(ICON)
Prudential
Equity
Fund, Inc.
ANNUAL
REPORT
Dec. 31, 1995
(LOGO)
<PAGE>
Prudential Equity Fund, Inc.
Performance At A Glance.
1995 was an exceptional year for U.S. stocks. In general, falling interest
rates and rising corporate profits gave stocks their best performance
since 1958, as measured by Ibbotson Associates. We're pleased to report
that the Prudential Equity Fund also enjoyed a strong year. Class A shares
performed better than the average equity fund and Class B and C shares
performed in line with the average equity fund, according to Lipper
Analytical Services.
<TABLE>
Cumulative Total Returns1 As of 12/31/95
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 31.6% 132.9% N/A 136.1%
Class B 30.6 123.9 274.4% 734.0
Class C 30.6 N/A N/A 30.6
Lipper Growth Avg3 30.8 113.4 251.8 615.9
<CAPTION>
Average Annual Total Returns1 As of 12/31/95
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 25.0% 17.2% N/A 14.6%
Class B 25.6 17.4 14.1% 16.6
Class C 29.6 N/A N/A 20.9
</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 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.
2Inception dates: Class A 1/22/90; Class B 3/15/82; Class C 8/1/94.
3These are the average returns of: 572 funds for one year; 237 funds for
five years; 153 funds for 10 years; and 115 funds since inception of the
Class B shares, as determined by Lipper Analytical Services.
How Investments Compared.
(As of 12/31/95)
(GRAPH)
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
return averages 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. The returns assume the reinvestment
of dividends.
U.S. Growth 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 have received higher historical
total returns from stocks than from most other investments.
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. Unlike bond funds, bonds, if held to maturity,
generally offer a fixed rate of return and fixed principal value.
Global Stock Funds will also fluctuate a great deal. However, investments
overseas are subject to political,social and currency risks that may affect
performance.
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. 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,
we look for bargains in the current market.
Strategy Session.
As 1995 started, we were almost fully invested in stocks (93% of total
net assets), our most optimistic position in several years. Our optimism
was rewarded: the economy slowed just enough to put inflation in the deep
freeze, and the Federal Reserve cut interest rates twice. Corporate
profits also hit record levels, rising more than 15%. The slowing economy,
low inflation, declining interest rates and rising corporate profits
encouraged stock investors, who bid prices higher and higher throughout
the year.
With stock prices so high, where did a value investor find strong companies
with undervalued stock prices? It wasn't easy, but we found some in the
financial services, automotive and retail industries. These stocks were
undervalued because investors initially feared a recession that never
occurred. The public postponed borrowing money (from financial services
companies like banks) and slowed down their purchases of new cars and
clothes from automakers and retailers.
Instead, as interest rates declined last year, financial services companies
were among the first to benefit. As the cost of their "raw material" --
money -- fell, financial services stock prices rose. Because 26% of total
net assets were financial services stocks (as of 6/30/95), the Fund profited.
Can automotive and retailing stocks be far behind? If the Federal Reserve
continues to cut interest rates in 1996 to boost the economy (as they did
on January 31), consumers should regain the confidence to buy more cars
and retail goods. As a result, the companies in these industries should
do well. Therefore, we remain optimistic about our automotive and retail
stocks, a combined 11.7% of net assets at year end.
Sector Breakdown.
Prudential Equity Fund
as of 12/31/95.
(PIE CHART)
Putting 1995
In Perspective.
The financial markets posted extraordinary returns in 1995. While
investors celebrated this performance, few expect last year's returns
to repeat in 1996. It is important to maintain realistic expectations
about the future -- differences in yearly returns highlight the
importance of diversification and professional management. Please
see page 2 for more information.
<PAGE>
What Went Well.
Banked On Low Rates.
Our large holdings in bank, financial services and insurance stocks (25%
of total net assets at year end) really helped the Fund's total return
last year. As interest rates declined, profits rose for American Express,
Dean Witter Discover and Travelers -- all stocks we owned. In addition,
the financial services industry continued to consolidate in 1995, reflecting
the trend toward "nationwide banks." The prices of many financial services
stocks rose because of a boom in merger and acquisition activity. Not
surprisingly, our holding of Chase Manhattan (1.1% of net assets at year
end), which merged with Chemical Bank, was a good move.
You Heard It Here First.
Digital Equipment Corporation, a stock we've owned since 1990, enjoyed one
of its best years in 1995. We have had a long-standing belief in the
turnaround potential of the company, but it wasn't until 1995 that an
improved product line and strong new management team led to a rise in
earnings, lifting the stock price to new levels. Digital Equipment
comprised 4.4% of assets at year end.
And Not So Well.
Cars and Clothes Hurt.
As mentioned earlier, we also focused on automotive and retail stocks in
1995, many of which we purchased at rock-bottom prices. Last year, for
example, Chrysler stock was attractively priced and we bought it. Weak
sales forced down stock prices of many retailers. So, we shopped for
bargains, buying Dillard and Federated department stores and adding to
our holdings of retail discounters such as TJX Companies.
If interest rates continue to fall, consumers will be more likely to borrow
to buy cars and retail goods. So, we're maintaining our investments in
these areas.
Too Little Tech.
We held fewer assets in technology stocks -- particularly telecommunications
stocks -- than many other growth funds when technology stocks were among
the biggest gainers for the year. Why? Technology stocks were more attractive
to "growth style" managers who focus more on future earnings growth than
current stock "value." However, if technology stock prices continue to fall
in 1996 (as they had begun to do when 1996 opened), we may consider
selectively buying them.
Of course, our substantial cash position (19.3% as of December 31, 1995)
also held back performance.
Five Largest Holdings.*
4.4% Digital Equipment
Computer Hardware
3.7% Kimberly Clark
Forest Products
2.8% Chrysler
Autos & Trucks
2.5% Baxter International
Drugs & Medical Supplies
2.4% Loews
Diversified Consumer Prod.
*Expressed as a percentage of total net assets as of 12/31/95.
Looking Ahead.
Where will our next investments be made? We're eyeing economically
sensitive stocks (such as manufacturing and industrial companies), but
the challenge for 1996 will be to determine when these stocks offer
enough value to compensate for the risks of a still-sluggish economy.
Do we see another 30%+ year for the stock market -- and for the Fund --
in 1996? Definitely not. In fact, we don't think U.S. stocks are likely
to match even the 16.4% average annual gains they've enjoyed since 1982.
Annual returns closer to the long-term (since 1926) historical average of
10.5% seem more likely. (Source: Prudential Investment Corp. based on the
Standard & Poor's 500 Stock Index.)
1
<PAGE>
President's Letter February 5, 1996
(PICTURE)
Dear Shareholder:
For many investors, 1995 was a profitable year -- most stock and bond funds
enjoyed healthy returns from the U.S. markets. While climbing returns can
tempt even the most skittish investors to start buying again, it is important
to remember that the stock and bond markets go down just as they go up.
At times like these, remember the importance of working with your Financial
Advisor or Registered Representative to help you find investments that are
consistent with your risk tolerance and time horizon. Your Financial Advisor
or Registered Representative can help you maintain realistic expectations
about both the potential performance and risks associated with your
investments.
Shareholder Legislative Action Program.
From time to time we've been informing you about significant legislation
before Congress, such as the American Dream Savings Account, that may
potentially impact mutual fund investors. We want to make it easier for
you to share your views with your Congressional member. So, beginning in
1996, whenever Congress is considering legislation that would affect you,
we'll send you postage-paid message cards that you simply drop in the mail
if you want to let your senator or representative know how you want him or
her to vote.
Fund Profiles.
Over the past year, we've worked to make your shareholder reports more
interesting, informative and easy to read. This year, we'll be considering
"fund profiles." Some mutual fund companies now offer one to shareholders
along with a full prospectus. The purpose of a fund profile is to provide
a very brief, reader-friendly summary of a fund's objective, investments,
risks and expenses. Would you like to see fund profiles from us? Please
call your Financial Advisor or Registered Representative to share your
views.
As always, thank you for your confidence in Prudential Mutual Funds.
Sincerely,
Richard A. Redeker
President
2
<PAGE>
Portfolio of Investments as
of December 31, 1995 PRUDENTIAL EQUITY FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
LONG-TERM INVESTMENTS--81.4%
COMMON STOCKS--80.7%
------------------------------------------------------------
Aerospace/Defense--2.2%
70,400 Lockheed Corp. $ 5,561,600
1,740,000 Loral Corp. 61,552,500
40,900 United Technologies Corp. 3,880,388
--------------
70,994,488
- ------------------------------------------------------------
Automobiles & Trucks--3.9%
1,700,000 Chrysler Corp. 94,137,500
600,000 General Motors Corp. 31,725,000
404,800 Navistar International Corp.(a) 4,250,400
--------------
130,112,900
- ------------------------------------------------------------
Banks & Financial Services--14.5%
1,800,000 American Express Co. 74,475,000
303,800 American Financial Group, Inc. 9,303,875
800,000 American General Corp. 27,900,000
700,000 Bank of New York Co., Inc. 34,125,000
500,000 BankAmerica Corp. 32,375,000
600,000 Chase Manhattan Corp. 36,375,000
900,000 Comerica, Inc. 36,112,500
1,300,000 Dean Witter Discover & Co. 61,100,000
177,000 First America Bank Corp. 7,854,375
1,000,000 Great Western Financial Corp. 25,500,000
800,000 Lehman Brothers Holdings, Inc. 17,000,000
292,505 Mellon Bank Corp. 15,722,144
256,500 Mercantile Bankshares Corp. 7,149,937
345,600 Morgan (J.P.) & Co., Inc. 27,734,400
500,000 NationsBank Corp. 34,812,500
225,000 Republic New York Corp. 13,978,125
600,000 Salomon, Inc. 21,300,000
--------------
482,817,856
- ------------------------------------------------------------
Chemicals--0.5%
706,900 Wellman, Inc. 16,081,975
Commercial Services--1.3%
600,000 AAR Corp. $ 13,200,000
273,800 American Standard Cos., Inc. 7,666,400
278,200 TRW Inc. 21,560,500
--------------
42,426,900
- ------------------------------------------------------------
Computer Hardware--7.2%
3,500,000 Amdahl Corp. 29,750,000
1,200,000 Comdisco, Inc. 27,150,000
2,300,000 Digital Equipment Corp.(a) 147,487,500
412,900 Gerber Scientific, Inc. 6,709,625
300,000 International Business Machines
Corp. 27,525,000
--------------
238,622,125
- ------------------------------------------------------------
Construction & Housing--0.6%
550,000 Centex Corp. 19,112,500
- ------------------------------------------------------------
Diversified Consumer Products--4.0%
750,000 Gibson Greetings Inc. 12,000,000
1,000,000 Loews Corp. 78,375,000
1,400,000 RJR Nabisco Holdings Corp. 43,225,000
--------------
133,600,000
- ------------------------------------------------------------
Drugs & Medical Supplies--2.5%
2,000,000 Baxter International Inc. 83,750,000
- ------------------------------------------------------------
Electric Power--0.8%
170,000 American Electric Power Company,
Inc. 6,885,000
570,000 General Public Utilities Corp. 19,380,000
--------------
26,265,000
- ------------------------------------------------------------
Electronics--0.5%
15,000 Harris Computer Systems, Inc. 202,500
300,000 Harris Corp. 16,387,500
--------------
16,590,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3 -----
<PAGE>
<PAGE>
Portfolio of Investments as
of December 31, 1995 PRUDENTIAL EQUITY FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
Energy Equipment & Services--0.8%
500,000 BJ Services Corp.(a) $ 14,500,000
1,300,000 NorAm Energy Corp. 11,537,500
--------------
26,037,500
- ------------------------------------------------------------
Forest Products--6.9%
55,000 Crown Vantage Inc. 783,750
225,000 Georgia-Pacific Corp. 15,440,625
1,183,500 International Paper Co. 44,825,062
550,000 James River Corp. of Virginia 13,268,750
1,476,598 Kimberly-Clark Corp. 122,188,484
161,300 Mead Corp. 8,427,925
125,000 Rayonier Inc. 4,171,875
202,300 Temple-Inland Inc. 8,926,488
198,700 Willamette Industries, Inc. 11,176,875
--------------
229,209,834
- ------------------------------------------------------------
Hospitals--3.6%
1,351,300 Foundation Health Corp.(a) 58,105,900
2,937,874 Tenet Healthcare Corp. 60,960,885
--------------
119,066,785
- ------------------------------------------------------------
Insurance--10.3%
1,000,000 Alexander & Alexander Services,
Inc. 19,000,000
600,000 Chubb Corp. 58,050,000
700,000 Citizens Corp. 13,037,500
1,132,700 First Colony Corp. 28,742,262
900,828 Old Republic International Corp. 31,979,394
255,500 Providian Corp. 10,411,625
1,400,000 SAFECO Corp. 48,300,000
426,900 St. Paul Companies, Inc. 23,746,312
1,500,000 The Equitable Companies, Inc. 36,000,000
4,000 Transport Holdings, Inc. 163,000
800,000 Travelers Corp. 50,300,000
1,461,900 Western National Corp. 23,573,138
--------------
343,303,231
Metals - Non Ferrous--2.2%
250,000 Alumax Inc.(a) $ 7,656,250
600,000 Aluminum Company of America 31,725,000
122,750 AMAX Gold Inc. 889,938
1,293,000 Cyprus Minerals Co. 33,779,625
--------------
74,050,813
- ------------------------------------------------------------
Oil & Gas Exploration/Production--5.3%
300,000 Amerada Hess Corp. 15,900,000
200,000 Atlantic Richfield Co. 22,150,000
1,100,000 Occidental Petroleum Corp. 23,512,500
1,500,000 Oryx Energy Co. 20,062,500
1,598,596 Societe Nationale Elf Aquitaine,
ADR (France) 58,748,403
738,365 Total SA, ADR (France)(a) 25,104,410
504,400 Union Texas Petroleum Holdings,
Inc. 9,772,750
--------------
175,250,563
- ------------------------------------------------------------
Retail--7.8%
119,700 Dayton-Hudson Corp. 8,977,500
1,642,900 Dillard Department Stores, Inc. 46,822,650
700,000 Federated Department Stores,
Inc.(a) 19,250,000
5,500,000 KMart Corp. 39,875,000
1,000,000 Liz Claiborne, Inc. 27,750,000
500,000 Petrie Stores Corp. 1,375,000
1,168,300 Tandy Corp. 48,484,450
1,432,700 TJX Companies, Inc. 27,042,212
800,000 Toys ``R'' Us, Inc.(a) 17,400,000
1,100,000 Waban, Inc.(a) 20,625,000
--------------
257,601,812
- ------------------------------------------------------------
Specialty Chemicals--0.8%
388,200 Eastman Chemical Co. 24,311,025
100,000 Witco Corp. 2,925,000
--------------
27,236,025
</TABLE>
- --------------------------------------------------------------------------------
- ----- 4 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments as
of December 31, 1995 PRUDENTIAL EQUITY FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
Steel--0.8%
500,000 Bethlehem Steel Corp.(a) $ 7,000,000
1,368,300 Birmingham Steel Corp. 20,353,463
--------------
27,353,463
- ------------------------------------------------------------
Telecommunications--3.1%
1,446,500 Sprint Corp. 57,679,188
1,100,000 Telefonica de Espana, S.A., ADR
(Spain) 46,062,500
--------------
103,741,688
- ------------------------------------------------------------
Transportation--1.1%
186,900 Canadian National Railway Co.(b) 2,803,500
1,000,000 OMI Corp. 6,500,000
550,000 Overseas Shipholding Group, Inc. 10,450,000
747,517 Southern Pacific Rail Corp. 17,940,408
--------------
37,693,908
--------------
Total common stocks
(cost $1,952,093,521) 2,680,919,366
PREFERRED STOCK--0.7%
4,000,000 RJR Nabisco Holdings Corp.
Conv. Pfd. Stock
(cost $25,999,617) 25,500,000
--------------
Total long-term investments
(cost $1,978,093,138) 2,706,419,366
--------------
Principal
Amount Description Value
(000) (Note 1)
<C> <S> <C>
SHORT-TERM INVESTMENTS--19.4%
- ------------------------------------------------------------
U.S. Government Security--0.1%
United States Treasury Note
$ 1,500 4.375%, 11/15/96 $ 1,489,176
- ------------------------------------------------------------
Repurchase Agreement--19.3%
642,246 Joint Repurchase Agreement
Account,
5.85%, due 1/2/96 (Note 5) 642,246,000
--------------
Total short-term investments
(cost $643,732,293) 643,735,176
--------------
- ------------------------------------------------------------
Total Investments--100.8%
(cost $2,621,825,431; Note 4) 3,350,154,542
Liabilities in excess of other
assets--(0.8%) (27,255,352)
--------------
Net Assets--100% $3,322,899,190
--------------
--------------
</TABLE>
- ---------------
(a) Non-income producing security.
(b) Installment Receipt. The Fund is liable for a second payment in the amount
of C$10.75 per share on November 26, 1996 if it continues to own this security.
ADR--American Depository Receipt.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5 -----
<PAGE>
<PAGE>
Statement of Assets and Liabilities PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S>
<C>
Assets
December 31, 1995
Investments, at value (cost
$2,621,825,431).............................................................
$ 3,350,154,542
Cash.........................................................................
........................... 259,868
Recievable for Fund shares
sold.........................................................................
8,155,413
Dividends and interest
receivable...................................................................
.... 7,342,692
Receivable for investments
sold.........................................................................
5,020,397
Deferred expenses and other
assets......................................................................
42,951
-----------------
Total
assets.......................................................................
.................. 3,370,975,863
-----------------
Liabilities
Payable for Fund shares
reacquired......................................................................
42,383,021
Distribution fee
payable......................................................................
.......... 2,070,371
Payable for investments
purchased.......................................................................
1,648,899
Management fee
payable......................................................................
............ 1,292,602
Accrued expenses and other
liabilities..................................................................
651,610
Deferred Trustees'
fees.........................................................................
........ 24,013
Forward contract - amount payable to
counterparties.....................................................
6,157
-----------------
Total
liabilities..................................................................
.................. 48,076,673
-----------------
Net
Assets.......................................................................
....................... $ 3,322,899,190
-----------------
-----------------
Net assets were comprised of:
Common stock, at
par..........................................................................
....... $ 2,022,458
Paid-in capital in excess of
par.....................................................................
2,448,996,627
-----------------
2,451,019,085
Undistributed net investment
income..................................................................
42,159,075
Accumulated net realized gain on
investments.........................................................
101,398,076
Net unrealized appreciation on investments and foreign
currencies.................................... 728,322,954
-----------------
Net assets, December 31,
1995...........................................................................
$ 3,322,899,190
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($1,158,110,658 / 70,464,888 shares of common stock issued and
outstanding)....................... $16.44
Maximum sales charge (5.00% of offering
price).......................................................
.87
-----------------
Maximum offering price to
public.....................................................................
$17.31
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per share
($2,140,894,944 / 130,326,420 shares of common stock issued and
outstanding)...................... $16.43
-----------------
-----------------
Class C:
Net asset value, offering price and redemption price per share
($23,893,588 / 1,454,527 shares of common stock issued and
outstanding)........................... $16.43
-----------------
-----------------
</TABLE>
- --------------------------------------------------------------------------------
- ----- 6 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL EQUITY FUND, INC.
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income December 31, 1995
-----------------
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $752,910).................... $ 55,983,658
Interest................................. 19,687,736
-----------------
Total income.......................... 75,671,394
-----------------
Expenses
Distribution fee--Class A................ 2,270,912
Distribution fee--Class B................ 18,911,600
Distribution fee--Class C................ 121,899
Management fee........................... 13,027,717
Transfer agent's fees and expenses....... 4,180,000
Reports to shareholders.................. 640,000
Franchise taxes.......................... 255,000
Registration fees........................ 242,000
Custodian's fees and expenses............ 200,000
Insurance expense........................ 71,000
Legal fees and expenses.................. 70,000
Audit fee and expenses................... 55,000
Directors' fees.......................... 45,000
Miscellaneous............................ 13,526
-----------------
Total expenses........................ 40,103,654
-----------------
Net investment income....................... 35,567,740
-----------------
Realized and Unrealized
Gain (Loss) on Investment and
Foreign Currency Transactions
Net realized gain on investment
transactions............................. 221,104,455
-----------------
Net change in unrealized appreciation/
depreciation on:
Investments.............................. 482,830,366
Foreign currencies....................... (6,157)
-----------------
482,824,209
-----------------
Net gain on investments and foreign
currencies............................... 703,928,664
-----------------
Net Increase in Net Assets
Resulting from Operations................... $ 739,496,404
-----------------
-----------------
</TABLE>
PRUDENTIAL EQUITY FUND, INC.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended December 31,
<S> <C> <C>
in Net Assets 1995 1994
Operations
Net investment income..... $ 35,567,740 $ 20,683,314
Net realized gain on
investments............ 221,104,455 81,494,071
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currency
transactions........... 482,824,209 (68,377,840)
--------------- ---------------
Net increase in net assets
resulting from
operations............. 739,496,404 33,799,545
--------------- ---------------
Net equalization
debit/credit.............. (4,049,462) 6,402,186
--------------- ---------------
Dividends and distributions (Note 1)
Dividends from net
investment income
Class A................ (17,125,686) (4,339,236)
Class B................ (19,755,318) (16,849,152)
Class C................ (167,436) (14,701)
--------------- ---------------
(37,048,440) (21,203,089)
--------------- ---------------
Distributions from net
realized capital gains
Class A................ (43,407,909) (12,591,770)
Class B................ (84,861,913) (91,043,748)
Class C................ (795,345) (95,226)
--------------- ---------------
(129,065,167) (103,730,744)
--------------- ---------------
Fund share transactions (net
of share conversions)
(Note 6)
Proceeds from shares
sold................... 2,331,421,579 1,454,763,135
Net asset value of shares
issued in reinvestment
of dividends and
distributions.......... 156,970,117 117,059,026
Cost of shares
reacquired............. (1,984,977,517) (1,264,107,170)
--------------- ---------------
Net increase in net assets
from
Fund share
transactions........... 503,414,179 307,714,991
--------------- ---------------
Total increase............... 1,072,747,514 222,982,889
Net Assets
Beginning of year............ 2,250,151,676 2,027,168,787
--------------- ---------------
End of year.................. $ 3,322,899,190 $ 2,250,151,676
--------------- ---------------
--------------- ---------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7 -----
<PAGE>
<PAGE>
Notes to Financial Statements 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: 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
- --------------------------------------------------------------------------------
- ----- 8
<PAGE>
<PAGE>
Notes to Financial Statements PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------------------------------------
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. Prudential Securities Incorporated (``PSI'') is
distributor of the Class B and Class C 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. Effective January 2, 1996, 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.
Pursuant to the Class A, B and C Plans, the Fund compensates PSI, and PMFD for
the year ended December 31, 1995 with respect to Class A shares, 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 Plan were .25 of 1% of the average daily net
assets of Class A shares and 1% of the average daily net assets under the Class
B and C Plans of both the Class B and Class C shares, respectively, for the year
ended December 31, 1995.
PMFD has advised the Fund that it has received approximately $2,251,000 in
front-end sales charges resulting from sales of Class A shares during the year
ended December 31, 1995. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salespersons.
PSI advised the Fund that for the year ended December 31, 1995, it received
approximately $3,461,900 and $8,400 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 year ended December 31,
1995, the Fund incurred fees of approximately $3,427,000 for the services of
PMFS. As of December 31, 1995, approximately $312,000 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 year ended December 31, 1995, PSI earned $82,445 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 year ended December 31, 1995 aggregated $443,235,852 and $533,026,204,
respectively.
At December 31, 1995, the Fund had an outstanding forward currency contract to
purchase foreign currency as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Purchase Contracts Payable Value Depreciaton
- ------------------------------ --------------- ------------ --------------
<S> <C> <C> <C>
Canadian Dollars
expiring 11/15/96 $ 1,474,191 $ 1,468,034 $ (6,157)
</TABLE>
The federal income tax basis of the Fund's investments at December 31, 1995 was
substantially the same as for financial reporting purposes and, accordingly, net
unrealized appreciation for federal income tax purposes was $728,329,111 (gross
unrealized appreciation--$815,973,531; gross unrealized
depreciation--$87,644,420).
- --------------------------------------------------------------------------------
9 -----
<PAGE>
<PAGE>
Notes to Financial Statements PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------------------------------------
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 December 31, 1995, the
Fund has a 55.52% undivided interest in the joint account. The undivided
interest for the Fund represents $642,246,000 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., 5.80%, in the principal amount of $262,000,000,
repurchase price $262,168,842, due 1/2/96. The value of the collateral including
accrued interest was $267,947,172.
BT Securities Corp., 5.75%, in the principal amount of $61,765,000, repurchase
price $61,804,460, due 1/2/96. The value of the collateral including accrued
interest was $63,059,883.
Goldman, Sachs & Co., 5.90%, in the principal amount of $365,000,000, repurchase
price $365,239,277, due 1/2/96. The value of the collateral including accrued
interest was $372,300,053.
Morgan Stanley & Co. Inc., 5.89%, in the principal amount of $103,000,000,
repurchase price $103,067,406, due 1/2/96. The value of the collateral including
accrued interest was $105,192,608.
Smith Barney, Inc., 5.83%, in the principal amount of $365,000,000, repurchase
price $365,236,438, due 1/2/96. The value of the collateral including accrued
interest was $372,300,416.
- ------------------------------------------------------------
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. 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.
There are 750 million shares of common stock, $.01 par value per share, divided
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>
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
---------------- ---------------
---------------- ---------------
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
---------------- ---------------
---------------- ---------------
<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)
---------------- ---------------
---------------- ---------------
</TABLE>
- --------------------------------------------------------------------------------
- ----- 10
<PAGE>
<PAGE>
Notes to Financial Statements PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Shares Amount
---------------- ---------------
<S> <C> <C>
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
---------------- ---------------
---------------- ---------------
<CAPTION>
Class C
<S> <C> <C>
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
---------------- ---------------
---------------- ---------------
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.
- --------------------------------------------------------------------------------
11 -----
<PAGE>
Financial Highlights PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
A
- -------------------------------------------------------------
Year Ended
December 31,
- -------------------------------------------------------------
1995 1994 1993
1992 1991
---------- --------
- -------- -------- -------
<S> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........ $ 13.24 $ 13.80 $
12.07 $ 11.39 $ 9.84
---------- --------
- -------- -------- -------
Income from investment operations
Net investment income..................... .27 .22
.23 .24 .27
Net realized and unrealized gain on
investments and foreign currencies..... 3.88 .09
2.42 1.30 2.09
---------- --------
- -------- -------- -------
Total from investment operations....... 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.................................. (.68) (.65)
(.70) (.63) (.57)
---------- --------
- -------- -------- -------
Total distributions.................... (.95) (.87)
(.92) (.86) (.81)
---------- --------
- -------- -------- -------
Net asset value, end of year.............. $ 16.44 $ 13.24 $
13.80 $ 12.07 $ 11.39
---------- --------
- -------- -------- -------
---------- --------
- -------- -------- -------
TOTAL RETURN(a):.......................... 31.58% 2.38%
22.14% 13.65% 24.55%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)............. $1,158,111 $276,412
$232,535 $136,834 $82,845
Average net assets (000).................. $ 908,365 $254,596
$190,778 $111,489 $57,845
Ratios to average net assets:
Expenses, including distribution
fees................................ .91% 1.00%
.91% .94% .97%
Expenses, excluding distribution
fees................................ .66% .75%
.71% .74% .77%
Net investment income.................. 1.82% 1.62%
1.71% 1.91% 2.36%
For Class A, B and C shares:
Portfolio turnover..................... 18% 12%
21% 22% 19%
Average commission rate paid per
share............................... $.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.
- --------------------------------------------------------------------------------
- ----- 12 See Notes to Financial Statements.
<PAGE>
Financial Highlights PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
B Class C
- --------------------------------------------------------------------
- ------------
Year Ended
December 31, Year Ended
- --------------------------------------------------------------------
December 31,
1995 1994
1993 1992 1991 1995
---------- ----------
- ---------- ---------- -------- ------------
<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 $ 13.24
---------- ----------
- ---------- ---------- -------- --------
Income from investment operations
Net investment income..................... .16 .12
.12 .14 .18 .16
Net realized and unrealized gain (loss) on
investments and foreign currencies..... 3.87 .09
2.42 1.30 2.09 3.87
---------- ----------
- ---------- ---------- -------- --------
Total from investment operations....... 4.03 .21
2.54 1.44 2.27 4.03
---------- ----------
- ---------- ---------- -------- --------
Less distributions
Dividends from net investment income...... (.16) (.12)
(.12) (.13) (.15) (.16)
Distributions from net realized capital
gains.................................. (.68) (.65)
(.70) (.63) (.57) (.68)
---------- ----------
- ---------- ---------- -------- --------
Total distributions.................... (.84) (.77)
(.82) (.76) (.72) (.84)
---------- ----------
- ---------- ---------- -------- --------
Net asset value, end of period............ $ 16.43 $ 13.24 $
13.80 $ 12.08 $ 11.40 $ 16.43
---------- ----------
- ---------- ---------- -------- --------
---------- ----------
- ---------- ---------- -------- --------
TOTAL RETURN(a):.......................... 30.62% 1.60%
21.13% 12.72% 23.55% 30.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $2,140,895 $1,970,580
$1,794,634 $1,203,740 $904,382 $ 23,894
Average net assets (000).................. $1,891,160 $1,901,972
$1,522,992 $1,042,028 $757,485 $ 12,190
Ratios to average net assets:
Expenses, including distribution
fees................................ 1.66% 1.75%
1.71% 1.74% 1.77% 1.66%
Expenses, excluding distribution
fees................................ .66% .75%
.71% .74% .77% .66%
Net investment income.................. .99% .87%
.91% 1.11% 1.56% 1.03%
<CAPTION>
<S> <C>
August 1,
1994(c)
through
December 31,
1994
------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $14.02
-----
Income from investment operations
Net investment income..................... .09
Net realized and unrealized gain (loss) on
investments and foreign currencies..... (.10)
-----
Total from investment operations....... (.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............ $13.24
-----
-----
TOTAL RETURN(a):.......................... .01%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $3,160
Average net assets (000).................. $1,847
Ratios to average net assets:
Expenses, including distribution
fees................................ 1.83%(b)
Expenses, excluding distribution
fees................................ .83%(b)
Net investment income.................. .90%(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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13 -----
<PAGE>
Report of Independent Accountants PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Prudential Equity Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential Equity Fund, Inc. (the
``Fund'') at December 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as ``financial
statements'') are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1995 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 23, 1996
Tax Information PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days of the
Fund's fiscal year end (December 31, 1995) as to the federal tax status of
dividends paid by the Fund during such fiscal year. Accordingly, we are advising
you that in 1995 the Fund paid distributions to Class A shares totalling $0.9475
per share, comprised of $0.27 per share of net investment income which are
taxable as ordinary income and $.6775 per share of net long-term capital gains.
The Fund paid distributions to Class B and C shares totalling $0.8375 per share,
comprised of $.0.16 per share of net investment income which are taxable as
ordinary income and $.6775 per share of net long-term capital gains. Further,
we
wish to advise you that 59% of the ordinary income dividends paid in 1995
qualified for the corporate dividends received deduction available to corporate
taxpayers.
- --------------------------------------------------------------------------------
- ----- 14
<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>
Getting
The Most
From Your
Prudential
Mutual
Fund
Change Your Mind.
You can exchange your shares in most Prudential Mutual Funds for
shares in most other Prudential Mutual Funds, without charges. This
may be most helpful if your investment needs change.
Reinvest Dividends Free Of Charge.
Reinvest your dividends and/or capital gains distributions automatically --
without charge.
Invest For Retirement.There is no minimum investment for an IRA. Plus, you
defer taxes on your investment earnings by investing in an IRA.
If you'd like, you can contribute up to $2,000 a year in an IRA. If you are
married, you and your spouse (if not working outside the home) can contribute
up to $2,250 a year. (Withdrawals are taxed as ordinary income and may be
subject to a 10% penalty prior to age 59 1/2.)
Change Your Job.
You can take your pension with you. Use a rollover IRA to manage your
company-sponsored retirement plan while retaining the special tax-deferred
advantages.
Invest In Your Children.
There's no fee to open a custodial account for a child's education or other
needs.
Take Income.
Would you like to receive monthly or quarterly checks in any amount from
your fund account? Just let us know. We'll take care of it. Of course, there
are minimum amounts. And shares redeemed may be subject to tax, and Class B
and C shares may be subject to contingent deferred sales charges. We'll
gladly answer your questions.
Keep Informed.
We want to keep you up-to-date. Of course, you receive account activity
statements every quarter. But you also receive annual and semi-annual fund
reports, as well as other important updates on events that affect your
investments, including tax information.
This material is only authorized for distribution when preceded or accompanied
by a current prospectus. Read the prospectus carefully before you invest or
send money.<PAGE>
<PAGE>
- --Prudential Equity Fund ==S & P 500 Index
The Prudential Equity Fund, Inc. and the S & P 500 Index:
Comparing a $10,000 Investment.
Average Annual
Total Returns
- -----------------------
With Sales Load
14.6% Since Inception
17.2% for 5 Years
25.0% for 1 Year
Class A
(GRAPH)
Without Sales Load
15.6% Since Inception
18.5% for 5 Years
31.6% for 1 Year
Average Annual
Total Returns
- ------------------
With Sales Load
16.6% Since Inception
14.1% for 10 Years
17.4% for 5 Years
25.6% for 1 Year
Class B
(GRAPH)
Without Sales Load
16.6% Since Inception
14.1% for 10 Years
17.5% for 5 Years
30.6% for 1 Year
Average Annual
Total Returns
- -------------------
With Sales Load
20.9% Since Inception
29.6% for 1 Year
Class C
(GRAPH)
Without Sales Load
20.9% Since Inception
30.6% for 1 Year
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so an investor's shares, when redeemed, will
be worth more or less than their original cost. The charts on the right
are designed to give you an idea of how much the Fund's returns can
fluctuate from year to year by measuring the best and worst years in
terms of total annual return since inception of each share class.
These graphs are furnished to you in accordance with SEC regulations. They
compare a $10,000 investment in the Prudential Equity Fund (Class A,
Class B and Class C) with a similar investment in the S&P 500 Index by
portraying the initial account values at the commencement of operations
for Class A and Class C shares, and 10 years for Class B shares, and
subsequent account values at the end of this reporting period (December
31), as measured on a quarterly basis, beginning in 1990 for Class A shares,
1985 for Class B shares and 1994 for Class C shares. For purposes of the
graphs, and unless otherwise indicated, in the accompanying tables it has
been assumed that (a) the maximum applicable front-end sales charge was
deducted from the initial $10,000 investment in Class A shares; (b) the
maximum applicable contingent deferred sales charge was deducted from the
value of the investment in Class B and Class C shares, assuming full
redemption on December 31, 1995; (c) all recurring fees (including
management fees) were deducted; and (d) all dividends and distributions
were reinvested. Class B shares will automatically convert to Class A
shares approximately seven years after purchase. This conversion feature
is not reflected in the graph.
The S&P 500 is a capital-weighted index, representing the aggregate market
value of the common equity of 500 stocks primarily traded on the New York
Stock Exchange. The S&P 500 is an unmanaged index and includes the
reinvestment of all dividends, but does not reflect the payment of
transaction costs and advisory fees associated with an investment in
the Fund. The securities in the S&P 500 may differ substantially from
the securities in the Fund. The S&P 500 is not the only index that may
be used to characterize performance of stock funds and other indexes may
portray different comparative performance.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
Internet Address:
http:\\www.prudential.com
(LOGO)
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.
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
744316100 MF101E
744316209 Cat. #4331473
744316308
