(ICON)
Prudential
Equity
Fund, Inc.
SEMI
ANNUAL
REPORT
June 30, 1996
(LOGO)
<PAGE>
Prudential Equity Fund, Inc.
Performance At A Glance.
U.S. stocks surged higher and higher in 1996, defying our belief that
this year would be a disappointment after 1995's record-setting returns.
Instead, every major stock index broke new records this spring, although
surging interest rates did mean there was far more volatility than
last year. The Prudential Equity Fund produced solid returns over
the last six months, though it performed below the average general
equity fund. That's because the Fund held significantly more cash
than the typical fund, we believe. As the broad stock market rose
higher, stocks became so expensive that it became difficult to find
those that met our strict value standards.
<TABLE>
Cumulative Total Returns1 As of 6/30/96
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A 7.0% 20.3% 108.0% N/A 152.7%
Class B 6.6 19.4 100.1 234.7 789.4
Class C 6.6 19.4 N/A N/A 39.3
Class Z N/A N/A N/A N/A 3.0
Lipper Growth Fund Avg3 10.1 22.2 99.9 216.5 683.9
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 6/30/96
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 14.3% 14.6% N/A 14.6%
Class B 14.4 14.8 12.9 16.5
Class C 18.4 N/A N/A 19.0
Class Z N/A N/A N/A 3.0
</TABLE>
1Source: Prudential Mutual Fund Management and Lipper Analytical Services.
Cumulative total returns do not take into account sales charges. 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 on a quarterly basis, after approximately
seven years. Class Z shares are not subject to a sales charge or a
distribution fee. Since Class Z shares have been in existence less
than one year, no average annual total returns are shown.
2Inception dates: 1/22/90, Class A; 3/15/82, Class B; 8/1/94, Class
C; 3/1/96, Class Z.
3These are the average returns of: 668 funds for six months, 619
funds for one year; 248 funds for five years; 162 funds for 10 years;
and 116 funds since inception, as determined by Lipper Analytical
Services, Inc.
How Investments Compared.
(As of 6/30/96)
(CHART)
Source: Lipper Analytical Services. Financial markets change, so a
mutual fund's past performance should never be used to predict future
results. The risks to each of the investments listed above are
different -- we provide 12-month total returns for several Lipper
mutual fund categories to show you that reaching for higher yields
means tolerating more risk. The greater the risk, the larger the
potential reward or loss. In addition, we've included historical
20-year average annual returns. These returns assume the reinvestment
of dividends.
U.S. Growth Funds will fluctuate a great deal. Investors have received
higher historical total returns from stocks than from most other
investments. Smaller capitalization stocks offer greater potential
for long-term growth but may be more volatile than larger capitalization
stocks.
General Bond Funds provide more income than stock funds, which can
help smooth out their total returns year by year. But their prices
still fluctuate (sometimes significantly) and their returns have been
historically lower than those of stock funds.
General Municipal Debt Funds invest in bonds issued by state
governments, state agencies and/or municipalities. This investment
provides income that is usually exempt from federal and state income
taxes.
Money Market Funds attempt to preserve a constant share value; they
don't fluctuate much in price but, historically, their returns have
been generally among the lowest of the major investment categories.
<PAGE>
Thomas R. Jackson, Fund Manager (PICTURE)
Portfolio
Manager's Report
The Prudential Equity Fund invests in stocks of major, established
companies, primarily in the United States. The Fund looks for bargains
in the current market, using a strict value investment style. We look
for stocks whose prices seem too low given their underlying earnings,
sales, cash flow or book value. There can be no assurance that the
Fund's investment objective will be achieved.
1996:
Another 1995?
We're quite pleased with what
the stock market has brought our
investors. We've had some exceptional
returns last year and once again this
year through June 30. But we'd like
to remind you that these returns are
far above the historic averages. So
while it's been delightful, it sure
won't last forever.
Strategy Session.
Where's the Value?
The Prudential Equity Fund follows a "value" investment approach,
buying stocks that we think are cheap -- as measured by the company's
potential earnings, cash flow, and the net value of its other assets.
When the stock market repeatedly breaks all-time records, as it
continues to do this year, we have to pause. Over the last six
months, we just couldn't find many stocks that met our rigorous
criteria. As a result, we maintained a large cash position, with
30% of total net assets in cash as of June 30.
The Fund's portfolio looks strikingly similar to the way it did
when we reported to you last December. Our single largest sector
remains financial services, where we primarily own stocks of insurance
companies, banks, credit card companies, and stock brokerage firms.
Among our largest holdings in this category are American Express and
Dean Witter Discover.
These holdings certainly haven't been helped by rising interest rates
this spring. And should inflation prove to be a threat, interest rates
could rise further. But if you believe that we are in an era where
financial assets continue to appreciate faster than their real assets,
these companies should become far more valuable than their current
prices reflect.
We also have substantial assets in retail stocks, which helped the
Fund's value significantly this year. We bought these stocks when
their prices were marked down substantially last year, because
investors feared a bleak holiday season. But sales have bounced
back, and so have the stocks. Among our largest holdings in
retail are Dillard Department Stores, K-Mart and Tandy. K-Mart,
for one, has rallied nicely off its low. In our view, we expect
all of these stocks to continue to improve.
Over the winter and into the spring, we acquired paper and forest
products stocks because they were good bargains. In fact, they
were one of the few groups that fit our definition of value in
recent months. (Frankly, we wish we could have found another
group as attractively priced as this one).
Cash Dominates.
Expressed as a percentage of
total net assets as of 6/30/96.
(CHART)
<PAGE>
What Went Well.
The stocks we held served us well. Despite our unusually large cash
position, we were able to perform as well as we did because of our
good stock selection.
We Pounced On Paper.
We're excited about the big bargains we found in paper and forest
products companies. This is now our second largest industry group
(8.5% of total net assets) after insurance and financial service
companies. Over the winter, the prices of paper products fell because
inventories were high (as a result of new paper-making facilities
starting up). So paper stocks then sunk to recession levels, below
their 1990 lows. We bought Georgia-Pacific, Williamette Industries,
Mead, Temple-Inland, and Weyerheuser.
Rebound In Retail.
Our third largest industry is retail (at 6.6% of total net assets
as of June 30) and these stocks produced much of our price
appreciation to date this year. We purchased many of these stocks
last year when they were marked down on fears of a poor holiday season
and overcapacity in the industry. As retail sales improved this year,
these stocks were outstanding performers. They did so well that we
sold several, including Liz Claiborne and TJX Companies, after they
reached our price appreciation targets.
Mergers & Acquisitions.
You might remember that last year's takeover of Scott Paper by Kimberly
Clark enhanced the Fund's returns. In April, another one of our holdings,
Loral, was acquired by Lockheed Martin. Loral, a defense/aerospace
company, was one of our 10 largest holdings. We started buying this
stock at about $8 and Lockheed paid us $38, plus we received stock
in a new company that was a smaller part of the old one, Loral Space
& Communications, worth about $15.
And Not So Well.
Holding Too Much Cash.
The Fund maintained a large cash position during the period. We were
chagrined to hold 30% of assets in cash on June 30, our highest in
six years. We wish we had 100% of that in the stocks we owned. But we
didn't because we know in the long run it pays to stay true to one's
discipline. We're looking hard for opportunities right now.
The stock market has been volatile this year. It should offer us some
bargains soon.
Five Largest Issuers.
2.7% Chrysler Corp.
Autos & Trucks
2.7% Digital Equipment
Computer Hardware
2.1% American Express
Banks & Financial Svcs.
2.0% Loews Corp.
Diversified Consumer
Products
1.9% Dean Witter Discover
Banks & Financial Svcs.
Expressed as a percentage of total net assets as of 6/30/96.
Looking Ahead.
We're in a bit of a quandary. The stock market rose at a record
pace last year, and this year's advance to date has been quite
handsome as well. Should interest rates continue to rise as they
did in the first half, bonds will offer serious competition to
stocks. That could mean that some stock prices might fall, giving
us a chance to put our cash to work.
We will continue to look at the stocks, not at the market, and we
won't buy these stocks until they are priced right. We will keep
searching for more opportunities -- like the paper and forest products
stocks we bought during the winter.
1
<PAGE>
A Conversation with Portfolio Manager Tom Jackson.
Patience Is A Virtue For This Value Investor.
Q. Tom, why are you holding so much cash?
A.I'm a value investor. I buy stocks that are inexpensive compared to
other stocks in the market. Right now I just can't find many. In my
judgment, a lot of stocks are selling at high prices. I'm a lot more
comfortable buying bargains.
Q. Have you had this much cash before?
A.Yes. I had a lot of cash both in 1990 and 1994. In the fall of 1990,
thanks to the market, I had opportunities to put it to work, and I did.
In 1994 I also had a lot of cash, and that's when I bought many of
the financial stocks that now are the largest segment of the portfolio.
Q. You must have bought something recently.
A.Over the winter, I liked what I saw in the paper and forest product
group -- companies that make industrial materials, like boxes, newsprint
and pulp, as opposed to consumer products, like tissues and other
household papers.
Q. Why did you like them?
A.These stocks are valued more cheaply relative to the stock market
than they were at their lows during the 1990 recession. Prices of
their products are under pressure because of high inventories and
excess production capacity. I believe that I bought the stocks at
recession-level prices.
Q.Surely there must be something else that looks interesting right now?
A.Not much at the moment, but stock prices can fall as well as rise. I
know this for sure -- given time, the market always offers opportunities.
So with a little patience, I should get a chance to put the cash to work
in very cheap stocks.
Q.So you don't see any reason to change your strategy now?
A.I'm going to stick to what I do best -- value investing. Over the
years, it has worked quite well. There's a time to buy. And a time to
sell. Right now, in my view, it's time to stand pat.
(PICTURE)
2
<PAGE>
President's Letter August 1, 1996
(PICTURE)
Dear Shareholder:
Last year, U.S. stocks and bonds generally posted extraordinary returns.
Investors celebrated this performance by putting record amounts of new
money into mutual funds in the first few months of 1996. According to
figures released by the Investment Company Institute, a mutual fund
industry trade group, new investments in mutual funds reached an
all-time monthly high of $33 billion in January of 1996. An additional
$66 billion was invested in the following three months, although
this rapid inflow subsided somewhat in late spring.
While we are pleased that mutual funds are attracting new investors,
we're concerned that some of them may be "buying last year's returns."
Few expect 1995's virtual non-stop returns from the stock and bond
markets. In fact, 1996's markets have been volatile so far (stock and
bond prices go down just as they go up). There's no better time than
now to be talking with your Financial Advisor or Registered
Representative. She or he can help you determine reasonable
expectations about both the potential performance and risks
associated with your investments.
Board of Directors Election.
In addition to this report, we are including a notice about a special
shareholder meeting to elect new Prudential mutual fund boards of
directors. Your Board of Directors has approved a proposal to
place a common board of experienced directors across many of
Prudential's mutual funds to improve business efficiency. The
enclosed material contains more complete information about
this proposal.
Changes at Prudential.
Finally, there have been some important changes recently at Prudential
that were made with you in mind. Prudential Mutual Funds has moved
under the umbrella of Prudential's newly created "Money Management
Group." This group manages and administers nearly $190 billion in
client assets and provides mutual funds, annuities, defined benefit
and defined contribution plans to our individual and institutional
investors. We plan to improve the range and quality of investment
products and services that we can provide you by better leveraging
Prudential's strengths. There will, however, be no change in the
service you receive from your Financial Advisor, Registered
Representative or our Customer Service unit.
We're excited about our future and hope that you are, too. Thank
you for your continued support and confidence in Prudential Mutual
Funds.
Sincerely,
Richard A. Redeker
President
3
<PAGE>
Portfolio of Investments as
of June 30, 1996 (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
LONG-TERM INVESTMENTS--68.6%
COMMON STOCKS--67.9%
------------------------------------------------------------
Automobiles & Trucks--3.8%
1,700,000 Chrysler Corp. $ 105,400,000
600,000 General Motors Corp. 31,425,000
404,800 Navistar International Corp. (a) 3,997,400
124,400 PACCAR Inc. 6,095,600
--------------
146,918,000
- ------------------------------------------------------------
Banks & Financial Services--13.1%
1,800,000 American Express Co. 80,325,000
303,800 American Financial Group Inc. 9,151,975
800,000 American General Corp. 29,100,000
192,400 Associates First Capital Corp. 7,239,050
700,000 Bank of New York Co., Inc. 35,875,000
500,000 BankAmerica Corp. 37,875,000
624,000 Chase Manhattan Corp. 44,070,000
1,300,000 Dean Witter Discover & Co. 74,425,000
177,000 First America Bank Corp. 7,920,750
1,000,000 Great Western Financial Corp. 23,875,000
800,000 Lehman Brothers Holdings Inc. 19,800,000
292,505 Mellon Bank Corp. 16,672,785
256,500 Mercantile Bankshares Corp. 6,540,750
345,600 Morgan (J.P.) & Co., Inc. 29,246,400
500,000 NationsBank Corp. 41,312,500
225,000 Republic New York Corp. 14,006,250
600,000 Salomon, Inc. 26,400,000
--------------
503,835,460
- ------------------------------------------------------------
Chemicals--0.4%
706,900 Wellman Inc. 16,523,788
- ------------------------------------------------------------
Commercial Services--1.6%
600,000 AAR Corp. 12,225,000
600,000 American Standard Co., Inc. 19,800,000
312,700 TRW Inc. 28,103,912
--------------
60,128,912
Computer Hardware--5.4%
3,500,000 Amdahl Corp. $ 37,625,000
1,200,000 Comdisco, Inc. 31,950,000
2,300,000 Digital Equipment Corp. (a) 103,500,000
412,900 Gerber Scientific, Inc. 6,658,012
300,000 International Business Machines
Corp. 29,700,000
--------------
209,433,012
- ------------------------------------------------------------
Construction & Housing--0.4%
550,000 Centex Corp. 17,118,750
- ------------------------------------------------------------
Diversfied Consumer Products--3.4%
750,000 Gibson Greetings Inc. 10,312,500
1,000,000 Loews Corp. 78,875,000
1,400,000 RJR Nabisco Holdings Corp. 43,400,000
--------------
132,587,500
- ------------------------------------------------------------
Electrical Power--0.7%
170,000 American Electric Power Company,
Inc. 7,246,250
570,000 General Public Utilities Corp. 20,092,500
--------------
27,338,750
- ------------------------------------------------------------
Electronics--0.5%
300,000 Harris Corp. 18,300,000
- ------------------------------------------------------------
Energy Equipment & Services--0.4%
1,300,000 NorAm Energy Corp. 14,137,500
- ------------------------------------------------------------
Forest Products--8.5%
800,000 Georgia-Pacific Corp. 56,800,000
1,200,000 International Paper Co. 44,250,000
550,000 James River Corp. of Virginia. 14,506,250
574,500 Kimberly-Clark Corp. 44,380,125
650,000 Mead Corp. 33,718,750
125,000 Rayonier Inc. 4,750,000
- --------------------------------------------------------------------------------
- ----- 4 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments as
of June 30, 1996 (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
Forest Products (cont'd.)
750,000 Temple-Inland Inc. $ 35,062,500
800,000 Weyerhaeuser Co. 34,000,000
1,000,000 Willamette Industries, Inc. 59,500,000
--------------
326,967,625
- ------------------------------------------------------------
Hospitals--2.7%
1,180,800 Foundation Health Corp. (a) 42,361,200
2,937,874 Tenet Healthcare Corp. 62,797,057
--------------
105,158,257
- ------------------------------------------------------------
Insurance--9.3%
1,000,000 Alexander & Alexander Services,
Inc. 19,750,000
1,200,000 Chubb Corp. 59,850,000
700,000 Citizens Corp. 13,125,000
1,132,700 First Colony Corp. 35,113,700
1,351,242 Old Republic International Corp. 29,051,703
255,500 Providian Corp. 10,954,563
1,400,000 SAFECO Corp. 49,525,000
426,900 St. Paul Companies, Inc. 22,839,150
1,500,000 The Equitable Companies, Inc. 37,312,500
1,200,000 Travelers Corp. 54,750,000
1,461,900 Western National Corp. 26,862,412
--------------
359,134,028
- ------------------------------------------------------------
Metals-Non Ferrous--1.7%
600,000 Aluminum Company of America 34,425,000
122,750 AMAX Gold Inc. 675,125
1,293,000 Cyprus Minerals Co. 29,254,125
--------------
64,354,250
- ------------------------------------------------------------
Oil & Gas Exploration/Production--5.3%
300,000 Amerada Hess Corp. 16,087,500
350,000 Atlantic Richfield Co. 41,475,000
1,100,000 Occidental Petroleum Corp. 27,225,000
1,500,000 Oryx Energy Co. 24,375,000
1,598,596 Societe Nationale Elf Aquitaine,
ADR (France) 58,748,403
738,365 Total SA, ADR (France) (a) 27,411,801
504,400 Union Texas Petroleum Holdings,
Inc. 9,835,800
--------------
205,158,504
Retail--6.6%
119,700 Dayton-Hudson Corp. $ 12,344,063
1,910,000 Dillard Department Stores, Inc. 69,715,000
5,500,000 K-Mart Corp. 68,062,500
500,000 Petrie Stores Corp. 1,375,000
1,168,300 Tandy Corp. 55,348,212
800,000 Toys ``R'' Us Inc. (a) 22,800,000
1,100,000 Waban, Inc. (a) 26,262,500
--------------
255,907,275
- ------------------------------------------------------------
Specialty Chemicals--0.7%
388,200 Eastman Chemical Co. (a) 23,631,675
100,000 Witco Corp. 3,437,500
--------------
27,069,175
- ------------------------------------------------------------
Steel--0.7%
500,000 Bethlehem Steel Corp. (a) 5,937,500
1,368,300 Birmingham Steel Corp. 22,405,912
--------------
28,343,412
- ------------------------------------------------------------
Telecommunications--2.2%
81,733 360 Communications Co. 1,961,592
1,740,000 Loral Space & Communications 23,707,500
1,100,000 Telefonica de Espana, S.A., ADR
(Spain) 60,637,500
--------------
86,306,592
- ------------------------------------------------------------
Transportation--0.5%
1,000,000 OMI Corp. 8,625,000
550,000 Overseas Shipholding Group, Inc. 9,968,750
--------------
18,593,750
--------------
Total common stocks
(cost $1,968,313,467) 2,623,314,540
--------------
PREFERRED STOCK--0.7%
4,000,000 RJR Nabisco Holdings Corp.
Conv. Pfd. Stock
(cost $25,999,617) 26,000,000
--------------
Total long-term investments
(cost $1,994,313,084) 2,649,314,540
--------------
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5 -----
<PAGE>
Portfolio of Investments
as of June 30, 1996 (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
SHORT-TERM INVESTMENTS--29.9%
- ------------------------------------------------------------
Commercial Paper--18.0%
$ 10,722 American Honda Finance Corp.
5.40%, 7/25/96 $ 10,683,401
37,987 Associates Corp. of North America
5.60%, 7/1/96 37,987,000
3,290 AT&T Corp.
5.32%, 7/12/96 3,284,652
25,000 Barnett Banks, Inc.
5.50%, 7/1/96 25,000,000
30,448 Canadian Imperial Bank
5.50%, 7/1/96 30,448,000
37,987 Cargill Financial Services Corp.
5.50%, 7/3/96 37,987,000
Ciesco, L.P.
5,000 5.30%, 7/12/96 4,991,903
10,000 5.32%, 7/19/96 9,973,400
14,000 5.32%, 8/2/96 13,933,795
37,987 Cooper Industries, Inc.
5.60%, 7/1/96 37,987,000
19,317 Corporate Asset Funding Co., Inc.
5.29%, 7/18/96 19,269,563
Countrywide Funding Corp.
8,000 5.40%, 7/15/96 7,983,200
4,000 5.42%, 7/25/96 3,985,546
5,000 5.43%, 8/20/96 4,962,292
12,000 Duracell, Inc.
5.40%, 7/22/96 11,962,200
Federal National Mortgage Assoc.
18,610 5.27%, 9/3/96 18,435,480
18,800 5.26%, 9/9/96 18,607,169
Finova Capital Corp.
3,000 5.42%, 7/11/96 2,995,483
11,000 5.42%, 7/15/96 10,976,815
1,000 5.45%, 7/17/96 997,578
5,900 5.48%, 7/19/96 5,883,834
7,000 5.47%, 8/9/96 6,958,519
17,900 First Data Corp.
5.45%, 7/23/96 17,840,383
1,000 First National Bank of Chicago,
Il.
5.32%, 7/22/96 999,965
$ 38,000 Ford Motor Credit Corp.
5.38%, 8/20/96 $ 37,716,056
GTE Corp.
7,285 5.45%, 7/12/96 7,272,869
3,000 5.39%, 7/15/96 2,993,712
8,000 5.43%, 7/22/96 7,974,660
4,000 5.42%, 7/26/96 3,984,944
Heller Financial Services, Inc.
2,000 5.46%, 7/8/96 1,997,877
2,000 5.44%, 7/22/96 1,993,653
8,000 International Business Machines
Credit Corp.
5.29%, 7/10/96 7,989,420
11,000 Lowes Co.
5.65%, 7/1/96 11,000,000
38,000 Merrill Lynch & Co., Inc.
5.40%, 7/12/96 37,937,300
6,000 Mitsubishi International Corp.
5.46%, 7/18/96 5,984,530
11,000 Morgan Stanley Group, Inc.
5.60%, 7/1/96 11,000,000
14,000 Nomura Holdings America, Inc.
5.67%, 7/1/96 14,000,000
3,000 Norwest Corp.
5.35%, 7/10/96 2,995,987
NYNEX Corp.
1,000 5.42%, 7/22/96 996,838
7,000 5.42%, 8/16/96 6,951,521
PHH Corp.
10,810 5.60%, 7/1/96 10,810,000
4,700 5.34%, 7/8/96 4,695,120
11,750 5.32%, 7/17/96 11,722,218
9,000 Philip Morris Cos., Inc.
5.39%, 7/25/96 8,967,660
6,555 Pitney-Bowes Credit Corp.
5.45%, 7/12/96 6,544,084
PNC Funding Corp.
2,000 5.43%, 7/8/96 1,997,888
5,000 5.40%, 7/11/96 4,992,500
4,848 Preferred Receivables Funding
Corp.
5.30%, 7/11/96 4,840,863
27,000 5.37%, 7/22/96 26,915,422
- --------------------------------------------------------------------------------
- ----- 6 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments
as of June 30, 1996 (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
Commercial Paper (cont'd.)
$ 9,000 Riverwoods Funding Corp.
5.30%, 7/2/96 $ 8,998,675
17,578 Rockwell International Corp.
5.45%, 7/16/96 17,538,083
3,000 Sears Roebuck Acceptance Corp.
5.40%, 7/25/96 2,989,200
Smith Barney, Inc.
3,000 5.36%, 7/2/96 2,999,554
6,000 5.37%, 7/9/96 5,992,840
13,000 5.38%, 7/11/96 12,980,572
23,000 Transamerica Corp.
5.34%, 7/9/96 22,972,707
6,000 United States National Bank of
Oregon
5.32%, 7/30/96 5,999,749
5,875 United States West Commerce, Inc.
5.45%, 7/15/96 5,862,548
Whirlpool Financial Corp.
5,123 5.40%, 7/22/96 5,106,863
14,000 5.40%, 7/25/96 13,949,600
--------------
Total commercial paper
(cost $693,799,559) 693,799,691
--------------
U.S. Government Security--0.1%
$ 1,500 United States Treasury Note
4.375%, 11/15/96
(cost $1,494,141) $ 1,494,141
--------------
- ------------------------------------------------------------
Repurchase Agreement--11.8%
459,936 Joint Repurchase Agreement
Account,
5.46%, due 7/1/96, (Note 5)
(cost $459,936,000) 459,936,000
--------------
Total short-term investments
(cost $1,155,229,700) 1,155,229,832
--------------
- ------------------------------------------------------------
Total Investments--98.5%
(cost $3,149,542,784; Note 4) 3,804,544,372
Other assets in excess of
liabilities--1.5% 56,154,753
--------------
Net Assets--100% $3,860,699,125
--------------
--------------
- ---------------
(a) Non-income producing security.
ADR--American Depository Receipt.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7 -----
<PAGE>
Statement of Assets and Liabilities (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S>
<C>
Assets
June 30, 1996
Investments, at value (cost
$3,149,542,784).................................................................
$3,804,544,372
Cash.........................................................................
............................... 759,303
Recievable for Fund shares
sold.........................................................................
.... 57,304,623
Dividends and interest
receivable...................................................................
........ 10,860,449
Forward contract - amount receivable from
counterparty......................................................
534,984
Deferred expenses and other
assets..........................................................................
129,294
--------------
Total
assets.......................................................................
...................... 3,874,133,025
--------------
Liabilities
Payable for Fund shares
reacquired...................................................................
....... 8,095,627
Distribution fee
payable......................................................................
.............. 2,299,988
Management fee
payable......................................................................
................ 1,445,121
Accrued expenses and other
liabilities..................................................................
.... 1,015,441
Forward contract - amount payable to
counterparty...........................................................
549,337
Deferred directors'
fees.........................................................................
........... 28,386
--------------
Total
liabilities..................................................................
...................... 13,433,900
--------------
Net
Assets.......................................................................
........................... $3,860,699,125
--------------
--------------
Net assets were comprised of:
Common stock, at
par..........................................................................
........... $ 2,261,040
Paid-in capital in excess of
par.........................................................................
2,902,111,760
--------------
2,904,372,800
Undistributed net investment
income......................................................................
51,868,166
Accumulated net realized gain on
investments.............................................................
249,470,924
Net unrealized appreciation on investments and foreign
currencies........................................ 654,987,235
--------------
Net assets, June 30,
1996.........................................................................
.......... $3,860,699,125
--------------
--------------
Class A:
Net asset value and redemption price per share
($1,250,158,349 / 73,013,932 shares of common stock issued and
outstanding)........................... $17.12
Maximum sales charge (5.00% of offering
price)...........................................................
.90
--------------
Maximum offering price to
public.........................................................................
$18.02
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($2,446,755,060 / 143,522,789 shares of common stock issued and
outstanding).......................... $17.05
--------------
--------------
Class C:
Net asset value, offering price and redemption price per share
($37,597,690 / 2,205,416 shares of common stock issued and
outstanding)............................... $17.05
--------------
--------------
Class Z:
Net asset value, offerng price and redemption price per share
($126,188,026 / 7,361,894 shares of common stock issued and
outstandng)............................... $17.14
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
- ----- 8 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL EQUITY FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income June 30, 1996
<S> <C>
Income
Dividends (net of foreign withholding taxes
of $908,726)............................ $ 54,451,738
Interest................................... 23,292,632
-------------
Total income............................ 77,744,370
-------------
Expenses
Distribution fee--Class A.................. 1,469,702
Distribution fee--Class B.................. 11,645,121
Distribution fee--Class C.................. 156,028
Management fee............................. 8,324,688
Transfer agent's fees and expenses......... 2,099,000
Reports to shareholders.................... 556,000
Franchise taxes............................ 142,000
Registration fees.......................... 111,000
Custodian's fees and expenses.............. 99,000
Insurance.................................. 33,000
Legal fees and expenses.................... 30,000
Audit fee and expenses..................... 27,000
Directors' fees............................ 22,000
Miscellaneous.............................. 6,920
-------------
Total expenses.......................... 24,721,459
-------------
Net investment income......................... 53,022,910
-------------
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions
Net realized gain on investment
transactions............................... 252,166,876
-------------
Net change in unrealized appreciation on:
Investments................................ (73,327,523)
Foreign currencies......................... (8,196)
-------------
(73,335,719)
-------------
Net gain on investments....................... 178,831,157
-------------
Net Increase in Net Assets
Resulting from Operations..................... $ 231,854,067
-------------
-------------
</TABLE>
PRUDENTIAL EQUITY FUND, INC.
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) June 30, December 31,
in Net Assets 1996 1995
<S> <C> <C>
Operations
Net investment income..... $ 53,022,910 $ 35,567,740
Net realized gain on
investments............ 252,166,876 221,104,455
Net change in unrealized
appreciation
(depreciation) of
investments............ (73,335,719) 482,824,209
--------------- ---------------
Net increase in net assets
resulting from
operations............. 231,854,067 739,496,404
--------------- ---------------
Net equalization debits...... -- (4,049,462)
--------------- ---------------
Dividends and distributions
(Note 1)
Dividends from net
investment income
Class A................ -- (17,125,686)
Class B................ -- (19,755,318)
Class C................ -- (167,436)
--------------- ---------------
-- (37,048,440)
--------------- ---------------
Distributions from net
realized
capital gains
Class A................ (32,936,673) (43,407,909)
Class B................ (66,772,503) (84,861,913)
Class C................ (966,578) (795,345)
Class Z................ (3,418,274) --
--------------- ---------------
(104,094,028) (129,065,167)
--------------- ---------------
Fund share transactions (net
of share conversion) (Note
6)
Proceeds from shares
sold................... 1,679,700,656 2,331,421,579
Net asset value of shares
issued in reinvestment
of dividends and
distributions.......... 99,511,732 156,970,117
Cost of shares
reacquired............. (1,369,172,492) (1,984,977,517)
--------------- ---------------
Net increase in net assets
from Fund share
transactions........... 410,039,896 503,414,179
--------------- ---------------
Total increase............... 537,799,935 1,072,747,514
Net Assets
Beginning of period.......... 3,322,899,190 2,250,151,676
--------------- ---------------
End of period................ $ 3,860,699,125 $ 3,322,899,190
--------------- ---------------
--------------- ---------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9 -----
<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 Net 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. Expenses
are recorded on the accrual basis which may require the use of certain estimates
by management.
Net investment income (other than distribution fees) and unrealized and realized
gains or losses are allocated daily to each class of shares based upon the
relative proportion of net assets of each class at the beginning of the day.
Forward Currency Contracts: A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The Fund enters into forward currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings or on specific receivables and payables denominated in a foreign
currency. The contracts are valued daily at current exchange rates and any
unrealized gain or loss is included in net unrealized appreciation or
depreciation on investments. Gain or loss is realized on the settlement date of
the contract equal to the difference between the settlement value of the
original and renegotiated forward contracts. This gain or loss, if any, is
included in net realized gain (loss) on foreign currency transactions. Risks may
arise upon entering into these contracts from the potential inability of the
counterparties to meet the terms of their contracts.
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: Effective January 1, 1996, the Fund discontinued the accounting
practice of equalization. Equalization is a practice whereby a portion of the
proceeds from sales and costs of repurchases of capital 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. The balance of $43,313,819 of undistributed net investment income at
December 31, 1995 resulting from equalization was transferred to paid-in capital
in excess of par. Such reclassification had no effect on net assets, results of
operations, or net asset value per share.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with A.I.C.P.A. Statement of
Position 93-2: Determination, Disclosure, and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. The effect of applying this statement was to decrease undistributed
net investment income by $43,313,819 and increase paid-in capital in excess of
par by $43,313,819. The reduction in undistributed net investment income was due
to the Fund discontinuing the accounting practice of equalization. Such
reclassification had no effect on net assets, results of operations, or net
asset value per share.
- --------------------------------------------------------------------------------
- ----- 10
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------------------------------------
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 had a distribution agreement with Prudential Mutual Fund Distributors,
Inc. (``PMFD''), which acted as the distributor of the Class A shares of the
Fund through January 1, 1996. Effective January 2, 1996, Prudential Securities
Incorporated (``PSI'') became the distributor of the Class A shares of the Fund
and is serving the Fund under the same terms and conditions as under the
arrangement with PMFD. PSI is also distributor of the Class B, Class C and Class
Z shares of the Fund. The Fund compensated PMFD and PSI 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 PSI 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 Class A, Class B and Class C Plans were .25%, 1% and 1%,
respectively, of the average daily net assets of Class A, Class B and Class C
shares for the six months ended June 30, 1996.
PSI has advised the Fund that it has received approximately $1,637,000 in
front-end sales charges resulting from sales of Class A shares during the period
ended June 30, 1996. From these fees, PSI paid such sales charges to dealers
(PSI and Prusec) which in turn paid commissions to salespersons.
PSI advised the Fund that for the period ended June 30, 1996, it received
approximately $2,096,000 and $16,000 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
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,
1996, the Fund incurred fees of approximately $2,084,000 for the services of
PMFS. As of June 30, 1996, approximately $363,000 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, 1996 , PSI earned $742,648 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 six months ended June 30, 1996 aggregated $476,839,567 and $240,918,297,
respectively.
- --------------------------------------------------------------------------------
11 -----
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------------------------------------
As of June 30, 1996, the Fund had outstanding forward currency contracts to
purchase and sell foreign currency as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Purchase Contract Payable Value Appreciaton
- ------------------------------ --------------- ------------ --------------
<S> <C> <C> <C>
Canadian Dollars
expiring 11/15/96 $ 1,474,191 $ 2,009,175 $ 534,984
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Sale Contract Receivable Value Depreciaton
- ------------------------------ --------------- ------------ --------------
<S> <C> <C> <C>
Canadian Dollars
expiring 11/15/96 $ 2,009,175 $ 1,459,838 $ (549,337)
</TABLE>
The federal income tax basis of the Fund's investments at June 30, 1996 was
substantially the same as for financial reporting purposes and, accordingly, net
unrealized appreciation for federal income tax purposes was $655,001,588 (gross
unrealized appreciation--$701,633,200; gross unrealized
depreciation--$46,631,612).
- ------------------------------------------------------------
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, 1996, the Fund
has a 41.55% undivided interest in the joint account. The undivided interest for
the Fund represents $459,936,000 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., 5.40%, in the principal amount of $369,000,000, repurchase
price $369,166,050, due 7/1/96. The value of the collateral including accrued
interest was $377,194,429.
Goldman, Sachs & Co. Inc., 5.47%, in the principal amount of $369,000,000,
repurchase price $369,168,203, due 7/1/96. The value of the collateral including
accrued interest was $376,380,556.
Smith Barney, Inc., 5.50%, in the principal amount of $369,000,000, repurchase
price $369,169,125, due 7/1/96. The value of the collateral including accrued
interest was $376,380,118.
- ------------------------------------------------------------
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 contingent
deferred sales charge of 1% during the first year. Class B shares will
automatically convert to Class A shares on a quarterly basis approximately seven
years after purchase. A special exchange privilege is also available for
shareholders who qualified to purchase Class A shares at net asset value.
Effective March 1, 1996 the Fund commenced offering Class Z shares. Class Z
shares are not subject to any sales charge and are offered exclusively for sale
to the participants of the PSI 401(K) Plan, a defined contribution plan
sponsored by PSI.
There are 1 billion shares of common stock, $.01 par value per share, divided
into four classes, designated Class A, Class B, Class C and Class Z 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, 1996:
Shares sold....................... 56,428,419 $ 966,732,948
Shares issued in reinvestment of
distributions................... 1,804,747 31,384,875
Shares reacquired................. (53,020,125) (908,418,897)
----------- ---------------
Net increase in shares outstanding
before conversion from Class
B............................... 5,213,041 89,698,926
Shares issued upon conversion from
Class B......................... 4,257,506 72,876,861
Shares reacquired upon conversion
into Class Z.................... (6,921,503) (118,081,252)
----------- ---------------
Net increase in shares
outstanding..................... 2,549,044 $ 44,494,535
----------- ---------------
----------- ---------------
Year ended December 31, 1995:
Shares sold....................... 71,637,369 $ 1,094,814,294
Shares issued in reinvestment of
dividends and distributions..... 3,610,392 57,800,752
Shares reacquired................. (66,953,389) (1,028,414,685)
----------- ---------------
Net increase in shares outstanding
before conversion from Class
B............................... 8,294,372 124,200,361
Shares issued upon conversion from
Class B......................... 41,288,563 582,060,191
----------- ---------------
Net increase in shares
outstanding..................... 49,582,935 $ 706,260,552
----------- ---------------
----------- ---------------
</TABLE>
- --------------------------------------------------------------------------------
- ----- 12
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Shares Amount
- ---------------------------------- ----------- ---------------
Six months ended
June 30, 1996:
<S> <C> <C>
Shares sold....................... 39,393,529 $ 672,441,511
Shares issued in reinvestment of
distributions................... 3,679,971 63,779,832
Shares reacquired................. (25,634,015) (436,656,438)
----------- ---------------
Net increase in shares outstanding
before conversion............... 17,439,485 299,564,905
Shares reacquired upon conversion
into Class A.................... (4,243,116) (72,876,861)
----------- ---------------
Net increase in shares
outstanding..................... 13,196,369 $ 226,688,044
----------- ---------------
----------- ---------------
<CAPTION>
Class B
- ----------------------------------
<S> <C> <C>
Year ended December 31, 1995:
Shares sold....................... 81,698,002 $ 1,215,662,984
Shares issued in reinvestment of
dividends and distributions..... 6,251,700 98,250,095
Shares reacquired................. (65,164,474) (953,481,508)
----------- ---------------
Net increase in shares outstanding
before conversion............... 22,785,228 360,431,571
Shares reacquired upon conversion
into Class A.................... (41,293,731) (582,060,191)
----------- ---------------
Net decrease in shares
outstanding..................... (18,508,503) $ (221,628,620)
----------- ---------------
----------- ---------------
<CAPTION>
Class C
- ----------------------------------
<S> <C> <C>
Six months ended
June 30, 1996:
Shares sold....................... 1,071,285 $ 18,319,021
Shares issued in reinvestment of
distributions................... 53,690 930,440
Shares reacquired................. (374,086) (6,361,869)
----------- ---------------
Net increase in shares
outstanding..................... 750,889 $ 12,887,592
----------- ---------------
----------- ---------------
Year ended December 31, 1995
Shares sold....................... 1,352,277 $ 20,944,301
Shares issued in reinvestment of
dividends and distributions..... 57,365 919,269
Shares reacquired................. (193,799) (3,081,322)
----------- ---------------
Net increase in shares
outstanding..................... 1,215,843 $ 18,782,248
----------- ---------------
----------- ---------------
<CAPTION>
Class Z Shares Amount
- ---------------------------------- ----------- ---------------
<S> <C> <C>
March 1, 1996(a) through
June 30, 1996:
Shares sold....................... 1,265,061 $ 22,207,176
Shares issued in reinvestment of
distributions................... 196,355 3,416,585
Shares reacquired................. (1,021,025) (17,735,288)
----------- ---------------
Net increase in shares outstanding
before conversion from Class
A............................... 440,391 7,888,473
Shares issued upon conversion from
Class A......................... 6,921,503 118,081,252
----------- ---------------
Net increase in shares
outstanding..................... 7,361,894 $ 125,969,725
----------- ---------------
----------- ---------------
</TABLE>
- ---------------
(a) Commencement of offering of Class Z shares.
- --------------------------------------------------------------------------------
13 -----
<PAGE>
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
- ----------------------------------------------------------------------------
Six Months
Ended Year
Ended December 31,
June 30,
- -------------------------------------------------------------
1996 1995 1994
1993 1992 1991
---------- ---------- --------
-------- -------- -------
<S> <C> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 16.44 $ 13.24 $ 13.80
$ 12.07 $ 11.39 $ 9.84
---------- ---------- --------
-------- -------- -------
Income from investment operations
Net investment income............. .27 .27 .22
.23 .24 .27
Net realized and unrealized gain
on investments and foreign
currencies..................... .89 3.88 .09
2.42 1.30 2.09
---------- ---------- --------
-------- -------- -------
Total from investment
operations.................. 1.16 4.15 .31
2.65 1.54 2.36
---------- ---------- --------
-------- -------- -------
Less distributions
Dividends from net investment
income......................... -- (.27) (.22)
(.22) (.23) (.24)
Distributions from net realized
capital gains.................. (.48) (.68) (.65)
(.70) (.63) (.57)
---------- ---------- --------
-------- -------- -------
Total distributions............ (.48) (.95) (.87)
(.92) (.86) (.81)
---------- ---------- --------
-------- -------- -------
Net asset value, end of period.... $ 17.12 $ 16.44 $ 13.24
$ 13.80 $ 12.07 $ 11.39
---------- ---------- --------
-------- -------- -------
---------- ---------- --------
-------- -------- -------
TOTAL RETURN(a):.................. 7.00% 31.58% 2.38%
22.14% 13.65% 24.55%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)... $1,250,158 $1,158,111 $276,412
$232,535 $136,834 $82,845
Average net assets (000).......... $1,182,222 $ 908,365 $254,596
$190,778 $111,489 $57,845
Ratios to average net assets:
Expenses, including
distribution fees........... .88%(b) .91% 1.00%
.91% .94% .97%
Expenses, excluding
distribution fees........... .63%(b) .66% .75%
.71% .74% .77%
Net investment income.......... 3.33%(b) 1.82% 1.62%
1.71% 1.91% 2.36%
For Class A, B, C and Z shares:
Portfolio turnover............. 9% 18% 12%
21% 22% 19%
Average commission rate paid
per share................... $.0537 $.0501 N/A
N/A N/A N/A
</TABLE>
- ---------------
(a) 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.
(b) Annualized.
- --------------------------------------------------------------------------------
- ----- 14 See Notes to Financial Statements.
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
B
- -----------------------------------------------------------------------------
- ------
Six Months
Ended Year
Ended December 31,
June 30,
- --------------------------------------------------------------------
1996 1995 1994
1993 1992 1991
---------- ---------- ----------
---------- ---------- --------
<S> <C> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 16.43 $ 13.24 $ 13.80
$ 12.08 $ 11.40 $ 9.85
---------- ---------- ----------
---------- ---------- --------
Income from investment operations
Net investment income............. .20 .16 .12
.12 .14 .18
Net realized and unrealized gain
(loss) on investments and
foreign currencies............. .90 3.87 .09
2.42 1.30 2.09
---------- ---------- ----------
---------- ---------- --------
Total from investment
operations.................. 1.10 4.03 .21
2.54 1.44 2.27
---------- ---------- ----------
---------- ---------- --------
Less distributions
Dividends from net investment
income......................... -- (.16) (.12)
(.12) (.13) (.15)
Distributions from net realized
capital gains.................. (.48) (.68) (.65)
(.70) (.63) (.57)
---------- ---------- ----------
---------- ---------- --------
Total distributions............ (.48) (.84) (.77)
(.82) (.76) (.72)
---------- ---------- ----------
---------- ---------- --------
Net asset value, end of period.... $ 17.05 $ 16.43 $ 13.24
$ 13.80 $ 12.08 $ 11.40
---------- ---------- ----------
---------- ---------- --------
---------- ---------- ----------
---------- ---------- --------
TOTAL RETURN(a):.................. 6.64% 30.62% 1.60%
21.13% 12.72% 23.55%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)... $2,446,755 $2,140,895 $1,970,580
$1,794,634 $1,203,740 $904,382
Average net assets (000).......... $2,341,821 $1,891,160 $1,901,972
$1,522,992 $1,042,028 $757,485
Ratios to average net assets:
Expenses, including
distribution fees........... 1.63%(b) 1.66% 1.75%
1.71% 1.74% 1.77%
Expenses, excluding
distribution fees........... .63%(b) .66% .75%
.71% .74% .77%
Net investment income.......... 2.67%(b) .99% .87%
.91% 1.11% 1.56%
<CAPTION>
Class C
Class Z
--------------------------------------------
--------
August 1,
March 1,
Six Months 1994(c)
1996(d)
Ended Year Ended Through
Through
June 30, December 31, December 31,
June 30,
1996 1995 1994
1996
---------- ------------ ------------
--------
<S> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 16.43 $ 13.24 $14.02
$ 17.10
---------- ------ -----
--------
Income from investment operations
Net investment income............. .20 .16 .09
.25
Net realized and unrealized gain
(loss) on investments and
foreign currencies............. .90 3.87 (.10)
.27
---------- ------ -----
--------
Total from investment
operations.................. 1.10 4.03 (.01)
.52
---------- ------ -----
--------
Less distributions
Dividends from net investment
income......................... -- (.16) (.12)
--
Distributions from net realized
capital gains.................. (.48) (.68) (.65)
(.48)
---------- ------ -----
--------
Total distributions............ (.48) (.84) (.77)
(.48)
---------- ------ -----
--------
Net asset value, end of period.... $ 17.05 $ 16.43 $13.24
$ 17.14
---------- ------ -----
--------
---------- ------ -----
--------
TOTAL RETURN(a):.................. 6.64% 30.62% .01%
2.99%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)... $ 37,598 $ 23,894 $3,160
$126,188
Average net assets (000).......... $ 31,377 $ 12,190 $1,847
$ 81,437
Ratios to average net assets:
Expenses, including
distribution fees........... 1.63%(b) 1.66%
1.83%(b) .63%(b)
Expenses, excluding
distribution fees........... .63%(b) .66%
.83%(b) .63%(b)
Net investment income.......... 2.67%(b) 1.03%
.90%(b) 3.58%(b)
</TABLE>
- ---------------
(a) 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.
(b) Annualized.
(c) Commencement of offering of Class C shares.
(d) Commencement of offering of Class Z shares.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 15 -----
<PAGE>
Getting
The Most
From Your
Prudential
Mutual
Fund.
When you invest through Prudential Mutual Funds, you receive financial
advice through a Prudential Securities financial advisor or
Prudential/Pruco Securities registered representative. Your
advisor or representative can provide you with the following
services:
There's No Reward Without Risk; But Is This Risk Worth It?
Your financial advisor or registered representative can help you match
the reward you seek with the risk you can tolerate. And risk can be
difficult to gauge --sometimes even the simplest investments bear
surprising risks. The educated investor knows that markets seldom
move in just one direction -- there are times when a market sector
or asset class will lose value or provide little in the way of total
return. Managing your own expectations is easier with help from
someone who understands the markets and who knows you!
Keeping Up With The Joneses.
A financial advisor or registered representative can help you wade
through the numerous mutual funds available to find the ones that
fit your own individual investment profile and risk tolerance. While
the newspapers and popular magazines are full of advice about investing,
they are aimed at generic groups of people or representative individuals,
not at you personally. Your financial advisor or registered
representative will review your investment objectives with you.
This means you can make financial decisions based on the assets
and liabilities in your current portfolio and your risk tolerance -- not
just based on the current investment fad.
Buy Low, Sell High.
Buying at the top of a market cycle and selling at the bottom are among
the most common investor mistakes. But sometimes it's difficult to hold
on to an investment when it's losing value every month. Your financial
advisor or registered representative can answer questions when you're
confused or worried about your investment, and remind you that you're
investing for the long haul.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
(800) 225-1852
http:\\www.prudential.com
Directors
Edward D. Beach
Eugene C. Dorsey
Delayne Dedrick Gold
Harry A. Jacobs, Jr.
Thomas T. Mooney
Thomas H. O'Brien
Richard A. Redeker
Nancy Hays 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
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, 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 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 June 30, 1996 were not
audited and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
<PAGE>
(LOGO)
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
(800) 225-1852
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