(ICON)
Prudential
Equity
Fund, Inc.
SEMI
ANNUAL
REPORT
June 30, 1998
(LOGO)
<PAGE>
Prudential Equity Fund, Inc.
Performance At A Glance.
In the first half of 1998, U.S. large-company
stocks once again rose at more
than double their historical rate. The Prudential
Equity Fund also had an
excellent six-month return, by historical
standards. However, the market's
gains were concentrated in the stocks of a few
companies with histories of
high, non-economically sensitive earnings growth.
Such stocks have been too
expensive for our value style of investing.
Accordingly, we held substantial
amounts of cash. Together with our holdings of out-
of-favor industrials,
smaller electronics companies, and tobacco
companies, our performance was
below the return of our more growth-stock oriented
peers.
<TABLE>
Cumulative Total Returns1
As of 6/30/98
<CAPTION>
Six One
Five Ten Since
Months Year
Years Years Inception2
<S> <C> <C>
<C> <C> <C>
Class A 12.11% 22.96%
138.67% N/A 286.78%
Class B 11.65 22.11
129.83 348.39% 1241.53
Class C 11.65 22.11
N/A N/A 110.11
Class Z 12.14 23.27
N/A N/A 58.41
Lipper Growth
Fund Average3 15.10 25.38
141.15 360.50 ***
</TABLE>
<TABLE>
Average Annual Total Returns1
As of 6/30/98
<CAPTION>
One
Five Ten Since
Year
Years Years Inception2
<S> <C>
<C> <C> <C>
Class A 16.81%
17.79% N/A 16.68%
Class B 17.11
18.01 16.19% 17.28
Class C 21.11
N/A N/A 20.90
Class Z 23.27
N/A N/A 21.83
</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 total 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 B shares
will automatically convert to
Class A shares, on a quarterly basis,
approximately seven years after purchase.
Class C shares have a 1% CDSC for one year. 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; and
Class Z, 3/1/96.
3Lipper average returns are for all funds in each
share class for the six-
month, one-, five-, and ten-year periods.
***Lipper Since Inception returns are 278.12% for
Class A; 1172.54% for Class
B; 130.58% for Class C; and 65.09% for Class Z
based on all funds in each
share class.
How Investments Compared.
(As of 6/30/98)
(GRAPH)
U.S. General General U.S.
Growth Bond Muni Debt Taxable
Funds Funds Funds Money Funds
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.
U.S. Taxable Money 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 of long-term
capital growth will be achieved.
A Hostile Climate.
Value investing seems to work best if any of three
conditions are present:
some stocks are very inexpensive compared to the
average stock, earnings for
many businesses are growing rapidly (so bargain
stocks also grow), or interest
rates are high or rising. We've had none of these
conditions. So although our
value style is producing good returns by
historical standards, it is trailing
the overall market.
Strategy Session.
Ready to Buy.
Our substantial cash holdings will remain a
constraint on our return while the
market average is rising rapidly, but our time-
tested investment discipline
tells us not to buy when prices are high. We're
ready to buy when patches of
inexpensively priced companies appear. "Ready to
buy" is not just a statement
of our intentions. If we aren't holding cash when
investors begin to sell, we
also would have to sell into the falling market to
raise cash before taking
advantage of value opportunities. Our cash
holdings give us mobility.
Concern About Growth.
Cyclicals now are the best value stocks in the
market. Although the U.S. stock
market averages have been buoyed by an average of
$20 billion a month of new
investment funds, investors are not confident
about economic growth.
Industrial cyclicals -- which normally do better
when the economy is expanding
- -- have become the best value stocks in the
market. About seven percent of our
assets are paper companies. The overcapacity that
reduced that industry's
profits is being closed and efficiency is
increasing. The Asian crisis hurt
forest products stocks because Asia accounts for a
third of world demand.
However, Asia also accounted for the greatest
growth of capacity and this will
slow considerably. The supply/demand situation
should improve and we expect
the stocks to rebound.
Portfolio Composition.
Sectors expressed as a percentage of
net assets as of 6/30/98.
(PIE CHART)
<PAGE>
What Went Well.
Consumers Spent.
We like consumer cyclicals. This was the best-
performing sector of the market.
We did particularly well on Chrysler, Kmart, and
Tandy. We also had a focus
on financial stocks, such as insurance companies
and financial services. On
average, these also had good returns. Morgan
Stanley Dean Witter, Lehman
Brothers, and The Equitable made substantial
contributions to our performance.
And Not So Well.
Underpriced Industrials Attracted Us.
In our view, industrial stocks have been
underpriced for a while. The market
continues to undervalue these stocks, so our
performance was hurt by our
substantial holdings of paper product companies.
We don't expect industrials
to catch up until the Asian economy shows signs of
stability. However,
industrials are the least expensive market sector
at current prices and have
excellent prospects for earnings growth when
demand does recover. Stock prices
tend to move rapidly at early signs of a changing
situation. We plan to hold
this inexpensive sector through its difficulties
and catch its recovery early.
Five Largest Holdings.
2.5% Chubb Corp.
2.5% Elf Acquitaine, ADR
2.3% Morgan Stanley
Dean Witter & Co.
2.3% Loews Corp.
1.9% Safeco Corp.
Expressed as a percentage of net assets as of
6/30/98.
Looking Ahead.
The past three years of exceptional stock market
returns have been driven by
sharply rising earnings and a substantial flow of
new funds into U.S. stocks.
The first of these factors has been substantially
reduced in recent quarters.
We expect an economic slowdown to further slow
corporate earnings growth
through the rest of 1998. Over the past year, the
stock market has been very
sensitive to earnings disappointments. Given this
change in the investment
setting, we are anticipating the rest of 1998 with
some interest.
- --------------------------------------------------
- -----------------------------
1
<PAGE>
Maintaining Flexibility.
Portfolio Manager Tom Jackson reviews the pros and
cons of today's market as
well as future opportunities for value-style
investors.
Q. Your fund gained 12% in just six months. Why
aren't you happy with the
current investment environment?
A. It's true our return is excellent by historical
standards and in terms of
what investors ought to expect, given how much
companies are earning. However,
we like to be ahead of the average stock fund
instead of behind it. Good
investment opportunity for our value style comes
when there are pockets of
underpriced stocks. Today, the stocks that seem
out of line with the overall
market are the small number of stocks that
investors are bidding up. There
seems to be no limit to how much investors will
pay for their favorite high-
growth companies. For value investors to do
better, we need the market advance
to broaden from these few very large market
favorites. Investor confidence
that the economic environment won't continue to
deteriorate would seem to be
a prerequisite for this to happen.
Q. So what are you doing?
A. We are holding a substantial amount of cash to
allow us to move in quickly
when really inexpensive stocks appear. Although we
are giving up some
performance for that ability, we believe that our
current returns are strong
enough that there is no reason to sacrifice our
flexibility. We are focusing
our current holdings on the industries that are
less expensive than average --
primarily companies that do best in an expanding
economy. These cyclicals have
been inexpensive compared to the average stock
because investors are concerned
about an economic slowdown. This concern, for
example, also has shown up in
the periods -- such as most of the second quarter
of 1998 -- when the market
stops rising or declines. Over the past year,
these periods generally have
been focused on concerns about the impact of Asian
events. It is becoming
clearer that the Asian economic slowdown is
slowing the U.S. and European
economies, so there well may be more such market
doldrums or a correction.
Q. What if our economy does slow significantly?
A. There are many signs now that the U.S. economy
already has begun to slow.
We suspect that the stocks that have risen most in
search of stable earnings
growth may have more room to correct should their
earnings suffer. Value
stocks usually show their advantage most by
falling less in a market
correction. Moreover, markets rarely decline just
to the right price; they
often overshoot. That creates opportunities for
value investors over the
longer term.
(PHOTO)
- --------------------------------------------------
- -----------------------------
2
<PAGE>
President's Letter
August 4, 1998
(PHOTO)
Managing
Expectations.
Dear Shareholder:
For nearly eight years we've enjoyed above-
average, double-digit returns from
stocks--a bull market of unprecedented duration.
As a result, many of us have
grown accustomed to seeing the Dow Jones
Industrial Average, the S&P 500 and
other market indexes set new records. That's why
the fluctuations normally
seen in financial markets may take investors by
surprise.
Although the media has given ample coverage to the
factors that have caused
concern in 1998, we'd like to remind you that
there is also good news to
report: the US economy is healthy and continues to
grow. Inflation remains
subdued and employment is strong.
Even with a sound economy, it isn't easy to
maintain your investment
discipline when the market is fluctuating. Here
are some thoughts that may
help:
- - Manage Your Expectations. Experienced mutual
fund investors understand that
financial markets rise and fall. Over time,
however, stocks and bonds have
produced attractive returns that have kept ahead
of inflation.
- - Don't Invest Emotionally. If you have long-term
(several years or longer)
investment goals, it may be counter-productive
to sell an investment in
reaction to short-term market fluctuation. Over
the course of several years,
it's not unusual for stocks and bonds to
experience several periods of
market uncertainty.
- - Diversification Lessens Risk. Market sectors
seldom move in tandem. A well-
diversified portfolio that includes stock, bond,
and money market mutual
funds can lessen the effects of market
volatility over time.
- - We're On Your Side. Your Prudential professional
can help you understand
what's happening in the markets. He or she can
assist you in making informed
decisions based upon a thorough knowledge of
your financial needs and long-
term goals. Call your Prudential professional
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
- --------------------------------------------------
- -----------------------------
3
<PAGE>
Portfolio of Investments as of June 30, 1998
(Unaudited)
PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Shares Description Value
(Note 1)
<C> <S>
<C>
- --------------------------------------------------
- ----------
LONG-TERM INVESTMENTS--80.2%
COMMON STOCKS--80.2%
- --------------------------------------------------
- ----------
Automobiles & Trucks--3.0%
859,000 Chrysler Corp. $
48,426,125
600,000 General Motors Corp.
40,087,500
17,134,308 LucasVarity PLC, ADR (Great
Britain)
68,081,600
404,800 Navistar International Corp. (a)
11,688,600
248,800 PACCAR Inc.
12,999,800
-
- -------------
181,283,625
- --------------------------------------------------
- ----------
Banks & Financial Services--10.2%
325,000 American Express Co.
37,050,000
552,800 American Financial Group Inc.
23,943,150
1,100,000 Bank of New York Co., Inc.
66,756,250
653,000 BankAmerica Corp.
56,443,688
877,200 Chase Manhattan Corp.
66,228,600
764,200 Lehman Brothers Holdings Inc.
59,273,263
285,706 Mellon Bank Corp.
19,892,280
384,750 Mercantile Bankshares Corp.
13,394,109
286,400 Morgan (J.P.) & Co., Inc.
33,544,600
1,533,000 Morgan Stanley, Dean Witter,
Discover & Co.
140,077,875
58,320 National City Corp.
4,140,720
900,000 NationsBank Corp.
68,850,000
450,000 Republic New York Corp.
28,321,875
-
- -------------
617,916,410
- --------------------------------------------------
- ----------
Chemicals--2.3%
711,000 Boc Group PLC, ADR (Great Britian)
19,285,875
513,700 Dow Chemical Co.
49,668,369
788,200 Eastman Chemical Co. (a)
49,065,450
706,900 Wellman Inc.
16,037,794
100,000 Witco Corp.
2,925,000
-
- -------------
136,982,488
- --------------------------------------------------
- ----------
Commercial Services--1.5%
900,000 American Standard Co., Inc .(a)
40,218,750
1,475,600 Waste Management, Inc.
51,646,000
-
- -------------
91,864,750
Computer Hardware--3.1%
2,598,750 Compaq Computer Corp. $
73,739,531
412,900 Gerber Scientific, Inc.
9,393,475
600,000 International Business Machines
Corp.
68,887,500
93,750 NCR Corp. (New)(a)
3,046,875
1,351,100 Seagate Technology, Inc. (a)
32,173,069
-
- -------------
187,240,450
- --------------------------------------------------
- ----------
Construction & Housing--0.7%
1,100,000 Centex Corp.
41,525,000
- --------------------------------------------------
- ----------
Diversfied Consumer Products--5.6%
1,858,300 Freeport-McMoRan, Inc.
26,749,837
750,000 Gibson Greetings Inc. (a)
18,750,000
1,600,000 Loews Corp.
139,400,000
1,865,000 Philip Morris Companies Inc.
73,434,375
3,360,000 RJR Nabisco Holdings Corp.
79,800,000
-
- -------------
338,134,212
- --------------------------------------------------
- ----------
Electrical Power--1.5%
170,000 American Electric Power Company,
Inc.
7,713,750
570,000 General Public Utilities Corp.
21,553,125
974,519 Houston Industries, Inc.
30,088,274
979,600 Unicom Corp.
34,347,225
-
- -------------
93,702,374
- --------------------------------------------------
- ----------
Electronics--2.7%
1,691,000 AMP, Inc.
58,128,125
1,359,400 Arrow Electronics, Inc.
29,566,950
172,900 Avnet, Inc.
9,455,469
600,000 Harris Corp.
26,812,500
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as of June 30, 1998
(Unaudited)
PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Shares Description Value
(Note 1)
<C> <S>
<C>
- --------------------------------------------------
- ----------
Electronics (cont'd.)
360,600 Hitachi Limited, ADR (Japan) $
23,258,700
1,250,000 National Semiconductor Corp. (a)
16,484,375
38,262 Raytheon Corp. (a)
2,204,848
-
- -------------
165,910,967
- --------------------------------------------------
- ----------
Forest Products--7.2%
643,900 Fort James Corp
28,653,550
1,146,000 Georgia-Pacific Corp.
91,665,750
1,475,000 International Paper Co.
63,425,000
1,500,000 Mead Corp.
47,625,000
752,500 Rayonier Inc.
34,615,000
787,500 Temple- Inland Inc.
42,426,562
1,260,000 Weyerhaeuser Co.
58,196,250
2,200,000 Willamette Industries, Inc.
70,400,000
-
- -------------
437,007,112
- --------------------------------------------------
- ----------
Healthcare--7.0%
3,738,300 Columbia/HCA Healthcare Corp.
108,877,987
3,051,740 Foundation Health Systems, Inc.(a)
80,489,642
497,300 Pacificare Health Systems (a)
43,948,888
2,817,274 Tenet Healthcare Corp. (a)
88,039,812
1,407,000 Wellpoint Health Networks Inc. (a)
104,118,000
-
- -------------
425,474,329
- --------------------------------------------------
- ----------
Insurance--11.6%
1,275,664 American General Corp.
90,811,331
1,891,600 Chubb Corp.
152,037,350
700,000 Citizens Corp.
21,918,750
2,550,363 Old Republic International Corp.
74,757,515
2,600,700 SAFECO Corp.
118,169,306
1,433,800 St. Paul Companies, Inc.
60,309,213
1,000,000 The Equitable Companies, Inc.
74,937,500
363,200 Tokio Marine & Fire Insurance
Company, ADR (Japan)
18,477,800
1,520,100 Travelers Corp.
92,156,063
-
- -------------
703,574,828
Metals-Nonferrous--1.3%
600,000 Aluminum Company of America $
39,562,500
1,256,900 Cyprus Minerals Co.
16,653,925
98,249 Kinross Gold Corp.(a) (Canada)
319,310
888,400 Newmont Mining Corp.
20,988,450
-
- -------------
77,524,185
- --------------------------------------------------
- ----------
Oil & Gas Exploration/Production--6.8%
300,000 Amerada Hess Corp.
16,293,750
1,000,000 Atlantic Richfield Co.
78,125,000
1,130,448 Marketspan Corp. (a)
33,842,787
1,100,000 Occidental Petroleum Corp.
29,700,000
1,523,900 Oryx Energy Co. (a)
33,716,287
350,000 Potash Corp. of Saskatchewan Inc.
(Canada)
26,446,875
2,098,596 Societe Nationale Elf Aquitaine,
ADR
(France)
149,000,316
738,365 Total SA, ADR (France)
48,270,612
-
- -------------
415,395,627
- --------------------------------------------------
- ----------
Photography--1.0%
807,300 Eastman Kodak Co.
58,983,356
- --------------------------------------------------
- ----------
Restaurants--1.8%
7,081,700 Darden Restaurants Inc.
112,421,988
- --------------------------------------------------
- ----------
Retail--8.5%
212,300 BJ's Wholesale Club, Inc. (a)
8,624,688
2,800,000 Dillards Department Stores, Inc.
116,025,000
1,100,000 Homebase, Inc. (a)
8,731,250
928,500 Ikon Office Solutions Inc.
13,521,281
6,000,000 Kmart Corp. (a)
115,500,000
814,700 Nine West Group, Inc. (a)
21,844,144
1,800,000 Pep Boys - Manny, Moe & Jack
34,087,500
500,000 Petrie Stores Corp. (a)
1,429,688
625,000 Sears, Roebuck & Co.
38,164,062
2,000,000 Tandy Corp.
106,125,000
2,125,000 Toys 'R' Us Inc. (a)
50,070,312
-
- -------------
514,122,925
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as of June 30, 1998
(Unaudited)
PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Shares Description Value
(Note 1)
<C> <S>
<C>
- --------------------------------------------------
- ----------
Steel - Producers--0.3%
1,373,300 Birmingham Steel Corp. $
16,994,588
- --------------------------------------------------
- ----------
Telecommunications--3.8%
1,481,733 360 Communications Co. (a)
47,415,456
1,000,000 AT&T Corp.
57,125,000
1,740,000 Loral Space & Communications (a)
49,155,000
722,400 Portugal Telecom, S.A. ADR
(Portugal)
38,242,050
300,400 Telefonica de Espana, S.A. ADR
(Spain)
41,774,375
-
- -------------
233,711,881
- --------------------------------------------------
- ----------
Transportation--0.3%
100,000 Marine Transport Corp. (a)
406,250
1,000,000 OMI Corp. (a)
8,000,000
550,000 Overseas Shipholding Group, Inc.
11,206,250
-
- -------------
19,612,500
-
- -------------
Total long-term investments
(cost $3,128,225,896)
4,869,383,595
-
- -------------
Principal
Amount
(000)
SHORT-TERM INVESTMENTS--20.3%
- --------------------------------------------------
- ----------
Commercial Paper--8.7%
American General Corp.
$ 4,000 5.53%, 7/14/98
3,991,398
Aon Corp.
3,863 5.55%, 7/14/98
3,854,662
Associates Corp. of North America.
49,000 5.52%, 8/10/98
48,691,952
Bank Austria Finance, Inc.
59,000 5.53%, 8/17/98
58,564,972
Bell Atlantic Network Funding
Corp.
6,000 5.58%, 7/22/98
5,979,540
Chase Manhattan Bank (USA)
10,000 5.57%, 8/14/98
10,000,000
CIT Group Holdings, Inc.
36,000 5.53%, 7/30/98
35,834,100
Commercial Credit Co.
10,000 5.57%, 8/11/98
9,935,017
Countrywide Home Loan, Inc.
$ 10,000 5.60%, 7/28/98 $
9,956,444
Credit Communal De Belgique S.A.
7,000 5.58%, 8/13/98
7,000,000
Cregem North America Inc.
6,000 5.70%, 7/20/98
5,981,950
First Tennessee Bank N.A.
5,000 5.55%, 7/13/98
4,999,945
Ford Motor Credit Corp.
17,000 5.54%, 7/2/98
16,994,768
General Electric Capital Corp.
13,000 5.53%, 8/14/98
12,910,138
30,000 5.53%, 8/17/98
29,778,800
GTE Funding, Inc.
9,000 5.60%, 7/23/98
8,967,800
Hertz Corp.
26,224 5.57%, 8/11/98
26,053,588
Nordbanken North America, Inc.
17,000 5.52%, 7/10/98
16,973,933
9,000 5.52%, 8/4/98
8,951,700
Norwest Corp.
16,000 5.57%, 7/23/98
15,943,062
SBC Finance Inc.
55,000 5.54%, 8/10/98
54,652,981
Svenska Handelsbanken
12,000 5.53%, 8/10/98
11,924,424
Westdeutsche Landesbank
Girozentrale
60,000 5.55%, 7/8/98
60,000,000
Xerox Overseas Holdings PLC
28,000 5.52%, 7/14/98
27,939,894
30,000 5.55%, 7/16/98
29,926,000
-
- -------------
Total commercial paper
(cost $525,874,788)
525,807,068
- --------------------------------------------------
- ----------
U.S. Government Agency & Instrumentalities--0.7%
Federal National Mortgage
Association
7,000 5.63%, 8/14/98
7,001,336
15,000 5.71%, 9/9/98
15,014,100
5,000 4.94%, 2/23/99
5,000,000
United States Treasury Note
17,000 6.125%, 8/31/98
17,022,343
-
- -------------
Total U.S. government agency &
instrumentalities
(cost $44,043,102)
44,037,779
-
- -------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 6
<PAGE>
Portfolio of Investments as of June 30, 1998
(Unaudited)
PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Shares Description Value
(Note 1)
<C> <S>
<C>
- --------------------------------------------------
- ----------
Repurchase Agreement--10.9%
$ 661,594 Joint Repurchase Agreement
Account,
5.72%, 7/1/98 (Note 5)
(cost $661,594,000) $
661,594,000
-
- -------------
Total short-term investments
(cost $1,231,511,890)
1,231,438,847
-
- -------------
- --------------------------------------------------
- ----------
Total Investments--100.5%
(cost $4,359,737,786; Note 4)
6,100,822,442
Liabilities in excess of other
assets--(0.5%)
(28,392,300)
-
- -------------
Net Assets--100%
$6,072,430,142
-
- -------------
-
- -------------
</TABLE>
- ---------------
(a) Non-income producing security.
ADR--American Depository Receipt.
The industry classification of short-term
portfolio holdings as a percentage of
net assets as of June 30, 1998 was as follows:
<TABLE>
<S>
<C>
Short-Term Business
Credit........................... 12.3%
Commercial
Banks..................................... 5.1
Federal Credit
Agencies.............................. .6
Auto-Rent
License.................................... .6
Bank Holding Company
U.S............................. .4
U.S. Government
Sovereign............................ .3
Motor Vehicle
Parts.................................. .3
Phone
Communications.................................
.2
Mortgage
Bankers.....................................
.2
Personal
Credit......................................
.1
Photographic
Equipment............................... .1
Life
Insurance.......................................
.05
Accident & Health
Insurance.......................... .05
- ----
20.3%
- ----
- ----
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 7
<PAGE>
Statement of Assets and Liabilities (Unaudited)
PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
Assets
June 30, 1998
<S>
<C>
Investments, at value (cost
$3,698,143,786)...................................
.............................. $5,439,228,442
Joint repurchase account, at value (cost
$661,594,000).....................................
................. 661,594,000
Cash..............................................
..................................................
........ 1,508,880
Dividends and interest
receivable........................................
...................................
13,517,300
Receivable for Fund shares
sold..............................................
...............................
8,336,096
Receivable for investments
sold..............................................
...............................
4,528,332
Prepaid expenses and other
assets............................................
...............................
60,819
- --------------
Total
assets............................................
.................................................
6,128,773,869
- --------------
Liabilities
Payable for investments
purchased.........................................
..................................
40,177,490
Payable for Fund shares
reacquired........................................
..................................
8,898,166
Distribution fee
payable...........................................
.........................................
3,276,753
Management fee
payable...........................................
...........................................
2,234,186
Accrued expenses and other
liabilities.......................................
...............................
1,726,117
Deferred Trustees'
fees..............................................
.......................................
28,444
Income distribution
payable...........................................
......................................
2,571
- --------------
Total
liabilities.......................................
.................................................
56,343,727
- --------------
Net
Assets............................................
..................................................
.... $6,072,430,142
- --------------
- --------------
Net assets were comprised of:
Common stock, at
par...............................................
...................................... $
2,761,887
Paid-in capital in excess of
par...............................................
.......................... 3,824,831,296
- --------------
3,827,593,183
Undistributed net investment
income............................................
.......................... 720,552
Accumulated net realized gain on investments
and foreign
currencies......................................
503,015,824
Net unrealized appreciation on investments and
foreign
currencies........................................
1,741,100,583
- --------------
Net assets, June 30,
1998..............................................
.....................................
$6,072,430,142
- --------------
- --------------
Class A:
Net asset value and redemption price per share
($2,295,671,894 / 104,349,516 shares of
common stock issued and
outstanding)..........................
$22.00
Maximum sales charge (5.00% of offering
price)............................................
............... 1.16
- --------------
Maximum offering price to
public............................................
............................. $23.16
- --------------
- --------------
Class B:
Net asset value, offering price and redemption
price per share
($3,344,966,114 / 152,257,981 shares of
common stock issued and
outstanding)..........................
$21.97
- --------------
- --------------
Class C:
Net asset value, offering price and redemption
price per share
($91,037,215 / 4,143,857 shares of common
stock issued and
outstanding)...............................
$21.97
- --------------
- --------------
Class Z:
Net asset value, offerng price and redemption
price per share
($340,754,918 / 15,489,020 shares of common
stock issued and
outstanding).............................
$22.00
- --------------
- --------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 8
<PAGE>
PRUDENTIAL EQUITY FUND, INC.
EQUITY FUND, INC.
Statement of Operations (Unaudited)
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
Net Investment Income
1998
<S>
<C>
Income
Dividends (net of foreign withholding
taxes of $869,874)..................... $
40,886,431
Interest..................................
26,233,675
--
- ------------
Total income...........................
67,120,106
--
- ------------
Expenses
Distribution fee--Class A.................
2,625,720
Distribution fee--Class B.................
16,513,102
Distribution fee--Class C.................
412,836
Management fee............................
13,240,395
Transfer agent's fees and expenses........
3,225,000
Reports to shareholders...................
445,000
Registration fees.........................
139,000
Custodian's fees and expenses.............
119,000
Franchise taxes...........................
91,000
Insurance expense.........................
43,000
Directors' fees and expenses..............
22,000
Audit fee and expenses....................
17,000
Legal fees and expenses...................
17,000
Miscellaneous.............................
14,545
--
- ------------
Total expenses.........................
36,924,598
--
- ------------
Net investment income........................
30,195,508
--
- ------------
Realized and Unrealized
Gain on Investments and
Foreign Currency Transactions
Net realized gain on:
Investment transactions...................
502,444,940
Foreign currency transactions.............
157,984
--
- ------------
502,602,924
--
- ------------
Net change in unrealized appreciation on:
Investments and foreign currencies........
109,332,242
--
- ------------
Net gain on investments......................
611,935,166
--
- ------------
Net Increase in Net Assets
Resulting from Operations.................... $
642,130,674
--
- ------------
--
- ------------
</TABLE>
PRUDENTIAL EQUITY FUND, INC.
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 1998
1997
<S> <C>
<C>
Operations
Net investment income..... $ 30,195,508
$ 69,461,804
Net realized gain on
investments and foreign
currencies............. 502,602,924
284,045,768
Net change in unrealized
appreciation of
investments
and foreign
currencies............. 109,332,242
662,447,800
---------------
- ---------------
Net increase in net assets
resulting from
operations............. 642,130,674
1,015,955,372
---------------
- ---------------
Dividends and distributions
(Note 1)
Dividends from net
investment income
Class A................ (15,810,263)
(31,371,300)
Class B................ (10,618,405)
(32,078,132)
Class C................ (288,037)
(681,499)
Class Z................ (2,758,251)
(4,240,127)
---------------
- ---------------
(29,474,956)
(68,371,058)
---------------
- ---------------
Distributions from net
realized
capital gains
Class A................ (9,607,367)
(100,192,825)
Class B................ (15,437,921)
(168,533,830)
Class C................ (394,461)
(3,730,960)
Class Z................ (1,482,546)
(13,864,843)
---------------
- ---------------
(26,922,295)
(286,322,458)
---------------
- ---------------
Fund share transactions (net
of share conversion) (Note
6)
Proceeds from shares
sold................... 4,013,249,711
4,882,813,820
Net asset value of shares
issued in reinvestment
of dividends and
distributions.......... 54,026,119
340,731,229
Cost of shares
reacquired............. (3,923,512,622)
(4,728,047,555)
---------------
- ---------------
Net increase in net assets
from Fund share
transactions........... 143,763,208
435,497,494
---------------
- ---------------
Total increase............... 729,496,631
1,096,759,350
Net Assets
Beginning of period.......... 5,342,933,511
4,246,174,161
---------------
- ---------------
End of period (a)............ $ 6,072,430,142
$ 5,342,933,511
---------------
- ---------------
---------------
- ---------------
- --------------------------------------------------
- ----------
(a) Includes undistributed
net investment income
of........................ $ 720,552
- --
---------------
- ---------------
---------------
- ---------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 9
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------
- ------------------------------
Prudential Equity Fund, Inc. (the 'Fund') is
registered under the Investment
Company Act of 1940 as a diversified, open-end
management investment company.
The investment objective of the Fund is long-term
growth of capital by investing
primarily in common stocks of major established
corporations.
- --------------------------------------------------
- ----------
Note 1. Accounting Policies
The following is a summary of significant
accounting policies followed by the
Fund in the preparation of its financial
statements.
Securities Valuation: Investments, including
options, traded on a national
securities or commodities exchange and Nasdaq
National Market equity securities
are valued at the last reported sales price on the
primary exchange on which
they are traded. Securities traded in the over-the-
counter market (including
securities listed on exchanges whose primary
market is believed to be
over-the-counter) and listed securities for which
no sale was reported on that
date are valued at the mean between the last
reported bid and asked prices.
Short-term securities which mature in more than 60
days are valued at current
market quotations. Short-term securities which
mature in 60 days or less are
valued at amortized cost which approximates market
value.
In connection with transactions in repurchase
agreements with U.S. financial
institutions, it is the Fund's policy that its
custodian or designated
subcustodians, as the case may be under triparty
repurchase agreements, take
possession of the underlying collateral
securities, the value of which exceeds
the principal amount of the repurchase
transaction, including accrued interest.
If the seller defaults and the value of the
collateral declines or if bankruptcy
proceedings are commenced with respect to the
seller of the security,
realization of the collateral by the Fund may be
delayed or limited.
All securities are valued as of 4:15 p.m., New
York time.
Foreign Currency Translation: The books and
records of the Fund are maintained
in United States dollars. Foreign currency amounts
are translated into United
States dollars on the following basis:
(i) market value of investment securities, other
assets and liabilities--at the
current rate of exchange.
(ii) purchases and sales of investment securities,
income and expenses--at the
rates of exchange prevailing on the respective
dates of such transactions.
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.
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 capital 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 ('PIFM'). Pursuant to this agreement, PIFM has
responsibility for all
investment advisory services and supervises the
subadviser's performance of such
services. PIFM has entered into a subadvisory
agreement with The Prudential
Investment Corporation ('PIC'); PIC furnishes
investment advisory services in
connection with the management of the Fund. PIFM
pays for the 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 PIFM 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.
- --------------------------------------------------
- ------------------------------
10
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------
- ------------------------------
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.
Effective July, 1, 1998,
Prudential Investment Management Services LLC
('PIMS') became the distributor of
the Fund and will serve the Fund under the same
terms and conditions as under
the arrangement with PSI.
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, 1998.
PSI has advised the Fund that it has received
approximately $1,580,121 in
front-end sales charges resulting from sales of
Class A shares during the six
months ended June 30, 1998. From these fees, PSI
paid such sales charges to
dealers (PSI and PRUCO Securities Corporation
(Prusec)), which in turn paid
commissions to salespersons.
PSI advised the Fund that for the six months ended
June 30, 1998, it received
approximately $2,011,274 and $17,933 in contingent
deferred sales charges
imposed upon certain redemptions by Class B and
Class C shareholders,
respectively.
PSI, PIFM, PIMS and PIC are indirect, wholly owned
subsidiaries of The
Prudential Insurance Company of America and
Prusec.
The Fund, along with other affiliated registered
investment companies (the
'Funds'), has a credit agreement (the 'Agreement')
with an unaffiliated lender.
The maximum commitment under the Agreement is
$200,000,000. 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 during the six
months ended June 30, 1998. 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.
The Agreement expired on December 30, 1997 and has
been extended through
December 29, 1998 under the same terms.
- --------------------------------------------------
- ----------
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,
1998, the Fund incurred fees of approximately
$2,844,000 for the services of
PMFS. As of June 30, 1998, approximately $493,000
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 nonaffiliates.
For the six months ended June 30, 1998, PSI earned
$110,069 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, 1998 aggregated
$664,859,145 and $900,591,609,
respectively.
The federal income tax basis of the Fund's
investments at June 30, 1998 was
substantially the same as for financial reporting
purposes and, accordingly, net
unrealized appreciation for federal income tax
purposes was $1,741,084,658
(gross unrealized appreciation--$1,840,213,659;
gross unrealized
depreciation--$99,129,001).
- --------------------------------------------------
- ----------
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, 1998, the Fund
has a 53.30% undivided interest in the joint
account. The undivided interest for
the Fund represents $661,594,000 in the principal
amount. As of such date, each
repurchase agreement in the joint account and the
collateral therefor were as
follows:
SBC Warburg Dillon Read Inc., 5.93%, in the
principal amount of $345,000,000,
repurchase price $345,056,829, due 7/1/98. The
value of the collateral including
accrued interest is $352,174,874.
Bear Stearns, Inc., 5.85%, in the principal amount
of $345,000,000, repurchase
price $345,056,063, due 7/1/98. The value of the
collateral including accrued
interest is $353,215,323.
Goldman Sachs, 5.20%, in the principal amount of
$206,264,000, repurchase price
$206,293,794, due 7/1/98. The value of the
collateral including accrued interest
was $210,389,609.
- --------------------------------------------------
- ------------------------------
11
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------
- ------------------------------
Salomon Smith Barney Inc., 5.70%, in the principal
amount of $345,000,000,
repurchase price $345,054,625, due 7/1/98. The
value of the collateral including
accrued interest was $352,383,850.
- --------------------------------------------------
- ----------
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, 1998:
Shares sold...................... 145,686,407
$ 3,129,027,191
Shares issued in reinvestment of
dividends...................... 1,100,649
24,111,931
Shares reacquired................ (143,591,142)
(3,091,205,693)
------------
- ---------------
Net decrease in shares
outstanding before
conversions.................... 3,195,914
61,933,429
Shares issued upon conversion
from Class B................... 4,810,087
105,018,386
------------
- ---------------
Net increase in shares
outstanding.................... 8,006,001
$ 166,951,815
------------
- ---------------
------------
- ---------------
Year ended December 31, 1997:
Shares sold...................... 176,089,330
$ 3,419,389,251
Shares issued in reinvestment of
dividends...................... 6,449,778
125,989,153
Shares reacquired................ (180,465,455)
(3,512,361,626)
------------
- ---------------
Net increase in shares
outstanding before
conversions.................... 2,073,653
33,016,778
Shares issued upon conversion
from Class B................... 10,616,578
206,433,920
------------
- ---------------
Net increase in shares
outstanding.................... 12,690,231
$ 239,450,698
------------
- ---------------
------------
- ---------------
<CAPTION>
Class B Shares
Amount
- --------------------------------- ------------
- ---------------
<S> <C>
<C>
Six months ended June 30, 1998:
Shares sold...................... 35,003,746
$ 742,787,337
Shares issued in reinvestment of
dividends...................... 1,142,707
25,021,081
Shares reacquired................ (34,984,160)
(739,462,708)
------------
- ---------------
Net decrease in shares
outstanding before
conversions.................... 1,162,293
28,345,710
Shares reacquired upon conversion
into Class A................... (4,790,766)
(105,018,386)
------------
- ---------------
Net decrease in shares
outstanding.................... (3,628,473)
$ (76,672,676)
------------
- ---------------
------------
- ---------------
Year ended December 31, 1997:
Shares sold...................... 59,587,032
$ 1,140,769,682
Shares issued in reinvestment of
dividends...................... 9,872,279
192,363,178
Shares reacquired................ (55,367,777)
(1,062,159,431)
------------
- ---------------
Net increase in shares
outstanding before
conversions.................... 14,091,534
270,973,429
Shares reacquired upon conversion
into Class A................... (10,585,531)
(206,433,920)
------------
- ---------------
Net increase in shares
outstanding.................... 3,506,003
$ 64,539,509
------------
- ---------------
------------
- ---------------
<CAPTION>
Class C
- ---------------------------------
Six months ended June 30, 1998:
Shares sold...................... 1,806,598
$ 38,538,694
Shares issued in reinvestment of
dividends...................... 30,110
659,223
Shares reacquired................ (1,336,564)
(28,212,989)
------------
- ---------------
Net increase in shares
outstanding.................... 500,144
$ 10,984,928
------------
- ---------------
------------
- ---------------
Year ended December 31, 1997:
Shares sold...................... 1,997,551
$ 38,680,939
Shares issued in reinvestment of
dividends...................... 219,243
4,278,697
Shares reacquired................ (1,327,660)
(25,772,744)
------------
- ---------------
Net increase in shares
outstanding.................... 889,134
$ 17,186,892
------------
- ---------------
------------
- ---------------
<CAPTION>
Class Z
- ---------------------------------
Six months ended June 30, 1998:
Shares sold...................... 4,874,684
$ 102,896,488
Shares issued in reinvestment of
dividends...................... 193,268
4,233,885
Shares reacquired................ (3,025,540)
(64,631,237)
------------
- ---------------
Net increase in shares
outstanding.................... 2,042,412
$ 42,499,136
------------
- ---------------
------------
- ---------------
Year ended December 31, 1997:
Shares sold...................... 11,766,210
$ 223,973,948
Shares issued in reinvestment of
dividends...................... 923,845
18,100,201
Shares reacquired................ (6,704,933)
(127,753,754)
------------
- ---------------
Net increase in shares
outstanding.................... 5,985,122
$ 114,320,395
------------
- ---------------
------------
- ---------------
</TABLE>
- --------------------------------------------------
- ------------------------------
12
<PAGE>
Financial Highlights (Unaudited)
PRUDENTIAL EQUITY FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class A
---
- --------------------------------------------------
- -------------------------------
Six Months
Ended Year Ended
December 31,
June 30, ----------------------------------
- --------------------------------
1998 1997 1996
1995 1994 1993
---
- ---------- ---------- ---------- -----
- ----- -------- --------
<S> <C>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $
19.85 $ 17.26 $ 16.44 $
13.24 $ 13.80 $ 12.07
---
- ---------- ---------- ---------- -----
- ----- -------- --------
Income from investment operations
Net investment income......................
.16 .38 .35 .27
.22 .23
Net realized and unrealized gain on
investments and foreign currencies......
2.24 3.70 2.52 3.88
.09 2.42
---
- ---------- ---------- ---------- -----
- ----- -------- --------
Total from investment operations........
2.40 4.08 2.87 4.15
.31 2.65
---
- ---------- ---------- ---------- -----
- ----- -------- --------
Less distributions
Dividends from net investment income.......
(.15) (.36) (.35)
(.27) (.22) (.22)
Distributions in excess of net investment
income..................................
- -- -- (.01) --
- -- --
Distributions from net realized capital
gains...................................
(.10) (1.13) (1.69)
(.68) (.65) (.70)
---
- ---------- ---------- ---------- -----
- ----- -------- --------
Total distributions.....................
(.25) (1.49) (2.05)
(.95) (.87) (.92)
---
- ---------- ---------- ---------- -----
- ----- -------- --------
Net asset value, end of period............. $
22.00 $ 19.85 $ 17.26 $
16.44 $ 13.24 $ 13.80
---
- ---------- ---------- ---------- -----
- ----- -------- --------
---
- ---------- ---------- ---------- -----
- ----- -------- --------
TOTAL RETURN(a):...........................
12.11% 23.88% 17.94%
31.58% 2.38% 22.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............ $
2,295,672 $1,912,802 $1,443,466
$1,158,111 $276,412 $232,535
Average net assets (000)................... $
2,117,984 $1,709,030 $1,233,792 $
908,365 $254,596 $190,778
Ratios to average net assets:
Expenses, including distribution fees...
.85%(b) .88% .89% .91%
1.00% .91%
Expenses, excluding distribution fees...
.60%(b) .63% .64% .66%
.75% .71%
Net investment income...................
1.46%(b) 1.87% 2.07%
1.82% 1.62% 1.71%
For Class A, B, C and Z shares:
Portfolio turnover......................
14% 13% 19% 18%
12% 21%
</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 one full year are not
annualized.
(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, ----------------------------------
- ---------------------
1998 1997 1996
1995 1994
---
- ---------- ---------- ---------- -----
- ----- ----------
<S> <C>
<C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $
19.83 $ 17.24 $ 16.43 $
13.24 $ 13.80
---
- ---------- ---------- ---------- -----
- ----- ----------
Income from investment operations
Net investment income......................
.08 .22 .22 .16
.12
Net realized and unrealized gain on
investments and foreign currencies......
2.23 3.72 2.51 3.87
.09
---
- ---------- ---------- ---------- -----
- ----- ----------
Total from investment operations........
2.31 3.94 2.73 4.03
.21
---
- ---------- ---------- ---------- -----
- ----- ----------
Less distributions
Dividends from net investment income.......
(.07) (.22) (.22)
(.16) (.12)
Distributions in excess of net investment
income..................................
- -- -- (.01) --
- --
Distributions from net realized capital
gains...................................
(.10) (1.13) (1.69)
(.68) (.65)
---
- ---------- ---------- ---------- -----
- ----- ----------
Total distributions.....................
(.17) (1.35) (1.92)
(.84) (.77)
---
- ---------- ---------- ---------- -----
- ----- ----------
Net asset value, end of period............. $
21.97 $ 19.83 $ 17.24 $
16.43 $ 13.24
---
- ---------- ---------- ---------- -----
- ----- ----------
---
- ---------- ---------- ---------- -----
- ----- ----------
TOTAL RETURN(a):...........................
11.65% 23.05% 17.14%
30.62% 1.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............ $
3,344,966 $3,090,767 $2,626,479
$2,140,895 $1,970,580
Average net assets (000)................... $
3,329,990 $2,924,413 $2,417,900
$1,891,160 $1,901,972
Ratios to average net assets:
Expenses, including distribution fees...
1.60%(b) 1.63% 1.64%
1.66% 1.75%
Expenses, excluding distribution fees...
.60%(b) .63% .64% .66%
.75%
Net investment income...................
.71%(b) 1.12% 1.37% .99%
.87%
<CAPTION>
1993
-----
- -----
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $
12.08
-----
- -----
Income from investment operations
Net investment income......................
.12
Net realized and unrealized gain on
investments and foreign currencies......
2.42
-----
- -----
Total from investment operations........
2.54
-----
- -----
Less distributions
Dividends from net investment income.......
(.12)
Distributions in excess of net investment
income..................................
- --
Distributions from net realized capital
gains...................................
(.70)
-----
- -----
Total distributions.....................
(.82)
-----
- -----
Net asset value, end of period............. $
13.80
-----
- -----
-----
- -----
TOTAL RETURN(a):...........................
21.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............
$1,794,634
Average net assets (000)...................
$1,522,992
Ratios to average net assets:
Expenses, including distribution fees...
1.71%
Expenses, excluding distribution fees...
.71%
Net investment income...................
.91%
</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 one 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
---
- --------------------------------------------------
- --------------------
August 1,
Six Months
1994(c)
Ended Year Ended December 31,
Through
June 30, ----------------------------------
- ---- December 31,
1998 1997 1996 1995
1994
---
- ---------- ------- ------------ ------
- --- ------------
<S> <C>
<C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......
$ 19.83 $ 17.24 $ 16.43 $
13.24 $14.02
- ------ ------- ------ -------
- -- -----
Income from investment operations
Net investment income......................
.09 .25 .22 .16
.09
Net realized and unrealized gain (loss) on
investments and foreign currencies......
2.22 3.69 2.51 3.87
(.10)
- ------ ------- ------ -------
- -- -----
Total from investment operations........
2.31 3.94 2.73 4.03
(.01)
- ------ ------- ------ -------
- -- -----
Less distributions
Dividends from net investment income.......
(.07) (.22) (.22) (.16)
(.12)
Distributions in excess of net investment
income..................................
- -- -- (.01) --
- --
Distributions from net realized capital
gains...................................
(.10) (1.13) (1.69) (.68)
(.65)
- ------ ------- ------ -------
- -- -----
Total distributions.....................
(.17) (1.35) (1.92) (.84)
(.77)
- ------ ------- ------ -------
- -- -----
Net asset value, end of period.............
$ 21.97 $ 19.83 $ 17.24 $
16.43 $13.24
- ------ ------- ------ -------
- -- -----
- ------ ------- ------ -------
- -- -----
TOTAL RETURN(a):...........................
11.65% 23.05% 17.14%
30.62% .01%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............
$91,037 $72,244 $ 47,477
$23,894 $3,160
Average net assets (000)...................
$88,251 $60,434 $ 36,745
$12,190 $1,847
Ratios to average net assets:
Expenses, including distribution fees...
1.60%(b) 1.63% 1.64% 1.66%
1.83%(b)
Expenses, excluding distribution fees...
.60%(b) .63% .64% .66%
.83%(b)
Net investment income...................
.73%(b) 1.11% 1.37% 1.03%
.90%(b)
<CAPTION>
Class Z
-----
- --------------------------------------
March 1,
Six
Months 1996(d)
Ended Year Through
June 30, Ended December 31,
1998 1997 1996
-----
- -------- -------- ------------
<S> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $
19.87 $ 17.26 $ 17.10
-----
- -------- -------- ------------
Income from investment operations
Net investment income......................
.19 .42 .37
Net realized and unrealized gain (loss) on
investments and foreign currencies......
2.22 3.72 1.88
-----
- -------- -------- ------------
Total from investment operations........
2.41 4.14 2.25
-----
- -------- -------- ------------
Less distributions
Dividends from net investment income.......
(.18) (.40) (.39)
Distributions in excess of net investment
income..................................
- -- (.01)
Distributions from net realized capital
gains...................................
(.10) (1.13) (1.69)
-----
- -------- -------- ------------
Total distributions.....................
(.28) (1.53) (2.09)
-----
- -------- -------- ------------
Net asset value, end of period............. $
22.00 $ 19.87 $ 17.26
-----
- -------- -------- ------------
-----
- -------- -------- ------------
TOTAL RETURN(a):...........................
12.14% 24.29% 13.65%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............ $
340,755 $267,121 $128,752
Average net assets (000)................... $
68,052 $ 57,646 $124,631
Ratios to average net assets:
Expenses, including distribution fees...
.60%(b) .63% .64%(b)
Expenses, excluding distribution fees...
.60%(b) .63% .64%(b)
Net investment income...................
1.23%(b) 2.11% 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>
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
Douglas H. McCorkindale
Mendel A. Melzer, CFA
Thomas T. Mooney
Stephen P. Munn
Richard A. Redeker
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Marguerite E.H. Morrison, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
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, 1998 were not audited
and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to
prospective investors unless
preceded or accompanied by a current prospectus.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
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