<PAGE>
ANNUAL REPORT SEPTEMBER 30, 2000
Prudential
Active Balanced Fund
Fund Type Stock and bond
Objective Income and long-term growth of capital
(GRAPHIC)
This report is not authorized for distribution to
prospective investors unless preceded or
accompanied by a current prospectus.
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.
(LOGO)
<PAGE>
Build on the Rock
Investment Goals and Style
The Prudential Active Balanced Fund seeks income
and long-term growth of capital by investing in a
portfolio of equity, fixed-income, and money market
securities that is actively managed to take
advantage of opportunities created by what we see
as market misvaluations. The Fund's investments
will be shifted among equity securities, fixed-
income securities, and money market instruments to
maximize its total investment return. Mark Stumpp
and James Scott manage the asset allocation with
the aid of a quantitative model. They also manage
the stocks using other quantitative models to
select securities they believe to be underpriced,
but maintaining a risk profile like that of the S&P
500 Index. Prudential's U.S. Liquidity Team manages
the bond portion of the portfolio. There can be no
assurance that the Fund will achieve its investment
objective.
Portfolio Composition
Expressed as a percentage of
net assets as of 9/30/00
39.0% Bonds
Equities:
11.4 Electronic Technology & Services
8.2 Finance
5.2 Consumer Services
4.9 Health Services & Technology
4.0 Producer Manufacturing
3.9 Technology Services
3.7 Energy & Non-Energy Materials
2.5 Retail Trade
3.0 Consumer Durables & Non-Durables
1.9 Utilities
0.7 Transportation
0.5 Process Industries
0.3 Commercial Services
10.8 Cash & Equivalents*
* Primarily collateral for bond futures contracts
used to manage asset allocation.
Source: Prudential.
Ten Largest Equity Holdings
Expressed as a percentage of
net assets as of 9/30/00
2.6% General Electric Co.
Diversified Operations
1.6 Cisco Systems, Inc.
Computer Software & Services
1.2 Exxon Mobil Corp.
Oil & Gas Equipment & Services
1.1 Intel Corp.
Electronic Components
1.0 Citigroup, Inc.
Financial Services
1.0 Microsoft Corp.
Computer Software & Services
0.9 Oracle Systems Corp.
Computer Software & Services
0.9 EMC Corp.
Computer Software & Services
0.9 Pfizer, Inc.
Medical Products & Services
0.8 Merck & Co., Inc.
Medical Products & Services
Holdings are subject to change.
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
Cumulative Total Returns1 As of 9/30/00
<TABLE>
<CAPTION>
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 11.56% N/A 55.06%
Class B 10.78 N/A 50.75
Class C 10.78 N/A 50.75
Class Z 11.87 75.94% 131.20
Lipper Balanced Fund Avg.3 11.31 83.26 ***
</TABLE>
Average Annual Total Returns1 As of 9/30/00
<TABLE>
<CAPTION>
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 5.98% N/A 10.45%
Class B 5.78 N/A 10.73
Class C 8.67 N/A 10.82
Class Z 11.87 11.96% 11.44
</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
LLC and Lipper Inc. The cumulative total returns do
not take into account sales charges. The average
annual total returns do take into account
applicable sales charges. The Fund charges a
maximum front-end sales charge of 5% for Class A
shares. Class B shares are subject to a declining
contingent deferred sales charge (CDSC) of 5%, 4%,
3%, 2%, 1%, and 1% for six years. Class B shares
will automatically convert to Class A shares, on a
quarterly basis, approximately seven years after
purchase. Class C shares are subject to a front-end
sales charge of 1% and a CDSC of 1% for 18 months.
Class Z shares are not subject to a sales charge or
distribution and service (12b-1) fees.
2Inception dates: Class A, B, and C, 11/7/96;
Class Z, 1/4/93.
3Lipper average returns are for all funds in each
share class for the one- and five-year periods in
the Balanced Portfolio Fund category. The Lipper
average is unmanaged. Balanced Portfolio funds are
funds whose primary objective is to conserve
principal by maintaining at all times a balanced
portfolio of both stocks and bonds. Typically, the
stock/bond ratio ranges around 60%: 40%.
***Lipper Since Inception returns are 74.74% for
Class A, B, and C; and 172.82% for Class Z, based
on all funds in each share class.
1
<PAGE>
(LOGO) November 15, 2000
Dear Shareholder,
The Prudential Active Balanced Fund Class A shares
returned 11.56% over the 12 months ended September
30, 2000--5.98% for those paying the maximum one-
time Class A share sales charge. This performance
was in line with the 11.31% Lipper Balanced Fund
Average, and not far behind the all-stock Standard
& Poor's 500 Index (S&P 500 Index) return of
13.27%. Moreover, because of its bond and money
market investments, as well as its excellent stock
selection, the Fund exhibited less month-to-month
volatility than the stock index. The primary
contribution to the Fund's return came from its
stock portfolio, which outperformed the S&P 500 by
several percentage points over the reporting
period. The Fund's bond holdings had a stabilizing
influence when stocks fell sharply.
The extraordinary volatility of stock markets in
recent months is a reminder of the benefits of
diversification. The Prudential Active Balanced
Fund, which maintains a core-stock portfolio (one
that maintains a profile close to that of the S&P
500 Index) as well as portfolios of bonds and money
market securities, provides broad diversification
with one mutual fund purchase.
Sincerely,
David R. Odenath, Jr., President
The Prudential Investment Portfolios,
Inc./Prudential Active Balanced Fund
2
<PAGE>
Prudential Active Balanced Fund
Annual Report September 30, 2000
Investment Adviser's Report
Active Asset Allocation
Asset class exposure can have a greater impact on
returns over the long term than selection of
individual securities. We use quantitative models
to determine which market sectors offer the best
opportunities. Using companies' earnings
expectations and stock prices, we compare the
expected returns on stocks with the interest rates
on bonds. We try to increase the proportion of the
type of security that offers the best value at any
time, monitoring our allocation daily. We implement
most of these allocation changes with stock and
bond futures contracts because it is quicker and
less expensive than trading the actual securities.
Our neutral target position is 57.5% stocks, 35.0%
bonds, and 2.5% cash.
Over this reporting period, the contribution from
asset allocation was mixed. We added value by
underweighting stocks in favor of bonds early in
2000 because we believed that rising interest rates
had reduced the current value of companies' future
earnings. We began to increase exposures again
after shares became less expensive in the spring.
However, this proved premature when stock prices
declined sharply towards the end of our reporting
period.
Our quantitative stock strategy
The basic quantitative stock management strategy of
the Prudential Active Balanced Fund is to enhance
returns over the performance of the S&P 500 Index
while avoiding large risks in the form of
deviations from its benchmark index. Instead, it
takes many small positions, overweighting stocks
our models rank as inexpensive for their growth
potential, and underweighting those it ranks as
expensive. We consider all deviations from our
benchmark, the S&P 500 Index, to be risk exposures.
We attempt to maintain a "risk profile" that is
similar to that of the Index--that is to say, we
normally hold industry, sector, and company-size
proportions fairly close to those of the S&P 500.
We allow a slight additional exposure to industries
and other factors only when stocks in these
categories are overall more
3
<PAGE>
Prudential Active Balanced Fund
Annual Report September 30, 2000
attractive than average according to our
quantitative measures. At period-end, the Fund held
positions in 230 different stocks, all but a few
amounting to less than 1% of its net assets. Adding
up the small comparative advantages and
disadvantages relative to the Index, the Fund's
total return can deviate markedly from its
benchmark, but we believe it is not significantly
vulnerable to any single influence. If our stock
selection methodology works as we hope, the
resulting return differential will be in our favor.
Over this reporting period, that is what happened.
The strong performance of our stock portfolio
considerably enhanced our return.
We overweighted technology and telecommunications
equipment stocks, particularly in 1999 when they
were still rising sharply. Our holdings in this
sector are good examples of how our strategy works.
Qualcomm was among the largest contributors to our
stock portfolio's outperformance of the S&P 500;
although our holding averaged less than 1% over the
period, it was almost one and a half times the
Average Index exposure (in fact, we held Qualcomm
months before it was added to the S&P 500 Index
later in 1999). We added more value by holding
Qualcomm through most of 1999 and then by reducing
our exposure in 2000 as its price fell. We held an
even smaller position in ADC Telecommunications,
but it was a much larger multiple of the Index
weighting. Since ADC rose 156% over the reporting
period, our overweight also added to our
outperformance. Altera added another increment: our
position averaged just 0.43%, but it was about six
times the Index weighting, and the stock gained
120%. These weighting decisions can work in another
way: although our position in Lucent Technologies,
which lost 53% over the period, was much larger
than our Altera position, it was substantially
underweighted compared to the Index weighting, so
it also helped our relative performance despite its
loss. The aggregate of hundreds of such decisions
to over- or underweight resulted in a substantial
benefit to the Fund.
4
<PAGE>
www.prudential.com (800) 225-1852
Bonds
During this reporting period, our bond portfolio
lagged its benchmark slightly because it had a
larger component of corporate bonds, on average,
and these trailed Treasury securities.
Looking ahead
Stock investors' concern about the level of
earnings in 2001 has maintained the market's
volatility as we enter the autumn period. We
believe these concerns are excessive and that stocks
are attractive at today's prices. However, there are
threats on the horizon that could change our view:
a combination of rising fuel prices, a slowdown in
technology-related industries, and the strong value of
the U.S. dollar may combine to dampen earnings in 2001.
We remain overweighted in stocks, but will keep a watchful
eye on earnings reports.
Prudential Active Balanced Fund Management Team
5
<PAGE>
Prudential Active Balanced Fund
Annual Report September 30, 2000
Financial
Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 75.5%
Common Stocks 50.2%
-------------------------------------------------------------------------------------
Aerospace/Defense 0.5%
900 B.F. Goodrich Co. $ 35,269
5,100 General Dynamics Corp. 320,344
7,200 Boeing Co. 453,600
2,800 Titan Corp. 46,200
--------------
855,413
-------------------------------------------------------------------------------------
Airlines 0.6%
15,700 AMR Corp. 513,194
5,750 Southwest Airlines Co. 139,437
9,500 UAL Corp.(a) 399,000
--------------
1,051,631
-------------------------------------------------------------------------------------
Aluminum 0.1%
7,900 Alcan Aluminum Ltd. 228,606
-------------------------------------------------------------------------------------
Audio/Visual
1,200 Polycom, Inc.(a) 80,362
-------------------------------------------------------------------------------------
Automobiles & Trucks 0.5%
11,669 Ford Motor Co. 295,372
3,200 General Motors Corp. 208,000
29,600 Visteon Corp. 447,700
--------------
951,072
-------------------------------------------------------------------------------------
Banking 1.0%
6,600 Bank of New York Co., Inc. 370,012
9,650 Chase Manhattan Corp. 445,709
4,600 Fifth Third Bancorp 247,825
12,000 Firstar Corp. 268,500
2,300 PNC Bank Corp. 149,500
2,400 Suntrust Banks, Inc. 119,550
5,500 U.S. Bancorp 125,125
1,300 Wachovia Corp. 73,694
--------------
1,799,915
</TABLE>
See Notes to Financial Statements 7
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
Beverages 0.8%
<C> <S> <C> <C>
8,400 Anheuser-Busch Companies, Inc. $ 355,425
7,700 Coca-Cola Co. 424,462
15,200 PepsiCo, Inc. 699,200
--------------
1,479,087
-------------------------------------------------------------------------------------
Building & Construction 0.5%
10,400 Armstrong Holdings, Inc. 124,150
7,400 Centex Corp. 237,725
15,000 Pulte Corp. 495,000
--------------
856,875
-------------------------------------------------------------------------------------
Business Services 0.1%
1,300 Omnicom Group, Inc. 94,819
-------------------------------------------------------------------------------------
Chemicals 0.3%
11,200 Air Products & Chemicals, Inc. 403,200
3,300 Ashland Inc. 111,169
2,900 Dow Chemical Co. 72,319
5,600 Schulman (A.), Inc. 61,600
--------------
648,288
-------------------------------------------------------------------------------------
Commercial Services 0.2%
5,000 Paychex, Inc. 262,500
2,200 Quanta Services, Inc.(a) 60,500
--------------
323,000
-------------------------------------------------------------------------------------
Computer Services 0.7%
4,500 Automatic Data Processing, Inc. 300,937
3,400 Electronic Data Systems Corp. 141,100
3,100 First Data Corp. 121,094
2,100 Fiserv, Inc.(a) 125,738
5,600 MarchFirst, Inc.(a) 87,850
2,900 Network Appliance, Inc.(a) 369,387
4,600 Network Associates, Inc.(a) 104,075
--------------
1,250,181
</TABLE>
8 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
Computer Software & Services 6.4%
<C> <S> <C> <C>
1,400 Adobe Systems, Inc. $ 217,350
18,600 America Online, Inc.(a) 999,750
52,200 Cisco Systems, Inc.(a) 2,884,050
16,600 EMC Corp.(a) 1,645,475
5,900 Intuit, Inc.(a) 336,300
31,100 Microsoft Corp.(a) 1,875,719
1,000 NVIDIA Corp.(a) 81,875
22,100 Oracle Systems Corp.(a) 1,740,375
12,200 Sun Microsystems, Inc.(a) 1,424,350
1,400 Teradyne, Inc.(a) 49,000
3,700 VERITAS Software Corp.(a) 525,400
--------------
11,779,644
-------------------------------------------------------------------------------------
Computer Systems/Peripherals 1.6%
3,000 Apple Computer, Inc.(a) 77,250
6,600 Dell Computer Corp.(a) 203,362
9,700 Gateway, Inc.(a) 453,475
7,600 Hewlett-Packard Co. 737,200
13,300 International Business Machines Corp. 1,496,250
--------------
2,967,537
-------------------------------------------------------------------------------------
Cosmetics/Toiletries 0.4%
1,100 Avon Products, Inc. 44,963
7,900 Colgate-Palmolive Co. 372,880
5,300 Kimberly-Clark Corp. 295,806
--------------
713,649
-------------------------------------------------------------------------------------
Distribution/Wholesalers 0.1%
2,400 BJ's Wholesale Club, Inc.(a) 81,900
2,100 Tech Data Corp.(a) 89,775
--------------
171,675
-------------------------------------------------------------------------------------
Diversified Consumer Products 0.2%
900 Procter & Gamble Co. 60,300
5,717 Unilever NV 275,845
--------------
336,145
</TABLE>
See Notes to Financial Statements 9
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
Diversified Operations 2.7%
<C> <S> <C> <C>
73,900 General Electric Co. $ 4,263,106
7,400 JDS Uniphase Corp.(a) 700,687
--------------
4,963,793
-------------------------------------------------------------------------------------
Diversified Manufacturing 0.6%
5,300 Cooper Industries, Inc. 186,825
7,437 Honeywell International Inc. 264,943
3,000 Illinois Tool Works Inc. 167,625
2,300 Minnesota Mining & Manufacturing Co. 209,587
18,800 National Service Industries, Inc. 367,775
--------------
1,196,755
-------------------------------------------------------------------------------------
Electrical Utilities 1.6%
1,860 American Electric Power Co., Inc. 72,773
3,500 Calpine Corp.(a) 365,312
2,700 Consolidated Edison, Inc. 92,137
600 Dominion Resources, Inc. 34,838
2,800 DTE Energy Co. 107,100
2,800 Duke Energy Corp. 240,100
4,400 Florida Progress Corp. 232,925
19,900 PG&E Corp. 481,331
15,900 PPL Corp. 663,825
2,100 Public Service Company of New Mexico 54,338
9,200 Reliant Energy, Inc. 427,800
4,800 Southern Co. 155,700
--------------
2,928,179
-------------------------------------------------------------------------------------
Electronic Components 4.3%
3,100 Advanced Micro Devices, Inc.(a) 73,238
11,600 Agilent Technologies, Inc.(a) 567,675
4,000 Altera Corp.(a) 191,000
2,900 Analog Devices, Inc.(a) 239,431
11,800 Applied Materials, Inc.(a) 699,887
4,000 Emerson Electric Co. 268,000
</TABLE>
10 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
50,200 Intel Corp. $ 2,086,437
4,800 Jabil Circuit, Inc.(a) 272,400
9,300 KLA-Tencor Corp.(a) 383,044
900 Linear Technology Corp. 58,275
4,800 Maxim Integrated Products, Inc.(a) 386,100
4,400 Micron Technology, Inc. 202,400
9,300 Novellus Systems, Inc.(a) 433,031
4,200 Semtech Corp.(a) 181,125
10,200 Texas Instruments, Inc. 481,312
1,700 TriQuint Semiconductor, Inc.(a) 61,944
1,500 Microchip Technology, Inc.(a) 49,594
2,300 Molex, Inc. 125,206
2,090 Motorola, Inc. 59,043
5,800 Sanmina Corp.(a) 543,025
4,900 Sawtek, Inc.(a) 188,727
1,300 SCI Systems, Inc.(a) 53,300
3,100 Xilinx, Inc.(a) 265,438
--------------
7,869,632
-------------------------------------------------------------------------------------
Entertainment 0.4%
18,600 Walt Disney Co. 711,450
-------------------------------------------------------------------------------------
Financial Services 5.6%
12,000 American Express Co. 729,000
500 Apollo Group Ltd.(a) 19,937
9,800 Associates First Capital Corp. 372,400
2,760 BankAmerica Corp. 144,555
35,366 Citigroup, Inc. 1,911,974
8,200 Federal Home Loan Mortgage Corp. 443,313
9,700 Federal National Mortgage Assoc. 693,550
9,800 FleetBoston Financial Corp. 382,200
100 Franklin Resources, Inc. 4,443
3,100 Northern Trust Corp. 275,513
8,800 Golden West Financial Corp. 471,900
6,000 Household International Corp. 339,750
4,400 Lehman Brothers Holdings, Inc. 650,100
20,100 MBNA Corp. 773,850
5,000 Mellon Financial Corp. 231,875
</TABLE>
See Notes to Financial Statements 11
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
7,600 Merrill Lynch & Co., Inc. $ 501,600
4,600 Morgan (J.P.) & Co., Inc. 751,525
9,600 Morgan Stanley, Dean Witter & Co. 877,800
5,400 Providian Financial Corp. 685,800
500 Union Planters Corp. 16,531
2,300 Wells Fargo Co. 105,656
--------------
10,383,272
-------------------------------------------------------------------------------------
Food Distribution 0.1%
3,600 SYSCO Corp. 166,725
---
-------------------------------------------------------------------------------------
Foods 0.3%
1 Archer-Daniels-Midland Co. 6
500 Bestfoods 36,375
3,800 Campbell Soup Co. 98,325
7,100 ConAgra, Inc. 142,444
4,000 H.J. Heinz Co. 148,250
9,600 Sara Lee Corp. 195,000
--------------
620,400
-------------------------------------------------------------------------------------
Health Care Services 0.1%
2,000 UnitedHealth Corp. 197,500
-------------------------------------------------------------------------------------
Home Furnishings 0.2%
10,300 Springs Industries, Inc. 290,331
-------------------------------------------------------------------------------------
Human Resources 0.1%
2,700 Robert Half International, Inc.(a) 93,656
-------------------------------------------------------------------------------------
Insurance 1.6%
5,800 Allstate Corp. 201,550
1,000 American General Corp. 78,000
14,000 American International Group, Inc. 1,339,625
1,200 Chubb Corp. 94,950
11,500 Cincinnati Financial Corp. 408,250
700 Hartford Financial Services Group 51,056
7,200 Jefferson-Pilot Corp. 488,700
2,500 Marsh & McLennan Cos., Inc. 331,875
--------------
2,994,006
</TABLE>
12 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
Internet Software & Services 0.4%
<C> <S> <C> <C>
1,200 Avocent Corp.(a) $ 66,150
4,800 Yahoo!, Inc.(a) 436,800
1,800 Macromedia, Inc.(a) 145,462
--------------
648,412
-------------------------------------------------------------------------------------
Leisure & Tourism 0.1%
9,900 Carnival Corp. 243,788
---
-------------------------------------------------------------------------------------
Machinery & Equipment 0.4%
700 Caterpillar, Inc. 23,625
7,900 Deere & Co. 262,675
11,800 Tecumseh Products Co. 494,125
--------------
780,425
-------------------------------------------------------------------------------------
Media & Communications 0.9%
2,200 McGraw-Hill Companies, Inc. 139,837
5,300 Seagram Co., Ltd. 304,419
11,100 Time Warner, Inc. 868,575
5,400 Tribune Co. 235,575
4,000 Viacom, Inc.(a) 234,000
--------------
1,782,406
-------------------------------------------------------------------------------------
Medical Products & Services 4.1%
1,600 Allergan, Inc. 135,100
1,200 Bausch & Lomb, Inc. 46,725
2,300 Biomet, Inc. 80,500
18,900 Bristol Myers Squibb Co. 1,079,663
11,600 Eli Lilly & Co. 941,050
3,100 Forest Laboratories, Inc.(a) 355,531
12,800 Johnson & Johnson Co. 1,202,400
20,300 Merck & Co., Inc. 1,511,081
4,000 PE Corp.-PE Biosystems Group(a) 466,000
37,050 Pfizer, Inc. 1,664,934
1,000 Schering-Plough Corp. 46,500
1,900 Tyco International Ltd. 98,563
--------------
7,628,047
</TABLE>
See Notes to Financial Statements 13
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
Medical Technology 0.7%
<C> <S> <C> <C>
2,200 Abbott Laboratories $ 104,638
10,900 Amgen, Inc.(a) 761,127
15,800 VISX, Inc.(a) 425,612
--------------
1,291,377
-------------------------------------------------------------------------------------
Metals-Nonferrous 0.1%
8,200 Alcoa, Inc. 207,563
-------------------------------------------------------------------------------------
Motorcycles 0.2%
7,400 Harley-Davidson, Inc. 354,275
-------------------------------------------------------------------------------------
Oil & Gas Equipment & Services 2.2%
5,700 Baker Hughes, Inc. 211,613
3,900 BJ Services Co. 238,387
2,700 El Paso Energy Corp. 166,388
24,532 Exxon Mobil Corp. 2,186,414
11,800 KeySpan Corp. 473,475
2,300 Nabors Industries, Inc.(a) 120,520
1,300 Schlumberger, Ltd. 107,006
1,400 Sempra Energy 29,138
3,400 Smith International, Inc.(a) 277,312
5,900 Williams Companies, Inc. 249,275
--------------
4,059,528
-------------------------------------------------------------------------------------
Oil & Gas Exploration/Production 2.1%
3,200 Anadarko Petroleum Corp. 212,672
4,400 Chevron Corp. 375,100
2,400 Coastal Corp. 177,900
2,800 Conoco, Inc. 75,425
3,400 Global Marine, Inc.(a) 104,975
9,800 Phillips Petroleum Co. 614,950
22,000 Royal Dutch Petroleum Co. 1,318,625
11,400 Texaco, Inc. 598,500
14,400 USX - Marathon Group 408,600
--------------
3,886,747
</TABLE>
14 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
Paper & Forest Products 0.2%
<C> <S> <C> <C>
1,770 International Paper Co. $ 50,777
19,600 Louisiana-Pacific Corp. 180,075
2,800 Weyerhaeuser Co. 113,050
--------------
343,902
-------------------------------------------------------------------------------------
Photography
1,400 Eastman Kodak Co. 57,225
-------------------------------------------------------------------------------------
Retail 2.6%
4,500 Abercrombie & Fitch Co.(a) 85,781
22,700 Bed Bath & Beyond, Inc.(a) 553,667
8,300 Best Buy Co., Inc.(a) 528,087
4,100 CDW Computer Centers, Inc.(a) 282,900
15,700 Consolidated Stores Corp.(a) 211,950
2,300 Federated Department Stores, Inc.(a) 60,088
7,300 Home Depot, Inc. 387,356
4,200 Kohl's Corp.(a) 242,288
300 Liz Claiborne, Inc. 11,550
6,600 Nike, Inc. 264,413
2,300 RadioShack Corp. 148,638
4,800 Safeway, Inc.(a) 224,100
10,800 Sears, Roebuck & Co. 350,136
2,700 Toys 'R' Us, Inc.(a) 43,875
22,900 Wal-Mart Stores, Inc. 1,102,062
9,100 Walgreen Co. 345,231
--------------
4,842,122
-------------------------------------------------------------------------------------
Steel & Metals 0.1%
4,700 Nucor Corp. 141,588
-------------------------------------------------------------------------------------
Telecommunication Equipment 1.4%
3,900 ADTRAN, Inc.(a) 165,933
12,500 Lucent Technologies, Inc. 382,031
24,600 Nortel Networks Corp. 1,465,237
1,500 Scientific- Atlanta, Inc. 95,438
11,300 Tellabs, Inc.(a) 539,575
--------------
2,648,214
</TABLE>
See Notes to Financial Statements 15
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
Telecommunication Services 2.7%
<C> <S> <C> <C>
39,250 AT&T Corp. $ 1,152,969
18,700 BellSouth Corp. 752,675
2,600 CenturyTel., Inc. 70,850
6,400 Qwest Communications International, Inc.(a) 307,600
26,012 SBC Communications, Inc. 1,300,600
21,892 Verizon Communications 1,060,394
7,912 WorldCom, Inc.(a) 240,327
--------------
4,885,415
-------------------------------------------------------------------------------------
Tobacco 0.3%
17,500 Philip Morris Co., Inc. 515,156
-------------------------------------------------------------------------------------
Transportation/Trucking/Shipping 0.1%
3,200 FedEx Corp.(a) 141,888
2,900 Union Pacific Corp. 112,738
--------------
254,626
-------------------------------------------------------------------------------------
Waste Management
1,700 Waste Management, Inc. 29,644
--------------
Total common stocks (cost $79,106,298) 92,604,058
--------------
</TABLE>
CORPORATE BONDS 12.3%
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
Aerospace/Defense 1.0%
Boeing Inc., Deb.,
A1 $ 700(d) 8.10%, 11/15/06 737,730
Northrop Grumman Corp., Deb.,
Baa3 700(d) 7.75%, 3/1/16 671,636
Raytheon Co., Note,
Baa2 500(d) 6.30%, 3/15/05 476,395
--------------
1,885,761
</TABLE>
16 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
Agricultural Products 0.3%
Monsanto Co., Note,
A1 $ 500(d) 5.75%, 12/1/05 $ 476,300
-------------------------------------------------------------------------------------
Airlines 0.1%
Delta Airlines, Inc., Note,
Baa3 230(d) 8.30%, 12/15/29 207,881
-------------------------------------------------------------------------------------
Asset Backed Securities 1.3%
Citibank Credit Card Master
Trust I, Class A,
Aaa 500(d) 5.875%, 3/10/11 465,000
Citibank Credit Card Master
Trust, Cl. A,
Aaa 1,500(d) 6.05%, 1/15/10 1,421,715
MBNA Master Credit Card
Trust, Ser. C, Cl. A,
Aaa 500(d) 6.45%, 2/15/08 494,530
--------------
2,381,245
-------------------------------------------------------------------------------------
Banking 1.9%
BankAmerica Corp., MTN,
Aa2 1,000(d) 7.125%, 5/12/05 1,001,330
Bank One Corp., Note,
Aa3 500(d) 6.875%, 8/1/06 488,585
Chase Manhattan Bank, Sub. Note,
A1 1,000(d) 7.00%, 6/1/05 994,480
First Union Corp.,
A2 350(d) 6.40%, 4/1/08 327,099
First Union National Bank, Note,
A1 240(d) 7.875%, 2/15/10 243,826
First Union-Lehman Brothers Bank
of America
Ser. 98-C2,
Aaa 400(d) 6.56%, 11/18/08 385,259
Keycorp Capital
A1 100(d) 7.75%, 7/15/29 86,585
--------------
3,527,164
</TABLE>
See Notes to Financial Statements 17
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
------------------------------------------------------------------------------------------
Beverages 0.1%
<S> <C> <C> <C> <C>
Coca Cola Enterprises Inc., Note,
A2 $ 150(d) 7.125%, 9/30/09 $ 146,835
-------------------------------------------------------------------------------------
Building & Construction 0.4%
Hanson Overseas BV, Sr. Note,
Baa1 800(d) 6.75%, 9/15/05 773,848
-------------------------------------------------------------------------------------
Computers 0.2%
Hewlett Packard Co., Note,
Aa2 350(d) 7.15%, 6/15/05 354,746
-------------------------------------------------------------------------------------
Consulting 0.2%
Comdisco, Inc., Note,
Baa1 400(d) 5.95%, 4/30/02 377,652
-------------------------------------------------------------------------------------
Financial Services 2.8%
Associates Corp. North America,
Sr. Note,
A1 350(d) 5.75%, 11/1/03 339,346
BCH Cayman Islands Ltd., Sub Note,
A1 160 7.70%, 7/15/06 160,429
Ford Motor Credit Co., Note,
A2 800(d) 7.375%, 10/28/09 781,616
Ford Motor Credit Corp., Deb.,
Note,
A2 285 7.40%, 11/1/46 252,823
General Motors Acceptance Corp.,
Sr. Note,
A2 570(d) 6.75%, 2/7/02 567,338
General Motors Acceptance Corp.,
Note,
A2 250(d) 7.75%, 1/19/10 252,497
Goldman, Sachs Group LP, Note,
A1 700(d) 7.25%, 10/1/05 702,870
Heller Financial, Inc., Note,
A3 400(d) 6.00%, 3/19/04 385,116
Lehman Brothers Holdings, Inc.,
Notes,
A3 240(d) 6.625%, 4/1/04 234,732
</TABLE>
18 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Morgan Stanley Dean Witter, Note,
Aa3 $ 400 7.75%, 6/15/05 $ 411,604
PaineWebber Group, Inc.,
Baa1 500(d) 7.625%, 12/1/09 504,635
Santander Finance Issuances, Note,
A1 520(d) 6.80%, 7/15/05 508,810
--------------
5,101,816
-------------------------------------------------------------------------------------
Foods 0.3%
Kroger Co., Sr. Note,
Baa3 250(d) 7.80%, 8/15/07 249,435
Safeway Inc., Note,
Baa2 250(d) 6.05%, 11/15/03 242,352
--------------
491,787
-------------------------------------------------------------------------------------
Foreign Government Bonds 0.2%
Comunidad Autonoma De Andalucia,
Note,
Aa3 120 7.25%, 10/1/29 116,604
-------------------------------------------------------------------------------------
Insurance 0.1%
Aon Corp., Sr. Note,
A3 130 8.65%, 5/15/05 136,547
-------------------------------------------------------------------------------------
Media & Entertainment 0.5%
News America Holdings, Inc., Deb.,
Baa3 300(d) 9.25%, 2/1/13 328,341
Time Warner, Inc., Sr. Note,
Baa3 600(d) 9.125%, 1/15/13 673,122
--------------
1,001,463
-------------------------------------------------------------------------------------
Medical Products & Services 0.2%
Tyco International Group, Note,
Baa1 400(d) 6.375%, 6/15/05 388,564
-------------------------------------------------------------------------------------
Oil & Gas Exploration/Production 0.7%
Atlantic Richfield Co., Deb.,
Aa2 700(d) 10.875%, 7/15/05 819,560
</TABLE>
See Notes to Financial Statements 19
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Duke Energy Field Services Corp.,
Note,
Baa2 $ 200 7.50%, 8/16/05 $ 201,556
Occidental Petroleum Corp., Sr.
Note,
Baa3 200(d) 7.65%, 2/15/06 202,652
--------------
1,223,768
-------------------------------------------------------------------------------------
Oil & Gas Services
Amerada Hess Corp., Note,
Baa1 50(d) 7.875%, 10/1/29 49,875
-------------------------------------------------------------------------------------
Paper & Forest Products 0.1%
International Paper Co., Note,
Baa1 150 8.00%, 7/8/03 153,012
-------------------------------------------------------------------------------------
Retail 0.1%
Target Corp., Note,
A2 200 7.50%, 8/15/10 199,678
-------------------------------------------------------------------------------------
Telecommunication Services 0.9%
Deutsche Telekom
International Guaranteed,
Aa2 350 8.00%, 6/15/10 359,422
GTE Corp.,
A2 220(d) 6.36%, 4/15/06, Deb. 210,355
A2 210(d) 7.51%, 4/1/09, Note 210,767
Telefonica Europe BV, Note,
A2 300 7.75%, 9/15/10 301,206
Sprint Capital Corp., Note,
Baa1 370(d) 6.90%, 5/1/19 325,600
United States West Communications,
Inc., Note,
A2 430 7.625%, 6/9/03 435,323
WorldCom Inc., Note
A3 125(d) 8.25%, 5/15/10 132,744
--------------
1,975,417
</TABLE>
20 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
------------------------------------------------------------------------------------------
Utilities 0.9%
<S> <C> <C> <C> <C>
Duke Energy Corp., Note,
A1 $ 350 7.125%, 9/3/02 $ 351,190
Hydro-Quebec, Deb. (Canada),
A2 300 8.00%, 2/1/13 317,697
Southern California Edison Co.,
Note,
A2 1,000(d) 6.50%, 6/1/01 995,620
--------------
1,664,507
--------------
Total corporate bonds
(cost $23,205,320) 22,634,470
--------------
-------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS 0.4%
Commercial Mortgage Asset Trust,
Series 1999 C2 Class A1,
Aaa 190 7.285%, 12/17/07 191,403
Federal National Mortgage
Association,
Remic, Series 1993 Cl55K,
Aaa 600 6.50%, 5/25/08 584,250
--------------
Total collateralized mortgage
obligations (cost $781,576) 775,653
--------------
-------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY MORTGAGE PASS-THROUGH OBLIGATIONS 9.8%
Federal National Mortgage Assoc.,
Aaa 2,644 7.00%, 3/1/08 2,646,694
Aaa 1,500(c) 7.50%, 11/1/15 1,510,770
Aaa 400 8.00%, 12/1/23 408,440
Aaa 561 6.50%, 5/1/24 541,753
Aaa 511 8.50%, 10/1/24 524,666
Aaa 292 8.50%, 2/1/28 299,766
Aaa 5,000 6.50%, 10/1/30 4,798,950
Aaa 3,100(c) 7.50%, 10/1/30 3,092,870
Government National Mortgage
Assoc.,
Aaa 4 8.00%, 7/15/22 3,980
Aaa 6 8.00%, 8/15/22 5,668
Aaa 1,440 8.00%, 12/15/22 1,471,958
</TABLE>
See Notes to Financial Statements 21
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aaa $ 1,675(c) 7.00%, 6/15/24 $ 1,656,082
Aaa 1,158 8.00%, 6/15/25 1,180,541
--------------
Total U.S. government agency
mortgage pass-through obligations
(cost $18,047,323) 18,142,138
--------------
-------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES 2.8%
Federal Farm Credit Bank,
Aaa 500(d) 6.75%, 9/3/02 501,740
United States Treasury Bonds,
Aaa 870(d) 8.75%, 5/15/20 1,128,416
255 8.00%, 11/15/21 311,419
Aaa 2,670(d) 6.50%, 11/15/26 2,821,015
United States Treasury Notes,
Aaa 25(d) 6.50%, 2/28/02 25,106
Aaa 246 6.00%, 8/15/09 247,230
70(d) 5.75%, 8/15/10 69,716
125(d) 6.50%, 2/15/10 130,254
--------------
Total U.S. government securities
(cost $5,236,820) 5,234,896
--------------
Total long-term investments
(cost $126,377,337) 139,391,215
--------------
SHORT-TERM INVESTMENTS 30.7%
-------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES 6.8%
United States Treasury Bills,
2,000(b) 5.98%, 12/21/00 1,973,090
Federal Home Loan Bank, Discount
Notes,
7,819 6.25%, 10/2/00 7,817,643
2,791 6.28%, 10/2/00 2,790,513
--------------
Total U.S. government securities
(cost $12,581,246, Note 4) 12,581,246
--------------
-------------------------------------------------------------------------------------
COMMERCIAL PAPER 6.6%
Comcast Cable, Inc.,
5,700 6.75%, 11/2/00 5,665,800
Keyspan Corp.,
744 6.75%, 10/20/00 741,349
</TABLE>
22 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Exelon Corp.,
$ 904 6.95%, 10/2/00 $ 903,825
TRW, Inc.,
1,000 6.72%, 11/13/00 991,973
4,000 6.73%, 11/27/00 3,957,377
--------------
Total commercial paper
(cost $12,260,325) 12,260,324
--------------
-------------------------------------------------------------------------------------
CORPORATE BONDS 0.3%
Financial Services
Merrill Lynch & Co., MTN,
6.02%, 5/11/01
Aa3 500(d) (cost $501,556) 497,010
--------------
REPURCHASE AGREEMENT 17.0%
Joint Repurchase Agreement
Account,
6.50%, 10/2/00
31,282 (cost $31,282,000, Note 5) 31,282,000
--------------
Total short-term investments
(cost $56,625,137) 56,620,580
--------------
Total Investments 106.2%
(cost $183,002,464, Note 4) 196,011,795
Liabilities in excess of other
assets--(6.2%) (11,510,935)
--------------
Net Assets 100% $ 184,500,860
--------------
--------------
</TABLE>
------------------------------
(a) Non-income producing security.
(b) All or partial amount of security is segregated as initial margin for
financial futures transactions.
(c) Mortgage dollar roll, see Note 1 and Note 4.
(d) Pledged as collateral for dollar rolls.
MTN--Medium Term Note.
The Fund's current Prospectus contains a description of Moody's and Standard &
Poor's ratings.
See Notes to Financial Statements 23
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
September 30, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $151,720,464) $164,729,795
Repurchase agreement (cost $31,282,000) 31,282,000
Cash 4,515
Receivable for investments sold 6,934,979
Dividends and interest receivable 724,110
Receivable for Series shares sold 383,353
Other assets 5,208
------------------
Total assets 204,063,960
------------------
LIABILITIES
Payable for investments purchased 17,970,380
Payable for Series shares reacquired 977,474
Due to broker - variation margin 305,909
Accrued expenses and other liabilities 188,365
Management fee payable 99,999
Distribution fee payable 20,973
------------------
Total liabilities 19,563,100
------------------
NET ASSETS $184,500,860
------------------
------------------
Net assets were comprised of:
Common stock, at par $ 13,394
Paid-in capital in excess of par 162,191,848
------------------
162,205,242
Undistributed net investment income 3,913,675
Accumulated net realized gain on investments 6,423,910
Net unrealized appreciation/depreciation on investments 11,958,033
------------------
Net assets, September 30, 2000 $184,500,860
------------------
------------------
</TABLE>
24 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Statement of Assets and Liabilities Cont'd.
<TABLE>
<CAPTION>
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
Class A:
Net asset value and redemption price per share
($16,444,230 / 1,194,824 shares of common stock
issued and outstanding) $13.76
Maximum sales charge (5% of offering price) .72
------------------
Maximum offering price to public $14.48
Class B:
Net asset value, offering price and redemption price per
share
($18,647,557 / 1,362,877 shares of common stock
issued and outstanding) $13.68
Class C:
Net asset value and redemption price per share
($2,893,435 / 211,476 shares of common stock issued
and outstanding) $13.68
Sales charge (1% of offering price) .14
------------------
Offering price to public $13.82
Class Z:
Net asset value, offering price and redemption price per
share
($146,515,638 / 10,624,603 shares of common stock
issued and outstanding) $13.79
</TABLE>
See Notes to Financial Statements 25
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Statement of Operations
<TABLE>
<CAPTION>
Year
Ended
September 30, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest $ 5,769,352
Dividends (net of foreign withholding taxes of $3,726) 938,001
------------------
Total income 6,707,353
------------------
Expenses
Management fee 1,078,167
Distribution fee--Class A 33,119
Distribution fee--Class B 137,941
Distribution fee--Class C 17,413
Transfer agent's fees and expenses 257,000
Reports to shareholders 147,000
Custodian's fees and expenses 130,000
Registration fees 50,000
Legal fees and expenses 40,000
Audit fee 21,000
Directors' fees and expenses 11,000
Miscellaneous 5,682
------------------
Total expenses 1,928,322
------------------
Net investment income 4,779,031
------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on:
Investment transactions 4,143,616
Financial futures contracts 2,731,436
------------------
6,875,052
------------------
Net change in unrealized appreciation/depreciation on:
Investments 6,279,897
Financial futures contracts (776,702)
------------------
5,503,195
------------------
Net gain on investments 12,378,247
------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 17,157,278
------------------
------------------
</TABLE>
26 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------
2000 1999
------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 4,779,031 $ 3,573,191
Net realized gain on investments 6,875,052 9,924,830
Net change in unrealized
appreciation/depreciation on
investments 5,503,195 9,882,582
------------------ ------------------
Net increase in net assets resulting
from operations 17,157,278 23,380,603
------------------ ------------------
Dividends and distributions (Note 1)
Dividends from net investment income
Class A (218,395) (74,318)
Class B (155,300) (52,406)
Class C (17,058) (4,693)
Class Z (2,869,829) (4,048,216)
------------------ ------------------
(3,260,582) (4,179,633)
------------------ ------------------
Distributions to shareholders from net
realized gains on investments
Class A (538,187) (438,657)
Class B (595,317) (480,842)
Class C (65,387) (43,068)
Class Z (6,387,685) (21,035,473)
------------------ ------------------
(7,586,576) (21,998,040)
------------------ ------------------
Series share transactions (net of share
conversion) (Note 6)
Net proceeds from shares sold 65,706,175 69,542,543
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions 10,820,733 26,157,302
Cost of shares reacquired (45,079,160) (114,537,650)
------------------ ------------------
Net increase (decrease) in net assets
from Series share transactions 31,447,748 (18,837,805)
------------------ ------------------
Total increase (decrease) 37,757,868 (21,634,875)
NET ASSETS
Beginning of year 146,742,992 168,377,867
------------------ ------------------
End of year(a) $184,500,860 $ 146,742,992
------------------ ------------------
------------------ ------------------
------------------------------
(a) Includes undistributed net investment
income of $ 3,913,675 $ 2,395,226
------------------ ------------------
</TABLE>
See Notes to Financial Statements 27
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Notes to Financial Statements
Prudential Active Balanced Fund (the 'Series') is a separately managed
series of The Prudential Investment Portfolios, Inc. (the 'Fund'). The Fund was
incorporated in Maryland on August 10, 1995 and is registered under the
Investment Company Act of 1940 as a diversified, open-end, management investment
company.
The Series' investment objective is to seek income and long-term growth of
capital. It invests in a portfolio of equity, fixed-income and money market
securities, which is actively managed to capitalize on opportunities created by
perceived misvaluation.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund and the Series in the preparation of its financial statements.
Securities Valuation: Securities listed on a securities exchange and
NASDAQ (other than options on securities and indices) are valued at the last
sale price on such exchange or system 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 last bid price on such day 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 by the Manager, in
consultation with the Subadviser, to be over-the-counter, are valued by an
independent pricing agent or more than one principal market maker. Futures
contracts and options thereon traded on a commodities exchange or board of trade
are valued at the last sale price at the close of trading on such exchange or
board of trade or, if there was no sale on the applicable commodities exchange
or board of trade on such day, at the mean between the most recently quoted bid
and asked prices on such exchange or board of trade. Securities for which market
quotations are not readily available, other than private placements, are valued
at a price supplied by an independent pricing agent which is, in the opinion of
such pricing agent, representative of the market value of such securities as of
the time of determination of net asset value or, using a methodology developed
by an independent pricing agent, which is, in the judgment of the Manager and
Subadviser, able to produce prices which are representative of market value.
Short-term securities which mature in more than 60 days, for which market
quotations are readily available, are valued at current market quotations as
provided by an independent pricing agent or principal market maker. Short-term
securities which mature in 60 days or less are valued at cost with interest
accrued or discount
28
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Notes to Financial Statements Cont'd.
amortized to the date of maturity, unless the Board of Directors determines that
such valuation does not represent fair value.
All securities are valued as of 4:15 p.m., New York time.
In connection with transactions in repurchase agreements, it is the
Series' 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.
Financial Futures Contracts: A financial futures contract is an
agreement to purchase (long) or sell (short) an agreed amount of securities or
commodities at a set price for delivery on a future date. Upon entering into a
financial futures contract, the Series 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 Series each day, depending on
the daily fluctuations in the value of the underlying security or commodity.
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.
The Series invests in financial futures contracts in order to hedge its
existing portfolio securities or securities the Series intends to purchase
against fluctuations in value caused by changes in prevailing interest rates or
market conditions. Should interest rates move unexpectedly, the Series may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts, interest rates and
the underlying hedged assets.
Dollar Rolls: The Series enters into mortgage dollar rolls in which the
Series sells mortgage securities for delivery in the current month, realizing a
gain or loss and simultaneously contracts to repurchase somewhat similar (same
type, coupon and maturity) securities on a specified future date. During the
roll period, the Series forgoes principal and interest paid on the securities.
The Series is compensated by the interest earned on the cash proceeds of the
initial sale and by the lower repurchase price at the future date. The
difference between the sales proceeds and the lower repurchase price is recorded
as interest income. The Series maintains a segregated
29
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Notes to Financial Statements Cont'd.
account, the dollar value of which is at least equal to its obligations in
respect of dollar rolls.
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: The Series 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 Series' 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.
Note 2. Agreements
The Fund has a management agreement for the Series 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'). The subadvisory
agreement provides that PIC will furnish investment advisory services in
connection with the management of the Series. In connection therewith, PIC is
obligated to keep certain books and records of the Series. PIFM continues to
have responsibility for all investment advisory services pursuant to the
management agreement and supervises PIC's performance of such services. PIFM
pays for the services of PIC, the compensation of officers of the Fund,
30
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Notes to Financial Statements Cont'd.
occupancy and certain clerical and bookkeeping costs of the Series. The Series
bears all other costs and expenses.
The management fee paid PIFM is computed daily and payable monthly at an
annual rate of .65 of 1% of the Series' average daily net assets.
Effective January 1, 2000, the subadvisory fee paid to PIC by PIFM is
computed daily and payable monthly at an annual rate of .325 of 1% of the
average daily net assets of the Series. Prior to January 1, 2000, PIC was
reimbursed by PIFM for reasonable costs and expenses incurred in furnishing
investment advisory services. The change in the subadvisory fee structure has no
impact on the management fee charged to the Series.
The Fund has a distribution agreement with Prudential Investment
Management Services LLC ('PIMS'), which acts as the distributor of the Class A,
Class B, Class C and Class Z shares. The Fund compensates PIMS for distributing
and servicing the Series' 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 were paid to PIMS as distributor of the Class Z
shares of the Series.
Pursuant to the Class A, B and C Plans, the Series compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, 1% and 1%
of the average daily net assets of the Class A, B and C shares, respectively.
Such expenses under the Plans were .25 of 1%, 1% and 1% of the average daily net
assets of the Class A, B and C shares, respectively, for the year ended
September 30, 2000.
PIMS has advised the Series that it received approximately $44,300 and
$11,100 in front-end sales charges resulting from sales of Class A shares and
Class C shares, respectively, during the year ended September 30, 2000. From
these fees, PIMS paid such sales charges to affiliated broker-dealers, which in
turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Series that for the year ended September 30, 2000, it
received approximately $34,000 and $2,500 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PIC, PIFM and PIMS are wholly owned subsidiaries of The Prudential
Insurance Company of America ('Prudential').
The Fund, along with other affiliated registered investment companies (the
'Funds'), entered into a syndicated credit agreement ('SCA') with an
unaffiliated lender. The maximum commitment under the SCA is $1 billion.
Interest on any such borrowings will be at market rates. The purpose of the
agreement is to serve as an
31
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Notes to Financial Statements Cont'd.
alternative source of funding for capital share redemptions. The Funds pay a
commitment fee at an annual rate of .080 of 1% of the unused portion of the
credit facility. The commitment fee is accrued and paid quarterly on a pro rata
basis by the Funds. The expiration date of the SCA is March 9, 2001. Prior to
March 9, 2000, the commitment fee was .065 of 1% of the unused portion of the
credit facility. The Series did not borrow any amounts pursuant to the SCA
during the year ended September 30, 2000.
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the year ended September 30, 2000,
the Series incurred fees of approximately $248,600 for the services of PMFS. As
of September 30, 2000, approximately $19,000 of such fees were due to PMFS.
Transfer agent fees and expenses in the Statement of Operations also include
certain out-of-pocket expenses paid to nonaffiliates.
Note 4. Portfolio Securities
Purchases and sales of investment securities other than short-term investments,
for the year ended September 30, 2000 were $318,616,990 and $296,659,744,
respectively.
The average monthly balance of dollar rolls outstanding during the year
ended September 30, 2000 was approximately $13,584,568. The value of dollar
rolls outstanding at September 30, 2000 was $6,086,825 (principal $6,067,578),
which was 3.0% of total assets.
The cost basis of investments for federal income tax purposes as of
September 30, 2000 was $183,093,681 and, accordingly, net unrealized
appreciation of investments for federal income tax purposes was $12,918,114
(gross unrealized appreciation--$18,743,711, gross unrealized
depreciation--$5,825,597).
During the year ended September 30, 2000, the Series entered into
financial futures contracts. Details of open contracts at September 30, 2000 are
as follows:
<TABLE>
<CAPTION>
Unrealized
Number of Expiration Appreciation/
Contracts Type Date (Depreciation)
--------------- ----------- ---------- --------------
<S> <C> <C> <C>
Long Positions:
U.S. 10 Yr.
31 Note Dec. 00 15,500
58 S&P 500 Dec. 00 (1,159,275)
U.S. 5 Yr.
133 Note Dec. 00 92,477
--------------
$ (1,051,298)
--------------
--------------
</TABLE>
32
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Notes to Financial Statements Cont'd.
Note 5. Joint Repurchase Agreement Account
The Series, along with other affiliated registered investment companies,
transfers uninvested cash balances into a single joint account, the daily
aggregate balance of which is invested in one or more repurchase agreements
collateralized by U.S. Government or federal agency obligations. At September
30, 2000, the Series had a 2.7% undivided interest in repurchase agreements in
the joint account. The undivided interest for the Series represented $31,282,000
in principal amount. As of such date, each repurchase agreement in the joint
account and the value of the collateral therefor was as follows:
Bear, Stearns & Co., Inc., 6.51%, in the principal amount of $300,000,000,
repurchase price $300,162,750, due 10/2/00. The value of the collateral
including accrued interest was $307,686,775.
Chase Securities, Inc., 6.45%, in the principal amount of $264,084,000,
repurchase price $264,225,945, due 10/2/00. The value of the collateral
including accrued interest was $269,373,200.
Credit Suisse First Boston Corp., 6.55%, in the principal amount of
$200,000,000, repurchase price $200,109,000, due 10/2/00. The value of the
collateral including accrued interest was $206,853,792.
Salomon Smith Barney, Inc., 6.45%, in the principal amount of $97,990,000,
repurchase price $98,042,670, due 10/2/00. The value of the collateral including
accrued interest was $102,042,316.
UBS Warburg, 6.52%, in the principal amount of $300,000,000, repurchase
price $300,163,000, due 10/2/00. The value of the collateral including accrued
interest was $306,002,065.
Note 6. Capital
The Series offers Class A, Class B, Class C and Class Z shares. Class A shares
are sold with a front-end sales charge of up to 5%. Class B shares are sold with
a contingent deferred sales charge which declines from 5% to zero depending upon
the period of time the shares are held. Class C shares are sold with a front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18 months. Class B shares will automatically convert to Class A shares on a
quarterly basis approximately seven years after purchase. A special exchange
privilege is also available for shareholders who qualify to purchase Class A
shares at net asset value.
33
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Notes to Financial Statements Cont'd.
Class Z shares are not subject to any sales or redemption charge and are offered
exclusively for sale to a limited group of investors.
There are 3 billion shares $.001 par value of common stock of the Fund
authorized which are divided into three series, each of which offers four
classes, designated Class A, Class B, Class C and Class Z, each of which
consists of 250 million authorized shares.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
---------------------------------------------------------- ---------- ------------
<S> <C> <C>
Year ended September 30, 2000:
Shares sold 581,989 $ 7,862,230
Shares issued in reinvestment of dividends and
distributions 57,495 751,456
Shares reacquired (258,444) (3,501,479)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion 381,040 5,112,207
Shares issued upon conversion from Class B 29,192 395,759
---------- ------------
Net increase (decrease) in shares outstanding 410,232 $ 5,507,966
---------- ------------
---------- ------------
Year ended September 30, 1999:
Shares sold 806,345 $ 10,710,045
Shares issued in reinvestment of dividends and
distributions 41,285 510,287
Shares reacquired (305,438) (4,105,228)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion 542,192 7,115,104
Shares issued upon conversion from Class B 236 3,120
---------- ------------
Net increase (decrease) in shares outstanding 542,428 $ 7,118,224
---------- ------------
---------- ------------
<CAPTION>
Class B
----------------------------------------------------------
<S> <C> <C>
Year ended September 30, 2000:
Shares sold 779,526 $ 10,543,588
Shares issued in reinvestment of dividends and
distributions 56,023 732,778
Shares reacquired (276,767) (3,704,451)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion 558,782 7,571,915
Shares reacquired upon conversion into Class A (29,275) (395,759)
---------- ------------
Net increase (decrease) in shares outstanding 529,507 $ 7,176,156
---------- ------------
---------- ------------
Year ended September 30, 1999:
Shares sold 652,713 $ 8,665,383
Shares issued in reinvestment of dividends and
distributions 41,783 516,862
Shares reacquired (90,666) (1,202,053)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion 603,830 7,980,192
Shares reacquired upon conversion into Class A (236) (3,120)
---------- ------------
Net increase (decrease) in shares outstanding 603,594 $ 7,977,072
---------- ------------
---------- ------------
</TABLE>
34
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Notes to Financial Statements Cont'd.
<TABLE>
<CAPTION>
Class C Shares Amount
---------------------------------------------------------- ---------- ------------
Year ended September 30, 2000:
<S> <C> <C>
Shares sold 163,480 $ 2,216,590
Shares issued in reinvestment of dividends and
distributions 6,048 79,112
Shares reacquired (42,829) (575,747)
---------- ------------
Net increase (decrease) in shares outstanding 126,699 $ 1,719,955
---------- ------------
---------- ------------
Year ended September 30, 1999:
Shares sold 98,943 $ 1,301,393
Shares issued in reinvestment of dividends and
distributions 3,860 47,750
Shares reacquired (39,496) (519,205)
---------- ------------
Net increase (decrease) in shares outstanding 63,307 $ 829,938
---------- ------------
---------- ------------
<CAPTION>
Class Z
----------------------------------------------------------
<S> <C> <C>
Year ended September 30, 2000:
Shares sold 3,323,493 $ 45,083,767
Shares issued in reinvestment of dividends and
distributions 708,293 9,257,387
Shares reacquired (2,770,821) (37,297,483)
---------- ------------
Net increase (decrease) in shares outstanding 1,260,965 $ 17,043,671
---------- ------------
---------- ------------
Year ended September 30, 1999:
Shares sold 3,692,823 $ 48,865,722
Shares issued in reinvestment of dividends and
distributions 2,032,131 25,082,403
Shares reacquired (8,515,198) (108,711,164)
---------- ------------
Net increase (decrease) in shares outstanding (2,790,244) $(34,763,039)
---------- ------------
---------- ------------
</TABLE>
35
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Notes to Financial Statements Cont'd.
Note 7. Acquisition of Prudential Balanced Fund
On November 10, 2000, Prudential Active Balanced Fund acquired all the net
assets of Prudential Balanced Fund pursuant to a plan of reorganization approved
by Prudential Balanced Fund shareholders on October 27, 2000. The acquisition
was accomplished by a tax-free exchange of the following shares:
<TABLE>
<CAPTION>
Prudential Balanced Prudential Active
Fund Shares Balanced Fund
Redeemed Shares Issued Value
------------------- ----------------- ------------
<S> <C> <C> <C>
Class A 43,724,218 39,781,013 $498,463,933
Class B 26,064,125 23,649,238 296,140,946
Class C 1,014,216 920,247 11,522,018
Class Z 10,247,005 9,315,459 116,834,540
</TABLE>
Prudential Balanced Fund net assets at that date ($922,961,437), including
$46,678,039 of unrealized appreciation, were combined with those of Prudential
Active Balanced Fund. The aggregate net assets of Prudential Active Balanced
Fund and Prudential Balanced Fund immediately before the acquisition were
$172,990,345 and $922,961,437, respectively.
36
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Financial
Highlights
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Financial Highlights
<TABLE>
<CAPTION>
Class A
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.25
--------
Income from investment operations:
Net investment income .38
Net realized and unrealized gain (loss) on investment
transactions 1.10
--------
Total from investment operations 1.48
--------
Less distributions:
Dividends from net investment income (.28)
Distributions from net realized gains (.69)
--------
Total distributions (.97)
--------
Net asset value, end of period $ 13.76
--------
--------
TOTAL RETURN(d): 11.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 16,444
Average net assets (000) $ 13,248
Ratios to average net assets:
Expenses, including distribution fees and service
(12b-1) fees 1.30%
Expenses, excluding distribution fees and service
(12b-1) fees 1.05%
Net investment income 2.76%
Portfolio turnover rate 243%
</TABLE>
------------------------------
(a) Commencement of offering of Class A shares.
(b) Calculated based upon weighted average shares outstanding during the period.
(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 returns for less than one year are not annualized.
38 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------------------------
Year Ended September 30, November 7, 1996(a)
------------------------------------------ through September 30,
1999 1998 1997
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 13.29 $14.41 $13.40
.31 .44 .21(b)
1.69 (.20) 1.97
-------- ------- -------
2.00 .24 2.18
-------- ------- -------
(.30) (.32) (.39)
(1.74) (1.04) (.78)
-------- ------- -------
(2.04) (1.36) (1.17)
-------- ------- -------
$ 13.25 $13.29 $14.41
-------- ------- -------
-------- ------- -------
16.07% 1.93% 17.48%
$ 10,397 $3,218 $ 990
$ 6,918 $2,090 $ 100
1.41% 1.28% 1.31%(c)
1.16% 1.03% 1.06%(c)
2.29% 2.72% 2.69%(c)
230% 256% 50%
</TABLE>
See Notes to Financial Statements 39
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class B
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.17
--------
Income from investment operations:
Net investment income .27
Net realized and unrealized gain (loss) on investment
transactions 1.11
--------
Total from investment operations 1.38
--------
Less distributions:
Dividends from net investment income (.18)
Distributions from net realized gains (.69)
--------
Total distributions (.87)
--------
Net asset value, end of period $ 13.68
--------
--------
TOTAL RETURN(d): 10.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 18,648
Average net assets (000) $ 13,794
Ratios to average net assets:
Expenses, including distribution fees and service
(12b-1) fees 2.05%
Expenses, excluding distribution fees and service
(12b-1) fees 1.05%
Net investment income 2.01%
Portfolio turnover rate 243%
</TABLE>
------------------------------
(a) Commencement of offering of Class B shares.
(b) Calculated based upon weighted average shares outstanding during the period.
(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 returns for less than one year are not annualized.
40 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------------------------------
Year Ended September 30, November 7, 1996(a)
------------------------------------------ through September 30,
1999 1998 1997
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 13.22 $14.34 $13.40
-------- ------- -------
.19 .27 .19(b)
1.69 (.14) 1.92
-------- ------- -------
1.88 .13 2.11
-------- ------- -------
(.19) (.21) (.39)
(1.74) (1.04) (.78)
-------- ------- -------
(1.93) (1.25) (1.17)
-------- ------- -------
$ 13.17 $13.22 $14.34
-------- ------- -------
-------- ------- -------
15.12% 1.10% 16.91%
$ 10,979 $3,038 $ 213
$ 7,018 $1,285 $ 71
2.16% 2.03% 2.06%(c)
1.16% 1.03% 1.06%(c)
1.54% 1.95% 1.94%(c)
230% 256% 50%
</TABLE>
See Notes to Financial Statements 41
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class C
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.17
--------
Income from investment operations:
Net investment income .27
Net realized and unrealized gain (loss) on investment
transactions 1.11
--------
Total from investment operations 1.38
--------
Less distributions:
Dividends from net investment income (.18)
Distributions from net realized gains (.69)
--------
Total distributions (.87)
--------
Net asset value, end of period $ 13.68
--------
--------
TOTAL RETURN(d): 10.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 2,893
Average net assets (000) $ 1,741
Ratios to average net assets:
Expenses, including distribution fees and service
(12b-1) fees 2.05%
Expenses, excluding distribution fees and service
(12b-1) fees 1.05%
Net investment income 2.02%
Portfolio turnover rate 243%
</TABLE>
------------------------------
(a) Commencement of offering of Class C shares.
(b) Calculated based upon weighted average shares outstanding during the period.
(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 returns for less than one year are not annualized.
42 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class C
---------------------------------------------------------------------------------------
Year Ended September 30, November 7, 1996(a)
through September 30,
1999 1998 1997
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 13.22 $14.34 $13.40
-------- ------- -------
.19 .48 .13(b)
1.69 (.35) 1.98
-------- ------- -------
1.88 .13 2.11
-------- ------- -------
(.19) (.21) (.39)
(1.74) (1.04) (.78)
-------- ------- -------
(1.93) (1.25) (1.17)
-------- ------- -------
$ 13.17 $13.22 $14.34
-------- ------- -------
-------- ------- -------
15.12% 1.10% 16.91%
$ 1,117 $ 284 $ 5
$ 674 $ 118 $ 1
2.16% 2.03% 2.06%(c)
1.16% 1.03% 1.06%(c)
1.54% 2.04% 1.94%(c)
230% 256% 50%
</TABLE>
See Notes to Financial Statements 43
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class Z
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 13.27
----------
Income from investment operations:
Net investment income .40
Net realized and unrealized gain (loss) on investment
transactions 1.12
----------
Total from investment operations 1.52
----------
Less distributions:
Dividends from net investment income (.31)
Distributions from net realized gains (.69)
----------
Total distributions (1.00)
----------
Net asset value, end of year $ 13.79
----------
----------
TOTAL RETURN(d): 11.87%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $146,516
Average net assets (000) $137,089
Ratios to average net assets:
Expenses, including distribution fees and service
(12b-1) fees 1.05%
Expenses, excluding distribution fees and service
(12b-1) fees 1.05%
Net investment income 2.99%
Portfolio turnover rate 243%
</TABLE>
------------------------------
(a) Net of expense subsidy.
(b) Calculated based upon weighted average shares outstanding during the period.
(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 returns for less than one year are not
annualized.
44 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class Z
-------------------------------------------------------------------------------------
Year Ended September 30,
-------------------------------------------------------------------------------------
1999 1998 1997 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 13.32 $ 14.45 $ 13.01 $ 12.46
---------------- ---------------- ---------------- ----------------
.35 .38 .39(b) .29(a)
1.68 (.12) 2.22 .81
---------------- ---------------- ---------------- ----------------
2.03 .26 2.61 1.10
---------------- ---------------- ---------------- ----------------
(.34) (.35) (.39) (.37)
(1.74) (1.04) (.78) (.18)
---------------- ---------------- ---------------- ----------------
(2.08) (1.39) (1.17) (.55)
---------------- ---------------- ---------------- ----------------
$ 13.27 $ 13.32 $ 14.45 $ 13.01
---------------- ---------------- ---------------- ----------------
16.32% 2.12% 21.34% 9.11%
$124,250 $161,838 $158,672 $153,588
$130,052 $177,443 $154,199 $142,026
1.16% 1.03% 1.06% 1.00%(a)
1.16% 1.03% 1.06% 1.00%(a)
2.54% 2.99% 2.94% 3.09%(a)
230% 256% 50% 51%
</TABLE>
See Notes to Financial Statements 45
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Report of Independent Accountants Cont'd.
To the Shareholders and Board of Directors of
The Prudential Investment Portfolios, Inc.--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 The Prudential Investment
Portfolios, Inc.--Prudential Active Balanced Fund (the 'Fund,' one of the
portfolios constituting The Prudential Investment Portfolios, Inc.) at September
30, 2000, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended and the
financial highlights for each of the four years in the period then ended, in
conformity with accounting principles generally accepted in the United States of
America. 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 audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, 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
audits, which included confirmation of securities at September 30, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion. The accompanying financial highlights for the year ended September
30, 1996 were audited by other independent accountants, whose opinion dated
November 13, 1996 was unqualified.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
November 22, 2000
46
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Active Balanced Fund
Federal Income Tax Information (Unaudited)
We are required by the Internal Revenue Code to advise you within 60 days
of the Series' fiscal year end (September 30, 2000) as to the federal tax status
of dividends and distributions paid by the Series during such fiscal year.
Accordingly, we are advising you that in the fiscal year ended September 30,
2000, dividends paid from net investment income were $.28 per share for Class A
shares, $.18 per share for Class B and Class C shares and $.31 per share for
Class Z shares, which are taxable as ordinary income. In addition, the Series
paid to Class A, B, C and Z shares a short-term capital gain distribution of
$.47 per share which is taxable as ordinary income and a long-term capital gain
distribution of $.22 per share which is taxable as such.
We are required by Massachusetts, Missouri and Oregon to inform you that
dividends which have been derived from interest on federal obligations are not
taxable to shareholders. Please be advised that 5.89% of the dividends paid from
ordinary income in the fiscal year ended September 30, 2000 qualify for each of
these states' tax exclusion.
We also wish to advise you that 10.75% of the dividends paid from ordinary
income in the fiscal year ended September 30, 2000 qualified for the corporate
dividends received deduction available to corporate taxpayers.
In January 2001, you will be advised on IRS Form 1099 DIV or substitute
1099 DIV as to the federal tax status of the distributions received by you in
calendar year 2000.
47
<PAGE>
Prudential Active Balanced Fund
Prudential Mutual Funds
Prudential offers a broad range of mutual funds
designed to meet your individual needs. For
information about these funds, contact your
financial adviser or call us at (800) 225-1852.
Read the prospectus carefully before you invest or
send money.
STOCK FUNDS
Large Capitalization Stock Funds
Prudential 20/20 Focus Fund
Prudential Equity Fund, Inc.
Prudential Stock Index Fund
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund
Strategic Partners Focused Growth Fund
Target Funds
Large Capitalization Growth Fund
Large Capitalization Value Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Prudential Value Fund
Small- to Mid-Capitalization Stock Funds
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Prudential Small Company Fund, Inc.
Prudential Tax-Managed Small-Cap Fund, Inc.
Prudential U.S. Emerging Growth Fund, Inc.
Target Funds
Small Capitalization Growth Fund
Small Capitalization Value Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Equity Opportunity Fund
Sector Stock Funds
Prudential Natural Resources Fund, Inc.
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Global/International Stock Funds
Global Utility Fund, Inc.
Prudential Europe Growth Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Prudential Global Growth Fund
Prudential International Value Fund
Prudential Jennison International Growth Fund
Target Funds
International Equity Fund
BALANCED/ALLOCATION FUNDS
Prudential Diversified Funds
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund
<PAG>
www.prudential.com (800) 225-1852
BOND FUNDS
Taxable Bond Funds
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential High Yield Total Return Fund, Inc.
Prudential Short-Term Corporate Bond Fund, Inc.
Income Portfolio
Prudential Total Return Bond Fund, Inc.
Target Funds
Total Return Bond Fund
Tax-Free Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Income Series
Insured Series
Prudential Municipal Series Fund
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
Global/International Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
MONEY MARKET FUNDS
Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Prudential MoneyMart Assets, Inc.
Prudential Special Money Market Fund, Inc.
Money Market Series
Tax-Free Money Market Funds
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
Prudential Tax-Free Money Fund, Inc.
Other Money Market Funds
COMMAND Government Fund
COMMAND Money Fund
COMMAND Tax-Free Fund
<PAGE>
Prudential Active Balanced Fund
Class A Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 9/30/00
One Year Five Years Since Inception
With Sales Charge 5.98% N/A 10.45%
Without Sales Charge 11.56% N/A 11.92%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since inception
of the share class. The graph compares a $10,000 investment
in the Prudential Active Balanced Fund (Class A shares)
with a similar investment in the Standard & Poor's
500 Composite Stock Price Index (S&P 500 Index) and
the Lehman Brothers Government/Credit Bond Index
(the Lehman Index) by portraying the initial
account value at the commencement of operations of
Class A shares, and the account value at the end of
the current fiscal year (September 30, 2000), as
measured on a quarterly basis, beginning in
November 1996. For purposes of the graph, and
unless otherwise indicated, it has been assumed
that (a) the maximum applicable front-end sales
charge was deducted from the initial $10,000
investment in Class A shares; (b) all recurring
fees (including management fees) were deducted; and
(c) all dividends and distributions were
reinvested.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The Lehman
Index is an unmanaged weighted index comprising
public, fixed-rate, nonconvertible domestic
corporate debt that is rated at least investment
grade (BBB/Baa or higher) and public obligations of
the U.S. Treasury. The S&P 500 Index and the Lehman
Index total returns include the reinvestment of all
dividends, but do not include the effect of sales
charges or operating expenses of a mutual fund. The
securities that comprise both indexes may differ
substantially from the securities in the Fund. These
indexes are not the only ones that may be used to
characterize performance of large-capitalization stock
and bond funds. Other indexes may portray different
comparative performance. Investors cannot invest
directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class B Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 9/30/00
One Year Five Years Since Inception
With Sales Charge 5.78% N/A 10.73%
Without Sales Charge 10.78% N/A 11.11%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since
inception of the share class. The graph compares a
$10,000 investment in the Prudential Active
Balanced Fund (Class B shares) with a similar
investment in the S&P 500 Index and the Lehman
Index by portraying the initial account value at
the commencement of operations of Class B shares,
and the account value at the end of the current
fiscal year (September 30, 2000), as measured on a
quarterly basis, beginning in November 1996. For
purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable contingent deferred sales charge was
deducted from the value of the investment in Class
B shares, assuming full redemption on September 30,
2000; (b) all recurring fees (including management
fees) were deducted; and (c) all dividends and
distributions were reinvested. Class B shares will
automatically convert to Class A shares, on a
quarterly basis, beginning approximately seven
years after purchase. This conversion feature is
not reflected in the graph.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The Lehman
Index is an unmanaged weighted index comprising
public, fixed-rate, nonconvertible domestic
corporate debt that is rated at least investment
grade (BBB/Baa or higher) and public obligations of
the U.S. Treasury. The S&P 500 Index and the Lehman
Index total returns include the reinvestment of all
dividends, but do not include the effect of sales
charges or operating expenses of a mutual fund. The
securities that comprise both indexes may differ
substantially from the securities in the Fund.
These indexes are not the only ones that may be
used to characterize performance of large-
capitalization stock and bond funds. Other indexes
may portray different comparative performance.
Investors cannot invest directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
Prudential Active Balanced Fund
Class C Growth of a $10,000 Investment
Average Annual Total Returns as of 9/30/00
(GRAPH)
One Year Five Years Since Inception
With Sales Charge 8.67% N/A 10.82%
Without Sales Charge 10.78% N/A 11.11%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since
inception of the share class.The graph compares a
$10,000 investment in the Prudential Active
Balanced Fund (Class C shares) with a similar
investment in the S&P 500 Index and the Lehman
Index by portraying the initial account value at
the commencement of operations of Class C shares,
and the account values at the end of the current
fiscal year (September 30, 2000), as measured on a
quarterly basis, beginning in November 1996. For
purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable front-end sales charge was deducted from
the initial $10,000 investment in Class C shares;
(b) the maximum applicable contingent deferred
sales charge was deducted from the value of the
investment in Class C shares, assuming full
redemption on September 30, 2000; (c) all recurring
fees (including management fees) were deducted; and
(d) all dividends and distributions were
reinvested.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The Lehman
Index is an unmanaged weighted index comprising
public, fixed-rate, nonconvertible domestic
corporate debt that is rated at least investment
grade (BBB/Baa or higher) and public obligations of
the U.S. Treasury. The S&P 500 Index and the Lehman
Index total returns include the reinvestment of all
dividends, but do not include the effect of sales
charges or operating expenses of a mutual fund. The
securities that comprise both indexes may differ
substantially from the securities in the Fund.
These indexes are not the only ones that may be
used to characterize performance of large-
capitalization stock and bond funds. Other indexes
may portray different comparative performance.
Investors cannot invest directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class Z Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 9/30/00
One Year Five Years Since Inception
With Sales Charge 11.87% 11.96% 11.44%
Without Sales Charge 11.87% 11.96% 11.44%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since
inception of the share class.The graph compares a
$10,000 investment in the Prudential Active
Balanced Fund (Class Z shares) with a similar
investment in the S&P 500 Index and the Lehman
Index by portraying the initial account value at
the commencement of operations of Class Z shares,
and the account value at the end of the current
fiscal year (September 30, 2000), as measured on a
quarterly basis, beginning in January 1993. For
purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) all
recurring fees (including management fees) were
deducted; and (b) all dividends and distributions
were reinvested. Class Z shares are not subject to
a sales charge or distribution and service (12b-1)
fees.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The Lehman
Index is an unmanaged weighted index comprising
public, fixed-rate, nonconvertible domestic
corporate debt that is rated at least investment
grade (BBB/Baa or higher) and public obligations of
the U.S. Treasury. The S&P 500 Index and the Lehman
Index total returns include the reinvestment of all
dividends, but do not include the effect of sales
charges or operating expenses of a mutual fund. The
securities that comprise both indexes may differ
substantially from the securities in the Fund.
These indexes are not the only ones that may be
used to characterize performance of large-
capitalization stock and bond funds. Other indexes
may portray different comparative performance.
Investors cannot invest directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
FOR MORE INFORMATION
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Visit Prudential's website at:
http://www.prudential.com
Directors
Saul K. Fenster, Ph.D.
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
W. Scott McDonald, Jr.
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
Judy A. Rice
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
Officers
David R. Odenath, Jr., President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Marguerite E.H. Morrison, Secretary
William V. Healey, Assistant Secretary
Jonathan D. Shain, 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 Investment
Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 8098
Philadelphia, PA 19101
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
Fund Symbols NASDAQ CUSIP
Class A PIBAX 74437E883
Class B PBFBX 74437E875
Class C PABCX 74437E867
Class Z PABFX 74437E859
MF185E
(LOGO) Printed on Recycled Paper
<PAGE>
ANNUAL REPORT SEPTEMBER 30, 2000
Prudential
Jennison Equity Opportunity Fund
Fund Type Stock
Objective Long-term growth of capital and income
(GRAPHIC)
This report is not authorized for distribution to
prospective investors unless preceded or
accompanied by a current prospectus.
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.
(LOGO)
<PAGE>
Build on the Rock
Investment Goals and Style
The Prudential Jennison Equity Opportunity Fund (as
it has been called since May 30, 2000) invests
primarily in stocks of established companies with
growth prospects that we believe are largely
unrecognized by most investors. We aim for strong
total investment returns by combining a focus on
earnings growth with attention to valuation (the
relation between a company's earnings and the price
the market is placing on the company). This
discipline discourages us from paying too much for
projected earnings growth or from continuing to
hold a stock when the risk/reward trade-off is no
longer favorable. There can be no assurance that
the Fund will achieve its investment objective of
long-term growth of capital and income (with
current income as a secondary objective).
Portfolio Composition
Expressed as a percentage of
net assets as of 9/30/00
16.8% Insurance
7.5 Chemicals
5.9 Petroleum
5.5 Aerospace/Defense
4.9 Health Care Services
4.6 Transportation
4.3 Banking
3.9 Publishing
3.6 Oil Services
3.4 Paper & Forest Products
3.3 U.S. Government Securities
Ten Largest Holdings
Expressed as a percentage of
net assets as of 9/30/00
2.9% The Allstate Corp.
Insurance
2.9 Conoco, Inc.
Petroleum
2.8 XL Capital, Ltd.
Insurance
2.3 FleetBoston Financial Corp.
Banking
2.2 The Hartford Financial Services
Group, Inc.
Insurance
2.2 Pall Corp.
Energy
2.0 John Hancock Financial Services
Insurance
2.0 Fed Ex Corp.
Transportation
1.9 Litton Industries, Inc.
Aerospace/Defense
1.9 Sabre Group Holdings, Inc.
Transportation
Holdings are subject to change.
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
Cumulative Total Returns1 As of 9/30/00
<TABLE>
<CAPTION>
One Since
Year Inception2
<S> <C> <C>
Class A 29.23% 91.35%
Class B 28.31 85.91
Class C 28.31 85.91
Class Z 29.64 93.49
Lipper Multi-Cap Value Fund Avg.3 11.94 67.62
</TABLE>
Average Annual Total Returns1 As of 9/30/00
<TABLE>
<CAPTION>
One Since
Year Inception2
<S> <C> <C>
Class A 22.76% 16.58%
Class B 23.31 16.93
Class C 26.02 16.95
Class Z 29.64 18.46
</TABLE>
Past performance is not indicative of future
results. Principal and investment return will
fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their
original cost.
1 Source: Prudential Investments Fund Management
LLC and Lipper Inc. The cumulative total returns do
not take into account sales charges. The average
annual total returns do take into account
applicable sales charges. The Fund charges a
maximum front-end sales charge of 5% for Class A
shares. Class B shares are subject to a declining
contingent deferred sales charge (CDSC) of 5%, 4%,
3%, 2%, 1%, and 1% for six years. Class B shares
will automatically convert to Class A shares, on a
quarterly basis, approximately seven years after
purchase. Class C shares are subject to a front-end
sales charge of 1% and a CDSC of 1% for 18 months.
Class Z shares are not subject to a sales charge or
distribution and service (12b-1) fees.
2 Inception date: Class A, B, C, and Z, 11/7/96.
3 Lipper average returns are for all funds in each
share class for the one-year and since-inception
periods in the Multi-Cap Value Fund category. The
Lipper average is unmanaged.
Multi-Cap Value funds, by portfolio practice,
invest in a variety of market capitalization
ranges, without concentrating 75% of their equity
assets in any one market capitalization range over
an extended period of time. Multi-Cap funds will
generally have between 25% and 75% of their assets
invested in companies with market capitalizations
(on a three-year weighted basis) above 300% of the
dollar-weighted median market capitalization of the
S&P(R) Mid-Cap 400 Index. Multi-Cap Value funds seek
long-term growth of capital by investing in
companies that are considered undervalued relative
to a major unmanaged stock index based on
price/earnings, book value, asset value, or other
factors. These funds will normally have a below-
average price/earnings ratio, price-to-book ratio,
and three-year earnings growth figure.
S&P(R) is a registered trademark of the Standard and Poor's Corporation.
1
<PAGE>
(LOGO) November 15, 2000
Dear Shareholder,
Our Fund has a new name: Prudential Jennison Equity
Opportunity Fund. We think the new name makes it
clearer that the Fund's investment style focuses on
attractively valued companies that we expect to
have an earnings improvement over the next 12 to 18
months. This style worked very well during the 12
months ended September 30, 2000. The Fund's Class A
shares had a 29.23% return, 22.76% for those paying
the maximum one-time Class A share sales charge.
This was about two and a half times the 11.94%
Lipper Multi-Cap Value Fund Average over the
period.
The Fund found excellent opportunities spread
broadly in the market, particularly in the
financial, healthcare, technology, and energy
sectors. It also had some strong performers among
its basic materials stocks, but its substantial
focus in this sector--which had a 25% decline over
the period--was the largest drag on its performance.
The equity markets exhibited an unusual amount of
style turbulence over this reporting period, with
the growth style dominating early, the value style
later, and frequent alternations between the two
for most of the period. Because of such volatility,
Prudential generally recommends that shareholders
own funds in both styles. However, the Prudential
Jennison Equity Opportunity Fund outperformed its
Lipper Average over both the first and last halves
of its reporting period. Over the second half and
over the full period, it also beat the S&P 500.
Since investment advisers often perform very
differently in growth and value markets, the Fund's
relatively strong performance through this
volatility was particularly attractive.
Sincerely,
David R. Odenath, Jr., President
The Prudential Investment Portfolio, Inc./
Prudential Jennison Equity Opportunity Fund
2
<PAGE>
Prudential Jennison Equity Opportunity Fund
Annual Report September 30, 2000
INVESTMENT ADVISER'S REPORT
Insurers were a smart play
Near the beginning of our reporting period we built
up our holdings in financial services, moving from
less than a market weighting to more. We found
quality life and property/casualty insurers selling
at share prices that were generally well under 10
times earnings because of the impact of a long
period of very competitive pricing. We thought the
weaker firms would contract and that pricing in the
industry would improve, which is what
happened. Companies such as XL Capital, the
Hartford Financial Services Group, and Allstate
(see Comments on Largest Holdings for all three)
have been among the largest contributors to our
return.
We also had a substantial gain with John Hancock, a
mutual company that went public during this period.
We avoided the first issue of stock, but bought it
after the shares fell well below their offering
price. The stock recovered and went on to a 58%
gain from issuance to the end of September.
Financial stocks have benefited from their
relatively secure earnings outlook in a market
otherwise concerned about cyclical weakness. They
comprised more than a fifth of our investments at
September 30. In addition to the insurance companies,
they included Fleet Boston Financial (see Comments on
Largest Holdings), which made a more modest positive
contribution to our return.
Not all financial stocks were winners. We came into
the period owning Unumprovident, which was among
our poorer-performing stocks. The result of a
merger of UNUM and Provident, Unumprovident
reported fourth-quarter earnings below our expectations,
so we sold it.
Healthcare soared
Stocks of healthcare companies, like those of
financials, were depressed by an industry-wide
squeeze on profits until a turn in the pricing
cycle for hospitals and healthcare managers spurred
a rebound. Health Management Associates (up 169%
for the 12 months) and HCA (up 75%) were among the
3
<PAGE>
Prudential Jennison Equity Opportunity Fund
Holdings expressed as a percentage of the Fund's net assets
Comments on Largest Holdings As of 9/30/00
-----------------------------------------------------------
3.0% The Allstate Corp./Insurance
We added to our Allstate holdings because it is the
premier personal line insurer in the United States,
a sector we believe is in the early stages of a
pricing improvement. Moreover, Allstate is moving
to a multichannel distribution strategy that will
include both the Internet as well as direct
telephone service. We believe management has
outlined a strategy that will enable the company to
regain its growth. We think that both earnings and
the price/earnings multiple the market is willing
to pay will recover.
2.9% Conoco, Inc./Petroleum
Conoco, which gained full independence from DuPont
in 1999, has become one of the few integrated oil
companies with accelerating growth. Moreover, we
expect the U.S. refining business generally to show
more stable profit growth over the next few years.
Conoco shares sell for less than ten times
estimated year 2000 earnings per share, which is
below the multiplier for most of its peers.
2.8% XL Capital, Ltd./Insurance
2.2% The Hartford Financial Services Group, Inc./Insurance
Two growing insurance companies (XL Capital, Ltd.
and The Hartford Financial Services Group, Inc.).
We believe that we are in the early stages of an
improved property and casualty pricing cycle, and
that both companies can increase earnings by 10% or
more in each of the next three years. Both were
selling, until a recent rally, at less than nine
times estimated earnings. Both were inexpensive
relative to the S&P 500 and to other high-quality
financial stocks.
2.3% FleetBoston Financial Corp./Banking
Fleet's string of mergers, most recently with Bank
of Boston, has consolidated its strength as a
super-regional bank in the Northeast. We expect
sizable cost savings still to come, as well as
several years of strong growth. It has a well-
balanced portfolio of assets, yet sells below 10
times estimated year 2000 earnings.
Holdings are subject to change.
4
<PAGE>
www.prudential.com (800) 225-1852
Annual Report September 30, 2000
largest contributors to our return. Health
Management is a hospital manager that used to be a
highly valued stock, but it lost the interest of
momentum investors when they focused narrowly on
technology. HCA is also a hospital management
company, and is benefiting from renewed confidence
in its growth prospects.
We owned two biotechnology stocks during the
period, both of which made large gains. Vertex
Pharmaceuticals is a biotechnology research firm
that we had owned for some time because of its
strong product pipeline. That pipeline of promising
drugs finally was recognized by investors as the
stock more than tripled over our reporting period.
We took our profits in Vertex. Aviron was also an
out-of-favor biotechnology stock, but it more than
doubled as the company came closer to filing with
the FDA on its mist vaccine for the flu.
Value in technology
Although technology was a strong sector for growth
investors for much of the year, we were able to
identify some "value" tech stocks that did very
well. Some were classified in other sectors. For
example, we had a substantial position in
Millipore, a company that supplies filtration
equipment to the biotechnology and semiconductor
industries. Although some tech investors might miss
Millipore because of its "old economy" capital
goods classification, its earnings prospects are
linked to those of high-tech companies.
Our largest gain among stocks classified as
technology was on International Rectifier, a mid-
cap manufacturer of power semiconductors. We were
able to buy the stock inexpensively because we
anticipated, by several quarters, a surge in its
earnings. The stock more than tripled over this
period.
General Motors was a winner for the period. While
certainly not a tech stock, a large part of its
performance was due to its ownership share in
Hughes Electronics and its efforts to turn that
asset into cash. We sold our GM position after a
significant run-up associated with its Hughes
strategy.
5
<PAGE>
Prudential Jennison Equity Opportunity Fund
Annual Report September 30, 2000
We also owned National Semiconductor, which had
earnings problems largely related to its
acquisition of Cyrix, a company competing directly
against Intel. Two factors led to the stock's
recovery: National shut down Cyrix, and the
semiconductor cycle entered an upswing.
Energy shortage
As it became clearer that there would be tight
supplies of oil and natural gas, investors moved to
the stocks of companies that would benefit.
Anadarko Petroleum made the greatest contribution
to our return, but we also benefited from several
smaller positions in oil service companies. We
added Conoco (see Comments on Largest Holdings).
The basic materials sector fell sharply
Basic materials--particularly paper and specialty
chemicals--is also one of our largest sector
commitments. This is a group of companies with
excellent long-term prospects, but in the short
term, they are vulnerable to a slowing economy and
higher raw material costs. Nonetheless, we had
strong positive returns from some holdings: Dexter,
a specialty materials company that was among our
largest holdings early in the year, gained 61%. As
a supplier to the technology and biotechnology
industries, the company was bought by a biotech
company. Champion International, a paper company,
rose sharply because of an acquisition offer that
culminated in its purchase in May by International
Paper for $7.3 billion.
However, overall, our holdings in the sector still
detracted substantially from our return because of
the size of our exposure. Some, such as the
specialty chemicals company Crompton, had very
large declines. We still believe that many of
these, including Crompton, are attractive
investments despite the recent disappointment. We
expect them to appreciate as investors accept that
the U.S. economy will continue to grow, albeit at a
more moderate pace.
6
<PAGE>
www.prudential.com (800) 225-1852
Looking ahead
We are encouraged by the broadening of the market
we've seen over the last 12 months. However, many
stocks are still selling at compellingly low
price/earnings ratios. As the U.S. economy slows,
the challenge is to ensure that companies maintain
the earnings prospects that led us to buy them. Our
portfolio is diversified: it includes cyclical
stocks (whose recovery may depend upon continued
healthy economic expansion) such as the basic
industries, and noncyclical industries such as
insurance, which are less dependent on the economy.
Prudential Jennison Equity Opportunity Fund Management Team
7
<PAGE>
Prudential Jennison Equity Opportunity Fund
<PAGE>
Prudential Jennison Equity Opportunity Fund
Annual Report September 30, 2000
Financial
Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Portfolio of Investments as of September 30, 2000
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 90.7%
Common Stocks
-------------------------------------------------------------------------------------
Aerospace/Defense 5.5%
93,300 General Motors Corp., Class H $ 3,468,894
88,300 Litton Industries, Inc.(a) 3,945,906
61,700 The Boeing Co. 3,887,100
--------------
11,301,900
-------------------------------------------------------------------------------------
Airlines 1.5%
97,200 AMR Corp. 3,177,225
-------------------------------------------------------------------------------------
Aluminum 0.8%
64,732 Alcoa, Inc. 1,638,529
-------------------------------------------------------------------------------------
Apparel 0.8%
103,600 Polo Ralph Lauren Corp.(a) 1,670,550
-------------------------------------------------------------------------------------
Auto & Truck 1.7%
122,500 Lear Corp.(a) 2,518,906
21,900 TRW, Inc. 889,688
--------------
3,408,594
-------------------------------------------------------------------------------------
Banking 4.3%
42,000 Chase Manhattan Corp. 1,939,875
121,300 FleetBoston Financial Corp. 4,730,700
94,200 U.S. Bancorp 2,143,050
--------------
8,813,625
-------------------------------------------------------------------------------------
Chemicals 7.5%
209,526 Crompton Corp. 1,650,017
77,500 Cytec Industries, Inc.(a) 2,591,406
189,500 Engelhard Corp. 3,079,375
45,700 FMC Corp.(a) 3,064,757
63,300 Minerals Technologies, Inc. 2,911,800
191,200 Solutia, Inc. 2,174,900
--------------
15,472,255
-------------------------------------------------------------------------------------
Computers & Business Equipment 1.6%
120,800 Diebold, Inc. 3,208,750
</TABLE>
See Notes to Financial Statements 9
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Containers & Packaging 1.5%
274,200 Pactiv Corp.(a) $ 3,067,613
-------------------------------------------------------------------------------------
Drugs & Health Care 1.3%
46,300 American Home Products Corp. 2,618,844
-------------------------------------------------------------------------------------
Electronic Components 2.0%
51,300 Gentex Corp.(a) 1,282,500
90,500 Rockwell International Corp. 2,737,625
--------------
4,020,125
-------------------------------------------------------------------------------------
Energy 2.7%
222,000 Pall Corp. 4,426,125
36,500 Southern Energy, Inc.(a) 1,145,187
--------------
5,571,312
-------------------------------------------------------------------------------------
Financial Services 0.6%
25,300 USA Education, Inc. 1,219,144
-------------------------------------------------------------------------------------
Health Care Services 4.9%
193,800 Caremark Rx, Inc.(a) 2,180,250
80,500 Columbia/HCA Healthcare Corp. 2,988,562
137,100 Health Management Associates, Inc.(a) 2,853,394
242,100 Healthsouth Corp.(a) 1,967,063
--------------
9,989,269
-------------------------------------------------------------------------------------
Hotels 1.4%
256,608 Hilton Hotels Corp. 2,967,030
-------------------------------------------------------------------------------------
Human Resources 1.4%
87,300 Manpower, Inc. 2,788,144
-------------------------------------------------------------------------------------
Industrial Technology/Instruments 1.7%
70,100 Millipore Corp. 3,395,469
-------------------------------------------------------------------------------------
Insurance 16.8%
27,300 American General Corp. 2,129,400
95,600 Aon Corp. 3,752,300
24,800 CIGNA Corp. 2,589,120
</TABLE>
10 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
72,300 CNA Financial Corp.(a) $ 2,765,475
152,400 John Hancock Financial Services(a) 4,095,750
32,100 Lincoln National Corp. 1,544,812
52,700 SAFECO Corp. 1,436,075
173,200 The Allstate Corp. 6,018,700
62,000 The Hartford Financial Services Group, Inc. 4,522,125
77,400 XL Capital, Ltd. 5,688,900
--------------
34,542,657
-------------------------------------------------------------------------------------
Medical Technology 1.4%
48,900 Aviron(a) 2,851,481
-------------------------------------------------------------------------------------
Mining 1.2%
145,000 Newmont Mining Corp. 2,465,000
-------------------------------------------------------------------------------------
Oil Services 3.6%
90,500 Diamond Offshore Drilling, Inc. 3,710,500
105,200 Unocal Corp. 3,728,025
--------------
7,438,525
-------------------------------------------------------------------------------------
Paint & Related Products 0.8%
67,200 Valspar Corp. 1,544,928
-------------------------------------------------------------------------------------
Paper & Forest Products 3.4%
127,600 Boise Cascade Corp. 3,389,375
43,800 Bowater, Inc. 2,033,962
40,300 Temple-Inland, Inc. 1,526,362
--------------
6,949,699
-------------------------------------------------------------------------------------
Petroleum 5.9%
60,800 Burlington Resources, Inc. 2,238,200
226,300 Conoco, Inc. 5,912,087
135,700 USX - Marathon Group 3,850,488
--------------
12,000,775
-------------------------------------------------------------------------------------
Publishing 3.9%
57,000 Knight-Ridder, Inc. 2,896,312
35,100 New York Times Co., Class A 1,379,869
86,800 Tribune Co. 3,786,650
--------------
8,062,831
</TABLE>
See Notes to Financial Statements 11
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Retail 2.9%
59,500 AutoZone, Inc.(a) $ 1,349,906
63,700 Federated Department Stores, Inc.(a) 1,664,163
151,000 Kmart Corp. 906,000
213,900 Saks, Inc.(a) 2,112,262
--------------
6,032,331
-------------------------------------------------------------------------------------
Semiconductors 2.0%
49,200 International Rectifier Corp.(a) 2,487,675
42,400 National Semiconductor Corp.(a) 1,706,600
--------------
4,194,275
-------------------------------------------------------------------------------------
Steel & Metals 0.7%
93,100 USX-U.S. Steel Group 1,413,956
-------------------------------------------------------------------------------------
Telecommunications 2.3%
42,800 Cable & Wireless PLC (ADR) 1,821,675
50,800 Global Crossing, Ltd.(a) 1,574,800
40,000 Millicom International Cellular SA(a) 1,422,500
--------------
4,818,975
-------------------------------------------------------------------------------------
Transportation 4.6%
48,800 Egl, Inc.(a) 1,476,200
90,200 Federal Express Corp.(a) 3,999,468
135,400 Sabre Group Holdings, Inc.(a) 3,918,138
--------------
9,393,806
--------------
Total long-term investments (cost $167,004,699) 186,037,617
--------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 7.3%
COMMERCIAL PAPER
Chevron USA, Inc.
P-1 $ 5,120 6.55%, 10/2/00 $ 5,120,000
American Express Co.
P-1 9,750 6.60%, 10/2/00 9,750,000
--------------
Total short-term investments
(cost $14,870,000) 14,870,000
--------------
Total investments before short
sales 98.0%
(cost $181,874,699; Note 4) 200,907,617
--------------
COMMON STOCKS SOLD SHORT(a) (2.8%)
</TABLE>
<TABLE>
<CAPTION>
Shares Description
<C> <S> <C> <C>
------------------------------------------------------------------------------------------
Computer Software & Services (1.1%)
(29,500) Oracle Systems Corp.
(proceeds $2,263,322) (2,323,125)
-------------------------------------------------------------------------------------
Technology (1.7%)
(38,500) Nasdaq-100 Shares Trust
Unit Series 1 (proceeds $3,730,227) (3,414,469)
--------------
Total common stocks sold short
(proceeds at cost $5,993,549) (5,737,594)
--------------
Total investments, net of short sales 95.2%
(cost $175,881,150) 195,170,023
Other assets in excess of liabilities 4.8% 9,935,625
--------------
Net Assets 100% $ 205,105,648
--------------
--------------
</TABLE>
------------------------------
(a) Non-income producing securities.
ADR--American Depository Receipt
PLC--Public Limited Company
SA--Societe Anonyme (French Corporation)
See Notes to Financial Statements 13
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
September 30, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $181,874,699) $ 200,907,617
Due from broker for securities sold short 359,164
Receivable for investments sold 10,141,406
Deposits for securities sold short 6,743,712
Receivable for Series shares sold 1,513,800
Dividends and interest receivable 170,901
Deferred expenses and other assets 16,652
------------------
Total assets 219,853,252
------------------
LIABILITIES
Payable to Custodian 1,701
Investments sold short, at value (proceeds $5,993,549) 5,737,594
Payable for investments purchased 8,259,028
Payable for Series shares reacquired 374,363
Accrued expenses and other liabilities 165,268
Distribution fees payable 111,915
Management fee payable 97,735
------------------
Total liabilities 14,747,604
------------------
NET ASSETS $ 205,105,648
------------------
------------------
Net assets were comprised of:
Common stock, at par $ 13,948
Paid-in capital in excess of par 163,091,019
------------------
163,104,967
Undistributed net investment income 190,283
Accumulated net realized gain on investments 22,521,525
Net unrealized appreciation on investments 19,288,873
------------------
Net assets, September 30, 2000 $ 205,105,648
------------------
------------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Statement of Assets and Liabilities Cont'd.
<TABLE>
<CAPTION>
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
Class A:
Net asset value and redemption price per share
($66,117,280 / 4,460,138 shares of common stock issued
and outstanding) $14.82
Maximum sales charge (5% of offering price) .78
------------------
Maximum offering price to public $15.60
------------------
------------------
Class B:
Net asset value, offering price and redemption price per
share ($108,439,797 / 7,421,472 shares of common stock
issued and outstanding) $14.61
------------------
------------------
Class C:
Net asset value and redemption price per share
($13,456,555 / 920,958 shares of common stock issued
and outstanding) $14.61
Sales charge (1% of offering price) .15
------------------
Offering price to public $14.76
------------------
------------------
Class Z:
Net asset value, offering price and redemption price per
share ($17,092,016 / 1,145,502 shares of common stock
issued and outstanding) $14.92
------------------
------------------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Statement of Operations
<TABLE>
<CAPTION>
Year
Ended
September 30, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Dividends (net of foreign withholding taxes of
$10,332) $ 2,003,924
Interest 892,570
---------------------
Total income 2,896,494
---------------------
Expenses
Management fee 950,935
Distribution fee--Class A 109,351
Distribution fee--Class B 963,250
Distribution fee--Class C 99,773
Transfer agent's fees and expenses 245,000
Custodian's fees and expenses 110,000
Reports to shareholders 100,000
Registration fees 39,000
Audit fees 20,000
Legal fees and expenses 15,000
Directors' fees and expenses 7,500
Miscellaneous 778
---------------------
Total expenses 2,660,587
---------------------
Net investment income 235,907
---------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on:
Investment transactions 31,550,136
Short sales (2,408,056)
Options 149,842
---------------------
29,291,922
---------------------
Net change in unrealized appreciation/depreciation on:
Investments 11,176,348
Short sales (603,885)
---------------------
10,572,463
---------------------
Net gain on investments 39,864,385
---------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $40,100,292
---------------------
---------------------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Year
Ended Ended
September 30, 2000 September 30, 1999
<S> <C> <C> <C>
------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 235,907 $ 12,304
Net realized gain on investment
transactions 29,291,922 16,757,829
Net change in unrealized appreciation/
depreciation on investments 10,572,463 13,528,215
------------------ ------------------
Net increase in net assets resulting
from operations 40,100,292 30,298,348
------------------ ------------------
Dividends and distributions (Note 1)
Dividends from net investment income
Class A -- (153,895)
Class B -- (76,687)
Class C -- (6,448)
Class Z -- (12,628)
------------------ ------------------
-- (249,658)
------------------ ------------------
Distributions from net realized
capital gains
Class A (3,956,469) (2,540,009)
Class B (9,827,462) (6,978,474)
Class C (885,234) (586,830)
Class Z (473,196) (164,167)
------------------ ------------------
(15,142,361) (10,269,480)
------------------ ------------------
Series share transactions (net of share
conversions) (Note 5)
Net proceeds from shares sold 94,271,423 39,742,571
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions 14,348,742 10,032,426
Cost of shares reacquired (69,560,800) (53,515,736)
------------------ ------------------
Net increase (decrease) in net assets
from Series share transactions 39,059,365 (3,740,739)
------------------ ------------------
Total increase 64,017,296 16,038,471
NET ASSETS
Beginning of year 141,088,352 125,049,881
------------------ ------------------
End of year(a) $205,105,648 $141,088,352
------------------ ------------------
------------------ ------------------
------------------------------
(a) Includes undistributed net investment
income of $ 190,283 $ --
------------------ ------------------
</TABLE>
See Notes to Financial Statements 17
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Notes to Financial Statements
Prudential Jennison Equity Opportunity Fund, formerly Prudential Jennison
Growth & Income Fund (the 'Series') is a separately managed series of The
Prudential Investment Portfolios, Inc. (the 'Fund'). The Fund was incorporated
in Maryland on August 10, 1995 and is registered under the Investment Company
Act of 1940 as a diversified, open-end, management investment company.
Investment operations of the Series commenced on November 7, 1996.
The Series' investment objective is to achieve long-term growth of capital
and income, with current income as a secondary objective. The Series seeks to
achieve its objectives by investing primarily in common stocks of established
companies with growth prospects believed to be underappreciated by the market.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Series in the preparation of its financial statements.
Securities Valuation: Securities listed on a securities exchange or
NASDAQ (other than options on securities and indices) are valued at the last
sales price on such exchange or system 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 on such day 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 by Prudential Investments
Fund Management LLC ('PIFM'), in consultation with Jennison Associates LLC
('Jennison'), to be over-the-counter, are valued by an independent pricing agent
or principal market maker. Convertible debt securities that are actively traded
in the over-the-counter market, including listed securities for which the
primary market is believed by the Manager and the Subadviser to be
over-the-counter, are valued at the mean between the last reported bid and asked
prices provided by a principal market maker. Options on securities and indices
traded on an exchange are valued at the mean between the most recently quoted
bid and asked prices on such exchange. Futures contracts and options thereon
traded on a commodities exchange or board of trade are valued at the last sale
price at the close of trading on such exchange or board of trade or, if there
was no sale on the applicable commodities exchange or board of trade on such
day, at the mean between the most recently quoted bid and asked prices on such
exchange or board of trade. Securities for which market quotations are not
readily available, other than private placements, are valued at a price supplied
by an independent pricing agent, which is, in the opinion of such pricing agent,
representative of the market value of such securities as of the time of
determination of net asset value, or using a methodology developed by an
18
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Notes to Financial Statements Cont'd.
independent pricing agent, which is, in the judgment of the Manager and the
Subadviser, able to produce prices which are representative of market value.
Short-term securities which mature in more than 60 days, for which market
quotations are readily available, are valued at current market quotations as
provided by an independent pricing agent or principal market maker. Short-term
securities which mature in 60 days or less are valued at cost with interest
accrued or discount amortized to the date of maturity, unless the Board of
Directors determines that such valuation does not represent fair value.
All securities are valued as of 4:15 p.m., New York time.
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; interest income is recorded on the accrual
basis and is net of discount accretion and premium amortization. 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 realized and
unrealized 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.
Short Sales: The Series may sell a security it does not own in
anticipation of a decline in the market value of that security (short sale).
When the Series makes a short sale, it must borrow the security sold short and
deliver it to the broker-dealer through which it made the short sale. The
proceeds received from the short sale are maintained as collateral for its
obligation to deliver the security upon conclusion of the sale. In addition, the
Series may have to make additional subsequent deposits with the broker equal to
the change in the market value of the security sold short. The Series may have
to pay a fee to borrow the particular security and may be obligated to remit any
payments received on such borrowed securities. A gain, limited to the price at
which the Series sold the security short, or a loss, unlimited in magnitude,
will be recognized upon the termination of a short sale if the market price at
termination is less than or greater than, respectively, the proceeds originally
received.
Dividends and Distributions: The Series expects to pay dividends of net
investment income, if any, semi-annually and to make distributions of any net
capital gains 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.
19
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Notes to Financial Statements Cont'd.
Options: The Fund may either purchase or write options in order to
hedge against adverse market movements or fluctuations in value caused by
changes in prevailing interest rates or foreign currency exchange rates with
respect to securities or currencies which the Fund currently owns or intends to
purchase. When the Fund purchases an option, it pays a premium and an amount
equal to that premium is recorded as an investment. When the Fund writes an
option, it receives a premium and an amount equal to that premium is recorded as
a liability. The investment or liability is adjusted daily to reflect the
current market value of the option. If an option expires unexercised, the Fund
realizes a gain or loss to the extent of the premium received or paid. If an
option is exercised, the premium received or paid is an adjustment to the
proceeds from the sale or the cost basis of the purchase in determining whether
the Fund has realized a gain or loss. The difference between the premium and the
amount received or paid on effecting a closing purchase or sale transaction is
also treated as a realized gain or loss. Gain or loss on purchased options is
included in net realized gain (loss) on investment transactions. Gain or loss on
written options is presented separately as net realized gain (loss) on written
option transactions.
The Fund, as writer of an option, has no control over whether the
underlying securities or currencies may be sold (called) or purchased (put). As
a result, the Fund bears the market risk of an unfavorable change in the price
of the security or currency underlying the written option. The Fund, as
purchaser of an option, bears the risk of the potential inability of the
counterparties to meet the terms of their contracts.
Taxes: It is the Series' 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 and interest are provided in
accordance with the Fund's understanding of the applicable country's tax rules
and rates.
Reclassification of Capital Accounts: The Fund accounts and reports for
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. The effect of applying
this statement was to decrease undistributed net investment income by $45,624,
decrease accumulated net realized gain on investments by $5,664,998 and increase
paid-in capital by $5,710,622 due to the Fund treating redemptions as
distributions for federal income tax purposes during the year ended September
30, 2000. Net investment income, net realized gains and net assets were not
affected by this change.
20
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Notes to Financial Statements Cont'd.
Note 2. Agreements
The Fund has a management agreement with (PIFM). Pursuant to a subadvisory
agreement between PIFM and Jennison Associates LLC ('Jennison'), Jennison
furnishes investment advisory services in connection with the management of the
Series. Under the subadvisory agreement, Jennison, subject to the supervision of
PIFM, is responsible for managing the assets of the Series in accordance with
its investment objectives and policies.
The management fee paid PIFM is computed daily and payable monthly, at an
annual rate of .60 of 1% of the average daily net assets of the Series. PIFM
pays Jennison a subadvisory fee at an annual rate of .30 of 1% of the average
daily net assets of the Series up to and including $300 million and .25 of 1% of
such assets in excess of $300 million. PIFM also pays the cost of compensation
of officers and employees of the Fund, occupancy and certain clerical and
bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
The Fund has a distribution agreement with Prudential Investment
Management Services LLC ('PIMS'), which acts as the distributor of the Fund. The
Fund compensates PIMS for distributing and servicing the Series' Class A, Class
B and Class C shares, pursuant to plans of distribution (the 'Class A, B and C
Plans'), regardless of expenses actually incurred by them. The distribution fees
are accrued daily and payable monthly. No distribution or service fees are paid
to PIMS as distributor of the Class Z shares of the Series.
Pursuant to the Class A, B and C Plans, the Series compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, 1% and 1%
of the average daily net assets of the Class A, B and C shares, respectively.
Such expenses under the Plans were .25 of 1%, 1% and 1% of average daily net
assets of the Class A, B and C shares, respectively, for the year ended
September 30, 2000.
PIMS has advised the Series that it received approximately $91,300 and
$36,900 in front-end sales charges resulting from sales of Class A and C shares,
respectively, during the year ended September 30, 2000. From these fees PIMS
paid such sales charges to affiliated broker-dealers, which in turn paid
commissions to salespersons and incurred other distribution costs.
PIMS has advised the Series that for the year ended September 30, 2000, it
received approximately $233,300 and $4,400 in contingent deferred sales charges
imposed upon certain redemptions by Class B and C shareholders, respectively.
PIFM, PIMS and Jennison are wholly owned subsidiaries of The Prudential
Insurance Company of America ('Prudential').
21
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Notes to Financial Statements Cont'd.
The Fund, along with other affiliated registered investment companies (the
'Funds'), entered into a syndicated credit agreement ('SCA') with an
unaffiliated lender. The maximum commitment under the SCA is $1 billion.
Interest on any such borrowings will be at market rates. The purpose of the
agreement is to serve as an alternative source of funding for capital share
redemptions. The Funds pay a commitment fee of .080 of 1% on the unused portion
of the credit facility. The commitment fee is accrued and paid quarterly on a
pro rata basis by the Funds. The expiration date of the SCA is March 9, 2001.
Prior to March 9, 2000, the commitment fee was .065 of 1% on the unused portion
of the credit facility. The Fund did not borrow any amounts pursuant to the SCA
during the year ended September 30, 2000.
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the year ended September 30, 2000,
the Series incurred fees of approximately $212,800 for the services of PMFS. As
of September 30, 2000, approximately $19,500 of such fees were due to PMFS.
Transfer agent fees and expenses in the Statement of Operations include certain
out-of-pocket expenses paid to nonaffiliates.
For the year ended September 30, 2000, Prudential Securities Incorporated
('PSI'), which is an indirect, wholly owned subsidiary of Prudential, earned
approximately $26,500 in brokerage commissions from portfolio transactions
executed on behalf of the Series.
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the year ended September 30, 2000 were $236,331,970 and $211,457,341,
respectively.
Transactions in options written during the year ended September 30, 2000
were as follows:
<TABLE>
<CAPTION>
Number of Premiums
Contracts Received
--------- --------
<S> <C> <C>
Options outstanding at September 30, 1999 -- --
Options written 1,115 $161,587
Options expired (305) (98,207)
Options closed (810) (63,380)
--------- --------
Options outstanding at September 30, 2000 -- $ --
</TABLE>
22
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Notes to Financial Statements Cont'd.
The cost basis of the investments for federal income tax purposes at
September 30, 2000 is substantially the same for financial reporting purposes
and, accordingly, net unrealized appreciation of investments for federal income
tax purposes was $17,624,068 (gross unrealized appreciation--$27,232,153; gross
unrealized depreciation--$9,608,085).
Note 5. Capital
The Series 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 B shares will automatically
convert to Class A shares on a quarterly basis approximately seven years after
purchase. A special exchange privilege is also available for shareholders who
qualified to purchase Class A shares at net asset value. Class C shares are sold
with a front-end sales charge of 1% and a contingent deferred sales charge of 1%
during the first 18 months. Class Z shares are not subject to any sales or
redemption charge and are offered exclusively for sale to a limited group of
investors.
There are 3 billion shares of $.001 par value common stock of the Fund
authorized which are divided into three series, each of which offers four
classes, designated Class A, Class B, Class C and Class Z, each of which
consists of 250 million authorized shares.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
---------------------------------------------------------- ---------- ------------
<S> <C> <C>
Year ended September 30, 2000:
Shares sold 3,735,739 $ 50,527,448
Shares issued in reinvestment of distributions 311,591 3,774,762
Shares reacquired (2,771,744) (36,327,739)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion 1,275,586 17,974,471
Shares issued upon conversion from Class B 273,305 3,692,627
---------- ------------
Net increase (decrease) in shares outstanding 1,548,891 $ 21,667,098
---------- ------------
---------- ------------
Year ended September 30, 1999:
Shares sold 923,437 $ 11,737,931
Shares issued in reinvestment of dividends and
distributions 226,178 2,592,003
Shares reacquired (1,265,737) (15,677,893)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion (116,122) (1,347,959)
Shares issued upon conversion from Class B 174,209 2,193,555
---------- ------------
Net increase (decrease) in shares outstanding 58,087 $ 845,596
---------- ------------
---------- ------------
</TABLE>
23
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Notes to Financial Statements Cont'd.
<TABLE>
<CAPTION>
Class B Shares Amount
---------------------------------------------------------- ---------- ------------
Year ended September 30, 2000:
<S> <C> <C>
Shares sold 1,738,564 $ 22,527,841
Shares issued in reinvestment of distributions 769,364 9,243,065
Shares reacquired (2,065,428) (25,875,475)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion 442,500 5,895,431
Shares reacquired upon conversion from Class A (276,531) (3,692,627)
---------- ------------
Net increase (decrease) in shares outstanding 165,969 $ 2,202,804
---------- ------------
---------- ------------
Year ended September 30, 1999:
Shares sold 1,447,677 $ 18,020,614
Shares issued in reinvestment of dividends and
distributions 583,173 6,683,169
Shares reacquired (2,334,384) (28,622,257)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion (303,534) (3,918,474)
Shares reacquired upon conversion from Class A (174,767) (2,193,555)
---------- ------------
Net increase (decrease) in shares outstanding (478,301) $ (6,112,029)
---------- ------------
---------- ------------
<CAPTION>
Class C
----------------------------------------------------------
<S> <C> <C>
Year ended September 30, 2000:
Shares sold 458,926 $ 5,963,960
Shares issued in reinvestment of distributions 72,279 868,408
Shares reacquired (212,204) (2,676,372)
---------- ------------
Net increase (decrease) in shares outstanding 319,001 $ 4,155,996
---------- ------------
---------- ------------
Year ended September 30, 1999:
Shares sold 199,958 $ 2,519,215
Shares issued in reinvestment of dividends and
distributions 51,069 585,254
Shares reacquired (299,144) (3,644,790)
---------- ------------
Net increase (decrease) in shares outstanding (48,117) $ (540,321)
---------- ------------
---------- ------------
<CAPTION>
Class Z
----------------------------------------------------------
<S> <C> <C>
Year ended September 30, 2000:
Shares sold 1,133,274 $ 15,252,174
Shares issued in reinvestment of distributions 38,006 462,507
Shares reacquired (358,742) (4,681,214)
---------- ------------
Net increase (decrease) in shares outstanding 812,538 $ 11,033,467
---------- ------------
---------- ------------
Year ended September 30, 1999:
Shares sold 570,577 $ 7,464,811
Shares issued in reinvestment of dividends and
distributions 14,995 172,000
Shares reacquired (419,436) (5,570,796)
---------- ------------
Net increase (decrease) in shares outstanding 166,136 $ 2,066,015
---------- ------------
---------- ------------
</TABLE>
24
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Portfolio of Investments as of September 30, 2000
Financial
Highlights
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Financial Highlights
<TABLE>
<CAPTION>
Class A
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 12.76
--------
Income from investment operations
Net investment income .04
Net realized and unrealized gain (loss) on investment
transactions 3.38
--------
Total from investment operations 3.42
--------
Less distributions
Dividends from net investment income --
Distributions from net realized gains (1.36)
--------
Total distributions (1.36)
--------
Net asset value, end of year $ 14.82
--------
--------
TOTAL RETURN(c) 29.23%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000) $ 66,117
Average net assets (000) $ 43,741
Ratios to average net assets:
Expenses, including distribution and service (12b-1)
fees 1.19%
Expenses, excluding distribution and service (12b-1)
fees .94%
Net investment income .64%
Class A, B, C and Z shares:
Portfolio turnover rate 145%
</TABLE>
------------------------------
(a) Commencement of investment operations.
(b) Annualized.
(c) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
26 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------------------------
Year Ended September 30,
------------------------------------------ November 7, 1996(a)
1999 1998 Through September 30, 1997
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 10.98 $ 12.89 $ 10.00
-------- -------- --------
.07 .15 .09
2.68 (1.32) 2.87
-------- -------- --------
2.75 (1.17) 2.96
-------- -------- --------
(.06) (.12) (.07)
(.91) (.62) --
-------- -------- --------
(.97) (.74) (.07)
-------- -------- --------
$ 12.76 $ 10.98 $ 12.89
-------- -------- --------
26.00% (9.40)% 29.72%
$ 37,158 $ 31,339 $ 34,846
$ 35,815 $ 35,145 $ 27,008
1.30% 1.31% 1.58%(b)
1.05% 1.06% 1.33%(b)
.54% 1.20% .90%(b)
111% 99% 55%
</TABLE>
See Notes to Financial Statements 27
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class B
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 12.68
----------
Income from investment operations
Net investment income (loss) (.02)
Net realized and unrealized gain (loss) on investment
transactions 3.31
----------
Total from investment operations 3.29
----------
Less distributions
Dividends from net investment income --
Distributions from net realized gains (1.36)
----------
Total distributions (1.36)
----------
Net asset value, end of year $ 14.61
----------
----------
TOTAL RETURN(c) 28.31%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000) $108,440
Average net assets (000) $ 96,325
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees 1.94%
Expenses, excluding distribution and service (12b-1) fees .94%
Net investment income (.12)%
</TABLE>
------------------------------
(a) Commencement of investment operations.
(b) Annualized.
(c) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
28 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------------------------------
Year Ended September 30,
------------------------------------------ November 7, 1996(a)
1999 1998 through September 30, 1997
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 10.96 $ 12.86 $ 10.00
-------- -------- --------
(.03) .06 .02
2.67 (1.31) 2.86
-------- -------- --------
2.64 (1.25) 2.88
-------- -------- --------
(.01) (.03) (.02)
(.91) (.62) --
-------- -------- --------
(.92) (.65) (.02)
-------- -------- --------
$ 12.68 $ 10.96 $ 12.86
-------- -------- --------
-------- -------- --------
24.98% (10.01)% 28.83%
$ 92,032 $ 84,751 $ 87,558
$ 94,904 $ 93,465 $ 62,575
2.05% 2.06% 2.33%(b)
1.05% 1.06% 1.33%(b)
(.20)% .46% .15%(b)
</TABLE>
See Notes to Financial Statements 29
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class C
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 12.68
--------
Income from investment operations
Net investment income (loss) (.01)
Net realized and unrealized gain (loss) on investment
transactions 3.30
--------
Total from investment operations 3.29
--------
Less distributions
Dividends from net investment income --
Distributions from net realized gains (1.36)
--------
Total distributions (1.36)
--------
Net asset value, end of year $ 14.61
--------
--------
TOTAL RETURN(c) 28.31%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000) $ 13,457
Average net assets (000) $ 9,977
Ratios to average net assets:
Expenses, including distribution and service (12b-1)
fees 1.94%
Expenses, excluding distribution and service (12b-1)
fees .94%
Net investment income (.10)%
Portfolio turnover rate
</TABLE>
------------------------------
(a) Commencement of investment operations.
(b) Annualized.
(c) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
30 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class C
---------------------------------------------------------------------------------------
Year Ended September 30,
------------------------------------------ November 7, 1996(a)
1999 1998 through September 30, 1997
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
$10.96 $12.86 $10.00
------- ------- -------
(.02) .06 .02
2.66 (1.31) 2.86
------- ------- -------
2.64 (1.25) 2.88
------- ------- -------
(.01) (.03) (.02)
(.91) (.62) --
------- ------- -------
(.92) (.65) (.02)
------- ------- -------
$12.68 $10.96 $12.86
------- ------- -------
------- ------- -------
24.98% (10.01)% 28.83%
$7,636 $7,124 $7,111
$7,702 $7,734 $5,631
2.05% 2.06% 2.33%(b)
1.05% 1.06% 1.33%(b)
(.19)% .46% .15%(b)
111% 99% 55%
</TABLE>
See Notes to Financial Statements 31
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class Z
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.80
--------
Income from investment operations
Net investment income .04
Net realized and unrealized gain (loss) on investment
transactions 3.44
--------
Total from investment operations 3.48
--------
Less distributions
Dividends from net investment income --
Distributions from net realized gains (1.36)
--------
Total distributions (1.36)
--------
Net asset value, end of period $ 14.92
--------
--------
TOTAL RETURN(c) 29.64%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 17,092
Average net assets (000) $ 8,446
Ratios to average net assets:
Expenses, including distribution and service (12b-1)
fees .94%
Expenses, excluding distribution and service (12b-1)
fees .94%
Net investment income .96%
</TABLE>
------------------------------
(a) Commencement of investment operations.
(b) Annualized.
(c) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
32 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class Z
---------------------------------------------------------------------------------------
Year Ended September 30,
------------------------------------------ November 7, 1996(a)
1999 1998 through September 30, 1997
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
$11.00 12.93 $10.00
------- ------- -------
.09 .17 .10
2.69 (1.33) 2.92
------- ------- -------
2.78 (1.16) 3.02
------- ------- -------
(.07) (.15) (.09)
(.91) (.62) --
------- ------- -------
(.98) (.77) (.09)
------- ------- -------
$12.80 $11.00 $12.93
------- ------- -------
------- ------- -------
26.31% (9.31)% 30.30%
$4,263 $1,836 $ 609
$3,088 $1,374 $ 227
1.05% 1.06% 1.33%(b)
1.05% 1.06% 1.33%(b)
.76% 1.54% 1.15%(b)
</TABLE>
See Notes to Financial Statements 33
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Report of Independent Accountants
To the Shareholders and Board of Directors of
The Prudential Investment Portfolios, Inc.--
Prudential Jennison Equity Opportunity 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 The Prudential Investment
Portfolios, Inc.--Prudential Jennison Equity Opportunity Fund (the 'Fund', one
of the portfolios constituting The Prudential Investment Portfolios, Inc.)
(formerly Prudential Jennison Growth & Income Fund) at September 30, 2000, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States of America. 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 audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, 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 audits, which included confirmation of securities at
September 30, 2000 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
November 22, 2000
34
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Equity
Opportunity Fund
Tax Information (Unaudited)
We are required by the Internal Revenue Code to advise you within 60 days
of the Fund's fiscal year end (September 30, 2000) as to the federal tax status
of dividends and distributions paid by the Fund during such fiscal year.
Accordingly, we are advising you that during its fiscal period ended September
30, 2000, the Series paid to Class A, B, C and Z shares a short-term capital
gain distribution of $.79 and a long-term capital gain distribution of $.57
which is taxable as such. The Fund utilized redemptions as distributions in the
amount of $.004, $.249 and $.262 of ordinary income, short-term capital gains
and long-term capital gains, respectively, for each class of shares.
We also wish to advise you that 18.09% of the dividends paid from ordinary
income in the fiscal year ended September 30, 2000 qualified for the corporate
dividends received deduction available to corporate taxpayers.
We are required by Massachusetts, Missouri and Oregon to inform you that
dividends which have been derived from interest on federal obligations are not
taxable to shareholders. Please be advised that 13.60% of the dividends paid
from ordinary income in the fiscal year ended September 30, 2000, qualify for
each of these states' tax exclusion.
In January 2001, you will be advised on IRS Form 1099 DIV or substitute
1099 DIV as to the federal tax status of the dividends and distributions
received by you in calendar year 2000.
35
<PAGE>
Prudential Jennison Equity Opportunity Fund
Getting the Most from Your Prudential Mutual Fund
Some mutual fund shareholders won't ever read this--
they don't read annual and semiannual reports. It's
quite understandable. These annual and semiannual
reports are prepared to comply with federal
regulations, and are often written in language that
is difficult to understand. So when most people run
into those particularly daunting sections of these
reports, they don't read them.
We think that's a mistake
At Prudential Mutual Funds, we've made some changes
to our report to make it easier to understand and
more pleasant to read. We hope you'll find it
profitable to spend a few minutes familiarizing
yourself with your investment. Here's what you'll
find in the report:
Performance at a Glance
Since an investment's performance is often a
shareholder's primary concern, we present
performance information in two different formats.
You'll find it first on the "Performance at a
Glance" page where we compare the Fund and the
comparable average calculated by Lipper, Inc., a
nationally recognized mutual fund rating agency. We
report both the cumulative total returns and the
average annual total returns. The cumulative total
return is the total amount of income and
appreciation the Fund has achieved in various time
periods. The average annual total return is an
annualized representation of the Fund's
performance. It gives you an idea of how much the
Fund has earned in an average year for a given time
period. Under the performance box, you'll see
legends that explain the performance information,
whether fees and sales charges have been included
in returns, and the inception dates for the Fund's
share classes.
See the performance comparison charts at the back
of the report for more performance information.
Please keep in mind that past performance is not
indicative of future results.
<PAGE>
www.prudential.com (800) 225-1852
investment adviser's report
The portfolio manager, who invests your money for
you, reports on successful--and not-so-successful--
strategies in this section of your report. Look for
recent purchases and sales here, as well as information
about the sectors the portfolio manager favors, and any
changes that are on the drawing board.
Portfolio of Investments
This is where the report begins to appear
technical, but it's really just a listing of
each security held at the end of the reporting
period, along with valuations and other
information. Please note that sometimes we discuss
a security in the "Investment Adviser's Report"
section that doesn't appear in this listing because
it was sold before the close of the reporting
period.
Statement of Assets and Liabilities
The balance sheet shows the assets (the value of
the Fund's holdings), liabilities (how much the
Fund owes), and net assets (the Fund's
equity, or holdings after the Fund pays its debts)
as of the end of the reporting period. It also
shows how we calculate the net asset value per
share for each class of shares. The net asset value
is reduced by payment of your dividend, capital gain,
or other distribution, but remember that the money
or new shares are being paid or issued to you. The
net asset value fluctuates daily, along with the
value of every security in the portfolio.
Statement of Operations
This is the income statement, which details income
(mostly interest and dividends earned) and expenses
(including what you pay us to manage your money).
You'll also see capital gains here--both realized
and unrealized.
<PAGE>
Prudential Jennison Equity Opportunity Fund
Getting the Most from Your Prudential Mutual Fund
Statement of Changes in Net Assets
This schedule shows how income and expenses
translate into changes in net assets. The Fund
is required to pay out the bulk of its income
to shareholders every year, and this statement
shows you how we do it (through dividends and
distributions) and how that affects the net assets.
This statement also shows how money from investors
flowed into and out of the Fund.
Notes to Financial Statements
This is the kind of technical material that can
intimidate readers, but it does contain useful
information. The Notes provide a brief history and
explanation of your Fund's objectives. In addition,
they outline how Prudential Mutual Funds prices
securities. The Notes also explain who manages and
distributes the Fund's shares and, more
importantly, how much they are paid for doing so.
Finally, the Notes explain how many shares are
outstanding and the number issued and redeemed over
the period.
Financial Highlights
This information contains many elements from prior
pages, but on a per-share basis. It is designed to
help you understand how the Fund performed, and to
compare this year's performance and expenses to those
of prior years.
Independent accountant's Report
Once a year, an outside auditor looks over our
books and certifies that the financial statements
are fairly presented and comply with generally
accepted accounting principles.
Tax Information
This is information that we report annually about
how much of your total return is taxable. Should
you have any questions, you may want to consult a
tax adviser.
<PAGE>
www.prudential.com (800) 225-1852
Performance Comparison
These charts are included in the annual report and
are required by the Securities Exchange Commission.
Performance is presented here as a hypothetical
$10,000 investment in the Fund since its inception
or for 10 years (whichever is shorter). To help you
put that return in context, we are required to
include the performance of an unmanaged, broad-based
securities index as well. The index does not reflect
the cost of buying the securities it contains or
the cost of managing a mutual fund. Of course, the
index holdings do not mirror those of the Fund--the
index is a broad-based reference point commonly used
by investors to measure how well they are doing. A
definition of the selected index is also provided.
Investors cannot invest directly in an index.
<PAGE>
Prudential Jennison Equity Opportunity Fund
Class A Growth of a $10,000 Investment
(GRAPHIC)
Average Annual Total Returns as of 9/30/00
One Year Since Inception
With Sales Charge 22.76% 16.58%
Without Sales Charge 29.23% 18.12%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since
inception of the share class. The graph compares a
$10,000 investment in Prudential Jennison Equity
Opportunity Fund. (Class A shares) with a similar
investment in the Standard & Poor's 500 Composite
Stock Price Index (S&P 500 Index) by portraying the
initial account value at the commencement of
operations of Class A shares, and the account value
at the end of the current fiscal year (September
30, 2000), as measured on a quarterly basis,
beginning in November 1996. For purposes of the
graph, and unless otherwise indicated, it has been
assumed that (a) the maximum applicable front-end
sales charge was deducted from the initial $10,000
investment in Class A shares; (b) all recurring
fees (including management fees) were deducted; and
(c) all dividends and distributions were
reinvested.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The S&P
500 Index total returns include the reinvestment of
all dividends, but do not include the effect of sales
charges or operating expenses of a mutual fund. The
securities that comprise the Index may differ
substantially from the securities in the Fund. The
Index is not the only one that may be used to
characterize performance of large-capitalization
stock funds. Other indexes may portray different
comparative performance. Investors cannot invest
directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class A Growth of a $10,000 Investment
(GRAPHIC)
Average Annual Total Returns as of 9/30/00
One Year Since Inception
With Sales Charge 23.31% 16.93%
Without Sales Charge 28.31% 17.25%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since
inception of the share class. The graph compares a
$10,000 investment in the Prudential Jennison
Equity Opportunity Fund. (Class B shares) with a
similar investment in the Standard & Poor's 500
Composite Stock Price Index (S&P 500 Index) by
portraying the initial account value at the
commencement of operations of Class B shares, and
the account value at the end of the current fiscal
year (September 30, 2000), as measured on a
quarterly basis, beginning in November 1996. For
purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable contingent deferred sales charge was
deducted from the value of the investment in Class
B shares, assuming full redemption on September 30,
2000; (b) all recurring fees (including management
fees) were deducted; and (c) all dividends and
distributions were reinvested. Class B shares will
automatically convert to Class A shares, on a quarterly
basis, beginning approximately seven years after purchase.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The S&P
500 Index total returns include the reinvestment of
all dividends, but do not include the effect of sales
charges or operating expenses of a mutual fund. The
securities that comprise the Index may differ
substantially from the securities in the Fund. The
Index is not the only one that may be used to
characterize performance of large-capitalization
stock funds. Other indexes may portray different
comparative performance. Investors cannot invest
directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
Prudential Jennison Equity Opportunity Fund
Class C Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 9/30/00
One Year Since Inception
With Sales Charge 26.02% 16.95%
Without Sales Charge 28.31% 17.25%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since
inception of the share class.The graph compares a
$10,000 investment in the Prudential Jennison
Equity Opportunity Fund. (Class C shares) with a
similar investment in the Standard & Poor's 500
Composite Stock Price Index (S&P 500 Index) by
portraying the initial account value at the
commencement of operations of Class C shares, and
the account values at the end of the current fiscal
year (September 30, 2000), as measured on a
quarterly basis, beginning in November 1996. For
purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable front-end sales charge was deducted from
the initial $10,000 investment in Class C shares;
(b) the maximum applicable contingent deferred
sales charge was deducted from the value of the
investment in Class C shares, assuming full
redemption on September 30, 2000; (c) all recurring
fees (including management fees) were deducted; and
(d) all dividends and distributions were
reinvested.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The S&P
500 Index total returns include the reinvestment of
all dividends, but do not include the effect of sales
charges or operating expenses of a mutual fund. The
securities that comprise the Index may differ
substantially from the securities in the Fund. The
Index is not the only one that may be used to
characterize performance of large-capitalization
stock funds. Other indexes may portray different
comparative performance. Investors cannot invest
directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class Z Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 9/30/00
One Year Since Inception
With Sales Charge 29.64% 18.46%
Without Sales Charge 29.64% 18.46%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since
inception of the share class.The graph compares a
$10,000 investment in the Prudential Jennison
Equity Opportunity Fund. (Class Z shares) with a
similar investment in the Standard & Poor's 500
Composite Stock Price Index (S&P 500 Index) by
portraying the initial account value at the
commencement of operations of Class Z shares, and
the account value at the end of the current fiscal
year (September 30, 2000), as measured on a
quarterly basis, beginning in November 1996. For
purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) all
recurring fees (including management fees) were
deducted; and (b) all dividends and distributions
were reinvested. Class Z shares are not subject to
a sales charge or distribution and service (12b-1)
fees.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The S&P
500 Index total returns include the reinvestment of
all dividends, but do not include the effect of sales
charges or operating expenses of a mutual fund. The
securities that comprise the Index may differ
substantially from the securities in the Fund. The
Index is not the only one that may be used to
characterize performance of large-capitalization
stock funds. Other indexes may portray different
comparative performance. Investors cannot invest
directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
FOR MORE INFORMATION
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Visit Prudential's website at:
http://www.prudential.com
Trustees
Saul K. Fenster, Ph.D.
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
W. Scott McDonald
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
Judy A. Rice
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
Officers
David R. Odenath, Jr., President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Marguerite E. H. Morrison, Secretary
William V. Healey, Assistant Secretary
Jonathan D. Shain, Assistant Secretary
Manager
Prudential Investments
Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
Jennison Associates LLC
466 Lexington Avenue
New York, NY 10017
Distributor
Prudential Investment
Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 8098
Philadelphia, PA 19101
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
Fund Symbols NASDAQ CUSIP
Class A PJIAX 74437E503
Class B PJIBX 74437E602
Class C PJGCX 74437E701
Class Z PJGZX 74437E800
MF172E
(LOGO) Printed on Recycled Paper
<PAGE>
ANNUAL REPORT SEPTEMBER 30, 2000
Prudential
Jennison Growth Fund
Fund Type Stock
Objective Long-term growth of capital
(GRAPHIC)
This report is not authorized for distribution to
prospective investors unless preceded or
accompanied by a current prospectus.
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.
(LOGO)
<PAGE>
Build on the Rock
Investment Goals and Style
The Prudential Jennison Growth Fund seeks to
achieve long-term growth of capital primarily
through investment in stocks of medium
and large companies (generally those with a total
market value of at least $1 billion) that we believe
have above-average prospects for growth.
The Fund may also invest in stocks of foreign
companies, investment-grade bonds, and securities
issued or backed by the U.S. government and its
agencies, such as mortgage-backed securities. There
can be no assurance that the Fund will achieve its
investment objective.
Portfolio Composition
Sectors expressed as a percentage of
net assets as of 9/30/00
35.7% Communication Services
16.2 Financial Services
15.8 Technology
12.3 Healthcare
9.5 Consumer Staples
5.5 Consumer Cyclical
5.0 Cash & Equivalents
Ten Largest Holdings
Expressed as a percentage of
net assets as of 9/30/00
4.0% Home Depot, Inc.
Retail
4.0 Citigroup, Inc.
Bank & Financial Services
3.5 General Electric Co.
Diversified Manufacturing
3.3 Pfizer, Inc.
Pharmaceuticals
3.1 Cisco Systems, Inc.
Networking
3.0 Viacom, Inc.
Media & Entertainment
2.9 Nokia Corp. (ADR)(Finland)
Telecommunications Equipment
2.8 Morgan Stanley Dean Witter
Banks & Financial Services
2.7 Qwest Communications
International, Inc.
Telecommunications
2.6 Vodafone AirTouch PLC
(ADR)(United Kingdom)
Telecommunications
Holdings are subject to change.
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
Cumulative Total Returns1 As of 9/30/00
<TABLE>
<CAPTION>
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 27.02% N/A 189.15%
Class B 26.04 N/A 178.69
Class C 26.04 N/A 178.69
Class Z 27.39 200.01% 183.34
Lipper Large-Cap Growth Fund Avg.3 30.33 187.52 ***
</TABLE>
Average Annual Total Returns1 As of 9/30/00
<TABLE>
<CAPTION>
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 20.67% N/A 22.84%
Class B 21.04 N/A 23.11
Class C 23.78 N/A 22.95
Class Z 27.39 24.57% 22.25
</TABLE>
Past performance is not indicative of future
results. Principal and investment return will
fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their
original cost.
1 Source: Prudential Investments Fund Management
LLC and Lipper Inc. The cumulative total returns do
not take into account sales charges. The average
annual total returns do take into account
applicable sales charges. The Fund charges a
maximum front-end sales charge of 5% for Class A
shares. Class B shares are subject to a declining
contingent deferred sales charge (CDSC) of 5%, 4%,
3%, 2%, 1%, and 1% for six years. Class B shares
will automatically convert to Class A shares, on a
quarterly basis, approximately seven years after
purchase. Class C shares are subject to a front-end
sales charge of 1% and a CDSC of 1% for 18 months.
Class Z shares are not subject to a sales charge or
distribution and service (12b-1) fees.
2 Inception dates: Class A, B, and C, 11/2/95;
Class Z, 4/15/96. On 9/20/96, The Prudential
Institutional Fund--Growth Stock Fund merged into
the Prudential Jennison Growth Fund, Class Z
shares. Performance prior to 9/20/96 is for the
Growth Stock Fund, which had an inception date of
11/5/92.
3 Lipper average returns are for all funds in each
share class for the one- and five-year periods in
the Large-Cap Growth Fund category. The Lipper
average is unmanaged. Large-Cap Growth funds, by
portfolio practice, invest at least 75% of their equity
assets in companies with market capitalizations (on
a three-year weighted basis) of greater than 300%
of the dollar-weighted median market capitalization
of the S&PR Mid-Cap 400 Index. Large-Cap Growth
funds normally invest in companies with long-term
earnings expected to grow significantly faster than
the earnings of the stocks represented in a major
unmanaged stock index. These funds will normally
have an above-average price/earnings ratio, price-
to-book ratio, and three-year earnings growth
figure.
S&PR is a registered trademark of the Standard &
Poor's Corporation.
***Lipper Since Inception returns are 192.40% for
Class A, B, and C, and 327.12% for Class Z, based
on all funds in each share class.
1
<PAGE>
(LOGO) November 15, 2000
DEAR SHAREHOLDER,
The stock market underwent a dramatic change of
mood in the middle of the Prudential Jennison
Growth Fund's fiscal year ended September 30, 2000.
Early in the period, investors strongly favored
growth stocks--particularly technology and
telecommunications. Then market preference
alternated rapidly and sharply between growth and
value styles. Our investment adviser thinks an
unusual period of large gains by a few favored
growth stocks is coming to an end, and markets are
returning to historical norms, with moderate gains
more broadly spread.
Over this reporting period, the Fund's Class A
shares returned 27.02%--20.67% to those paying the
maximum one-time Class A share sales charge, well
above the 10-year averages for both the Standard &
Poor's 500 Index (S&P 500) and the Lipper Growth
Fund Average. However, most of the gains came early
in the period. A substantial portion were given
back in the second half as growth stocks
underperformed an
overall market that also was in decline. Both gain
and loss were affected by the fact that a year ago
35% of the Fund's net assets were invested in
technology stocks. Their extraordinary rise was the
largest factor in the Fund's strong performance.
Some of these gains were locked in by sales, while
some shares declined in value. Consequently, the
Fund begins its new fiscal year with a somewhat
more diversified portfolio.
Historically--and the past year was no exception--
value funds tend to have better returns when growth
funds are falling. Yet, despite a slowdown, there
are few signs that the current economic growth
cycle will reverse. You can potentially share in
the prospects of a diversified selection of the
companies driving the economy's expansion through
the Prudential Jennison Growth Fund.
Yours sincerely,
David R. Odenath, Jr., President
The Prudential Investment Portfolios, Inc./
Prudential Jennison Growth Fund
2
<PAGE>
Prudential Jennison Growth Fund
Annual Report September 30, 2000
Investment Adviser's Report
Where we're coming from
Over the past few years, there has been a global
boom in investments in technology and
telecommunications infrastructure (switches,
networks, etc.). This build-out helped drive
economic growth through the longest continuous
period in U.S. history. Since the beginning of
1999, corporate profits have been escalating
rapidly. Jennison traditionally focuses on
companies that are increasing their earnings by 15%
to 20%. This is more than twice the long-term 7%
average increase in corporate profit (before tax)
for U.S. companies, but we believe it represents a
pace that an established company can sustain for a
reasonable time. During the recent profit surge, we
kept increasing our earnings estimates, and yet
companies kept beating them. The price of
technology and telecommunications shares rose
accordingly.
Technology. As this fiscal year began, our
technology holdings had reached 35% of net assets,
and they grew to a peak of about 42% during the
period. We had substantial positions in EMC
(computer network memory), Cisco Systems (see
Comments on Largest Holdings), Juniper Networks
(Internet routers), JDS Uniphase (optical
computing), and Sun Microsystems (network
computers), among others. Several of these doubled
or tripled in value, or gained as much as 622% over
the period.
We took some of our profits in the technology group
near the market top. However, we would have had a
much higher return had we sold more.
The technology sector began a sharp decline in
March 2000. Although our holdings fell less, on
average, than the S&P 500 technology group, we did
own more of them, and we gave up our advantage over
the Lipper Large-Cap Growth Fund Average. Some of
our largest losses over the fiscal year were on the
technology blue chips such as Microsoft, IBM, and
Ericsson, and on the world's largest wireless
telecommunications firm, Vodafone.
3
<PAGE>
Prudential Jennison Growth Fund
Holdings expressed as a percentage of the Fund's net assets
Comments on Largest Holdings As of 9/30/00
------------------------------------------------------------
4.0% Home Depot, Inc./Retail
The dominant company in the U.S. building materials
industry, and the only one beginning to move
internationally. A well-managed company that we
believe can grow 20% to 25% a year for the
foreseeable future. Home Depot has high returns on
equity and on capital. The share price dropped
after the end of our reporting period because
lumber prices were weak; we bought more on the
opportunity.
4.0% Citigroup, Inc./Bank & Financial Services
Extremely strong management, one of only four top
players in the global capital markets business, and
a business with long-range growth potential because
of the surge in global restructuring. We expect
growth of about 15% a year, and Citigroup also
provides balance to the rest of our portfolio
because of its relative independence of technology
and its lower share price.
3.5% General Electric Co./Diversified Manufacturing
Another case in which top management is a company's
strongest asset. Beyond that, GE is broadly diversified,
primarily not in technology, and has dominant positions
in all the businesses in which it competes. The proposed
merger with Honeywell would further enhance its strength
in aerospace.
3.3% Pfizer, Inc./Pharmaceuticals
The recently finalized merger with Warner Lambert
gives Pfizer the dominant position in many drug
categories, as well as substantial opportunities
to reduce costs. Drug companies, in general, offer
growth that is not dependent upon economic growth,
a particular advantage when economies are slowing.
We expect earnings growth of 20% a year or better
over the next three years.
3.1% Cisco Systems, Inc./Networking
Leading data networking equipment manufacturer.
Provides most of the Internet switching
infrastructure for both carriers and corporate
entry points, as well as internal corporate
networks. The Internet is causing Cisco's revenues
and earnings to accelerate from already high
levels. These trends should continue for the
foreseeable future.
Holdings are subject to change.
4
<PAGE>
www.prudential.com (800) 225-1852
Annual Report September 30, 2000
As a result of our sales and the falling values in
the market, our technology weighting has dropped to
29%, slightly below the S&P 500 weighting. We
redeployed the money into other sectors, especially
healthcare and financial services.
Financial services. As investors became more
confident that economic growth was slowing to
sustainable levels, financials as a group
benefited. The investment banks also benefited from
very active capital markets as industries
consolidate globally and continue to raise funds to
finance new technological infrastructure. Our
financial holdings had, on average, an even higher
return over the 12-month reporting period than our
technology stocks, but we had less invested in
them. We focused on the dominant companies in this
sector, which is in the process of consolidating
into a few global giants. We owned Citigroup (see
Comments on Largest Holdings), Morgan Stanley Dean
Witter (investment banking), American International
Group (insurance), and MBNA (credit cards). We took
our profits on Merrill Lynch, American Express, and
Goldman Sachs.
Healthcare. Our drug and biotechnology stocks, by
and large, had a good year. We benefited
particularly from the acquisition of Warner Lambert
(our tenth largest holding at one point) by Pfizer
(see Comments on Largest Holdings). The
biotechnology firms Genentech and Amgen also made
substantial contributions to our return.
Where we're going
We believe that over the past few years investors
gradually came to realize the growth potential of
technology firms, but that now after the
extraordinary gains of the past two years, much of
that potential has been priced into their stocks.
This doesn't mean that their growth will subside or
that their stocks are overpriced; it means that
they have, as a group, about the same possibilities
for share price appreciation from their current
levels as the rest of the market does. As in other
sectors, there are individual companies whose
shares are undervalued and some that are
overvalued, given their growth potential.
Accordingly, we have broadened our portfolio's
focuses; in fact, our five
5
<PAGE>
Prudential Jennison Growth Fund
Annual Report September 30, 2000
largest holdings come from five different
industries. Our four largest sectors, as of the end
of September, comprised only 70% of our total
investments. We expect that individual stock
selection, not sector selection, will be required
to earn above-market returns over the next few
years. We think that's a good environment for
Jennison's research-intensive investment process.
As for the overall market, if we are correct that
growth potential is now priced into most growth
stocks, returns should come down to the long-term
market average of about 12% to 13%. If current
prices are still on the optimistic side, the
adjustment period of lower returns may continue for
a while. In either case, we caution shareholders
not to expect the above 20% market that
characterized 1995 through 1999. That run was
already two years longer than the previous record
of such high returns.
Prudential Jennison Growth Fund Management Team
6
<PAGE>
Prudential Jennison Growth Fund
Annual Report September 30, 2000
Financial
Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Portfolio of Investments as of September 30, 2000
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 95.0%
Common Stocks
-------------------------------------------------------------------------------------
Aerospace 0.5%
579,700 Boeing Co. $ 36,521,100
-------------------------------------------------------------------------------------
Banks & Financial Services 14.1%
3,064,200 American Express Co. 186,150,150
1,998,000 Chase Manhattan Corp. 92,282,625
5,295,033 Citigroup, Inc. 286,262,722
1,250,300 Goldman Sachs Group, Inc. 142,456,056
1,607,200 Merrill Lynch & Co., Inc. 106,075,200
2,199,180 Morgan Stanley Dean Witter & Co. 201,087,521
----------------
1,014,314,274
-------------------------------------------------------------------------------------
Biotechnology 0.9%
2,092,800 Serono SA (ADR)(Switzerland)(a) 63,307,200
-------------------------------------------------------------------------------------
Computer Systems/Peripherals 7.0%
4,031,900 Compaq Computer Corp. 111,199,802
1,453,100 EMC Corp.(a) 144,038,538
1,489,400 Hewlett-Packard Co. 144,471,800
921,300 Sun Microsystems, Inc.(a) 107,561,775
----------------
507,271,915
-------------------------------------------------------------------------------------
Diversified Manufacturing 3.5%
4,360,500 General Electric Co. 251,546,344
-------------------------------------------------------------------------------------
EDP Software & Services 0.8%
421,550 VERITAS Software Corp.(a) 59,860,100
-------------------------------------------------------------------------------------
Electronic Components 5.7%
1,311,200 ASM Lithography Holding NV(a) 42,368,150
290,700 Broadcom Corp. 70,858,125
2,760,000 Intel Corp. 114,712,500
883,600 JDS Uniphase Corp.(a) 83,665,875
2,045,100 Texas Instruments, Inc. 96,503,156
----------------
408,107,806
</TABLE>
8 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Household & Personal Care Products 0.3%
538,000 Estee Lauder Co., Inc. $ 19,704,250
-------------------------------------------------------------------------------------
Industrial Technology/Instruments 0.9%
1,146,100 Applied Materials, Inc.(a) 67,978,056
-------------------------------------------------------------------------------------
Insurance 2.1%
1,593,125 American International Group, Inc. 152,442,148
-------------------------------------------------------------------------------------
Media & Entertainment 9.0%
5,858,700 AT&T Corp. - Liberty Media Group(a) 105,456,600
603,200 Clear Channel Communications, Inc.(a) 34,080,800
889,900 Omnicom Group, Inc. 64,907,081
1,213,400 Time Warner, Inc. 94,948,550
1,802,800 Univision Communications, Inc.(a) 67,379,650
328,400 Verisign, Inc.(a) 66,521,525
3,740,666 Viacom, Inc.(a) 218,828,961
----------------
652,123,167
-------------------------------------------------------------------------------------
Networking 5.2%
4,081,400 Cisco Systems, Inc.(a) 225,497,350
308,900 Juniper Networks, Inc.(a) 67,629,794
1,520,000 Metromedia Fiber Network, Inc. 36,955,000
374,400 Network Appliance, Inc.(a) 47,689,200
----------------
377,771,344
-------------------------------------------------------------------------------------
Oil Services 2.0%
1,776,300 Schlumberger Ltd. 146,211,694
-------------------------------------------------------------------------------------
Pharmaceuticals 12.3%
2,767,200 American Home Products Corp. 156,519,750
1,608,600 Amgen, Inc.(a) 112,325,522
514,500 Genentech, Inc.(a) 95,536,219
1,687,500 Lilly (Eli) & Co. 136,898,437
5,264,525 Pfizer, Inc. 236,574,592
2,316,768 Pharmacia & Upjohn, Inc. 139,440,474
151,600 Schering-Plough Corp. 7,049,400
----------------
884,344,394
</TABLE>
See Notes to Financial Statements 9
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Retail 9.2%
5,397,150 Home Depot, Inc. $ 286,386,272
2,731,600 Kohl's Corp.(a) 157,579,175
2,256,400 Tiffany & Co. 87,012,425
2,819,700 Wal-Mart Stores, Inc. 135,698,062
----------------
666,675,934
-------------------------------------------------------------------------------------
Telecommunications 11.1%
1,069,650 Allegiance Telecom, Inc.(a) 39,844,462
4,152,400 Global Crossing Ltd. 128,724,400
471,300 Level 3 Communications, Inc.(a) 36,349,013
2,021,200 Nextel Communications, Inc.(a) 94,491,100
1,222,100 NEXTLINK Communications, Inc.(a) 43,002,644
1,608,487 NTL, Inc.(a)(b) 74,493,054
4,091,100 Qwest Communications International, Inc.(a) 196,628,494
5,041,186 Vodafone AirTouch PLC (ADR)(United Kingdom)(a) 186,523,882
----------------
800,057,049
-------------------------------------------------------------------------------------
Telecommunications Equipment 10.4%
474,000 Applied Micro Circuits Corp.(a) 98,147,625
403,100 Corning, Inc. 119,720,700
3,342,700 Ericsson (L.M.) Telephone Co., Inc. (ADR)(Sweden) 49,513,744
2,855,200 General Motors Corp. 'H' 106,156,336
1,811,800 Motorola, Inc. 51,183,350
5,245,800 Nokia Corp. (ADR)(Finland) 208,848,412
1,915,000 Nortel Networks Corp. 114,062,188
----------------
747,632,355
----------------
Total long-term investments (cost $5,368,476,671) 6,855,869,130
----------------
</TABLE>
10 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Portfolio of Investments as of September 30, 2000 Cont'd.
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 4.5%
Commercial Paper
$ 145,000 American Express Credit Corp.
6.53%, 10/2/00 $ 145,000,000
77,885 Ford Motor Credit Corp.
6.00%, 10/2/00 77,885,000
100,000 IBM Credit Corp.
6.62%, 10/2/00 100,000,000
----------------
Total short-term investments
(cost $322,885,000) 322,885,000
----------------
Total Investments (cost $5,691,361,671; Note
4) 99.5% 7,178,754,130
Other assets in excess of liabilities 0.5% 37,968,873
----------------
Net Assets 100% $ 7,216,723,003
----------------
----------------
</TABLE>
--------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Portion of securities on loan with an aggregate market value of $36,998,657;
received securities as collateral with an aggregate market value of
$37,062,262.
ADR--American Depository Receipt.
NV--Naamkee Vennootnchap (Dutch Corporation).
PLC--Public Limited Company (British Corporation).
SA--Sociedad Anomia (Spanish Corporation) or Societe Anonyme (French
Corporation).
See Notes to Financial Statements 11
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
September 30, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $5,691,361,671) $ 7,178,754,130
Cash 13,433
Receivable for investments sold 164,848,069
Receivable for Series shares sold 16,518,678
Dividends and interest receivable 1,870,209
Deferred expenses and other assets 104,364
Receivable for securities lending income 11,929
--------------------
Total assets 7,362,120,812
--------------------
LIABILITIES
Payable for investments purchased 76,555,837
Payable for Series shares reacquired 61,660,228
Management fee payable 3,518,173
Distribution fees payable 2,538,500
Accrued expenses and other liabilities 1,111,875
Securities lending rebate payable 13,196
--------------------
Total liabilities 145,397,809
--------------------
NET ASSETS $ 7,216,723,003
--------------------
--------------------
Net assets were comprised of:
Common stock, at par $ 301,061
Paid-in capital in excess of par 5,154,586,492
--------------------
5,154,887,553
Accumulated net realized gain on investments 574,442,991
Net unrealized appreciation on investments 1,487,392,459
--------------------
Net assets, September 30, 2000 $ 7,216,723,003
--------------------
--------------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Statement of Assets and Liabilities Cont'd.
<TABLE>
<CAPTION>
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
Class A:
Net asset value and redemption price per share
($1,745,454,335 / 72,138,339 shares of common stock
issued and outstanding) $24.20
Maximum sales charge (5% of offering price) 1.27
--------------------
Maximum offering price to public $25.47
--------------------
--------------------
Class B:
Net asset value, offering price and redemption price per
share ($2,216,911,129 / 95,423,808 shares of common
stock issued and outstanding) $23.23
--------------------
--------------------
Class C:
Net asset value and redemption price per share
($291,541,579 / 12,548,885 shares of common stock
issued and outstanding) $23.23
Sales charge (1% of offering price) .23
--------------------
Offering price to public $23.46
--------------------
--------------------
Class Z:
Net asset value, offering price and redemption price per
share ($2,962,815,960 / 120,949,491 shares of common
stock issued and outstanding) $24.50
--------------------
--------------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Statement of Operations
<TABLE>
<CAPTION>
Year
Ended
September 30, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
NET INVESTMENT LOSS
Income
Dividends (net of foreign withholding taxes of $349,543) $ 23,873,500
Interest 13,847,640
Income from securities loaned, net 4,653,109
------------------
Total income 42,374,249
------------------
Expenses
Management fee 38,074,482
Distribution fee--Class A 3,724,474
Distribution fee--Class B 21,586,408
Distribution fee--Class C 2,429,395
Transfer agent's fees and expenses 8,630,000
Registration fees 830,000
Reports to shareholders 775,000
Custodian's fees and expenses 230,000
Directors' fees and expenses 145,000
Insurance expense 65,000
Legal fees and expenses 65,000
Audit fee 20,000
Amortization of deferred organization expenses 3,225
Miscellaneous 98,216
------------------
Total expenses 76,676,200
------------------
Net investment loss (34,301,951)
------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 743,200,290
Net change in unrealized appreciation/depreciation on
investments 460,985,846
------------------
Net gain on investments 1,204,186,136
------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,169,884,185
------------------
------------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Year
Ended Ended
September 30, 2000 September 30, 1999
<S> <C> <C> <C>
------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss $ (34,301,951) $ (22,210,880)
Net realized gain on investments 743,200,290 201,324,080
Net change in unrealized
appreciation/depreciation of
investments 460,985,846 828,202,820
------------------ ------------------
Net increase in net assets resulting
from operations 1,169,884,185 1,007,316,020
------------------ ------------------
Distributions from net realized capital
gains (Note 1)
Class A (56,726,162) (17,349,525)
Class B (94,312,745) (27,545,469)
Class C (9,330,766) (1,752,623)
Class Z (112,764,183) (38,052,986)
------------------ ------------------
(273,133,856) (84,700,603)
------------------ ------------------
Series share transactions (net of
conversion)
(Note 5)
Net proceeds from shares sold 4,839,587,838 2,794,924,604
Net asset value of shares issued in
reinvestment of distributions 267,626,458 83,061,464
Cost of shares reacquired (3,240,774,223) (1,569,556,414)
------------------ ------------------
Net increase in net assets from Series
share transactions 1,866,440,073 1,308,429,654
------------------ ------------------
Total increase 2,763,190,402 2,231,045,071
NET ASSETS
Beginning of year 4,453,532,601 2,222,487,530
------------------ ------------------
End of year $7,216,723,003 $4,453,532,601
------------------ ------------------
------------------ ------------------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Notes to Financial Statements
Prudential Jennison Growth Fund (the 'Series') is a separately managed
series of The Prudential Investment Portfolios, Inc. (the 'Fund'). The Fund was
incorporated in Maryland on August 10, 1995 and is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Series had no significant operations other than the issuance of
3,334 shares of Class A and 3,333 shares of Class B and Class C common stock for
$100,000 on September 13, 1995 to Prudential Investments Fund Management LLC
('PIFM' or 'Manager'). Investment operations commenced on November 2, 1995.
The Series' investment objective is to achieve long-term growth of
capital. It invests primarily in equity securities (common stock, preferred
stock and securities convertible into common stock) of established companies
with above-average growth prospects.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Series in the preparation of its financial statements.
Securities Valuation: Securities listed on a securities exchange (other
than options on securities and indices) are valued at the last sale price on
such exchange or system 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
last bid price on such day 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 by the Manager, in consultation with the
Subadviser (Jennison Associates LLC 'Jennison'), to be over-the-counter, are
valued by an independent pricing agent or principal market maker. Convertible
debt securities that are actively traded in the over-the-counter market,
including listed securities for which the primary market is believed by the
Manager and the Subadviser to be over-the-counter, are valued at the mean
between the last reported bid and asked prices provided by a principal market
maker. Options on securities and indices traded on an exchange are valued at the
mean between the most recently quoted bid and asked prices on such exchange.
Futures contracts and options thereon traded on a commodities exchange or board
of trade are valued at the last sales price at the close of trading on such
exchange or board of trade or, if there was no sale on the applicable
commodities exchange or board of trade on such day, at the mean between the most
recently quoted bid and asked prices on such exchange or board of trade.
Securities for which market quotations are not readily available, other than
private placements, are valued at a price supplied by an independent pricing
agent, which is, in the opinion of such pricing agent, representative of the
market value of such securities as of the time of determination of
16
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Notes to Financial Statements Cont'd.
net asset value, or using a methodology developed by an independent pricing
agent, which is, in the judgment of the Manager and the Subadviser, able to
produce prices which are representative of market value.
Short-term securities which mature in more than 60 days, for which market
quotations are readily available, are valued at current market quotations as
provided by an independent pricing agent or principal market maker. Short-term
securities which mature in 60 days or less are valued at cost with interest
accrued or discount amortizied to the date of maturity, unless the Board of
Directors determines that such valuation does not represent fair value.
All securities are valued as of 4:15 p.m., New York time.
Securities Lending: The Fund may lend securities to broker-dealers. The
loans are secured by collateral at least equal at all times to the market value
of the securities loaned. Loans are subject to termination at the option of the
borrower or the Fund. Upon termination of the loan, the borrower will return to
the lender securities identical to the loaned securities. The Fund may bear the
risk of delay in recovery of, or even loss of rights in, the securities loaned
should the borrower of the securities fail financially. The Fund receives
compensation, net of any rebate, for lending its securities in the form of fees
or it retains a portion of interest on the investment of any cash received as
collateral. The Fund also continues to receive interest and dividends on the
securities loaned and any gain or loss in the market price of the securities
loaned that may occur during the term of the loan. Prudential Securities
Incorporated ('PSI') is the securities lending agent for the Fund. For the year
ended September 30, 2000, PSI has been compensated approximately $1,551,100 for
these services.
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; interest income is recorded on the accrual
basis and is net of discount accretion and premium amortization. Expenses are
recorded on the accrual basis which may require the use of certain estimates by
management.
Net investment income (loss), other than distribution fees, and realized
and unrealized 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: The Series expects to pay dividends of net
investment income, if any, semi-annually and to make distributions of any net
capital gains at least annually. Dividends and distributions are recorded on the
ex-dividend date. Income distributions and capital gain distributions are
determined in accordance
17
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Notes to Financial Statements Cont'd.
with income tax regulations which may differ from generally accepted accounting
principles.
Taxes: It is the Series' 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 Series' understanding of the applicable country's tax rules
and rates.
Deferred Organization Expenses: Approximately $200,000 of expenses were
incurred in connection with the organization of the Fund. These costs have been
deferred and are being amortized ratably over a period of sixty months from the
date the Series commenced investment operations.
Reclassification of Capital Accounts: The Series accounts and reports
for 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 year ended
September 30, 2000, the Series reclassified current net operating losses and
redemptions utilized as distributions for federal income tax purposes by
decreasing accumulated net investment loss by $34,301,951, decreasing
accumulated net realized gain on investments by $94,296,948 and increasing
paid-in capital by $59,994,997. Net investment income, net realized gains and
net assets were not affected by this change.
Note 2. Agreements
The Fund has a management agreement for the Series with PIFM. Pursuant to a
subadvisory agreement between PIFM and Jennison Associates LLC ('Jennison'),
Jennison furnishes investment advisory services in connection with the
management of the Series. Under the subadvisory agreement, Jennison, subject to
the supervision of PIFM, is responsible for managing the assets of the Series in
accordance with its investment objective and policies.
Effective January 1, 2000, the management fee paid PIFM is computed daily
and payable monthly, at an annual rate of .60% of the Series' average daily net
assets up to $300 million, .575% of the next $4.7 billion and .55% of the
Series' average daily net assets in excess of $5 billion. Until January 1, 2000,
the management fee was payable at an annual rate of .60% of the Series' average
daily net assets. PIFM pays Jennison a subadvisory fee at an annual rate of .30
of 1% of the average daily net assets of the Series up to and including $300
million and .25 of 1% of such assets in excess of $300 million. PIFM also pays
the cost of compensation of officers and
18
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Notes to Financial Statements Cont'd.
employees of the Fund, occupancy and certain clerical and bookkeeping costs of
the Fund. The Series bears all other costs and expenses.
The Fund has a distribution agreement with Prudential Investment
Management Services LLC ('PIMS'), which acts as the distributor of the Fund. The
Fund compensates PIMS for distributing and servicing the Series' Class A, Class
B and Class C shares, pursuant to plans of distribution (the 'Class A, B and C
Plans'), regardless of expenses actually incurred by them. The distribution fees
are accrued daily and payable monthly. No distribution or service fees are paid
to PIMS as distributor of the Class Z shares of the Series.
Pursuant to the Class A, B and C Plans, the Series compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, 1% and 1%
of the average daily net assets of the Class A, B and C shares, respectively.
Such expenses under the plans were .25 of 1%, 1% and 1% of the average daily net
assets of the Class A, B and C shares, respectively, for the year ended
September 30, 2000.
PIMS has advised the Series that it received approximately $2,999,400 and
$1,155,800 in front-end sales charges resulting from sales of Class A and Class
C shares during the year ended September 30, 2000. From these fees, PIMS paid
such sales charges to affiliated broker-dealers, which in turn paid commissions
to salespersons and incurred other distribution costs.
PIMS has advised the Series that for the year ended September 30, 2000, it
received approximately $3,052,100 and $134,700 in contingent deferred sales
charges imposed upon certain redemptions by Class B and C shareholders,
respectively.
PIFM, PIMS and Jennison are wholly owned subsidiaries of The Prudential
Insurance Company of America ('Prudential').
The Fund, along with other unaffiliated registered investment companies
(the 'Funds'), entered into a syndicated credit agreement ('SCA') with an
unaffiliated lender. The maximum commitment under the SCA is $1 billion.
Interest on any such borrowings will be at market rates. The purpose of the
agreement is to serve as an alternative source of funding for capital share
redemptions. The Funds pay a commitment fee of .080 of 1% of the unused portion
of the credit facility. The commitment fee is accrued and paid quarterly on a
pro rata basis by the Funds. The expiration date of the SCA is March 9, 2001.
Prior to March 9, 2000, the commitment fee was .065 of 1% of the unused portion
of the credit facility. The Series did not borrow any amounts pursuant to the
SCA during the year ended September 30, 2000.
19
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Notes to Financial Statements Cont'd.
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the year ended September 30, 2000,
the Series incurred fees of approximately $7,502,000 for the services of PMFS.
As of September 30, 2000, approximately $644,000 of such fees were due to PMFS.
Transfer agent fees and expenses in the Statement of Operations include certain
out-of-pocket expenses paid to nonaffiliates.
For the year ended September 30, 2000, Prudential Securities Incorporated
('PSI'), which is an indirect, wholly owned subsidiary of Prudential, earned
approximately $541,200 in brokerage commissions from portfolio transactions
executed on behalf of the Series.
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the year ended September 30, 2000 were $6,545,894,575 and $5,244,305,253,
respectively.
The cost of investments for federal income tax purposes at September 30,
2000, was $5,725,586,461 and, accordingly, net unrealized appreciation of
investments for federal income tax purposes was $1,453,167,669 (gross unrealized
appreciation--$1,670,446,898; gross unrealized depreciation--$217,279,229).
Note 5. Capital
The Series 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 B shares automatically convert to
Class A shares on a quarterly basis approximately seven years after purchase. A
special exchange privilege is also available for shareholders who qualified to
purchase Class A shares at net asset value. Class C shares are sold with a
front-end sales charge of 1% and a contingent deferred sales charge of 1% during
the first 18 months. Class Z shares are not subject to any sales or redemption
charge and are offered for sale to a limited group of investors.
There are 3 billion shares of $.001 par value common stock authorized
which are divided into three series, each of which offers four classes,
designated Class A, Class B, Class C and Class Z, each of which consists of 250
million authorized shares.
20
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Notes to Financial Statements Cont'd.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
------------------------------------------------------ ----------- ---------------
<S> <C> <C>
Year ended September 30, 2000:
Shares sold 81,700,801 $ 2,021,000,138
Shares issued in reinvestment of distributions 2,447,380 54,576,570
Shares reacquired (65,143,859) (1,617,762,148)
----------- ---------------
Net increase (decrease) in shares outstanding before
conversion 19,004,322 457,814,560
Shares issued upon conversion from Class B 7,680,130 195,263,218
----------- ---------------
Net increase (decrease) in shares outstanding 26,684,452 $ 653,077,778
----------- ---------------
----------- ---------------
Year ended September 30, 1999:
Shares sold 34,344,966 $ 662,914,500
Shares issued in reinvestment of distributions 1,032,752 16,627,307
Shares reacquired (23,547,037) (457,441,788)
----------- ---------------
Net increase (decrease) in shares outstanding before
conversion 11,830,681 222,100,019
Shares issued upon conversion from Class B 2,660,015 51,625,561
----------- ---------------
Net increase (decrease) in shares outstanding 14,490,696 $ 273,725,580
----------- ---------------
----------- ---------------
<CAPTION>
Class B
------------------------------------------------------
<S> <C> <C>
Year ended September 30, 2000:
Shares sold 37,569,694 $ 888,985,755
Shares issued in reinvestment of distributions 4,234,039 91,243,545
Shares reacquired (15,944,289) (376,561,661)
----------- ---------------
Net increase (decrease) in shares outstanding before
conversion 25,859,444 603,667,639
Shares reacquired upon conversion into Class A (7,978,000) (195,263,218)
----------- ---------------
Net increase (decrease) in shares outstanding 17,881,444 $ 408,404,421
----------- ---------------
----------- ---------------
Year ended September 30, 1999:
Shares sold 42,766,896 $ 799,643,630
Shares issued in reinvestment of distributions 1,698,149 26,677,924
Shares reacquired (14,404,393) (265,401,893)
----------- ---------------
Net increase (decrease) in shares outstanding before
conversion 30,060,652 560,919,661
Shares reacquired upon conversion into Class A (2,736,865) (51,625,561)
----------- ---------------
Net increase (decrease) in shares outstanding 27,323,787 $ 509,294,100
----------- ---------------
----------- ---------------
</TABLE>
21
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Notes to Financial Statements Cont'd.
<TABLE>
<CAPTION>
Class C Shares Amount
------------------------------------------------------ ----------- ---------------
Year ended September 30, 2000:
<S> <C> <C>
Shares sold 7,259,799 $ 172,301,711
Shares issued in reinvestment of distributions 422,563 9,106,236
Shares reacquired (2,428,874) (57,879,720)
----------- ---------------
Net increase (decrease) in shares outstanding 5,253,488 $ 123,528,227
----------- ---------------
----------- ---------------
Year ended September 30, 1999:
Shares sold 6,235,444 $ 117,953,942
Shares issued in reinvestment of distributions 108,868 1,710,322
Shares reacquired (2,247,639) (41,843,724)
----------- ---------------
Net increase (decrease) in shares outstanding 4,096,673 $ 77,820,540
----------- ---------------
----------- ---------------
<CAPTION>
Class Z
------------------------------------------------------
<S> <C> <C>
Year ended September 30, 2000:
Shares sold 70,468,867 $ 1,757,300,234
Shares issued in reinvestment of distributions 5,002,224 112,700,107
Shares reacquired (48,067,246) (1,188,570,694)
----------- ---------------
Net increase (decrease) in shares outstanding 27,403,845 $ 681,429,647
----------- ---------------
----------- ---------------
Year ended September 30, 1999:
Shares sold 63,109,118 $ 1,214,412,532
Shares issued in reinvestment of distributions 2,345,617 38,045,912
Shares reacquired (42,230,402) (804,869,008)
----------- ---------------
Net increase (decrease) in shares outstanding 23,224,333 $ 447,589,436
----------- ---------------
----------- ---------------
</TABLE>
22
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Financial
Highlights
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Financial Highlights
<TABLE>
<CAPTION>
Class A
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 20.05
------------------
Income from investment operations
Net investment income (loss)(c) (0.09)
Net realized and unrealized gain on investment transactions 5.42
------------------
Total from investment operations 5.33
------------------
Less distributions
Distributions from net realized gains (1.18)
------------------
Net asset value, end of period $ 24.20
------------------
------------------
TOTAL RETURN(b) 27.02%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $1,745,454
Average net assets (000) $1,489,790
Ratios to average net assets:
Expenses, including distribution and service (12b-1)
fees .99%
Expenses, excluding distribution and service (12b-1)
fees .74%
Net investment income (loss) (.35)%
For Class A, B, C and Z shares:
Portfolio turnover rate 83%
</TABLE>
------------------------------
(a) Commencement of investment operations.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(c) Calculated based upon average shares outstanding during the period.
(d) Annualized.
24 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------------------------------------
Year Ended September 30, November 2, 1995(a)
---------------------------------------------------------- through September 30,
1999 1998 1997 1996
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 14.44 $ 15.39 $ 10.97 $ 10.00
---------------- ---------------- ---------------- --------
(.08) (.04) (.03) (.03)
6.23 .40 4.45 1.00
---------------- ---------------- ---------------- --------
6.15 .36 4.42 .97
---------------- ---------------- ---------------- --------
(.54) (1.31) -- --
---------------- ---------------- ---------------- --------
$ 20.05 $ 14.44 $ 15.39 $ 10.97
---------------- ---------------- ---------------- --------
---------------- ---------------- ---------------- --------
43.58% 3.02% 40.29% 9.70%
$911,467 $446,996 $145,022 $85,440
$748,315 $251,118 $105,982 $70,667
1.05% 1.08% 1.09% 1.23%(d)
.80% .83% .84% .98%(d)
(.44)% (.26)% (.25)% (.37)%(d)
56% 58% 63% 42%
</TABLE>
See Notes to Financial Statements 25
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class B
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 19.43
------------------
Income from investment operations
Net investment income (loss)(c) (.26)
Net realized and unrealized gain on investment transactions 5.24
------------------
Total from investment operations 4.98
------------------
Less distributions
Distributions from net realized gains (1.18)
------------------
Net asset value, end of period $ 23.23
------------------
------------------
TOTAL RETURN(b) 26.04%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $2,216,911
Average net assets (000) $2,158,641
Ratios to average net assets:
Expenses, including distribution and service (12b-1)
fees 1.74%
Expenses, excluding distribution and service (12b-1)
fees .74%
Net investment income (loss) (1.10)%
</TABLE>
------------------------------
(a) Commencement of investment operations.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(c) Calculated based upon average shares outstanding during the period.
(d) Annualized.
26 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------- November 2, 1995(a)
1999 1998 1997 through September 30, 1996
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 14.11 $ 15.18 $ 10.89 $ 10.00
---------------- ---------------- ---------------- ----------
(.22) (.15) (.12) (.10)
6.08 .39 4.41 .99
---------------- ---------------- ---------------- ----------
5.86 .24 4.29 .89
---------------- ---------------- ---------------- ----------
(.54) (1.31) -- --
---------------- ---------------- ---------------- ----------
$ 19.43 $ 14.11 $ 15.18 $ 10.89
---------------- ---------------- ---------------- ----------
---------------- ---------------- ---------------- ----------
42.51% 2.21% 39.39% 8.90%
$1,506,839 $708,463 $419,405 $231,541
$1,236,825 $557,823 $299,476 $162,412
1.80% 1.83% 1.84% 1.98%(d)
.80% .83% .84% .98%(d)
(1.19)% (1.01)% (1.00)% (1.12)%(d)
</TABLE>
See Notes to Financial Statements 27
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class C
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 19.43
------------------
Income from investment operations
Net investment income (loss)(c) (.26)
Net realized and unrealized gain on investment transactions 5.24
------------------
Total from investment operations 4.98
------------------
Less distributions
Distributions from net realized gains (1.18)
------------------
Net asset value, end of period $ 23.23
------------------
------------------
TOTAL RETURN(b) 26.04%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 291,542
Average net assets (000) $ 242,939
Ratios to average net assets:
Expenses, including distribution and service (12b-1)
fees 1.74%
Expenses, excluding distribution and service (12b-1)
fees .74%
Net investment income (loss) (1.10)%
</TABLE>
------------------------------
(a) Commencement of investment operations.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(c) Calculated based upon average shares outstanding during the period.
(d) Annualized.
28 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------- November 2, 1995(a)
1999 1998 1997 through September 30, 1996
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 14.11 $ 15.18 $ 10.89 $ 10.00
---------------- ---------------- ---------------- ----------
(.22) (.15) (.12) (.10)
6.08 .39 4.41 .99
---------------- ---------------- ---------------- ----------
5.86 .24 4.29 .89
---------------- ---------------- ---------------- ----------
(.54) (1.31) -- --
---------------- ---------------- ---------------- ----------
$ 19.43 $ 14.11 $ 15.18 $ 10.89
---------------- ---------------- ---------------- ----------
---------------- ---------------- ---------------- ----------
42.51% 2.21% 39.39% 8.90%
$141,770 $ 45,126 $ 25,134 $ 15,281
$ 98,033 $ 35,337 $ 18,248 $ 12,550
1.80% 1.83% 1.84% 1.98%(d)
.80% .83% .84% .98%(d)
(1.20)% (1.01)% (1.00)% (1.12)%(d)
</TABLE>
See Notes to Financial Statements 29
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class Z
------------------
Year Ended
September 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 20.24
------------------
Income from investment operations
Net investment income (loss)(c) (.02)
Net realized and unrealized gain on investment transactions 5.46
------------------
Total from investment operations 5.44
------------------
Less distributions
Distributions from net realized gains (1.18)
------------------
Net asset value, end of period $ 24.50
------------------
------------------
TOTAL RETURN(b) 27.39%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $2,962,816
Average net assets (000) $2,733,194
Ratios to average net assets:
Expenses, including distribution and service (12b-1)
fees .74%
Expenses, excluding distribution and service (12b-1)
fees .74%
Net investment income (loss) (.10)%
</TABLE>
------------------------------
(a) Commencement of investment operations.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(c) Calculated based upon average shares outstanding during the period.
(d) Annualized.
30 See Notes to Financial Statements
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class Z
------------------------------------------------------------------------------------------
Year Ended September 30, April 15, 1996(a)
---------------------------------------------------------- through September 30,
1999 1998 1997 1996
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 14.53 $ 15.45 $ 10.98 $ 10.32
---------------- ---------------- ---------------- ----------
(.04) -- -- (.02)
6.29 .39 4.47 .68
---------------- ---------------- ---------------- ----------
6.25 .39 4.47 .66
---------------- ---------------- ---------------- ----------
(.54) (1.31) -- --
---------------- ---------------- ---------------- ----------
$ 20.24 $ 14.53 $ 15.45 $ 10.98
---------------- ---------------- ---------------- ----------
---------------- ---------------- ---------------- ----------
43.94% 3.22% 40.71% 6.40%
$1,893,457 $1,021,903 $609,869 $ 362,416
$1,596,809 $ 810,296 $455,684 $ 26,829
.80% .83% .84% .98%(d)
.80% .83% .84% .98%(d)
(.19)% (.01)% -- (.12)%(d)
</TABLE>
See Notes to Financial Statements 31
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Report of Independent Accountants
To the Shareholders and Board of Directors of
The Prudential Investment Portfolios, Inc.--Prudential Jennison Growth 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 The Prudential Investment
Portfolios, Inc.--Prudential Jennison Growth Fund (the 'Fund', one of the
portfolios constituting The Prudential Investment Portfolios, Inc.) at September
30, 2000, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended and the
financial highlights for each of the four years in the period then ended, in
conformity with accounting principles generally accepted in the United States of
America. 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 audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, 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
audits, which included confirmation of securities at September 30, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion. The accompanying financial highlights for the period ended
September 30, 1996 were audited by other independent accountants, whose opinion
dated November 4,1996 was unqualified.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
November 22, 2000
32
<PAGE>
The Prudential Investment Portfolios, Inc. Prudential Jennison Growth Fund
Tax Information (Unaudited)
We are required by the Internal Revenue Code to advise you within 60 days
of the Series' fiscal year end (September 30, 2000) as to the federal tax status
of dividends and distributions paid by the Series during such fiscal year end.
Accordingly, we are advising you that in the fiscal year, the Series paid
distributions for Class A, B, C and Z shares totalling $1.18 per share of
long-term capital gains which is taxable as such. The Series utilized
redemptions as distributions in the amount of $.383 of long-term capital gains
for each class of share. Furthermore, we wish to advise you that your dividend
received deduction is zero.
In January 2001, you will be advised on IRS Form 1099 DIV or substitute
1099 DIV as to the federal tax status of the dividends and distributions
received by you in calendar year 2000.
33
<PAGE>
Prudential Jennison Growth Fund
Prudential Mutual Funds
Prudential offers a broad range of mutual funds
designed to meet your individual needs. For
information about these funds, contact your
financial adviser or call us at (800) 225-1852.
Read the prospectus carefully before you invest or
send money.
STOCK FUNDS
Large Capitalization Stock Funds
Prudential 20/20 Focus Fund
Prudential Equity Fund, Inc.
Prudential Stock Index Fund
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund
Strategic Partners Focused Growth Fund
Target Funds
Large Capitalization Growth Fund
Large Capitalization Value Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Prudential Value Fund
Small- to Mid-Capitalization Stock Funds
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Prudential Small Company Fund, Inc.
Prudential Tax-Managed Small-Cap Fund, Inc.
Prudential U.S. Emerging Growth Fund, Inc.
Target Funds
Small Capitalization Growth Fund
Small Capitalization Value Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Equity Opportunity Fund
Sector Stock Funds
Prudential Natural Resources Fund, Inc.
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Global/International Stock Funds
Global Utility Fund, Inc.
Prudential Europe Growth Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Prudential Global Growth Fund
Prudential International Value Fund
Prudential Jennison International Growth Fund
Target Funds
International Equity Fund
BALANCED/ALLOCATION FUNDS
Prudential Diversified Funds
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund
<PAGE>
www.prudential.com (800) 225-1852
BOND FUNDS
Taxable Bond Funds
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential High Yield Total Return Fund, Inc.
Prudential Short-Term Corporate Bond Fund, Inc.
Income Portfolio
Prudential Total Return Bond Fund, Inc.
Target Funds
Total Return Bond Fund
Tax-Free Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Income Series
Insured Series
Prudential Municipal Series Fund
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
Global/International Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
MONEY MARKET FUNDS
Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Prudential MoneyMart Assets, Inc.
Prudential Special Money Market Fund, Inc.
Money Market Series
Tax-Free Money Market Funds
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
Prudential Tax-Free Money Fund, Inc.
Other Money Market Funds
COMMAND Government Fund
COMMAND Money Fund
COMMAND Tax-Free Fund
<PAGE>
Prudential Jennison Growth Fund
Class A Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 9/30/00
One Year Five Years Since Inception
With Sales Charge 20.67% N/A 22.84%
Without Sales Charge 27.02% N/A 24.13%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since
inception of the share class. The graph compares a
$10,000 investment in Prudential Jennison Growth
Fund (Class A shares) with a similar investment in
the Standard & Poor's 500 Composite Stock Price
Index (S&P 500 Index) by portraying the initial
account value at the commencement of operations of
Class A shares, and the account value at the end of
the current fiscal year (September 30, 2000), as
measured on a quarterly basis, beginning in
November 1995. For purposes of the graph, and
unless otherwise indicated, it has been assumed
that (a) the maximum applicable front-end sales
charge was deducted from the initial $10,000
investment in Class A shares; (b) all recurring
fees (including management fees) were deducted; and
(c) all dividends and distributions were
reinvested.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The S&P
500 Index total returns include the reinvestment of
all dividends, but do not include the effect of
sales charges or operating expenses of a mutual
fund. The securities that comprise the Index may
differ substantially from the securities in the
Fund. The Index is not the only one that may be
used to characterize performance of large-
capitalization stock funds. Other indexes may
portray different comparative performance.
Investors cannot invest directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class B Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 9/30/00
One Year Five Years Since Inception
With Sales Charge 21.04% N/A 23.11%
Without Sales Charge 26.04% N/A 23.20%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since
inception of the share class. The graph compares a
$10,000 investment in the Prudential Jennison
Growth Fund (Class B shares) with a similar
investment in the Standard & Poor's 500 Composite
Stock Price Index (S&P 500 Index) by portraying the
initial account value at the commencement of
operations of Class B shares, and the account value
at the end of the current fiscal year (September
30, 2000), as measured on a quarterly basis,
beginning in November 1995. For purposes of the
graph, and unless otherwise indicated, it has been
assumed that (a) the maximum applicable contingent
deferred sales charge was deducted from the value
of the investment in Class B shares, assuming full
redemption on September 30, 2000; (b) all recurring
fees (including management fees) were deducted; and
(c) all dividends and distributions were
reinvested. Class B shares will automatically
convert to Class A shares, on a quarterly basis,
beginning approximately seven years after purchase.
This conversion feature is not reflected in the
graph.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The S&P
500 Index total returns include the reinvestment of
all dividends, but do not include the effect of sales
charges or operating expenses of a mutual fund. The
securities that comprise the Index may differ
substantially from the securities in the Fund. The
Index is not the only one that may be used to
characterize performance of large-capitalization
stock funds. Other indexes may portray different
comparative performance. Investors cannot invest
directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
Prudential Jennison Growth Fund
Class C Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 9/30/00
One Year Five Years Since Inception
With Sales Charge 23.78% N/A 22.95%
Without Sales Charge 26.04% N/A 23.20%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since inception
of the share class.The graph compares a $10,000
investment in the Prudential Jennison Growth Fund
(Class C shares) with a similar investment in the
Standard & Poor's 500 Composite Stock Price Index
(S&P 500 Index) by portraying the initial account
value at the commencement of operations of Class C
shares, and the account values at the end of the current
fiscal year (September 30, 2000), as measured on a
quarterly basis, beginning in November 1995. For
purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable front-end sales charge was deducted from
the initial $10,000 investment in Class C shares;
(b) the maximum applicable contingent deferred
sales charge was deducted from the value of the
investment in Class C shares, assuming full
redemption on September 30, 2000 ; (c) all
recurring fees (including management fees) were
deducted; and (d) all dividends and distributions
were reinvested.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The S&P
500 Index total returns include the reinvestment of
all dividends, but do not include the effect of
sales charges or operating expenses of a mutual
fund. The securities that comprise the Index may
differ substantially from the securities in the
Fund. The Index is not the only one that may be
used to characterize performance of large-
capitalization stock funds. Other indexes may
portray different comparative performance.
Investors cannot invest directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class Z Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 9/30/00
One Year Five Years Since Inception
With Sales Charge 27.39% 24.57% 22.25%
Without Sales Charge 27.39% 24.57% 22.25%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since
inception of the share class.The graph compares a
$10,000 investment in the Prudential Jennison
Growth Fund (Class Z shares) with a similar
investment in the Standard & Poor's 500 Composite
Stock Price Index (S&P 500 Index) by portraying the
initial account value at the commencement of
operations of Class Z shares, and the account value
at the end of the current fiscal year (September
30, 2000), as measured on a quarterly basis,
beginning in November 1995. For purposes of the
graph, and unless otherwise indicated, it has been
assumed that (a) all recurring fees (including
management fees) were deducted; and (b) all
dividends and distributions were reinvested. Class
Z shares are not subject to a sales charge or
distribution and service (12b-1) fees.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The S&P
500 Index total returns include the reinvestment of
all dividends, but do not include the effect of sales
charges or operating expenses of a mutual fund. The
securities that comprise the Index may differ
substantially from the securities in the Fund. The
Index is not the only one that may be used to
characterize performance of large-capitalization
stock funds. Other indexes may portray different
comparative performance. Investors cannot invest
directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
FOR MORE INFORMATION
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Visit Prudential's website at:
http://www.prudential.com
Trustees
Saul K. Fenster, Ph.D.
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
W. Scott McDonald, Jr.
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
Judy A. Rice
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
Officers
David R. Odenath, Jr., President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Marguerite E. H. Morrison, Secretary
William V. Healey, Assistant Secretary
Jonathan D. Shain, Assistant Secretary
Manager
Prudential Investments
Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
Jennison Associates LLC
466 Lexington Avenue
New York, NY 10017
Distributor
Prudential Investment
Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 8098
Philadelphia, PA 19101
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
Fund Symbols NASDAQ CUSIP
Class A PJFAX 74437E107
Class B PJFBX 74437E206
Class C PJFCX 74437E305
Class Z PJFZX 74437E404
MF168E
(LOGO) Printed on Recycled Paper
