<PAGE>
SEMIANNUAL REPORT APRIL 30, 2000
Prudential
Tax-Managed Equity Fund
Fund Type Stock
Objective Long-term after-tax growth of capital
The views expressed in this report and information
about the Fund's portfolio holdings are for the
period covered by this report and are subject to
change thereafter.
This report is not authorized for distribution to
prospective investors unless preceded or
accompanied by a current prospectus.
<PAGE>
Build on the Rock
Investment Goals and Style
The Prudential Tax-Managed Equity Fund attempts to
provide after-tax returns that exceed those of the
Standard & Poor's 500 Composite Stock Price Index
(S&P 500 Index) over the long term. Using
quantitative investment strategies, we emphasize
individual securities that we believe are likely to
perform well. To manage risk and provide broad
market participation at all times, however, we try
to maintain the Fund's sector, industry, size, and
security exposures close to those of the S&P 500
Index.
Portfolio Composition
Sectors expressed as a percentage of
net assets as of 4/30/00
25.5% Electronic Technology
14.2 Finance
8.8 Utilities
8.2 Health Technology
8.1 Technology Services
6.7 Retail Trade
6.3 Process Industries
5.0 Energy Minerals
3.7 Consumer Non-Durables
3.1 Producer Manufacturing
3.0 Consumer Services
7.3 Other
0.1 Cash & Equivalents
Ten Largest Holdings
Expressed as a percentage of
net assets as of 4/30/00
4.3% General Electric Co.
Diversified Manufacturing
3.8 Cisco Systems, Inc.
Computer Networks
3.6 Intel Corp.
Semiconductors
2.6 Microsoft Corp.
Computer Software & Services
2.2 Wal-Mart Stores, Inc.
Retail
1.9 Oracle Systems Corp.
Computer Software & Services
1.8 Exxon Mobil Corporation
Petroleum & Coal
1.8 Pfizer Inc.
Pharmaceuticals
1.7 Citigroup Inc.
Financial Services
1.6 International Business Machines Corp.
Computers
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
Cumulative Total Returns1 As of 4/30/00
Six One Since
Months Year Inception2
Class A 10.47% 13.91% 24.50%
Class B 10.16 13.08 23.60
Class C 10.16 13.08 23.60
Class Z 10.62 14.16 25.00
Lipper Large-Cap
Core Fd. Avg.3 10.79 14.31 22.58
Average Annual Total Returns1 As of 4/30/00
One Since
Year Inception2
Class A 8.21% 15.60%
Class B 8.08 16.71
Class C 10.95 18.20
Class Z 14.16 21.25
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.
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, 3/3/99.
3 Lipper average returns are for all funds in each
share class for the six-month, one-year, and since-
inception periods in the Large-Cap Core Fund
category. The Lipper average is unmanaged. Large-
Cap Core funds invest at least 75% of their equity
assets in companies with market capitalizations (on
a three-year weighted basis) greater than 300% of
the dollar-weighted median market capitalization of
the S&P(r) Mid-Cap 400 Index. Large-Cap Core funds
have wide latitude in the companies in which they
invest. These funds will normally have an average
price/earnings ratio, price/book ratio, and three-
year earnings growth figure.
"S&P(r)" is a registered trademark of The McGraw-Hill
Companies, Inc.
1
<PAGE>
(LOGO) June 15, 2000
Dear Shareholder,
The six months ended April 30, 2000, were an
extraordinarily volatile
period for U.S. stocks. Although the S&P 500 Index
gained 7.18% over the half-year, this moderate rise
masked both steep and unsustainable climbs and
sharp drops that continued after the end of our
reporting period. The Prudential Tax-Managed Equity
Fund's Class A shares returned 10.47% over the six
months, well above the S&P 500 Index and in line
with the 10.79% gain of the Lipper Large-Cap Core
Fund Average. This return placed the Fund in the
top half of funds in this Lipper category, as
the average was pulled up by the high returns of
funds with a growth emphasis. Our return was 4.95%
to those paying the maximum one-time Class A share
sales charge.
The Fund's advantage over the S&P 500 Index was
primarily due to strong selection largely among
technology stocks. Performance also was helped by
good sector selection: a modest overweight in
strong-performing technology and a slight
underweight of the lagging consumer nondurables.
Sector selection offset the negative impact of a
small overrepresentation of smaller company stocks,
which lagged the market.
The final months of this reporting period marked a
dramatic shift in
market favor from growth to value stocks. Whether
the change endures, is reversed again, or market
favor becomes more evenly distributed, the
volatility reminds us of the advantage of being
diversified across styles and sectors.
Sincerely,
John R. Strangfeld, President
Prudential Tax-Managed Funds--Prudential Tax-Managed Equity Fund
2
<PAGE>
www.prudential.com (800) 225-1852
Semiannual Report April 30, 2000
Investment adviser's report
The Prudential Tax-Managed Equity Fund is managed
to reduce the risk of a large deviation in return
from the Fund's S&P 500 Index benchmark, while also
increasing the likelihood that its performance will
be better than the Index. In our classification of
the market into 17 economic sectors, no sector had
an average deviation from the benchmark of more
than two percentage points over this reporting
period. At period end, no single stock deviated
from its benchmark weighting by more than 0.60 of a
percentage point.
However, there were many smaller deviations from
the benchmark, and our active management of these
exposures accounted for our three-percentage-point
outperformance of the S&P 500 Index over the six-
month period. Our margin of outperformance over the past 12
months was closer to four percentage points.
On a month-to-month basis, our return varied with
the general trend of the S&P 500 Index, and our
largest underperformance of the Index (in January)
was only 0.20 of a percentage point. On the other
hand, we beat the Index by as much as 1.55
percentage points in February. Although we were
pleased with February's return, it was larger than
we would normally expect over the long term, and we
would not characterize it as a typical month.
As with the broader market, the largest
contribution to our absolute return came from
electronic technology companies. The giants of this
sector were Cisco Systems and Intel. Our holdings
of these were close to their benchmark weighting.
Our outperformance in the sector was due to our
overweights in many smaller high performers:
Qualcomm, ADC Telecommunications, Altera, Teradyne,
and others. Our stock selection in this sector was
the largest single factor in our outperformance,
but our overweight of the sector as a whole also
contributed.
3
<PAGE>
Prudential Tax-Managed Equity Fund
Semiannual Report April 30, 2000
We benefited, as well, from good stock selection
and a slight overweighting in technology services,
which includes software companies. Again, large
companies such as Oracle Systems and Microsoft had
the greatest absolute impact on our return, but our
margin of outperformance came from smaller firms
such as Citrix Systems and Siebel Systems.
An overweight in financials hurt both our absolute
and relative performance. The sector fell, largely
over fears that the Federal Reserve would increase
short-term interest rates and accidentally cause a
sharp economic slowdown. Moreover, our stock
selection overweighted the poorer
performers, on average, such as Conseco and
Providian. (Conseco was no longer in the portfolio
at period end.)
We should emphasize that we allow only small
deviations from the benchmark S&P 500 Index in risk
factors such as sector, industry, and market
capitalization. Such deviations do not come about
because we believe that, for example, the
technology sector will outpace others. Rather, we
attempt to overweight (or underweight) individual
stocks on the basis of our assessment of their
investment prospects. This sometimes results in an
overweight in a sector. Over time, we expect
exposure to various risk factors to have only a
minor impact on our return. Our primary objective
is to add value through judiciously chosen
individual securities.
How we select stocks
Usually, stocks of both fast-growing and slow-
growing companies (often called value stocks) are
represented in our portfolio. We have found that no
single discipline identifies winners and losers
equally well within each style. Consequently, we
apply different selection criteria to growth and
value stocks.
Research in behavioral finance--the discipline that
applies scientifically derived generalizations
about human judgment to financial behavior--suggests
that investors tend to overemphasize recent news
while neglecting longer-term trends. So, among
value stocks, we tend to buy and hold shares in
companies that become underpriced relative to their
earnings or book
4
<PAGE>
www.prudential.com (800) 225-1852
value. We do this in the belief that the market has
overreacted to past
disappointments from these firms. We buy slow-
growth stocks with the intention of holding them
until they have reached their fair value.
Among stocks in rapidly growing companies, however,
both theory and practice suggest that investors'
overconfidence slows their response to news about
future growth. We try to emphasize stocks with
positive news about future prospects in the belief
that the market will eventually follow. We hold
these stocks until bad news calls into question the
firm's ability to sustain profitable future growth.
In contrast to value stocks, we de-emphasize price
because low prices do not necessarily make
attractive growth stocks.
Difference between absolute and relative performance
Our definition of success is a return that is
better than the overall market, as measured by the
S&P 500 Index, over the long term. So we try to be
somewhat like the Index, only a bit better.
Consider, for example, our average holding of
Microsoft over this reporting period. It hurt our
absolute performance because Microsoft was a large
holding and it had a large decline. But we had a
substantial underweight in Microsoft compared to
its weighting in the S&P 500 Index, so our relative
performance benefited. In other words, it didn't
hurt us as much as it hurt the Index. We think we
did well by reducing our exposure to the stock
without taking the larger risk that holding no
Microsoft would have represented. We de-emphasized
Microsoft because our quantitative models suggested
that the stock was overpriced. If we had no concern
about deviating from the performance of the S&P 500
Index, we even might have avoided Microsoft
altogether. We sometimes hold a stock that we think
is a poor investment, but at a lower-than-benchmark
weight, because it is a large component of our
benchmark index.
Similarly, at the sector level, consumer
nondurables such as Procter & Gamble and Coca-Cola
hurt our absolute return because the sector had a
large average loss. But we had slightly
underrepresented consumer nondurable stocks, and we
adjusted our weights within the sector to reduce
the average loss compared with the S&P 500 Index.
So our consumer nondurables also made a large
positive contribution to our relative performance.
5
<PAGE>
Prudential Tax-Managed Equity Fund
Semiannual Report April 30, 2000
Tax management
The changes in market value of a stock in our
portfolio affect our net asset value and our
return, but have no tax consequences until the gain
or loss is locked in by the shares' sale. This is
called "realizing" the gain or loss.
We review our portfolio daily for stocks that have
fallen in value. When we can replace such a stock
with another that has a similar profile--that is, it
is in the same industry, it has a similar market
capitalization, and it has a
similar growth potential--we often do so to realize
a loss that can be used to offset the tax
implications of realized gains. We try to keep a
capital loss carry-forward--a net realized loss that
can be subtracted from future gains--amounting to 3%
to 5% of our portfolio.
For example, Qualcomm had been our largest
overweight, and the stock rose 219% from the
beginning of this reporting period to the end of
1999. We thought the higher share price captured at
least some of its growth potential, so we wanted to
reduce our overweight. In order to lower our
commitment after the stock price already had risen
(which increased the value of our holdings), we had
to sell a substantial amount of Qualcomm, so we
realized a large gain. However, we were able to
sell stocks that had depreciated to realize a
similar loss, while maintaining the risk profile we
desired. (Qualcomm shares fell sharply toward the
end of our reporting period, so locking in its gain
proved to be wise.)
Although our overall return over the reporting
period was in the top half of large-cap core funds
in the Lipper universe--and an excellent half-year
performance for a stock portfolio--we kept our
capital loss carry-forward within our target range
for much of the last six months. That means we
realized about the same amount of gains and losses,
minimizing the tax consequences of the
transactions. We are pleased that we were able to
offset our realized gains with realized losses
while still producing a strong performance.
Prudential Tax-Managed Equity Fund Management Team
6
<PAGE>
Prudential Tax-Managed Equity Fund
Financial
Statements
<PAGE>
Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 99.9%
Common Stocks
-------------------------------------------------------------------------------------
Aerospace/Defense 0.7%
36,900 Boeing Co. $ 1,464,469
20,100 General Dynamics Corp. 1,175,850
3,700 Northrop Grumman Corp. 262,237
300 Rockwell Int'l. Corp. 11,813
--------------
2,914,369
-------------------------------------------------------------------------------------
Airlines 0.5%
34,300 AMR Corp.(a) 1,168,344
17,700 Delta Air Lines, Inc. 933,675
8,000 Southwest Airlines Co. 173,500
--------------
2,275,519
-------------------------------------------------------------------------------------
Aluminum 0.5%
9,500 Alcan Aluminum Ltd. 311,125
33,000 Alcoa Inc. 2,140,875
--------------
2,452,000
-------------------------------------------------------------------------------------
Auto & Truck 3.0%
18,100 Arvin Industries, Inc. 393,675
9,500 Borg-Warner Automotive, Inc. 397,219
38,900 Delphi Automotive Systems Corp. 743,963
78,300 Ford Motor Co. 4,282,031
53,300 General Motors Corp. 4,990,212
2,700 Genuine Parts Co. 70,875
13,300 Harley-Davidson, Inc. 529,506
23,100 Johnson Controls, Inc. 1,462,519
10,200 Navistar International Corp.(a) 357,000
6,900 PACCAR Inc. 328,181
1,500 TRW Inc. 87,750
--------------
13,642,931
-------------------------------------------------------------------------------------
Banking 3.1%
100 Associated Banc-Corp. 2,556
27,700 Astoria Financial Corp. 763,481
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
51,600 Bank of America Corp. $ 2,528,400
13,000 Bank of New York Co., Inc. 533,813
4,000 Bank One Corp. 122,000
30,200 Chase Manhattan Corp. 2,176,287
22,700 Dime Bancorp, Inc. 425,625
1,300 Fifth Third Bancorp 82,063
28,600 First Union Corp. 911,625
9,864 Firstar Corp. 245,367
31,030 FleetBoston Financial Corp. 1,099,626
7,800 Mellon Financial Corp. 250,575
800 Northern Trust Corp. 51,300
18,900 PNC Financial Services Group 824,513
40,100 SouthTrust Corp. 957,387
3,500 SunTrust Banks, Inc. 177,625
800 Washington Mutual, Inc. 20,450
69,300 Wells Fargo Co. 2,845,631
--------------
14,018,324
-------------------------------------------------------------------------------------
Beverages 1.8%
18,500 Anheuser-Busch Cos., Inc. 1,305,406
39,000 Coca-Cola Co. 1,835,437
62,200 Coca-Cola Enterprises Inc. 1,325,638
92,400 PepsiCo Inc. 3,389,925
1,000 Seagram Co. Ltd. 54,000
--------------
7,910,406
-------------------------------------------------------------------------------------
Biotechnology 0.1%
4,000 PE Corp.-PE Biosystems Group 240,000
-------------------------------------------------------------------------------------
Business Services 0.1%
8,800 Paychex, Inc. 463,100
-------------------------------------------------------------------------------------
Chemicals 0.6%
600 Ashland Inc. 20,475
4,600 Dow Chemical Co. 519,800
32,385 E.I. du Pont de Nemours & Co. 1,536,263
6,800 Praxair, Inc. 302,175
1,700 Schulman (A.), Inc. 21,888
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
3,800 Union Carbide Corp. $ 224,200
--------------
2,624,801
-------------------------------------------------------------------------------------
Computers 5.1%
14,600 Apple Computer, Inc.(a) 1,811,313
36,400 Dell Computer Corp.(a) 1,824,550
40,500 Hewlett-Packard Co. 5,467,500
65,300 International Business Machines Corp. 7,289,112
6,600 Lexmark Int'l Group, Inc.(a) 778,800
1,700 Seagate Technology, Inc.(a) 86,381
62,600 Sun Microsystems, Inc.(a) 5,755,288
--------------
23,012,944
-------------------------------------------------------------------------------------
Computer Networks 4.1%
246,400 Cisco Systems, Inc.(a) 17,082,450
15,200 Network Appliance, Inc.(a) 1,123,850
--------------
18,206,300
-------------------------------------------------------------------------------------
Computer Software & Services 10.1%
23,700 Adobe Systems Inc. 2,866,219
67,900 America Online, Inc. 4,061,269
19,700 Automatic Data Processing, Inc. 1,060,106
14,100 Citrix Systems, Inc.(a) 860,981
29,300 Comverse Technology, Inc.(a) 2,613,194
18,900 Electronic Data Systems Corp. 1,299,375
39,500 EMC Corp.(a) 5,488,031
17,900 First Data Corp. 871,506
166,100 Microsoft Corp.(a) 11,585,475
103,700 Oracle Systems Corp.(a) 8,289,519
18,400 Siebel Systems, Inc.(a) 2,260,900
24,100 SunGard Data Systems Inc.(a) 832,956
12,000 VERITAS Software Corp.(a) 1,287,188
12,900 Yahoo! Inc.(a) 1,680,225
--------------
45,056,944
-------------------------------------------------------------------------------------
Consumer Products 0.2%
900 American Greetings Corp. 16,313
16,600 NIKE, Inc. 721,062
--------------
737,375
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Cosmetics & Soaps 0.8%
22,300 Colgate-Palmolive Co. $ 1,273,887
7,100 Gillette Co. (The) 262,700
25,000 Kimberly-Clark Corp. 1,451,562
10,100 Procter & Gamble Co. 602,213
--------------
3,590,362
-------------------------------------------------------------------------------------
Distribution/Wholesalers 0.1%
7,400 Costco Wholesale Corp.(a) 400,063
-------------------------------------------------------------------------------------
Diversified Manufacturing 5.7%
700 Ball Corp. 22,050
8,200 Cooper Industries, Inc. 281,362
6,700 Corning Inc. 1,323,250
3,300 Eaton Corp. 277,200
123,700 General Electric Co. 19,451,825
18,550 Honeywell International Inc. 1,038,800
4,200 Illinois Tool Works Inc. 269,063
100 Liz Claiborne, Inc. 4,631
17,600 Minnesota Mining & Manufacturing Co. 1,522,400
19,100 National Service Industries, Inc. 410,650
22,000 Pittston Brink's Group 360,250
3,200 PPG Industries, Inc. 174,000
22,300 Trinity Industrial, Inc. 496,175
--------------
25,631,656
-------------------------------------------------------------------------------------
Drugs & Medical Supplies 3.0%
44,300 Abbott Laboratories 1,702,781
51,000 Amgen Inc.(a) 2,856,000
3,900 Baxter Int'l. Inc. 253,988
19,600 Boston Scientific Corp.(a) 519,400
88,500 Bristol-Myers Squibb Co. 4,640,719
31,700 Cardinal Health, Inc. 1,745,481
100 Express Scripts, Inc.(a) 3,575
23,000 Johnson & Johnson 1,897,500
--------------
13,619,444
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Electronics 0.3%
2,700 Avnet, Inc. $ 212,288
11,800 Emerson Electric Co. 647,525
6,600 Linear Technology Corp. 377,025
--------------
1,236,838
-------------------------------------------------------------------------------------
Electronic Components 3.0%
33,500 Altera Corp.(a) 3,425,375
4,700 American Power Conversion Corp.(a) 165,969
2,900 Jabil Circuit, Inc.(a) 118,719
30,100 KLA-Tencor Corp.(a) 2,253,737
13,900 Microchip Technology, Inc.(a) 862,669
3,375 Molex Inc. 185,414
25,632 Motorola, Inc. 3,051,810
30,300 Teradyne, Inc.(a) 3,333,000
--------------
13,396,693
-------------------------------------------------------------------------------------
Financial Services 8.2%
3,300 Ambac Financial Group, Inc. 158,400
23,700 American Express Co. 3,556,481
36,965 Bear Stearns Cos. Inc. 1,584,874
126,850 Citigroup Inc. 7,539,647
41,200 Concord EFS, Inc.(a) 921,850
14,800 Countrywide Credit Industries, Inc. 408,850
12,900 Federal Home Loan Mortgage Corp. 592,594
37,100 Federal National Mortgage Association 2,237,594
71,500 FINOVA Group Inc. (The) 916,094
49,400 Golden West Financial Corp. 1,685,775
26,400 H&R Block, Inc. 1,103,850
5,000 Household Int'l., Inc. 208,750
29,500 Lehman Brothers Holdings Inc. 2,420,844
42,900 MBNA Corp. 1,139,531
9,000 Merrill Lynch & Co., Inc. 917,437
5,000 MGIC Investment Corp. 239,063
23,400 Morgan (J.P.) & Co., Inc. 3,003,975
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
57,200 Morgan Stanley Dean Witter & Co. $ 4,390,100
48,300 PaineWebber Group Inc. 2,119,162
8,500 Providian Financial Corp. 748,531
14,900 Schwab (Charles) Corp. 663,050
--------------
36,556,452
-------------------------------------------------------------------------------------
Foods 0.8%
705 Archer-Daniels-Midland Co. 7,006
1,000 H.J. Heinz Co. 34,000
82,300 IBP, Inc. 1,357,950
9,000 International Multifoods Corp. 115,313
800 Kellogg Co. 19,550
10,300 Quaker Oats Co. (The) 671,431
19,000 Suiza Foods Corp.(a) 739,812
2,000 SUPERVALU INC. 41,375
11,500 SYSCO Corp. 432,688
400 Wrigley (William) Jr. Co. 28,950
--------------
3,448,075
-------------------------------------------------------------------------------------
Gas Distribution 0.1%
23,800 Sempra Energy 441,788
-------------------------------------------------------------------------------------
Gas Pipelines 0.4%
4,700 El Paso Energy Corp. 199,750
19,900 Enron Corp. 1,386,781
--------------
1,586,531
-------------------------------------------------------------------------------------
Health Care 0.6%
34,300 Columbia/HCA Healthcare Corp. 975,406
27,600 Foundation Health Systems, Inc.(a) 277,725
5,000 Tenet Healthcare Corp.(a) 127,500
4,200 Trigon Healthcare, Inc.(a) 150,938
16,000 UnitedHealth Group, Inc. 1,067,000
200 Wellpoint Health Networks Inc.(a) 14,750
--------------
2,613,319
-------------------------------------------------------------------------------------
Housing Construction 0.3%
26,700 Centex Corp. 644,137
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
100 Masco Corp. $ 2,244
29,100 Pulte Corp. 625,650
--------------
1,272,031
-------------------------------------------------------------------------------------
Insurance 3.4%
6,800 Aetna Inc. 393,550
5,100 AFLAC INC. 248,944
19,000 Allmerica Financial Corp. 1,028,375
135,600 Allstate Corp. 3,203,550
5,200 American Financial Group, Inc. 132,275
1,600 American General Corp. 89,600
60,800 American Int'l. Group, Inc. 6,669,000
25,000 Everest Re Group, Ltd. 731,250
6,800 Hartford Financial Services Group, Inc. 354,875
1,600 Jefferson-Pilot Corp. 106,500
300 Loews Corp. 16,537
5,000 Marsh & McLennan Co., Inc. 492,812
8,100 PMI Group, Inc. (The) 392,344
41,200 St. Paul Companies, Inc. 1,467,750
--------------
15,327,362
-------------------------------------------------------------------------------------
Lodging
400 Marriott Int'l., Inc. 12,800
-------------------------------------------------------------------------------------
Machinery 0.3%
6,100 Deere & Co. 246,288
6,900 Dover Corp. 350,606
4,200 Ingersoll-Rand Co. 197,138
26,200 McDermott Int'l., Inc. 212,875
4,000 Milacron Inc. 73,000
7,400 Tecumseh Products Co. 343,637
--------------
1,423,544
-------------------------------------------------------------------------------------
Media 2.9%
18,900 Comcast Corp.(a) 757,181
79,100 Disney (Walt) Co. 3,426,019
6,800 Dow Jones & Co., Inc. 441,150
11,100 Gannett Co., Inc. 709,013
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
7,400 Interpublic Group of Companies, Inc. $ 303,400
3,200 Knight-Ridder, Inc. 157,000
5,900 McGraw-Hill Cos., Inc. 309,750
6,800 New York Times Co. 280,075
10,500 Omnicom Group Inc. 956,156
62,200 Time Warner, Inc. 5,594,112
--------------
12,933,856
-------------------------------------------------------------------------------------
Metals
700 Inco Ltd.(a) 10,938
-------------------------------------------------------------------------------------
Mining
900 Barrick Gold Corp. 15,131
-------------------------------------------------------------------------------------
Miscellaneous Basic Industry 1.2%
2,500 Precision Castparts Corp. 104,375
21,500 Textron, Inc. 1,331,656
81,110 Tyco Int'l. Ltd. 3,725,991
--------------
5,162,022
-------------------------------------------------------------------------------------
Office Equipment & Supplies 0.1%
17,000 Wallace Computer Services, Inc. 185,938
3,100 Xerox Corp. 81,956
--------------
267,894
-------------------------------------------------------------------------------------
Oil & Gas 0.5%
9,500 Amerada Hess Corp. 604,438
14,600 BJ Services Co.(a) 1,025,650
14,500 Coastal Corp. 727,719
--------------
2,357,807
-------------------------------------------------------------------------------------
Oil & Gas Exploration/Production 0.5%
300 Apache Corp. 14,531
13,100 Conoco Inc. 325,863
34,000 ENSCO International, Inc. 1,128,375
30,200 Tosco Corp. 968,287
--------------
2,437,056
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Paper & Packaging 1.0%
3,500 Champion Int'l. Corp. $ 230,125
6,200 Consolidated Papers, Inc. 234,825
6,200 Georgia-Pacific Group 227,850
75,600 International Paper Co. 2,778,300
71,600 Louisiana-Pacific Corp. 957,650
--------------
4,428,750
-------------------------------------------------------------------------------------
Petroleum & Coal 4.6%
148 Arch Coal, Inc. 794
14,036 BP Amoco PLC, ADR (United Kingdom) 715,836
27,700 Chevron Corp. 2,357,962
102,003 Exxon Mobil Corporation 7,924,358
42,200 Phillips Petroleum Co. 2,001,863
73,900 Royal Dutch Petroleum Co. 4,240,012
63,900 Texaco Inc. 3,163,050
--------------
20,403,875
-------------------------------------------------------------------------------------
Pharmaceuticals 5.5%
7,300 Allergan, Inc. 429,788
43,600 Eli Lilly & Co. 3,370,825
87,700 Merck & Co., Inc. 6,095,150
187,900 Pfizer Inc. 7,915,287
26,900 Schering-Plough Corp. 1,084,406
50,100 Warner-Lambert Co. 5,702,006
200 Watson Pharmaceuticals, Inc.(a) 8,988
--------------
24,606,450
-------------------------------------------------------------------------------------
Railroads 0.6%
82,000 Burlington Northern, Inc. 1,978,250
1,500 Kansas City Southern Industries, Inc. 107,812
12,600 Union Pacific Corp. 530,775
--------------
2,616,837
-------------------------------------------------------------------------------------
Restaurants 0.2%
3,100 McDonald's Corp. 118,187
29,700 Starbucks Corp.(a) 897,961
--------------
1,016,148
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Retail 6.6%
400 Albertson's, Inc. $ 13,025
6,100 Bed Bath & Beyond Inc.(a) 223,794
12,500 Best Buy Co., Inc.(a) 1,009,375
31,700 Circuit City Stores-Circuit City Group 1,864,356
500 CVS Corp. 21,750
37,600 Federated Department Stores, Inc.(a) 1,278,400
41,600 Gap, Inc. (The) 1,528,800
99,950 Home Depot, Inc. 5,603,447
172,900 Kmart Corp.(a) 1,404,813
18,800 Kohl's Corp.(a) 902,400
5,489 Limited, Inc. 248,034
23,300 Lowe's Companies, Inc. 1,153,350
13,500 Neiman-Marcus Group, Inc.(a) 347,625
4,400 Safeway Inc.(a) 194,150
51,600 Sears, Roebuck & Co. 1,889,850
7,300 Target Corp. 485,906
9,600 Tiffany & Co. 697,800
176,500 Wal-Mart Stores, Inc. 9,773,687
36,200 Walgreen Co. 1,018,125
--------------
29,658,687
-------------------------------------------------------------------------------------
Semiconductors 6.6%
7,400 Analog Devices, Inc.(a) 568,413
45,400 Applied Materials, Inc.(a) 4,622,287
8,400 Atmel Corp.(a) 411,075
128,600 Intel Corp. 16,308,087
47,500 LSI Logic Corp.(a) 2,968,750
1,800 Novellus Systems, Inc.(a) 120,038
27,000 Texas Instruments Inc. 4,397,625
--------------
29,396,275
-------------------------------------------------------------------------------------
Steel - Producers 0.1%
14,300 Nucor Corp. 614,900
1,500 USX-U.S. Steel Group 37,594
--------------
652,494
</TABLE>
See Notes to Financial Statements 17
<PAGE>
Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Telecommunications 8.8%
65,300 ADC Telecommunications, Inc.(a) $ 3,966,975
100,700 AT&T Corp. 4,701,431
63,600 Bell Atlantic Corp. 3,768,300
22,700 BellSouth Corp. 1,105,206
35,800 GTE Corp. 2,425,450
70,000 Lucent Technologies, Inc. 4,353,125
47,450 MCI WorldCom, Inc.(a) 2,156,009
52,000 Nortel Networks Corp. 5,889,000
33,400 QUALCOMM, Inc.(a) 3,621,813
116,494 SBC Communications Inc. 5,103,893
40,700 Sprint Corp. 2,503,050
--------------
39,594,252
-------------------------------------------------------------------------------------
Textiles 0.1%
11,900 Springs Industries, Inc. 488,644
-------------------------------------------------------------------------------------
Tobacco 0.3%
69,400 Philip Morris Companies Inc. 1,518,125
1,200 Universal Corp. 22,650
--------------
1,540,775
-------------------------------------------------------------------------------------
Transportation
5,000 CNF Transportation Inc. 139,688
-------------------------------------------------------------------------------------
Utilities 3.4%
500 Ameren Corp. 18,344
1,700 American Electric Power Co., Inc. 62,263
5,300 Calpine Corp.(a) 484,950
1,000 Carolina Power & Light Co. 36,563
2,000 Cinergy Corp. 53,500
5,200 Consolidated Edison, Inc. 182,975
3,900 Constellation Energy Group 128,944
6,673 Dominion Resources, Inc. 300,285
50,900 Duke Energy Corp. 2,926,750
77,000 Entergy Corp. 1,958,687
6,600 FirstEnergy Corp. 167,887
</TABLE>
18 See Notes to Financial Statements
<PAGE>
Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
10,100 Florida Progress Corp. $ 494,900
4,200 FPL Group, Inc. 189,787
6,100 Minnesota Power, Inc. 112,469
86,200 PG&E Corp. 2,235,812
1,600 Pinnacle West Capital Corp. 56,200
24,100 Public Service Company of New Mexico(a) 433,800
2,200 Public Service Enterprise Group Inc. 78,925
4,900 Puget Sound Energy, Inc. 116,375
84,200 Reliant Energy, Inc. 2,241,825
59,100 Texas Utilities Co. 1,990,931
16,000 Unicom Corp. 636,000
24,400 UtiliCorp United Inc. 469,700
--------------
15,377,872
--------------
Total long-term investments (cost $354,258,806) 447,217,422
SHORT-TERM INVESTMENT 0.3%
<CAPTION>
Principal
Amount
(000)
<C> <S> <C> <C>
-------------------------------------------------------------------------------------
Repurchase Agreement 0.3%
1,172 Joint Repurchase Agreement Account,
5.71%, 5/1/00
(cost $1,172,000; Note 5) 1,172,000
--------------
Total Investments 100.2%
(cost $355,430,806; Note 4) 448,389,422
Liabilities in excess of other assets (0.2%) (966,443)
--------------
Net Assets 100% $ 447,422,979
--------------
--------------
</TABLE>
--------------------------------------------------------------------------------
(a) Non-income producing security.
ADR--American Depository Receipt.
PLC--Public Limited Company (British Corporation)
See Notes to Financial Statements 19
<PAGE>
Prudential Tax-Managed Equity Fund
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
April 30, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $355,430,806) $ 448,389,422
Cash 37,438
Receivable for investments sold 9,315,189
Receivable for Fund shares sold 2,220,693
Dividends and interest receivable 279,625
Prepaid expenses 1,778
--------------
Total assets 460,244,145
--------------
LIABILITIES
Payable for investments purchased 10,576,077
Payable for Fund shares reacquired 1,503,295
Distribution fee payable 295,390
Management fee payable 238,212
Accrued expenses and other liabilities 208,192
--------------
Total liabilities 12,821,166
--------------
NET ASSETS $ 447,422,979
--------------
--------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 36,133
Paid-in capital in excess of par 375,219,316
--------------
375,255,449
Net investment loss (1,132,606)
Accumulated net realized loss on investments (19,658,480)
Net unrealized appreciation on investments 92,958,616
--------------
Net assets, April 30, 2000 $ 447,422,979
--------------
--------------
</TABLE>
20 See Notes to Financial Statements
<PAGE>
Prudential Tax-Managed Equity Fund
Statement of Assets and Liabilities (Unaudited) Cont'd.
<TABLE>
<CAPTION>
April 30, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share
($92,386,347 / 7,419,423 shares of beneficial interest
issued and outstanding) $12.45
Maximum sales charge (5% of offering price) .66
--------------
Maximum offering price to public $13.11
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($208,694,478 / 16,887,885 shares of beneficial interest
issued and outstanding) $12.36
--------------
--------------
Class C:
Net asset value and redemption price per share
($128,596,192 / 10,406,416 shares of beneficial interest
issued and outstanding) 12.36
Sales charge (1% of offering price) .12
--------------
Offering price to public $12.48
--------------
--------------
Class Z:
Net asset value, offering price and redemption price per share
($17,745,962 / 1,419,604 shares of beneficial interest
issued and outstanding) $12.50
--------------
--------------
</TABLE>
See Notes to Financial Statements 21
<PAGE>
Prudential Tax-Managed Equity Fund
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
April 30, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
NET INVESTMENT LOSS
Income
Dividends (net of foreign withholding taxes of $2,410) $ 2,417,560
Interest 27,955
-----------------
Total income 2,445,515
-----------------
Expenses
Management fee 1,383,532
Distribution fee--Class A 111,145
Distribution fee--Class B 982,232
Distribution fee--Class C 614,174
Transfer agent's fees and expenses 116,000
Amortization of offering costs 110,000
Reports to shareholders 80,000
Custodian's fees and expenses 75,000
Registration fees 75,000
Audit fee and expenses 13,000
Legal fees and expenses 10,000
Trustees' fees and expenses 7,000
Miscellaneous 1,038
-----------------
Total expenses 3,578,121
-----------------
Net investment loss (1,132,606)
-----------------
-----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment transactions (7,373,310)
Net change in unrealized appreciation on investments 49,063,657
-----------------
Net gain on investments 41,690,347
-----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 40,557,741
-----------------
-----------------
</TABLE>
22 See Notes to Financial Statements
<PAGE>
Prudential Tax-Managed Equity Fund
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months March 3, 1999(a)
Ended Through
April 30, 2000 October 31, 1999
<S> <C> <C> <C>
------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment loss $ (1,132,606) $ (981,843)
Net realized loss on investments (7,373,310) (12,285,170)
Net change in unrealized appreciation
of investments 49,063,657 43,894,959
---------------- -------------------
Net increase in net assets resulting
from operations 40,557,741 30,627,946
---------------- -------------------
Fund share transactions (net of share
conversions)
(Note 6)
Net proceeds from shares subscribed 98,399,276 391,486,386
Cost of shares reacquired (69,379,649) (44,368,721)
---------------- -------------------
Net increase in net assets from Fund
share transactions 29,019,627 347,117,665
---------------- -------------------
Total increase 69,577,368 377,745,611
NET ASSETS
Beginning of period 377,845,611 100,000
---------------- -------------------
End of period $447,422,979 $ 377,845,611
---------------- -------------------
---------------- -------------------
---------------
(a) Commencement of investment operations.
</TABLE>
See Notes to Financial Statements 23
<PAGE>
Prudential Tax-Managed Equity Fund
Notes to Financial Statements (Unaudited)
Prudential Tax-Managed Equity Fund (the 'Fund') is registered under the
Investment Company Act of 1940 as an open-end, diversified, management
investment company. The Fund was organized as a business trust in Delaware on
September 18, 1998. The Fund had no significant operations other than the
issuance of 2,500 shares each of Class A, Class B, Class C and Class Z for
$100,000 on December 8, 1998 to Prudential Investments Fund Management LLC
('PIFM'). The Fund commenced investment operations on March 3, 1999.
The investment objective of the Fund is to seek long-term after-tax growth
of capital. The Fund pursues its objective by investing a majority of the total
assets in equity-related securities, such as common stock and convertible
securities of U.S. companies.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Securities Valuation: Securities listed on a securities exchange are
valued at the last sale price on such exchange on the day of valuation, or, if
there was no sale on such day, at the mean between the last bid and asked prices
on such day or at the bid price 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 to be
over-the-counter, are valued by an independent pricing agent or principal market
maker. Securities for which market quotations are not readily available or for
which the pricing agent or principal market maker does not provide a valuation
methodology or provides a valuation or methodology that does not represent fair
value are valued in accordance with procedures adopted by the Fund's Board of
Trustees.
Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost.
In connection with transactions in repurchase agreements with U.S.
financial institutions, it is the Fund's policy that its custodian or designated
subcustodians under triparty repurchase agreements, as the case may be, take
possession of the underlying 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 Net Investment Income: Securities
transactions are recorded on the trade date. Realized gains and losses from
investment and currency transactions are calculated on the identified cost
basis. Dividend income is
24
<PAGE>
Prudential Tax-Managed Equity Fund
Notes to Financial Statements (Unaudited) Cont'd.
recorded on the ex-dividend date; 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 (loss), 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 Fund expects to pay dividends of net
investment income and distributions of net realized capital and currency gains,
if any, annually. Dividends and distributions are recorded on the ex-dividend
date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
Taxes: It is the intent of the Fund to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income tax provision is required.
Withholding taxes on foreign dividends have been provided for in
accordance with the Fund's understanding of the applicable country's tax rules
and rates.
Deferred Offering Cost: The Fund incurred approximately $327,000 in
connection with the initial offering of the Fund. Offering costs have been
amortized over a period of 12 months ending in March 2000.
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management,
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM has entered into a subadvisory agreement with The Prudential
Investment Corporation ('PIC'), PIC furnishes investment advisory services in
connection with the Management of the Fund. PIFM pays for the services of PIC,
the cost of compensation of officers of the Fund, occupancy and certain clerical
and bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
For the period ended November 1, 1999 through December 31, 1999 the
management fee paid PIFM was computed daily and payable monthly at an annual
rate of .65% of 1% of the Fund's average daily net assets. Effective January 1,
2000 the management fee paid PIFM is computed daily and payable monthly at an
annual rate of
25
<PAGE>
Prudential Tax-Managed Equity Fund
Notes to Financial Statements (Unaudited) Cont'd.
.65% of 1% of the average daily net assets of the Fund up to and including $500
million and .60% of 1% of such assets in excess of $500 million.
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 of the Fund. The Fund compensates PIMS for
distributing and servicing the Fund's Class A, Class B and Class C shares,
pursuant to plans of distribution (the 'Class A, B and C Plans'), regardless of
expenses actually incurred 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 Fund.
Pursuant to the Class A, B and C Plans, the Fund 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 six months ended
April 30, 2000.
PIMS has advised the Fund that it has received approximately $197,700 and
$198,800 in front-end sales charges resulting from sales of Class A and Class C
shares, respectively, during the six months ended April 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 Fund that for the six months ended April 30, 2000, it
received approximately $477,300 and $110,800 in contingent deferred sales
charges imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PIMS, PIC and PIFM are wholly owned subsidiaries of The Prudential
Insurance Company of America ('The 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 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 Fund did not borrow any amounts pursuant to the SCA
during the six months ended April 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 six months ended April 30, 2000,
the
26
<PAGE>
Prudential Tax-Managed Equity Fund
Notes to Financial Statements (Unaudited) Cont'd.
Fund incurred fees of approximately $115,000 for the services of PMFS. As of
April 30, 2000, approximately $20,200 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.
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the six months ended April 30, 2000 were $223,248,093 and $193,019,961,
respectively.
The federal income tax basis of the Fund's investments at April 30, 2000
was $356,309,776 and accordingly, net unrealized appreciation on investments for
federal income tax purposes was $92,079,646 (gross unrealized
appreciation--$102,895,696, gross unrealized depreciation--$10,816,050).
The Fund had a capital loss carryforward as of October 31, 1999, of
$11,454,800 which expires in 2007. Accordingly, no capital gains distributions
are expected to be paid to shareholders until future net gains have been
realized in excess of such amounts.
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment companies, transfers
uninvested cash 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 April 30, 2000, the Fund had a
.14% undivided interest in the repurchase agreements in the joint account. The
undivided interest for
27
<PAGE>
Prudential Tax-Managed Equity Fund
Notes to Financial Statements (Unaudited) Cont'd.
the Fund represents $1,172,000 in principal amount. As of such date, each
repurchase agreement in the joint account and the collateral therefore were as
follows:
ABN AMRO Incorporated, 5.72%, in the principal amount of $160,000,000,
repurchase price $160,076,267, due 5/1/00. The value of the collateral including
accrued interest was $163,200,995.
Bear, Stearns & Co. Inc., 5.72%, in the principal amount of $160,000,000,
repurchase price $160,076,267, due 5/1/00. The value of the collateral including
accrued interest was $166,727,544.
Credit Suisse First Boston Corp., 5.75%, in the principal amount of
$160,000,000, repurchase price $160,076,667, due 5/1/00. The value of the
collateral including accrued interest was $165,506,481.
Morgan (J.P.) Securities Inc., 5.72%, in the principal amount of
$210,000,000, repurchase price $210,100,100, due 5/1/00. The value of the
collateral including accrued interest was $214,200,036.
Salomon Smith Barney, Inc., 5.65%, in the principal amount of
$162,577,000, repurchase price $162,653,547, due 5/1/00. The value of the
collateral including accrued interest was $165,893,849.
Note 6. Capital
The Fund offers Class A, Class B, Class C and Class Z shares. Class A shares are
sold with a front-end sales charge of up to 5%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Class C shares are sold with a front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18 months. Class B shares automatically convert to Class A shares on a quarterly
basis approximately seven years after purchase. Class Z shares are not subject
to any sales or redemption charge and are offered exclusively for sale to a
limited group of investors.
The Fund has authorized an unlimited number of shares of beneficial
interest at $.001 par value. As of April 30, 2000, The Prudential owned 2,504
Class A shares, 2,551 Class B shares, 2,500 Class C shares and 2,504 Class Z
shares.
28
<PAGE>
Prudential Tax-Managed Equity Fund
Notes to Financial Statements (Unaudited) Cont'd.
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
---------------------------------------------------------- ----------- -------------
<S> <C> <C>
Six months ended April 30, 2000:
Shares sold 2,171,709 $ 25,629,334
Shares reacquired (1,805,228) (21,542,683)
----------- -------------
Net increase in shares outstanding before conversion 366,481 4,086,651
Shares issued upon conversion from Class B 115,910 1,374,856
----------- -------------
Net increase in shares outstanding 482,391 $ 5,461,507
----------- -------------
----------- -------------
March 3, 1999(a) through October 31, 1999:
Shares sold 8,370,870 $ 86,651,084
Shares reacquired (1,531,309) (16,474,883)
----------- -------------
Net increase in shares outstanding before conversion 6,839,561 70,176,201
Shares issued upon conversion from Class B 94,971 1,036,253
----------- -------------
Net increase in shares outstanding 6,934,532 $ 71,212,454
----------- -------------
----------- -------------
<CAPTION>
Class B
----------------------------------------------------------
<S> <C> <C>
Six months ended April 30, 2000:
Shares sold 3,285,716 $ 38,892,003
Shares reacquired (1,886,969) (22,481,949)
----------- -------------
Net increase in shares outstanding before conversion 1,398,747 16,410,054
Shares reacquired upon conversion into Class A (116,577) (1,374,856)
----------- -------------
Net increase in shares outstanding 1,282,170 $ 15,035,198
----------- -------------
----------- -------------
------------------------------
(a) Commencement of investment operations.
</TABLE>
29
<PAGE>
Prudential Tax-Managed Equity Fund
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B Shares Amount
---------------------------------------------------------- ----------- -------------
March 3, 1999(a) through October 31, 1999:
<S> <C> <C>
Shares sold 16,918,477 $ 175,697,109
Shares reacquired (1,220,109) (13,250,878)
----------- -------------
Net increase in shares outstanding before conversion 15,698,368 162,446,231
Shares reacquired upon conversion into Class A (95,153) (1,036,253)
----------- -------------
Net increase in shares outstanding 15,603,215 $ 161,409,978
----------- -------------
----------- -------------
<CAPTION>
Class C
----------------------------------------------------------
<S> <C> <C>
Six months ended April 30, 2000:
Shares sold 1,964,310 $ 23,189,621
Shares reacquired (1,439,725) (17,032,628)
----------- -------------
Net increase in shares outstanding 524,585 $ 6,156,993
----------- -------------
----------- -------------
March 3, 1999(a) through October 31, 1999:
Shares sold 10,842,964 $ 112,692,373
Shares reacquired (963,633) (10,448,107)
----------- -------------
Net increase in shares outstanding 9,879,331 $ 102,244,266
----------- -------------
----------- -------------
<CAPTION>
Class Z
----------------------------------------------------------
<S> <C> <C>
Six months ended April 30, 2000:
Shares sold 900,044 $ 10,688,318
Shares reacquired (689,004) (8,322,389)
----------- -------------
Net increase in shares outstanding 211,040 $ 2,365,929
----------- -------------
----------- -------------
March 3, 1999(a) through October 31, 1999:
Shares sold 1,592,714 $ 16,445,820
Shares reacquired (386,650) (4,194,853)
----------- -------------
Net increase in shares outstanding 1,206,064 $ 12,250,967
----------- -------------
----------- -------------
</TABLE>
---------------
(a) Commencement of investment operations.
30
<PAGE>
Prudential Tax-Managed Equity Fund
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Class A
-------------------------------------------
Six Months March 3, 1999(a)
Ended Through
April 30, 2000(d) October 31, 1999(d)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.27 $ 10.00
-------- --------
Income from investment operations
Net investment income --(e) 0.01
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions 1.18 1.26
-------- --------
Total from investment operations 1.18 1.27
-------- --------
Net asset value, end of period $ 12.45 $ 11.27
-------- --------
-------- --------
TOTAL RETURN(b): 10.47% 12.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 92,386 $ 78,169
Average net assets (000) $ 89,404 $ 66,701
Ratios to average net assets(c):
Expenses, including distribution fees 1.13% 1.23%
Expenses, excluding distribution fees 0.88% 0.98%
Net investment income .02% 0.09%
For Class A, B, C and Z shares:
Portfolio turnover 45% 67%
</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) Annualized.
(d) Based on weighted average shares outstanding during the period.
(e) Less than $.005 per share.
See Notes to Financial Statements 31
<PAGE>
Prudential Tax-Managed Equity Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
-------------------------------------------
Six Months March 3, 1999(a)
Ended Through
April 30, 2000(d) October 31, 1999(d)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.22 $ 10.00
---------- ----------
Income from investment operations
Net investment loss (0.04) (0.05)
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions 1.18 1.27
---------- ----------
Total from investment operations 1.14 1.22
---------- ----------
Net asset value, end of period $ 12.36 $ 11.22
---------- ----------
---------- ----------
TOTAL RETURN(b): 10.16% 12.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $208,695 $175,129
Average net assets (000) $197,526 $144,221
Ratios to average net assets(c):
Expenses, including distribution fees 1.88% 1.98%
Expenses, excluding distribution fees 0.88% .98%
Net investment income (0.73)% (0.67)%
</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) Annualized.
(d) Based on weighted average shares outstanding during the period.
32 See Notes to Financial Statements
<PAGE>
Prudential Tax-Managed Equity Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
-------------------------------------------
Six Months March 3, 1999(a)
Ended Through
April 30, 2000(d) October 31, 1999(d)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.22 $ 10.00
---------- ----------
Income from investment operations
Net investment loss (0.04) (0.05)
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions 1.18 1.27
---------- ----------
Total from investment operations 1.14 1.22
---------- ----------
Net asset value, end of period $ 12.36 $ 11.22
---------- ----------
---------- ----------
TOTAL RETURN(b): 10.16% 12.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $128,596 $110,895
Average net assets (000) $123,510 $ 91,235
Ratios to average net assets(c):
Expenses, including distribution fees 1.88% 1.98%
Expenses, excluding distribution fees .88% .98%
Net investment income (0.73)% (0.67)%
</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) Annualized.
(d) Based on weighted average shares outstanding during the period.
See Notes to Financial Statements 33
<PAGE>
Prudential Tax-Managed Equity Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
-------------------------------------------
Six Months March 3, 1999(a)
Ended Through
April 30, 2000(d) October 31, 1999(d)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.30 $ 10.00
-------- --------
Income from investment operations
Net investment income 0.02 0.02
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions 1.18 1.28
-------- --------
Total from investment operations 1.20 1.30
-------- --------
Net asset value, end of period $ 12.50 $ 11.30
-------- --------
-------- --------
TOTAL RETURN(b): 10.62% 13.00%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 17,746 $ 13,653
Average net assets (000) $ 17,601 $ 12,627
Ratios to average net assets(c):
Expenses, including distribution fees 0.88% 0.98%
Expenses, excluding distribution fees 0.88% 0.98%
Net investment income 0.27% 0.35%
</TABLE>
------------------------------
(a) Commencement of investment operations.
(b) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each period reported and includes reinvestment
of dividends and distributions. Total returns for periods of less than a
full year are not annualized.
(c) Annualized.
(d) Based on weighted average shares outstanding during the period.
34 See Notes to Financial Statements
<PAGE>
Prudential Tax-Managed Equity Fund
Getting the Most from Your Prudential Mutual Fund
How many times have you read these reports--or other
financial materials--and stumbled across a word that
you don't understand?
Many shareholders have run into the same problem.
We'd like to help. So we'll use this space from
time to time to explain some of the words you might
have read, but not understood. And if you have a
favorite word that no one can explain to your
satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half
of one percent is 50 basis points.
Collateralized Mortgage Obligations (CMOs):
Mortgage-backed bonds that separate mortgage pools
into different maturity classes called tranches.
These instruments are sensitive to changes in
interest rates and homeowner refinancing activity.
They are subject to prepayment and maturity
extension risk.
Derivatives: Securities that derive their value
from other securities. The rate of return of these
financial instruments rises and falls--sometimes
very suddenly--in response to changes in some
specific interest rate, currency, stock, or other
variable.
Discount Rate: The interest rate charged by the
Federal Reserve on loans to member banks.
Federal Funds Rate: The interest rate charged by
one bank to another on overnight loans.
Futures Contract: An agreement to purchase or sell
a specific amount of
a commodity or financial instrument at a set price
at a specified date in the future.
<PAGE>
Prudential Tax-Managed Equity Fund
Getting the Most from Your Prudential Mutual Fund
Leverage: The use of borrowed assets to enhance
return. The expectation is that the interest rate
charged on borrowed funds will be lower than the
return on the investment. While leverage can
increase profits, it can also magnify losses.
Liquidity: The ease with which a financial
instrument (or product) can be bought or sold
(converted into cash) in the financial markets.
Price/Earnings Ratio: The price of a share of stock
divided by the earnings per share for a 12-month
period.
Option: An agreement to purchase or sell something,
such as shares of stock, by a certain time for a
specified price. An option need not be exercised.
Spread: The difference between two values; often
used to describe the
difference between "bid" and "asked" prices of a
security, or between the yields of two similar
maturity bonds.
Yankee Bond: A bond sold by a foreign company or
government on the U.S. market and denominated in
U.S. dollars.
<PAGE>
www.prudential.com (800) 225-1852
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Trustees
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
Robin B. Smith
John R. Strangfeld
Louis A. Weil, III
Clay T. Whitehead
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Marguerite E.H. Morrison, Secretary
William V. Healey, Assistant Secretary
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
194 Wood Avenue South
Iselin, NJ 08830
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 PTMAX 74437B103
Class B PTMBX 74437B202
Class C PTMCX 74437B301
Class Z PTEZX 74437B400
The views expressed in this report and information
about the Fund's portfolio holdings are for the
period covered by this report and
are subject to change thereafter.
The accompanying financial statements as
of April 30, 2000, were not audited and,
accordingly, no opinion is expressed on them.
<PAGE>
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Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
MF187E2 74437B103 74437B202 74437B301 74437B400
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