PRUDENTIAL EQUITY FUND, N-30D, 1997-09-09

PRUDENTIAL EQUITY FUND
N-30D, 1997-09-09

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(ICON)

Prudential
Equity
Fund, Inc.

SEMI
ANNUAL
REPORT

June 30, 1997

<PAGE>

Prudential Equity Fund, Inc.

Performance At A Glance.
With the exception of a brief downturn in late March and early April,
large-company U.S. stocks extended their long climb through the first half of
1997. General equity funds trailed the market and the Prudential Equity Fund
trailed the average growth fund tracked by Lipper Analytical Services. The
Fund held considerably more cash than its peer group, reducing its return.
Still, our returns over one and five years are much higher than the historical
market averages. We also were competitive with the average equity fund, as
measured by Lipper, over these time periods.

Cumulative Total Returns1 As of 6/30/97
<TABLE>
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A 13.0% 24.5% 134.1% N/A 214.6%
Class B 12.5 23.5 125.4 242.7% 997.2
Class C 12.5 23.5 N/A N/A 72.1
Class Z 13.1 24.8 N/A N/A 28.5
Lipper Growth
Fund Avg3 14.3 24.0 121.6 243.8 ***
</TABLE>

Average Annual Total Returns1 As of 6/30/97
<TABLE>
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 18.3% 17.3% N/A 15.9%
Class B 18.5 17.6 13.1% 17.0
Class C 22.5 N/A N/A 20.5
Class Z 24.8 N/A N/A 20.7
</TABLE>

Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.

1Source: Prudential Investments Fund Management and Lipper Analytical Services.
The cumulative total returns do not take into account sales charges. The
average annual returns do take into account applicable sales charges. The Fund
charges a maximum front-end sales load of 5% for Class A shares and a declining
contingent deferred sales charge (CDSC) of 5%, 4%, 3%, 2%, 1% and 1% for six
years, for Class B shares. Class C shares have a 1% CDSC for one year. Class B
shares will automatically convert to Class A shares on a quarterly basis,
approximately seven years after purchase. Class Z shares are not subject to a
sales charge or distribution fee.

2Inception dates: Class A, 1/22/90; Class B, 3/15/82; Class C, 8/1/94; Class
Z: 3/1/96.

3Lipper returns are 840 funds for six months; 758 funds for one year; 280
funds for five years, and 174 funds for 10 years.

*** Lipper Since Inception returns are: Class A, 199.4%; Class B, 904.9%;
Class C, 81.6% and Class Z, 30.6% for all funds in each Lipper share class.

How Investments Compared.
(As of 6/30/97)
(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
12-month total returns for several Lipper mutual fund categories to show you
that reaching for higher returns 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
(PHOTO)

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.

Holding Fast.
We are disciplined value investors. Value investors look for companies that
sell at large discounts from the average company, either because their
strengths aren't appreciated or because they are in a temporary earnings
depression. Research shows that historically it has been wise to stick to an
investment style: Disciplined investors do better in the long run, whatever
their style. These are times that try the discipline of value investors, but
we are holding fast.

Strategy Session.
- ------------------------------------------------------------------------------
Currently, stock prices are very high, in general, and these prices have been
sustained by first-quarter earnings reports up about 18%, on average, over a
year earlier. Since mid-1994, stock prices have risen substantially faster
than their underlying earnings. As a result, the earnings yield on stocks
(earnings divided by price) has declined to below the yield on a 30-year
Treasury bond. Rarely have stocks been this rich by price compared to bonds.
To make matters worse, "cheap stocks" are currently not particularly
inexpensive compared to the average stock. If current earnings projections
begin to look unsustainable, stocks will appear even more expensive. Similarly,
if interest rates should rise, the comparison will also look less favorable to
stocks.

Portfolio Breakdown.
Expressed as a percentage of
total investments as of 6/30/97.
(CHART)

Our Value Discipline.
Value investors look for companies that sell at large discounts from the
average company. We look for companies that sell at low price/earnings ratios,
price/book value ratios, and price/cash flow ratios. However, the long bull
market has pushed up prices of almost all companies with reasonable earnings
prospects, leaving little for the disciplined value manager to purchase. Our
time-tested investment discipline tells us not to buy when prices are high.
The likelihood of above-average returns is limited and the risk of a price
decline is comparatively high. Historically, there have been alternating
periods of time that favored value styles and growth styles. We're ready to
buy as soon as the cycle changes and some patches of inexpensively priced
companies appear.

In 1994, when we had a similar cash supply, stock prices fell, the cost of
buying a dollar of earnings reached a cyclical low, and we scooped up Loews,
Travelers and Dean Witter at bargain prices. They are bolstering our current
returns. We are not forecasting when a similar market will occur, but we do
believe that the time to buy is when the price is right. We are prepared to
move then.

<PAGE>

What Went Well.
- ---------------------------------------------------------
Banking On
Financial Services.
Despite the handicaps of our cash position and an investing environment hostile
to our value approach, we delivered a good return for the half year. We did it
by holding almost 27% of total investments in the finance sector, and financial
service firms were the second-best performing sector of the market. Within the
sector, our stock selection also improved returns. For example, Chubb, Morgan
Stanley Dean Witter, and Travelers Group were among our largest holdings, with
returns for the past six months of 26%, 31%, and 40%, respectively.

And Not So Well.
- ---------------------------------------------------------
A Hostile Investment Climate.
We trailed not only the large-company U.S. stock market, but also the average
of broad-based equity funds, although we were much closer than we were to the
index. Portfolio managers in general didn't do very well in the first half of
1997. Large-capitalization growth stocks such as Microsoft, Intel, Coca-Cola,
Cisco Systems, and General Electric have been leading the market. As the
economic cycle has aged, high earnings growth has become scarce and investors
have concentrated on a relatively limited universe of companies. As a result,
these companies have been bid to very high valuations, that have not been seen
since the two-tier market of the 1970s. This environment doesn't favor
selective buyers generally, and it was particularly harsh for value investors.

Caution Costs.
Although a 13% return for a half year is a solid performance on a historical
basis, we trailed the S&P 500 by a substantial margin. Our underperformance was
the result of our large cash holdings. We didn't keep up with the market
because prices for companies have reached historical highs even compared with
their current excellent earnings. In the first quarter, we saw that the market
can change quickly on the mere suspicion that prospects may become less rosy:
the market dropped almost 10% on a modest interest rate rise. We didn't take
the risk of a market reaction should earnings growth falter and it is reflected
in our performance during the reporting period.

Five Largest
Holdings.
2.7% Loews
Diversified Consumer
Products

2.6% Chubb Corp.
Insurance

2.3% Societe Nationale
Elf Acquitaine, ADR
Oil & Gas Exploration

2.3% Morgan Stanley
Dean Witter
Banks & Financial Svcs.

2.1% Travelers Group Inc.
Insurance

Expressed as a percentage of total investments as of 6/30/97.

Looking Ahead.
- ----------------------------------------------------------------------------
Bull markets begin when only problems are visible (and everyone who will sell
has sold already) and end when there are nothing but opportunities in sight.
When the last investor has become optimistic and fully invested, there is no
else left to drive the market. The stock market has risen several fold over
the past seven years. But historically, prices have always fallen from
exceptionally high levels to more normal ones. By any objective valuation
measure, stocks are selling for considerably more than a level history
suggests is a reasonable expectation. We are ready with the cash when
opportunities present themselves.

1
<PAGE>

President's Letter August 4, 1997
- ------------------------------------------------------------------------
(PHOTO)

Dear Shareholder:
With the midpoint of 1997 behind us, I'm pleased to report that the recent
news from the financial markets has been decidedly upbeat. The Dow Jones
Industrial Average has gained more than 20% through the end of June, while
lower long-term interest rates have made bonds an attractive investment.

This stands in contrast to April when the Dow fell 10% from a record high on
fears of higher interest rates and surging inflation. Interest rates have
since fallen as the economy slowed and the Dow has reached several new highs.

The market swings we've seen this year illustrate the importance of "staying
the course" to your financial goal. We realize that maintaining investment
discipline when faced with market uncertainty isn't easy. Here are some
thoughts that may help:

- - Keep Your Expectations Realistic. The best investors know that financial
markets rise and fall -- and so too, will the value of their investments.
Over time, however, stocks have been shown to produce very attractive
returns that were well ahead of inflation. And where income is the primary
goal, bonds have also provided attractive returns.

- - Remember Your Time Horizon. If your investment goals are long term (several
years or more), so should your time horizon. During this period, it's not
unusual for stocks and bonds to experience several periods of market
uncertainty.

- - We're On Your Side. Your Prudential Securities Financial Advisor or Pruco
Securities Registered Representative can help you understand what's happening
in the financial markets. They can assist you in making informed decisions
based upon a thorough knowledge of your financial needs and long-term goals.
Call him or her today.

Thank you for your continued confidence in Prudential mutual funds. We'll do
everything we can to keep you informed and to earn your trust.

Sincerely,

Brian M. Storms
President, Prudential Mutual Funds & Annuities

<PAGE>

Portfolio of Investments as of PRUDENTIAL EQUITY
June 30, 1997 (Unaudited) FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--75.0%
COMMON STOCKS--75.0%
- ------------------------------------------------------------
Automobiles & Trucks--2.7%
2,497,900 Chrysler Corp. $ 81,962,344
600,000 General Motors Corp. 33,412,500
404,800 Navistar International Corp. (a) 6,982,800
248,800 PACCAR Inc. 11,553,650
--------------
133,911,294
- ------------------------------------------------------------
Banks & Financial Services--12.3%
1,000,000 American Express Co. 74,500,000
1,100,000 Bank of New York Co., Inc. 47,850,000
1,000,000 BankAmerica Corp. 64,562,500
475,700 Chase Manhattan Corp. 46,172,631
265,500 First America Bank Corp. 12,146,625
654,000 Great Western Financial Corp. 35,152,500
800,000 Lehman Brothers Holdings Inc. 32,400,000
585,010 Mellon Bank Corp. 26,398,576
256,500 Mercantile Bankshares Corp. 10,260,000
345,600 Morgan (J.P.) & Co., Inc. 36,072,000
2,600,000 Morgan Stanley, Dean Witter, and
Discover & Co. 111,962,500
700,000 NationsBank Corp. 45,150,000
225,000 Republic New York Corp. 24,187,500
600,000 Salomon, Inc. 33,375,000
--------------
600,189,832
- ------------------------------------------------------------
Chemicals--1.6%
711,000 Boc Group PLC 25,240,500
578,000 Eastman Chemical Co. (a) 36,703,000
706,900 Wellman Inc. 12,282,388
100,000 Witco Corp. 3,793,750
--------------
78,019,638
- ------------------------------------------------------------
Computer Hardware--4.0%
3,500,000 Amdahl Corp.(a) 30,625,000
2,750,000 Digital Equipment Corp. (a) 97,453,125
412,900 Gerber Scientific, Inc. 8,154,775
600,000 International Business Machines
Corp. 54,112,500
93,750 NCR Corp. (New)(a) 2,789,063
--------------
193,134,463
Construction & Housing--2.1%
550,000 Centex Corp. $ 22,343,750
900,000 American Standard Co., Inc. (a) 40,275,000
625,400 TRW Inc. 35,530,538
--------------
98,149,288
- ------------------------------------------------------------
Diversfied Consumer Products--5.4%
750,000 Gibson Greetings Inc. 16,875,000
2,500,000 Guinness PLC 24,446,096
1,300,000 Loews Corp. 130,162,500
2,800,000 RJR Nabisco Holdings Corp. 92,400,000
--------------
263,883,596
- ------------------------------------------------------------
Electrical Power--1.6%
170,000 American Electric Power Company,
Inc. 7,140,000
570,000 General Public Utilities Corp. 20,448,750
1,284,600 Long Island Lighting Co. 29,545,800
872,900 Unicom Corp. 19,422,025
--------------
76,556,575
- ------------------------------------------------------------
Electronics--0.5%
300,000 Harris Corp. 25,200,000
- ------------------------------------------------------------
Energy Equipment & Services--0.4%
1,300,000 NorAm Energy Corp. 19,825,000
- ------------------------------------------------------------
Forest Products--8.8%
800,000 Georgia-Pacific Corp. 68,300,000
1,200,000 International Paper Co. 58,275,000
550,000 James River Corp. of Virginia. $ 20,350,000
500,000 Kimberly-Clark Corp. 24,875,000
750,000 Mead Corp. 46,687,500
752,500 Rayonier Inc. 31,652,031
750,000 Temple-Inland Inc. 40,500,000
1,200,000 Weyerhaeuser Co. 62,400,000
1,100,000 Willamette Industries, Inc. 77,000,000
--------------
430,039,531
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3

<PAGE>

Portfolio of Investments as of PRUDENTIAL EQUITY
June 30, 1997 (Unaudited) FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Healthcare--3.8%
1,665,040 Foundation Health Systems, Inc.(a) 50,471,525
2,937,874 Tenet Healthcare Corp. (a) 86,850,900
1,073,100 Wellpoint Health Networks Inc. (a) 49,228,463
--------------
186,550,888
- ------------------------------------------------------------
Insurance--11.7%
552,800 American Financial Group Inc. 23,459,450
800,000 American General Corp. 38,200,000
1,891,600 Chubb Corp. 126,500,750
700,000 Citizens Corp. 19,337,500
1,700,242 Old Republic International Corp. 51,538,585
1,400,000 SAFECO Corp. 65,362,500
716,900 St. Paul Companies, Inc. 54,663,625
1,500,000 The Equitable Companies, Inc. 49,875,000
1,600,000 Travelers Corp. 100,900,000
1,461,900 Western National Corp. 39,197,194
--------------
569,034,604
- ------------------------------------------------------------
Metals-Non Ferrous--1.6%
600,000 Aluminum Company of America 45,225,000
122,750 AMAX Gold Inc. (a) 751,844
1,293,000 Cyprus Minerals Co. 31,678,500
--------------
77,655,344
- ------------------------------------------------------------
Oil & Gas Exploration/Production--5.9%
300,000 Amerada Hess Corp. 16,668,750
700,000 Atlantic Richfield Co. 49,350,000
1,100,000 Occidental Petroleum Corp. 27,568,750
1,523,900 Oryx Energy Co. (a) $ 32,192,387
2,098,596 Societe Nationale Elf Aquitaine,
ADR
(France) 114,242,320
738,365 Total SA, ADR (France) 37,379,728
504,400 Union Texas Petroleum Holdings,
Inc. 10,560,875
--------------
287,962,810
Restaurants--1.3%
7,081,700 Darden Restaurants Inc. 64,177,906
- ------------------------------------------------------------
Retail--7.1%
359,100 Dayton-Hudson Corp. 19,099,631
2,500,000 Dillards Department Stores, Inc. 86,562,500
6,000,000 K-Mart Corp. (a) 73,500,000
500,000 Petrie Stores Corp. (a) 1,562,500
1,292,300 Tandy Corp. 72,368,800
1,700,000 Toys 'R' Us Inc. (a) 59,500,000
1,100,000 Waban, Inc. (a) 35,406,250
--------------
347,999,681
- ------------------------------------------------------------
Steel--0.5%
500,000 Bethlehem Steel Corp. (a) 5,218,750
1,408,300 Birmingham Steel Corp. 21,828,650
--------------
27,047,400
- ------------------------------------------------------------
Telecommunications--3.3%
1,181,733 360 Communications Co. (a) 20,237,178
1,500,000 AT&T Corp. 52,593,750
1,740,000 Loral Space & Communications (a) 26,100,000
700,000 Telefonica de Espana, S.A., ADR
(Spain) 60,375,000
--------------
159,305,928
- ------------------------------------------------------------
Transportation--0.4%
1,000,000 OMI Corp. (a) 9,562,500
550,000 Overseas Shipholding Group, Inc. 10,793,750
--------------
20,356,250
--------------
Total long-term investments
(cost $2,354,582,302) 3,659,000,028
--------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4

<PAGE>

Portfolio of Investments as of PRUDENTIAL EQUITY
June 30, 1997 (Unaudited) FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
SHORT-TERM INVESTMENTS--25.1%
- ------------------------------------------------------------
Commercial Paper--17.3%
$ 37,004 American Express Credit Corp.
6.00%, 7/1/97 $ 37,004,000
American Honda Finance Corp.
4,000 5.67%, 7/23/97 3,986,140
7,000 5.65%, 7/28/97 6,970,337
24,000 5.63%, 8/25/97 23,790,126
Aristar, Inc.
2,000 5.67%, 7/14/97 1,995,905
1,000 5.70%, 7/24/97 996,358
Associates Corp. of North America
9,000 5.55%, 7/3/97 8,997,225
26,000 6.19%, 7/1/97 26,000,000
Bank of Montreal
48,374 6.375%, 7/1/97 48,374,000
Banque Nationale de Paris
27,505 6.50%, 7/1/97 27,505,000
Bear Stearns Co., Inc.
6,000 5.57%, 7/7/97 5,994,430
Berliner Handels-Und Frankfurter
Bank
11,000 5.72%, 7/21/97 11,000,000
Canadian Imperial Bank of Commerce
32,374 6.25%, 7/1/97 32,374,000
5.60%, 8/25/97 16,000,000
Commerzbank U.S. Finance, Inc.
46,000 5.58%, 7/1/97 46,000,839
Countrywide Home Loan, Inc.
11,000 5.55%, 7/2/97 10,998,304
6,000 5.60%, 8/7/97 5,965,467
Creditanstalt Finance, Inc.
5,000 5.55%, 7/3/97 4,998,458
Deutsche Bank
48,374 6.25%, 7/1/97 48,374,000
Engelhard Corp.
16,000 6.35%, 7/1/97 16,000,000
Finova Capital Corp.
11,000 5.60%, 7/7/97 10,989,733
First National Bank of Chicago
47,374 6.25%, 7/1/97 47,374,000
Ford Motor Credit Co.
$ 43,000 5.55%, 7/9/97 $ 42,946,967
General Motors Acceptance Corp.
46,000 5.59%, 7/7/97 45,957,143
GTE Funding, Inc.
8,800 5.60%, 7/23/97 8,769,884
Hertz Corp.
3,700 5.55%, 7/8/97 3,696,007
Indosuez North America Inc.(a)
22,000 5.63%, 8/11/97 22,000,825
John Deere Capital Corp.
3,000 5.54%, 7/9/97 2,996,307
Lehman Brothers Holdings, Inc.
13,000 6.40%, 7/1/97 13,000,000
15,000 5.75%, 7/2/97 14,997,604
Mitsubishi International Corp.
36,000 5.65%, 7/9/97 35,954,800
Nynex Corp.
2,500 5.55%, 7/7/97 2,497,688
PHH Corp.
5,760 5.67%, 7/7/97 5,754,557
Preferred Receivables Funding
Corp.
1,000 5.55%, 7/10/97 998,613
Republic National Bank of New York
48,374 6.25%, 7/1/97 48,374,000
Sears Roebuck Acceptance Corp.
11,000 6.20%, 7/1/97 11,000,000
Smith Barney, Inc.
8,000 5.55%, 7/7/97 7,992,600
Societe Generale North America,
Inc.
48,374 6.375%, 7/1/97 48,374,000
Svenska Handelsbanken
12,000 5.66%, 7/14/97 12,000,385
Xerox Credit Corp.
24,000 5.60%, 7/11/97 23,962,667
General Electric Capital Corp.
48,374 6.30%, 7/1/97 48,374,000
--------------
Total commercial paper
(cost $841,339,994) 841,336,369
--------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5

<PAGE>

<TABLE>
<S> <C>
Commercial Banks 8.5%
Security Brokers & Dealers 6.5
Business Credits 3.6
Federal Credit Agencies 1.5
Personal Credit Institutions 1.5
Finance Lessors .9
Commodity Trading Firms .7
Government Coupon Issues .7
Mortgage Bankers .4
Refining .3
Auto Rent & Lease .2
Telecommunications .2
Asset Backed Securities .1
----
25.1
----
----
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6

<PAGE>
Statement of Assets and Liabilities (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets June 30, 1997
<S> <C>
Investments, at value (cost $3,576,553,302)................................................................. $4,880,942,467
Cash........................................................................................................ 1,059,068
Dividends and interest receivable........................................................................... 14,186,561
Receivable for Fund shares sold............................................................................. 9,629,190
Receivable for investments sold............................................................................. 1,164,879
Deferred expenses and other assets.......................................................................... 133,123
--------------
Total assets............................................................................................. 4,907,115,288
--------------
Liabilities
Payable for Fund shares reacquired.......................................................................... 24,583,873
Distribution fee payable.................................................................................... 2,805,450
Management fee payable...................................................................................... 1,824,721
Payable for investments purchased........................................................................... 1,691,856
Accrued expenses and other liabilities...................................................................... 803,945
Deferred directors' fees.................................................................................... 30,392
--------------
Total liabilities........................................................................................ 31,740,237
--------------
Net Assets.................................................................................................. $4,875,375,051
--------------
--------------
Net assets were comprised of:
Common stock, at par..................................................................................... $ 2,543,056
Paid-in capital in excess of par......................................................................... 3,391,839,038
--------------
3,394,382,094
Undistributed net investment income...................................................................... 809,131
Accumulated net realized gain on investments............................................................. 175,794,499
Net unrealized appreciation on investments............................................................... 1,304,389,327
--------------
Net assets, June 30, 1997................................................................................... $4,875,375,051
--------------
--------------
Class A:
Net asset value and redemption price per share
($1,752,806,419 / 91,361,966 shares of common stock issued and outstanding)........................... $19.19
Maximum sales charge (5.00% of offering price)........................................................... 1.01
--------------
Maximum offering price to public......................................................................... $20.20
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($2,901,141,887 / 151,401,839 shares of common stock issued and outstanding).......................... $19.16
--------------
--------------
Class C:
Net asset value, offering price and redemption price per share
($58,896,034 / 3,073,543 shares of common stock issued and outstanding)............................... $19.16
--------------
--------------
Class Z:
Net asset value, offerng price and redemption price per share
($162,530,711 / 8,468,282 shares of common stock issued and outstanding).............................. $19.19
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7

<PAGE>

PRUDENTIAL EQUITY FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income June 30, 1997
<S> <C>
Income
Dividends (net of foreign withholding taxes
of $1,011,596).......................... $ 37,421,528
Interest................................... 29,547,763
-------------
Total income............................ 66,969,291
-------------
Expenses
Distribution fee--Class A.................. 1,906,219
Distribution fee--Class B.................. 13,646,583
Distribution fee--Class C.................. 264,217
Management fee............................. 10,220,282
Transfer agent's fees and expenses......... 2,970,000
Reports to shareholders.................... 545,000
Registration fees.......................... 200,000
Custodian's fees and expenses.............. 95,000
Franchise taxes............................ 92,000
Insurance expense.......................... 45,000
Audit fee and expenses..................... 27,000
Legal fees and expenses.................... 22,000
Directors' fees and expenses............... 22,000
Miscellaneous.............................. 3,673
-------------
Total expenses.......................... 30,058,974
-------------
Net investment income......................... 36,910,317
-------------
Realized and Unrealized
Gain on Investments and
Foreign Currency Transactions
Net realized gain on:
Investment transactions.................... 173,494,906
Foreign currency transactions.............. 41,863
-------------
173,536,769
-------------
Net change in unrealized appreciation on:
Investments................................ 335,068,786
-------------
Net gain on investments....................... 508,605,555
-------------
Net Increase in Net Assets
Resulting from Operations..................... $545,515,872
-------------
-------------
</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 1997 1996
<S> <C> <C>
Operations
Net investment income..... $ 36,910,317 $ 84,423,409
Net realized gain on
investments............ 173,536,769 292,150,223
Net change in unrealized
appreciation of
investments............ 335,068,786 240,997,587
--------------- ---------------
Net increase in net assets
resulting from
operations............. 545,515,872 617,571,219
--------------- ---------------
Dividends and distributions
(Note 1)
Dividends from net
investment income
Class A................ (15,543,933) (33,236,107)
Class B................ (16,439,761) (47,847,982)
Class C................ (330,588) (804,866)
Class Z................ (1,645,125) (3,521,489)
--------------- ---------------
(33,959,407) (85,410,444)
--------------- ---------------
Distributions from net
realized
capital gains
Class A................ (9,687,038) (118,298,003)
Class B................ (17,362,912) (229,567,620)
Class C................ (338,819) (3,810,365)
Class Z................ (1,016,419) (11,209,393)
--------------- ---------------
(28,405,188) (362,885,381)
--------------- ---------------
Fund share transactions (net
of share conversions)
(Note 6)
Proceeds from shares
sold................... 2,210,131,718 3,721,606,540
Net asset value of shares
issued in reinvestment
of dividends and
distributions 59,867,748 429,066,548
Cost of shares
reacquired............. (2,123,949,853) (3,396,673,511)
--------------- ---------------
Net increase in net assets
from Fund share
transactions........... 146,049,613 753,999,577
--------------- ---------------
Total increase............... 629,200,890 923,274,971
Net Assets
Beginning of period.......... 4,246,174,161 3,322,899,190
--------------- ---------------
End of period................ $ 4,875,375,051 $ 4,246,174,161
--------------- ---------------
--------------- ---------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 8

<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. There were no open foreign
currency contracts at June 30, 1997.
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.
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 Investments Fund Management
LLC ('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.
- --------------------------------------------------------------------------------
9

<PAGE>

Notes to Financial Statements (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- -------------------------------------------------------------------------------
The management fee paid PMF is computed daily and payable monthly, at an annual
rate of .50 of 1% of the Fund's average daily net assets up to $500 million,
.475 of 1% of the next $500 million of average daily net assets and .45 of 1% of
the Fund's average daily net assets in excess of $1 billion.
The Fund has a distribution agreement with Prudential Securities Incorporated
('PSI'), which acts as the distributor of the Class A, Class B, Class C and
Class Z shares of the Fund. The Fund compensates 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 for Class A, B and C shares are accrued
daily and payable monthly. No distribution or service fees are paid to PSI as
distributor of the Class Z shares of the Fund.
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, 1997.
PSI has advised the Fund that it has received approximately $1,182,000 in
front-end sales charges resulting from sales of Class A shares during the six
months ended December 31, 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 six months ended June 30, 1997, it received
approximately $2,147,788 and $13,302 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PSI, PMF and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America.
The Fund, along with other affiliated registered investment companies (the
'Funds'), entered into a credit agreement (the 'Agreement') on December 31, 1996
with an unaffiliated lender. The maximum commitment under the Agreement is
$200,000,000. The Agreement expires on December 30, 1997. Interest on any such
borrowings outstanding will be at market rates. The purpose of the Agreement is
to serve as an alternative source of funding for capital share redemptions. The
Fund has not borrowed any amounts pursuant to the Agreement as of June 30, 1997.
The Funds pay a commitment fee at an annual rate of .055 of 1% on the unused
portion of the credit facility. The commitment fee is accrued and paid quarterly
on a pro-rata basis by the Funds.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly-owned subsidiary of PIFM,
serves as the Fund's transfer agent and during the six months ended June 30,
1997, the Fund incurred fees of approximately $2,418,000 for the services of
PMFS. As of June 30, 1997, approximately $417,000 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 June 30, 1997, PSI earned $133,404 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, 1997 aggregated $216,614,277 and $297,099,296,
respectively.
The federal income tax basis of the Fund's investments at June 30, 1997 was
substantially the same as for financial reporting purposes and, accordingly, net
unrealized appreciation for federal income tax purposes was $1,304,389,165
(gross unrealized appreciation--$1,367,192,657; gross unrealized
depreciation--$62,803,492).
- ------------------------------------------------------------
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, 1997, the Fund
has a 39.74% undivided interest in the joint account. The undivided interest for
the Fund represents $270,636,000 in the principal amount. As of such date, each
repurchase agreement in the joint account and the collateral therefor were as
follows:
Dean Witter Reynolds, Inc., 5.90%, in the principal amount of $1000,000,000,
repurchase price $100,016,389, due 7/1/97. The value of the collarteral
including accrued interest is $102,000,893.
Deutsche Bank Securities Corp., 5.95%, in the principal amount of $184,000,000,
repurchase price $184,030,411, due 7/1/97. The value of the collarteral
including accrued interest is $187,680,112.
- --------------------------------------------------------------------------------
10

<PAGE>

Notes to Financial Statements (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- -------------------------------------------------------------------------------
J.P. Morgan Securities, 6.00%, in the principal amount of $170,000,000,
repurchase price $170,028,333, due 7/1/97. The value of the collateral including
accrued interest was $173,400,988.
SBC Warburg, Ltd., 5.95%, in the principal amount of $527,000,000, repurchase
price $227,037,518, due 7/1/97. The value of the collateral including accrued
interest is $232,448,194.
- ------------------------------------------------------------
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 a limited group of investors.
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, 1997:
Shares sold...................... 82,794,325 $ 1,511,924,449
Shares issued in reinvestment of
dividends...................... 1,301,574 24,157,675
Shares reacquired................ (82,931,311) (1,515,115,398)
------------ ---------------
Net decrease in shares
outstanding before
conversions.................... 1,164,588 20,966,726
Shares issued upon conversion
from Class B................... 6,544,073 123,872,537
------------ ---------------
Net decrease in shares
outstanding.................... 7,708,661 $ 144,839,263
------------ ---------------
------------ ---------------
<CAPTION>
Class A Shares Amount
- --------------------------------- ------------ ---------------
<S> <C> <C>
Year ended December 31, 1996:
Shares sold...................... 121,412,060 $ 2,078,689,059
Shares issued in reinvestment of
dividends and distributions.... 8,451,292 144,703,799
Shares reacquired................ (119,988,980) (2,054,486,124)
------------ ---------------
Net increase in shares
outstanding before conversion
from Class B................... 9,874,372 168,906,734
Shares issued upon conversion
from Class B................... 10,235,548 174,694,214
Shares reacquired upon
conversion into Class Z........ (6,921,503) (118,081,252)
------------ ---------------
Net increase in shares
outstanding.................... 13,188,417 $ 225,519,696
------------ ---------------
------------ ---------------
<CAPTION>
Class B
- ---------------------------------
<S> <C> <C>
Six months ended June 30, 1997:
Shares sold...................... 32,921,827 $ 596,565,401
Shares issued in reinvestment of
dividends...................... 1,776,979 32,400,047
Shares reacquired................ (29,155,743) (527,791,969)
------------ ---------------
Net decrease in shares
outstanding before
conversions.................... 5,543,063 101,173,479
Shares reacquired upon conversion
into Class A................... (6,521,655) 123,872,537
------------ ---------------
Net decrease in shares
outstanding.................... 978,592 $ 225,046,016
------------ ---------------
------------ ---------------
Year ended December 31, 1996:
Shares sold...................... 74,658,239 $ 1,272,242,211
Shares issued in reinvestment of
dividends and distributions.... 15,498,339 265,200,473
Shares reacquired................ (57,845,034) (984,240,216)
------------ ---------------
Net increase in shares
outstanding before
conversion..................... 32,311,544 553,202,468
Shares reacquired upon
conversion into Class A........ (10,257,533) (174,694,214)
------------ ---------------
Net increase in shares
outstanding.................... 22,054,011 $ 378,508,254
------------ ---------------
------------ ---------------
</TABLE>
- --------------------------------------------------------------------------------
11

<PAGE>

Notes to Financial Statements (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Shares Amount
- --------------------------------- ------------ ---------------
Six months ended June 30, 1997:
<S> <C> <C>
Shares sold...................... 902,456 $ 16,307,236
Shares issued in reinvestment of
dividends...................... 35,512 648,173
Shares reacquired................ (619,005) (11,238,280)
------------ ---------------
Net decrease in shares
outstanding.................... 318,963 $ 5,717,129
------------ ---------------
------------ ---------------
Year ended December 31, 1996:
Shares sold...................... 1,824,988 $ 31,122,983
Shares issued in reinvestment of
dividends and distributions.... 259,155 4,433,090
Shares reacquired................ (784,090) (13,332,036)
------------ ---------------
Net increase in shares
outstanding.................... 1,300,053 $ 22,224,037
------------ ---------------
------------ ---------------
<CAPTION>
Class Z
- ---------------------------------
<S> <C> <C>
Six months ended June 30, 1997:
Shares sold...................... 4,741,852 $ 85,334,632
Shares issued in reinvestment of
dividends...................... 143,342 2,661,853
Shares reacquired................ (3,878,398) (69,804,206)
------------ ---------------
Net decrease in shares
outstanding.................... 1,006,796 $ 18,192,279
------------ ---------------
------------ ---------------
March 1, 1996(a) through
December 31, 1996:
Shares sold...................... 2,700,145 $ 46,776,821
Shares issued in reinvestment of
dividends and distributions.... 860,658 14,729,186
Shares reacquired................ (3,020,820) (51,839,669)
------------ ---------------
Net increase in shares
outstanding before conversion
from Class A................... 539,983 9,666,338
Shares issued upon conversion
from Class A................... 6,921,503 118,081,252
------------ ---------------
Net increase in shares
outstanding.................... 7,461,486 $ 127,747,590
------------ ---------------
------------ ---------------
</TABLE>
- ---------------
(a) Commencement of offering of Class Z shares.
- --------------------------------------------------------------------------------
12

<PAGE>

Financial Highlights (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------------
Six Months
Ended Year Ended December 31,
June 30, ---------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year.................. $ 17.26 $ 16.44 $ 13.24 $ 13.80 $ 12.07
---------- ---------- ---------- -------- --------
Income from investment operations
Net investment income............................... .20 .35 .27 .22 .23
Net realized and unrealized gain on investments and
foreign currencies............................... 2.03 2.52 3.88 .09 2.42
---------- ---------- ---------- -------- --------
Total from investment operations................. 2.23 2.87 4.15 .31 2.65
---------- ---------- ---------- -------- --------
Less distributions
Dividends from net investment income................ (.18) (.35) (.27) (.22) (.22)
Distributions from net realized capital gains....... (.12) (1.69) (.68) (.65) (.70)
Distributions in excess of net investment income.... -- (.01) -- -- --
---------- ---------- ---------- -------- --------
Total distributions.............................. (.30) (2.05) (.95) (.87) (.92)
---------- ---------- ---------- -------- --------
Net asset value, end of year........................ $ 19.19 $ 17.26 $ 16.44 $ 13.24 $ 13.80
---------- ---------- ---------- -------- --------
---------- ---------- ---------- -------- --------
TOTAL RETURN(a):.................................... 12.95% 17.94% 31.58% 2.38% 22.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)....................... $1,756,806 $1,443,466 $1,158,111 $276,412 $232,535
Average net assets (000)............................ $1,537,613 $1,233,792 $ 908,365 $254,596 $190,778
Ratios to average net assets:
Expenses, including distribution fees............ .89%(b) .89% .91% 1.00% .91%
Expenses, excluding distribution fees............ .64%(b) .64% .66% .75% .71%
Net investment income............................ 2.13%(b) 2.07% 1.82% 1.62% 1.71%
For Class A, B, C and Z shares:
Portfolio turnover............................... 6.4% 19% 18% 12% 21%
Average commission rate paid per share........... $.0466 $.0523 $.0501 N/A N/A
<CAPTION>
1992
--------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year.................. $ 11.39
--------
Income from investment operations
Net investment income............................... .24
Net realized and unrealized gain on investments and
foreign currencies............................... 1.30
--------
Total from investment operations................. 1.54
--------
Less distributions
Dividends from net investment income................ (.23)
Distributions from net realized capital gains....... (.63)
Distributions in excess of net investment income.... --
--------
Total distributions.............................. (.86)
--------
Net asset value, end of year........................ $ 12.07
--------
--------
TOTAL RETURN(a):.................................... 13.65%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)....................... $136,834
Average net assets (000)............................ $111,489
Ratios to average net assets:
Expenses, including distribution fees............ .94%
Expenses, excluding distribution fees............ .74%
Net investment income............................ 1.91%
For Class A, B, C and Z shares:
Portfolio turnover............................... 22%
Average commission rate paid per share........... 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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13

<PAGE>

Financial Highlights (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
----------------------------------------------------------------------
Six Months
Ended Year Ended December 31,
June 30, -------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 17.24 $ 16.43 $ 13.24 $ 13.80 $ 12.08
---------- ---------- ---------- ---------- ----------
Income from investment operations
Net investment income............................... .12 .22 .16 .12 .12
Net realized and unrealized gain (loss) on
investments and foreign currencies............... 2.03 2.51 3.87 .09 2.42
---------- ---------- ---------- ---------- ----------
Total from investment operations................. 2.15 2.73 4.03 .21 2.54
---------- ---------- ---------- ---------- ----------
Less distributions
Dividends from net investment income................ (.11) (.22) (.16) (.12) (.12)
Distributions from net realized capital gains....... (.12) (1.69) (.68) (.65) (.70)
Distributions in excess of net investment income.... -- (.01) -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions.............................. (.23) (1.92) (.84) (.77) (.82)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period...................... $ 19.16 $ 17.24 $ 16.43 $ 13.24 $ 13.80
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN(a):.................................... 12.52% 17.14% 30.62% 1.60% 21.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $2,901,142 $2,626,479 $2,140,895 $1,970,580 $1,794,634
Average net assets (000)............................ $2,751,935 $2,417,900 $1,891,160 $1,901,972 $1,522,992
Ratios to average net assets:
Expenses, including distribution fees............ 1.64%(b) 1.64% 1.66% 1.75% 1.71%
Expenses, excluding distribution fees............ .64%(b) .64% .66% .75% .71%
Net investment income............................ 1.36%(b) 1.37% .99% .87% .91%
<CAPTION>
1992
----------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 11.40
----------
Income from investment operations
Net investment income............................... .14
Net realized and unrealized gain (loss) on
investments and foreign currencies............... 1.30
----------
Total from investment operations................. 1.44
----------
Less distributions
Dividends from net investment income................ (.13)
Distributions from net realized capital gains....... (.63)
Distributions in excess of net investment income.... --
----------
Total distributions.............................. (.76)
----------
Net asset value, end of period...................... $ 12.08
----------
----------
TOTAL RETURN(a):.................................... 12.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $1,203,740
Average net assets (000)............................ $1,042,028
Ratios to average net assets:
Expenses, including distribution fees............ 1.74%
Expenses, excluding distribution fees............ .74%
Net investment income............................ 1.11%
</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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 14

<PAGE>

Financial Highlights (Unaudited) PRUDENTIAL EQUITY FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Class Z
---------------------------------------------------------- ----------
August 1,
Six Months 1994(c) Six Months
Ended Year Ended December 31, Through Ended
June 30, -------------------------- December 31, June 30,
1997 1996 1995 1994 1997
---------- ------------ --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 17.24 $ 16.43 $ 13.24 $14.02 $ 17.26
---------- ------ --------- ----- ----------
Income from investment operations
Net investment income............................... .12 .22 .16 .09 .20
Net realized and unrealized gain (loss) on
investments and foreign currencies............... 2.03 2.51 3.87 (.10) 2.05
---------- ------ --------- ----- ----------
Total from investment operations................. 2.15 2.73 4.03 (.01) 2.25
---------- ------ --------- ----- ----------
Less distributions
Dividends from net investment income................ (.11) (.22) (.16) (.12) (.20)
Distributions from net realized capital gains....... (.12) (1.69) (.68) (.65) (.12)
Distributions in excess of net investment income.... -- (.01) -- -- --
---------- ------ --------- ----- ----------
Total distributions.............................. (.23) (1.92) (.84) (.77) (.30)
---------- ------ --------- ----- ----------
Net asset value, end of period...................... $ 19.16 $ 17.24 $ 16.43 $13.24 $ 19.19
---------- ------ --------- ----- ----------
---------- ------ --------- ----- ----------
TOTAL RETURN(a):.................................... 12.52% 17.14% 30.62% .01% 13.06%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $ 58,896 $ 47,477 $23,894 $3,160 $ 162,531
Average net assets (000)............................ $ 52,281 $ 36,745 $12,190 $1,847 $ 153,828
Ratios to average net assets:
Expenses, including distribution fees............ 1.64%(b) 1.64% 1.66% 1.83%(b) .64%(b)
Expenses, excluding distribution fees............ .64%(b) .64% .66% .83%(b) .64%(b)
Net investment income............................ 1.38%(b) 1.37% 1.03% .90%(b) 2.45%(b)
<CAPTION>
March 1,
1996(d)
Through
December 31,
1996
------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 17.10
------------
Income from investment operations
Net investment income............................... .37
Net realized and unrealized gain (loss) on
investments and foreign currencies............... 1.88
------------
Total from investment operations................. 2.25
------------
Less distributions
Dividends from net investment income................ (.39)
Distributions from net realized capital gains....... (1.69)
Distributions in excess of net investment income.... (.01)
------------
Total distributions.............................. (2.09)
------------
Net asset value, end of period...................... $ 17.26
------------
------------
TOTAL RETURN(a):.................................... 13.65%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $128,752
Average net assets (000)............................ $124,631
Ratios to average net assets:
Expenses, including distribution fees............ .64%(b)
Expenses, excluding distribution fees............ .64%(b)
Net investment income............................ 2.43%(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.
- ----------------------------------------------------------------------------
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>

Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077

(800) 225-1852
http://www.prudential.com

Directors
Edward D. Beach
Delayne Dedrick Gold
Robert F. Gunia
Donald D. Lennox
Douglas H. McCorkindale
Mendel A. Melzer
Thomas T. Mooney
Stephen P. Munn
Richard A. Redeker
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead

Officers
Richard A. Redeker, President
Susan C. Cote, Vice President
Thomas A. Early, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary

Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077

Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 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 LLC
P.O. Box 15005
New Brunswick, NJ 08906

Independent Auditors
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, 1997 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>

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Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852

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