(ICON)
Prudential
Stock Index
Fund
SEMI
ANNUAL
REPORT
March 31, 1997
(LOGO)
<PAGE>
Prudential Stock Index Fund
A Series of the Prudential Dryden Fund
Performance At A Glance.
Led by large companies, stocks continued their record bull market run for much
of the last six months, before faltering somewhat toward the end of the period
on fears of rising interest rates and slowing corporate earnings growth. The
Prudential Stock Index Fund reflected these gains, performing in line with the
average stock index fund as measured by Lipper Analytical Services.
Cumulative Total Returns1 As of 3/31/97
<TABLE>
<CAPTION>
Six One Three Since
Months Year Years Inception2
<S> <C> <C> <C> <C>
Stock Index Fund 10.7% 18.9% 80.0% 97.3%
Lipper S&P 500 Fds Avg3 10.9 19.2 80.4 98.7
</TABLE>
Average Annual Total Returns1 As of 3/31/97
<TABLE>
<CAPTION>
One Three Since
Year Years Inception2
<S> <C> <C> <C>
Stock Index Fund 18.9% 21.6% 16.7%
</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
average annual returns do take into account applicable sales charges.
2Inception date: 11/5/92. Lipper provides data on a monthly basis, so for
comparative purposes the Lipper Average since inception returns reflect the
Fund's first full calendar month of performance.
3Lipper average returns are for 62 funds for six months, 54 funds for one year,
42 funds for three years, and 24 funds since inception.
How Investments Compared.
(As of 3/31/97)
(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 yields 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 invest-ments. 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.
Taxable 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 (PICTURE)
Portfolio
Manager's Report
The Stock Index Fund seeks to provide investment results that mirror the
performance of Standard & Poor's 500-Stock Composite Index. The S&P 500 is
widely regarded as representative of the performance of the U.S. stock market
as a whole, and comprises stocks that represent more than 70% of the total
market value of all publicly traded U.S. common stocks. Because the index does
not include any of the transaction costs necessarily accompanying purchases and
sales, the difference between its return and that of the Fund is primarily due
to fees and management expenses. There can be no assurance that the Fund will
achieve its investment objective.
An Index Fund.
The Stock Index Fund is passively managed: we hold the same stocks that compose
the S&P 500 Index and in the same proportion. While traditional money managers
selectively buy and sell securities in hope of beating the performance of the
stock market as a whole, this Fund is designed to match the market's
performance, with lower transaction and management costs than actively managed
funds.
Market Review.
- -----------------------------------------------------------------------------
The overall stock market rose more than 20% in each of the past two years,
gains that were twice as much as the long-term historical average. They can
not be sustained indefinitely. It has been widely believed that some change
was overdue.
Portfolio Breakdown.
Expressed as a percentage of
total investments as of 3/31/97.
(GRAPH)
Midway through the first quarter of 1997, the stock market began to reflect
these doubts: the S&P 500 hit a high on February 18 and moved erratically for
the rest of the quarter. Although the Fund's six-month performance heavily
reflects the late 1996 surge, performance for the first quarter of 1997 was
decidedly weaker, actually far closer to historical stock market averages.
What happened? The stock market began to suspect that corporate earnings growth
would slow. Additionally, in the last two days of March, the Federal Reserve
had raised short-term interest rates for the first time in two years, prompting
the market to drop more than 4% -- the worst two days since 1990. (Of course,
rising interest rates crimp corporate profits by increasing the cost of doing
business, and also make bonds more competitive investments with stocks.)
The performance of an index fund does not reflect decisions of an individual
manager as much as it does the performance of the market sectors in which it
must invest. The leading sectors over the past half year have been finance,
energy, and technology, each of which had double-digit gains over the period.
Industrial stocks and utility stocks hindered performance the most, with
utilities showing a net decline in the first quarter of 1997.
<PAGE>
What Went Well.
- ---------------------------------------------------------------------------
Financials: Financial stocks continued to rise over the past six months,
jumping 12% in the first two months of 1997 alone, but then fell back to a
still-respectable 4.4% rise for the first quarter of 1997. For the six-month
period, they increased 18.6%. Concerns over rising interest rates and slower
economic growth are detrimental to bank stocks, the largest component of the
financial sector, because bank earnings reflect overall economic activity and
also because a bank's cost of funds generally rises more quickly than the
interest earned on their loan portfolios.
Energy: The best-performing stocks in the first quarter of 1997 were energy
stocks, which rose 5.8% over the period, bringing the six-month figure to
18.1%. Energy finished the period with a 4.9% leap in March alone, reflecting
the continued gap between projected demand and supply.
Technology: Almost all of the technology sector's 12.5% rise over the six
months came in the last quarter of 1996, capping a 40% increase for that year.
After accelerating to an 11% spurt in January alone, technology stocks gave it
back in a series of mixed and modest earnings reports. Continued outstanding
performance by electronics stocks were offset by declining communications and
aerospace shares.
And Not So Well.
- ---------------------------------------------------------------------------
Industrials: The worst-performing stocks for the six-month period were
industrial stocks, although even they rose by 6.4%, almost all in the fourth
quarter of 1996. Despite good current earnings, investors apparently feared
that these economically-sensitive stocks would suffer should the economy slow.
Both the exceptional longevity of the current expansion, and increasing
likelihood of Federal Reserve action to cool the economy, fueled these fears.
Consumer Cyclicals: These stocks, including retail, autos, housing and apparel,
finished just ahead of the industrial stocks, gaining 6.5%. Although these
stocks advanced briskly as the economy strengthened in the first quarter of
1997, they never fully recovered from a very difficult fourth quarter of 1996,
in which they gained only 1.8% as a result of disappointing Christmas sales.
S&P 500 Sector Performance
(GRAPH)
Looking Ahead.
We are cautious about the stock market's short-term prospects. After seeing
nearly six years of a consistently rising market, investors may become
increasingly concerned about slower corporate earnings growth and the Federal
Reserve's decision to increase short-term interest rates. So we expect returns
this year to be much closer to the historical average.
1
<PAGE>
President's Letter May 14, 1997
- -------------------------------------------------------
(PICTURE)
We're On Your Side
Dear Shareholder:
The past few months were mixed for most U.S. stock and bond investors. The
recent news was good: The Dow Jones Industrial Average set several record
highs in May and long-term interest rates were easing. The average stock and
bond mutual fund finished the four-month period ending in April in positive
territory. It was a different story only a few weeks earlier when the Dow
declined significantly from another record high set in mid-March, and
long-term interest rates were at the highest levels in six months.
The reasons behind these recent market swings have been widely publicized --
higher interest rates and inflationary pressures. And while we are watching
market developments closely, we are also very concerned about you and how
you're dealing with events. We realize that staying the course during times of
market uncertainty isn't easy. Here are some thoughts that may help:
- -- Keep Your Expectations Realistic. The best investors know that financial
markets rise and fall -- and so too, will the value of their investments.
Over time, however, stocks have been shown to produce very attractive
returns that were well ahead of inflation.
- -- Remember Your Time Horizon. If your investment goals are long term (several
years or more), your time horizon should also be long term. During this
period, it's not unusual for stocks and bonds to experience several periods
of market uncertainty.
- -- We're On Your Side. Your Prudential Securities Financial Advisor or
Prudential Registered Representative can help you understand what's
happening in the financial markets. They can assist you in making informed
decisions based upon a thorough knowledge of your financial needs and
long-term goals. Call him or her today.
Thank you for your continued confidence in Prudential mutual funds. 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 THE PRUDENTIAL DRYDEN FUND
March 31, 1997 (Unaudited) STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--92.8%
COMMON STOCKS--92.8%
- ------------------------------------------------------------
Aerospace/Defense--2.2%
11,600 Allied-Signal, Inc. $ 826,500
15,015 Boeing Co. 1,480,854
2,700 General Dynamics Corp. 181,912
7,830 Lockheed Martin Corp. 657,720
8,600 McDonnell Douglas Corp. 524,600
2,300 Northrop Grumman Corp. 173,938
9,600 Raytheon Co. 433,200
9,000 Rockwell International Corp. 583,875
9,800 United Technologies Corp.(a) 737,450
------------
5,600,049
- ------------------------------------------------------------
Airlines--0.3%
3,750 AMR Corp.(a) 309,375
3,000 Delta AirLines, Inc. 252,375
5,900 Southwest Airlines Co. 130,538
2,800 USAir Group, Inc.(a) 68,600
------------
760,888
- ------------------------------------------------------------
Aluminum--0.4%
9,300 Alcan Aluminum Ltd. 315,038
7,200 Aluminum Co. of America 489,600
2,550 Reynolds Metals Co. 158,100
------------
962,738
- ------------------------------------------------------------
Automobiles & Trucks--1.9%
29,600 Chrysler Corp. 888,000
1,600 Cummins Engine Co., Inc. 82,000
4,000 Dana Corp. 131,500
2,600 Echlin Inc. 88,400
48,400 Ford Motor Co. 1,518,550
31,000 General Motors Corp. 1,716,625
4,800 Genuine Parts Co. 223,800
1,700 Johnson Controls, Inc. $ 136,850
3,020 Navistar International Corp.(a) 28,312
2,500 Safety-Kleen Corp. 36,875
------------
4,850,912
- ------------------------------------------------------------
Banking--7.3%
17,430 Banc One Corp. 692,842
6,200 Bank of Boston Corp. 415,400
16,000 Bank of New York Co., Inc. 588,000
14,700 BankAmerica Corp. 1,481,025
3,300 Bankers Trust NY Corp. 270,600
8,000 Barnett Banks, Inc. 372,000
18,008 Chase Manhattan Corp. 1,685,999
19,200 Citicorp 2,078,400
4,500 Comerica, Inc. 253,688
9,100 CoreStates Financial Corp. 432,250
4,300 Fifth Third Bancorp 333,250
5,500 First Bank System, Inc. 401,500
13,101 First Chicago NBD Corp. 709,092
11,600 First Union Corp. 941,050
10,787 Fleet Financial Group, Inc. 617,556
2,400 Golden West Financial Corp. 150,600
5,600 Great Western Financial Corp. 226,100
4,200 H.F. Ahmanson & Co. 153,300
9,200 KeyCorp 448,500
5,325 Mellon Bank Corp. 387,394
7,600 Morgan (J.P.) & Co. Inc. 746,700
9,200 National City Corp. 428,950
28,976 NationsBank Corp. 1,604,546
15,200 Norwest Corp. 703,000
13,900 PNC Bank Corp. 556,000
2,200 Republic New York Corp. 193,875
9,100 Suntrust Banks, Inc. 422,012
6,200 U.S. Bancorp 331,700
3,776 Wells Fargo & Co. 1,072,856
------------
18,698,185
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of THE PRUDENTIAL DRYDEN FUND
March 31, 1997 (Unaudited) STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Beverages--3.7%
1,600 Adolph Coors Co. $ 34,000
20,300 Anheuser Busch Cos., Inc. 855,138
2,900 Brown-Forman Corp. 138,475
102,000 Coca-Cola Co. 5,699,250
63,700 PepsiCo, Inc. 2,078,212
15,400 Seagram Co., Ltd. 589,050
------------
9,394,125
- ------------------------------------------------------------
Chemicals--2.1%
4,600 Air Products & Chemicals, Inc. 312,225
10,000 Dow Chemical Co. 800,000
23,100 E.I. du Pont de Nemours & Co. 2,448,600
3,100 Eastman Chemical Co. 166,625
4,200 Hercules, Inc. 177,450
24,200 Monsanto Co. 925,650
2,800 Nalco Chemical Co. 104,650
2,600 Rohm & Haas Co. 194,675
4,000 Sigma-Aldrich Corp. 123,500
5,200 Union Carbide Corp. 230,100
------------
5,483,475
- ------------------------------------------------------------
Chemicals-Specialty--0.4%
5,925 Engelhard Corp. 124,425
2,500 Great Lakes Chemical Corp. 115,000
5,900 Morton International, Inc. 249,275
6,500 Praxair, Inc. 291,688
1,800 Raychem Corp. 148,275
3,400 W.R. Grace & Co. 161,075
------------
1,089,738
- ------------------------------------------------------------
Commercial Services--0.2%
16,325 CUC International Inc.(a) 367,313
3,400 Deluxe Corp. 110,075
1,300 John H. Harland Co. 30,875
4,200 Moore Corp., Ltd. 84,000
------------
592,263
Computer Software & Services--4.5%
7,100 3Com Corp.(a) $ 232,525
1,800 Autodesk, Inc. 55,800
12,000 Automatic Data Processing, Inc. 502,500
8,000 Bay Networks, Inc.(a) 143,000
6,400 Cabletron Systems, Inc.(a) 187,200
3,000 Ceridian Corp.(a) 107,625
26,900 Cisco Systems, Inc.(a) 1,294,562
14,750 Computer Associates International,
Inc. 573,406
3,050 Computer Sciences Corp.(a) 188,338
7,300 Dell Computer Corp.(a) 493,663
9,500 EMC Corp.(a) 337,250
1,300 Intergraph Corp.(a) 10,075
8,700 Micron Technology Inc. 352,350
49,400 Microsoft Corp.(a) 4,529,362
3,493 NCR Corp. (New)(a) 123,128
14,400 Novell, Inc.(a) 136,800
27,675 Oracle Systems Corp.(a) 1,067,217
10,200 Seagate Technology, Inc. 457,725
7,300 Silicon Graphics, Inc.(a) 142,350
15,300 Sun Microsystems, Inc.(a) 441,788
4,500 Tandem Computers Inc.(a) 53,438
------------
11,430,102
- ------------------------------------------------------------
Construction--0.1%
3,400 Fluor Corp. 178,500
1,800 Foster Wheeler Corp. 63,675
1,100 Kaufman & Broad Home Corp. 14,575
900 Pulte Corp. 26,325
------------
283,075
- ------------------------------------------------------------
Containers--0.2%
1,200 Ball Corp. 31,800
2,300 Bemis Co., Inc. 92,000
5,200 Crown Cork & Seal Co., Inc. 268,450
------------
392,250
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as of THE PRUDENTIAL DRYDEN FUND
March 31, 1997 (Unaudited) STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Cosmetics & Soaps--2.4%
3,200 Alberto-Culver Co. $ 83,600
5,300 Avon Products, Inc. 278,250
2,100 Clorox Co. 235,462
6,000 Colgate-Palmolive Co. 597,750
22,700 Gillette Co. 1,648,587
4,450 International Flavors & Fragrances,
Inc. 194,688
27,900 Procter & Gamble Co. 3,208,500
------------
6,246,837
- ------------------------------------------------------------
Diversified Gas--0.2%
4,400 Coastal Corp. 211,200
1,000 Eastern Enterprises, Inc. 30,875
2,900 Enserch Corp. 59,450
2,000 NICOR Inc. 64,000
1,300 Oneok Inc. 33,800
------------
399,325
- ------------------------------------------------------------
Drugs & Medical Supplies--9.0%
31,900 Abbott Laboratories 1,790,387
2,600 Allergan, Inc. 75,725
3,700 ALZA Corp.(a) 101,750
26,200 American Home Products Corp. 1,572,000
11,000 Amgen, Inc. (a) 614,625
2,300 Bausch & Lomb, Inc. 90,850
11,100 Baxter International, Inc. 478,687
5,000 Becton, Dickinson & Co. 225,000
5,100 Biomet, Inc.(a) 86,063
7,300 Boston Scientific Corp.(a) 450,775
41,100 Bristol-Myers Squibb Co. 2,424,900
2,200 C.R. Bard, Inc. 62,700
2,050 Covance, Inc.(a) 33,056
22,600 Eli Lilly & Co. 1,858,850
3,000 Guidant Corp. 184,500
54,600 Johnson & Johnson Co. 2,886,975
3,100 Mallinckrodt, Inc. 127,488
9,800 Medtronic, Inc. 610,050
49,500 Merck & Co., Inc. 4,170,375
26,400 Pfizer Inc. 2,220,900
20,755 Pharmacia & Upjohn, Inc. 760,152
15,100 Schering-Plough Corp. $ 1,098,525
3,300 St. Jude Medical, Inc.(a) 110,138
2,500 United States Surgical Corp. 76,250
11,100 Warner-Lambert Co. 960,150
------------
23,070,871
- ------------------------------------------------------------
Electrical Equipment--0.4%
7,300 Applied Materials, Inc.(a) 338,538
2,200 W.W. Grainger Inc. 162,800
25,900 Westinghouse Electric Corp. 459,725
------------
961,063
- ------------------------------------------------------------
Electronics--4.6%
5,600 Advanced Micro Devices, Inc.(a) 232,400
5,000 Amdahl Corp.(a) 46,875
8,984 AMP, Inc. 308,825
4,900 Apple Computer, Inc. 89,425
1,700 Data General Corp.(a) 28,900
6,300 Digital Equipment Corp.(a) 172,463
2,100 EG&G, Inc. 43,838
18,200 Emerson Electric Co. 819,000
5,800 General Instrument Corp.(a) 132,675
1,600 Harris Corp. 123,000
41,600 Hewlett-Packard Co. 2,215,200
33,700 Intel Corp. 4,688,512
5,200 LSI logic Corp.(a) 180,700
24,300 Motorola, Inc. 1,467,112
5,900 National Semiconductors Corp.(a) 162,250
1,700 Perkin-Elmer Corp. 109,438
3,300 Pioneer Hi-Bred International, Inc. 207,487
2,400 Tandy Corp. 120,300
1,400 Tektronix, Inc. 70,700
7,800 Texas Instruments, Inc. 584,025
2,200 Thomas & Betts Corp. 94,050
------------
11,897,175
- ------------------------------------------------------------
Environmental Services--0.1%
13,100 Laidlaw Inc. (Class 'B' Stock) 180,125
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as of THE PRUDENTIAL DRYDEN FUND
March 31, 1997 (Unaudited) STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Financial Services--2.9%
19,400 American Express Co. $ 1,161,575
2,200 Beneficial Corp. 142,175
13,116 Dean Witter Discover & Co. 457,421
29,300 Federal Home Loan Mortgage Corp. 798,425
44,900 Federal National Mortgage Association 1,622,012
18,300 First Data Corp. 619,912
5,700 Green Tree Financial Corp. 192,375
4,200 H&R Block, Inc. 123,375
4,000 Household International, Inc. 344,500
1,800 MBIA, Inc. 172,575
13,738 MBNA Corp. 382,933
6,800 Merrill Lynch & Co., Inc. 583,950
6,200 Morgan Stanley Group, Inc. 364,250
4,400 Salomon, Inc. 219,450
2,650 Transamerica Corp. 237,175
------------
7,422,103
- ------------------------------------------------------------
Food & Beverage--2.4%
22,434 Archer-Daniels-Midland Co. 401,008
19,000 Campbell Soup Co. 881,125
9,900 ConAgra, Inc. 537,075
5,900 CPC International, Inc. 483,800
1,300 Fleming Cos., Inc. 22,750
6,550 General Mills, Inc. 406,919
2,500 Giant Foods, Inc. 80,000
15,100 H.J. Heinz & Co. 596,450
6,200 Hershey Foods Corp. 310,000
8,550 Kellogg Co. 574,987
5,700 Quaker Oats Co. 208,050
4,300 Ralston Purina Co. 335,937
19,900 Sara Lee Corp. 805,950
7,400 Sysco Corp. 252,525
4,800 W.M. Wrigley Jr. Co. 280,200
------------
6,176,776
- ------------------------------------------------------------
Forest Products--1.3%
2,000 Boise Cascade Corp. 61,000
4,000 Champion International Corp. 182,000
3,750 Georgia-Pacific Corp. 271,875
12,216 International Paper Co. $ 474,897
3,500 James River Corp. 101,937
11,608 Kimberly-Clark Corp. 1,153,545
4,500 Louisiana-Pacific Corp. 93,375
2,100 Mead Corp. 111,300
1,100 Potlatch Corp. 45,238
4,000 Stone Container Corp. 44,500
2,300 Temple Inland Inc. 120,750
2,800 Union Camp Corp. 131,950
4,100 Westvaco Corp. 103,012
8,200 Weyerhaeuser Co. 365,925
2,300 Willamette Industries, Inc. 143,750
------------
3,405,054
- ------------------------------------------------------------
Gas Pipelines--0.6%
6,318 Cinergy Corp. 215,602
2,300 Columbia Gas System, Inc. 133,112
3,900 Consolidated Natural Gas Co. 196,462
539 El Paso Natural Gas Co. 30,521
10,600 Enron Corp. 402,800
5,300 NorAm Energy Corp. 77,513
6,200 PanEnergy Corp. 267,375
1,300 Peoples Energy Corp. 43,063
6,400 Williams Companies, Inc. 284,800
------------
1,651,248
- ------------------------------------------------------------
Health Services--0.1%
12,800 Healthsouth Corp.(a) 244,800
- ------------------------------------------------------------
Hospital Management--0.9%
4,000 Beverly Enterprises, Inc.(a) 57,000
27,628 Columbia/HCA Healthcare Corp. 928,991
6,600 Humana, Inc.(a) 145,200
2,800 Manor Care, Inc. 68,250
9,600 Service Corp. International 285,600
900 Shared Medical Systems Corp. 41,850
12,200 Tenet Healthcare Corp.(a) 300,425
7,500 United Healthcare Corp. 357,188
------------
2,184,504
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
Portfolio of Investments as of THE PRUDENTIAL DRYDEN FUND
March 31, 1997 (Unaudited) STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Housing Related--0.5%
1,700 Armstrong World Industries, Inc. $ 110,075
1,400 Centex Corp. 49,350
1,600 Fleetwood Enterprises, Inc. 40,000
7,100 Lowe's Companies, Inc. 265,362
6,700 Masco Corp. 239,525
4,000 Maytag Corp. 82,500
2,200 Owens Corning 88,550
3,600 Stanley Works 136,350
2,700 Tupperware Corp. 90,450
3,100 Whirlpool Corp. 147,638
------------
1,249,800
- ------------------------------------------------------------
Insurance--4.0%
6,200 Aetna, Inc. 532,425
18,174 Allstate Corp. 1,079,081
8,300 American General Corp. 338,225
19,312 American International Group, Inc. 2,266,746
4,500 Aon Corp. 275,625
7,200 Chubb Corp. 387,900
3,050 CIGNA Corp. 445,681
6,800 Conseco, Inc. 242,250
3,400 General Re Corp. 537,200
4,800 ITT Hartford Group Inc. 346,200
2,825 Jefferson-Pilot Corp. 153,609
4,300 Lincoln National Corp. 230,050
2,900 Marsh & McLennan Companies, Inc. 328,425
2,400 MGIC Investment Corp. 169,800
3,900 Providian Corp. 208,650
5,200 SAFECO Corp. 208,000
3,400 St. Paul Cos, Inc. 220,575
2,950 Torchmark Corp. 163,356
26,162 Travelers Group, Inc. 1,252,506
3,000 UNUM Corp. 219,000
4,900 USF&G Corp. 105,350
1,350 USLIFE Corp. 63,113
6,800 Wachovia Corp. 370,600
------------
10,144,367
Leisure--1.2%
4,200 Brunswick Corp. $ 112,875
4,100 Harrah's Entertainment Inc.(a) 70,213
5,400 Hasbro, Inc. 147,825
4,700 ITT Corp. (New) 276,712
1,600 King World Productions, Inc.(a) 58,400
11,087 Mattel, Inc. 266,088
27,692 Walt Disney, Co. 2,021,516
------------
2,953,629
- ------------------------------------------------------------
Lodging--0.3%
5,300 HFS, Inc.(a) 312,038
10,300 Hilton Hotels Corp. 249,775
5,200 Marriott International, Inc. 258,700
------------
820,513
- ------------------------------------------------------------
Machinery--1.1%
1,100 Briggs & Stratton Corp. 49,363
3,000 Case Corp. 152,250
7,800 Caterpillar Inc. 625,950
1,400 Cincinnati Milacron, Inc. 26,250
4,400 Cooper Industries, Inc. 190,850
10,500 Deere & Co. 456,750
4,700 Dover Corp. 246,750
3,100 Eaton Corp. 219,712
1,000 Giddings & Lewis, Inc. 14,875
2,000 Harnischfeger Industries, Inc. 93,000
4,400 Ingersoll-Rand Co. 191,950
1,602 PACCAR Inc. 106,934
2,950 Parker-Hannifin Corp. 126,112
2,650 Snap-On Inc. 102,688
6,200 Thermo Electron Corp.(a) 191,425
1,200 Timken Co. 64,200
------------
2,859,059
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7
<PAGE>
Portfolio of Investments as of THE PRUDENTIAL DRYDEN FUND
March 31, 1997 (Unaudited) STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Media--1.7%
13,550 Comcast Corp. $ 228,656
3,900 Dow Jones & Co., Inc. 158,438
6,900 Dun & Bradstreet Corp. 175,088
5,750 Gannett Co., Inc. 493,781
3,300 Interpublic Group of Companies, Inc. 174,075
3,700 Knight-Ridder, Inc. 147,538
4,100 McGraw-Hill Companies, Inc. 209,612
2,200 Meredith Corp. 50,875
3,900 New York Times Co. 172,088
6,100 R.R. Donnelley & Sons, Co. 212,737
23,300 Time Warner, Inc. 1,007,725
4,100 Times Mirror Co. 223,962
5,100 Tribune Co. 206,550
25,600 U.S. West Media Group 476,800
14,339 Viacom, Inc.(a) 474,979
-------------
4,412,904
- ------------------------------------------------------------
Mineral Resources--0.7%
2,000 ASARCO Inc. 56,250
14,600 Barrick Gold Corp. 346,750
3,850 Cyprus Amax Minerals Co. 91,438
5,200 Echo Bay Mines, Ltd. 34,450
7,900 Freeport-McMoran Copper & Gold, Inc 239,962
6,100 Homestake Mining Co. 92,263
7,000 Inco, Ltd. 228,375
4,098 Newmont Mining Corp. 158,798
2,600 Phelps Dodge Corp. 190,125
10,300 Placer Dome, Inc. 186,687
5,440 Santa Fe Pacific Gold Corp. 89,760
-------------
1,714,858
- ------------------------------------------------------------
Miscellaneous Basic Industry--4.2%
8,900 Browning-Ferris Industries, Inc. 256,987
6,800 Cognizant Corp. 198,050
1,800 Crane Co. 56,475
2,700 Ecolab, Inc. 102,600
1,450 FMC Corp.(a) 88,813
67,500 General Electric Co. 6,699,375
2,000 General Signal Corp. 78,250
5,100 Illinois Tool Works, Inc. 416,287
4,700 ITT Industries, Inc. 105,163
4,700 Loews Corp. 417,712
1,800 Millipore Corp. $ 76,275
250 NACCO Industries, Inc. 12,313
5,333 Pall Corp. 123,326
7,500 PPG Industries, Inc. 405,000
1,025 Quest Diagnostics Inc.(a) 15,247
3,400 Textron, Inc. 357,000
1,100 Trinova Corp. 36,850
5,200 TRW, Inc. 269,100
6,900 Tyco International, Ltd 379,500
2,250 Unisource Worldwide, Inc. 34,594
19,700 WMX Technologies, Inc. 603,312
-------------
10,732,229
- ------------------------------------------------------------
Miscellaneous Consumer Growth--1.8%
3,200 American Greetings Corp. 102,200
3,900 Black & Decker Corp. 125,287
9,400 Corning, Inc. 417,125
13,700 Eastman Kodak Co. 1,039,487
1,500 Jostens, Inc. 33,938
17,100 Minnesota Mining & Manufacturing Co. 1,444,950
1,800 Polaroid Corp. 71,550
6,200 Rubbermaid, Inc. 154,225
6,600 Unilever N.V. 1,229,250
4,400 Whitman Corp. 107,800
-------------
4,725,812
- ------------------------------------------------------------
Office Equipment & Supplies--2.2%
4,300 Avery Dennison Corp. 165,550
11,100 Compaq Computer Corp.(a) 850,538
5,200 Honeywell, Inc. 352,950
5,400 Ikon Office Solutions Inc. 180,900
21,200 International Business Machines
Corp. 2,912,350
6,000 Pitney Bowes, Inc. 352,500
6,600 Unisys Corp.(a) 42,075
13,350 Xerox Corp. 759,281
-------------
5,616,144
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 8
<PAGE>
Portfolio of Investments as of THE PRUDENTIAL DRYDEN FUND
March 31, 1997 (Unaudited) STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Petroleum--7.9%
3,700 Amerada Hess Corp. $ 196,100
20,400 Amoco Corp. 1,767,150
2,700 Ashland, Inc. 108,675
6,650 Atlantic Richfield Co. 897,750
5,100 Burlington Resources, Inc. 218,025
26,700 Chevron Corp. 1,858,987
50,950 Exxon Corp. 5,489,862
2,000 Kerr-McGee Corp. 123,750
1,400 Louisiana Land & Exploration Co. 66,325
16,200 Mobil Corp. 2,116,125
13,400 Occidental Petroleum Corp. 329,975
1,900 Pennzoil Co. 98,325
10,800 Phillips Petroleum Co. 441,450
22,000 Royal Dutch Petroleum Co. (ADR)
(Netherlands) 3,850,000
3,600 Santa Fe Energy Resources, Inc.(a) 49,950
2,800 Sun Co., Inc. 73,150
7,000 Tenneco Inc. 273,000
10,800 Texaco Inc. 1,182,600
10,260 Union Pacific Resources Group, Inc. 274,455
10,100 Unocal Corp. 385,063
11,800 USX - Marathon Group 328,925
------------
20,129,642
- ------------------------------------------------------------
Petroleum Services--1.1%
6,000 Baker Hughes, Inc. 230,250
7,300 Dresser Industries, Inc. 220,825
5,000 Halliburton Co. 338,750
1,100 Helmerich & Payne, Inc. 50,875
2,200 McDermott International, Inc. 47,025
4,400 Oryx Energy Co.(a) 84,700
16,800 PG&E Corp. 394,800
3,700 Rowan Companies, Inc.(a) 83,713
10,100 Schlumberger, Ltd. 1,083,225
3,500 Sonat, Inc. 190,750
2,100 Western Atlas, Inc.(a) 127,312
------------
2,852,225
Precious Metals
8,900 Battle Mountain Gold Co. $ 58,963
- ------------------------------------------------------------
Railroads--0.8%
6,265 Burlington Northern, Inc. 463,610
2,667 Conrail, Inc. 300,704
8,900 CSX Corp. 413,850
5,100 Norfolk Southern Corp. 434,775
10,000 Union Pacific Corp. 567,500
------------
2,180,439
- ------------------------------------------------------------
Restaurants--0.6%
5,950 Darden Restaurants, Inc. 46,856
28,600 McDonald's Corp. 1,351,350
5,400 Wendys International, Inc. 111,375
------------
1,509,581
- ------------------------------------------------------------
Retail--4.7%
10,400 Albertson's, Inc. 353,600
5,900 American Stores Co. 262,550
6,100 AutoZone, Inc.(a) 137,250
3,400 Charming Shoppes, Inc. 18,275
4,000 Circuit City Stores, Inc. 133,500
8,552 Costco Companies, Inc.(a) 236,249
4,300 CVS Corp. 198,337
8,800 Dayton-Hudson Corp. 367,400
4,700 Dillard Department Stores, Inc. 148,050
8,400 Federated Department Stores, Inc.(a) 276,150
1,400 Great Atlantic & Pacific Tea Co., Inc. 35,525
2,800 Harcourt General, Inc. 130,200
19,566 Home Depot, Inc. 1,046,781
10,300 J.C. Penney Co., Inc. 490,537
20,000 Kmart Corp. 242,500
5,200 Kroger Co.(a) 263,900
2,800 Liz Claiborne, Inc. 122,150
1,400 Longs Drug Stores Corp. 32,900
10,200 May Department Stores Co. 464,100
1,400 Mercantile Stores Co., Inc. 64,925
6,500 Newell Co. 217,750
11,800 Nike, Inc. (Class B) 731,600
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9
<PAGE>
Portfolio of Investments as of THE PRUDENTIAL DRYDEN FUND
March 31, 1997 (Unaudited) STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Retail (cont'd.)
3,300 Nordstrom, Inc. $ 124,988
2,400 Pep Boys - Manny, Moe & Jack 72,000
2,400 Reebok International, Ltd. 107,700
5,000 Rite Aid Corp. 210,000
16,100 Sears Roebuck & Co. 809,025
7,000 Sherwin-Williams Co. 189,000
2,000 Stride Rite Corp. 30,000
2,700 SUPERVALU, Inc. 80,325
11,700 The Gap, Inc. 391,950
11,288 The Limited, Inc. 207,417
3,200 TJX Companies, Inc. 136,800
12,000 Toys 'R' Us, Inc.(a) 336,000
94,100 Wal-Mart Stores, Inc. 2,623,037
10,000 Walgreen Co. 418,750
6,100 Winn-Dixie Stores, Inc. 201,300
5,700 Woolworth Corp. 133,238
------------
12,045,759
- ------------------------------------------------------------
Rubber--0.2%
2,200 B.F. Goodrich Co. 80,575
3,800 Cooper Tire & Rubber Co. 70,300
6,300 Goodyear Tire & Rubber Co. 329,175
------------
480,050
- ------------------------------------------------------------
Steel--0.2%
7,272 Allegheny Teldyne, Inc. 204,525
3,800 Armco, Inc.(a) 15,200
4,500 Bethlehem Steel Corp.(a) 37,125
2,400 Inland Steel Industries, Inc. 46,800
3,700 Nucor Corp. 169,275
3,500 USX-U.S. Steel Group, Inc. 93,187
3,750 Worthington Industries, Inc. 71,719
------------
637,831
- ------------------------------------------------------------
Telecommunications--3.4%
20,600 AirTouch Communications, Inc.(a) 473,800
7,700 Alltel Corp. 250,250
3,788 Andrew Corp.(a) 136,823
66,400 AT&T Corp. $ 2,307,400
4,900 DSC Communications Corp.(a) 102,594
6,800 Frontier Corp. 121,550
26,070 Lucent Technologies, Inc. 1,375,192
28,200 MCI Communications Corp. 1,004,625
10,600 Northern Telecom, Ltd. 692,975
3,000 Scientific-Atlanta, Inc. 45,750
17,700 Sprint Corp. 805,350
27,600 Tele-Communications, Inc.(a) 331,200
7,300 Tellabs, Inc.(a) 263,713
35,300 WorldCom Inc.(a) 776,600
------------
8,687,822
- ------------------------------------------------------------
Textiles--0.2%
3,000 Fruit of the Loom, Inc.(a) 124,500
2,000 National Service Industries, Inc. 78,250
1,500 Russell Corp. 53,625
900 Springs Industries, Inc. 40,275
2,600 V.F. Corp. 173,875
------------
470,525
- ------------------------------------------------------------
Tobacco--1.7%
7,000 American Brands, Inc. 354,375
33,450 Philip Morris Cos., Inc. 3,817,481
7,400 UST, Inc. 206,275
------------
4,378,131
- ------------------------------------------------------------
Trucking & Shipping--0.1%
1,700 Caliber System, Inc. 45,050
4,600 Federal Express Corp.(a) 239,775
3,300 Ryder System, Inc. 96,525
------------
381,350
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 10
<PAGE>
Portfolio of Investments as of THE PRUDENTIAL DRYDEN FUND
March 31, 1997 (Unaudited) STOCK INDEX FUND
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Utility-Communications--3.8%
22,500 Ameritech Corp. 1,383,750
17,900 Bell Atlantic Corp. 1,089,663
40,700 BellSouth Corp. 1,719,575
39,400 GTE Corp. $ 1,837,025
18,000 NYNEX Corp. 821,250
17,700 Pacific Telesis Group 668,175
24,700 SBC Communications Inc. 1,299,837
19,700 U.S. West Communications, Inc. 669,800
8,900 Unicom Corp. 173,550
------------
9,662,625
- ------------------------------------------------------------
Utilities-Electric--2.2%
7,600 American Electric Power Co. 313,500
6,000 Baltimore Gas & Electric Co. 160,500
6,100 Carolina Power & Light Co. 221,125
8,800 Central & South West Corp. 188,100
9,500 Consolidated Edison Co. of NY, Inc. 285,000
7,300 Dominion Resources, Inc. 265,537
6,000 DTE Energy Co. 161,250
8,200 Duke Power Co. 361,825
17,700 Edison International 398,250
9,300 Entergy Corp. 227,850
7,500 FPL Group, Inc. 330,937
5,000 GPU Corp. 160,625
9,700 Houston Industries, Inc. 202,488
5,900 Niagara Mohawk Power Corp. 50,150
2,900 Northern States Power Co. 137,388
6,200 Ohio Edison Co. 130,975
3,600 Pacific Enterprises 108,900
12,200 PacifiCorp 260,775
9,400 PECO Energy Co. 191,525
6,400 PP & L Resources Inc. 129,600
9,800 Public Service Enterprise Group, Inc. 257,250
27,800 Southern Co. 587,275
9,300 Texas Utilities Co. 318,525
4,200 Union Electric Co. 154,875
------------
5,604,225
------------
Total common stocks
(cost $185,396,275) 237,686,164
SHORT-TERM INVESTMENTS--8.0%
- ------------------------------------------------------------
U.S. Government Securities--0.4%
$100(b) 4.98%, 6/19/97 $ 98,907
200(b) 5.05%, 6/19/97 197,784
700(b) 5.19%, 6/19/97 692,027
------------
Total U.S. Government Securities
(cost $988,718) 988,718
- ------------------------------------------------------------
Repurchase Agreement--7.6%
19,591 Joint Repurchase Agreement Account
6.438%, 04/01/97(Note 4)
(cost $19,591,000) 19,591,000
------------
Total short-term investments
(cost $20,579,718) 20,579,718
- ------------------------------------------------------------
Total Investments--100.8%
(cost $205,975,993; Note 3) 258,265,882
Liabilities in excess of other
assets--(0.8%) (2,059,126)
------------
Net Assets--100% $256,206,756
------------
------------
</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>
THE PRUDENTIAL DRYDEN FUND
Statement of Assets and Liabilities (Unaudited) STOCK INDEX FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets March 31, 1997
<S> <C>
Investments, at value (cost $205,975,993).................................................................. $258,265,882
Cash....................................................................................................... 297
Receivable for Fund shares sold............................................................................ 646,562
Dividends and interest receivable.......................................................................... 370,160
Prepaid deferred expenses.................................................................................. 11,258
--------------
Total assets............................................................................................ 259,294,159
--------------
Liabilities
Payable for Fund shares reacquired......................................................................... 1,459,155
Payable for investments purchased.......................................................................... 1,080,548
Due to broker - variation margin........................................................................... 398,200
Accrued expenses........................................................................................... 81,696
Management fee payable..................................................................................... 67,804
--------------
Total liabilities....................................................................................... 3,087,403
--------------
Net Assets................................................................................................. $256,206,756
--------------
--------------
Net assets were comprised of:
Common stock, at par.................................................................................... $ 14,762
Paid-in capital in excess of par........................................................................ 202,574,602
--------------
202,589,364
Undistributed net investment income..................................................................... 946,211
Accumulated net realized gain on investments............................................................ 1,282,667
Net unrealized appreciation on investments.............................................................. 51,388,514
--------------
Net assets, March 31, 1997................................................................................. $256,206,756
--------------
--------------
Shares of beneficial interest issued and outstanding....................................................... 14,762,241
--------------
--------------
Net asset value per share.................................................................................. 17.36
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 12
<PAGE>
THE PRUDENTIAL DRYDEN FUND
STOCK INDEX FUND
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
March 31,
Net Investment Income 1997
<S> <C>
Income
Dividends (net of foreign withholding taxes
of $3,260)............................... $ 2,015,637
Interest.................................... 501,550
-----------
Total income............................. 2,517,187
-----------
Expenses
Management fee.............................. 352,217
Administration fee.......................... 26,557
Transfer agent's fees and expenses.......... 87,925
Custodian's fees and expenses............... 65,000
Reports to shareholders..................... 22,000
Legal fees and expenses..................... 11,500
Audit fees and expenses..................... 9,500
Registration fees........................... 8,000
Amortization of organization expenses....... 6,674
Trustees' fees.............................. 5,000
Miscellaneous............................... 6,318
-----------
Total expenses........................... 600,691
Less: Expense subsidy (Note 2)................. (16,070)
-----------
Net expenses............................. 584,621
-----------
Net investment income.......................... 1,932,566
-----------
Realized and Unrealized Gain (Loss)
on Investments
Net realized gain on:
Investment transactions..................... 144,070
Financial futures contracts................. 1,581,326
-----------
1,725,396
-----------
Net change in unrealized appreciation (depreciation) on:
Investments................................. 16,291,366
Financial futures contracts................. (917,600)
-----------
15,373,766
-----------
Net gain on investments........................ 17,099,162
-----------
Net Increase in Net Assets
Resulting from Operations...................... $19,031,728
-----------
-----------
</TABLE>
THE PRUDENTIAL DRYDEN FUND
STOCK INDEX FUND
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase March 31, September 30,
in Net Assets 1997 1996
<S> <C> <C>
Operations
Net investment income......... $ 1,932,566 $ 2,743,808
Net realized gain on
investment transactions.... 1,725,396 1,791,564
Net change in unrealized
appreciation on
investments................ 15,373,766 20,293,266
-------------- -------------
Net increase in net assets
resulting from
operations................. 19,031,728 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....................... 161,162,771 113,692,034
Net asset value of shares
issued to shareholders in
reinvestment of
distributions.............. 4,906,633 6,622,798
Cost of shares reacquired..... (108,366,255) (56,086,722)
-------------- -------------
Net increase in net assets
from Fund share
transactions............... 57,703,149 64,228,110
-------------- -------------
Total increase................... 71,828,240 82,433,950
Net Assets
Beginning of period.............. 184,378,516 101,944,566
-------------- -------------
End of period.................... $ 256,206,756 $ 184,378,516
-------------- -------------
-------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13
<PAGE>
THE PRUDENTIAL DRYDEN FUND
Notes to Financial Statements (Unaudited) STOCK INDEX 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 two separate funds: Stock Index Fund (the 'Fund') and
Active Balanced Fund. Prior to October 28, 1996 the Company was named the
Prudential Institutional Fund and prior to September 20, 1996 it consisted of
seven separate funds, five of which were subsequently 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. ('PIFM'). Investment operations of the Fund
commenced on November 5, 1992. The Fund's investment objective seeks 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 and NASDAQ national
market equity securities 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 average of readily closing bid and asked prices quoted on such day.
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, shall be valued at the average of the most recently quoted
bid and asked prices provided by a principal market maker or dealer.
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
provides a valuation that, in the judgement of one of the subadvisers, does not
represent fair value, shall by 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, as the case may be under
triparty repurchase agreements, take possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. If
the seller defaults, and the value of the collateral declines or, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
Securities Transactions and 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.
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 their
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.
Dividends and Distributions:
Dividends and distributions of the Fund are declared in cash and automatically
reinvested in additional shares of the
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 14
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 the date each of the Funds' commenced
investment operations.
- ------------------------------------------------------------
Note 2. Agreements
The Fund had a management agreement with PIFM through October 30, 1996. Pursuant
to this agreement, PIFM had responsibility for all investment advisory services
and supervises the subadviser's performance of such services.
PIFM 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. PIFM 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 PIFM 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 PMF was 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 a management agreement with
Prudential Mutual Fund Management LLC ('PMF'). Pursuant to this agreement PMF
has responsibility for all investment advisory services. PMF entered into a
subadvisory agreement with PIC. PIC, subject to the supervision of PMF, manages
the assets of the Fund in accordance with its investment objectives and policies
and in a manner consistent with the previous agreement. PMF 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.
PIFM voluntarily agreed to subsidize a portion of the operating expenses of the
Fund until October 30, 1996. Such expenses were recovered by PIFM through
October 30, 1996 so long as the total expense ratio did not exceed the
predetermined level set forth in the Fund's prospectus of .60% per annum. For
the six months ended March 31, 1997, PIFM subsidized $16,070 of the expenses of
the Fund (.007% of the average net assets of the Fund/$.001 per share).
The Fund had an administration agreement with PMF through October 30, 1996. The
administration fee paid PMF 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. PMF
furnished to the Fund such services as the Fund may require in connection with
the administration of the Fund's business affairs. PMF also provided certain
transfer agent services through its wholly-owned subsidiary, Prudential Mutual
Fund Services, Inc. ('PMFS'). For such services, PMFS was paid .03% of the
Company's 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
PMF. Upon termination of the administration agreement, PMFS will enter 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 will
incur the expenses of distributing the Fund's shares, none of which is
reimbursed by or paid for by the Fund.
PIFM, PIC, PMF and PSI are indirect wholly-owned subsidiaries of the Prudential
Insurance Company of America.
- ------------------------------------------------------------
Note 3. Portfolio Securities
Purchases and sales of portfolio securities, excluding short-term investments,
for the six months ended March 31, 1997 aggregated $48,658,157 and $626,905,
respectively.
- --------------------------------------------------------------------------------
15
<PAGE>
THE PRUDENTIAL DRYDEN FUND
Notes to Financial Statements (Unaudited) STOCK INDEX FUND
- -------------------------------------------------------------------------------
On March 31, 1997, the Stock Index Fund purchased 23 financial futures contracts
on the S&P 500 Index expiring June, 1997. The cost of such contracts was
$18,335,375. The value of such contracts on March 31, 1997 was $17,434,000,
thereby resulting in an unrealized loss of $901,375.
The cost basis of investments for federal income tax purposes is substantially
the same as for financial reporting purposes and, accordingly, as of March 31,
1997, net unrealized appreciation for federal income tax purposes was
$52,289,889 (gross unrealized appreciation--$55,255,235 gross unrealized
depreciation--$2,965,346).
- ------------------------------------------------------------
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 March 31, 1997, the Fund had
a 2.03% undivided interest in the repurchase agreements in the joint account.
The undivided interest represented $19,591,000 in principal amount. As of such
date, each repurchase agreement in the joint account and the collateral therefor
was as follows:
Bear, Stearns & Co., Inc., 6.40%, in the principal amount of $315,000,000,
repurchase price $315,056,000, due 4/1/97. The value of the collateral including
accrued interest was $321,684,450.
CS First Boston Corp., 6.45%, in the principal amount of $250,000,000,
repurchase price $250,044,792, due 4/1/97. The value of the collateral including
accrued interest was $256,162,625.
Goldman, Sachs & Co., Inc., 6.50%, in the principal amount of $315,000,000,
repurchase price $315,056,875, due 4/1/97. The value of the collateral including
accrued interest was $321,300,771.
J.P. Morgan Securities, Inc., 6.00%, in the principal amount of $18,220,000,
repurchase price $18,223,037, due 4/1/97. The value of the collateral including
accrued interest was $18,584,479.
UBS Securities, Inc., 6.40% in the principal amount of $65,000,000, repurchase
price $65,011,556, due 4/1/97. The value of the collateral including accrued
interest was $66,300,284.
- ------------------------------------------------------------
Note 5. 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 during
the six months ended March 31, 1997 and the fiscal year ended September 30, 1996
were as follows:
<TABLE>
<CAPTION>
Six Months
ended Year ended
March 31, September 30,
1997 1996
---------- -------------
<S> <C> <C>
Shares sold............................... 9,188,807 7,589,233
Shares issued in reinvestment of dividends
and distributions........................ 283,293 467,712
Shares reacquired......................... (6,190,037) (3,745,568)
---------- -------------
Net increase.............................. 3,282,063 4,311,377
---------- -------------
---------- -------------
</TABLE>
Of the shares outstanding at March 31, 1997, PIFM and affiliates owned 4,340,936
shares of the Fund.
- ------------------------------------------------------------
Note 6. Reorganization
On May 17, 1996, the Trustees of the Company approved an Agreement and a Plan of
Reorganization (the 'Plan of Reorganization') for five other series of the
Company. The Plan of Reorganization was approved by shareholders on September 6,
1996. This Fund approved a new manager, distributor and transfer agency
agreements on October 30, 1996.
Under the 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 Class Z shares of
Prudential Jennison Fund, Inc., Prudential Allocation Fund--Balanced Portfolio,
Prudential Government Income Fund, Inc. and Prudential MoneyMart Assets, Inc.,
respectively. These Series then ceased operations.
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.
Active Balanced Fund and the Fund remained with The Prudential Institutional
Fund (renamed the Prudential Dryden Fund) as separate funds. Existing
shareholders of the Active Balanced Fund became Class Z shareholders and Active
Balanced Fund began offering Classes A, B and C shares. The Fund offers a single
class of shares. Effective October 30, 1996 these funds were managed by PMF,
PMFS will provide transfer agency services and PSI will act as distributor.
- --------------------------------------------------------------------------------
16
<PAGE>
THE PRUDENTIAL DRYDEN FUND
Financial Highlights (Unaudited) STOCK INDEX FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
November 5,
Six Months 1992(a)
Ended Year Ended September 30, Through
March 31, --------------------------------- September 30,
1997 1996 1995 1994 1993
---------- -------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................. $ 16.06 $ 14.22 $ 11.27 $ 11.12 $ 10.00
---------- -------- -------- ------- -------------
Income from investment operations:
Net investment income (b)............................. .14 .25 .23 .26 .23
Net realized and unrealized gain on investment
transactions....................................... 1.57 2.44 2.97 .11 .94
---------- -------- -------- ------- -------------
Total from investment operations.................... 1.71 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........................ $ 17.36 $ 16.06 $ 14.22 $ 11.27 $ 11.12
---------- -------- -------- ------- -------------
---------- -------- -------- ------- -------------
TOTAL RETURN(d)....................................... 10.65% 19.72% 29.02% 3.33% 11.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)....................... $256,207 $184,379 $101,945 $50,119 $ 27,142
Average net assets (000).............................. $224,665 $142,540 $ 71,711 $38,098 $ 18,807
Ratios to average net assets: (b)
Expenses............................................ .52%(c) .60% .60% .60% .60%(c)
Net investment income............................... 1.73%(c) 1.92% 2.55% 2.34% 2.41%(c)
Portfolio turnover rate............................... 1% 2% 11% 2% 1%
Average commission rate paid per share................ $ 0.0250 $ 0.0250 N/A N/A N/A
</TABLE>
- ---------------
(a) Commencement of investment operations.
(b) Net of expense subsidy.
(c) Annualized.
(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 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. 17
<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
Robert F. Gunia, Vice President
Eugene S. Stark, 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 07101
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 Auditors
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Kirkpatrick and Lockhart LLP
1800 Massachusetts Ave., N.W.
Washington, D.C. 20036
The views expressed in this report and information about the Fund's portfolio
holdings are for the period covered by this report and are subject to change
thereafter.
The accompanying financial statements as of March 31, 1997 were not audited
and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
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