(ICON)
Prudential
Equity
Fund,
Inc.
(ICON)
SEMI
ANNUAL
REPORT
June 30, 1995
Prudential Mutual Funds
Building Your Future
On Our StrengthSM (LOGO)
<PAGE>
Prudential Equity Fund, Inc.
Performance At A Glance.
U.S. stocks experienced one of their best six months in history during the first
half of 1995. The Standard & Poor's 500 Index gained 20.2%, soaring to new highs
on lower interest rates and rising corporate earnings. Your Fund gained about
17% in total return, performing in line with the average growth equity fund
tracked by Lipper Analytical Services, Inc.
<TABLE>
<CAPTION>
Cumulative Total Returns1 As of 6/30/95
Six One Five Ten Since
Months Year Years Years Inception
<S> <C> <C> <C> <C> <C>
Class A 17.0% 22.6% 97.8% N/A 110.0%
Class B 16.6 21.7 90.2 278.8% 644.4
Class C 16.6 N/A N/A N/A 16.6
Lipper Growth Avg3 17.4 22.2 71.3 243.8 538.0
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns1 As of 6/30/95
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 16.5% 13.4% 13.6%
Class B 16.7 13.6 16.3
Class C N/A N/A N/A
</TABLE>
Past performance is not a guarantee of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
1Source: Prudential Mutual Fund Management, Inc. and Lipper Analytical Services,
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 load 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 C shares have a 1% CDSC for one
year. Class B shares will automatically convert to Class A shares a quarterly
basis, after approximately seven years.
2Inception dates: 1/22/90, Class A; 3/15/82, Class B; 8/1/94, Class C.
3These are the average returns of: 583 funds in the growth category for six
months; 514 funds for one year; 229 funds for five years; 145 funds for 10
years; and 112 funds since inception, as determined by Lipper Analytical
Services, Inc.
GRAPH
Source: Lipper Analytical Services, Inc. Financial markets change, so a mutual
fund's past performance should never be used to predict future results. The
risks to each of the investments listed above are different -- we provide
12-month total returns for several Lipper mutual fund categories to show you
that reaching for higher yields means tolerating more risk. The greater the
risk, the larger the potential reward or loss. In addition, we've added
historical 20-year average annual returns to show that 1995's returns (so far)
are higher than normal. These returns assume the reinvestment of dividends.
Stock funds will fluctuate a great deal. Smaller capitalization stocks offer
greater potential for long term growth but may be more volatile than larger
capitalization stocks. Investors receive higher historical total returns from
stocks than from most other investments.
Bond funds provide more income than stock funds, which can help smooth out their
total returns year by year. But their prices still fluctuate (sometimes a good
deal) and their returns are historically lower than those of stock funds.
Sector or specialty stock funds usually entail the greatest risks because they
are not widely diversified. They are designed for sophisticated investors who
can tolerate additional risk in exchange for higher potential rewards or losses.
Money market funds attempt to preserve a constant share value; they don't
fluctuate much in price but their returns are generally among the lowest
of the major investment categories.
<PAGE>
Thomas R. Jackson, Fund Manager
(picture)
Portfolio
Manager's Report
The Prudential Equity Fund invests in stocks of major, established companies,
primarily in the U.S. We employ a strict value investment style, looking for
stocks whose prices seem too low given their underlying earnings, sales, cash
flow or book value. In other words, the Fund looks for bargains in the current
market. The Fund may invest up to 30% of its assets foreign securities, which
are subject to currency fluctuations and political, social and economic risks.
Overview.
Tom is a strict "value" investor. He chooses stocks for the Fund's portfolio
that are, in his view, temporarily low priced, given the company's perceived
true worth. These are normally stocks of major. established corporations which
have a sound financial foundation and prospects for price appreciation greater
than the broadly based market.
1. Strategy Session.
4,000?
Been There,
Done That.
Many value investment opportunities presented themselves at the beginning of
1995, after U.S. stock prices had declined during the fourth quarter of 1994.
Believing some stocks were simply too cheap not to own at those low levels, we
began buying, reducing our cash position to 7% at year end 1994, the lowest
level in almost two years. And we continued to find bargains in the first
quarter.
The Dow Jones Industrial Average (DJIA) broke the 4,000 mark in February. The
DJIA continued to surge higher during the first half of 1995, ending June 30
above 4,500.
The DJIA is an unmanaged weighted average of 30 of the largest industrial stocks
traded on the New York Stock Exchange. Though it is less comprehensive than the
broader S&P 500, it is a widely followed indicator of U.S. stock prices. With
the averages at ever-higher valuations, we continue to look for fundamentally
strong companies whose stocks seem underpriced. We are finding particularly
good values today in finance and consumer durables, including autos and
retailers. Approximately 40% of the Fund was invested in these areas as of
June 30, 1995.
<PAGE>
2. What Went Well.
Taking Cash to the Bank.
The Fund increased its holdings in finance stocks to 27% of the portfolio as of
June 30, 1995. Finance stocks had been among the hardest hit by the rise in
U.S. interest rates throughout 1994 and looked inexpensive to us.
Investing in finance paid off. As interest rates fell in the U.S. this year,
finance stocks surged, becoming one of the strongest-performing sectors of the
U.S. stock market. Strong holdings in this area included Chase Manhattan and
Bank of New York, financial services companies American Express and Dean Witter
Discover, and insurance company Chubb Corp. They all benefitted from increased
profit margins resulting from lower interest rates.
Five Largest
Holdings*
4.5% Scott Paper
Paper products.
3.3% Digital Equipment
Commercial electronics.
2.9% Chrysler
Automotive.
2.6% Baxter International
Drugs & medical supplies.
2.3% Tandy Corp.
Consumer electronics.
* Expressed as a percentage of total net assets.
3. And Not So Well.
Cash Was Not King.
Though the Fund did not have substantial cash levels throughout the first half
of this year, any cash held back performance in such a strong stock market. The
S&P 500, an unmanaged index, does not have any cash in its makeup. Consequently,
few equity mutual funds performed better than the S&P 500 during the period.
Waiting on Autos
and Retailers.
We continue to seek undervalued retail and autos stocks with good long-term
price appreciation potential. Unfortunately, auto and retail stocks did not
perform as well over the past six months as we had hoped, hurt by consumers'
fears of possible recession earlierthis year. We still find these stocks
inexpensive with great price appreciation potential. Based on that confidence,
we added to our position in Chrysler, Dillards Department Stores and K Mart,
and began new positions in apparel maker Liz Claiborne and off-price retailer
TJX Companies.
Expecting Chips to Dip.
Another move that may have held back the Fund's performance was our relatively
smaller position in technology stocks and in consumer growth stocks such as
foods and beverages. These kinds of stocks were among the strongest performers
during the first half of 1995. At their high prices, though, they did not meet
our value criteria.
4. Looking Ahead.
U.S. interest rates have fallen and corporate earnings remain strong. Despite
the heady levels of the U.S. stock market, we remain optimistic that U.S. stocks
have room to appreciate. Don't forget, though: the last six months comprised one
of the best periods in U.S. stock market history, one not likely to be repeated
anytime soon. More realistically, we believe that U.S. stocks should return to
their historical norms of about 10% a year.
1
<PAGE>
President's Letter July 31, 1995
PICTURE
Dear Shareholder:
You've probably noticed your shareholder report looks different this month.
We've designed it to provide clear, concise and forthright information about
your investment, its performance, risks and potential rewards. And, from time
to time, I'll share some thoughts with you about the industry, mutual fund
trends and how we're responding to them at Prudential Mutual Funds.
On The Hill
One recent trend we like is part of the "Contract with America." It's called the
American Dream Savings Account and it was approved by the House of
Representatives earlier in the year. The Senate has now taken up the proposal,
which would improve the traditional Individual Retirement Account program by
allowing higher non-working spouse contributions. The proposed law would also
allow tax-free and penalty-free withdrawals from the account before age 59 1/2,
for certain expenses. Prudential Mutual Funds supports the proposal and we urge
you to share your opinion about it with your Senator. You can reach your
Senator's office by calling 202-224-3121.
In Closing
One final note: if you're a Class B shareholder, you'll begin noticing a change
on your statements once you've held your shares for seven years. At that time
they will automatically begin to convert to Class A shares on a quarterly basis.
Since Class A shares carry lower annual distribution charges than Class B
shares, your total returns will automatically rise after the conversion.
Conversions started earlier this year and will occur each calendar quarter --
beginning in December, 1995, they'll take place every March, June, September
and December.
I hope you'll find this information useful as you work with your financial
advisor or registered representative to develop your personal investment plan.
Thank you for choosing Prudential Mutual Funds for your mutual fund investment.
Sincerely,
Richard A. Redeker
President
2
<PAGE>
Portfolio of Investments as
of June 30, 1995 (Unaudited) PRUDENTIAL EQUITY FUND, INC.
------------------------------------------------------------
------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
LONG-TERM INVESTMENTS--88.2%
COMMON STOCKS--87.3%
------------------------------------------------------------
Aerospace/Defense--3.7%
338,714 Lockheed Corp. $ 21,381,321
870,000 Loral Corp. 45,022,500
500,000 United Technologies Corp. 39,062,500
---------------
105,466,321
------------------------------------------------------------
Automobiles & Trucks--4.1%
1,700,000 Chrysler Corp. 81,387,500
600,000 General Motors Corp. 28,125,000
404,800 Navistar International Corp.(a) 6,122,600
---------------
115,635,100
------------------------------------------------------------
Banks & Financial Services--15.1%
1,800,000 American Express Co. 63,225,000
800,000 American General Corp. 27,000,000
700,000 Bank of New York Co., Inc. 28,262,500
500,000 BankAmerica Corp. 26,312,500
250,000 Bankers Trust New York Corp. 15,500,000
600,000 Chase Manhattan Corp. 28,200,000
900,000 Comerica, Inc. 28,912,500
1,300,000 Dean Witter Discover & Co. 61,100,000
177,000 First America Bank Corp. 6,571,125
1,000,000 Great Western Financial Corp. 20,625,000
800,000 Lehman Brothers Holdings, Inc. 17,500,000
292,505 Mellon Bank Corp. 12,175,521
256,500 Mercantile Bankshares Corp. 5,771,250
345,600 Morgan (J.P.) & Co., Inc. 24,235,200
500,000 NationsBank Corp. 26,812,500
225,000 Republic New York Corp. 12,600,000
600,000 Salomon, Inc. 24,075,000
---------------
428,878,096
------------------------------------------------------------
Chemicals--1.5%
555,500 IMC Fertilizer Group, Inc. 30,066,438
500,000 Wellman, Inc. 13,687,500
---------------
43,753,938
Commercial Services--0.4%
600,000 AAR Corp. $ 10,725,000
------------------------------------------------------------
Computer Hardware--6.4%
2,432,100 Amdahl Corp. 27,057,112
800,000 Comdisco, Inc. 24,300,000
2,300,000 Digital Equipment Corp.(a) 93,725,000
412,900 Gerber Scientific, Inc. 6,916,075
300,000 International Business Machines
Corp. 28,800,000
---------------
180,798,187
------------------------------------------------------------
Construction & Housing--0.5%
550,000 Centex Corp. 15,537,500
------------------------------------------------------------
Diversified Consumer Products--4.7%
400,000 Eastman Kodak Co. 24,250,000
750,000 Gibson Greetings, Inc. 10,031,250
500,000 Loews Corp. 60,500,000
1,400,000 RJR Nabisco Holdings Corp. 39,025,000
---------------
133,806,250
------------------------------------------------------------
Drugs & Medical Supplies--3.1%
2,000,000 Baxter International, Inc. 72,750,000
400,000 Upjohn Co. 15,150,000
---------------
87,900,000
------------------------------------------------------------
Electric Power--0.8%
170,000 American Electric Power, Inc. 5,971,250
570,000 General Public Utilities Corp. 16,957,500
---------------
22,928,750
--------------------------------------------------------------------------------
See Notes to Financial Statements.
3
<PAGE>
<PAGE>
Portfolio of Investments as
of June 30, 1995 (Unaudited) PRUDENTIAL EQUITY FUND, INC.
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
Electronics--0.6%
15,000 Harris Computer Systems, Inc. $ 206,250
300,000 Harris Corp. 15,487,500
---------------
15,693,750
------------------------------------------------------------
Energy Equipment & Services--0.7%
500,000 BJ Services Co.(a) 11,375,000
1,300,000 Noram Energy Corp. 8,450,000
---------------
19,825,000
------------------------------------------------------------
Forest Products--6.3%
400,000 International Paper Co. 34,300,000
550,000 James River Corp. of Virginia 15,193,750
125,000 Rayonier Timberlands, L.P. 4,437,500
2,534,100 Scott Paper Co. 125,437,950
---------------
179,369,200
------------------------------------------------------------
Hospitals & Other Healthcare Providers--3.0%
400,000 Columbia Healthcare Corp. 17,300,000
1,000,000 Foundation Health Corp.(a) 27,000,000
2,937,874 Tenet Healthcare Corp. 42,231,939
---------------
86,531,939
------------------------------------------------------------
Insurance--10.2%
1,000,000 Alexander & Alexander Services,
Inc. 23,875,000
600,000 Chubb Corp. 48,075,000
700,000 Citizens Corp. 11,462,500
406,600 Emphesys Financial Group, Inc. 9,605,925
1,132,700 First Colony Corp. 27,184,800
900,828 Old Republic International Corp. 23,534,131
255,500 Providian Corp. 9,261,875
700,000 SAFECO Corp. 40,206,250
350,000 St. Paul Companies, Inc. 17,237,500
1,300,000 The Equitable Companies Inc. 27,137,500
800,000 Travelers Corp. 35,000,000
1,461,900 Western National Corp. 18,091,013
---------------
290,671,494
Non-Ferrous Metals--2.7%
250,000 Alumax, Inc.(a) $ 7,781,250
600,000 Aluminum Company of America 30,075,000
122,750 AMAX Gold, Inc. 675,125
1,293,000 Cyprus Minerals Co. 36,850,500
---------------
75,381,875
------------------------------------------------------------
Oil & Gas Exploration/Production--6.1%
300,000 Amerada Hess Corp. 14,662,500
200,000 Atlantic Richfield Co. 21,950,000
1,100,000 Occidental Petroleum Corp. 25,162,500
1,500,000 Oryx Energy Co. 20,625,000
1,541,030 Societe Nationale Elf Aquitaine,
ADR (France) 57,403,367
717,640 Total SA, ADR (France)(a) 21,708,610
504,400 Union Texas Petroleum Holdings,
Inc. 10,655,450
---------------
172,167,427
------------------------------------------------------------
Retail--9.5%
119,700 Dayton-Hudson Corp. 8,588,475
1,642,900 Dillard Department Stores, Inc. 48,260,187
700,000 Federated Department Stores,
Inc.(a) 18,025,000
3,500,000 KMart Corp. 51,187,500
1,000,000 Liz Claiborne, Inc. 21,250,000
500,000 Petrie Stores Corp. 3,375,000
1,207,500 TJX Companies, Inc. 15,999,375
750,000 Toys ``R'' Us, Inc.(a) 21,937,500
1,273,800 Tandy Corp. 66,078,375
1,100,000 Waban, Inc.(a) 16,362,500
---------------
271,063,912
------------------------------------------------------------
Specialty Chemicals--0.9%
388,200 Eastman Chemical Co.(a) 23,097,900
100,000 Witco Corp. 3,225,000
---------------
26,322,900
------------------------------------------------------------
Steel--0.8%
500,000 Bethlehem Steel Corp.(a) 8,125,000
776,500 Birmingham Steel Corp. 14,365,250
---------------
22,490,250
</TABLE>
--------------------------------------------------------------------------------
4 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL EQUITY FUND, INC.
Portfolio of Investments as of June 30, 1995 (Unaudited)
------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
Telecommunications--4.9%
400,000 ITT Corp. $ 47,000,000
1,446,500 Sprint Corp. 48,638,563
1,100,000 Telefonica de Espana, S.A., ADR
(Spain) 42,625,000
---------------
138,263,563
------------------------------------------------------------
Transportation--1.3%
1,000,000 OMI Corp. 6,625,000
550,000 Overseas Shipholding Group, Inc. 11,412,500
1,200,000 Southern Pacific Rail Corp. 18,900,000
---------------
36,937,500
---------------
Total common stocks
(cost $1,931,333,231) 2,480,147,952
---------------
PREFERRED STOCK--0.9%
------------------------------------------------------------
4,000,000 RJR Nabisco Holdings Corp.
Conv. Pfd. Stock
(cost $25,999,617) 24,500,000
---------------
Total long-term investments
(cost $1,957,332,848) 2,504,647,952
---------------
Principal
Amount
(000)
SHORT-TERM INVESTMENT--10.6%
------------------------------------------------------------
Repurchase Agreement
$ 300,249 Joint Repurchase Agreement
Account,
6.12%, due 7/3/95
(cost $300,249,000; Note 5) 300,249,000
------------------------------------------------------------
Total Investments--98.8%
(cost $2,257,581,848; Note 4) 2,804,896,952
Other assets in excess of
liabilities--1.2% 35,500,082
---------------
Net Assets--100% $ 2,840,397,034
---------------
---------------
</TABLE>
---------------
(a) Non-income producing security.
ADR--American Depository Receipt.
--------------------------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
<PAGE>
Statement of Assets and Liabilities (Unaudited) PRUDENTIAL EQUITY FUND, INC.
-------------------------------------------------------------------------------
<TABLE>
<S>
<C>
ASSETS
June 30, 1995
Investments, at value (cost
$2,257,581,848).................................................................
$2,804,896,952
Cash.........................................................................
............................... 135,155
Receivable for Fund shares
sold.........................................................................
.... 40,304,817
Dividends and interest
receivable...................................................................
........ 8,610,504
Receivable for investments
sold.........................................................................
.... 6,006,175
Deferred expenses and other
assets..........................................................................
57,474
--------------
Total
assets.......................................................................
...................... 2,860,011,077
--------------
Liabilities
Payable for investments
purchased....................................................................
....... 8,900,887
Payable for Fund shares
reacquired...................................................................
....... 7,405,869
Distribution fee
payable......................................................................
.............. 1,704,839
Management fee
payable......................................................................
................ 1,059,415
Withholding tax
liability....................................................................
............... 395,294
Accrued expenses and other
liabilities..................................................................
.... 147,739
--------------
Total
liabilities..................................................................
...................... 19,614,043
--------------
Net
Assets.......................................................................
........................... $2,840,397,034
--------------
--------------
Net assets were comprised of:
Common stock, at
par..........................................................................
........... $ 1,837,443
Paid-in capital in excess of
par.........................................................................
2,155,177,857
--------------
2,157,015,300
Undistributed net investment
income......................................................................
56,432,754
Accumulated net realized gain on
investments.............................................................
79,633,876
Net unrealized appreciation on
investments...............................................................
547,315,104
--------------
Net assets, June 30,
1995.........................................................................
.......... $2,840,397,034
--------------
--------------
Class A:
Net asset value and redemption price per share
($966,423,830 / 62,379,617 shares of common stock issued and
outstanding)............................. $15.49
Maximum sales charge (5.00% of offering
price)...........................................................
.82
--------------
Maximum offering price to
public.........................................................................
$16.31
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($1,861,907,831 / 120,583,294 shares of common stock issued and
outstanding).......................... $15.44
--------------
--------------
Class C:
Net asset value, offering price and redemption price per share
($12,065,373 / 781,401 shares of common stock issued and
outstanding)................................. $15.44
--------------
--------------
</TABLE>
--------------------------------------------------------------------------------
6 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL EQUITY FUND, INC.
Statement of Operations (Unaudited)
------------------------------------------------------------
------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
1995
<S> <C>
Net Investment Income
Dividends (net of foreign withholding taxes
of $495,718)............................ $ 27,066,311
Interest................................... 7,227,097
------------
Total income............................ 34,293,408
------------
Expenses
Distribution fee--Class A.................. 938,971
Distribution fee--Class B.................. 8,777,041
Distribution fee--Class C.................. 34,237
Management fee............................. 5,841,182
Transfer agent's fees and expenses......... 1,837,000
Reports to shareholders.................... 298,000
Franchise taxes............................ 127,000
Custodian's fees and expenses.............. 123,000
Registration fees.......................... 82,000
Legal fees................................. 50,000
Audit fee.................................. 22,500
Directors' fees............................ 22,500
Miscellaneous.............................. 35,122
------------
Total expenses.......................... 18,188,553
------------
Net investment income......................... 16,104,855
------------
Realized and Unrealized
Gain on Investments
Net realized gain on investment
transactions............................... 70,275,088
Net change in unrealized appreciation on
investments................................ 301,816,359
------------
Net gain on investments....................... 372,091,447
------------
Net Increase in Net Assets
Resulting from Operations..................... $388,196,302
------------
------------
</TABLE>
PRUDENTIAL EQUITY FUND, INC.
Statement of Changes in Net Assets (Unaudited)
---------------------------------------------
---------------------------------------------
<TABLE>
<CAPTION>
Six Months
Increase (Decrease) Ended Year Ended
in Net Assets June 30, 1995 December 31, 1994
<S> <C> <C>
Operations
Net investment income..... $ 16,104,855 $ 20,683,314
Net realized gain on
investments............ 70,275,088 81,494,071
Net change in unrealized
appreciation of
investments............ 301,816,359 (68,377,840)
--------------- -----------------
Net increase in net assets
resulting from
operations............. 388,196,302 33,799,545
--------------- -----------------
Net equalization debit
(credit).................. (7,361,338) 6,402,186
--------------- -----------------
Dividends and distributions (Note 1)
Dividends from net
investment income
Class A................ -- (4,339,236)
Class B................ -- (16,849,152)
Class C................ -- (14,701)
--------------- -----------------
-- (21,203,089)
--------------- -----------------
Distributions from net
realized
capital gains
Class A................ -- (12,591,770)
Class B................ -- (91,043,748)
Class C................ -- (95,226)
--------------- -----------------
-- (103,730,744)
--------------- -----------------
Fund share transactions (net
of share conversions)
(Note 6)
Proceeds from shares
sold................... 1,196,420,818 1,454,763,135
Net asset value of shares
issued in reinvestment
of dividends and
distributions.......... -- 117,059,026
Cost of shares
reacquired............. (987,010,424) (1,264,107,170)
--------------- -----------------
Net increase in net assets
from Fund share
transactions........... 209,410,394 307,714,991
--------------- -----------------
Total increase............... 590,245,358 222,982,889
Net Assets
Beginning of period.......... 2,250,151,676 2,027,168,787
--------------- -----------------
End of period................ $ 2,840,397,034 $ 2,250,151,676
--------------- -----------------
--------------- -----------------
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EQUITY FUND, INC.
-------------------------------------------------------------------------------
Prudential Equity Fund, Inc. (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 long-term growth of capital by investing
primarily in common stocks of major established corporations.
------------------------------------------------------------
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: Investments, including options, traded on a national
securities or commodities exchange and NASDAQ National Market equity securities
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.
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 which approximates market value.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, take
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction, including accrued interest.
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 and interest income is recorded on the accrual basis.
Net investment income, other than distribution fees, and unrealized and realized
gains or losses are allocated daily to each class of shares based upon the
relative proportion of net assets of each class at the beginning of the day.
Dividends and Distributions: Dividends from net investment income are declared
and paid semi-annually. The Fund will distribute at least annually net capital
gains in excess of loss carryforwards, if any. 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.
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.
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 and net capital gains, if any, to its
shareholders. Therefore, no federal income tax provision is required.
Withholding taxes on foreign dividends have been provided for in accordance with
the Fund's understanding of the applicable country's tax rules and rates.
------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement 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 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 .50 of 1% of the Fund's average daily net assets up to $500 million,
.475 of 1% of the next $500 million of average daily net assets and .45 of 1%
of
the Fund's average daily net assets in excess of $1 billion.
The Fund has distribution agreements with Prudential Mutual Fund Distributors,
Inc. (``PMFD''), which acts as the distributor of the Class A
--------------------------------------------------------------------------------
8
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EQUITY FUND, INC.
-------------------------------------------------------------------------------
shares of the Fund, and with Prudential Securities Incorporated (``PSI''), which
acts as distributor of the Class B and Class C shares of the Fund (collectively
the ``Distributors''). The Fund compensates the Distributors 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.
Pursuant to the Class A, B and C Plans, the Fund compensates the Distributors
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. With respect to the Class A Plan, PMFD has agreed to limit its
distribution-related fees to .25 of 1% of average daily net assets for the
fiscal year ending December 31, 1995. With respect to the Class B and Class C
Plan, PMFD has agreed to limit its distribution fee to 1% of average daily net
assets of Class B and Class C shares, respectively, for the fiscal year ending
December 31, 1995.
PMFD has advised the Fund that it has received approximately $1,067,142 in
front-end sales charges resulting from sales of Class A shares during the period
ended June 30, 1995. From these fees, PMFD paid such sales charges to PSI and
Pruco Securities Corporation, affiliated broker-dealers, which in turn paid
commissions to salespersons and incurred other distribution costs.
PSI advised the Fund that for the period ended June 30, 1995, it received
approximately $262,100 in contingent deferred sales charges imposed upon
redemptions by certain Class B and Class C shareholders.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and during the period ended June 30,
1995, the Fund incurred fees of approximately $1,637,000 for the services of
PMFS. As of June 30, 1995, $286,000 of such fees were due to PMFS. Transfer
agent fees and expenses in the Statement of Operations include certain
out-of-pocket expenses paid to non-affiliates.
For the six months ended June 30, 1995, PSI earned approximately $66,700 in
brokerage commissions from portfolio transactions executed on behalf of the
Fund.
------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the period ended June 30, 1995 aggregated $267,751,756 and $222,512,137,
respectively.
The federal income tax basis of the Fund's investments at June 30, 1995 was
substantially the same as for financial reporting purposes and, accordingly, net
unrealized appreciation for federal income tax purposes was $547,315,104 (gross
unrealized appreciation--$605,955,360; gross unrealized
depreciation--$58,640,256).
------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or federal agency obligations. As of June 30, 1995, the Fund
has a 44.38% undivided interest in the joint account. The undivided interest for
the Fund represents $300,249,000 in the principal amount. As of such date, each
repurchase agreement in the joint account and the collateral therefor were as
follows:
Bear Stearns & Co. Inc., 6.125%, in the principal amount of $200,000,000,
repurchase price $200,102,083, due 7/3/95. The value of the collateral including
accrued interest is $204,321,562.
CS First Boston Corp., 6.13%, in the principal amount of $160,000,000,
repurchase price $160,081,733, due 7/3/95. The value of the collateral including
accrued interest is $163,246,196.
Goldman Sachs & Co., 6.10%, in the principal amount of $116,557,000, repurchase
price $116,616,250, due 7/3/95. The value of the collateral including accrued
interest is $118,889,059.
Smith Barney Inc., 6.13%, in the principal amount of $200,000,000, repurchase
price $200,102,166, due 7/3/95. The value of the collateral including accrued
interest is $204,000,775.
------------------------------------------------------------
Note 6. Capital
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge of up to 5%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Class C shares are sold with a contingent
deferred sales charge of 1% during the first year.
--------------------------------------------------------------------------------
9
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EQUITY FUND, INC.
-------------------------------------------------------------------------------
Class B shares will automatically convert to Class A shares on a quarterly basis
approximately seven years after purchase commencing in February 1995.
There are 750 million shares of common stock, $.01 par value per share, dividend
into three classes, designated Class A, Class B and Class C common stock, each
of which consists of 250 million authorized shares.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
--------------------------- ---------------- ---------------
<S> <C> <C>
Six months ended
June 30, 1995:
Shares sold................ 37,267,001 $ 538,023,186
Shares reacquired.......... (33,311,341) (482,003,962)
---------------- ---------------
Net increase in shares
outstanding before
conversion............... 3,955,660 56,019,224
Shares issued upon
conversion from Class
B........................ 37,542,004 521,236,150
---------------- ---------------
Net increase in shares
outstanding.............. 41,497,664 $ 577,255,374
---------------- ---------------
---------------- ---------------
Year ended December 31,
1994:
Shares sold................ 18,103,878 $ 247,518,724
Shares issued in
reinvestment of dividends
and distributions........ 1,247,329 16,412,624
Shares reacquired.......... (15,323,527) (209,456,746)
---------------- ---------------
Net increase in shares
outstanding.............. 4,027,680 $ 54,474,602
---------------- ---------------
---------------- ---------------
Class B
Six months ended
June 30, 1995:
Shares sold................ 46,088,777 $ 649,995,682
Shares reacquired.......... (36,795,280) (504,489,967)
---------------- ---------------
Net decrease in shares
outstanding before
conversion............... 9,293,497 145,505,715
Shares reacquired upon
conversion into Class
A........................ (37,545,126) (521,236,150)
---------------- ---------------
Net decrease in shares
outstanding.............. (28,251,629) $ (375,730,435)
---------------- ---------------
---------------- ---------------
Class B Shares Amount
---------------- ---------------
Year ended December 31,
1994:
Shares sold................ 89,556,181 $ 1,203,380,489
Shares issued in
reinvestment of dividends
and distributions........ 7,818,109 100,544,482
Shares reacquired.......... (78,586,261) (1,053,979,338)
---------------- ---------------
Net increase in shares
outstanding.............. 18,788,029 $ 249,945,633
---------------- ---------------
---------------- ---------------
Class C
---------------------------
Six months ended June 30,
1995:
Shares sold................ 578,388 $ 8,401,950
Shares reacquired.......... (35,671) (516,495)
---------------- ---------------
Net increase in shares
outstanding.............. 542,717 $ 7,885,455
---------------- ---------------
---------------- ---------------
August 1, 1994(a) through
December 31, 1994:
Shares sold................ 279,964 $ 3,863,922
Shares issued in
reinvestment of dividends
and distributions........ 7,877 101,920
Shares reacquired.......... (49,158) (671,086)
---------------- ---------------
Net increase in shares
outstanding.............. 238,683 $ 3,294,756
---------------- ---------------
---------------- ---------------
</TABLE>
---------------
(a) Commencement of offering of Class C shares.
------------------------------------------------------------
Note 7. Dividends and Distributions
Subsequent to June 30, 1995, the Board of Directors of the Fund declared
dividends from undistributed net investment income to Class A shareholders of
$.12 per share and Class B and C shareholders of $.07 per share and a long-term
capital gains distribution of $.0525 to Class A, Class B, and Class C
shareholders payable on August 1, 1995 to shareholders of record on July 27,
1995.
-------------------------------------------------------------------------------
10
<PAGE>
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL EQUITY FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------------------------
January 22,
Six Months
1990(b)
Ended Year
Ended December 31, through
June 30,
---------------------------------------------- December 31,
1995 1994
1993 1992 1991 1990
<S> <C> <C> <C>
<C> <C> <C>
---------- --------
-------- -------- ------- ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......... $ 13.24 $ 13.80 $
12.07 $ 11.39 $ 9.84 $ 11.25
---------- --------
-------- -------- ------- ---------
Income from investment operations
Net investment income........................ .13 .22
.23 .24 .27 .31
Net realized and unrealized gain (loss) on
investment transactions.................... 2.12 .09
2.42 1.30 2.09 (.15)
---------- --------
-------- -------- ------- --------
Total from investment operations.......... 2.25 .31
2.65 1.54 2.36 .16
---------- --------
-------- -------- ------- --------
Less distributions
Dividends from net investment income......... -- (.22)
(.22) (.23) (.24) (.35)
Distributions from net realized capital
gains...................................... -- (.65)
(.70) (.63) (.57) (1.22)
---------- --------
-------- -------- ------- ------
Total distributions....................... -- (.87)
(.92) (.86) (.81) (1.57)
---------- --------
-------- -------- ------- ------
Net asset value, end of period............... $ 15.49 $ 13.24 $
13.80 $ 12.07 $ 11.39 $ 9.84
---------- --------
-------- -------- ------- ------
---------- --------
-------- -------- ------- ------
TOTAL RETURN(c):............................. 16.99% 2.38%
22.14% 13.65% 24.55% 0.29%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............. $966,424 $276,412
$232,535 $136,834 $82,845 $ 30,264
Average net assets (000)..................... $757,402 $254,596
$190,778 $111,489 $57,845 $ 27,371
Ratios to average net assets:
Expenses, including distribution fees..... .92%(a) 1.00%
.91% .94% .97% 1.01%(a)
Expenses, excluding distribution fees..... .67%(a) .75%
.71% .74% .77% .84%(a)
Net investment income..................... 1.92%(a) 1.62%
1.71% 1.91% 2.36% 2.86%(a)
Portfolio turnover........................... 10% 12%
21% 22% 19% 76%
</TABLE>
---------------
(a) Annualized.
(b) Commencement of offering of Class A shares.
(c) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on
the last day of each period reported and includes reinvestment of
dividends and distributions. Total returns for periods of less than a full
year are not annualized.
(d) Commencement of offering of Class C shares.
--------------------------------------------------------------------------------
See Notes to Financial Statements.
11
<PAGE>
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL EQUITY FUND, INC.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
--------------------------------------------------------------------------------
Six Months
Ended
Year Ended December 31,
June 30,
-----------------------------------------------------------------
1995 1994
1993 1992 1991 1990
<S> <C> <C>
<C> <C> <C> <C>
---------- ----------
---------- ---------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......... $ 13.24 $ 13.80
$ 12.08 $ 11.40 $ 9.85 $ 11.83
---------- ----------
---------- ---------- -------- --------
Income from investment operations
Net investment income........................ .08 .12
.12 .14 .18 .26
Net realized and unrealized gain (loss) on
investment transactions.................... 2.12 .09
2.42 1.30 2.09 (.76)
---------- ----------
---------- ---------- -------- --------
Total from investment operations.......... 2.20 .21
2.54 1.44 2.27 (.50)
---------- ----------
---------- ---------- -------- --------
Less distributions
Dividends from net investment income......... -- (.12)
(.12) (.13) (.15) (.26)
Distributions from net realized capital
gains...................................... -- (.65)
(.70) (.63) (.57) (1.22)
---------- ----------
---------- ---------- -------- --------
Total distributions....................... -- (.77)
(.82) (.76) (.72) (1.48)
---------- ----------
---------- ---------- -------- --------
Net asset value, end of period............... $ 15.44 $ 13.24
$ 13.80 $ 12.08 $ 11.40 $ 9.85
---------- ----------
---------- ---------- -------- --------
---------- ----------
---------- ---------- -------- --------
TOTAL RETURN(c):............................. 16.62% 1.60%
21.13% 12.72% 23.55% (4.28)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............. $1,861,908 $1,970,580
$1,794,634 $1,203,740 $904,382 $578,213
Average net assets (000)..................... $1,769,956 $1,901,972
$1,522,992 $1,042,028 $757,485 $583,016
Ratios to average net assets:
Expenses, including distribution fees..... 1.67%(a) 1.75%
1.71% 1.74% 1.77% 1.89%
Expenses, excluding distribution fees..... .67%(a) .75%
.71% .74% .77% .89%
Net investment income..................... 1.01%(a) .87%
.91% 1.11% 1.56% 2.27%
Portfolio turnover........................... 10% 12%
21% 22% 19% 76%
<CAPTION>
Class C
August 1,
Six Months 1994(d)
Ended through
June 30, December 31,
1995 1994
<S> <C> <C>
---------- ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......... $ 13.24 $14.02
---------- ------
Income from investment operations
Net investment income........................ .08 .09
Net realized and unrealized gain (loss) on
investment transactions.................... 2.12 (.10)
---------- ------
Total from investment operations.......... 2.20 (.01)
---------- ------
Less distributions
Dividends from net investment income......... -- (.12)
Distributions from net realized capital
gains...................................... -- (.65)
---------- ------
Total distributions....................... -- (.77)
---------- ------
Net asset value, end of period............... $ 15.44 $13.24
---------- ------
---------- ------
TOTAL RETURN(c):............................. 16.62% .01%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............. $ 12,065 $3,160
Average net assets (000)..................... $ 6,904 $1,847
Ratios to average net assets:
Expenses, including distribution fees..... 1.67%(a) 1.83%(a)
Expenses, excluding distribution fees..... .67%(a) .83%(a)
Net investment income..................... 1.14%(a) .90%(a)
Portfolio turnover........................... 10% 12%
</TABLE>
-------------------------------------------------------------------------------
12 See Notes to Financial Statements.
<PAGE>
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
Directors
Edward D. Beach
Eugene C. Dorsey
Delayne Dedrick Gold
Harry A. Jacobs, Jr.
Thomas T. Mooney
Thomas O'Brien
Richard A. Redeker
Nancy H. Teeters
Officers
Richard A. Redeker, President
David W. Drasnin, Vice President
Robert F. Gunia, Vice President
Eugene S. Stark, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Deborah A. Docs, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
The accompanying financial statements as of June 30, 1995 were not audited and,
accordingly, no opinion is expressed on them.This report is not authorized for
distribution to prospective investors unless preceded or accompanied by a
current prospectus.
<PAGE>
Prudential Mutual Funds
Building Your Future
On Our StrengthSM (LOGO)
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
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