-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, jBYH/5xVYwteXlC6ZJgchEbkN6YY1s5L8ljjJKhPg0GS2081ltFUH3K9TUYT5LOa 7RjZoZ0OHauno1Dno2OeEw== 0000318531-94-000002.txt : 19940610 0000318531-94-000002.hdr.sgml : 19940610 ACCESSION NUMBER: 0000318531-94-000002 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940609 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRUDENTIAL GROWTH OPPORTUNITY FUND CENTRAL INDEX KEY: 0000318531 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 133040042 STATE OF INCORPORATION: MD FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03084 FILM NUMBER: 94533529 BUSINESS ADDRESS: STREET 1: 199 WATER ST CITY: NEW YORK STATE: NY ZIP: 10292 BUSINESS PHONE: 2122141250 MAIL ADDRESS: STREET 2: ONE SEAPORT PLZ CITY: NEW YORK STATE: NY ZIP: 10292 FORMER COMPANY: FORMER CONFORMED NAME: PRUDENTIAL BACHE GROWTH OPPORTUNITY FUND INC DATE OF NAME CHANGE: 19920601 FORMER COMPANY: FORMER CONFORMED NAME: PRUDENTIAL BACHE NEW DECADE GROWTH FUND INC DATE OF NAME CHANGE: 19850714 FORMER COMPANY: FORMER CONFORMED NAME: CHANCELLOR NEW DECADE GROWTH FUND INC DATE OF NAME CHANGE: 19840205 N-30D 1 GROWTH OPPORTUNITY N30D FILING (3/94) Letter to Shareholders May 10, 1994 Dear Shareholder: The past six months brought mixed news for the Prudential Growth Opportunity Fund. The continuing economic recovery, corporate restructurings and favorable earnings reports helped the Fund produce positive returns during the fourth quarter. In the first three months of 1994, however, Federal Reserve interest rate hikes spurred a market downturn, which was reflected in the Fund's net asset value and returns. Fund Performance Your Fund's net asset value declined to $11.91 for Class A shares and $11.55 for Class B shares as of March 31, 1994, from $13.06 and $12.74, respectively, on September 30, 1993. In addition, an annual capital gains distribution of $.79 per share for both share classes was paid in December 1993. For the six months ended March 31, 1994, cumulative total returns, not including sales charges, were -2.9% for Class A and -3.3% for Class B shares. During this time, the Russell 2000 stock market index returned -0.1%. The Russell 2000 is comprised of the smallest 2,000 stocks out of the largest 3,000 equity-capitalized corporations in terms of market value in the United States. During the period, the Prudential Growth Opportunity Fund was invested in a blend of small and mid-sized companies, which generally did not perform as well as the smallest equities. Market Correction Impacts Small Stocks Small company stocks declined during the recent market correction, though not as much as their large company counterparts. There are three main reasons small company stocks tended to perform better than those of larger companies in the current market: - Small companies tend to benefit earlier in an economic recovery and, conversely, to be affected later by economic downturns. - Most small companies have less exposure to foreign economies, which have generally been weaker than the U.S. economy. - Small companies comprise the largest sector of new job creation in the growing U.S. economy. -1- A Value Approach We employ a "value" oriented, bottom-up approach to portfolio management. As a result, the Fund tends to hold an eclectic group of stocks across many industries. We focus on inexpensive issues that have the potential for price increases. This strategy generally leads the Fund toward market sectors where stock prices are low. Currently, we are employing this strategy in the industrial, technology, consumer growth and finance sectors-all of which present opportunities after the recent market downturn. Within these sectors, the Fund is holding stocks in the conglomerates, regional banking, electronics and computer hardware industries. Portfolio Activity In the six months ended March 31, 1994, the Fund increased emphasis on industrial stocks, making it the portfolio's second largest sector. Some of the holdings that performed relatively well over the period include Cabot Corporation (1.8% of the portfolio), which produces specialty chemicals and materials, and Rykoff-Sexton (1.6% of the portfolio), one of the largest food service distributors in the country that recently underwent reorganization. In contrast, our largest holding, Trinity Industries (2.9% of the portfolio), performed well in 1993 but declined 12% for this year's first quarter. During the period, we reduced some of our largest holdings that we felt had reached their price potential. For example, we decreased our positions in railroad and financial conglomerate Kansas City Southern (1.8% of the portfolio), industrial electronics producer Marshall Industries (2.0% of the portfolio), and children's book publisher Western Publishing (0.6% of the portfolio). The latter lost 29% in the first quarter, following rumors of a complete sale or takeover of the firm. The Fund had taken advantage of the stock's significant gains in the last quarter of 1993 and sold a portion of its holdings. The technology stocks offered opportunities in smaller niche companies with greater earnings potential. New holdings in this area include Hutchinson Technology (0.6% of the portfolio), which makes suspension assembly equipment for computer disk drives and Legent (0.3% of the portfolio), which supplies productivity enhancement system software for IBM. We believe both companies have solid fundamentals but declined along with other technology stocks in the first quarter. In addition, we believe Legent was undervalued as a result of a merger last year. One miss in this category was engineering software maker Structural Dynamics (0.8% of the portfolio), which declined 24%, and contributed to the Fund's underperformance. We think the financial sector has shown above-average growth potential resulting from recent takeover activity. In this area, we added to regional -2- bank issues such as Riggs National Corporation (0.5% of the portfolio), the holding company for Washington D.C.'s largest commercial bank. Riggs' price was especially attractive due to a one-time cost for a new program to overhaul its operations. Outlook We are still optimistic about the outlook for small company stocks in the coming months. The U.S. economy remains fundamentally strong, with continued corporate restructuring and increased efficiency leading the way for economic recovery. The rise in interest rates represents a temporary setback for economic growth. In fact, we feel the market correction has actually made many small stock prices more attractive. While there can be no assurance, we believe small stocks may generally outpace those of larger companies for the next several years. As always, it is a pleasure to have you as a shareholder of the Prudential Growth Opportunity Fund and to take the opportunity to report our activities to you. Sincerely, Lawrence C. McQuade President Robert P. Fetch Portfolio Manager -3- PRUDENTIAL GROWTH OPPORTUNITY FUND Portfolio of Investments March 31, 1994 (Unaudited)
Value Shares Description (Note 1) LONG-TERM INVESTMENTS--97.7% Common Stocks--97.7% Aerospace/Defense--0.8% 114,800 Precision Castparts Corp.................... $ 3,860,150 ------------ Automotive--1.3% 200,000(D) Jason, Inc.* (cost $2,200,000; purchase date - 1/21/94)................ 1,997,500 220,000 Mascotech, Inc.*.......... 4,510,000 ------------ 6,507,500 ------------ Banking--10.3% 217,100 Bank South Corp........... 3,934,937 99,750 Charter One Financial, Inc..................... 1,870,312 75,000 Citfed Bancorp, Inc.*..... 1,856,250 92,300 Citizens First Bancorp, Inc.*................... 807,625 85,000 Commerce Bancshares, Inc..................... 2,539,375 172,300 Commercial Federal Corp.*.................. 3,122,937 270,000 Community First Bankshares, Inc......... 3,543,750 135,000 Dauphin Deposit Corp...... 3,172,500 100,000 First Commerce Corp....... 2,412,500 53,400 First Eastern Corp.*...... 1,398,413 95,000 First Security Corp....... 2,648,125 12,900 First Virginia Banks, Inc..................... 466,013 120,000 Hawkeye Bancorporation.... 2,205,000 272,900 Riggs National Corp.*..... 2,643,719 108,000 Rochester Community Savings Bank*........... 1,782,000 130,000 SouthTrust Corp........... 2,396,875 99,000 Summit Bancorporation..... 1,942,875 87,500 TCF Financial Corp........ 2,668,750 90,000 Union Planters Corp....... 2,238,750 225,000 Washington Mutual Savings Bank.................... 4,331,250 85,000 West One Bancorp.......... 2,305,625 ------------ 50,287,581 ------------ Cable & Pay TV Systems--1.3% 172,500 Comcast Corp.............. $ 3,105,000 145,000 TCA Cable TV, Inc......... 3,153,750 ------------ 6,258,750 ------------ Commercial Services--2.4% 113,100 AAR Corp.................. 1,753,050 40,000 Banner Aerospace, Inc.*... 235,000 160,000 Borg Warner Security Corp.*.................. 2,700,000 66,800 Flightsafety International, Inc...... 2,488,300 215,000 Pinkertons, Inc.*......... 4,300,000 12,300 Sterling Software, Inc.*................... 355,163 ------------ 11,831,513 ------------ Computer Hardware--5.5% 243,700 Adaptec, Inc.*............ 4,401,831 275,000 Electronics for Imaging, Inc.*................... 3,953,125 264,700 Exabyte Corp.*............ 5,062,387 90,500 Hutchinson Technology, Inc.*................... 2,839,438 96,800 Norand Corp.*............. 3,037,100 15,900 Quixote Corp.............. 258,375 330,000 Telxon Corp............... 4,248,750 200,000 Verifone, Inc.*........... 3,450,000 ------------ 27,251,006 ------------ Computer Software & Services--4.7% 325,000 American Management Systems, Inc.*.......... 6,439,062 213,800 Continuum, Inc.*.......... 4,543,250 39,700 Control Data Systems, Inc..................... 334,969 24,000 INTERLINQ Software Corp.*.................. 189,000 64,300 LEGENT Corp.*............. 1,631,613 275,000 Primark Corp.*............ 3,712,500
-4- See Notes to Financial Statements. PRUDENTIAL GROWTH OPPORTUNITY FUND
Value Shares Description (Note 1) Computer Software & Services (cont'd) 300,000 Structural Dynamics Research Corp.*......... $ 3,975,000 67,000 SunGard Data Systems...... 2,378,500 ------------ 23,203,894 ------------ Construction--1.3% 193,400 Calmat Co................. 3,940,525 60,000 Southdown, Inc.*.......... 1,545,000 148,000 Willcox & Gibbs Inc.*..... 999,000 ------------ 6,484,525 ------------ Consumer Products--1.1% 200,900 Fedders Corp.*............ 1,556,975 104,800 Russell Corp.............. 2,973,700 62,800 Sealright Co., Inc........ 910,600 ------------ 5,441,275 ------------ Consumer Services--0.5% 161,300 Regis Corp.*.............. 2,217,875 ------------ Drugs & Medical Supplies--3.4% 274,900 Biomet, Inc.*............. 2,834,906 138,700 Carter Wallace, Inc....... 2,912,700 207,200 Endosonics Corp.*......... 1,605,800 75,000 Maxxim Medical, Inc.*..... 1,237,500 109,700 Medex, Inc................ 1,851,188 155,000 Nellcor, Inc.*............ 3,875,000 71,400 Sybron Corp.*............. 2,284,800 ------------ 16,601,894 ------------ Electrical Equipment--0.9% 149,000 Reliance Electric Co.*.... 2,514,375 116,500 Thomas Industries, Inc.... 1,776,625 ------------ 4,291,000 ------------ Electronics--6.1% 100,000 Augat, Inc.*.............. 2,000,000 263,100 Kemet Corp.*.............. 4,209,600 290,000 Laser Precision Corp.*.... 1,667,500 102,600 Lattice Semiconductor Corp.*.................. 1,654,425 380,000 Marshall Industries, Inc.*................... $ 9,452,500 440,000 Methode Eletronics, Inc..................... 7,205,000 15,100 Robinson Nugent, Inc...... 96,263 62,300 Tektronix, Inc............ 1,900,150 102,100 Woodhead Industries, Inc..................... 1,620,837 ------------ 29,806,275 ------------ Environmental Services--0.2% 200 Air & Water Technologies Corp.*.................. 1,775 91,500 BHA Group, Inc............ 937,875 ------------ 939,650 ------------ Financial Services--2.0% 120,062 Edwards (A.G.), Inc....... 2,146,108 215,000 McDonald & Co. Investments, Inc........ 3,198,125 309,300 Piper Jaffray, Inc........ 4,600,838 ------------ 9,945,071 ------------ Food & Beverages--2.4% 67,200 Dreyers Grand Ice Cream, Inc..................... 1,604,400 87,300 Performance Food Group Co.*.................... 1,713,262 393,400 Rykoff-Sexton, Inc........ 7,572,950 69,800 Sanderson Farms, Inc...... 1,081,900 ------------ 11,972,512 ------------ Forest Products--1.5% 270,000 Mercer International, Inc.*................... 3,290,625 139,600 Mosinee Paper Corp........ 4,153,100 ------------ 7,443,725 ------------ Health Care Services--2.8% 146,800 Living Centers of America, Inc.*................... 3,780,100 188,800 Multicare Cos, Inc.*...... 3,233,200 215,000 Novacare, Inc.*........... 3,493,750 14,700 Safeguard Health Enterprises............. 207,637 100,000 Salick Health Care, Inc..................... 1,625,000 61,000 Universal Health Services, Inc.*................... 1,433,500 ------------ 13,773,187 ------------ Household Products--1.4% 265,400 Libbey, Inc.*............. 4,578,150
-5- See Notes to Financial Statements. PRUDENTIAL GROWTH OPPORTUNITY FUND
Value Shares Description (Note 1) Household Products (cont'd) 145,600 Mr. Coffee, Inc.*......... $ 2,038,400 ------------ 6,616,550 ------------ Industrials--7.7% 225,000 Amcast Industrial Corp.... 5,625,000 216,000 Carlisle Companies, Inc..................... 6,912,000 200,550 Diebold, Inc.............. 7,320,075 40,100 ESSEF Corp.*.............. 646,613 36,200 Harmon Industries, Inc.*................... 730,787 81,000 Insituform Mid-America, Inc..................... 1,164,375 17,000 KENETECH Corp.*........... 393,125 145,000 Mark IV Industries, Inc..................... 2,664,375 195,000 Medalist Inds., Inc.*..... 2,608,125 48,600 Park Ohio Inds., Inc.*.... 707,737 50,000 Schulman, Inc............. 1,587,500 160,000 Shorewood Packaging Corp.*.................. 2,460,000 65,000 Thermotrex Corp.*......... 950,625 25,000 Tyco Labs, Inc............ 1,246,875 109,250 Varlen Corp............... 2,594,687 ------------ 37,611,899 ------------ Information Services--0.6% 165,500 American Business Information*............ 2,751,437 ------------ Insurance--2.8% 135,400 Amvestors Financial Corp.*.................. 1,354,000 75,000 CCP Insurance, Inc........ 1,631,250 110,000 First Colony Corp......... 2,667,500 500,000 I. C. H. Corp.*........... 2,937,500 221,400 Philadelphia Consolidated Holding Corp.*.................. 2,352,375 125,500 SCOR U.S. Corp............ 1,302,062 136,080 Statesman Group, Inc...... 1,496,880 ------------ 13,741,567 ------------ Leisure--1.4% 86,000 American Recreation Co. Hldgs, Inc.............. 1,161,000 82,300 Johnson Worldwide Associates, Inc.*....... $ 1,944,338 525,000 Topps Co.................. 3,609,375 ------------ 6,714,713 ------------ Machinery & Equipment--7.2% 52,300 Bearings, Inc............. 1,667,063 184,800 Brenco, Inc............... 1,778,700 64,500 GATX Corp................. 2,709,000 268,800 Gerber Scientific, Inc.... 3,998,400 160,000 Kaydon Corp............... 3,740,000 53,400 Lamson & Sessions Co.*.... 347,100 46,200 Lindsay Manufacturing Co.*.................... 1,472,625 150,000 Lufkin Industries, Inc.... 2,737,500 255,000 Measurex Corp............. 4,653,750 199,400 Regal Beloit Corp......... 4,985,000 14,400 Speizman Industries, Inc..................... 165,600 94,100 Thermo Electron Corp.*.... 3,658,138 130,000 Watts Industries, Inc..... 3,103,750 ------------ 35,016,626 ------------ Media--0.8% 155,000 Scripps (E.W.) Co......... 3,875,000 ------------ Natural Resources--0.2% 176,900 Nord Resources Corp.*..... 1,017,175 ------------ Office Equipment & Supplies--0.7% 159,900 Interface, Inc............ 2,048,719 125,000 Tokheim Corp.*............ 1,531,250 ------------ 3,579,969 ------------ Oil & Gas Exploration & Production--5.5% 447,000 American Oil & Gas Corp.*.................. 4,470,000 128,500 Basin Exploration, Inc.*................... 1,172,562 12,900 Belden & Blake Corp....... 161,250 15,000 Cabot Oil & Gas Corp...... 292,500 120,000 Diamond Shamrock, Inc..... 3,300,000 243,000 Dreco Energy Services Ltd.*................... 2,217,375 900,000 Energy Service, Inc.*..... 3,262,500
-6- See Notes to Financial Statements. PRUDENTIAL GROWTH OPPORTUNITY FUND
Value Shares Description (Note 1) Oil & Gas Exploration & Production (cont'd) 20,600 Enterra Corp.*............ $ 401,700 39,400 Evergreen Resources, Inc.*................... 320,125 145,000 International Colin Energy Co...................... 1,866,875 148,000 Lomak Petroleum, Inc.*.... 1,063,750 56,700 Mitchell Energy & Dev. Corp., Class A.......... 1,013,513 128,550 Mitchell Energy & Dev. Corp., Class B.......... 2,313,900 200,000 Smith International, Inc.*................... 2,125,000 87,000 USX -Delhi Group.......... 1,185,375 100,000 Weatherford International*.......... 837,500 100,000 Wheatley TXT Corp......... 1,000,000 ------------ 27,003,925 ------------ Publishing--1.6% 150,000 Lee Enterprises, Inc...... 5,268,750 195,700 Western Publishing Group, Inc.*................... 2,727,569 ------------ 7,996,319 ------------ Railroads--1.8% 169,700 Kansas City Southern Industries, Inc......... 8,591,063 ------------ Realty Investment Trust--0.3% 39,600 Manufactured Home Community, Inc.......... 1,638,450 ------------ Restaurants--0.6% 80,000 Sbarro, Inc............... 3,070,000 ------------ Retail--3.8% 262,000 Babbage's, Inc.*.......... 2,816,500 63,000 Brauns Fashions Corp...... 476,437 89,900 Michael Anthony Jewelers, Inc.*................... 561,875 389,000 Software Et Cetera Stores, Inc..................... 4,570,750 220,000 Stride Rite Corp.......... 3,245,000 172,700 Tiffany & Co.............. 5,267,350 19,200 Today's Man, Inc.......... 326,400 70,200 Younkers, Inc.*........... $ 1,246,050 ------------ 18,510,362 ------------ Specialty Chemicals--3.8% 165,800 Cabot Corp................ 8,953,200 63,400 Ferro Corp................ 1,965,400 60,000 Lesco, Inc................ 787,500 60,000 Potash Corp............... 1,522,500 170,000 Vigoro Corp............... 5,227,500 ------------ 18,456,100 ------------ Steel--4.1% 155,000 Oregon Steel Mills, Inc..................... 3,565,000 85,000 Quanex Corp............... 1,700,000 19,500 Rouge Steel Co............ 419,250 375,800 Trinity Industries, Inc..................... 14,280,400 ------------ 19,964,650 ------------ Telecommunications Equipment--2.6% 244,800 Digital Microwave Corp.*.................. 3,641,400 120,000 Intermediate Telephone, Inc..................... 1,117,500 175,000 Intertrans Corp........... 2,362,500 7,400 Keptel, Inc............... 72,150 135,000 LDDS Communications, Inc.*................... 3,223,125 119,800 National Data Corp........ 2,246,250 ------------ 12,662,925 ------------ Transportation--2.3% 75,000 Air Express International Corp.................... 1,678,125 325,000 Expeditors International of Washington, Inc......... 5,850,000 205,000 OMI Corp.*................ 1,358,125 416,200 WorldCorp, Inc.*.......... 2,445,175 ------------ 11,331,425 ------------ Total common stocks (cost $454,392,412)..... 478,267,538 ------------
-7- See Notes to Financial Statements. PRUDENTIAL GROWTH OPPORTUNITY FUND
Principal Amount Value (000) Description (Note 1) SHORT-TERM INVESTMENTS--1.5% Repurchase Agreement--1.4% $ 6,673 Joint Repurchase Agreement Account, 3.46%, 4/4/94, (Note 5) (cost $6,673,000)....... $ 6,673,000 ------------ Time Deposit--0.1% 383 Chemical Bank, N.A., 3.50%, 4/1/94 (cost $383,000)........... 383,000 ------------ Contracts# Put Option Purchased --------- 2,500 S & P 100 Index, expiring April 1994 (cost $19,137)............ 70,000 ------------ Total short-term investments (cost $7,075,137)......... 7,126,000 ------------ Total Investments--99.2% (cost $461,467,549; Note 4)...................... 485,393,538 Other assets in excess of liabilities--0.8%......... 3,723,186 ------------ Net Assets--100%.......... $489,116,724 ------------ ------------
- ------------ * Non-income producing security. # One contract relates to 100 units. (D) Private placement restricted as to resale. The value ($1,997,500) is 0.4% of net assets. The restricted security held by the Fund at March 31, 1994 includes registration rights under which the Fund may demand registration by the issuer. -8- See Notes to Financial Statements. PRUDENTIAL GROWTH OPPORTUNITY FUND Statement of Assets and Liabilities (Unaudited)
Assets March 31, 1994 -------------- Investments, at value (cost $461,467,549)................................................ $485,393,538 Cash......................................................................... ............ 16,164 Receivable for investments sold.......................................................... 14,139,153 Receivable for Fund shares sold.......................................................... 2,530,715 Dividends and interest receivable........................................................ 455,263 Deferred expenses and other assets....................................................... 16,125 -------------- Total assets....................................................................... .... 502,550,958 -------------- Liabilities Payable for investments purchased........................................................ 9,029,365 Payable for Fund shares reacquired....................................................... 3,547,280 Distribution fee payable................................................................. 380,281 Management fee payable................................................................... 311,944 Accrued expenses..................................................................... .... 165,364 -------------- Total liabilities.................................................................. .... 13,434,234 -------------- Net Assets....................................................................... ........ $489,116,724 -------------- -------------- Net assets were comprised of: Common stock, at par................................................................... $ 421,072 Paid-in capital in excess of par....................................................... 434,135,342 -------------- 434,556,414 Accumulated net investment income...................................................... 419,374 Accumulated net realized gains on investments.......................................... 30,214,947 Net unrealized appreciation on investments............................................. 23,925,989 -------------- Net assets, March 31,1994................................................................ $489,116,724 -------------- -------------- Class A: Net asset value and redemption price per share ($96,161,054 / 8,075,719 shares of common stock issued and outstanding).............. $11.91 Maximum sales charge (5.25% of offering price)......................................... .66 -------------- Maximum offering price to public....................................................... $12.57 -------------- -------------- Class B: Net asset value, offering price and redemption price per share ($392,955,670 / 34,031,470 shares of common stock issued and outstanding)............ $11.55 -------------- --------------
See Notes to Financial Statements. -9- PRUDENTIAL GROWTH OPPORTUNITY FUND Statement of Operations (Unaudited)
Six Months Ended March 31, Net Investment Income 1994 ------------ Income Dividends............................ $ 2,446,069 Interest............................. 434,693 ------------ Total income....................... 2,880,762 ------------ Expenses Distribution fee--Class A............ 110,052 Distribution fee--Class B............ 1,993,972 Management fee....................... 1,737,529 Transfer agent's fees and expenses... 517,000 Custodian's fees and expenses........ 127,000 Registration fees.................... 125,000 Reports to shareholders.............. 41,000 Audit fee............................ 25,500 Franchise taxes...................... 20,000 Directors' fees...................... 15,000 Legal fees........................... 15,000 Miscellaneous........................ 11,199 ------------ Total expenses..................... 4,738,252 ------------ Net investment loss.................... (1,857,490) ------------ Realized and Unrealized Gain (Loss) on Investments Net realized gain on investment transactions......................... 39,236,335 Net decrease in unrealized appreciation of investments....................... (53,872,448) ------------ Net loss on investments................ (14,636,113) ------------ Net Decrease in Net Assets Resulting from Operations.............. $(16,493,603) ------------ ------------
PRUDENTIAL GROWTH OPPORTUNITY FUND Statement of Changes in Net Assets (Unaudited)
Six Months Year Ended Ended Increase (Decrease) March 31, September 30, in Net Assets 1994 1993 ------------ ------------- Operations Net investment loss.... $ (1,857,490) $ (1,311,418) Net realized gain on investment transactions......... 39,236,335 23,835,926 Net change in unrealized appreciation of investments.......... (53,872,448) 64,901,994 ------------ ------------- Net increase (decrease) in net assets resulting from operations........... (16,493,603) 87,426,502 ------------ ------------- Net equalization credits................ 45,227 90,512 ------------ ------------- Distributions to shareholders from net realized gain (Note 1) Class A................ (5,775,787) (5,979,973) Class B................ (24,227,795) (24,035,427) ------------ ------------- (30,003,582) (30,015,400) ------------ ------------- Fund share transactions (Note 6) Net proceeds from shares subscribed.... 219,850,826 453,141,309 Net asset value of shares issued in reinvestment of distributions........ 28,758,329 28,283,287 Cost of shares reacquired........... (183,950,165) (284,879,535) ------------ ------------- Net increase in net assets from Fund share transactions... 64,658,990 196,545,061 ------------ ------------- Total increase........... 18,207,032 254,046,675 Net Assets Beginning of period...... 470,909,692 216,863,017 ------------ ------------- End of period............ $489,116,724 $ 470,909,692 ------------ ------------- ------------ -------------
See Notes to Financial Statements. See Notes to Financial Statements. -10- PRUDENTIAL GROWTH OPPORTUNITY FUND Notes to Financial Statements (Unaudited) Prudential Growth Opportunity Fund (the ``Fund'') is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The investment objective of the Fund is to achieve capital growth, consistent with reasonable risk, by investing in a carefully selected portfolio of common stocks having prospects of a high return on equity, increasing earnings, increasing dividends and price-earnings ratios which are not excessive. Note 1. Accounting The following is a summary Policies of significant accounting poli- cies followed by the Fund in the preparation of its financial statements. Securities Valuations: Investments traded on a national securities exchange are valued at the last reported sales price on the primary exchange on which they are traded. Securities traded in the over-the-counter market (including securities listed on exchanges whose primary market is believed to be over-the-counter) and listed securities for which no sale was reported on that date are valued at the mean between the last reported bid and asked prices. Any security for which a reliable market quotation is unavailable is valued at fair value as determined in good faith by or under the direction of the Fund's Board of Directors. Short-term securities which mature in more than 60 days are valued based upon current market quotations. Short-term securities which mature in 60 days or less are valued at amortized cost. In connection with transactions in repurchase agreements with U.S. financial institutions, it is the Fund's policy that its custodian takes possession of the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. 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. All securities are valued as of 4:15 P.M., New York time. Securities Transactions and Investment Income: Securities transactions are recorded on the trade date. Realized gains and losses on sales of investments are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date; interest income is recorded on the accrual basis. Net investment income (loss), other than distribution fees, and unrealized and realized gains or losses are allocated daily to each class of shares of the Fund based upon the relative proportion of net assets of each class at the beginning of the day. Federal Income Taxes: It is the Fund's policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net income to its shareholders. Therefore, no federal income tax provision is required. Equalization: The Fund follows the accounting practice known as equalization, by which a portion of the proceeds from sales and costs of reacquisitions of Fund shares, equivalent on a per share basis to the amount of distributable net investment income on the date of the transaction, is credited or charged to undistributed net investment income. As a result, undistributed net investment income per share is unaffected by sales or reacquisitions of the Fund's shares. Dividends and Distributions: The Fund expects to pay dividends of net investment income, if any, semi-annually and make distributions at least annually of any net capital gains. Dividends and distributions are recorded on the ex-dividend date. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Reclassification of Capital Accounts: The Fund accounts and reports for distributions to shareholders in accordance with Statement of Position 93-2: Determination, Disclosure, and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies. During the six months ended March 31, 1994, the reclassification of $3,168,908 of net operating losses increased paid-in capital by $1,311,418, increased undistributed net investment income by $1,857,490 and decreased accumulated net realized gains by $3,168,908. Net investment income, net realized gains, and net assets were not affected by this change. Note 2. Agreements The Fund has a management agreement with Prudential Mutual Fund Management, Inc. (``PMF''). Pursuant to this agreement, PMF has responsibility for all investment advisory services and supervises the subadviser's performance of such services. PMF has entered into a subadvisory agreement -11- with The Prudential Investment Corporation (``PIC''); PIC furnishes investment advisory services in connection with the management of the Fund. PMF pays for the cost of the subadviser's services, the compensation of officers of the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other costs and expenses. The management fee paid PMF is computed daily and payable monthly, at an annual rate of .70 of 1% of the Fund's average daily net assets. The Fund has distribution agreements with Prudential Mutual Fund Distributors, Inc. (``PMFD''), which acts as the distributor of the Class A shares of the Fund, and with Prudential Securities Incorporated (``PSI''), which acts as distributor of the Class B shares of the Fund (collectively the ``Distributors''). To reimburse the Distributors for their expenses incurred in distributing the Fund's Class A and B shares, the Fund, pursuant to plans of distribution, pays the Distributors a reimbursement accrued daily and payable monthly. Pursuant to the Class A Plan, the Fund reimburses PMFD for its expenses with respect to Class A shares, at an annual rate of up to .30 of 1% of the average daily net assets of the Class A shares. Such expenses under the Class A Plan were .20 of 1% of the average daily net assets of the Class A shares for the three months ended December 31, 1993. Effective January 1, 1994, the Class A Plan distribution expenses were increased to .25 of 1% of the average daily net assets. PMFD pays various broker-dealers including PSI and Pruco Securities Corporation (``Prusec''), affiliated broker-dealers, for account servicing fees and other expenses incurred by such broker-dealers. Pursuant to the Class B Plan, the Fund reimburses PSI for its distribution-related expenses with respect to Class B shares at an annual rate of up to 1% of the average daily net assets of the Class B shares. The Class B distribution expenses include commission credits for payment of commissions and account servicing fees to financial advisers and an allocation for overhead and other distribution-related expenses, interest and/or carrying charges, the cost of printing and mailing prospectuses to potential investors and of advertising incurred in connection with the distribution of shares. The Distributors recover the distribution expenses and service fees incurred through the receipt of reimbursement payments from the Fund under the plans and the receipt of initial sales charges (Class A only) and contingent deferred sales charges (Class B only) from shareholders. PMFD has advised the Fund that it has received approximately $283,000 in front-end sales charges resulting from sales of Class A shares during the six months ended March 31, 1994. From these fees, PMFD paid such sales charges to dealers (PSI and Prusec) which in turn paid commissions to salespersons. With respect to the Class B Plan, at any given time the amount of expenses incurred by PSI in distributing the Fund's shares and not recovered through the imposition of contingent deferred sales charges in connection with certain redemptions of shares may exceed the total payments made by the Fund pursuant to the Class B Plan. PSI advised the Fund that for the six months ended March 31, 1994, it received approximately $337,000 in contingent deferred sales charges imposed upon certain redemptions by investors. PSI, as distributor, has also advised the Fund that at March 31, 1994, the amount of distribution expenses incurred by PSI and not yet reimbursed by the Fund or recovered through contingent deferred sales charges approximated $4,910,000. This amount may be recovered through future payments under the Class B Plan or contingent deferred sales charges. In the event of termination or noncontinuation of the Class B Plan, the Fund would not be contractually obligated to pay PSI, as distributor, for any expenses not previously reimbursed or recovered through contingent deferred sales charges. PMFD is a wholly-owned sudsidiary of PMF; PSI, PMF and PIC are indirect wholly-owned subsidiaries of The Prudential Insurance Company of America. Note 3. Other Prudential Mutual Fund Ser- Transactions vices, Inc. (``PMFS''), a with Affiliates wholly-owned subsidiary of PMF, serves as the Fund's transfer agent. During the six months ended March 31, 1994, the Fund incurred fees of approximately $357,000 for the services of PMFS. As of March 31, 1994, approximately $64,000 of such fees were due to PMFS. For six months ended March 31, 1994, PSI earned approximately $9,125 in brokerage commissions from portfolio transactions executed on behalf of the Fund. Note 4. Portfolio Purchases and sales of invest- Securities ment securities, other than short-term investments, for the six months ended March 31, 1994 were $244,176,398 and $201,112,320, respectively. The federal income tax basis of the Fund's investments at March 31, 1994 was $461,873,410 and, accordingly, net unrealized appreciation for federal income tax purposes was -12- $23,520,128 (gross unrealized appreciation--$52,098,670 gross unrealized depreciation--$28,578,542). Note 5. Joint The Fund, along with other Repurchase affiliated registered invest- Agreement ment companies, transfers Account uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by U.S. Treasury or federal agency obligations. As of March 31, 1994, the Fund had a 0.7% undivided interest in the repurchase agreements in the joint account. The undivided interest for the Fund represented $6,673,000 in principal amount. As of such date, each repurchase agreement in the joint account and the collateral therefor were as follows: Bear, Stearns & Co., Inc., 3.30%, dated 3/31/94, in the principal amount of $226,643,000, repurchase price $226,726,102, due 4/4/94; collateralized by $7,965,000 U.S. Treasury Note, 7.625%, due 4/30/96; $89,000,000 U.S. Treasury Note, 5.125%, due 6/30/98 and $140,230,000 U.S. Treasury Note, 5.125%, due 3/31/98; aggregate value including accrued interest--$231,552,457. BT Securities, 3.55%, dated 3/31/94, in the prin- cipal amount of $175,000,000, repurchase price $175,069,028, due 4/4/94; collateralized by $37,860,000 U.S. Treasury Note, 7.875%, due 8/15/01; $20,320,000 U.S. Treasury Note, 8.50%, due 2/15/00; $50,000,000 U.S. Treasury Bond, 10.75%, due 2/15/03; and $39,569,000 U.S. Treasury Bond, 10.75%, due 5/15/03; aggregate value including accrued interest--$179,069,820. Merrill Lynch, Pierce, Fenner & Smith, Inc., 3.40%, dated 3/31/94, in the principal amount of $280,000,000, repurchase price $280,105,778, due 4/4/94; collateralized by $289,950,000 U.S. Treasury Note, 5.875%, due 3/31/99 and $750,000 U.S. Treasury Note, 5.375%, due 4/30/94; aggregate value including accrued interest--$286,345,112. Morgan (J.P.) Securities, Inc., 3.45%, dated 3/31/94, in the principal amount of $100,000,000, repurchase price $100,038,333, due 4/4/94; collateralized by $3,268,000 U.S. Treasury Note, 5.00%, due 1/31/99 and $100,000,000 U.S. Treasury Note, 5.125%, due 3/31/96; aggregate value, including accrued interest--$103,036,460. Morgan Stanley & Co., Inc., 3.45%, dated 3/31/94, in the principal amount of $152,000,000 repurchase price $152,058,267, due 4/4/94 collateralized by $155,615,000 U.S. Treasury Note, 4.25%, due 12/31/95; value including accrued interest--$155,168,195. Note 6. Capital The Fund offers both Class A and Class B shares. Class A shares are sold with a front-end sales charge of up to 5.25%. 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. Both classes of shares have equal rights as to earnings, assets and voting privileges except that each class bears different distribution expenses and has exclusive voting rights with respect to its distribution plan. There are 500 million shares of common stock, $.01 par value per share, divided into two classes, designated Class A and Class B common stock, each of which consists of 250 million authorized shares. -13- Transactions in shares of common stock for the six months ended March 31, 1994 and for the fiscal year ended September 30, 1993 were as follows:
Class A Shares Amount - ---------------------------- ----------- ------------- Six months ended March 31, 1994: Shares sold................. 4,682,093 $ 59,306,605 Shares issued in reinvestment of distributions............. 467,223 5,644,046 Shares reacquired............ (4,337,125) (55,012,684) ----------- ------------- Net increase in shares outstanding............... 812,191 $ 9,937,967 ----------- ------------- ----------- ------------- Year ended September 30, 1993: Shares sold................. 7,753,935 $ 136,609,388 Shares issued in reinvestment of distributions............. 350,531 5,794,272 Shares issued as a result of 3 for 2 stock split....... 2,387,650 -- Shares reacquired........... (5,886,921) (104,383,394) ----------- ------------- Net increase in shares outstanding............... 4,605,195 $ 38,020,266 ----------- ------------- ----------- -------------
Class B Shares Amount - ---------------------------- ----------- ------------- Six months ended March 31, 1994: Shares sold................. 12,934,754 $ 160,544,221 Shares issued in reinvestment of distributions............. 1,960,499 23,114,283 Shares reacquired............ (10,391,961) (128,937,481) ----------- ------------- Net increase in shares outstanding............... 4,503,292 $ 54,721,023 ----------- ------------- ----------- ------------- Year ended September 30, 1993: Shares sold................. 18,585,281 $ 316,531,921 Shares issued in reinvestment of distributions............. 1,382,238 22,489,015 Shares issued as a result of 3 for 2 stock split....... 9,826,606 -- Shares reacquired........... (10,612,911) (180,496,141) ----------- ------------- Net increase in shares outstanding............... 19,181,214 $ 158,524,795 ----------- ------------- ----------- -------------
-14- PRUDENTIAL GROWTH OPPORTUNITY FUND Financial Highlights (Unaudited)
Class A Class B - --------------------------------------------------------- - --------------------------------- January 22, Six Months 1990(D) Six Months Year Ended Ended Year Ended September 30, Through Ended September 30, March 31, --------------------------- September 30, March 31, ------------------- 1994 1993**(D)(D) 1992**(D)(D) 1991(D)(D) 1990(D)(D) 1994 1993**(D)(D) 1992**(D)(D) ----------- ------- ------- ------- - ------------- ----------- -------- -------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period................. $ 13.06 $ 11.25 $ 10.16 $ 7.36 $ 8.55 $ 12.74 $ 11.08 $ 10.11 --------- ------- ------- ------- - --------- ---------- -------- -------- Income from investment - ---------------------- operations ---------- Net investment income (loss).................... -- .03 .02 .05 .09 (.05) (.06) (.07) Net realized and unrealized gain (loss) on investment transactions.............. (.36) 3.14 1.47 2.82 (1.20) (.35) 3.08 1.44 --------- ------- ------- ------- - --------- ---------- -------- -------- Total from investment operations.............. (.36) 3.17 1.49 2.87 (1.11) (.40) 3.02 1.37 --------- ------- ------- ------- - --------- ---------- -------- -------- Less distributions - ------------------ Dividends from net investment income......... -- -- -- (.07) (.08) -- -- -- Distributions from net realized capital gain..... (.79) (1.36) (.40) -- -- (.79) (1.36) (.40) --------- ------- ------- ------- - --------- ---------- -------- -------- Total distributions......... (.79) (1.36) (.40) (.07) (.08) (.79) (1.36) (.40) --------- ------- ------- ------- - --------- ---------- -------- -------- Net asset value, end of period.................... $ 11.91 $ 13.06 $ 11.25 $ 10.16 $ 7.36 $ 11.55 $ 12.74 $ 11.08 --------- ------- ------- ------- - --------- ---------- -------- -------- --------- ------- ------- ------- - --------- ---------- -------- -------- TOTAL RETURN#:.............. (2.87)% 30.42% 15.39% 39.39% (13.19)% (3.27)% 29.40% 14.27% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000)..................... $96,161 $94,842 $44,845 $25,165 $ 17,222 $ 392,956 $376,068 $172,018 Average net assets (000).... $97,911 $69,801 $36,011 $20,650 $ 132,627 $ 399,890 $278,659 $154,601 Ratios to average net assets: Expenses, including distribution fees....... 1.29%* 1.17% 1.33% 1.50% 1.61%* 2.06%* 1.97% 2.13% Expenses, excluding distribution fees....... 1.06%* .97% 1.13% 1.30% 1.42%* 1.06%* .97% 1.13% Net investment income (loss).................... (.13)%* .26% .19% .59% 1.54%* (.90)%* (.54)% (.61)% Portfolio turnover.......... 43% 68% 99% 111% 79% 43% 68% 99%
1991(D)(D) 1990(D)(D) 1989(D)(D) -------- -------- -------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period................. $ 7.34 $ 9.11 $ 7.47 -------- -------- -------- Income from investment operations Net investment income (loss).................... (.02) .07 .06 Net realized and unrealized gain (loss) on investment transactions.............. 2.82 (1.75) 1.65 -------- -------- -------- Total from investment operations.............. 2.80 (1.68) 1.71 -------- -------- -------- Less distributions Dividends from net investment income......... (.03) (.09) (.07) Distributions from net realized capital gain..... -- -- -- -------- -------- -------- Total distributions......... (.03) (.09) (.07) -------- -------- -------- Net asset value, end of period.................... $ 10.11 $ 7.34 $ 9.11 -------- -------- -------- -------- -------- -------- TOTAL RETURN#:.............. 38.33% (18.63)% 23.20% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000)..................... $118,660 $ 86,440 $160,995 Average net assets (000).... $104,508 $132,622 $144,244 Ratios to average net assets: Expenses, including distribution fees....... 2.30% 2.18% 1.79% Expenses, excluding distribution fees....... 1.30% 1.28% 1.17% Net investment income (loss).................... (.21)% .91% .74% Portfolio turnover.......... 111% 79% 79%
- --------------- * Annualized. ** Calculated based upon weighted average shares outstanding during the period. (D) Commencement of offering of Class A shares. (D)(D) Restated to reflect 3 for 2 stock split paid to shareholders of record on September 17, 1993. # 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. See Notes to Financial Statements. -15- EX-99 2 GROWTH OPPORTUNITY N30D FILING GRAPH DSC. (3/94) Chart entitled Prudential Mutual Funds: Risk/Reward Spectrum. The chart shows a graphic representation of the spectrum of risks of various categories of Prudential Mutual Funds including stock funds, tax-exempt bond funds, taxable bond funds and global taxable bond funds. The chart rates the risk of individual Prudential Mutual Funds relative to other Prudential Mutual Funds in each category. Under the category of stock funds, the chart lists from low risk to high risk the following funds (beginning at the low end of the spectrum): FlexiFund (The Conservatively Managed Portfolio) IncomeVertible Fund FlexiFund (The Strategy Portfolio) Equity Income Fund Utility Fund Global Utility Fund Equity Fund Growth Fund Global Fund Nicholas-Applegate Growth Equity Fund Growth Opportunity Fund Multi-Sector Fund Global Natural Resources Fund Global Genesis Fund Pacific Growth Fund Under the category of tax-exempt bond funds, the chart lists from low risk to high risk the following funds (beginning at the low end of the spectrum): Municipal Bond Fund (Modified Term Series) Municipal Bond Fund (Insured Series) National Municipals Fund Municipal Series Fund (State Series Fund) California Municipal Fund (California Income Series) Municipal Bond Fund (High Yield Series) Under the category of taxable bond funds, the chart lists from low risk to high risk the following funds (beginning at the low end of the spectrum): Adjustable Rate Securities Fund The BlackRock Government Income Fund Structured Maturity Fund (Income Portfolio) Government Securities Trust (Intermediate Term Series) GNMA Fund Government Plus Fund U.S. Government Fund High Yield Fund Under the category of global taxable bond funds, the chart lists from low risk to high risk the following funds (beginning at the low end of the spectrum): Short-Term Global Income Fund (Global Assets Portfolio) Short-Term Global Income Fund (Short-Term Global Income Portfolio) Intermediate Global Income Fund Performance Charts A. Historical Investment Results The chart shows comparative historical investment results for the one-year, five-year and since inception periods ended March 31, 1994 for the Class A shares of the Fund, the Class B shares of the Fund, the Lipper Small Company Growth Fund Average and the Russell 2000 Index, without taking into account front-end or contingent deferred sales charges. B. Average Annual Total Returns The chart also shows the average annual total returns for the one-year, five- year and since inception periods ended March 31, 1994 for Class A and Class B shares taking into account any applicable sales charges. Mountain Charts Two mountain charts show the growth of an assumed investment of $10,000 in the Prudential Growth Opportunity Fund. The charts represent historical performance and are not a guarantee of future performance of Class A shares or Class B shares. A. Class A shares The chart shows the growth of a $10,000 investment in Class A shares from inception on January 22, 1990 through March 31, 1994, and assumes a front-end sales charge of 5.25%. The chart shows the value of the investment as of January 22, 1990, (i) with the reinvestment of dividends and distributions in additional shares of the Fund and (ii) with all dividends and distributions taken in cash. B. Class B shares The chart shows the growth of a $10,000 investment in Class B shares from inception on November 30, 1980 through March 31, 1994, and does not assume the effect of a contingent deferred sales charge on redemptions. The chart shows the value of the investment as of November 30, 1980, (i) with the reinvestment of dividends and distributions in additional shares of the Fund and (ii) with all dividends and distributions taken in cash. -----END PRIVACY-ENHANCED MESSAGE-----