------
(1.21) (2.03) (1.17) (.16)
- ---------------- ---------------- ---------------- ----------------
$ 12.67 $ 12.64 $ 14.01 $ 11.85
- ---------------- ---------------- ---------------- ----------------
10.63% 5.37% 29.39% (1.24)%
$122,129 $131,671 $129,459 $ 4,015
$121,398 $128,358 $ 99,391 $ 4,217
.92% .94% .92% .95%(c)
.92% .94% .92% .95%(c)
2.60% 2.76% 3.12% 2.72%(c)
</TABLE>
See Notes to Financial Statements 47
<PAGE>
Prudential Balanced Fund
Getting the Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds, you receive financial advice
from a Prudential Securities Financial Advisor or 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 WORH IT?
Your financial advisor or registered representative can help you match the
reward you seek with the risk you can tolerate. 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 THR JONESES
A financial advisor or registered representative can help you wade through the
numerous available mutual funds to find the ones that fit your 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 should remind you that you're investing for the
long haul.
<PAGE>
Prudential Balanced Fund
Getting the Most From Your Prudential Mutual Fund
How many times have you read these reports--or other financial materials--and
stumbled across a word that you don't understand?
Many shareholders have run into the same problem. We'd like to help. So we'll
use this space from time to time to explain some of the words you might have
read, but not understood. And if you have a favorite word that no one can
explain to your satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half of one percent is 50 basis
points.
Collateralized Mortgage Obligations (CMOs): Mortgage-backed bonds that separate
mortgage pools into different maturity classes called tranches. These
instruments are sensitive to changes in interest rates and homeowner
refinancing activity. They are subject to prepayment and maturity extension
risk.
Derivatives: Securities that derive their value from other securities. The
rate of return of these financial instruments rises and falls--sometimes very
suddenly--in response to changes in some specific interest rate, currency,
stock, or other variable.
Discount Rate: The interest rate charged by the Federal Reserve on loans to
member banks.
Federal Funds Rate: The interest rate charged by one bank to another on
overnight loans.
Futures Contract: An agreement to purchase or sell a specific amount of a
commodity or financial instrument at a set price at a specified date in the
future.
<PAGE>
www.prudential.com (800) 225-1852
Leverage: The use of borrowed assets to enhance return. The expectation is that
the interest rate charged on borrowed funds will be lower than the return on
the investment. While leverage can increase profits, it can also magnify
losses.
Liquidity: The ease with which a financial instrument (or product) can be
bought or sold (converted into cash) in the financial markets.
Price/Earnings Ratio: The price of a share of stock divided by the earnings
per share for a 12-month period.
Option: An agreement to purchase or sell something, such as shares of stock,
by a certain time for a specified price. An option need not be exercised.
Spread: The difference between two values; often used to describe the
difference between "bid" and "asked" prices of a security, or between the
yields of two similar maturity bonds.
Yankee Bond: A bond sold by a foreign company or government on the U.S. market
and denominated in U.S. dollars.
<PAGE>
Prudential Balanced Fund
Getting the Most From Your Prudential Mutual Fund
Prudential offers a broad range of mutual funds designed to meet your
individual needs. For information about these funds, contact your financial
adviser or call us at (800) 225-1852. Read the prospectus carefully before you
invest or send money.
STOCK FUNDS
Prudential Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Index Series Fund
Prudential Small-Cap Index Fund
Prudential Stock Index Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Mid-Cap Value Fund
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund
Prudential 20/20 Focus Fund
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Target Funds
Large Capitalization Growth Fund
Large Capitalization Value Fund
Small Capitalization Growth Fund
Small Capitalization Value Fund
Asset Allocation/Balanced Funds
Prudential Balanced Fund
Prudential Diversified Funds
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund
GLOBAL FUNDS
Global Stock Funds
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Prudential Latin America Equity Fund
Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Index Series Fund
Prudential Europe Index Fund
Prudential Pacific Index Fund
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Prudential Global Growth Fund
Prudential International Value Fund
Prudential Jennison International Growth Fund
Global Utility Fund, Inc.
Target Funds
International Equity Fund
Global Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
<PAGE>
www.prudential.com (800) 225-1852
BOND FUNDS
Taxable Bond Funds
Prudential Diversified Bond Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential High Yield Total Return Fund, Inc.
Prudential Index Series Fund
Prudential Bond Market Index Fund
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Target Funds
Total Return Bond Fund
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Income Series
Insured Series
Prudential Municipal Series Fund
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
MONEY MARKET FUNDS
Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund, Inc.
Money Market Series
Prudential MoneyMart Assets, Inc.
Tax-Free Money Market Funds
Prudential Tax-Free Money Fund, Inc.
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
COMMAND Funds
COMMAND Money Fund
COMMAND Government Fund
COMMAND Tax-Free Fund
Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
<PAGE>
www.prudential.com (800) 225-1852
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Trustees
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
Robin B. Smith
John R. Strangfeld
Louis A. Weil, III
Clay T. Whitehead
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Marguerite E. H. Morrison, Secretary
William V. Healey, Assistant Secretary
Stephen M. Ungerman, Assistant Treasurer
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
Fund Symbols NASDAQ CUSIP
Class A PFCAX 74431M105
Class B PRFCX 74431M204
Class C -- 74431M303
Class Z PFCZX 74431M402
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, 2000, were not audited
and, accordingly, no opinion is expressed on them.
<PAGE>
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Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
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