(ICON)
Prudential
Stock Index
Fund
ANNUAL
REPORT
Sept. 30, 1997
(LOGO)
<PAGE>
Prudential Stock Index Fund
A Series of the Prudential Dryden Fund
Performance At A Glance.
It has been an exceptionally good 12 months for the S&P 500.
For most of the
year, investors preferred stocks of the largest, most
familiar companies --
the companies that dominate the S&P 500 Index -- and bid
their prices up. Not
only did the market index deliver an outstanding 40% gain,
but index funds
outperformed the average actively managed growth fund by six
percentage
points, as measured by Lipper Analytical Services. The
Prudential Stock Index
Fund performed in line with the Lipper S&P 500 Fund Average.
Cumulative Total Returns1 As of
9/30/97
<TABLE>
<CAPTION>
<C> <S> <S>
One Three
Since
Year Years
Inception2
Class Z 39.34% (39.08)4 115.22% (114.83)4
148.48% (148.03)4
Class I N/A N/A
0.00
Lipper S&P 500
Funds Avg3 39.65 116.05
***
</TABLE>
Average Annual Total Returns1 As
of 9/30/97
<TABLE>
<CAPTION>
<S> <C> <C>
One Three
Since
Year Years
Inception2
Class Z 39.34% (39.08)4 29.10% (29.02)4
20.41% (20.36)4
</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 costs.
1Source: Prudential Investments Fund Management and Lipper
Analytical Services.
Since Class I shares have been in existence less than one
year, no average
annual total returns are presented.
2Inception dates: 11/5/92, Class Z; 8/1/97, Class I.
3These are the average returns for 64 funds in Lipper
Analytical Services' S&P
500 Index Fund average for one year, and 44 funds for three
years since the
inception of Class Z shares on 11/5/92.
4Without waiver of management fees and/or expense
subsidization, the Fund's
cumulative and/or average annual total returns would have
been lower, as
indicated in the parentheses ().
*** The Lipper Since inception category for Class Z shares
is 150.35% for 25
funds; and Class I shares is -0.50% for 76 funds.
How Investments Compared.
(As of 9/30/97)
(CHART)
Source: Lipper Analytical Services. Financial markets
change, so a mutual
fund's past performance should never be used to predict
future results. The
risks to each of the investments listed above are different
- -- we provide
12-month total returns for several Lipper mutual fund
categories to show you
that reaching for higher returns means tolerating more risk.
The greater the
risk, the larger the potential reward or loss. In addition,
we've included
historical 20-year average annual returns. These returns
assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Investors
have received higher
historical total returns from stocks than from most other
investments. Smaller
capitalization stocks offer greater potential for long-term
growth but may be
more volatile than larger capitalization stocks.
General Bond Funds provide more income than stock funds,
which can help smooth
out their total returns year by year. But their prices still
fluctuate
(sometimes significantly) and their returns have been
historically lower than
those of stock funds.
General Municipal Debt Funds invest in bonds issued by state
governments,
state agencies and/or municipalities. This investment
provides income that is
usually exempt from federal and state income taxes.
Money Market Funds attempt to preserve a constant share
value; they don't
fluctuate much in price but, historically, their returns
have been generally
among the lowest of the major investment categories.
<PAGE>
John Moschberger, Fund Manager
(PHOTO)
Portfolio
Manager's Report
The Prudential Stock Index Fund seeks to provide investment
results that mirror
the performance of Standard & Poor's 500 Composite Stock
Index. The S&P 500 is
widely regarded as representative of the performance of the
U.S. stock market
as a whole, and is comprised of stocks that represent more
than 70% of the
total market value of all publicly traded U.S. common
stocks. The difference
between the Fund's return and that of the index is primarily
fees and
management expenses. There can be no assurance that the Fund
will achieve its
investment objective.
The Place To Be.
When the S&P 500 rises faster than indexes of smaller
stocks, it historically
also has performed better than the average selective mutual
fund. The past 12
months was such a year -- the S&P 500 was the place to be.
In addition to
having the low management costs of an index fund, the
Prudential Stock Index
Fund owned the stocks that most investors wanted to own.
Market Review.
- ------------------------------------------------------------
- -------------------
A year ago we attributed the stock market's good performance
for the prior year
to increasing corporate earnings, moderate economic growth
and subdued
inflation. Those factors remained in place to drive the
stock market to a
third successive year of very solid growth. This year's
return doubled last
year's, as stock prices climbed even faster than rising
corporate earnings.
However, after its long bull run, the market has
occasionally suffered anxiety
attacks. One occurred in March, when investors feared that
rising interest
rates would curtail the long-running economic expansion. The
Federal Reserve
did indeed increase short-term interest rates for the first
time in two
years -- but only by a small amount. Shortly thereafter,
the economic
expansion slowed to a pace consistent with smooth, long-term
growth and the
stock market resumed its climb.
The markets suffered an anxiety attack in August, with the
threat of earnings
disappointments. Stocks have been priced on the assumption
of continued rapid
earnings growth, and corporate earnings through much of this
12-month period
have supported the assumption. By late summer, however,
investors seemed ready
to believe that earnings would slow. Even if earnings
stabilized at the high
levels they reached, the rapid escalation of stock prices
would be harder to
justify. Stock prices suffered another setback in late
October but began to
rebound once again in November.
Portfolio Composition
Expressed as a percentage of
net assets as of 9/30/97.
(CHART)
<PAGE>
What Went Well.
- -------------------------------------------------
Tech Stocks Lead The Way.
The market was led by technology stocks -- up 60%, on
average -- particularly
those of electronics and computer firms. Intel and
Microsoft were the giants
among computer-related firms whose share prices more than
doubled over the
year, but the number also included Compaq, Data General,
Texas Instruments and
Dell. IBM's outstanding 67% growth looked slow by
comparison. The second
fastest-growing sector was financial stocks -- up 58% --
with Merrill Lynch
and Barnett Banks among the larger firms whose stocks
doubled in the year.
Savings and loans and financial services companies, notably
the investment
firms, were the leading industries. Banks, (money center and
regional) and
insurance companies also had an excellent year. The energy
sector -- paced by
oil service companies such as Schlumberger and Halliburton,
and to a smaller
extent by integrated oil companies -- also did well.
And Not So Well.
- -------------------------------------------------
Have Prices
Reached A Plateau?
Over the past 12 months, there was very little bad news in
the market. Gold
stocks fell, but other declines affected specific stocks,
not entire
industries. Even the slowest-rising sector, utilities,
climbed by 26% over
the year -- led by telecommunications service companies.
This trailing sector
rose at a rate that would have been considered very good for
the market
average.
By the end of September, however, there were signs that
earnings at some of the
market leaders may have reached a plateau. Moreover, when
companies reported
earnings disappointments, their stock prices slid, even when
the underlying
business was healthy. Investors broadened their search for
good value, so the
shares of smaller companies accelerated. These recent
trends suggest that
investors should not expect the exceptional performance of
the last 12 months
to continue.
S&P 500 Index
Total Annual Return by Sector as of 9/30/97
Technology 59.95%
Finance 57.84%
Energy 47.24%
Consumer Cyclical 37.72%
Industrials 31.69%
Consumer Growth/Staple 31.32%
Utility 26.03%
S&P 500 Index 40.43%
Source: Prudential
Looking Ahead.
- -------------------------------------------------
The U.S. economy continues to grow at a moderate rate --
fast enough to
support earnings, but not fast enough to create supply
bottlenecks and
inflation. Inflation shows no signs of reviving. Of the
three factors we
mentioned, only earnings growth has been spotty. Some
prominent companies are
continuing to report strong earnings, while others are
disappointing analysts'
expectations. Stock prices have been volatile all year and
economic turmoil
in Asia is raising anxiety levels. By many valuation
standards, shares are
expensive, but investors appear to be more sensitive to
earnings
disappointments than to stock prices.
1
<PAGE>
President's Letter
November 12, 1997
- ------------------------------------------------------------
- -------------------
Keep Events In Perspective.
Dear Shareholder:
For investors, the late October decline experienced by the
financial markets
was unsettling -- but let's put events in perspective.
October's downturn was the third significant one this year.
Stock prices fell
sharply in early spring and dropped again in late summer.
Yet following each
episode the financial markets recovered most of the lost
ground. That's very
important because it shows that investors today are not
easily swayed by
temporary setbacks -- they choose to stay the course and are
investing for the
long term.
Despite the recent volatility, it has been a very good year
for investors.
Plus, the U.S. economy is strong, inflation remains low, and
unemployment is
down. At the end of the sell-off on October 27, the Standard
& Poor's 500 Index
had still gained more than 18% for the year. The Dow Jones
Industrial Average
was also up 11% and the Nasdaq Composite nearly 19%.
Here are a few more thoughts that may help you during times
of market
uncertainty:
- - Keep your expectations realistic. Seasoned investors know
that financial
markets rise and fall -- as will the value of their
holdings. Over time,
however, stocks have been shown to produce very attractive
returns. As a
matter of fact, the S&P 500 rose more than 280% from the
time of the last
major market downturn (October 31, 1987) through December
31, 1996, according
to Lipper Analytical Services.
- - Don't make rash decisions. If you have an investment
plan, stick to it.
While past performance is not indicative of future results,
historically,
investors have profited by taking advantage of the long-term
growth potential
of U.S. stocks.
- - We're on your side. Your Prudential Securities Financial
Advisor or Pruco
Securities Registered Representative can help you understand
what's happening
in the financial markets. Why not call him or her today?
Thank you for your continued confidence in Prudential Mutual
Funds and
Annuities. We'll do everything we can to keep you informed
and to earn your
trust.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds & Annuities
2
<PAGE>
Portfolio of Investments as of PRUDENTIAL
DRYDEN FUND
September 30, 1997 PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--95.8%
COMMON STOCKS--95.8%
- ------------------------------------------------------------
Aerospace/Defense--2.1%
1,800 Aeroquip-Vickers Inc. $
88,200
36,700 Allied-Signal, Inc.
1,559,750
65,550 Boeing Co.
3,568,378
4,100 General Dynamics Corp.
357,213
12,530 Lockheed Martin Corp.
1,336,011
4,300 Northrop Grumman Corp.
521,913
15,300 Raytheon Co.
904,612
13,700 Rockwell International Corp.
862,244
15,200 United Technologies Corp.
1,231,200
--------
- ----
10,429,521
- ------------------------------------------------------------
- ----
Airlines--0.3%
5,850 AMR Corp.(a)
647,522
4,700 Delta Airlines, Inc.
442,681
9,700 Southwest Airlines Co.
309,794
5,000 USAir Group, Inc.(a)
206,875
--------
- ----
1,606,872
- ------------------------------------------------------------
- ----
Aluminum--0.4%
14,600 Alcan Aluminum Ltd.
507,350
11,200 Aluminum Co. of America
918,400
4,850 Reynolds Metals Co.
343,441
--------
- ----
1,769,191
- ------------------------------------------------------------
- ----
Automobiles & Trucks--2.0%
44,600 Chrysler Corp.
1,641,838
2,400 Cummins Engine, Inc.
187,350
6,800 Dana Corp.
335,750
4,100 Echlin Inc.
143,756
77,400 Ford Motor Co.
3,502,350
47,400 General Motors Corp.
3,172,837
11,600 Genuine Parts Co.
357,425
5,200 Johnson Controls, Inc.
257,725
4,720 Navistar International Corp.(a)
130,390
3,600 Safety-Kleen Corp. $
86,175
--------
- ----
9,815,596
- ------------------------------------------------------------
- ----
Banking--7.8%
37,730 Banc One Corp.
2,105,806
9,400 Bank of Boston Corp.
831,312
25,000 Bank of New York Co., Inc.
1,200,000
45,400 BankAmerica Corp.
3,328,387
6,300 Bankers Trust NY Corp.
771,750
12,700 Barnett Banks, Inc.
898,525
27,908 Chase Manhattan Corp.
3,293,144
30,000 Citicorp
4,018,125
6,900 Comerica, Inc.
544,669
13,300 CoreStates Financial Corp.
880,294
10,200 Fifth Third Bancorp
666,825
19,001 First Chicago Corp.
1,429,825
37,200 First Union Corp.
1,862,325
16,887 Fleet Financial Group, Inc.
1,107,154
3,600 Golden West Financial Corp.
323,100
6,500 H.F. Ahmanson & Co.
369,281
10,200 Huntington Bancshares, Inc.
367,838
14,400 KeyCorp
916,200
16,850 Mellon Bank Corp.
922,537
12,000 Morgan (J.P.) & Co., Inc.
1,363,500
14,200 National City Corp.
874,187
47,176 NationsBank Corp.
2,919,015
24,200 Norwest Corp.
1,482,250
20,700 PNC Bank Corp.
1,010,419
6,100 Providian Financial Corp.
242,094
3,500 Republic New York Corp.
397,688
10,500 State Street Bank Corp.
639,844
14,400 Suntrust Banks, Inc.
978,300
15,919 U.S. Bancorp
1,536,183
5,776 Wells Fargo & Co.
1,588,400
--------
- ----
38,868,977
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of PRUDENTIAL
DRYDEN FUND
September 30, 1997 PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Beverages--3.3%
2,300 Adolph Coors Co. $
87,113
31,800 Anheuser Busch Cos., Inc.
1,434,975
4,700 Brown-Forman Corp.
233,531
161,200 Coca-Cola Co.
9,823,125
99,700 PepsiCo, Inc.
4,044,081
24,100 Seagram Co., Ltd.
849,525
--------
- ----
16,472,350
- ------------------------------------------------------------
- ----
Chemicals--2.0%
7,100 Air Products & Chemicals, Inc.
588,856
15,000 Dow Chemical Co.
1,360,313
73,300 E.I. du Pont de Nemours & Co.
4,512,531
5,200 Eastman Chemical Co.
322,400
6,400 Hercules, Inc.
318,400
38,200 Monsanto Co.
1,489,800
4,300 Nalco Chemical Co.
172,269
4,100 Rohm & Haas Co.
393,344
6,300 Sigma-Aldrich Corp.
207,506
4,540 Solutia Inc. (a)
90,800
8,000 Union Carbide Corp.
389,500
--------
- ----
9,845,719
- ------------------------------------------------------------
- ----
Chemical-Specialty--0.4%
9,125 Engelhard Corp.
196,758
3,800 Great Lakes Chemical Corp.
187,388
9,200 Morton International, Inc.
326,600
10,400 Praxair, Inc.
532,350
2,700 Raychem Corp.
228,150
4,700 W.R. Grace & Co.
346,037
--------
- ----
1,817,283
- ------------------------------------------------------------
- ----
Commercial Services--0.2%
26,425 CUC International, Inc.(a)
819,175
5,300 Deluxe Corp.
177,881
2,100 Harland (John H.) Co.
48,431
5,700 Moore Corp. Ltd.
108,300
--------
- ----
1,153,787
Computer Software & Services--5.6%
22,400 3Com Corp.(a) $
1,148,000
4,600 Adobe Systems, Inc.
231,725
3,200 AutoDesk, Inc.
145,200
18,900 Automatic Data Processing, Inc.
945,000
12,700 Bay Networks, Inc.(a)
490,537
10,200 Cabletron Systems, Inc.(a)
326,400
5,100 Ceridian Corp.(a)
188,700
920 ChoicePoint Inc.(a)
34,385
43,600 Cisco Systems, Inc.(a)
3,185,525
23,650 Computer Associates International,
Inc.
1,698,366
5,050 Computer Sciences Corp.(a)
357,288
21,600 Dell Computer Corp.(a)
2,092,500
16,100 EMC Corp.(a)
939,837
5,600 KLA Instruments Corp.(a)
378,350
13,700 Micron Technology Inc.
475,219
77,900 Microsoft Corp.(a)
10,307,144
21,900 Novell, Inc.(a)
196,416
63,562 Oracle Systems Corp.(a)
2,316,040
8,000 Parametric Technology Co.(a)
353,000
15,700 Seagate Technology, Inc.(a)
567,162
11,700 Silicon Graphics Inc.(a)
307,125
24,000 Sun Microsystems Inc.(a)
1,123,500
--------
- ----
27,807,419
- ------------------------------------------------------------
- ----
Construction--0.1%
5,400 Fluor Corp.
289,575
2,500 Foster Wheeler Corp.
109,844
2,300 Kaufman & Broad Home Corp.
49,881
1,400 Pulte Corp.
53,550
--------
- ----
502,850
- ------------------------------------------------------------
- ----
Containers--0.2%
1,800 Ball Corp.
62,663
3,400 Bemis, Inc.
152,150
8,400 Crown Cork & Seal, Inc.(a)
387,450
9,200 Owens-Illinois, Inc.(a)
312,225
--------
- ----
914,488
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as of PRUDENTIAL
DRYDEN FUND
September 30, 1997 PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Cosmetics & Soaps--2.4%
3,400 Alberto-Culver Co. $
103,488
8,700 Avon Products, Inc.
539,400
6,700 Clorox Co.
496,637
19,100 Colgate-Palmolive Co.
1,331,031
36,400 Gillette Co.
3,141,775
7,050 International Flavors & Fragrances
Inc.
345,450
87,900 Procter & Gamble Co.
6,070,594
--------
- ----
12,028,375
- ------------------------------------------------------------
- ----
Diversified Gas--0.1%
6,700 Coastal Corp.
410,375
1,500 Eastern Enterprises, Inc.
55,969
3,200 NICOR Inc.
120,000
1,900 Oneok Inc.
61,987
--------
- ----
648,331
- ------------------------------------------------------------
- ----
Drugs & Medical Supplies--9.3%
50,000 Abbott Laboratories
3,196,875
4,300 Allergan, Inc.
155,606
5,400 ALZA Corp.(a)
156,600
42,300 American Home Products Corp.
3,087,900
17,300 Amgen, Inc.(a)
829,319
3,700 Bard (C.R.), Inc.
125,569
3,600 Bausch & Lomb, Inc.
145,800
18,200 Baxter International, Inc.
950,950
8,100 Becton Dickinson & Co.
387,787
7,200 Biomet, Inc.(a)
172,800
12,500 Boston Scientific Corp.(a)
689,844
64,700 Bristol-Myers Squibb Co.
5,353,925
7,100 Cardinal Health, Inc.
504,100
36,100 Eli Lilly & Co
4,347,794
9,600 Guidant Corp.
537,600
86,600 Johnson & Johnson Co.
4,990,325
4,800 Mallinckrodt, Inc.
172,800
30,800 Medtronic, Inc.
1,447,600
78,500 Merck & Co., Inc.
7,845,094
83,900 Pfizer, Inc.
5,039,244
33,155 Pharmacia & Upjohn, Inc. $
1,210,157
47,600 Schering- Plough Corp.
2,451,400
5,700 St. Jude Medical, Inc.(a)
199,856
4,800 United States Surgical Corp.
140,100
17,600 Warner Lambert Co.
2,374,900
--------
- ----
46,513,945
- ------------------------------------------------------------
- ----
Electronics--4.8%
9,100 Advanced Micro Devices, Inc.(a)
296,319
14,184 AMP Inc.
759,730
8,000 Apple Computer, Inc.
173,500
3,200 Data General Corp.(a)
85,200
10,100 Digital Equipment Corp. (a)
437,456
3,000 EG&G, Inc.
62,063
29,000 Emerson Electric Co.
1,671,125
5,200 Harris Corp.
237,900
67,600 Hewlett-Packard Co.
4,702,425
106,200 Intel Corp.
9,803,587
9,400 LSI Logic Corp.(a)
301,975
38,700 Motorola, Inc.
2,781,562
9,200 National Semiconductors Corp.(a)
377,200
3,000 Perkin-Elmer Corp.
219,188
6,800 Tandy Corp.
228,650
2,200 Tektronix, Inc.
148,363
12,400 Texas Instruments Inc.
1,675,550
3,400 Thomas & Betts Corp.
185,725
--------
- ----
24,147,518
- ------------------------------------------------------------
- ----
Environmental Services--0.3%
20,700 Laidlaw Inc. (Class
openqopenqBclquoclquo stock)
309,206
29,100 Waste Management Inc.
1,016,681
--------
- ----
1,325,887
- ------------------------------------------------------------
- ----
Financial Services--3.8%
30,500 American Express Co.
2,497,188
3,500 Beneficial Corp.
266,656
6,900 Block (H&R), Inc.
266,513
17,400 Charles Schwab Corp.
622,050
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as of PRUDENTIAL
DRYDEN FUND
September 30, 1997 PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Financial Services (cont'd.)
7,200 Countrywide Mortgage Investments, Inc. $
262,350
9,900 Equifax Inc.
311,231
45,000 Federal Home Loan Mortgage Corp.
1,586,250
69,000 Federal National Mortgage Assn.
3,243,000
29,300 First Data Corp.
1,100,581
8,700 Green Tree Financial Corp.
408,900
6,900 Household International Corp.
780,994
2,800 MBIA, Inc.
351,225
21,538 MBNA Corp.
872,269
21,500 Merrill Lynch & Co., Inc.
1,595,031
37,971 Morgan Stanley, Dean Witter, Discover
& Co.
2,052,807
7,100 Salomon, Inc.
533,831
12,450 SunAmerica, Inc.
487,884
4,350 Transamerica Corp.
432,825
16,310 Washington Mutual, Inc.
1,137,623
--------
- ----
18,809,208
- ------------------------------------------------------------
- ----
Food & Beverage--2.3%
36,356 Archer-Daniels-Midland Co.
870,265
29,900 Campbell Soup Co.
1,465,100
15,500 ConAgra, Inc.
1,023,000
9,300 CPC International, Inc.
861,412
2,000 Fleming Cos., Inc.
36,625
10,450 General Mills, Inc.
720,397
4,000 Giant Foods, Inc.
130,250
24,200 H.J. Heinz Co.
1,117,737
9,300 Hershey Foods Corp.
525,450
26,800 Kellogg Co.
1,128,950
9,000 Quaker Oats Co.
453,375
6,900 Ralston Purina Co.
610,650
31,300 Sara Lee Corp.
1,611,950
11,500 Sysco Corp.
424,781
7,500 Wm. Wrigley Jr. Co.
564,844
--------
- ----
11,544,786
- ------------------------------------------------------------
- ----
Forest Products--1.4%
3,700 Boise Cascade Corp.
155,631
6,100 Champion International Corp.
371,719
12,300 Fort James Corp. $
563,494
5,850 Georgia-Pacific Corp.
610,594
19,716 International Paper Co.
1,085,612
36,516 Kimberly-Clark Corp.
1,787,002
7,100 Louisiana-Pacific Corp.
177,500
3,300 Mead Corp.
238,425
1,700 Potlatch Corp.
85,531
6,800 Stone Container Corp.
105,825
3,700 Temple Inland Inc.
236,800
4,500 Union Camp Corp.
277,594
6,400 Westvaco Corp.
230,800
12,900 Weyerhaeuser Co.
765,937
7,000 Willamette Industries, Inc.
267,750
--------
- ----
6,960,214
- ------------------------------------------------------------
- ----
Gas Pipelines--0.4%
10,218 Cinergy Corp.
341,664
3,600 Columbia Gas System, Inc.(a)
252,000
6,000 Consolidated Natural Gas Co.
349,125
19,400 Enron Corp.
746,900
2,100 Peoples Energy Corp.
79,144
10,300 Williams Cos., Inc.
482,169
--------
- ----
2,251,002
- ------------------------------------------------------------
- ----
Hospital Management--0.8%
7,000 Beverly Enterprises, Inc.(a)
121,625
43,528 Columbia/HCA Healthcare Corp.
1,251,430
22,000 Healthsouth Corp.(a)
587,125
11,000 Humana, Inc.(a)
261,938
4,300 Manor Care, Inc.
142,975
16,100 Service Corp. International
518,219
1,400 Shared Medical Systems Corp.
74,025
19,300 Tenet Healthcare Corp.(a)
562,112
12,100 United Healthcare Corp.
605,000
--------
- ----
4,124,449
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 6
<PAGE>
Portfolio of Investments as of PRUDENTIAL
DRYDEN FUND
September 30, 1997 PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Housing Related--0.6%
2,800 Armstrong World Industries, Inc. $
187,775
1,800 Centex Corp.
105,075
2,200 Fleetwood Enterprises, Inc.
73,838
11,000 Loweclquos Companies, Inc.
427,625
10,700 Masco Corp.
490,194
6,300 Maytag Corp.
214,987
3,500 Owens Corning Fiberglas Corp. (a)
127,750
5,300 Pioneer Hi-Bred International, Inc.
482,300
6,000 Stanley Works
258,000
4,100 Tupperware Corp.
115,312
4,800 Whirlpool Corp.
318,300
--------
- ----
2,801,156
- ------------------------------------------------------------
- ----
Insurance--4.2%
9,700 Aetna Life & Casualty Co.
789,944
28,574 Allstate Corp.
2,296,635
16,115 American General Corp.
835,966
45,568 American International Group, Inc.
4,702,048
10,650 Aon Corp.
563,119
11,400 Chubb Corp.
810,112
4,750 CIGNA Corp.
884,687
12,200 Conseco, Inc.
595,512
5,200 General Re Corp.
1,032,200
7,700 ITT Hartford Group Inc.
662,681
4,625 Jefferson-Pilot Corp.
365,375
6,800 Lincoln National Corp.
473,450
10,800 Marsh & McLennan Cos.
827,550
7,500 MGIC Investment Corp.
429,844
4,700 Progressive Corp.
503,488
8,000 SAFECO Corp.
424,000
5,400 St. Paul Cos, Inc.
440,438
8,900 Torchmark Corp.
349,325
41,761 Travelers, Inc.
2,850,188
8,900 UNUM Corp.
406,063
7,200 USF&G Corp.
165,150
10,400 Wachovia Corp.
748,800
--------
- ----
21,156,575
Leisure--1.1%
6,300 Brunswick Corp. $
222,075
6,600 Harrahclquos Entertainment Inc.(a)
148,088
8,000 Hasbro, Inc.
225,000
7,600 ITT Corp. (New)
514,900
2,600 King World Productions, Inc.(a)
112,450
18,987 Mattel, Inc.
628,944
11,600 Mirage Resorts, Inc. (a)
349,450
43,692 Walt Disney Co.
3,522,667
--------
- ----
5,723,574
- ------------------------------------------------------------
- ----
Lodging--0.4%
10,500 HFS, Inc.(a)
781,594
16,400 Hilton Hotels Corp.
552,475
8,200 Marriott International, Inc.(a)
582,712
--------
- ----
1,916,781
- ------------------------------------------------------------
- ----
Machinery--1.2%
1,400 Briggs & Stratton Corp.
69,213
4,800 Case Corp.
319,800
24,500 Caterpillar Inc.
1,321,469
2,400 Cincinnati Milacron, Inc.
64,500
8,000 Cooper Industries, Inc.
432,500
16,600 Deere & Co.
892,250
7,300 Dover Corp.
495,487
5,000 Eaton Corp.
461,875
3,300 Harnischfeger Industries, Inc.
141,075
10,700 Ingersoll-Rand Co.
460,769
5,104 PACCAR Inc.
285,824
7,325 Parker Hannifin Corp.
329,625
3,950 Snap-On Inc.
181,947
9,600 Thermo Electron Corp.(a)
384,000
4,100 Timken Co.
164,256
--------
- ----
6,004,590
- ------------------------------------------------------------
- ----
Media--1.7%
22,750 Comcast Corp.
585,813
9,400 Donnelley (R.R.) & Sons, Co.
335,463
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 7
<PAGE>
Portfolio of Investments as of PRUDENTIAL
DRYDEN FUND
September 30, 1997 PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Media (cont'd.)
6,200 Dow Jones & Co., Inc. $
289,850
11,400 Dun & Bradstreet Corp.
323,475
9,150 Gannett Co., Inc.
987,628
7,950 Interpublic Group of Companies, Inc.
407,934
6,000 Knight-Ridder, Inc.
327,750
6,300 McGraw Hill Cos., Inc.
426,431
3,400 Meredith Corp.
112,625
5,900 New York Times Co.
309,750
36,400 Time Warner, Inc.
1,972,425
6,200 Times Mirror Co.
340,613
7,700 Tribune Co.
410,506
39,000 U.S. West Media Group
870,187
22,739 Viacom, Inc.(a)
719,121
--------
- ----
8,419,571
- ------------------------------------------------------------
- ----
Mineral Resources--0.5%
2,600 ASARCO Inc.
83,200
23,900 Barrick Gold Corp.
591,525
6,150 Cyprus Amax Minerals Co.
147,600
9,700 Echo Bay Mines, Ltd.
55,169
12,900 Freeport-McMoran Copper & Gold, Inc.
371,681
9,800 Homestake Mining Co.
150,063
10,800 INCO, Ltd.
270,675
10,037 Newmont Mining Corp.
451,038
4,200 Phelps-Dodge Corp.
326,025
15,900 Placer Dome, Inc.
304,087
--------
- ----
2,751,063
- ------------------------------------------------------------
- ----
Miscellaneous Basic Industry--5.0%
11,900 Applied Materials, Inc.(a)
1,133,475
13,900 Browning-Ferris Industries, Inc.
529,069
11,000 Cognizant Corp.
448,250
2,900 Crane Co.
119,263
4,100 Ecolab, Inc.
199,106
2,450 FMC Corp.(a)
217,438
11,500 Fortune Brands, Inc.
387,406
212,900 General Electric Co.
14,490,506
3,200 General Signal Corp. $
138,400
3,300 Grainger (W.W.) Inc.
293,700
16,200 Illinois Tool Works, Inc.
810,000
8,100 ITT Industries Inc.
268,819
7,400 Loews Corp.
835,737
2,900 Millipore Corp.
142,463
500 NACCO Industries, Inc.
58,781
8,033 Pall Corp.
173,212
11,600 PPG Industries, Inc.
727,175
10,700 Textron, Inc.
695,500
8,100 TRW Inc.
444,487
17,300 Tyco International Ltd.
1,419,681
42,000 Westinghouse Electric Corp.
1,136,625
--------
- ----
24,669,093
- ------------------------------------------------------------
- ----
Miscellaneous Consumer Growth--1.6%
5,100 American Greetings Corp.
188,063
5,900 Black & Decker Corp.
219,775
14,800 Corning, Inc.
699,300
21,400 Eastman Kodak Co.
1,389,662
2,200 Jostens, Inc.
59,675
27,000 Minnesota Mining & Manufacturing Co.
2,497,500
2,700 Polaroid Corp.
138,206
9,400 Rubbermaid, Inc.
240,288
10,400 Unilever N.V.
2,211,300
6,300 Whitman Corp.
171,675
--------
- ----
7,815,444
- ------------------------------------------------------------
- ----
Office Equipment & Supplies--2.9%
6,800 Avery Dennison Corp.
272,000
49,232 Compaq Computer Corp.(a)
3,680,092
8,300 Honeywell, Inc.
557,656
9,000 Ikon Office Solutions Inc.
230,063
64,200 International Business Machines Corp.
6,801,187
9,400 Pitney Bowes, Inc.
781,963
10,900 Unisys Corp.(a)
166,906
20,950 Xerox Corp.
1,763,728
--------
- ----
14,253,595
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 8
<PAGE>
Portfolio of Investments as of PRUDENTIAL
DRYDEN FUND
September 30, 1997 PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Petroleum--7.8%
5,900 Amerada Hess Corp. $
363,956
32,000 Amoco Corp.
3,084,000
3,900 Anadarko Petroleum Corp.
280,069
5,900 Apache Corp.
252,962
4,600 Ashland Oil, Inc.
250,125
20,800 Atlantic Richfield Co.
1,777,100
7,900 Burlington Resources Inc.
405,369
42,500 Chevron Corp.
3,535,469
5,998 Enserch Exploration, Inc. (a)
53,982
161,000 Exxon Corp.
10,314,062
3,000 Kerr-McGee Corp.
206,438
2,200 Louisiana Land & Exploration Co.
172,288
51,200 Mobil Corp.
3,788,800
2,558 Monterey Resources, Inc.
53,723
21,500 Occidental Petroleum Corp.
557,656
2,900 Pennzoil Co.
231,094
17,100 Phillips Petroleum Co.
882,787
139,200 Royal Dutch Petroleum Co. (ADR)
(Netherlands)
7,725,600
4,900 Sun Co., Inc.
214,681
11,000 Tenneco, Inc.
526,625
34,400 Texaco Inc.
2,113,450
16,760 Union Pacific Resources Group, Inc.
438,902
16,300 Unocal Corp.
704,975
18,900 USX Marathon Corp
702,844
--------
- ----
38,636,957
- ------------------------------------------------------------
- ----
Petroleum Services--1.2%
10,800 Baker Hughes, Inc.
472,500
11,600 Dresser Industries, Inc.
498,800
16,500 Halliburton Co.
858,000
1,700 Helmerich & Payne, Inc.
136,000
3,300 McDermott International, Inc.
120,450
6,800 Oryx Energy Co.(a)
172,975
28,500 PG&E Corp.
660,844
5,600 Rowan Cos., Inc.(a)
199,500
32,100 Schlumberger, Ltd.
2,702,419
5,500 Sonat Inc.
279,812
3,400 Western Atlas, Inc.(a) $
299,200
--------
- ----
6,400,500
- ------------------------------------------------------------
- ----
Precious Metals--0.0%
15,200 Battle Mountain Gold Co.
109,250
- ------------------------------------------------------------
- ----
Railroads--0.7%
10,065 Burlington Northern Inc.
972,531
14,100 CSX Corp.
824,850
8,100 Norfolk Southern Corp.
836,325
16,100 Union Pacific Corp.
1,008,262
--------
- ----
3,641,968
- ------------------------------------------------------------
- ----
Restaurants--0.5%
9,950 Darden Restaurants Inc.
115,047
44,700 McDonaldclquos Corp.
2,128,837
8,600 Wendyclquos International, Inc.
182,750
--------
- ----
2,426,634
- ------------------------------------------------------------
- ----
Retail--4.8%
16,100 Albertsonclquos, Inc.
561,487
17,500 American Stores Co.
426,563
10,000 AutoZone, Inc.(a)
300,000
6,200 Charming Shoppes, Inc.
38,169
6,200 Circuit City Stores, Inc.
249,938
11,300 CVS Corp.
642,687
14,000 Dayton Hudson Corp.
839,125
7,500 Dillard Department Stores, Inc.
328,594
13,800 Federated Department Stores, Inc.(a)
595,125
17,900 Gap, Inc.
896,119
2,600 Great Atlantic & Pacific Tea Co., Inc.
82,550
4,800 Harcourt General, Inc.
237,900
47,449 Home Depot, Inc.
2,473,279
30,900 Kmart Corp.
432,600
16,700 Kroger Co.(a)
504,131
17,688 Limited, Inc.
432,251
4,800 Liz Claiborne, Inc.
263,700
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 9
<PAGE>
Portfolio of Investments as of PRUDENTIAL
DRYDEN FUND
September 30, 1997 PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Retail (cont'd.)
16,000 J.C. Penney, Inc. $
932,000
2,600 Longs Drug Stores Corp.
69,388
15,400 May Department Stores Co.
839,300
2,300 Mercantile Stores, Inc.
144,756
10,600 Newell Co.
424,000
18,500 Nike, Inc. (Class B)
980,500
5,100 Nordstrom, Inc.
325,125
4,000 Pep Boys - Manny, Moe & Jack
109,000
13,852 Price Costco, Inc.(a)
521,181
3,600 Reebok International, Ltd.
175,275
7,800 Rite-Aid Corp.
432,412
25,500 Sears, Roebuck & Co.
1,451,906
11,200 Sherwin-Williams Co.
329,700
2,000 Stride Rite Corp.
27,125
3,800 Supervalu, Inc.
149,150
10,300 TJX Companies, Inc.
314,794
18,800 Toys clquoRclquo Us Inc.(a)
667,400
147,000 Wal-Mart Stores, Inc.
5,383,875
31,900 Walgreen Co.
817,437
9,600 Winn-Dixie Stores, Inc.
340,200
8,400 Woolworth Corp.
185,850
--------
- ----
23,924,592
- ------------------------------------------------------------
- ----
Rubber--0.2%
3,500 B.F. Goodrich Co.
158,375
5,400 Cooper Tire & Rubber
143,437
10,200 Goodyear Tire & Rubber Co.
701,250
--------
- ----
1,003,062
- ------------------------------------------------------------
- ----
Steel--0.2%
11,472 Allegheny Teldyne, Inc.
328,386
5,600 Armco Inc.(a)
33,600
7,000 Bethlehem Steel Corp.(a)
72,188
3,100 Inland Steel Industries, Inc.
67,813
5,900 Nucor Corp.
310,856
5,500 USX Corp. - U.S. Steel Group
191,125
6,350 Worthington Industries, Inc.
128,587
--------
- ----
1,132,555
Telecommunications--2.2%
12,000 Alltel Corp. $
414,000
5,987 Andrew Corp.(a)
156,785
6,300 Clear Channel Communications, Inc.(a)
408,712
7,400 DSC Communications Corp.(a)
199,338
10,700 Frontier Corp.
246,100
41,770 Lucent Technologies, Inc.
3,399,034
44,900 MCI Communications Corp.
1,318,937
9,500 NexLevel Systems, Inc.(a)
159,125
17,000 Northern Telecom Ltd.
1,766,937
4,800 Scientific Atlanta, Inc.
108,600
28,000 Sprint Corp.
1,400,000
34,000 Tele-Communications, Inc.(a)
697,000
12,000 Tellabs, Inc.(a)
618,000
--------
- ----
10,892,568
- ------------------------------------------------------------
- ----
Textiles--0.2%
5,000 Fruit of the Loom, Inc.(a)
140,625
3,100 National Service Industries, Inc.
136,206
2,500 Russell Corp.
73,594
1,500 Springs Industries, Inc.
78,750
4,200 V.F. Corp.
389,025
--------
- ----
818,200
- ------------------------------------------------------------
- ----
Tobacco--1.4%
157,350 Phillip Morris Cos., Inc.
6,539,859
11,900 UST, Inc.
363,694
--------
- ----
6,903,553
- ------------------------------------------------------------
- ----
Trucking & Shipping--0.2%
2,800 Caliber System Inc.
151,900
7,500 Federal Express Corp.(a)
600,000
4,800 Ryder System, Inc.
172,500
--------
- ----
924,400
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 10
<PAGE>
Portfolio of Investments as of PRUDENTIAL
DRYDEN FUND
September 30, 1997 PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Utility-Communications--5.1%
32,600 AirTouch Communications.(a) $
1,155,262
35,700 Ameritech Corp.
2,374,050
105,500 AT&T Corp.
4,674,969
50,058 Bell Atlantic Corp.
4,026,573
64,300 BellSouth Corp.
2,973,875
62,200 GTE Corp.
2,822,325
41 Netscape Communications Corp.
1,476
59,646 SBC Communications Inc.
3,660,800
31,100 U.S. West Communications Group
1,197,350
14,000 Unicom Corp.
327,250
59,000 WorldCom Inc.(a)
2,087,125
--------
- ----
25,301,055
- ------------------------------------------------------------
- ----
Utilities - Electric--2.1%
12,200 American Electric Power, Inc.
555,100
9,900 Baltimore Gas & Electric Co.
274,725
9,800 Carolina Power & Light Co.
352,187
13,700 Central & South West Corp.
303,969
15,300 Consolidated Edison Co.
520,200
12,300 Dominion Resources, Inc.
465,862
9,700 DTE Energy Co.
295,244
23,497 Duke Power Co.
1,161,633
26,200 Edison International
661,550
15,700 Entergy Corp.
409,181
12,000 FPL Group, Inc.
615,000
7,800 General Public Utilities Corp.
279,825
18,822 Houston Industries, Inc.
409,380
8,300 Niagara Mohawk Power Corp.
79,369
4,700 Northern States Power Co.
233,825
9,700 Ohio Edison Co.
227,344
5,300 Pacific Enterprises
179,538
19,300 Pacificorp
431,837
14,600 PECO Energy Co.
342,188
10,400 PP & L Resources Inc.
227,500
15,000 Public Service Enterprise Group $
386,250
44,000 Southern Co.
992,750
15,600 Texas Utilities Co.
561,600
6,900 Union Electric Co.
265,219
--------
- ----
10,231,276
Total common stocks
cost $361,151,805)
477,215,780
Principal Amount
(000)
SHORT-TERM INVESTMENTS--3.8%
- ------------------------------------------------------------
- ----
U.S. Government Securities--0.2%
$1,200(b) United States Treasury Bill,
4.94%, 12/18/97
(cost $1,187,156) $
1,187,156
--------
- ----
- ------------------------------------------------------------
- ----
Repurchase Agreement--3.6%
17,665 Joint Repurchase Agreement Account,
6.127%, 10/01/97(Note 4)
(cost $17,665,000)
17,665,000
--------
- ----
Total short-term investments
(cost $18,852,156)
18,852,156
- ------------------------------------------------------------
- ----
Total Investments--99.6%
(cost $380,003,961; Note 3)
496,067,937
Other assets in excess of
liabilities--0.4%
1,939,428
--------
- ----
Net Assets--100%
$498,007,365
--------
- ----
--------
- ----
</TABLE>
- ---------------
(a) Non-income producing security.
(b) Pledged as initial margin on futures contracts.
ADR--American Depository Receipt.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 11
<PAGE>
PRUDENTIAL
DRYDEN FUND
Statement of Assets and Liabilities PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Assets
September 30, 1997
<S>
<C>
Investments, at value (cost
$380,003,961)...............................................
................ $496,067,937
Cash........................................................
............................................
30,824
Receivable for Fund shares
sold........................................................
................. 3,445,272
Dividends and interest
receivable..................................................
..................... 679,433
Receivable due from
Manager.....................................................
........................ 324,620
Deferred expenses and other
assets......................................................
................ 6,756
- ------------
Total
assets......................................................
................................... 500,554,842
- ------------
Liabilities
Payable for Fund shares
reacquired..................................................
.................... 1,534,340
Payable for investments
purchased...................................................
.................... 773,483
Due to broker - variation
margin......................................................
.................. 126,875
Accrued
expenses....................................................
.................................... 112,779
- ------------
Total
liabilities.................................................
................................... 2,547,477
- ------------
Net
Assets......................................................
........................................
$498,007,365
- ------------
- ------------
Net assets were comprised of:
Shares of beneficial
interest....................................................
.................... $ 22,775
Paid-in capital in excess of
par.........................................................
............ 367,445,134
- ------------
367,467,909
Undistributed net investment
income......................................................
............ 4,093,229
Accumulated net realized gain on
investments.................................................
........ 10,104,301
Net unrealized appreciation on investments and futures
contracts.....................................
116,341,926
- ------------
Net assets, September 30,
1997........................................................
.................. $498,007,365
- ------------
- ------------
Class I:
Net asset value and redemption price per share
($312,127,196 / 14,272,607 shares of beneficial
interest issued and outstanding)..................
$21.87
Class Z:
Net asset value and redemption price per share
($185,880,172 / 8,502,702 shares of beneficial
interest issued and outstanding)...................
$21.86
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 12
<PAGE>
PRUDENTIAL DRYDEN FUND
PRUDENTIAL STOCK INDEX FUND
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year
Ended
Net Investment Income September 30,
1997
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $33,846)..................... $
5,174,932
Interest.................................
1,214,412
----------
- --
Total income..........................
6,389,344
----------
- --
Expenses
Management fee...........................
921,557
Transfer agent's fees and expenses...
367,000
Reports to shareholders..................
280,000
Custodian's fees and expenses........
176,000
Registration fees........................
136,000
Legal fees...............................
30,000
Audit fees...............................
15,000
Administration fee.......................
26,557
Organization expense.....................
13,385
Trustees' fees.......................
11,250
Miscellaneous............................
14,572
----------
- --
Total expenses........................
1,991,321
Less: Expense subsidy (Note 2)..............
(681,561)
----------
- --
Net expenses..........................
1,309,760
----------
- --
Net investment income.......................
5,079,584
----------
- --
Realized and Unrealized Gain
on Investments
Net realized gain on:
Investment transactions..................
6,467,755
Financial futures contracts..............
4,079,275
----------
- --
10,547,030
----------
- --
Net change in unrealized appreciation on:
Investments..............................
80,065,453
Financial futures contracts..............
261,725
----------
- --
80,327,178
----------
- --
Net gain on investments.....................
90,874,208
----------
- --
Net Increase in Net Assets
Resulting from Operations................... $
95,953,792
----------
- --
----------
- --
</TABLE>
PRUDENTIAL DRYDEN FUND
PRUDENTIAL STOCK INDEX FUND
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended September
30,
in Net Assets 1997
1996
<S> <C> <C>
Operations
Net investment income......... $ 5,079,584 $
2,743,808
Net realized gain on
investment transactions.... 10,547,030
1,791,564
Net change in unrealized
appreciation on
investments................ 80,327,178
20,293,266
-------------- -------
- ------
Net increase in net assets
resulting from
operations................. 95,953,792
24,828,638
-------------- -------
- ------
Dividends and distributions
Dividends to shareholders from
net investment income...... (3,111,526)
(2,181,628)
-------------- -------
- ------
Distributions to shareholders
from net realized gains.... (1,795,111)
(4,441,170)
-------------- -------
- ------
Fund share transactions
Net proceeds from shares
sold....................... 447,194,409
113,692,034
Net asset value of shares
issued to shareholders in
reinvestment of
distributions.............. 4,906,633
6,622,798
Cost of shares reacquired..... (229,519,348)
(56,086,722)
-------------- -------
- ------
Net increase in net assets
from Fund share
transactions............... 222,581,694
64,228,110
-------------- -------
- ------
Net increase..................... 313,628,849
82,433,950
Net Assets
Beginning of year................ 184,378,516
101,944,566
-------------- -------
- ------
End of year...................... $ 498,007,365 $
184,378,516
-------------- -------
- ------
-------------- -------
- ------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 13
<PAGE>
PRUDENTIAL
DRYDEN FUND
Notes to Financial Statements PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- --------------------
Prudential Dryden Fund (the "Company) is registered under
the
Investment Company Act of 1940 as an open-end, diversified
management investment
company. The Company was established as a Delaware business
trust on May 11,
1992 and currently consists of six separate funds, one of
which is the
Prudential Stock Index Fund (the "Fund"). Prior to October
30,
1996 the Company was named The Prudential Institutional Fund
and prior to
September 20, 1996 it consisted of seven separate funds (the
"Funds"), five of which were reorganized and combined with
existing funds in the Prudential Mutual Funds family of
funds (see Note 6).
The Company had no operations until July 7, 1992 when 10,000
shares of
beneficial interest of the Company were sold for $100,000 to
Prudential
Institutional Fund Management, Inc. Investment operations of
the Fund commenced
on November 5, 1992. The Fund's investment objective is to
provide
investment results that correspond to the price and yield
performance of
Standard & Poor's 500 Composite Stock Price Index.
- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting
policies followed by the
Fund.
Securities Valuation: Securities, including options,
warrants, futures contracts
and options thereon, for which the primary market is on a
national securities
exchange, commodities exchange or board of trade or NASDAQ
are valued at the
last sale price on such exchange or board of trade on the
date of valuation or,
if there was no sale on such day, at the mean between the
closing bid and asked
prices quoted on such day or at the bid price in the absence
of an asked price.
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 by a principal market maker or
independent pricing
agent.
U.S. Government securities for which market quotations are
available shall be
valued at a price provided by an independent broker/dealer
or pricing service.
Securities for which reliable market quotations are not
available or for which
the pricing agent or principal market maker does not provide
a valuation or
methodology or provides a valuation or methodology that, in
the judgment of the
subadvisers, does not represent fair value, are valued at
fair value as
determined under procedures established by the Trustees.
In connection with transactions in repurchase agreements, it
is the Fund's
policy that its custodian or designated subcustodians, under
triparty repurchase
agreements, as the case may be take possession of the
underlying collateral
securities, the value of which exceeds the principal amount
of the repurchase
transaction, including accrued interest. To the extent that
any repurchase
transaction exceeds one business day, the value of the
collateral is
marked-to-market on a daily basis to ensure the adequacy of
the collateral. If
the seller defaults and the value of the collateral declines
or if bankruptcy
proceedings are commenced with respect to the seller of the
security,
realization of the collateral by the Fund may be delayed or
limited.
Securities Transactions and Net Investment Income:
Securities transactions are
recorded on the trade date. Realized gains and losses on
sales of securities 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 transfer agent fees) and
unrealized and
realized gains or losses are allocated daily to each class
of shares based upon
the relative proportion of net assets of each class at the
beginning of the day.
Financial Futures Contracts: A financial futures contract is
an agreement to
purchase (long) or sell (short) an agreed amount of
securities at a set price
for delivery on a future date. Upon entering into a
financial futures contract,
the Fund is required to pledge to the broker an amount of
cash and/or other
assets equal to a certain percentage of the contract amount.
This amount is
known as the "initial margin." Subsequent payments, known as
"variation margin," are made or received by the Fund each
day,
depending on the daily fluctuations in the value of the
underlying security.
Such variation margin is recorded for financial statement
purposes on a daily
basis as unrealized gain or loss. When the contract expires
or is closed, the
gain or loss is realized and is presented in the statement
of operations as net
realized gain (loss) on financial futures contracts.
The Fund invests in financial futures contracts in order to
hedge existing
portfolio securities, or securities the Fund intends to
purchase, against
fluctuations in value. Under a variety of circumstances, 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
and the underlying
assets.
- ------------------------------------------------------------
- --------------------
14
<PAGE>
PRUDENTIAL DRYDEN FUND
Notes to Financial Statements
PRUDENTIAL STOCK INDEX FUND
- ------------------------------------------------------------
- --------------------
Dividends and Distributions: Dividends and distributions of
the Fund are
declared in cash and automatically reinvested in additional
shares of the Fund.
The Fund will declare and distribute its net investment
income and net capital
gains, if any, at least annually. Dividends and
distributions are recorded on
the ex-dividend date.
Income distributions and capital gain distributions are
determined in accordance
with income tax regulations which may differ from generally
accepted accounting
principles.
Taxes: It is the Fund's policy to continue to meet the
requirements of the
Internal Revenue Code applicable to regulated investment
companies and to
distribute all of its taxable net income to its
shareholders. Therefore, no
federal income tax provision is required.
Withholding taxes on foreign dividends have been provided
for in accordance with
the Fund's understanding of the applicable country's tax
rules and
rates.
Deferred Organizational Expenses: Approximately $450,000 of
costs were incurred
in connection with the organization and initial registration
of the Company and
have been deferred and are being amortized ratably over a
period of sixty months
from the date each of the Funds commenced investment
operations.
- ------------------------------------------------------------
Note 2. Agreements
The Fund had a management agreement with Prudential
Institutional Fund
Management, Inc. through October 30, 1996. Pursuant to this
agreement,
Prudential Institutional Fund Management, Inc. had
responsibility for all
investment advisory services and supervised the subadviser's
performance of
such services.
Prudential Institutional Fund Management, Inc. had a
subadvisory agreement with
The Prudential Investment Corporation ("PIC") through
October
30, 1996. PIC furnished investment advisory services in
connection with the
management of the Fund. Prudential Institutional Fund
Management, Inc. paid for
the costs and expenses attributable to the subadvisory
agreement and the
salaries and expenses of all personnel of the Fund except
for fees and expenses
of unaffiliated Trustees. The Fund paid for all other costs
and expenses.
Through October 30, 1996 the management fee paid Prudential
Institutional Fund
Management, Inc. was computed daily and payable monthly at
an annual rate of .40
of 1% of the average daily net assets of the Fund. Effective
October 31, 1996
the management fee paid Prudential Investments Fund
Management LLC
("PIFM") is computed daily and payable monthly at an annual
rate of .30 of 1% of the average daily net assets of the
Fund.
Effective October 31, 1996 the Fund entered into a
management agreement with
PIFM. Pursuant to this agreement PIFM has responsibility for
all investment
advisory services. PIFM has entered into a subadvisory
agreement with PIC. PIC,
subject to the supervision of PIFM, manages the assets of
the Fund in accordance
with its investment objectives and policies and in a manner
consistent with the
previous agreement. PIFM pays for the costs and expenses
attributable to the
subadvisory agreement and the salaries and expenses of all
personnel of the Fund
except for fees and expenses of unaffiliated Trustees.
Effective May 1, 1997 PIFM has agreed to reimburse the Fund
so that total
operating expenses do not exceed .40% of the average net
assets for Class Z
shares of the Fund. Effective August 1, 1997 PIFM has agreed
to reimburse the
Fund so that total operating expenses do not exceed .30% of
the average net
assets for Class I shares of the Fund. For the year ended
September 30, 1997,
PIFM subsidized $681,561 of the expenses of the Fund (.226%
of the average net
assets of the Fund/$.030 per share).
The Fund had an administration agreement with PIFM through
October 30, 1996. The
administration fee paid PIFM was computed daily and payable
monthly, at an
annual rate of .17% of the Company's average daily net
assets up to $250
million and .15% of the Company's average daily net assets
in excess of $250
million. PIFM furnished to the Fund such services as the
Fund required in
connection with the administration of the Fund's business
affairs. PIFM also
provided certain transfer agent services through its wholly-
owned subsidiary,
Prudential Mutual Fund Service LLC ("PMFS"). For such
services, PMFS was paid .03% of the Company's average daily
net assets up to
$250 million and .02% of the Company's average daily net
assets in excess of
$250 million from the administration fee paid to PIFM. Upon
termination of the
administration agreement, PMFS entered into a separate
transfer agency agreement
directly with the Fund.
Effective October 31, 1996 Prudential Securities
Incorporated
("PSI") became the distributor of the Fund's shares. Under
the distribution agreement, PSI incurs the expenses of
distributing the
Fund's shares, none of which is reimbursed by or paid for by
the Fund.
Prudential Institutional Fund Management, Inc., PIC, PIFM
and PSI are
wholly-owned subsidiaries of The Prudential Insurance
Company of America.
- ------------------------------------------------------------
- --------------------
15
<PAGE>
PRUDENTIAL
DRYDEN FUND
Notes to Financial Statements PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- --------------------
The Fund, along with other affiliated registered investment
companies (the
"funds"), entered into a credit agreement (the "Agreement")
on December 31,
1996 with an unaffiliated lender.
The maximum commitment under the Agreement is $200,000,000.
The Agreement
expires on December 30, 1997. Interest on any such
borrowings outstanding will
be at market rates. The purpose of the Agreement is to serve
as an alternative
source of funding for capital share redemptions. The Fund
has not borrowed any
amounts pursuant to the Agreement as of September 30, 1997.
The funds pay a
commitment fee at an annual rate of .055 of 1% on the unused
portion of the
credit facility. The commitment fee is accrued and paid
quarterly on a pro-rata
basis by the funds.
- ------------------------------------------------------------
Note 3. Portfolio Securities
Purchases and sales of portfolio securities, excluding short-
term investments,
for the year ended September 30, 1997 aggregated
$230,411,073 and $12,947,978,
respectively.
On September 30, 1997, the Fund held 35 purchased financial
futures contracts on
the S&P 500 Index expiring December, 1997. The cost of such
contracts was
$16,425,800. The value of such contracts on September 30,
1997 was $16,703,750,
thereby resulting in an unrealized gain of $277,950.
The cost basis of investments for federal income tax
purposes is $380,054,009
and, accordingly, as of September 30, 1997, net unrealized
appreciation for
federal income tax purposes was $116,013,928 (gross
unrealized
appreciation--$117,543,776 gross unrealized depreciation--
$1,529,848).
- ------------------------------------------------------------
Note 4. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment
companies, transfers
uninvested cash balances into a single joint account, the
daily aggregate
balance of which is invested in one or more repurchase
agreements collateralized
by U.S. Treasury or federal agency obligations. At September
30, 1997, the Fund
had a 1.31% undivided interest in the repurchase agreements
in the joint
account. The undivided interest represented $17,665,000 in
principal amount. As
of such date, each repurchase agreement in the joint account
and the collateral
therefor was as follows:
Credit Suisse First Boston Corp., 6.15%, in the principal
amount of
$341,000,000, repurchase price $341,058,254, due 10/1/97.
The value of the
collateral including accrued interest was $352,935,110.
Goldman, Sachs & Co., Inc., 6.15%, in the principal amount
of $341,000,000,
repurchase price $341,058,254, due 10/1/97. The value of the
collateral
including accrued interest was $347,820,010.
Morgan Stanley Dean Witter, Discover & Co., 6.15%, in the
principal amount of
$325,256,000, repurchase price $325,311,564, due 10/1/97.
The value of the
collateral including accrued interest was $331,761,960.
UBS Securities LLC, 6.06%, in the principal amount of
$341,000,000, repurchase
price $341,057,402, due 10/1/97. The value of the collateral
including accrued
interest was $347,821,030.
- ------------------------------------------------------------
Note 5. Capital
The Fund offers Class I and Class Z shares. Class I shares
are not subject to
any sales or redemption charge and are offered to certain
pension, profit
sharing or other employee benefit plans qualified under
Section 401, 457 or
403(b)(7) of the Internal Revenue Code. 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 at
$.001 par value dividend into two classes, designated Class
Z and Class I.
Transactions in shares of beneficial interest during the
fiscal year ended
September 30, 1997 and the fiscal year ended September 30,
1996 were as follows:
<TABLE>
<CAPTION>
Class I Shares Amount
- --------------------------------- ----------- ---------
- ----
<S> <C> <C>
Year ended September 30, 1997:
Shares sold...................... 2,006,789 $
42,151,000
Shares issued in reinvestment of
dividends and distributions.... --
- --
Shares reacquired................ (1,553,190)
(33,405,742)
----------- ---------
- ----
Net increase in shares
outstanding before exchange.... 453,599
8,745,258
Shares issued upon exchange from
Class Z........................ 13,819,008
303,202,163
----------- ---------
- ----
Net increase in shares
outstanding.................... 14,272,607 $
311,947,421
----------- ---------
- ----
----------- ---------
- ----
<CAPTION>
Class Z
- ---------------------------------
<S> <C> <C>
Year ended September 30, 1997:
Shares sold...................... 21,286,422 $
405,043,409
Shares issued in reinvestment of
dividends and distributions.... 283,293
4,906,633
Shares reacquired................ (10,728,183)
(196,113,606)
----------- ---------
- ----
Net increase in shares
outstanding before exchange.... 10,841,532
213,836,436
Shares issued upon exchange to
Class I........................ (13,819,008)
(303,202,163)
----------- ---------
- ----
Net increase in shares
outstanding.................... (2,977,476) $
(89,365,727)
----------- ---------
- ----
----------- ---------
- ----
</TABLE>
- ------------------------------------------------------------
- --------------------
16
<PAGE>
PRUDENTIAL
DRYDEN FUND
Notes to Financial Statements PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class Z Shares Amount
- --------------------------------- ----------- ---------
- ----
<S> <C> <C>
Year ended September 30, 1996:
Shares sold...................... 7,589,233 $
113,692,034
Shares issued in reinvestment of
dividends and distributions.... 467,712
6,622,798
Shares reacquired................ (3,745,568)
(56,086,722)
----------- ---------
- ----
Net increase in shares
outstanding.................... 4,311,377
64,228,110
----------- ---------
- ----
----------- ---------
- ----
</TABLE>
Of the shares outstanding at September 30, 1997, PIFM and
affiliates owned
5,390,369 shares of the Fund.
- ------------------------------------------------------------
Note 6. Reorganization
On May 17, 1996, the Trustees of the Company approved an
Agreement and Plan of
Reorganization (the "Plan of Reorganization") for five other
series of the Company. Each Plan of Reorganization was
approved by applicable
shareholders on September 7, 1996. This Fund approved a new
manager, distributor
and transfer agency agreements on October 30, 1996.
Under each Plan of Reorganization, all of the assets and
liabilities of the
Growth Stock Fund, Balanced Fund, Income Fund and Money
Market Fund
("Series") were transferred at net asset value for
equivalent
value of Class Z shares of Prudential Jennison Series Fund,
Inc., Prudential
Allocation Fund--Balanced Portfolio, Prudential Government
Income Fund, Inc. and
Prudential MoneyMart Assets, Inc., respectively. These
Series then ceased
operations.
The Company's International Stock Fund joined the Prudential
Global Fund as
separate series of a newly named Prudential World Fund, Inc.
Existing
shareholders became Class Z shareholders and the
International Stock Fund also
began offering Classes A, B and C shares.
Prudential Active Balanced Fund and the Fund remained a
series of The Prudential
Institutional Fund (renamed the Prudential Dryden Fund).
Existing shareholders
of Prudential Active Balanced Fund became Class Z
shareholders and Prudential
Active Balanced Fund began offering Classes A, B and C
shares. The Fund offers
Class I and Class Z shares. Effective October 30, 1996 these
funds were managed
by PIFM, PMFS provides transfer agency services and PSI acts
as distributor.
- ------------------------------------------------------------
- --------------------
17
<PAGE>
PRUDENTIAL
DRYDEN FUND
Financial Highlights PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class Z Class I
-----------
- ----------------------------------------------------- --
- ----------
<S> <C>
<C> <C> <C> <C> <C>
November 5, August 1,
1992(a) 1997(b)
Year Ended September 30, Through
Through
-----------
- ----------------------------------- September 30,
September 30,
1997
1996 1995 1994 1993
1997
--------
- -------- -------- ------- ------------- ----
- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 16.06
$ 14.22 $ 11.27 $ 11.12 $ 10.00 $
21.87
--------
- -------- -------- ------- ------- --
- -------
Income from investment operations:
Net investment income (c)..................... .46
.25 .23 .26 .23
.06
Net realized and unrealized gain on investment
transactions............................... 5.75
2.44 2.97 .11 .94
(.06)
--------
- -------- -------- ------- ------- --
- -------
Total from investment operations............ 6.21
2.69 3.20 .37 1.17
- --
--------
- -------- -------- ------- ------- --
- -------
Less distributions:
Dividends from net investment income.......... (.26)
(.28) (.22) (.18) (.05)
- --
Distributions from net realized gains......... (.15)
(.57) (.03) (.04) --
- --
--------
- -------- -------- ------- ------- --
- -------
Total distributions......................... (.41)
(.85) (.25) (.22) (.05)
- --
--------
- -------- -------- ------- ------- --
- -------
Net asset value, end of period................ $ 21.86
$ 16.06 $ 14.22 $ 11.27 $ 11.12 $
21.87
--------
- -------- -------- ------- ------- --
- -------
--------
- -------- -------- ------- ------- --
- -------
TOTAL RETURN(e)............................... 39.34%
19.72% 29.02% 3.33% 11.73%
0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $185,881
$184,379 $101,945 $50,119 $27,142 $
312,127
Average net assets (000)...................... $254,644
$142,540 $ 71,711 $38,098 $18,807
296,788
Ratios to average net assets:(c)
Expenses.................................... .46%
.60% .60% .60% .60%(d)
.30%(d)
Net investment income....................... 1.66%
1.92% 2.55% 2.34% 2.41%(d)
1.73%(d)
Portfolio turnover rate....................... 5%
2% 11% 2% 1%
5%
Average commission rate paid per share........ $ 0.0250
$ 0.0250 N/A N/A N/A $
0.0250
</TABLE>
(a) Commencement of investment operations.
(b) Commencement of offering of Class I shares
(c) Net of expense subsidy.
(d) Annualized.
(e) 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 return for periods
of less than a full
year are not annualized. Total return includes the
effect of expense
subsidies.
N/A--Data not required for these periods.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 18
<PAGE>
PRUDENTIAL
DRYDEN FUND
Report of Independent Accountants PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- --------------------
The Shareholders and Board of Trustees of
Prudential Dryden Fund--Prudential Stock Index Fund:
In our opinion, the accompanying statement of assets and
liabilities, including
the portfolio of investments, and the related statements of
operations and of
changes in net assets and the financial highlights present
fairly, in all
material respects, the financial position of Prudential
Dryden Fund--Prudential
Stock Index Fund (the "Fund", one of the portfolios
constituting Prudential Dryden Fund) (formerly The
Prudential Institutional
Fund--Prudential Stock Index Fund) at September 30, 1997,
and the results of its
operations, the changes in its net assets and the financial
highlights for the
year then ended, in conformity with generally accepted
accounting principles.
These financial statements and financial highlights
(hereafter referred to as
"financial statements") are the responsibility of the
Fund's management; our responsibility is to express an
opinion on these
financial statements based on our audit. We conducted our
audit of these
financial statements in accordance with generally accepted
auditing standards
which require that we plan and perform the audit to obtain
reasonable assurance
about whether the financial statements are free of material
misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles
used and significant estimates made by management, and
evaluating the overall
financial statement presentation. We believe that our audit,
which included
confirmation of securities at September 30, 1997 by
correspondence with the
custodian and brokers and the application of alternative
auditing procedures
where securities purchased had not been received, provides a
reasonable basis
for the opinion expressed above. The accompanying statement
of changes in net
assets for the year ended September 30, 1996 and the
financial highlights for
the periods other than the year ended September 30, 1997
were audited by other
independent accountants, whose opinion dated November 13,
1996 was unqualified.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
November 19, 1997
- ------------------------------------------------------------
- --------------------
19
<PAGE>
PRUDENTIAL
DRYDEN FUND
Change of Auditors PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- --------------------
Effective March 1, 1997, Deloitte & Touche LLP was
terminated as the Fund's
auditors. For the year ended September 30, 1993, through
September 30, 1996,
Deloitte & Touche LLP expressed an unqualified opinion on
the Fund's
financial statements. There were no disagreements between
Fund management and
Deloitte & Touche LLP prior to their termination. The Board
of Trustees approved
the termination of Deloitte & Touche LLP and the appointment
of Price Waterhouse
LLP as the Fund's independent accountants.
PRUDENTIAL
DRYDEN FUND
Federal Income Tax Information PRUDENTIAL
STOCK INDEX FUND
- ------------------------------------------------------------
- --------------------
We are required by the Internal Revenue Code to advise you
within 60 days of the
Fund's fiscal year end (September 30, 1997) as to the
federal tax status of
dividends paid by the Fund during such fiscal year.
Accordingly, we are advising
you that in 1997 the Fund paid distributions to Class Z
shares totalling $0.41
per share, comprised of $0.26 per share of net investment
income, $0.06 per
share from short-term capital gains (both of which are
taxable as ordinary
income) and $0.09 per share of net long-term capital gains
which are taxable as
such. Further, we wish to advise you that 90% of the
ordinary income dividends
paid in the fiscal year ended September 30, 1997 qualified
for the corporate
dividends received deduction available to corporate
taxpayers.
In January 1998, you will be advised on IRS Form 1099 DIV or
substitute Form
1099 DIV as to the federal tax status of the distributions
received by you in
calendar 1997. The amounts that will be reported on such
Form 1099 DIV will be
the amounts to use on your 1997 federal income tax return
and will differ from
the amounts which we must report for the Fund's fiscal year
ended September
30, 1997.
- ------------------------------------------------------------
- --------------------
20
<PAGE>
Comparing A $10,000 Investment.
- -------------------------------------------------
Prudential Stock Index Fund vs. the S&P 500 Index.
Prudential Stock Index Fund
S&P 500 Index
Average Annual Total
Returns - Class Z
- --------------------
*Without Sales Charge
20.41% (20.36) Since Inception
29.10% (29.02) for 3 Years
39.34% (39.08) for 1 Year
Class Z
(CHART)
Class I
(CHART)
Past performance is not indicative of future results and an
investor's shares
may be worth more or less than their original cost.
These graphs are is furnished to you in accordance with SEC
regulations. It
compares a $10,000 investment in the Prudential Stock Index
Fund (the "Fund")
with a similar investment in the Standard & Poor's 500 Index
(S&P 500) by
portraying the initial account value at the commencement of
operations and
subsequent account values at the end of each fiscal year
(September 30)
beginning in 1992. For purposes of the graph and, unless
otherwise indicated
in the accompanying table, it has been assumed that all
recurring fees
(including management fees) were deducted and all dividends
and distributions
were reinvested. Since Class I shares have been in existence
less than one
year, no average annual total returns are presented.
The S&P 500 is a capital-weighted index, representing the
aggregate market
value of the common equity of 500 stocks primarily traded on
the New York
Stock Exchange. The S&P 500 is an unmanaged index and
includes the reinvestment
of all dividends, but does not reflect the payment of
transaction costs and
advisory fees associated with an investment in the Fund. The
securities which
comprise the S&P 500 may differ substantially from the
securities in the
Fund's portfolio. S&P 500 is not the only index that may be
used to
characterize performance of equity funds and other indices
may portray
different comparative performance.
*Without waiver of management fees and/or expense
subsidation, the Fund's
average annual total returns would have been lower as
indicated in the
parentheses ( ).
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Trustees
Edward D. Beach
Delayne Dedrick Gold
Robert F. Gunia
Donald D. Lennox
Douglas H. McCorkindale
Mendel A. Melzer
Thomas T. Mooney
Stephen P. Munn
Richard A. Redeker
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
Officers
Richard A. Redeker, President
Thomas A. Early, Vice President
Grace C. Torres, Treasurer
S. Jane Rose, Secretary
Marguerite E.H. Morrison, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
Raritan Plaza One
Edison, NJ 08837
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
The views expressed in this report and information about the
Fund's portfolio
holdings are for the period covered by this report and are
subject to change
thereafter.
This report is not authorized for distribution to
prospective investors unless
preceded or accompanied by a current prospectus.
74431F209 MF174E
74431F860 Cat# 42M267I
(ICON)
Prudential
Active
Balanced
Fund
ANNUAL
REPORT
Sept. 30, 1997
(LOGO)
<PAGE>
Prudential Active Balanced Fund
A Series of the Prudential Dryden Fund
Performance At A Glance.
Over the past 12 months, investors in U.S. stocks broadened
their interests
beyond the brand-name market leaders to include the less
well-known
and somewhat smaller companies favored by the Prudential
Active
Balanced Fund. So our stock holdings did quite well.
However,
their contribution to our return was diluted because we
generally held less than 50% of assets in stock over the
past
year, while most balanced funds held 60%. We did this
because
we believed stock prices were high and vulnerable to
earnings
disappointments.
<TABLE>
<CAPTION>
Six One Three
Since
Months
Year Years Inception2
<C> <S> <C> <C>
<C> <C>
Cumulative Class A 15.74% N/A
N/A 17.48%
Total Class B 15.37% N/A
N/A 16.91%
Returns1 Class C 15.37% N/A
N/A 16.91%
As of 9/30/97 Class Z 15.88%
21.34% 55.78% 73.98%
Lipper Balanced
Fund Avg3 17.57%
24.03% 66.73% ***
</TABLE>
<TABLE>
<CAPTION>
One Three Since
Year Years Inception2
<C> <S> <C> <C>
<C>
Average Annual
Total Returns1 Class Z 21.34% 15.92% 12.40%
As of 9/30/97
</TABLE>
Past performance is not indicative of future results.
Principal
and investment return will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their
original cost.
1Source: Prudential Investments Fund Management and Lipper
Analytical Services. The cumulative total returns do not
take into account sales charges. The Fund charges a maximum
front-end sales load of 5% for Class A shares and a
declining
contingent deferred sales charge (CDSC) of 5%, 4%, 3%, 2%,
1% and 1% for six years, for Class B shares. Class C shares
have a 1% CDSC for one year. Class B shares will
automatically
convert to Class A shares on a quarterly basis,
approximately
seven years after purchase. Class Z shares are not subject
to
a sales charge or a distribution fee. Since Class A, B and C
shares have been in existence less than one year, no average
annual total returns are presented.
2Inception dates: 11/7/97 for Class A, B, and C shares;
1/4/93
for Class Z shares.
3Lipper average returns are 363 funds for six months, 333
funds
for one year, and 209 funds for three years.
*** Lipper Since Inception returns are 21.61% for Class A,
B,
and C shares and 83.72% for Class Z shares for all shares in
each share class.
How Investments Compared.
(As of 9/30/97)
(GRAPH)
Source: Lipper Analytical Services. Financial markets
change, so
a mutual fund's past performance should never be used to
predict
future results. The risks to each of the investments listed
above
are different -- we provide 12-month total returns for
several
Lipper mutual fund categories to show you that reaching for
higher returns means tolerating more risk. The greater the
risk, the larger the potential reward
or loss. In addition, we've
included historical 20-year average
annual
returns. These
returns assume the reinvestment of
dividends.
U.S. Growth Funds will fluctuate a
great deal. Investors have
received higher historical total
returns from stocks than
from most other investments. Smaller
capitalization stocks
offer greater potential for long-term
growth but may be
more volatile than larger
capitalization stocks.
General Bond Funds provide more income
than stock funds,
which can help smooth out their total
returns year by
year. But their prices still fluctuate
(sometimes significantly) and their
returns have been historically
lower than those of stock funds.
General Municipal Debt Funds invest in
bonds
issued by
state governments, state agencies
and/or municipalities.
This investment provides income that is
usually exempt
from federal and state income taxes.
Money Market Funds attempt to preserve
a constant share
value; they don't fluctuate much in
price but, historically, their returns
have been generally among the lowest of
the major investment categories.
<PAGE>
Bradley Goldberg, Fund Manager
(PICTURE)
Portfolio
Manager's Report
The Prudential Active Balanced Fund
seeks the higher returns
that stocks have historically provided,
while trying to avoid the risks
inherent in an all-stock portfolio.
The Fund invests in a combination of
stocks, bonds and
lower-risk money market instruments,
such as shortterm
U.S. Treasury securities. By
diversifying in this way,
the Fund aims to benefit from rising
stock markets and
to provide investors with greater
protection when stocks
fall. There can be no assurance that
the Fund will achieve
its investment objective.
A Hybrid Strategy.
In stocks, we use a hybrid of growth
and value investing,
aiming at both greater earnings growth
than the market and
lower valuations. We look at companies
we think will
produce better earnings or earnings
sustainability than
most investors expect. We're somewhat
contrarian - we
look where most portfolio managers
don't. Our bond investment strategy is
cautious. We use bonds to stabilize
the price swings of the portfolio.
Strategy Session.
The sustainability of corporate
earnings growth is the dominant
issue for investment strategy today.
Earnings have been at record
highs and stock prices have risen to
expensive levels (even for
such elevated earnings). Should
earnings falter, stock prices
could fall. Throughout the past year,
we held a smaller
proportion of stocks than our peers
and our comparative
performance suffered. On September 30,
stock prices were
even higher and there had been signs
that market leaders
were hitting earnings plateaus.
Although we have reduced the
amount of cash we hold to below 10%,
most of our additional
investment has gone into bonds. Our
stock holdings were
only 51% of net assets, below the 60%
we consider neutral.
Bonds made up 39% of our investments
as of September 30.
Stocks.
In this environment, our investment
style -looking for long-term
earnings growth at faster rates than
the overall market in
companies selling significantly below
the average ratio of
price to earnings -- is particularly
appropriate.
For example, we recently purchased
Dole Foods at about 13 times
its estimated 1998 earnings, while
many food companies sell for
more than 20 times earnings. Why is
Dole so inexpensive? Because
bananas, which are classified as
commodities, are a large part of their
product mix, so the company is priced
as a commodity producer
instead of as a food company. We
believe Dole is developing
a more broad-based product mix, and
that its share price
should move up when investors come to
recognize this.
Bonds.
We believe the current premium paid on
corporate bonds over
Treasuries is too small to warrant
taking the increased risk,
so we are predominantly in Treasury
bonds. We increased the
duration of our portfolio -- a measure
of its sensitivity to changes in
interest rates -- slightly to 5.5
years.
Portfolio Composition
Sectors expressed as a percentage
of net assets as of 9/30/97.
(PIE CHART)
<PAGE>
What Went Well.
Stocks Did Well.
Our stock holdings increased their
return substantially when
investors widened their focus from a
few large familiar companies to
include the smaller and cheaper
companies that we favor.
Our focus on publishing companies paid
off very well. The New
York Times Corporation, one of our
largest holdings, and McGraw
Hill, which owns Standard & Poor's as
well as many electronic
and paper publications, have both
performed well through the year.
In financial services, CIGNA -- an
insurance company -- was
our third largest holding and also a
great success. We also
did well on Hibernia -- a bank holding
company. It was among our 10 largest
holdings.
General Motors has been restructuring
for about 18 months;
investors are now recognizing the
fruits of that move. We
think GM is positioned to reward
shareholders over the next
few years with higher earnings and
more share repurchases
than expected. The stock is still
quite reasonably priced,
selling at only about nine times
earnings, when the multiples
for most comparable firms are well
into the double digits.
IBM, a traditional computer and
systems
integration firm,
had been somewhat neglected by
investors who focused on the
fast moving personal computer
business. IBM's sound performance
in its primary businesses drove the
stock nicely higher in the
past year.
And Not So Well.
Too Much Cash.
We held a fairly large amount of cash
- -- as much as 19% during
the year -- and we would have earned
more had that been invested
in stocks or bonds. We believed that
this stock market's prices
were quite vulnerable to a setback. We
had a defensive position,
holding more cash than usual through
the entire fiscal year.
When stocks turned down in October,
this cash cushioned our portfolio.
During most of our reporting period,
investors preferred the large,
name-brand growth stocks that we were
avoiding because we thought
they were overpriced. If we had joined
the herd, we would have
improved our performance considerably
over that period. However,
we believe it would have been unwise
to try to time
precisely the turn toward our less
expensive stocks. Over the
full period, our stocks more than
caught up.
Five Largest Holdings.
2.6% General Motors Corp.
Automobiles
2.0% New
York Times
Co.
Publishing
2.0% CIGNA
Corp.
Insurance
1.7%
International
Business
Machines Corp.
Computer Systems
1.7% The
Limited, Inc.
Retail
Expressed as a percentage of total
net assets as of 9/30/97.
Looking Ahead.
As of September 30, stock prices
seemed high, assuming that
future earnings remain strong. We
believed there wasn't much
room left for stock prices to
advance. Moreover, investors
had been punishing companies when
their earnings fell below
analysts' high estimates even when
those earnings represented
reasonable growth. The value
orientation of our investment
style is particularly appropriate for
this market.
We have increased our bond allocation
to 39% because we believe
that real (inflation-adjusted)
interest rates are too high. Bond
prices
could rise (and yields fall) in a
correction.
1
<PAGE>
Brad Goldberg Explains Hybrid
Investing.
How Portfolio Manager Brad Goldberg
takes the best from growth and
value investing to make the most of
today's investment opportunities
Q. Are you a growth or value investor?
A. Neither. We use a hybrid of value
and growth styles: we look
for good earnings growth for the
portfolio as a whole at as
reasonable a valuation as we can find.
We're trying to achieve
better average earnings growth for our
holdings than for the
S&P 500, but with a significantly
lower price/earnings ratio.
We believe that such a portfolio will
be rewarded over the next
12 months, particularly if the market
leadership continues to
broaden as it did in the summer and
early fall of 1997.
Q. So you buy moderate growth stocks
because they sell at a reasonable
price?
A. No. There's more earnings variation
in the stocks we buy than
is implied by the term "moderate
growth stock." At any time, there
will be winners and losers in the
portfolio, but, on average, we
expect these companies to increase
their earnings by 16% in both
1997 and 1998. This is significantly
faster than the estimated
earnings growth of the S&P 500 overall
- -- about 11% for 1997
and 8% for 1998. And we are not paying
a premium for this
earnings growth. For estimated 1998
earnings, we're selling
at less than 15 times earnings, while
the S&P 500 is at 20
times (as of September 30).
Q. Where do you look for these
companies?
A. We prefer mid to large cap stocks.
(Market capitalization is
the market value of all a company's
outstanding shares -- what
it would take to buy the entire
company.) We like companies
that control their destiny and have
high revenue and unit growth
rates. We frequently do well with
stocks that start between
$2 billion and $20 billion (as opposed
to the $40$50 billion
large companies). We monitor about 400
stocks, checking for
unit growth, profitability, clean
balance sheets, management that
can capitalize on opportunities, and a
research and development pipeline.
Q. How do you assess long-term growth
potential?
A. At daily morning meetings, our 17
investment professionals share
information and opinions about the
companies they follow. Our analysts
meet their management, suppliers,
competitors and customers. We depend
on our analysts to
make their own judgments about risk
and reward potential
using any available information
resource.
Q. Your cash holdings this year were
higher than usual. Why?
A. If we don't think there's a
compelling reason to put
cash to work, we'll hold back. We've
tended to hold
moderate amounts of cash, giving us
the flexibility
to move quickly on new equity
recommendations. We don't feel
compelled to buy.
We buy when we are satisfied that a
stock's potential
reward clearly outweighs its risk. We
estimate the future trading range for
a stock; a new purchase should have
three times the potential gain as
loss.
If we can't find a stock like that,
then we'll hold
cash. And if we think a stock we own
no longer has at
least twice the potential gain as
loss, it's a candidate
for sale. We're not attracted to a
stock that we think
can rise only 15%, because the stock
can also go down 15%. We look for
significantly more growth potential
than that. This year, fewer stocks had
that favorable balance of risk and
reward.
Brad Goldberg (PICTURE)
2
<PAGE>
President's Letter
November 12, 1997
Keep Events In Perspective.
Dear Shareholder:
For investors, the late October
decline experienced by the
financial markets was unsettling --
but let's put events in perspective.
October's downturn was the third
significant one this year. Stock
prices fell sharply in early spring
and dropped again in late
summer. Yet following each episode the
financial markets recovered
any lost ground. That's very important
because it shows that
investors today are not easily swayed
by temporary setbacks --
they choose to stay the course and are
investing for the long term.
Despite the recent volatility, it has
been a very good year for
investors. Plus, the U.S. economy is
strong, inflation remains
low, and unemployment is down. At the
end of the sell-off on
October 27, the Standard & Poor's 500
Index had still gained more than 18%
for the year. The Dow Jones
Industrial Average was also up 11% and
the Nasdaq Composite
nearly 19%.
Here are a few more thoughts that may
help you during times
of market uncertainty:
- -- Keep your expectations realistic.
Seasoned investors know
that financial markets rise and fall -
- - as will the value of
their holdings. Over time, however,
stocks have been shown to
produce very attractive returns. As a
matter of fact, the S&P
500 rose more than 280% from the time
of the last major market
downturn (October 31, 1987) through
December 31, 1996, according
to Lipper Analytical Services.
- -- Don't make rash decisions. If you
have an investment plan,
stick to it. While past performance is
not indicative
of future results, historically,
investors have profited by
taking advantage of the long-term
growth potential of U.S. stocks.
- -- We're on your side. Your
Prudential
Securities Financial
Advisor or Pruco Securities Registered
Representative can
help you understand what's happening
in the financial markets.
Why not call him or her today?
Thank you for your continued
confidence in Prudential Mutual Funds
and Annuities. We'll do everything we
can to keep you informed and
to earn your trust.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds &
Annuities
3
<PAGE>
Portfolio of Investments as
PRUDENTIAL
DRYDEN FUND
of September 30, 1997
PRUDENTIAL
ACTIVE BALANCED FUND -----------------
- --------------------------------------
- ----
<TABLE>
<CAPTION>
Shares Description
Value
(Note 1)
<C> <S>
<C>
----------------------------------
- -------------------------
LONG-TERM INVESTMENTS--90.7%
COMMON STOCKS--50.8% -----------------
-----------------------------
- --------------
Airlines--0.6%
10,600 Delta Air Lines, Inc.
$ 998,388
- --------------------------------------
- ---------------------
Automobiles & Trucks--2.7%
61,800 General Motors Corp.
4,136,737
4,700 Meritor Automotive Inc.(a)
112,495
- -------------
4,249,232 ----------------------------
- -------------------------------
Banking--3.2%
14,400 Chase Manhattan Corp.
1,699,200
14,500 Fleet Financial Group,
Inc.
950,656
142,200 Hibernia Corp. U.A.
2,417,400
- -------------
5,067,256
- --------------------------------------
- ---------------------
Business Services--4.3%
40,975 CUC International Inc.(a)
1,270,225
25,000 Hertz Corp
942,187
20,300 Manpower, Inc.
801,850
50,200 Ogden Corp.
1,185,975
8,600 Omnicom Group
625,650
58,800 Ryder System, Inc.
2,113,125
- -------------
6,939,012 ----------------------------
- -------------------------------
Computer Systems/Peripherals--4.1%
18,400 Digital Equipment Corp.(a)
796,950
20,000 Hewlett-Packard Co.
1,391,250
25,700 International Business
Machines
Corp.
2,722,594
21,550 Symbol Technologies, Inc.
946,853
48,100 Unisys Corp.(a)
736,531
- -------------
6,594,178 ----------------------------
- -------------------------------
Food--1.2%
42,900 Dole Food Company, Inc.
1,938,544
Hotels--0.9%
41,000 Hilton Hotels Corp.
$ 1,381,188
- --------------------------------------
- ---------------------
Household & Personal Care Products--
0.5%
44,300 The Dial Corp.
772,481 ------------------------------
- -----------------------------
Insurance--2.8%
16,800 CIGNA Corp.
3,129,000
27,600 NAC Re Corp.
1,417,950
- -------------
4,546,950 ----------------------------
- -------------------------------
Machinery--1.0%
16,800 Case Corp.
1,119,300
9,400 Caterpillar Inc.
507,012
- -------------
1,626,312 ----------------------------
- -------------------------------
Media--0.7%
43,200 Westinghouse Electric
Corp.
1,169,100 ----------------------------
- -------------------------------
Metals--2.2%
47,700 Alumax, Inc.(a)
1,949,738
22,900 Reynolds Metals Co.
1,621,606
- -------------
3,571,344 ----------------------------
- -------------------------------
Oil Services--2.0%
25,300 Baker Hughes, Inc.
1,106,875
25,600 Dresser Industries, Inc.
1,100,800
21,800 Unocal Corp.
942,850
- -------------
3,150,525 ----------------------------
- -------------------------------
Paper--2.3%
35,500 Boise Cascade Corp.
1,493,219
22,300 Champion International
Corp.
1,358,906
49,600 Stone Container Corp.
771,900
- -------------
3,624,025
</TABLE> -----------------------------
- --------------------------------------
- ------------
See Notes to Financial Statements.
4
<PAGE>
Portfolio of Investments as
PRUDENTIAL DRYDEN FUND
of September 30, 1997
PRUDENTIAL ACTIVE BALANCED FUND ------
- --------------------------------------
- ---------------
<TABLE>
<CAPTION>
Shares Description
Value
(Note 1)
<C> <S>
<C>
----------------------------------
- -------------------------
Petroleum (Domestic)--2.3%
18,600 Amerada Hess Corp.
$ 1,147,387
17,900 Anadarko Petroleum Corp.
1,285,444
49,023 Union Pacific Resources
Group, Inc.
1,283,790
- -------------
3,716,621 ----------------------------
- -------------------------------
Pharmaceuticals--0.1%
4,300 Vertex Pharmaceuticals,
Inc.(a)
162,325 ------------------------------
- -----------------------------
Photography/Imaging Technology--1.0%
19,200 Xerox Corp.
1,616,400 ----------------------------
- -------------------------------
Publishing--5.7%
43,700 American Greetings Corp.
1,611,438
30,600 McGraw-Hill Companies,
Inc.
2,071,237
61,000 New York Times Co.
3,202,500
39,900 Tribune Co.
2,127,169
- -------------
9,012,344 ----------------------------
- -------------------------------
Railroads--0.9%
21,561 Union Pacific Corp.
1,350,258 ----------------------------
- -------------------------------
Realty Investment Trust--0.7%
39,450 Avalon Properties, Inc.
1,173,638 ----------------------------
- -------------------------------
Retail--3.0%
24,100 AutoZone, Inc.(a)
723,000
108,979 The Limited, Inc.
2,663,174
24,600 Sears, Roebuck & Co.
1,400,663
- -------------
4,786,837 ----------------------------
- -------------------------------
Savings & Loan--0.9%
20,200 Washington Mutual, Inc.
1,408,950
Semiconductor Devices & Equipment--
0.5%
35,600 International Rectifier
Corp.(a)
$ 832,150
- --------------------------------------
- ---------------------
Specialty Chemicals--2.5%
24,200 Betz Dearborn Inc.
1,654,675
32,200 Dexter Corp.
1,290,012
31,000 Morton International, Inc.
1,100,500
- -------------
4,045,187 ----------------------------
- -------------------------------
Steel & Metal--2.0%
24,300 Kennametal, Inc.
1,178,550
30,800 Steel Dynamics, Inc.(a)
723,800
37,800 USX Corp.-U.S. Steel Group
1,313,550
- -------------
3,215,900 ----------------------------
- -------------------------------
Telecommunications Equipment--1.4%
33,900 General Motors Corp.,
Series H
2,241,636 ----------------------------
- -------------------------------
Trucking & Shipping--0.5%
25,300 Knightsbridge Tankers Ltd.
716,306 ------------------------------
- -----------------------------
Waste Management--0.8%
36,800 Waste Management Inc.
1,285,701
- -------------
Total common stocks
(cost $58,321,045)
81,192,788
- -------------
PREFERRED STOCKS--0.5% ---------------
-------------------------------
- --------------
15,400 USX Capital Trust Conv.
Pfd. 6.75%
(cost $736,572)
736,313
- -------------
</TABLE> -----------------------------
- --------------------------------------
- ------------
See Notes to Financial Statements.
5
<PAGE>
PRUDENTIAL DRYDEN FUND
PRUDENTIAL ACTIVE BALANCED FUND
Portfolio of Investments as of
September 30, 1997 -------------------
- --------------------------------------
- --
<TABLE>
<CAPTION>
Principal
Amount
(000) Description
Value
(Note 1)
<C> <S>
<C>
----------------------------------
- -------------------------
DEBT OBLIGATIONS--39.4% --------------
- --------------------------------------
- -------
Corporate Bonds--1.0%
$1,570 General Motors Acceptance
Corp.
6.75%, 2/7/02
(cost $1,576,798)
$ 1,588,840
- --------------------------------------
- ---------------------------------
U.S. Government Securities--38.4%
9,805 United States Treasury
Bond,
7.875%, 2/15/21
11,422,825
United States
Treasury Notes, 4,865
8.875%, 11/15/98
5,029,194
7,045 7.50%, 11/15/01
7,424,796
17,435 6.25%, 2/15/03
17,601,155
20,300 5.75%, 8/15/03
19,985,959
- -------------
Total U.S.
Government
securities (cost
$59,559,007)
61,463,929
- -------------
Total debt
obligations
(cost $61,135,805)
63,052,769
- -------------
Total long-term
investments (cost
$120,193,422)
144,981,870
- -------------
SHORT-TERM INVESTMENT--10.6%
- --------------------------------------
- ---------------------
Repurchase Agreement--10.6%
16,910 Joint Repurchase Agreement
Account,
6.127%, 10/01/97 (Note
5)
(cost $16,910,000)
16,910,000 ---------------------------
- --------------------------------
Total Investments--101.3%
(cost $137,103,422; Note 4)
161,891,870
Liabilities in excess of
other assets--(1.3%)
(2,011,517)
- -------------
Net Assets--100%
$ 159,880,353
- -------------
- -------------
</TABLE>
- ---------------
(a) Non-income producing security. ---
- --------------------------------------
- --------------------------------------
See Notes to Financial Statements.
6
<PAGE>
PRUDENTIAL DRYDEN FUND
Statement of Assets and Liabilities
PRUDENTIAL ACTIVE BALANCED FUND ------
- --------------------------------------
- -----------------------------------
<TABLE>
Assets
September 30, 1997
<S>
<C>
Investments, at value (cost
$137,103,422).........................
............ .........................
$161,891,870
Cash..................................
............
......................................
............ ...
205,643
Dividends and interest
receivable............................
............
..............................
866,767
Receivable for investments
sold..................................
............
..........................
577,190 Receivable for Fund shares
sold..................................
............
..........................
127,392 Deferred expenses and other
assets................................
............ .........................
7,060
- ------------------
Total
assets................................
............
......................................
..... 163,675,922
- ------------------
Liabilities
Payable for investments
purchased.............................
............
.............................
2,261,304 Payable for Fund shares
reacquired............................
............
.............................
1,359,140 Accrued
expenses..............................
............
......................................
....... 89,843
Management fee
payable...............................
............
......................................
84,977
Distribution fee
payable...............................
............
....................................
305
- ------------------
Total
liabilities...........................
............
......................................
..... 3,795,569
- ------------------
Net
Assets................................
............
......................................
........... $159,880,353
- ------------------
- ------------------
Net assets were comprised of:
Shares of beneficial interest, at
par...................................
............ ................
$ 11,065
Paid-in capital in excess of
par...................................
............ .....................
120,808,732
- ------------------
120,819,797
Undistributed net investment
income................................
............ .....................
3,191,713
Accumulated net realized gain on
investments...........................
............ .................
11,080,395
Net unrealized appreciation on
investments...........................
............ ...................
24,788,448
- ------------------
Net assets, September 30,
1997..................................
............
...........................
$159,880,353
- ------------------
- ------------------
Class A:
Net asset value and redemption
price per share ($990,155 /
68,713 shares of beneficial
interest issued and
outstanding).........................
$14.41
Maximum sales charge (5% of
offering
price)................................
............
............. .76
Maximum offering price to
public................................
............ ........................
$15.17 Class B:
Net asset value, offering price and
redemption
price per share
($212,588 / 14,829 shares of
beneficial
interest issued and
outstanding).........................
$14.34
Class C:
Net asset value, offering price and
redemption
price per share
($5,252 / 366 shares of
beneficial interest issued and
outstanding)..........................
....
$14.34
Class Z:
Net asset value, offering price and
redemption
price per share
($158,672,358 / 10,980,644 shares of
beneficial interest issued and
outstanding)................. $14.45
</TABLE> -----------------------------
- --------------------------------------
- ------------
See Notes to Financial Statements.
7
<PAGE>
PRUDENTIAL DRYDEN FUND
PRUDENTIAL ACTIVE BALANCED FUND
Statement of Operations --------------
- --------------------------------------
- -------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income
September 30, 1997
<S> <C>
Income
Interest............................
.. $
4,870,516
Dividends (net of foreign
withholding
taxes of $522).....................
1,282,755
-----------------
Total
income.........................
6,153,271
-----------------
Expenses
Management
fee........................ 1,009,861
Distribution fee--Class
A.............
228
Distribution fee--Class
B.............
650
Distribution fee--Class
C.............
6
Registration
fees.....................
183,000
Transfer agent's fees and
expenses....
167,000
Custodian's fees and
expenses.........
92,000
Reports to
shareholders...............
88,000
Legal
fees............................
33,000
Administration
fee....................
21,553
Audit
fee.............................
15,000
Organization
expense..................
13,213
Trustees'
fees........................
11,250
Miscellaneous.........................
1,676
-----------------
Total
expenses.......................
1,636,437
-----------------
Net investment
income.................... 4,516,834
-----------------
Realized and Unrealized Gain
on Investments
Net realized gain on investment
transactions.......................
...
11,725,117
Net change in unrealized appreciation
on
investments........................
...
13,786,966
-----------------
Net gain on
investments..................
25,512,083
-----------------
Net Increase in Net Assets
Resulting from
Operations................ $
30,028,917
-----------------
-----------------
</TABLE>
PRUDENTIAL DRYDEN FUND
PRUDENTIAL ACTIVE BALANCED FUND
Statement of Changes in Net Assets ---
- --------------------------------------
- ------------------
<TABLE>
<CAPTION>
Increase
Year Ended September 30,
<S>
<C>
<C>
in Net Assets
1997
1996
Operations
Net investment income.......... $
4,516,834
$ 4,391,687
Net realized gain on
investment.................. 11,725,117
9,129,045
Net change in unrealized
appreciation/depreciation on
investments................. 13,786,966
(1,120,181)
- ------------------------
Net increase in net assets
resulting from operations... 30,028,917
12,400,551
- ------------------------
Dividends and distributions
Dividends to shareholders from net
investment income
Class A..................... (64)
- --
Class B..................... (6)
- --
Class C..................... (6)
- --
Class Z..................... (4,627,738)
(3,972,955)
-
- -----------------------
(4,627,814)
(3,972,955)
-
- -----------------------
Distributions to shareholders
from net realized gains
Class A..................... (128)
- --
Class B..................... (12)
- --
Class C..................... (12)
- --
Class Z..................... (9,255,475)
(1,932,789)
-
- -----------------------
(9,255,627)
(1,932,789)
-
- -----------------------
Fund share transactions (Note 6)
Net proceeds from shares
sold........................ 55,048,728
36,454,403
Net asset value of shares
issued in reinvestment of
distributions............... 13,883,406
5,905,744
Cost of shares reacquired......
(78,785,554) (28,618,544)
-
- -----------------------
Net increase (decrease) in net
assets from Fund share
transactions................ (9,853,420)
13,741,603
-
- -----------------------
Total increase.................... 6,292,056
20,236,410
Net Assets
Beginning of year.................
153,588,297 133,351,887
--
- ----------------------
End of year.......................
$159,880,353
$ 153,588,297
--
- ----------------------
--
- ----------------------
</TABLE> -----------------------------
- --------------------------------------
- ------------
See Notes to Financial Statements.
8
<PAGE>
PRUDENTIAL DRYDEN FUND
Notes to Financial Statements
PRUDENTIAL ACTIVE BALANCED FUND ------
- --------------------------------------
- -----------------------------------
The Prudential Dryden Fund (the
'Company') is registered under the
Investment
Company Act of 1940 as an open-end,
diversified management investment
company.
The Company was established as a
Delaware business trust on May 11,
1992 and
currently consists of six separate
funds, one of which is Active Balanced
Fund
(the 'Fund'). Prior to October 30,
1996 the Company was named the
Prudential
Institutional Fund and prior to
September 20, 1996, it consisted of
seven
separate funds (the 'Funds'), five of
which were reorganized on September
20,
1996 and combined with existing funds
in the Prudential Mutual Funds family
of
funds (see Note 7).
The Company had no operations until
July 7, 1992 when 10,000 shares of
beneficial interest of the Company
were sold for $100,000 to Prudential
Institutional Fund Management, Inc.
Investment operations of the Fund
commenced
on January 4, 1993. The Fund's
investment objective is to achieve
total returns approaching equity
returns, while accepting less risk
than an all-equity
portfolio, through an actively-managed
portfolio of equity securities, fixed
income securities and money market
instruments.
- --------------------------------------
- ---------------------
Note 1. Accounting Policies
The following is a summary of
significant accounting policies
followed by the
Fund.
Securities Valuation: Securities,
including options, warrants, futures
contracts
and options thereon, for which the
primary market is a national
securities
exchange, commodities exchange, board
of trade or NASDAQ are valued at the
last
sale price on such exchange or board
of trade on the date of valuation or,
if
there was no sale on such day, at the
mean between the closing bid and asked
prices quoted on such day or at the
bid price in the absence of an asked
price.
Securities that are actively traded in
the overthe-counter market, including
listed securities for which the
primary market is believed to be
over-the-counter, are valued by a
principal market maker or independent
pricing
agent.
U.S. government securities for which
market quotations are readily
available are
valued at a price provided by an
independent broker/dealer or pricing
service.
Securities for which reliable market
quotations are not available or for
which
the pricing agent or principal market
maker does not provide a valuation or
methodology or provides a valuation or
methodology that, in the judgment of
the
subadviser, does not represent fair
value, are valued at fair value as
determined under procedures
established by the Trustees.
In connection with transactions in
repurchase agreements, it is the
Fund's
policy that its custodian or
designated subcustodians, under
triparty repurchase agreements, as the
case may be, take possession of the
underlying collateral
securities, the value of which exceeds
the principal amount of the repurchase
transaction, including accrued
interest. To the extent that any
repurchase
transaction exceeds one business day,
the value of the collateral is
marked-to-market on a daily basis to
ensure the adequacy of the collateral.
If
the seller defaults and the value of
the collateral declines or, if
bankruptcy
proceedings are commenced with respect
to the seller of the security,
realization of the collateral by the
Fund may be delayed or limited.
Securities Transactions and Net
Investment Income: Securities
transactions are
recorded on the trade date. Realized
gains or losses on sales of securities
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.
Dividends and Distributions: Dividends
and distributions of the Fund are
declared in cash and automatically
reinvested in additional shares of
the Fund.
The Fund will declare and distribute
its net investment income and net
capital
gains, if any, at least annually.
Dividends and distributions are
recorded on
the ex-dividend date.
Income distributions and capital gain
distributions are determined in
accordance
with income tax regulations which may
differ from generally accepted
accounting
principles.
Taxes: It is the Fund's policy to
continue to meet the requirements of
the
Internal Revenue Code applicable to
regulated investment companies and to
distribute all of its taxable net
investment income to its shareholders.
Therefore, no federal income tax
provision is required.
Withholding taxes on foreign dividends
have been provided for in accordance
with
the Fund's understanding of the
applicable country's tax rules and
rates. -------------------------------
- --------------------------------------
- ----------
9
<PAGE>
PRUDENTIAL DRYDEN FUND
Notes to Financial Statements
PRUDENTIAL ACTIVE BALANCED FUND ------
- --------------------------------------
- -----------------------------------
Deferred Organizational Expenses:
Approximately $450,000 of costs were
incurred
in connection with the organization
and initial registration of the
Company and
have been deferred and are being
amortized ratably over a period of
sixty months
from the date each of the Funds
commenced investment operations.
Reclassification of Capital Accounts:
The Fund accounts and reports
distributions to shareholders in
accordance with the American Institute
of
Certified Public Accountants'
Statement of Position 93-2:
Determination,
Disclosure, and Financial Statement
Presentation of Income, Capital Gain,
and
Return of Capital Distributions by
Investment Companies. For the fiscal
year
ended September 30, 1997, the
application of this statement
increased unrealized
appreciation on investments and
decreased paid-in capital by $7,210.
Net
investment income, net realized gains,
and net assets were not affected by
these reclassifications. -------------
- --------------------------------------
- --------
Note 2. Agreements
The Fund had a management agreement
with Prudential Institutional Fund
Management, Inc. through October 30,
1996. Pursuant to this agreement,
Prudential Institutional Fund
Management, Inc. had responsibility
for all
investment advisory services and
supervised the subadviser's
performance of such
services.
Prudential Institutional Fund
Management, Inc. had a subadvisory
agreement with
Jennison Associates Capital Corp.
('Jennison') through October 30, 1996.
Jennison furnished investment advisory
services in connection with the
management of the Fund. Prudential
Institutional Fund Management, Inc.
paid for
the costs and expenses attributable to
the subadvisory agreements and the
salaries and expenses of all personnel
of the Fund except for fees and
expenses
of unaffiliated Trustees. The Fund
paid for all other costs and expenses.
Through October 30, 1996 the
management fee paid Prudential
Institutional Fund
Management, Inc. was computed daily
and payable monthly at an annual rate
of .70
of 1% of the average daily net assets
of the Fund. Effective October 31,
1996
the Fund entered into a management
agreement with Prudential Investments
Fund
Management LLC ('PIFM') under which
the management fee is computed daily
and
payable monthly at an annual rate of
.65 of 1% of the average daily net
assets
of the Fund. Pursuant to this
agreement PIFM has responsibility for
all
investment advisory services. PIFM has
entered into a subadvisory agreement
with
Jennison under which Jennison is
compensated by PIFM for its services
at an
annual rate of .30 of 1% of the Fund's
average daily net assets up to and
including $300 million and .25 of 1%
of the Fund's average daily net assets
in
excess of $300 million. This is the
same rate paid to Jennison under the
prior
subadvisory agreement.
Jennison, subject to the supervision
of PIFM, manages the assets of the
Fund in
accordance with its investment
objectives and policies and in a
manner
consistent with the previous
arrangement. PIFM pays for the
compensation of
officers of the Fund, occupancy and
certain clerical and bookkeeping costs
of
the Fund. The Fund will bear all other
costs and expenses.
The Fund had an administration
agreement with PIFM through October
30, 1996. The
administration fee paid PIFM was
computed daily and payable monthly, at
an
annual rate of .17% of the Company's
average daily net assets up to $250
million
and .15% of the Company's average
daily net assets in excess of $250
million.
PIFM furnished to the Fund such
services as the Fund required in
connection with
the administration of the Fund's
business affairs. PIFM provided
certain
transfer agent services through its
wholly-owned subsidiary, Prudential
Mutual
Fund Services LLC ('PMFS'). For such
services, PMFS was paid .03% of the
Company's average daily net assets up
to $250 million and .02% of the
Company's
average daily net assets in excess of
$250 million from the administration
fee
paid to PIFM (see note 3 below).
Effective October 31, 1996 Prudential
Securities Incorporated ('PSI') became
the
distributor of the Fund's Class A,
Class B and Class C shares. PSI also
incurs
the expenses of distributing the
Fund's Class Z shares under the
distribution
agreement, none of which is reimbursed
by or paid for by the Fund. The Fund
compensates PSI for distributing and
servicing the Fund's Class A, Class B
and
Class C shares pursuant to plans of
distribution (the 'Class A, B and C
Plans'),
regardless of expenses actually
incurred. The distribution fees are
accrued
daily and payable monthly. No
distribution or service fees are paid
to PSI as
distributor of Class Z shares of the
Fund. Pursuant to the Class A, B and
C Plans, the Fund compensates PSI for
distribution-related activities at an
annual rate of up to .30 of 1%, 1%
and 1%
of the average daily net assets of the
Class A, B and C shares, respectively.
Such expenses under the Plans were
charged at a rate of .25 of 1%, 1% and
1% of
the average daily net assets of the
Class A, B and C shares, respectively,
for
the period November 7, 1996 through
September 30, 1997.
PSI has advised the Fund that it
received approximately $12,900 in
front-end
sales charges resulting from sales of
Class A shares during the period ended
September 30, 1997. From these fees,
PSI paid such sales charges to
affiliated
broker-dealers, which in turn paid
commissions to salespersons and
incurred
other distribution costs. ------------
- --------------------------------------
- -----------------------------
10
<PAGE>
PRUDENTIAL DRYDEN FUND
Notes to Financial Statements
PRUDENTIAL ACTIVE BALANCED FUND ------
- --------------------------------------
- -----------------------------------
Jennison, PIFM and PSI are wholly-
owned subsidiaries of The Prudential
Insurance
Company of America.
The Fund, along with other
affiliated registered investment
companies (the
'funds'), entered into a credit
agreement (the 'Agreement') on
December 31, 1996
with an unaffiliated lender. The
maximum commitment under the
Agreement is
$200,000,000. The Agreement expires
on December 30, 1997. Interest on any
such
borrowings outstanding will be at
market rates. The purpose of the
Agreement is
to serve as an alternative source of
funding for capital share
redemptions. The
Fund has not borrowed any amounts
pursuant to the Agreement as of
September 30,
1997. The funds pay a commitment fee
at an annual rate of .055 of 1% on
the
unused portion of the credit
facility. The commitment fee is
accrued and paid
quarterly on a pro-rata basis by the
funds. -------------------------------
- ----------------------------
Note 3. Other Transactions With
Affiliates
PMFS, a wholly-owned subsidiary of
PIFM, serves as the Fund's transfer
agent.
During the year ended September 30,
1997, the Fund incurred fees of
approximately $165,100 for the
services of PMFS. As of September 30,
1997,
approximately $16,200 of such fees
were due to PMFS. Transfer agent fees
and
expenses in the Statement of
Operations also include certain out-of-
pocket
expenses paid to non-affiliates. -----
- --------------------------------------
- ----------------
Note 4. Portfolio Securities
Purchases and sales of portfolio
securities, excluding short-term
investments,
for the year ended September 30, 1997
aggregated $64,694,120 and
$66,972,643,
respectively.
The cost basis of investments for
federal income tax purposes is
$137,231,525.
As of September 30, 1997, net
unrealized appreciation for federal
income tax
purposes was $24,660,345 (gross
unrealized appreciation--$24,737,869,
gross
unrealized depreciation--$77,524). ---
- --------------------------------------
- ------------------
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 joint repurchase agreements
collateralized by U.S. Treasury or
federal agency obligations. At
September 30,
1997, the Fund had a 1.3% undivided
interest in the repurchase agreements
in the
joint account. The undivided interest
represented $16,910,000 in principal
amount. As of such date, each
repurchase agreement in the joint
account and the
collateral therefor was as follows:
Credit Suisse First Boston Corp.,
6.15%, in the principal amount of
$341,000,000, repurchase price
$341,058,254, due 10/1/97. The value
of the
collateral including accrued
interest was $352,935,110.
Goldman, Sachs & Co., 6.15%, in the
principal amount of $341,000,000,
repurchase
price $341,058,254, due 10/1/97. The
value of the collateral including
accrued
interest was $347,820,010.
Morgan Stanley, Dean Witter, Discover
& Co., 6.15%, in the principal amount
of
$325,256,000, repurchase price
$325,311,564, due 10/1/97. The value
of the
collateral including accrued interest
was $331,761,960.
UBS Securities LLC, 6.06%, in the
principal amount of $341,000,000,
repurchase
price $341,057,402, due 10/1/97. The
value of the collateral including
accrued
interest was $347,821,030. -----------
- --------------------------------------
- ----------
Note 6. Capital
The Fund offers Class A, Class B,
Class C and Class Z shares. Class A
shares are
sold with a front-end sales charge of
up to 5%. Class B shares are sold with
a
contingent deferred sales charge which
declines from 5% to zero depending on
the
period of time the shares are held.
Class C shares are sold with a
contingent
deferred sales charge of 1% during the
first year. Class B shares will
automatically convert to Class A
shares on a quarterly basis
approximately seven
years after purchase. Special
exchange privileges are also
available for
shareholders who qualify to purchase
Class A shares at net asset value or
Class
Z shares. 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 at
$.001 par
value per share. Transactions in
shares of beneficial interest during
the year
ended September 30, 1997 and
September 30, 1996 were as follows:
<TABLE>
<CAPTION>
Class A Shares
Amount
- ----------------------------------- ----------
- ------------
<S> <C>
<C>
November 7, 1996(a)
through September 30, 1997:
Shares sold........................ 68,711
$ 971,421
Shares issued in reinvestment of
dividends and distributions...... 15
183
Shares reacquired.................. (13)
(178)
--------------------
- -
Net increase in shares
outstanding...................... 68,713
$ 971,426
- ---------------------
- ---------------------
</TABLE> -----------------------------
- --------------------------------------
- ------------
11
<PAGE>
PRUDENTIAL DRYDEN FUND
Notes to Financial Statements
PRUDENTIAL ACTIVE BALANCED FUND ------
- --------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class B Shares
Amount
- -----------------------------------
- ----------
- ------------
<S>
<C>
<C>
November 7, 1996(a)
through September 30, 1997:
Shares sold........................ 14,903
$ 197,257
Shares issued in reinvestment of
dividends and distributions...... 1
9
Shares reacquired.................. (75)
(964)
- ---------------------
Net increase in shares
outstanding...................... 14,829
$ 196,302
- ---------------------
- ---------------------
<CAPTION>
Class C
- -----------------------------------
<S>
<C>
<C>
November 7, 1996(a)
through September 30, 1997:
Shares sold........................ 365
$ 5,122
Shares issued in reinvestment of
dividends and distributions...... 1
9
Shares reacquired.................. --
- --
- ---------------------
Net increase in shares
outstanding...................... 366
$ 5,131
- ---------------------
- ---------------------
<CAPTION>
Class Z
- -----------------------------------
<S> <C>
<C>
Year ended September 30, 1997:
Shares sold........................ 4,174,112
$ 53,874,928
Shares issued in reinvestment of
dividends and distributions...... 1,097,487
13,883,205
Shares reacquired.................. (6,097,293)
(78,784,412)
--------------------
- -
Net decrease in shares
outstanding...................... (825,694)
$(11,026,279)
--------------------
- -
--------------------
- -
Year ended September 30, 1996:
Shares sold........................ 2,893,381
$ 36,454,403
Shares issued in reinvestment of
dividends and distributions...... 483,285
5,905,744
Shares reacquired.................. (2,273,501)
(28,618,544)
--------------------
- -
Net increase in shares
outstanding...................... 1,103,165
$ 13,741,603
--------------------
- -
--------------------
- -
</TABLE>
- ---------------
(a) Commencement of offering of Class
A, B, and C shares.
Of the shares outstanding at
September 30, 1997, PIFM and
affiliates owned
388,158 shares of the Fund. ----------
- --------------------------------------
- -----------
Note 7. Reorganization
On May 17, 1996, the Trustees of the
Company approved an Agreement and Plan
of
Reorganization (the 'Plan of
Reorganization') for five other series
of the
Company. Each Plan of Reorganization
was approved by applicable
shareholders on
September 7, 1996. This Fund approved
new manager, distributor and transfer
agency agreements on October 30, 1996.
Under each Plan of Reorganization, all
of the assets and liabilities of the
Growth Stock Fund, Balanced Fund,
Income Fund and Money Market Fund
('Series')
were transferred at net asset value
for equivalent value of Class Z shares
of
Prudential Jennison Series Fund, Inc.,
Prudential Allocation Fund--Balanced
Portfolio, Prudential Government
Income Fund, Inc.
and Prudential MoneyMart
Assets, Inc., respectively. These
Series then ceased operations.
The Company's International Stock
Fund joined the Prudential Global
Fund as
separate series of a newly named
Prudential World Fund. Existing
shareholders
became Class Z shareholders and the
International Stock Fund also began
offering
Classes A, B and C shares.
Prudential Stock Index Fund and the
Fund remained a series of The
Prudential
Institutional Fund (renamed the
Prudential Dryden Fund). Existing
shareholders
of the Fund became Class Z
shareholders and the Fund began
offering Classes A, B
and C shares. Prudential Stock Index
Fund offers Class I and Class Z
shares.
Effective October 30, 1996 these funds
were managed by PIFM. PMFS provides
transfer agency services and PSI acts
as distributor. ----------------------
- -------------------------------------
Note 8. Proposed Reorganization
On August 26, 1997, the Board of
Trustees of the Fund Company approved
an
Agreement and Plan of Conversion and
Liquidation (the 'Plan') which
provides for
the transfer of all of the assets of
the Fund to the Prudential Jennison
Series
Fund, Inc.--Prudential Jennison Active
Balanced Fund (the 'Portfolio') in
exchange for the respective Class A,
Class B, Class C and Class Z shares of
the
Portfolio and the Portfolio's
assumption of the liabilities of the
Fund.
The Plan is subject to approval by the
shareholders of the Fund at a
shareholder
meeting scheduled on January 15, 1998.
If the Plan is approved, it is
expected
that the reorganization will take
place on or about January 23, 1998.
The Fund
will bear the costs of the
reorganization, including the cost of
proxy
solicitation. ------------------------
- --------------------------------------
- -----------------
12
<PAGE>
PRUDENTIAL DRYDEN FUND
Financial Highlights
PRUDENTIAL ACTIVE BALANCED FUND ------
- --------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class A Class B
Class C
Class Z
- ------------ ------------- ---
- ---------- --------
- ----------------------------
<S>
<C>
<C> <C>
<C>
<C> <C>
November 7, November
7, November 7,
1996(e) 1996(e)
1996(e)
Through Through
Through Year Ended
September 30,
September 30, September 30,
September 30, ------
- ------------------------------
1997 1997
1997 1997
1996 1995
- ------------
- ------------- ------------- --------
- -- -------- --------
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period......................... $ 13.40
$ 13.40 $ 13.40 $
13.01 $
12.46 $ 10.92
---------
- ----- ---------- ----
- ---- --------
Income from investment
operations:
Net investment
income.............
.21(f) .19(f)
.13(f)
.39(f) .29(b)
.33(b)
Net realized and unrealized gain
(loss) on investment
transactions................... 1.97
1.92 1.98
2.22
.81 1.54
---------
- ----- ---------- ----
- ---- --------
Total from investment
operations.................. 2.18
2.11 2.11
2.61
1.10 1.87
---------
- ----- ---------- ----
- ---- --------
Less distributions:
Dividends from net investment
income......................... (.39)
(.39) (.39)
(.39)
(.37) (.29)
Distributions from net realized
gains.......................... (.78)
(.78) (.78)
(.78)
(.18) (.04)
---------
- ----- ---------- ----
- ---- --------
Total distributions............ (1.17)
(1.17) (1.17)
(1.17)
(.55) (.33)
---------
- ----- ---------- ----
- ---- --------
Net asset value, end of period.... $ 14.41
$ 14.34 $ 14.34 $
14.45 $
13.01 $ 12.46
--------- ---
- -- ---------- ----
- ---- --------
--------- ---
- -- ---------- ----
- ---- --------
TOTAL RETURN(d)................... 17.48%
16.91% 16.91%
21.34%
9.11% 17.66%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...
$ 990
$ 213 $ 5
$158,672
$153,588 $133,352
Average net assets (000)..........
$ 100
$ 71 $ 1
$154,199
$142,026 $104,821
Ratios to average net assets:
Expenses, including
distribution fees...........
1.31%(c) 2.06%(c) 2.06%(c)
1.06% 1.00%(b)
1.00%(b) Expenses, excluding
distribution fees...........
1.06%(c) 1.06%(c) 1.06%(c)
N/A N/A N/A
Net investment
income..........
2.69%(c) 1.94%(c)
1.94%(c)
2.94% 3.09%(b) 3.53%(b)
Portfolio turnover rate........... 50%
50% 50%
50%
51% 30%
Average commission rate paid per
share..........................
$ .0625
$ .0625 $ .0625 $
.0625 $
.0654 N/A
<CAPTION>
<S>
<C>
<C> <C>
January 4,
1993(a)
Through
September 30,
1994
1993
--
- ----- ------------
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period......................... $
11.05
$ 10.00
------------
Income from investment
operations:
Net investment income............. .24(b)
.21(b)
Net realized and unrealized gain
(loss) on investment
transactions................... (.12)
.84
------------
Total from investment
operations................
.. .12
1.05
------------
Less distributions:
Dividends from net investment
income.......................
.. (.14)
- --
Distributions from net realized
gains........................
.. (.11)
- --
------------
Total distributions............
(.25)
- --
------------
Net asset value, end of
period.... $ 10.92
$ 11.05
------------
------------
TOTAL
RETURN(d)................... 1.07%
10.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)... $81,176 $38,786
Average net assets
(000).......... $58,992 $12,815
Ratios to average net assets:
Expenses, including
distribution fees........... 1.00%(b)
1.00%(b)(c)
Expenses, excluding
distribution fees........... N/A
N/A
Net investment income.......... 3.06%(b)
2.68%(b)(c)
Portfolio turnover rate........... 40%
47%
Average commission rate paid per
share.......................... N/A
N/A
</TABLE>
- ---------------
(a) Commencement of investment
operations.
(b) Net of expense subsidy.
(c) Annualized.
(d) Total return does not consider
the effects of sales loads. Total
return is
calculated assuming a purchase of
shares on
the first day and a sale on the
last day of each period reported
and includes reinvestment of
dividends and
distributions. Total return for
periods of
less than a full year are not
annualized. Total return includes
the effect of expense subsidies where
applicable.
(e) Commencement of offering of Class
A, B and C shares.
(f) Calculated based upon weighted
average shares outstanding during the
year.
N/A--Data not required for these
periods. -----------------------------
- --------------------------------------
- ------------
See Notes to Financial Statements.
13
<PAGE>
PRUDENTIAL DRYDEN FUND
Report of Independent Accountants
PRUDENTIAL ACTIVE BALANCED FUND ------
- --------------------------------------
- -----------------------------------
To the Shareholders and Board of
Trustees of Prudential Dryden Fund--
Prudential Active Balanced Fund
In our opinion, the accompanying
statement of assets and liabilities,
including
the portfolio of investments, and the
related statements of operations and
of
changes in net assets and the
financial highlights present fairly,
in all
material respects, the financial
position of Prudential Dryden Fund--
Prudential
Active Balanced Fund (the 'Fund', one
of the portfolios constituting
Prudential
Dryden Fund) (formerly The
Prudential Institutional Fund--
Prudential Active Balanced Fund)
at September 30, 1997, and the
results of its operations, the
changes in its net assets and the
financial highlights for the year
then ended,
in conformity with generally accepted
accounting principles. These
financial
statements and financial highlights
(hereafter referred to as 'financial
statements') are the responsibility
of the Fund's management; our
responsibility
is to express an opinion on these
financial statements based on our
audit. We
conducted our audit of these
financial statements in accordance
with generally
accepted auditing standards which
require that we plan and perform the
audit to
obtain reasonable assurance about
whether the financial statements are
free of
material misstatement. An audit
includes examining, on a test
basis, evidence supporting the
amounts and disclosures in the
financial statements, assessing
the accounting principles used and
significant estimates made by
management, and
evaluating the overall financial
statement presentation. We believe
that our
audit, which included confirmation of
securities at September 30, 1997 by
correspondence with the custodian and
brokers and the application of
alternative
auditing procedures where securities
purchased had not been received,
provides a
reasonable basis for the opinion
expressed above. The accompanying
statement of
changes in net assets for the year
ended September 30, 1996 and the
financial
highlights for each of the four
periods in the
period ended September 30, 1996
were audited by other independent
accountants, whose opinion dated
November 13,
1996 was unqualified.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
November 14, 1997 --------------------
- --------------------------------------
- ---------------------
14
<PAGE>
PRUDENTIAL DRYDEN FUND
Change of Auditors
PRUDENTIAL ACTIVE BALANCED FUND ------
- --------------------------------------
- -----------------------------------
Effective March 1, 1997, Deloitte &
Touche LLP was terminated as the
Fund's
auditors. For the year ended September
30, 1993, through September 30, 1996,
Deloitte & Touche LLP expressed an
unqualified opinion on the Fund's
financial
statements. There were no
disagreements between Fund management
and Deloitte &
Touche LLP prior to their termination.
The Board of Trustees approved the
termination of Deloitte & Touche LLP
and the appointment of Price
Waterhouse LLP
as the Fund's independent accountants.
PRUDENTIAL DRYDEN FUND
Federal Income Tax Information
PRUDENTIAL ACTIVE BALANCED FUND
- --------------------------------------
- --------------------------------------
- ---
We are required by the Internal
Revenue Service to advise you within
60 days of
the Fund's fiscal year end (September
30, 1997) as to the federal tax income
tax
status of dividends paid during such
fiscal year. Accordingly, we are
advising
you that for its fiscal year ended
September 30, 1997, the Fund paid a
dividend
from net investment income of $.39 per
share, a short-term capital gain
distribution of $.17 per share, all of
which is taxable as ordinary income
and a
long-term capital gain distribution of
$.61 per share, to Class A, B, C and Z
shares, which is taxable as such.
Further, we wish to advise you that
19.51% of
the ordinary income dividends paid in
the fiscal year ended September 30,
1997
qualified for the corporate dividends
received deduction available to
corporate
taxpayers. ---------------------------
- --------------------------------------
- --------------
15
<PAGE>
Getting
The Most
From Your
Prudential
Mutual
Fund.
Change Your Mind.
You can exchange your shares in most
Prudential Mutual Funds for shares in
most other Prudential Mutual Funds,
without charges. This may be most
helpful if your investment
needs change.
Reinvest Dividends Free Of Charge.
Reinvest your dividends and/or capital
gains distributions
automatically -- without charge.
Invest For Retirement.
There is no minimum investment for an
IRA. Plus, you defer taxes
on your investment earnings by
investing in an IRA.
If you'd like, you can contribute up
to $2,000 a year in an IRA.
And if you are married and not covered
by a retirement
plan at work, you and your spouse may
each contribute $2,000 a
year to an IRA for a total of $4,000.
Change Your Job.
You can take your pension with you.
Use a rollover IRA to manage
your company-sponsored retirement plan
while retaining the
special tax-deferred advantages.
Invest In Your Children.
There's no fee to open a custodial
account for a child's education
or other needs.
Take Income.
Would you like to receive monthly or
quarterly checks in any
amount from your fund account? Just
let us know. We'll take
care of it. Of course, there are
minimum amounts. And shares
redeemed may be subject to tax, and
Class B and C shares may
be subject to contingent deferred
sales charges. We'll gladly
answer your questions.
Keep Informed.
We want to keep you up-to-date. Of
course, you receive account
activity statements every quarter. But
you also receive annual
and semi-annual fund reports, as well
as other important updates
on events that affect your
investments, including tax
information.
This material is only authorized for
distribution when preceded
or accompanied by a current
prospectus. Read the prospectus
carefully before you invest or send
money.
<PAGE>
Comparing A $10,000 Investment. ------
- --------------------------------------
- ----------
Prudential Active Balanced Fund vs.
the S&P 500 Index
and the Lehman Government/Corporate
Bond Index.
- -- Prudential Active Balanced Fund
// S&P 500 Index
- ---Lehman Gov't/Corp Index
Past performance is not indicative of
future results and an
investor's shares may be worth more or
less than their original cost.
This graph is furnished to you in
accordance with SEC regulations.
It compares a $10,000 investment in
the Prudential Active Balanced
Fund (Class A, B, C and Z shares) with
similar investments in the
Standard & Poor's 500 Index (S&P 500)
and the Lehman Government/Corporate
Bond Index by portraying the initial
account value at the commencement
of operations and subsequent account
values at the end of each
fiscal year (September 30) beginning
in 1996 for Class A, B, and
C shares; and 1993 for Class Z shares.
For purposes of
the graph and, unless otherwise
indicated in the accompanying
table, it has been assumed (a) that
the maximum applicable
front-end sales charge was deducted
from the initial $10,000
investment in Class A shares; (b) the
maximum applicable contingent
deferred sales charge was deducted
from the value of the
investment in Class B and Class C
shares, assuming full
redemption on September 30, 1997; (c)
all recurring fees
(including management fees) were
deducted; and (d) all dividends and
distributions were reinvested. Since
Class A, B, and C
shares have been in existence less
than a year, no average
annual total returns are presented.
Class B shares automatically convert
to Class A shares, on a quarterly
basis, approximately seven years after
purchase. This
conversion feature is not reflected in
the graph. Class
Z shares are not subject to a sales
charge or distribution fee.
The Lehman Index is a weighted index
comprised of public,
fixed rate, non-convertible domestic
corporate debts that
are rated at least investment grade
(BBB/Baa or higher) and
public obligations of the U.S.
Treasury. The S&P 500 is a
capital-weighted index, representing
the aggregate market
value of the common equity of 500
stocks primarily traded on the New
York Stock Exchange. The Lehman Index
and the S&P 500 Index are unmanaged
indices and both
include the reinvestment of all
income, but do not reflect
the payment of transaction costs and
advisory fees associated
with an investment in the Fund. The
securities which comprise
the Lehman Index and the S&P 500 Index
may differ substantially
from the securities in the Fund's
portfolio. The Lehman Index
and the S&P 500 Index are not the only
indices which may be
used to characterize performance of
actively balanced funds
and other indices may portray
different comparative performance.
Class A (GRAPH)
Class B (GRAPH)
Class C (GRAPH)
Class Z (GRAPH)
Average Annual Total
Returns -
Class Z -----
- -------------
- --Without
Sales Load
12.40% Since
Inception
21.34% for 1
Year
<PAGE>
Prudential
Mutual Funds
Gateway
Center Three
100 Mulberry
Street
Newark, NJ
07102-4077
(800) 225-
1852
http://www.pr
udential.com
Trustees
Edward D.
Beach
Delayne
Dedrick
Gold Robert
F. Gunia
Donald D.
Lennox
Douglas H.
McCorkindal
e Mendel A.
Melzer
Thomas
T.
Mooney
Stephe
n P.
Munn
Richar
d A.
Redeke
r
Robin
B.
Smith
Louis
A.
Weil,
III
Clay
T.
Whiteh
ead
Office
rs
Richard A. Redeker, President
Thomas A. Early, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant
Treasurer
S. Jane Rose, Secretary
Marguerite E.H. Morrison,
Assistant Secretary
Manager
Prudential Investments Fund
Management LLC Gateway Center
Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
Jennison Associates
Capital Corp. 466
Lexington Avenue
New York, NY 10017
Distributor
Prudential Securities
Incorporated One
Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and
Trust Company One
Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund
Services LLC P.O. Box
15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the
Americas
New York, NY 10036
Legal Counsel
Gardner, Carton &
Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
The views expressed in this report and
information about
the Fund's portfolio holdings are for
the period covered
by this report and are subject to
change thereafter.
This report is not authorized for distribution to
prospective investors unless preceded or accompanied by a
current
prospectus.
74431F506 74431F605 74431F704 74431F803 MF174E3
Cat# 42M269E
(ICON)
Prudential
Pacific Index
Fund
ANNUAL
REPORT
Sept. 30, 1997
(LOGO)
<PAGE>
Portfolio of Investments as of PRUDENTIAL DRYDEN FUND
September 30, 1997
PRUDENTIAL PACIFIC INDEX FUND --------
- --------------------------------------
- --------------------------------------
- ---------------------------------
<TABLE>
<CAPTION>
Shares Description
Value
(Note 1)
<C> <S>
<C> ----------------------------------
- -------------------------
LONG-TERM INVESTMENTS--98.2%
COMMON STOCKS--97.9% -----------------
- --------------------------------------
- ----
Australia--6.8%
6,600 Amcor Ltd. (Paper &
Packaging)
$ 41,527
3,000 Australian Gas & Light Co.
(Natural
Gas Utilities)
20,377
7,600 Australian National
Industries Ltd.
(Diversified
Industries)
9,741
11,600 Boral Ltd. (Building
Materials &
Products)
35,120
2,300 Brambles Industries Ltd.
(Transportation)
47,883
19,800 Broken Hill Proprietary
Co., Ltd.
(Mining)
230,553
8,500 Coca-Cola Amatil Ltd.
(Food &
Beverage)
90,905
11,800 Coles Myer Ltd. (Retail)
55,541
7,100 Crown Ltd.(a) (Gaming)
8,483
10,300 CSR Ltd. (Building
Materials &
Products)
42,216
2,800 Email Ltd. (Appliances &
Household
Durables)
9,388
1,200 F. H. Faulding Co., Ltd.
(Drugs &
Health Care)
7,169
20,000 Fosters Brewing Group
(Diversified
Industries)
42,145
4,600 Futuris Corp., Ltd.
(Diversified
Industries)
6,779
11,700(b) General Property Trust
(Real Estate)
22,824
6,100 GIO Australia Holdings
Ltd.
(Insurance)
18,111
12,600 Goodman Fielder Ltd.
(Food
Processing)
20,347
2,300 Great Central Mines Ltd.
(Mining)
3,548
4,000 Hardie (James)
Industries (Building
Materials & Products)
14,781
2,700 ICI Australia Ltd.
(Diversified
Industries)
25,691
2,700 Leighton Holdings Ltd.
(Building &
Construction)
14,273
2,500 Lend Lease Corp. Ltd.
(Real Estate)
59,363
16,500 M.I.M. Holdings Ltd.
(Mining)
20,192
14,500 National Australia Bank
Ltd.
(Commercial Banking)
222,809
2,300 Newcrest Mining Ltd.(a)
(Precious
Metals)
4,130
20,500 News Corp., Ltd.
(Broadcasting &
Other Media)
105,056
16,600 Normandy Mining Ltd.
(Mining)
21,036
7,200 North Ltd. (Diversified
Resources)
25,417
10,400 Pacific Dunlop Ltd.
(Diversified
Industries)
$ 29,522
9,200 Pioneer International
Ltd. (Building
Materials & Products)
31,272
1,800 Plutonic Resources Ltd.
(Precious
Metals)
4,940
2,900 QBE Insurance Group Ltd.
(Insurance)
18,251
6,300 QCT Resources Ltd.
(Mining)
7,482
2,100 RGC Ltd. (Mining)
5,833
3,300 Rio Tinto Ltd. (Mining)
49,585
1,200 Rothmans Holdings
(Tobacco)
6,769
6,200 Santos Ltd. (Oil & Gas)
31,876
4,000 Schroders Propriety Fund
(Real
Estate)
7,041
1,800 Smith (Howard) Ltd.
(Diversified
Industries)
17,662
6,200 Southcorp Holdings Ltd.
(Diversified
Industries)
22,897
3,100 Stockland Trust Group
(Real Estate)
8,238
3,000 Tabcorp Holdings Ltd.
(Gaming)
15,207
12,000(b) Westfield Trust (Real
Estate)
24,253
11,600 Western Mining Corp.
Holdings Ltd.
(Diversified Resources)
54,432
17,600 Westpac Banking Corp.
(Commercial
Banking)
110,880
- ------------
1,671,545 ----------------------------
- -------------------------------
Hong Kong--9.4%
13,000 Bank of East Asia
(Commercial
Banking)
48,549
35,000 Cathay Pacific Air
(Airlines)
49,073
22,000 Cheung Kong Ltd. (Real
Estate)
247,334
25,000 China Light & Power Co.
Ltd.
(Electrical Utilities)
137,623
20,000 Chinese Estates Holdings
(Real
Estate)
18,091
3,000 Dickson Concept Inc.
(Retail)
11,184
11,000 Hang Lung Development Co.
(Real
Estate)
20,682
19,000 Hang Seng Bank Ltd.
(Commercial
Banking)
233,863
35,000 Hong Kong & China Gas Co.
(Natural
Gas Utilities)
72,139
</TABLE>
- --------------------------------------
- --------------------------------------
- ---
See Notes to Financial Statements.
3
<PAGE>
Portfolio of Investments as of
PRUDENTIAL DRYDEN FUND September 30,
1997
PRUDENTIAL PACIFIC INDEX FUND --------
- --------------------------------------
- --------------------------------------
- ------------------------
- ----------
<TABLE>
<CAPTION>
Shares Description
Value
(Note 1)
<C> <S>
<C> ----------------------------------
- -------------------------
Hong Kong (cont'd.)
11,000 Hong Kong & Shanghai
Hotels (Hotels &
Restaurants)
$ 13,362
2,000 Hong Kong Aircraft
Engineering Co.
Ltd. (Aircrafts and
Parts)
6,487
120,000 Hong Kong
Telecommunications Ltd.
(Telecommunications)
271,370
44,000 Hopewell Holdings Ltd.
(Real Estate)
26,723
38,000 Hutchison Whampoa Ltd.
(Diversified
Industries)
374,426
9,000 Hysan Development Co.
(Real Estate)
26,924
4,000 Johnson Electric Holdings
Ltd.
(Electronic Components)
10,907
4,000 Kumagai Gumi Ltd.
(Building &
Construction)
5,815
6,000 Miramar Hotel & Investment
Co.
(Hotels &
Restaurants)
15,313
19,000 New World Development
Co., Ltd.
(Building &
Construction)
114,906
14,000 Oriental Press Group
(Printing &
Publishing)
4,523
6,000 Peregrine Investments
(Financial
Services)
10,196
38,000 Regal Hotel
International (Hotels &
Restaurants)
9,821
16,000 Shangri La Asia Ltd.
(Hotels &
Restaurants)
16,437
14,000 Shun Tak Holdings. Ltd.
(Transportation)
8,955
32,000 Sino Land Co. (Real
Estate)
29,566
14,000 South China Morning Post
(Printing &
Publishing)
12,754
24,000 Sun Hung Kai Properties
Ltd. (Real
Estate)
282,225
16,000 Swire-Pacific Ltd. 'A'
(Diversified
Industries)
122,504
4,000 Television Broadcasts
Ltd.
(Broadcasting & Other
Media)
14,163
23,000 Wharf Holdings Ltd. (Real
Estate)
84,706
2,000 Wing Lung Bank (Commercial
Banking)
11,863
- ------------
2,312,484 ----------------------------
- -------------------------------
Japan--75.3%
4,000 77th Bank(a) (Commercial
Banking)
40,752
1,300 Acom Co., Ltd. (Financial
Services)
67,730
900 Advantest Corp.
(Electronics)
$ 88,710
7,000 Ajinomoto Co., Inc. (Food
Processing)
61,459
2,000 Alps Electric Co.
(Electronics)
22,530
3,000 Amada Co. (Machinery &
Equipment)
17,369
1,000 Amano Corp. (Electrical
Equipment)
8,946
700 Aoyama Trading Co., Ltd.
(Retail)
20,061
500 Arabian Oil Co.(a) (Oil &
Gas)
13,874
23,000 Asahi Bank (Commercial
Banking)
133,355
5,000 Asahi Breweries (Food &
Beverages)
80,345
15,000 Asahi Chemical Ltd.
Industries
(Chemicals)
75,665
12,000 Asahi Glass Co. (Glass
Products)
93,233
5,000 Ashikaga Bank (Commercial
Banking)
13,667
200 Autobacs Seven Co.
(Retail)
9,360
46,000 Bank of Tokyo, Mitsubishi
Bank
(Commercial Banking)
876,335
11,000 Bank of Yokohama
(Commercial Banking)
43,734
8,000 Bridgestone Corp. (Tires &
Rubber)
192,164
3,000 Brother Industries Ltd.
(Office
Equipment & Supplies)
8,076
9,000 Canon, Inc. (Office
Equipment &
Supplies)
263,149
3,000 Casio Computer Co.
(Electronics)
26,837
7,000 Chiba Bank (Commercial
Banking)
32,353
6,000 Chichibu Onoda Cement
Corp. (Building
& Construction)
16,251
2,000 Chiyoda Corp. (Engineering
&
Construction)
4,672
2,000 Chugai Pharmacy Co. (Drugs
& Health
Care)
17,229
3,000 Citizen Watch Co. (Retail)
22,066
5,000 Cosmo Oil Co. (Oil & Gas)
11,679
1,500 Credit Saison Co. Ltd.
(Financial
Services)
40,752
500 CSK Corp. (Computer
Software &
Services)
16,483
8,000 Dai Nippon Printing Co.,
Ltd.
(Printing)
170,960
4,000 Daicel Chemical Industries
(Chemicals)
10,238
4,000 Daido Steel Co. (Iron &
Steel)
7,786
7,000 Daiei Inc. (Retail)
38,615
1,000 Daifuku Co. (Machinery &
Equipment)
7,049
3,000 Daiichi Pharmaceutical Co.
(Drugs &
Health Care)
44,231
3,000 Daikin Industries
(Electrical
Equipment)
18,910
2,000 Daikyo Inc. (Building &
Construction)
2,352
3,000 Daimaru Inc. (Retail)
12,176
8,000 Dainippon Ink & Chemicals
Inc.
(Chemicals)
27,831
</TABLE>
- --------------------------------------
- --------------------------------------
- ---
See Notes to Financial Statements.
4
<PAGE>
Portfolio of Investments as of
PRUDENTIAL DRYDEN FUND September 30,
1997
PRUDENTIAL PACIFIC INDEX FUND --------
- --------------------------------------
- --------------------------------------
- ---------------------------------
<TABLE>
<CAPTION>
Shares Description
Value
(Note 1)
<C> <S>
<C> ----------------------------------
- -------------------------
Japan (cont'd.)
2,000 Dainippon Screen
Manufacturing Co.,
Ltd. (Electronic
Components)
$ 17,726
1,000 Daito Trust Construction
Co., Ltd.
(Real Estate)
10,437
5,000 Daiwa House Industries
(Building &
Construction)
49,698
2,000 Daiwa Kosho Lease Co.,
Ltd. (Real
Estate)
11,215
14,000 Daiwa Securities Co.,
Ltd. (Financial
Services)
85,811
5,000 Denki Kagaku Kogyo K.K.
(Chemicals)
8,780
9,000 Denso Corp. (Automobiles
& Auto
Parts)
218,421
40 East Japan Railway Co.
(Railroads)
187,526
3,000 Ebara Corp. (Machinery)
39,261
3,000 Eisai Co., Ltd. (Drugs &
Health Care)
53,673
1,000 Ezaki Glico Co. (Food &
Beverages)
7,496
2,200 Fanuc Ltd. (Electronic
Components)
83,641
29,000 Fuji Bank (Commercial
Banking)
319,473
5,000 Fuji Photo Film Co.
(Hotels &
Leisure)
206,245
3,000 Fujikura Ltd. (Electrical
Equipment)
21,445
5,000 Fujita Corp.
(Construction)
3,189
1,000 Fujita Kanko Inc. (Hotels
&
Restaurants)
10,768
19,000 Fujitsu Ltd.(Computers)
237,638
7,000 Furukawa Electric Co.
Ltd.
(Electrical Equipment)
35,078
1,000 Gakken Co. (Printing &
Publishing)
3,272
5,000 Gunma Bank (Commercial
Banking)
42,657
2,000 Gunze Ltd. (Retail)
6,312
9,000 Hankyu Corp. (Railroads)
44,877
2,000 Hankyu Department Stores
(Retail)
16,566
3,000 Higo Bank (Commercial
Banking)
18,512
300 Hirose Electric Co., Ltd.
(Electronics)
22,091
10,000 Hitachi Zosen Corp.
(Engineering &
Equipment)
23,192
33,000 Hitachi Ltd.
(Electronics)
287,004
6,000 Hokuriku Bank (Commercial
Banking)
16,549
10,000 Honda Motor Co., Ltd.
(Automobiles)
348,712
1,000 House Food Corp. (Food
Processing)
16,980
1,000 Hoya Corp. (Optical
Supplies)
33,712
2,000 Inax Corp. (Building
Materials &
Products)
9,608
25,000 Indonesia Bank
(Commercial Banking)
310,610
2,000 Isetan Co. (Retail)
19,216
3,000 Ishihara Sangyo(a) Kaisha
(Chemicals)
$ 5,839
4,000 Ito Yokado Co. (Retail)
216,682
15,000 Itochu Corp. (Wholesale)
51,934
2,000 Itoham Foods Inc. (Food
Processing)
7,786
2,000 Iwatani International
Corp.(a)
(Wholesale)
5,351
1,000 Jaccs Co., Ltd.
(Financial Services)
5,699
18,000 Japan Air Lines Co.(a)
(Airlines)
65,452
11,000 Japan Energy Corp. (Oil &
Gas)
17,949
4,000 Japan Steel Works
(Machinery &
Equipment)
4,141
2,000 JGC Corp. (Engineering &
Construction)
6,411
9,000 Joyo Bank (Commercial
Banking)
45,772
3,000 Jusco Co. (Retail)
68,334
10,000 Kajima Corp. (Building &
Construction)
43,982
3,000 Kamigumi Co., Ltd.
(Transportation)
11,927
2,000 Kandenko Co. (Electrical
Equipment)
12,342
5,000 Kanebo Ltd.(a) (Textiles)
5,674
4,000 Kaneka Corp. (Chemicals)
25,511
9,000 Kansai Electrical Power
(Electrical
Utilities)
160,275
3,000 Kansai Paint Co.
(Chemicals)
7,653
6,000 Kao Corp. (Cosmetics &
Toiletries)
86,971
1,000 Katokichi Co. (Food &
Beverages)
16,400
13,000 Kawasaki Heavy Industries
(Machinery
& Equipment)
44,902
6,000 Kawasaki Kisen Kaisha
Ltd.
(Transportation)
6,560
33,000 Kawasaki Steel Corp.
(Iron & Steel)
63,141
5,000 Keihin Electric Express
Railway Co.,
Ltd. (Railroads)
20,707
2,000 Kikkoman Corp. (Food
Processing)
11,845
3,000 Kinden Corp. (Electrical
Equipment)
39,758
17,000 Kinki Nippon Railway
(Railroads)
97,018
11,000 Kirin Brewery Co. (Food
& Beverages)
90,566
1,000 Kissei Pharmaceutical
Co., Ltd.
(Drugs & Health Care)
16,235
1,000 Kokuyo Co. (Office
Equipment &
Supplies)
23,689
10,000 Komatsu Ltd. (Machinery &
Equipment)
55,910
1,000 Komori Corp. (Machinery &
Equipment)
20,873
200 Konami Co. (Computer
Software &
Services)
6,129
4,000 Konica Corp. (Photography)
21,337
2,000 Koyo Seiko Co.
(Automobiles & Auto
Parts)
12,209
14,000 Kubota Corp. (Machinery &
Equipment)
54,502
</TABLE> -----------------------------
- --------------------------------------
- ------------
See Notes to Financial Statements.
5
<PAGE>
Portfolio of Investments as of
PRUDENTIAL DRYDEN FUND September 30,
1997
PRUDENTIAL PACIFIC INDEX FUND --------
- --------------------------------------
- --------------------------------------
- ---------------------------------
<TABLE>
<CAPTION>
Shares Description
Value
(Note 1)
<C> <S>
<C> ----------------------------------
- -------------------------
Japan (cont'd.)
7,000 Kumagai Gumi Co.(a)
(Building &
Construction)
$ 5,740
3,000 Kurabo Industries
(Textiles)
4,572
3,000 Kuraray Co. (Chemicals)
26,340
2,000 Kureha Chemical Industry
Co. Ltd. Co.
(Chemicals)
5,367
1,000 Kurita Water Industries
(Machinery &
Equipment)
19,962
1,800 Kyocera Corp.
(Electronics)
117,634
4,000 Kyowa Hakko Kogyo Co.
Ltd. (Drugs &
Health Care)
21,370
1,000 Kyudenko Co. Ltd.
(Engineering &
Equipment)
5,715
3,000 Lion Corp. (Cosmetics &
Toiletries)
10,760
1,000 Maeda Road Construction
Co. (Building
& Construction)
6,055
1,000 Makino Milling Machine
(Machinery &
Equipment)
5,177
2,000 Makita Corp. (Electrical
Equipment)
27,334
15,000 Marubeni Corp.
(Wholesale)
49,698
3,000 Maruha Corp. (Food
Processing)
5,492
4,000 Marui Co.(a) (Retail)
65,932
22,000 Matsushita Electric
Industrial Co.,
Ltd. (Appliances &
Household Durables)
397,250
3,000 Meiji Milk Product Co.,
Ltd. (Food
Processing)
9,890
4,000 Meiji Seika Kaisha (Food
& Beverages)
17,394
4,000 Minebea Co.(a)
(Electronic
Components)
44,397
1,000 Misawa Homes Co.
(Building &
Construction)
3,595
23,000 Mitsubishi Chemical Corp.
(Chemicals)
53,152
16,000 Mitsubishi Corp.
(Wholesale)
155,057
22,000 Mitsubishi Electric Corp.
(Electronics)
86,557
13,000 Mitsubishi Estate Co.,
Ltd. (Real
Estate)
189,514
5,000 Mitsubishi Gas Chemicals
Co.
(Chemicals)
17,974
33,000 Mitsubishi Heavy
Industries Ltd.
(Engineering &
Construction) 180,676
2,000 Mitsubishi Logistics
Corp.
(Warehousing)
23,192
12,000 Mitsubishi Materials
Corp.
(Metals-Non Ferrous)
35,981
5,000 Mitsubishi Oil Co. (Oil
& Gas)
13,418
3,000 Mitsubishi Paper Mills
(Paper &
Packaging)
$ 7,355
6,000 Mitsubishi Rayon Co.
(Chemicals)
19,332
13,000 Mitsubishi Trading &
Banking
(Commercial Banking)
202,435
16,000 Mitsui & Co. (Wholesale)
125,768
8,000 Mitsui Engineering &
Shipbuilding
Co., Ltd.(a)
(Engineering &
Construction)
10,271
8,000 Mitsui Fudosan Co., Ltd.
(Real
Estate)
97,407
7,000 Mitsui Marine & Fire
Insurance Co.,
Ltd. (Insurance)
40,586
5,000 Mitsui Mining & Smelting
Co.
(Metals-Non Ferrous)
21,494
11,000 Mitsui O.S.K. Lines
(Transportation)
14,031
1,000 Mitsui Soko Co.
(Warehousing)
4,390
11,000 Mitsui Trust & Banking
Co.
(Commercial Banking)
54,759
5,000 Mitsukoshi Ltd. (Retail)
24,890
1,000 Mori Seiki Co.
(Machinery &
Equipment)
11,679
2,000 Murata Manufacturing
Co., Ltd.
(Electronics)
86,474
3,000 Mycal Corp. (Retail)
33,297
2,000 Nagase & Co. (Wholesale)
9,774
8,000 Nagoya Railroad Co.
(Railroads)
28,692
400 Namco Ltd. (Gaming)
14,711
5,000 Nankai Electric Railway
Co.
(Railroads)
23,772
16,000 NEC Corp. (Electronics)
194,815
4,000 NGK Insulators Ltd.
(Diversified
Industries)
37,439
2,000 NGK Spark Plug Co.
(Automobiles &
Auto Parts)
17,891
4,000 Nichido Fire & Marine
Insurance
(Insurance)
26,174
3,000 Nichirei Corp. (Food
Processing)
8,796
3,000 Nihon Cement Co.
(Building &
Construction)
8,324
4,000 Nikon Corp. (Photography)
62,950
1,000 Nippon Comsys Corp.
(Engineering &
Equipment)
13,004
11,000 Nippon Express Co., Ltd.
(Transportation)
64,143
6,000 Nippon Fire & Marine
Insurance
(Insurance)
26,290
5,000 Nippon Light Metal Co.,
Ltd.
(Metals-Non Ferrous)
11,141
</TABLE> -----------------------------
- --------------------------------------
- ------------
See Notes to Financial Statements.
6
<PAGE>
Portfolio of Investments as of
PRUDENTIAL DRYDEN FUND September 30,
1997
PRUDENTIAL PACIFIC INDEX FUND --------
- --------------------------------------
- --------------------------------------
- ---------------------------------
<TABLE>
<CAPTION>
Shares Description
Value
(Note 1)
<C> <S>
<C> ----------------------------------
- -------------------------
Japan (cont'd.)
2,000 Nippon Meat Packers, Inc.
(Food
Processing)
$ 26,505
13,000 Nippon Oil Co. (Oil & Gas)
53,193
10,000 Nippon Paper Industries
Co. (Paper &
Packaging)
54,833
1,000 Nippon Sharyo Ltd.
(Machinery &
Equipment)
3,653
4,000 Nippon Sheet Glass Co.
(Glass
Products)
8,415
3,000 Nippon Shinpan Co.
(Financial
Services)
6,063
2,000 Nippon Shokubai Co.
(Chemicals)
12,308
66,000 Nippon Steel Corp. (Iron &
Steel)
145,415
3,000 Nippon Suisan Kaisha(a)
(Food
Processing)
4,672
128 Nippon Telegraph &
Telephone Corp.
(Telecommunications)
1,176,841
12,000 Nippon Yusen K.K.
(Transportation)
40,255
3,000 Nishimatsu Construction
Co. (Building
& Construction)
16,649
26,000 Nissan Motor Co., Ltd.
(Automobiles)
155,057
2,000 Nisshinbo Industries,
Inc. (Textiles)
13,236
1,000 Nissin Food Products Co.,
Ltd. (Food
Processing)
23,358
1,000 Nitto Denko Corp.
(Electronics)
18,719
36,000 NKK Corp. (Iron & Steel)
48,306
2,000 NOF Corp. (Diversified
Industries)
4,522
20,000 Nomura Securities Co.,
Ltd.
(Financial Services)
260,084
2,000 Noritake Co. (Appliances
& Household
Durables)
12,507
6,000 NSK Ltd. (Machinery &
Equipment)
25,644
5,000 NTN Corp. (Machinery &
Equipment)
20,252
8,000 Obayashi Corp. (Building
&
Construction)
48,306
7,000 Odakyu Electric Railway
(Railroads)
34,962
11,000 Oji Paper Co. (Paper &
Packaging)
49,201
1,000 Okuma Corp. (Machinery &
Equipment)
4,986
2,000 Okumura Corp. (Building &
Construction)
10,321
3,000 Olympus Optical Co.
(Photography)
20,152
3,000 Omron Corp. (Electronics)
62,868
2,000 Onward Kashiyama & Co.,
Ltd.
(Apparel)
28,825
3,000 Orient Corp. (Financial
Services)
$ 6,610
600 Orix Corp. (Financial
Services)
45,622
26,000 Osaka Gas Co. (Natural
Gas Utilities)
62,023
100 Oyo Corp. (Business
Services)
2,742
4,000 Penta-Ocean Construction
(Building &
Construction)
8,415
2,000 Pioneer Electronic Corp.
(Appliances
& Household Durables)
42,574
2,000 Q.P. Corp.
(Financial Services)
14,081
3,000 Renown Inc.
(Apparel)
3,454
1,000 Rohm Co., Ltd.
(Electronics)
117,618
34,000 Sakura Bank (Commercial
Banking)
162,495
1,000 Sanden Corp. (Automobiles
& Auto
Parts)
7,090
2,000 Sankyo Aluminium Industry
Co.
(Building &
Construction)
3,114
5,000 Sankyo Co. (Drugs & Health
Care)
173,114
1,000 Sanrio Co.(a)
(Entertainment)
6,875
2,000 Sanwa Shutter Corp.
(Building &
Construction)
14,247
20,000 Sanyo Electric Co.
(Appliances &
Household Durables)
61,294
3,000 Sapporo Breweries (Food &
Beverages)
19,978
1,000 Secom Co., Ltd. (Business
Services)
67,506
1,000 Sega Enterprises Ltd.
(Electronics)
29,404
1,000 Seino Transportation Co.
(Transportation)
9,028
2,000 Seiyu Ltd. (Retail)
8,349
6,000 Sekisui Chemical Corp.,
Ltd.
(Building Materials &
Products) 45,175
7,000 Sekisui House Ltd.
(Building &
Construction)
66,678
12,000 Sharp Corp. (Appliances &
Household
Durables)
109,335
500 Shimachu Co. (Retail)
10,726
1,000 Shimano Inc. (Machinery &
Equipment)
23,192
8,000 Shimizu Corp. (Building &
Construction)
35,782
4,000 Shin-Etsu Chemical Co.,
Ltd.
(Chemicals)
109,997
4,000 Shionogi & Co. (Drugs &
Health Care)
24,882
4,000 Shiseido Co., Ltd.
(Cosmetics &
Toiletries)
64,276
8,000 Shizuoka Bank (Commercial
Banking)
85,480
11,000 Showa Denko KK (Chemicals)
18,860
1,000 Skylark Co. (Hotels &
Restaurants)
12,673
600 SMC Corp. (Machinery &
Equipment)
57,152
</TABLE> -----------------------------
- --------------------------------------
- ------------
See Notes to Financial
Statements. 7
<PAGE>
Portfolio of Investments as
of PRUDENTIAL DRYDEN FUND
September 30, 1997
PRUDENTIAL PACIFIC INDEX FUND --------
- --------------------------------------
- --------------------------------------
- ---------------------------------
<TABLE>
<CAPTION>
Shares Description
Value
(Note 1)
<C> <S>
<C> ----------------------------------
- -------------------------
Japan (cont'd.)
3,000 Snow Brand Milk Products
(Food
Processing)
$ 9,790
3,900 Sony Corp. (Appliances &
Household
Durables)
368,260
31,000 Sumitomo Bank (Commercial
Banking)
467,324
17,000 Sumitomo Chemical Co.,
Ltd.
(Chemicals)
62,379
11,000 Sumitomo Corp. (Wholesale)
82,001
7,000 Sumitomo Electric
Industries
(Electrical Equipment)
100,306
2,000 Sumitomo Forestry Co.,
Ltd.
(Diversified
Industries)
15,738
6,000 Sumitomo Heavy Industries
Ltd.
(Engineering &
Construction)
15,953
7,000 Sumitomo Marine & Fire
Insurance Co.
(Insurance)
48,414
32,000 Sumitomo Metal
Industries(a) (Iron &
Steel)
66,529
6,000 Sumitomo Metal Mining Co.
(Precious
Metals)
32,105
5,000 Sumitomo Osaka Cement Co.
(Building
Materials & Products)
9,567
10,000 Taisei Corp.
(Construction)
37,356
4,000 Taisho Pharmacy Co.,
Ltd. (Drugs &
Health Care)
105,690
1,000 Taiyo Yuden Co.
(Diversified
Industries)
11,182
2,000 Takara Shuzo Co. (Food
& Beverages)
10,685
1,000 Takara Standard Co., Ltd.
(Building &
Construction)
7,107
3,000 Takashimaya Co. (Retail)
30,813
9,000 Takeda Chemical
Industries (Drugs &
Health Care)
269,858
1,000 Takuma Co. Ltd. (Building
&
Construction)
9,940
10,000 Teijin Ltd. (Chemicals)
31,475
3,000 Teikoku Oil Co. (Oil &
Gas)
10,337
2,000 Toa Corp. (Building &
Construction)
4,108
9,000 Tobu Railway Co.
(Railroads)
37,050
1,000 Toei Co. (Entertainment)
4,995
100 Toho Co. (Entertainment)
13,501
5,000 Tohoku Electric Power
Co.,
Inc.(Electrical
Utilities)
80,759
21,000 Tokai Bank (Commercial
Banking)
$ 173,768
16,000 Tokio Marine & Fire
Insurance Co.
(Insurance)
192,164
2,000 Tokyo Broadcasting System
Inc.
(Broadcasting & Other
Media) 35,285
2,000 Tokyo Dome Corp.
(Entertainment)
19,382
13,200 Tokyo Electric Power Co.
(Electrical
Utilities)
253,657
2,000 Tokyo Electron Ltd.
(Electronics)
122,091
29,000 Tokyo Gas Co. (Natural
Gas Utilities)
68,699
1,400 Tokyo Steel Manufacturing
Co. (Iron &
Steel)
9,915
1,000 Tokyo Style Co. (Apparel)
10,022
2,000 Tokyo Tatemono Co., Ltd.
(Real
Estate)
8,068
3,000 Tokyotokeiba Co. (Gaming)
5,516
11,000 Tokyu Corp.
(Transportation)
52,845
7,000 Toppan Printing Co.
(Printing &
Publishing)
96,828
15,000 Toray Industries Inc.
(Chemicals)
88,586
5,000 Tosoh Corp. (Chemicals)
10,561
2,000 Tostem Corp. (Building
Materials &
Products)
31,807
4,000 Toto Ltd. (Building
Materials &
Products)
40,752
2,000 Toyo Engineering
(Engineering &
Construction)
4,473
2,000 Toyo Seikan Kaisha
(Containers)
34,954
7,000 Toyobo Co. (Textiles)
11,132
3,000 Toyoda Auto Loom Works
Ltd.
(Machinery &
Equipment)
59,637
38,000 Toyota Motor Corp.
(Automobiles)
1,164,582
2,000 Tsubakimoto Chain Co.
(Machinery &
Equipment)
8,150
8,000 Ube Industries Ltd.
(Chemicals)
16,168
600 Uni-Charm Corp. (Paper
& Packaging)
18,835
5,000 Unitika Ltd.(a)
(Chemicals)
5,384
2,000 Uny Co. (Retail)
30,150
2,000 Wacoal Corp. (Apparel)
22,033
2,000 Yamaguchi Bank
(Commercial Banking)
28,328
2,000 Yamaha Corp.
(Entertainment)
31,144
12,000 Yamaichi Securities Co.
(Financial
Services)
24,650
3,000 Yamanouchi
Pharmaceutical Co., Ltd.
(Drugs & Health
Care)
74,050
4,000 Yamato Transport Co.
(Transportation)
49,035
</TABLE> -----------------------------
- --------------------------------------
- ------------
See Notes to Financial Statements.
8
<PAGE>
Portfolio of Investments as of
PRUDENTIAL DRYDEN FUND September 30,
1997
PRUDENTIAL PACIFIC INDEX FUND --------
- --------------------------------------
- --------------------------------------
- ---------------------------------
<TABLE>
<CAPTION>
Shares Description
Value
(Note 1)
<C> <S>
<C> ----------------------------------
- -------------------------
Japan (cont'd.)
2,000 Yamazaki Baking Co (Food
Processing)
$ 27,665
10,000 Yasuda Trust & Banking(a)
(Commercial
Banking)
29,487
3,000 Yokogawa Electric Corp.
(Electronic
Components)
16,276
- ------------
18,590,370 ---------------------------
- --------------------------------
Malaysia--3.1%
4,000 AMMB Holdings Berhad
(Commercial
Banking)
10,489
10,000 Amsteel Corp. (Iron &
Steel)
4,411
9,000 Berjaya Group Berhad
(Diversified
Industries)
4,637
6,000 Berjaya Land Berhad (Real
Estate)
8,070
8,000 Commerce Asset Holdings
(Commercial
Banking)
8,983
2,000 Edaran Otomobil Nasional
Berhad
(Automobiles)
8,021
5,000 Ekran Berhad (Building &
Construction)
6,571
10,000 Golden Hope Plants
(Agriculture)
14,561
3,000 Guinness Anchor Berhad
(Food &
Beverages)
4,627
6,000 Highlands & Lowlands
(Agriculture)
7,515
2,000 Hong Leong Industries
Berhad
(Diversified
Industries)
4,134
7,000 Hong Leong Properties
Berhad (Real
Estate)
4,794
2,000 Hume Industries Berhad
(Building &
Construction)
4,319
6,000 Idris Hydraulic Berhad(a)
(Appliances
& Household Durables)
3,813
9,000 Ioi Corp.
(Agriculture)
9,107
3,000 Jaya Tiasa Holdings
(Diversified
Industries)
8,283
4,000 Kedah Cement Holdings
Berhad
(Building Materials
& Products) 3,640
7,000 Kuala Lumpur Kepong
Berhad
(Agriculture)
17,276
5,000 Land & General Berhad
(Diversified
Industries)
3,224
4,000 Leader Universal
Holdings (Wire &
Cable)
$ 3,208
16,000 Magnum Corp. Berhad
(Entertainment)
14,067
11,000 Malayan Banking Berhad
(Commercial
Banking)
55,313
4,000 Malayan Cement Holdings
Berhad Class
B
(Building Materials &
Products) 4,122
13,000 Malayan United Industries
(Financial
Services)
5,695
8,000 Malayasian Airline System
(Airlines)
12,833
10,000 Malayasian International
Shipping
Corp. (Transportation)
19,127
8,000 Malaysian Mining Corp.
Berhad
(Mining)
5,972
1,000 Malaysian Oxygen Berhad
(Chemicals)
3,702
2,000 Malaysian Pacific
Industries
(Diversified Services)
7,157
10,000 Malaysian Resources Corp.
(Real
Estate)
8,730
8,000 MBF Capital Berhad
(Financial
Companies)
6,663
8,000 Metroplex Berhad (Real
Estate)
5,281
8,000 Mulpha Intl. Berhad
(Wholesale)
3,381
8,000 Multi-Purpose Holdings
Berhad
(Diversified
Industries)
5,972
4,000 Mycom Berhad (Real
Estate)
3,196
2,000 Nestle Malay Berhad (Food
Processing)
11,785
2,000 New Straits Times 'A'
Berhad
(Printing &
Publishing)
6,047
2,000 Oriental Holdings Berhad
(Automobiles)
8,144
8,000 Pan-Malaysia Cement Works
Berhad
(Building &
Construction)
7,355
4,000 Perlis Plantations
Berhad (Food
Processing)
8,638
6,000 Perusahaan Otomobil
Nasional(a)
(Automobiles)
16,751
17,000 Public Bank Berhad
(Commercial
Banking)
14,737
3,000 Rashid Hussain Berhad
(Financial
Services)
6,895
12,000 Resorts World Berhad
(Entertainment)
26,284
15,000 RHB Capital Berhad
(Commercial
Banking)
17,769
3,000 RJ Reynolds Berhad
(Tobacco)
5,136
3,000 Rothmans Pall Mall Berhad
(Tobacco)
24,294
</TABLE> -----------------------------
- --------------------------------------
- ------------
See Notes to Financial Statements.
9
<PAGE>
Portfolio of Investments as of
PRUDENTIAL DRYDEN FUND September 30,
1997
PRUDENTIAL PACIFIC INDEX FUND --------
- --------------------------------------
- --------------------------------------
- ---------------------------------
<TABLE>
<CAPTION>
Shares Description
Value
(Note 1)
<C> <S>
<C> ----------------------------------
- -------------------------
Malaysia (cont'd.)
3,000 Shell Refining Co. (Oil &
Gas)
$ 7,219
24,000 Sime Darby Berhad
(Diversified
Industries)
49,976
4,000 Sungei Way Holdings
(Mining)
3,677
7,000 Ta Enterprise Berhad
(Financial
Services)
4,125
7,000 Tan Chong Motor Holdings
(Automobiles)
5,766
8,000 Technology Resources
Industries
Berhad
(Telecommunications) 9,724
30,000 Telekom Malaysia Berhad
(Telecommunications)
91,160
32,000 Tenaga Nasional Berhad
(Electrical
Utilities)
86,378
7,000 Time Engineering Berhad
(Building &
Construction)
4,945
3,000 UMW Holdings Berhad
(Machinery &
Equipment)
6,016
8,000 United Engineers
Malaysia Berhad
(Building &
Construction)
25,667
13,000 YTL Corp. (Diversified
Industries)
16,363
- ------------
765,745 ------------------------------
- -----------------------------
New Zealand--0.8%
27,900 Brierley Investments Ltd.
(Diversified
Industries)
24,107
16,000 Carter Holt Harvey Ltd.
(Diversified
Resources)
34,716
3,300 Fletcher Challenge
Buildings
(Building Materials &
Products) 10,772
3,400 Fletcher Challenge Energy
(Oil & Gas)
15,363
8,000 Fletcher Challenge
Forestry Ltd.
(Diversified Resources)
9,985
6,700 Fletcher Challenge Paper
(Paper &
Packging)
13,208
5,500 Lion Nathan Ltd. (Food &
Beverages)
13,447
18,000 Telecom Corp. of New
Zealand
(Telecommunications)
91,244
- ------------
212,842 ------------------------------
- -----------------------------
Singapore--2.5%
8,000 City Developments Ltd.
(Real Estate)
51,764
1,000 Creative Technology
Ltd.(a)
(Electronic Components)
26,340
2,000 Cycle & Carriage Ltd.(a)
(Automobiles)
12,091
10,000 DBS Land Ltd. (Real
Estate)
24,313
4,000 Development Bank of
Singapore Ltd.
(Commercial Banking)
40,784
3,000 First Capital Corp.
(Real Estate)
$ 6,706
3,000 Fraser & Neave Ltd.
(Food &
Beverages)
17,157
4,000 Hotel Properties Ltd.
(Hotels &
Restaurants)
4,941
2,000 Inchcape Berhad
(Automobiles)
6,993
1,000 Jurong Shipyard Ltd.
(Engineering &
Construction)
4,444
8,000 Keppel Corp., Ltd.
(Engineering &
Construction)
31,895
3,000 Natsteel Ltd. (Iron &
Steel)
8,196
7,000 Neptune Orient Lines
Ltd.
(Transportation)
5,444
1,000 Overseas Union
Enterprises (Hotels &
Restaurants)
3,987
9,000 Overseas Chinese Banking
Corp., Ltd.
(Commercial Banking)
62,352
3,000 Parkway Holdings Ltd.
(Real Estate)
12,157
10,000 Singapore Airlines Ltd.
(Airlines)
73,855
3,000 Singapore Press Holdings
Ltd.
(Printing &
Publishing)
44,117
7,000 Singapore Technologies
Industrial
Corp. (Diversified
Industries) 12,673
61,000 Singapore
Telecommunications
(Telecommunications)
103,260
3,000 Straits Trading Co.(a)
(Metals)
5,294
6,000 United Overseas Land Ltd.
(Real
Estate)
7,529
8,000 United Overseas Bank Ltd.
(Commercial
Banking)
59,084
10,000 UTD Industrial Corp.
(Real Estate)
6,928
- ------------
632,304
- ------------
Total common stocks
(cost US$24,488,374)
24,185,290
- ------------
PREFERRED STOCKS--0.3%
Australia--0.3%
15,400 News Corp., Ltd.
(Broadcasting &
Other Media)
68,137
5,300 Sydney Harbour Casino
Holdings
Ltd.(a) (Gaming)
(cost US$72,532)
7,446
- ------------
75,583
- ------------
Total long-term
investments
(cost US$24,560,906)
24,260,873
- ------------
</TABLE> -----------------------------
- ---------------------
- -----------------------------
- -
See Notes to Financial
Statements. 10
<PAGE>
Portfolio of Investments as
of
PRUDENTIAL DRYDEN FUND September 30,
1997
PRUDENTIAL PACIFIC INDEX FUND --------
- --------------------------------------
- --------------------------------------
- ---------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description
Value
(Note 1)
<C> <S>
<C>
- --------------------------------------
- ---------------------
SHORT-TERM INVESTMENT--1.2%
JOINT REPURCHASE AGREEMENT
United States--1.2%
$287 Joint Repurchase Agreement
Account,
6.127%, 10/01/97
(cost US$287,000; Note
5)
$ 287,000
- --------------------------------------
- --------------------------------
Total Investments--99.4%
(cost US$24,847,906; Note 4)
24,547,873
Other assets in excess of
liabilities--0.6%
151,187
- ------------
Net Assets--100%
$ 24,699,060
- ------------
- ------------
</TABLE>
- ---------------
(a) Non-income producing security.
(b) One contract equals 1,000 face
value.
The industry classification of
portfolio holdings and other assets in
excess of
liabilities shown as a percentage of
net assets as of September 30, 1997
was as
follows:
<TABLE>
<S>
<C>
Commercial
Banking...............................
.....
16.2%
Telecommunications....................
............
.... 7.1
Automobiles...........................
............ .... 7.0
Real
Estate................................
........... 5.3
Electronics...........................
............ .... 5.2
Appliances & Household
Durables....................... 4.1
Diversified
Industries............................
.... 3.4 Drugs & Health
Care..................................
. 3.3 Electrical
Utilities.............................
..... 2.9
Retail................................
............ .... 2.8
Chemicals.............................
............ .... 2.6
Financial
Services..............................
......
2.4
Building &
Construction..........................
..... 2.4 Machinery &
Equipment.............................
.... 2.0
Wholesale.............................
............ .... 2.0
Railroads.............................
............ .... 1.9
Insurance.............................
............ .... 1.5
Food &
Beverages.............................
......... 1.5
Iron &
Steel.................................
......... 1.4
Mining................................
............ .... 1.4
Printing &
Publishing............................
..... 1.4
Transportation........................
............ .... 1.3
Office Equipment &
Supplies...........................
1.2
Hotels &
Restaurants...........................
.......
1.2
Building Materials &
Products.........................
1.1 Electrical
Equipment.............................
..... 1.1 Engineering &
Construction..........................
.. 1.0 Automobiles & Auto
Parts..............................
1.0
Food
Processing............................
........... 1.0
Computers.............................
............ .... 1.0
Natural Gas
Utilities.............................
.... 0.9 Broadcasting & Other
Media............................
0.9
Airlines..............................
............ .... 0.8
Electronic
Components............................
..... 0.8 Tires &
Rubber................................
........
0.8
Paper &
Packaging.............................
........
0.7
Oil &
Gas...................................
.......... 0.7
Cosmetics &
Toiletries............................
.... 0.7 Diversified
Resources.............................
.... 0.6
Entertainment.........................
............ .... 0.5
Photography...........................
............ .... 0.4
Glass
Products..............................
.......... 0.4
Business
Services..............................
.......
0.3
Metals-Non
Ferrous...............................
..... 0.3
Apparel...............................
............ .... 0.2
Gaming................................
............ .... 0.2
Agriculture...........................
............ .... 0.2
Engineering &
Equipment.............................
.. 0.2 Precious
Metals................................
.......
0.2
Tobacco...............................
............ .... 0.1
Containers............................
............ .... 0.1
Textiles..............................
............ .... 0.1
Optical
Supplies..............................
........
0.1
Warehousing...........................
............ .... 0.1
Computer Software &
Services..........................
0.1 Aircrafts and
Parts.................................
.. 0.1 Short-Term
Investment............................
..... 1.2
- -----
99.4%
Other assets in excess of
liabilities................. 0.6
- -----
100.0%
- -----
- -----
</TABLE> -----------------------------
- --------------------------------------
- ------------
See Notes to Financial Statements.
11
<PAGE>
PRUDENTIAL DRYDEN FUND
Statement of Assets and Liabilities
PRUDENTIAL PACIFIC INDEX FUND --------
- --------------------------------------
- ---------------------------------
<TABLE>
<CAPTION>
Assets
September 30, 1997
<S>
<C>
Investments, at value (cost
$24,847,906)..........................
............ .........................
$ 24,547,873 Foreign currency, at
value (cost
$4,724,397)...........................
............ ....................
4,670,182 Dividends and interest
receivable............................
............
..............................
61,143
Due from
Manager...............................
............
......................................
...... 31,985
Deferred offering
costs.................................
............
...................................
19,792
- ------------------
Total
assets................................
............
......................................
...... 29,330,975
- ------------------
Liabilities
Bank
overdraft.............................
............
......................................
.......... 99,617
Payable for investments
purchased.............................
............
.............................
4,469,156 Accrued expenses and other
liabilities...........................
............
..........................
34,100 Deferred offering costs payable
(Note
1)....................................
............ ...............
20,123
Foreign withholding taxes
payable...............................
............
...........................
8,919
- ------------------
Total
liabilities...........................
............
......................................
...... 4,631,915
- ------------------
Net
Assets................................
............
......................................
........... $ 24,699,060
- ------------------
- ------------------
Net assets were comprised of:
Shares of beneficial interest, at
par...................................
............ ................
$ 2,500
Paid-in capital in excess of
par...................................
............ .....................
24,997,700
- ------------------
25,000,200
Undistributed net investment
income................................
............ .....................
7,343
Net unrealized depreciation on
investments and
foreign
currencies............................
....... (308,483)
- ------------------
Net assets, September 30,
1997..................................
............
........................... $
24,699,060
- ------------------
- ------------------
Net asset value per share
($24,699,060 / 2,500,020 shares of
beneficial
interest issued and
outstanding)......................
$9.88
- ------------------
- ------------------
</TABLE> -----------------------------
- --------------------------------------
- ------------
See Notes to Financial Statements.
12
<PAGE>
PRUDENTIAL DRYDEN FUND
PRUDENTIAL PACIFIC INDEX FUND
Statement of Operations --------------
- ------------------------------------
- ----------
<TABLE>
<CAPTION>
September 24, 1997(a)
Through
Net Investment Income September 30,
1997
<S> <C>
Income
Dividends (net of foreign
withholding
taxes of $8,888)....................
$ 51,984
Interest..............................
.
4,015
--------------------
Total income........................
55,999
--------------------
Expenses
Management
fee.........................
1,630
Audit fees and
expenses................
15,000
Custodian's fees and
expenses..........
10,000
Registration
fees......................
7,600
Reports to
shareholders................
1,000
Miscellaneous.........................
.
831
--------------------
Total expenses......................
36,061
Less: Expense subsidy (Note
2)......... (33,615)
--------------------
Net expenses........................
2,446
--------------------
Net investment
income.....................
53,553
--------------------
E Realized and Unrealized Loss on
Investments and Foreign Currency
Transactions
Net realized loss on Foreign currency
transactions.......................
....
(46,210)
--------------------
Net change in unrealized depreciation
on:
Investments........................
....
(300,033)
Foreign
currencies.....................
(8,450)
--------------------
(308,483)
--------------------
Net loss on investments and foreign
currencies.........................
....
(354,693)
--------------------
Net Decrease in Net Assets
Resulting from
Operations.................
$ (301,140)
--------------------
--------------------
</TABLE>
- ---------------
(a) Commencement of investment
operations.
<TABLE>
<CAPTION>
September 24, 1997(a)
Increase (Decrease) Through
in Net Assets September 30, 1997
<S> <C>
Operations
Net investment
income...................
$ 53,553
Net realized loss on foreign
currency
transactions....................
.....
(46,210)
Net change in unrealized
depreciation on investments and
foreign currencies...
(308,483)
--------------------
Net decrease in net assets
resulting
from operations......................
(301,140)
--------------------
Fund share transactions
Net proceeds from Fund shares
sold......
25,000,200
--------------------
Total
increase.............................
24,699,060
--------------------
Net Assets
Beginning of
period........................
0
--------------------
End of
period..............................
$24,699,060
--------------------
--------------------
</TABLE>
- ---------------
(a) Commencement of investment
operations. --------------------------
- --------------------------------------
- ---------------
See Notes to Financial Statements.
13
<PAGE>
PRUDENTIAL DRYDEN FUND
Notes to Financial Statements
PRUDENTIAL PACIFIC INDEX FUND --------
- --------------------------------------
- ---------------------------------
Prudential Dryden Fund (the 'Company')
is registered under the Investment
Company Act of 1940 as an open-end,
diversified management investment
company.
The Company was established as a
Deleware business trust on May 11,
1992 and
currently consists of six separate
funds. Prudential Pacific Index Fund
(the
'Fund') commenced investment
operations on September 24, 1997 when
2,500,020
shares of beneficial interest of the
Fund were sold for $25,000,200 to The
Prudential Insurance Company of
America ('The Prudential').
The investment objective of the Fund
is to seek to provide investment
results
that correspond to the price and yield
performance of a broad-based index of
securities of issuers in the Pacific
region, currently the Morgan Stanley
Capital International Pacific Free
Index. -------------------------------
- ----------------------------
Note 1. Accounting Policies
The following is a summary of
significant accounting policies
followed by the
Company and the Fund in the
preparation of its financial
statements.
Securities Valuation: Securities for
which the primary market is on an
exchange,
are valued at the last sale price on
such exchange on the day of valuation
or,
if there was no sale on such day, at
the mean between the last bid and
asked
prices on such day or at the bid price
in the absence of an asked price.
Securities that are actively traded in
the overthe-counter market, including
listed securities for which the
primary market is believed to be
over-the-counter, are valued by an
independent pricing agent or a
principal
market maker. Securities for which
reliable market quotations are not
available
or for which the pricing agent or
principal market maker does not
provide a
valuation or methodology or provides a
valuation or methodology that, in the
judgment of the subadviser, does not
represent fair value, are valued at
fair
value as determined by procedures
established by the Company's Trustees.
Short-term securities which mature in
more than 60
days are valued at current
market quotations. Short-term
securities which mature in 60 days
or less are
valued at amortized cost.
In connection with transactions in
repurchase agreements with U.S.
financial
institutions, it is the Company's
policy that its custodian or
designated
subcustodians, as the case may be
under triparty repurchase agreements,
takes
possession of the underlying
collateral securities, the value of
which exceeds
the principal amount of the repurchase
transaction including accrued
interest.
To the extent that any repurchase
transaction exceeds one business day,
the
value of the collateral is marked-to-
market on a daily basis to ensure the
adequacy of the collateral. If the
seller defaults and the value of the
collateral declines or if bankruptcy
proceedings are commenced with respect
to
the seller of the security,
realization of the collateral by the
Fund may be
delayed or limited.
Foreign Currency Translation: The
books and records of the Fund are
maintained
in U.S. dollars. Foreign currency
amounts are translated into U.S.
dollars on
the following basis:
(i) market value of investment
securities, other assets and
liabilities--at the
closing rates 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 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 debt
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 losses on foreign
currency transactions represent net
foreign
exchange gains or losses from forward
currency contracts, disposition of
foreign
currencies, currency gains or losses
realized between the trade and
settlement
dates on security transactions, and
the difference between the amounts of
interest, dividends and foreign taxes
recorded on the Fund's books and the
U.S.
dollar equivalent amounts actually
received or paid. Net currency gains
and
losses from valuing foreign currency
denominated assets and liabilities at
fiscal period end exchange rates are
reflected as a component of unrealized
appreciation on investments and
foreign currencies.
Foreign security and currency
transactions may involve certain
considerations
and risks not typically associated
with those of domestic origin as a
result of,
among other factors, the possibility
of political and economic instability
and
the level of governmental supervision
and regulation of foreign securities
markets.
Securities Transactions and Net
Investment Income: Securities
transactions are
recorded on the trade date. Realized
gains and losses from investment and
foreign currency transactions are
calculated on the identified cost
basis.
Dividend income is recorded on the ex-
dividend date and interest -----------
- --------------------------------------
- ------------------------------
14
<PAGE>
PRUDENTIAL DRYDEN FUND
Notes to Financial Statements
PRUDENTIAL PACIFIC INDEX FUND --------
- --------------------------------------
- ---------------------------------
income is recorded on an accrual
basis. Expenses are recorded on the
accrual
basis which may require the use of
certain estimates by management.
Dividends and Distributions: The Fund
expects to pay dividends of net
investment
income and distributions of net
realized capital and currency gains,
if any,
annually. Dividends and distributions
are recorded on the ex-dividend date.
Income distributions and capital gain
distributions are determined in
accordance
with income tax regulations which may
differ from generally accepted
accounting
principles.
Taxes: It is the Fund's policy to
meet the requirements of the Internal
Revenue
Code applicable to regulated
investment companies and to
distribute all of its
taxable income to shareholders.
Therefore, no federal income tax
provision is
required.
Withholding taxes on foreign
dividends, interest and capital gains
have been
provided for in accordance with the
Fund's understanding of the
applicable
country's tax rules and rates.
Deferred Offering Expenses:
Approximately $20,000 of offering and
initial
registration costs have been deferred
and are being amortized over the
period of
benefit not to exceed 12 months from
the date the Fund commenced investment
operations.
Reclassification of Capital Accounts:
The Fund accounts for and reports
distributions to shareholders in
accordance with the American Institute
of
Certified Public Accountants (AICPA)
Statement of Position 93-2:
Determination,
Disclosure, and Financial Statement
Presentation of Income, Capital Gain,
and
Return of Capital Distributions by
Investment Companies. The effect of
applying
this statement was to decrease
undistributed net investment income
and decrease
accumulated net realized loss on
investments by $46,210 relating to net
realized
foreign currency loss. Net investment
income, net realized gains and net
assets
were not affected by these changes. --
- --------------------------------------
- -------------------
Note 2. Agreements
The Company 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 cost of the
subadviser's services, the
compensation of officers of the
Company, occupancy
and certain clerical and bookkeeping
costs of the Company. The Company
bears all
other costs and expenses.
The management fee paid PIFM is
computed daily and payable monthly at
an annual
rate of .40 of 1% of the average daily
net assets of the Fund.
PIFM has agreed to subsidize the
operating expenses of the Fund until
September
30, 1998, so that total Fund operating
expenses do not exceed .60% on an
annualized basis of the Fund's average
daily net assets. For the period ended
September 30, 1997, PIFM subsidized
$33,615 of the expenses of the Fund
(8.25%
of average net assets annualized,
$.013 per share).
PSI, PIFM and PIC are wholly-owned
subsidiaries of The Prudential.
The Company, along with other
affiliated registered investment
companies (the
'Funds'), entered into a credit
agreement (the 'Agreement') on
December 31, 1996
with an unaffiliated lender. The
maximum commitment under the Agreement
is
$200,000,000. The Agreement expires on
December 30, 1997. Interest on any
such
borrowings outstanding will be at
market rates. The purpose of the
Agreement is
to serve as an alternative source of
funding for capital share
redemptions. The
Fund has not borrowed any amounts
pursuant to the Agreement as of
September 30,
1997. The Funds pay a commitment fee
at an annual rate of .055 of 1% on
the
unused portion of the credit
facility. The commitment fee is
accrued and paid
quarterly on a pro-rata basis by the
Funds. -------------------------------
- ----------------------------
Note 3. Other Transactions With
Affiliates Prudential Mutual Fund
Services LLC ('PMFS'), a wholly owned
subsidiary of PIFM,
serves as the Company's transfer
agent. As of September 30, 1997, the
Fund has
not yet incurred any transfer agent
fees. --------------------------------
- ---------------------------
Note 4. Portfolio Securities
Purchases of investment securities,
other than short-term investments, for
the
period September 24, 1997 through
September 30, 1997 were $24,560,906.
There
were no sales of investment
securities.
The United States federal income tax
cost basis of the Fund's investments
at
September 30, 1997 was $24,850,501
and, accordingly, net unrealized
depreciation
for federal income tax purposes was
$302,628 (gross unrealized
appreciation--$267,910; gross
unrealized depreciation--$570,538). --
- --------------------------------------
- --------------------------------------
- -
15
<PAGE>
PRUDENTIAL DRYDEN FUND
Notes to Financial Statements
PRUDENTIAL PACIFIC INDEX FUND --------
- --------------------------------------
- ---------------------------------
Note 5. Joint Repurchase Agreement
Account
The Fund along with other affiliated
registered investment companies,
transfers
uninvested cash balances into a single
joint account, the daily aggregate
balance of which is invested in one or
more repurchase agreements
collateralized
by U.S. Treasury or Federal agency
obligations. As of September 30, 1997,
the
Fund had a 0.02% undivided interest in
the repurchase agreements in the joint
account. The undivided interest for
the Fund represented $287,000 in
principal
amount. As of such date, each
repurchase agreement in the joint
account and the
value of the collateral therefor was
as follows: Credit Suisse First Boston
Corp., 6.15%, in the principal amount
of
$341,000,000, repurchase price
$341,058,254, due
10/01/97. The value of the
collateral including accrued interest
was $352,935,110.
Goldman, Sachs & Co., Inc., 6.15%, in
the principal amount of $341,000,000,
repurchase price $341,058,254, due
10/01/97. The value of the collateral
including accrued interest was
$347,820,010. Morgan Stanley, Dean
Witter, Discover & Co., 6.15%, in the
principal amount of
$325,256,000, repurchase price
$325,311,565, due 10/01/97. The value
of the
collateral including accrued interest
was $331,761,960.
UBS Securities LLC, 6.06%, in the
principal amount of $341,000,000,
repurchase
price $341,057,402, due 10/01/97. The
value of the collateral including
accrued
interest was $347,821,030. -----------
- --------------------------------------
- ----------
Note 6. Capital
The Fund has authorized an unlimited
number of shares of beneficial
interest at
$.001 par value per share.
Transactions in shares of beneficial
interest for the
period September 24, 1997 through
September 30, 1997 were as follows:
<TABLE>
<CAPTION>
Shares Amount
-------------------
<S> <C>
<C>
Shares sold...........................
2,500,020 $25,000,200
-------------------
Net increase in shares outstanding....
2,500,020 $25,000,200
-------------------
-------------------
</TABLE>
At September 30, 1997, all of the
outstanding shares were owned by The
Prudential. --------------------------
- --------------------------------------
- ---------------
16
<PAGE>
PRUDENTIAL DRYDEN FUND
Financial Highlights
PRUDENTIAL PACIFIC INDEX FUND --------
- --------------------------------------
- ---------------------------------
<TABLE>
<CAPTION>
September 24, 1997(a)
Through
September 30, 1997
- ---------------------
<S>
<C>
PER SHARE OPERATING PERFORMANCE: Net
asset value, beginning of
period................................
........
$ 10.00
- ------
Income from investment operations
Net investment
income(c).............................
............ ...........
0.02
Net realized and unrealized loss on
investment and foreign currency
transactions..........................
............ .......................
(0.14)
- ------
Total from investment
operations............................
............ . (0.12)
- ------
Net asset value, end of
period................................
............ .. $ 9.88
- ------
- ------
TOTAL
RETURN(d).............................
............ ....................
(1.20)% RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).................................
............ $24,699
Average net assets
(000).................................
............ ....... $24,802
Ratios to average net assets: (c)
Expenses..............................
............ .......................
.60%(b)
Net investment
income................................
............ ........
13.14%(b)
Portfolio
turnover..............................
............ ................
0%
Average commission rate paid per
share.................................
..... $0.0087
</TABLE>
- ---------------
(a) Commencement of investment
operations.
(b) Annualized.
(c) Net of expense subsidy.
(d) Total return is calculated
assuming a purchase of shares on the
first day
and a sale on the last day of each
period
reported and includes reinvestment
of dividends and distributions. Total
returns
for periods of less than a
full year are not annualized. ----
- --------------------------------------
- -------------------------------------
See Notes to Financial Statements.
17
<PAGE>
PRUDENTIAL DRYDEN FUND
Report of Independent Accountants
PRUDENTIAL PACIFIC INDEX FUND --------
- --------------------------------------
- ---------------------------------
To the Trustees and Shareholders of
Prudential Dryden Fund--Prudential
Pacific Index Fund:
In our opinion, the accompanying
statement of assets and liabilities,
including
the portfolio of investments, and the
related statements of operations and
of
changes in net assets and the
financial highlights present fairly,
in all
material respects, the financial
position of Prudential Dryden Fund--
Prudential
Pacific Index Fund (the 'Fund', one of
the portfolios constituting Prudential
Dryden Fund) at September 30, 1997,
and the results of its operations, the
changes in its net assets and the
financial highlights for the period
September
24, 1997 (commencement of operations)
through September 30, 1997, in
conformity
with generally accepted accounting
principles. These financial statements
and
financial highlights (hereafter
referred to as 'financial statements')
are the
responsibility of the Fund's
management; our responsibility is to
express an
opinion on these financial statements
based on our audit. We conducted our
audit
of these financial statements in
accordance with generally accepted
auditing
standards which require that we plan
and perform the audit to obtain
reasonable
assurance about whether the financial
statements are free of material
misstatement. An audit includes
examining, on a test basis, evidence
supporting
the amounts and disclosures in the
financial statements, assessing the
accounting principles used and
significant estimates made by
management, and
evaluating the overall financial
statement presentation. We believe
that our
audit, which included confirmation of
securities at September 30, 1997 by
correspondence with the custodian and
brokers and the application of
alternative
auditing procedures where securities
purchased had
not been received, provides a
reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
November 19, 1997 --------------------
- --------------------------------------
- ---------------------
18
<PAGE>
Prudential Mutual Funds
Gateway
Center Three
100 Mulberry
Street
Newark, NJ
07102-4077
(800) 225-
1852
http://www.pr
udential.com
Trustees
Edward D.
Beach
Delayne
Dedrick
Gold Robert
F. Gunia
Donald D.
Lennox
Douglas H.
McCorkindal
e Mendel A.
Melzer
Thomas
T.
Mooney
Stephe
n P.
Munn
Richar
d A.
Redeke
r
Robin
B.
Smith
Louis
A.
Weil,
III
Clay
T.
Whiteh
ead
Office
rs
Richard A. Redeker, President
Thomas A. Early, Vice President
Grace C. Torres, Treasurer
S. Jane Rose, Secretary
Marguerite E.H. Morrison,
Assistant Secretary
Manager
Prudential Investments Fund
Management LLC Gateway Center
Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment
Corporation Prudential
Plaza
Newark, NJ 07102-3777
Distributor
Prudential Securities
Incorporated One Seaport
Plaza
New York, NY 10292
Custodian
State Street Bank and
Trust Company One
Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund
Services LLC Raritan
Plaza One
Edison, NJ
08837
Independent
Accountants
Price
Waterhouse LLP
1177 Avenue of
the Americas
New York, NY
10036
Legal Counsel
Gardner, Carton
& Douglas
Quaker Tower
321 North Clark
Street Chicago,
IL 60610-4795
The views expressed in this report and information about the
Fund's portfolio holdings are for the period covered by this
report and are subject to change thereafter.This report is
not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
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