<PAGE>
SEMIANNUAL REPORT JUNE 30, 2000
Prudential Equity Fund, Inc.
Fund Type Stock
Objective Long-term growth of capital
(GRAPHIC)
The views expressed in this report and information about the Fund's portfolio
holdings are for the period covered by this report and are subject to change
thereafter.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(LOGO)
<PAGE>
Build on the Rock
Investment Goals and Style
Prudential Equity Fund, Inc. invests in stocks of major, established companies
primarily in the United States. The Fund looks for bargains in the current
market, using a value investment style. We look for stocks with prices that
seem too low given their underlying earnings, cash flow, or book value.
Historically, stocks that are inexpensive on these value measures subsequently
have tended to outperform the market averages. We also look for a
price/earnings ratio lower than earnings per share growth, strong market
position, improving profitability, and distinctive business strengths. Of
course, there can be no assurance that past trends will continue or that the
Fund will achieve its investment objective.
A strategy adjustment
In order to reduce the impact of the growth/value cycle on the Fund's return,
we are taking steps to keep its sector weightings closer to those of the S&P
500. We are also broadening the Fund's focus beyond stocks that are inexpensive
on an absolute basis to include those that are priced below their historical
range or below others in their industry. As a result, we expect the average
market capitalization of the Fund's holdings to increase, again moving closer
to the overall market.
Portfolio Composition
Sectors expressed as a percentage of net assets as of 6/30/00
32.1% Consumer Growth
18.9 Industrial
16.0 Finance
9.8 Consumer Cyclical
8.1 Technology
7.5 Energy
5.8 Utility
1.8 Cash & Equivalents
Five Largest Holdings
Expressed as a percentage of net assets as of 6/30/00
4.3% Tenet Healthcare Corp.
Healthcare
4.0 Columbia/HCA Healthcare Co.
Healthcare
3.8 Eastman Kodak Co.
Photography
3.6 Wellpoint Health Networks, Inc.
Healthcare
3.6 UnitedHealth Group, Inc.
Healthcare
www.prudential.com (800) 225-1852
Performance at a Glance
Cumulative Total Returns1 As of 6/30/00
Six One Five Ten Since
Months Year Years Years Inception2
Class A -5.95% -8.48% 88.49% 272.77% 295.75%
Class B -6.31 -9.15 81.59 245.29 1252.15
Class C -6.31 -9.15 81.59 N/A 111.78
Class Z -5.87 -8.27 N/A N/A 62.85
Lipper Multi-Cap
Value Fund Avg.3 -0.47 -3.99 96.25 243.56 ***
Average Annual Total Returns1 As of 6/30/00
One Five Ten Since
Year Years Years Inception2
Class A -13.05% 12.36% 13.48% 13.53%
Class B -14.15 12.55 13.19 15.29
Class C -11.06 12.45 N/A 13.34
Class Z -8.27 N/A N/A 11.92
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.
1 Source: Prudential Investments Fund Management LLC and Lipper Inc. The
cumulative total returns do not take into account sales charges. The average
annual total returns do take into account applicable sales charges. The Fund
charges a maximum front-end sales charge of 5% for Class A shares. Class B
shares are subject to a declining contingent deferred sales charge (CDSC) of
5%, 4%, 3%, 2%, 1%, and 1% for six years. Class B shares will automatically
convert to Class A shares, on a quarterly basis, approximately seven years
after purchase. Class C shares are subject to a front-end sales charge of 1%
and a CDSC of 1% for 18 months. Class Z shares are not subject to a sales
charge or distribution and service (12b-1) fees.
2 Inception dates: Class A, 1/22/90; Class B, 3/15/82; Class C, 8/1/94; and
Class Z, 3/1/96.
3 Lipper average returns are for all funds in each share class for the
six-months, one-, five-, and ten-year periods in the Multi-Cap Value Fund
category. The Lipper average is unmanaged. Multi-Cap Value funds, by portfolio
practice, invest in a variety of market capitalization ranges. They generally
have between 25% to 75% of their equity assets in companies with market
capitalizations above 300% of the dollar-weighted median market capitalization
of the S&P(r) Mid-Cap 400 Index. Multi-Cap Value funds invest in companies
considered to be undervalued and with below-average price/earnings ratios,
price-to-book ratios, and three-year earnings growth figures.
(r)S&P is a registered trademark of The McGraw-Hill Companies, Inc.
***Lipper Since Inception returns are 269.83% for Class A, 1217.61% for Class
B, 132.51% for Class C, and 67.75% for Class Z, based on all funds in each
share class.
1
<PAGE>
(LOGO) August 14, 2000
Dear Shareholder,
Prudential Equity Fund, Inc. Class A shares returned a negative 5.95% over the
six months ended June 30, 2000; this was -10.65% for those paying the maximum
one-time Class A sales charge. It trailed the -0.47% Lipper Multi-Cap Value
Average. The underperformance came primarily in the first quarter of the year,
when computer and telecommunications equipment stocks were rocketing up. The
Fund held few of these stocks. Moreover, it had a heavy representation of
cyclical companies-those that do best in an expanding economy-such as basic
materials and retail stocks. Many of these had negative returns because
investors were very concerned that rising interest rates would slow or reverse
the growth of the United States economy. On the positive side, the Fund's
healthcare and energy-related holdings performed very well.
Recently, we have had a run of years unprecedented since the inception of style
indexes in which growth investing has outperformed value investing. However
likely or unlikely it may be that such a run will continue or recur, we do not
wish to expose our shareholders to the full risk that investing in one style
represents. We are taking several steps, described in the Investment Adviser's
Report, to reduce the impact of the growth/value cycle on the Fund's return.
The Fund's new strategy is intended to dilute the impact of long runs of
adverse market favor while maintaining the value orientation that has such a
good long-term record of success.
Yours sincerely,
John R. Strangfeld, President
Prudential Equity Fund, Inc.
2
<PAGE>
Prudential Equity Fund, Inc.
Semiannual Report June 30, 2000
Investment Adviser's Report
A lull for basic materials
We had a large focus on paper companies and a smaller one on metals throughout
the reporting period. These stocks, particularly aluminum and paper, had a
strong rally early in 1999, but they dropped in price when the Federal Reserve
began to raise interest rates. The performance of basic materials stocks is
strongly linked to economic cycles, and investors feared that rising interest
rates would choke off economic growth. This year, in a climate marked by
extreme investor jumpiness, the stocks of some well-managed and profitable
industrial companies such as Georgia Pacific, International Paper, Mead, and
Alcoa had very steep price declines.
We believe it is important to note that the falling share prices of our basic
materials stocks were not caused by negative earnings news. On the contrary;
the businesses represented in our portfolio are doing well. In our view, their
poor stock performance was due almost entirely to uncertainty about the
economy. This uncertainty is likely to abate in the course of 2000.
In July, after the end of our reporting period, Georgia Pacific announced that
it would buy Fort James, which we also own, at a substantial premium. It
subsequently sold its timberlands operations. The transactions are intended to
allow Georgia-Pacific to focus on noncommodity businesses, such as tissue,
where profit is steadier.
Low tech weighting hurt
Despite the volatility of the technology sector over our reporting period, it
finished the half year ahead of the S&P 500. Our return suffered because we
owned so little in the way of technology stocks. Because we intend to
approximate the sector weightings of the S&P 500 more closely in the future,
we are likely to increase our holdings in this area.
3
<PAGE>
Comments on Largest Holdings As of 6/30/00
4.3% Tenet Healthcare Corp./Healthcare
Second largest hospital chain in the United States. Sales were up 10% in
1999. Should benefit from recovery of industry pricing, its continued
cost-control efforts, and the growth in healthcare demand as the average
age in the United States rises. Government pressure on pricing has eased
substantially.
4.0% Columbia/HCA Healthcare Company/Healthcare
Largest hospital chain in the United States. New management stopped
aggressive expansion to focus on getting its operations under control.
Settlement of government billing suit cost it less than expected.
Pricing for the hospital industry appears to have bottomed. Should
benefit from growth in healthcare demand as the average age in the
United States rises.
3.8% Eastman Kodak Co./Photography
Inexpensive because it's perceived as "old economy." A very strong
franchise in photography; adding digital imaging to its product line
while increasing sales and earnings. Focused on becoming more cost
competitive. We think the expanding U.S. market for digital photography
and the expanding global market for film (which is relatively cheap) mean
strong earnings growth.
3.6% Wellpoint Health Networks, Inc./Healthcare
3.6% UnitedHealth Group, Inc./Healthcare
The two best-managed U.S. healthcare companies, in our view. They are
benefiting from better pricing, good control over their costs,
increasing membership, and no (Wellpoint) or negligible (UnitedHealth)
exposure to Medicare problems.
Holdings are subject to change.
4
<PAGE>
The technology stocks we did own during this reporting period performed better
than most, on average. Hewlett Packard, Seagate Technology, and Arrow
Electronics had excellent returns. We sold our holdings in the first two,
taking our profits.
We also had good performance from Harris, a manufacturer of equipment for
wireless telecommunications. The Fund benefited by being underweighted in
telecommunications service companies, as this industry-which was a 1999
highflier-crashed in 2000.
Reconfiguring some food and tobacco companies
We benefited substantially from consolidation activity in the food and tobacco
industries. Carl Icahn's hostile bid for Nabisco Group Holdings set in motion a
series of ownership shifts: Nabisco Group Holdings sold its shares of Nabisco
Group to Philip Morris at a substantial premium, and R.J. Reynolds bought the
residual part of Nabisco Group Holdings. We owned the three stocks involved,
and all three appreciated significantly because the new alignment left each
company more focused on its strengths. Nabisco Group Holdings returned 148%
over the period.
Healthcare is improving
Four of our five largest holdings are in healthcare. (See Comments on Largest
Holdings.) We are well into an upswing in Managed Care pricing. As HMOs become
more profitable, they can afford to give hospitals better deals. Healthcare
earnings generally are improving, and stock prices are beginning to reflect
this. UnitedHealth Group, whose shares rose 62% in our reporting period, made a
particularly large contribution to the Fund's return. Other holdings also had
significant above-market returns, including WellPoint Health, Tenet Healthcare,
and Foundation Health Systems.
Energy is getting expensive
The imbalance of supply and demand for oil is helping our oil stocks-Total
Fina, BP Amoco, and Amerada Hess. Natural gas, too, is currently in short
supply. Our shares of Keyspan, a natural gas distributor, also performed well.
5
<PAGE>
Insurance is beginning to pay off
Prices are finally increasing in the insurance industry. Despite the fact that
it takes some time for better pricing to flow through to earnings, some of the
larger companies such as Chubb (our largest insurance holding) have already
seen their stocks move up. Fund performance was also helped by a particularly
large gain posted by Old Republic International. However, several of our
smaller companies have yet to benefit from the improved pricing environment.
Overall, our insurance holdings had a negligible impact on our return for the
period, but the trend is in the right direction.
Looking Ahead
We believe investors are becoming more confident that the Federal Reserve will
accept that the U.S. economy has slowed to a sustainable pace. This is creating
an environment in which they can focus more on current earnings. We think fewer
stocks will be carried by optimistic projections; investors will seek out
companies whose earnings growth is current and visible in their income
statements. These are conditions that could revive the 1999 cyclical stock
rally and also help our insurance and healthcare companies.
Prudential Equity Fund Management Team
6
<PAGE>
Prudential Equity Fund, Inc.
Portfolio of Investments as of June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 98.5%
Common Stocks 98.5%
-------------------------------------------------------------------------------------
Aluminum 2.5%
3,340,000 Alcoa, Inc. $ 96,860,000
-------------------------------------------------------------------------------------
Automobiles & Trucks 1.3%
377,422 Delphi Automotive Systems Corp. 5,496,208
406,136 General Motors Corp. 23,581,271
404,800 Navistar International Corp.(a) 12,574,100
248,800 PACCAR, Inc. 9,874,250
----------------
51,525,829
-------------------------------------------------------------------------------------
Banks & Financial Services 4.0%
1,473,134 Bank of America Corp. 63,344,762
920,300 Bank of New York Co., Inc. 42,793,950
1,352,700 John Hancock Financial Services 32,042,081
139,612 Mellon Financial Corp. 5,087,112
384,750 Mercantile Bankshares Corp. 11,470,360
----------------
154,738,265
-------------------------------------------------------------------------------------
Chemicals 1.2%
828,800 Eastman Chemical Co. 39,575,200
506,900 Wellman, Inc. 8,205,444
----------------
47,780,644
-------------------------------------------------------------------------------------
Computer Hardware 2.9%
3,295,350 Compaq Computer Corp. 84,237,385
572,700 Computer Associates International, Inc. 29,315,081
----------------
113,552,466
-------------------------------------------------------------------------------------
Construction & Housing 0.7%
1,100,000 Centex Corp. 25,850,000
-------------------------------------------------------------------------------------
Diversfied Consumer Products 6.1%
1,600,000 Loews Corp. 96,000,000
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Equity Fund, Inc.
Portfolio of Investments as of June 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C>
3,360,000 Nabisco Group Holdings Corp. $ 87,150,000
2,147,900 Sara Lee Corp. 41,481,319
3,086,700 Service Corp. International(a) 9,838,856
----------------
234,470,175
-------------------------------------------------------------------------------------
Diversified Manufacturing 0.9%
900,000 American Standard Companies, Inc.(a) 36,900,000
-------------------------------------------------------------------------------------
Electronics 2.7%
1,937,700 Arrow Electronics, Inc.(a) 60,068,700
776,300 Avnet, Inc. 45,995,775
----------------
106,064,475
-------------------------------------------------------------------------------------
Fertilizers 0.5%
350,000 Potash Corp. of Saskatchewan, Inc. (Canada) 19,315,625
-------------------------------------------------------------------------------------
Health Care 19.3%
4,270,940 Foundation Health Systems, Inc.(a) 55,522,220
5,191,300 Columbia/HCA Healthcare Corp. 157,685,737
4,693,300 HEALTHSOUTH Corp.(a) 33,733,094
963,600 PacifiCare Health Systems, Inc.(a) 57,996,675
6,269,574 Tenet Healthcare Corp.(a) 169,278,498
1,623,500 United HealthCare Group, Inc. 139,215,125
1,957,600 Wellpoint Health Networks, Inc.(a) 141,803,650
----------------
755,234,999
-------------------------------------------------------------------------------------
Hotels & Leisure 0.7%
3,111,700 Hilton Hotels Corp. 29,172,187
-------------------------------------------------------------------------------------
Industrial Technology 0.1%
250,200 Gerber Scientific, Inc. 2,877,300
-------------------------------------------------------------------------------------
Insurance 9.6%
552,800 American Financial Group, Inc. 13,716,350
648,164 American General Corp. 39,538,004
1,962,400 AXA Financial, Inc. 66,721,600
1,891,600 Chubb Corp. 116,333,400
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Equity Fund, Inc.
Portfolio of Investments as of June 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C>
2,805,363 Old Republic International Corp. $ 46,288,490
2,600,700 SAFECO Corp. 51,688,912
1,144,400 St. Paul Companies, Inc. 39,052,650
----------------
373,339,406
-------------------------------------------------------------------------------------
Metals-Non Ferrous 3.3%
3,461,100 Freeport-McMoRan Copper & Gold, Inc. (Class A)(a) 31,582,538
487,000 Freeport-McMoRan Copper & Gold, Inc. (Class B)(a) 4,504,750
2,758,800 Newmont Mining Corp. 59,659,050
938,135 Phelps Dodge Corp. 34,886,895
----------------
130,633,233
-------------------------------------------------------------------------------------
Office Equipment & Supplies 0.5%
4,566,000 IKON Office Solutions, Inc. 17,693,250
2,544,000 Lanier Worldwide, Inc.(a) 2,544,000
----------------
20,237,250
-------------------------------------------------------------------------------------
Oil & Gas Exploration/Production 7.5%
300,000 Amerada Hess Corp. 18,525,000
1,495,844 BP Amoco PLC 84,608,676
562,319 Kerr-McGee Corp. 33,141,676
1,100,000 Occidental Petroleum Corp. 23,168,750
1,744,770 Total Fina S.A., ADR (France) 134,020,146
----------------
293,464,248
-------------------------------------------------------------------------------------
Paper & Forest Products 10.2%
643,900 Fort James Corp. 14,890,188
1,046,000 Georgia-Pacific Corp. (Timber Group) 22,619,750
2,832,500 Georgia-Pacific Corp. 74,353,125
1,616,000 International Paper Co. 48,177,000
2,047,000 Mead Corp. 51,686,750
752,500 Rayonier, Inc. 26,995,937
1,101,500 Temple-Inland, Inc. 46,263,000
1,260,000 Weyerhaeuser Co. 54,180,000
2,112,100 Willamette Industries, Inc. 57,554,725
----------------
396,720,475
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Equity Fund, Inc.
Portfolio of Investments as of June 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C>
Photography 3.8%
2,501,400 Eastman Kodak Co. $ 148,833,300
-------------------------------------------------------------------------------------
Restaurants 2.8%
1,644,200 CKE Restaurants, Inc. 4,932,600
6,457,300 Darden Restaurants, Inc. 104,931,125
----------------
109,863,725
-------------------------------------------------------------------------------------
Retail 6.7%
1,694,800 Consolidated Stores Corp.(a) 20,337,600
3,110,000 Dillard's, Inc. (Class A) 38,097,500
823,500 J.C. Penney Co., Inc. 15,183,281
641,808 Jones Apparel Group, Inc.(a) 15,082,488
6,000,000 Kmart Corp.(a) 40,875,000
1,417,300 Pep Boys - Manny, Moe & Jack 8,503,800
1,845,800 Radioshack Corp. 87,444,775
125,800 Sears, Roebuck & Co. 4,104,225
2,125,000 Toys 'R' Us, Inc.(a) 30,945,313
----------------
260,573,982
-------------------------------------------------------------------------------------
Steel - Producers 0.1%
1,373,300 Birmingham Steel Corp.(a) 5,321,538
-------------------------------------------------------------------------------------
Telecommunications 5.1%
876,082 ALLTEL Corp. 54,262,329
1,068,250 AT&T Corp. 33,783,406
142,565 General Motors Corp (Class 'H' Stock) 12,510,065
2,544,000 Harris Corp. 83,316,000
2,409,900 Loral Space & Communications, Ltd.(a) 16,718,681
----------------
200,590,481
-------------------------------------------------------------------------------------
Tobacco 2.1%
1,865,000 Philip Morris Companies, Inc. 49,539,062
1,120,000 R.J. Reynolds Tobacco Holdings, Inc. 31,290,000
----------------
80,829,062
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Equity Fund, Inc.
Portfolio of Investments as of June 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C>
Utilities - Electric 3.1%
170,000 American Electric Power Co., Inc. $ 5,036,250
570,000 GPU, Inc. 15,425,625
1,130,448 KeySpan Corp. 34,761,276
974,519 Reliant Energy, Inc. 28,809,218
979,600 Unicom Corp. 37,898,275
----------------
121,930,644
-------------------------------------------------------------------------------------
Waste Management 0.8%
1,580,010 Waste Management, Inc. 30,020,190
----------------
Total long-term investments (cost $3,409,676,545) 3,846,699,499
----------------
SHORT-TERM INVESTMENTS 1.8%
<CAPTION>
Principal
Amount
(000)
<C> <S> <C>
-------------------------------------------------------------------------------------
Commercial Paper 0.8%
Citicorp,
20,000 6.60%, 8/3/00 19,879,000
Enterprise Funding Corp.
11,723 6.55%, 7/28/00 11,665,411
----------------
Total short-term investments (cost $31,544,411) 31,544,411
-------------------------------------------------------------------------------------
Repurchase Agreement 1.0%
39,643 Joint Repurchase Agreement Account,
6.56%, 7/3/00
(cost $39,643,000) 39,643,000
----------------
Total short-term investments (cost $71,187,411;
Note 5) 71,187,411
----------------
Total Investments 100.3%
(cost $3,480,863,956; Note 4) 3,917,886,910
Liabilities in excess of other assets (0.3%) (10,671,385)
----------------
Net Assets 100% $ 3,907,215,525
----------------
----------------
</TABLE>
------------------------------
(a) Non-income producing security.
ADR--American Depository Receipt.
See Notes to Financial Statements 11
<PAGE>
Prudential Equity Fund, Inc.
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
June 30, 2000
<S> <C>
--------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $3,480,863,956) $3,917,886,910
Cash 671,577
Dividends and interest receivable 8,438,034
Receivable for Fund shares sold 2,820,347
Deferred expenses and other assets 755,100
--------------
Total assets 3,930,571,968
--------------
LIABILITIES
Payable for Fund shares reacquired 18,178,712
Distribution fee payable 1,923,820
Accrued expenses and other liabilities 1,690,191
Management fee payable 1,540,184
Deferred Directors' fees 23,536
--------------
Total liabilities 23,356,443
--------------
NET ASSETS $3,907,215,525
--------------
--------------
Net assets were comprised of:
Common stock, at par $ 2,233,804
Paid-in capital in excess of par 3,000,766,690
--------------
3,003,000,494
Undistributed net investment income 2,524,319
Accumulated net realized gain on investments 464,667,758
Net unrealized appreciation on investments and foreign
currencies 437,022,954
--------------
Net assets, June 30, 2000 $3,907,215,525
--------------
--------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Equity Fund, Inc.
Statement of Assets and Liabilities (Unaudited) Cont'd.
<TABLE>
<CAPTION>
June 30, 2000
<S> <C>
--------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share
($1,930,062,930 / 110,295,912 shares of common stock
issued and outstanding) $17.50
Maximum sales charge (5% of offering price) .92
--------------
Maximum offering price to public $18.42
--------------
--------------
Class B:
Net asset value, offering price and redemption price per
share ($1,657,951,476 / 94,844,563 shares of common stock
issued and outstanding) $17.48
--------------
--------------
Class C:
Net asset value and redemption price per share
($61,950,223 / 3,543,911 shares of common stock issued
and outstanding) $17.48
Sales charge (1% of offering price) .18
--------------
Offering price to public $17.66
--------------
--------------
Class Z:
Net asset value, offerng price and redemption price per
share ($257,250,896 / 14,696,063 shares of common stock
issued and outstanding) $17.50
--------------
--------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Equity Fund, Inc.
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 2000
<S> <C>
--------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Dividends (net of foreign withholding taxes of $507,831) $ 37,880,400
Interest 4,768,703
-------------
Total income 42,649,103
-------------
Expenses
Management fee 9,706,790
Distribution fee--Class A 2,440,377
Distribution fee--Class B 9,686,312
Distribution fee--Class C 347,491
Transfer agent's fees and expenses 3,215,000
Reports to shareholders 236,000
Custodian's fees and expenses 107,000
Registration fees 33,000
Directors' fees and expenses 23,000
Legal fees and expenses 20,000
Audit fee and expenses 15,000
Miscellaneous 50,486
-------------
Total expenses 25,880,456
-------------
Net investment income 16,768,647
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
Net realized gain on:
Investment transactions 466,707,012
Foreign currency transactions 2,101,833
-------------
468,808,845
-------------
Net change in unrealized appreciation (depreciation) on:
Investments (799,676,564)
Foreign currencies 172,486
-------------
(799,504,078)
-------------
Net loss on investments and foreign currencies (330,695,233)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(313,926,586)
-------------
-------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Equity Fund, Inc.
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 2000 December 31, 1999
<S> <C> <C>
----------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 16,768,647 $ 45,944,405
Net realized gain on investments and
foreign currencies 468,808,845 646,664,939
Net change in unrealized depreciation of
investments and foreign currencies (799,504,078) (97,256,200)
--------------- -----------------
Net increase (decrease) in net assets
resulting from operations (313,926,586) 595,353,144
--------------- -----------------
Dividends and distributions (Note 1):
Dividends from net investment income
Class A (12,830,473) (28,805,414)
Class B (3,686,533) (13,641,876)
Class C (138,703) (456,451)
Class Z (2,052,034) (4,692,283)
--------------- -----------------
(18,707,743) (47,596,024)
--------------- -----------------
Distributions from net realized capital
gains
Class A (57,469,827) (273,294,379)
Class B (49,537,784) (312,998,178)
Class C (1,863,820) (10,688,756)
Class Z (7,606,678) (38,537,773)
--------------- -----------------
(116,478,109) (635,519,086)
--------------- -----------------
Fund share transactions (net of share
conversions)
(Note 6)
Proceeds from shares sold 1,633,892,734 4,402,962,271
Net asset value of shares issued in
reinvestment of dividends and
distributions 130,249,660 655,203,376
Cost of shares reacquired (2,386,906,941) (5,601,791,028)
--------------- -----------------
Net decrease in net assets from Fund
share transactions (622,764,547) (543,625,381)
--------------- -----------------
Total decrease (1,071,876,985) (631,387,347)
NET ASSETS
Beginning of period 4,979,092,510 5,610,479,857
--------------- -----------------
End of period(a) $ 3,907,215,525 $ 4,979,092,510
--------------- -----------------
--------------- -----------------
---------------
(a) Includes undistributed net investment
income $ 422,486 $ 2,361,582
--------------- -----------------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Equity Fund, Inc.
Notes to Financial Statements (Unaudited)
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.
The Fund invests 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: Securities traded on an exchange and NASDAQ
National Market System securities are valued at the last reported sales price on
the exchange or system on which they are traded or, if no sale was reported on
that date, at the mean between the last reported bid and asked prices or at the
bid price on such day in the absence of an asked price. Securities traded in the
over-the-counter market (including securities listed on exchanges whose primary
market is believed to be over-the-counter) are value by an independent pricing
agent or principal market maker. Short-term securities which mature in more than
60 days are valued based at current market quotations. Short-term securities
which mature in 60 days or less are valued at amortized cost. Securities for
which reliable market quotations are not readily available are valued by the
Valuation Committee based upon procedures adopted by the Board of Directors in
consultation with the manager or subadviser.
In connection with transactions in repurchase agreements with U.S.
financial institutions, it is the Fund's policy that its custodian or designated
subcustodians under triparty repurchase agreements, as the case may be, 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 U.S. dollars. Foreign currency amounts are translated into U.S.
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.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the year, the Fund does not isolate that
portion of
16
<PAGE>
Prudential Equity Fund, Inc.
Notes to Financial Statements (Unaudited) Cont'd.
the results of operations arising as a result of changes in the foreign exchange
rates from the fluctuations arising from changes in the market prices of
securities held at the end of the year. Similarly, the Fund does not isolate the
effect of changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of portfolio securities sold during the year.
Net realized gains or losses on foreign currency transactions represent
net foreign exchange gains or losses from sales and maturities of short-term
securities, disposition of foreign currency, gains or losses realized between
the trade and settlement dates of security transactions, and the difference
between amounts of dividends, interest and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent amounts actually received or
paid. Net currency gains and losses from valuing foreign currency denominated
assets and liabilities at year end exchange rates are reflected as a component
of unrealized appreciation or depreciation on investments and foreign
currencies.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of domestic origin
as a result of, among other factors, the possibility of political and economic
instability and the level of governmental supervision and regulation of foreign
securities markets.
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.
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.
17
<PAGE>
Prudential Equity Fund, Inc.
Notes to Financial Statements (Unaudited) Cont'd.
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.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to increase undistributed net investment income and decrease
accumulated net realized gain on investments and foreign currencies by
$2,101,833. Net investment income, net realized gains and net assets were not
affected by this change.
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'), a wholly owned subsidiary of Prudential. The
Subadvisory Agreement provides that the subadviser will furnish investment
advisory services in connection with the management of the Fund. In connection
therewith, the Subadviser is obligated to keep certain books and records of the
Fund. PIFM continues to have responsibility for all investment advisory services
pursuant to the Management Agreement and supervises the Subadviser's performance
of such services. The Subadviser is reimbursed by PIFM for the reasonable costs
and expenses incurred by the Subadviser in furnishing those services. Effective
January 1, 2000, PIC is paid by PIFM at an annual rate of .250 of 1% of the
Fund's average daily net assets up to $500 million, .226% of 1% of the next $500
million of average daily net assets and .203 of 1% of the Fund's average daily
net assets in excess of $1 billion. PIFM pays for
18
<PAGE>
Prudential Equity Fund, Inc.
Notes to Financial Statements (Unaudited) Cont'd.
the services of PIC, the cost of 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.
The Fund has a distribution agreement with Prudential Investment
Management Services LLC ('PIMS'). The Fund compensates PIMS 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 PIMS. The distribution fees are accrued daily and payable monthly.
No distribution or service fees are paid to PIMS as distributor of the Class Z
shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS 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, 2000.
PIMS has advised the Fund that it has received approximately $335,600 and
$39,100 in front-end sales charges resulting from sales of Class A and Class C
shares, respectively, during the six months ended June 30, 2000. From these
fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn
paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the six months ended June 30, 2000, it
received approximately $2,380,000 and $18,200 in contingent deferred sales
charges imposed upon certain redemptions by certain Class B and Class C
shareholders, respectively.
PIFM, PIC and PIMS are wholly owned subsidiaries of The Prudential
Insurance Company of America.
The Fund, along with other affiliated registered investment companies (the
'Funds'), entered into a syndicated credit agreement ('SCA') with an
unaffiliated lender. The maximum commitment under the SCA is $1 billion.
Interest on any such borrowings will be at market rates. The purpose of the
agreement is to serve as an alternative source of funding for capital share
redemptions. The Funds pay a commitment fee of .080 of 1% of the unused portion
of the credit facility. The commitment fee is accrued and paid quarterly on a
pro rata basis by the Funds. The expiration date
19
<PAGE>
Prudential Equity Fund, Inc.
Notes to Financial Statements (Unaudited) Cont'd.
of the SCA is March 9, 2001. Prior to March 9, 2000, the commitment fee was .065
of 1% of the unused portion of the credit facility. The Fund did not borrow any
amounts pursuant to the SCA during the six months ended June 30, 2000.
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. During the six months ended June 30, 2000,
the Fund incurred fees of approximately $2,691,000 for the services of PMFS. As
of June 30, 2000, approximately $438,900 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, 2000, Prudential Securities
Incorporated, a wholly owned subsidiary of The Prudential Insurance Company of
America, earned $62,400 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, 2000 aggregated $105,621,821 and $743,774,941,
respectively.
The federal income tax basis of the Fund's investments at June 30, 2000
was substantially the same as for financial reporting purposes and, accordingly,
net unrealized appreciation for federal income tax purposes was $437,022,954
(gross unrealized appreciation--$995,443,211; gross unrealized
depreciation--$558,420,257).
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, 2000, the Fund
had a 7.8% undivided interest in the joint account. The undivided interest for
the Fund represents
20
<PAGE>
Prudential Equity Fund, Inc.
Notes to Financial Statements (Unaudited) Cont'd.
$39,643,000 in principal amount. As of such date, each repurchase agreement in
the joint account and the collateral therefor were as follows:
ABN AMRO, Inc., 6.60%, in the principal amount of $100,000,000, repurchase
price $100,055,000, due 7/3/00. The value of the collateral including accrued
interest was $102,000,279.
Bear, Stearns & Co., Inc., 6.55%, in the principal amount of $125,000,000,
repurchase price $125,068,229, due 7/3/00. The value of the collateral including
accrued interest was $128,815,250.
Credit Suisse First Boston Corp., 6.65%, in the principal amount of
$125,000,000, repurchase price $125,069,271, due 7/3/00. The value of the
collateral including accrued interest was $129,282,882.
UBS Warburg, 6.30%, in the principal amount of $58,110,000, repurchase
price $58,140,508, due 7/3/00. The value of the collateral including accrued
interest was $59,275,285.
UBS Warburg, 6.55%, in the principal amount of $100,000,000, repurchase
price $100,054,583, due 7/3/00. The value of the collateral including accrued
interest was $102,000,550.
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 front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18 months. 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. 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.
21
<PAGE>
Prudential Equity Fund, Inc.
Notes to Financial Statements (Unaudited) Cont'd.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
------------------------------------------------------- ------------ ---------------
<S> <C> <C>
Six months ended June 30, 2000:
Shares sold 74,254,433 $ 1,349,503,084
Shares issued in reinvestment of dividends 3,750,951 67,104,513
Shares reacquired (94,043,040) (1,704,283,273)
------------ ---------------
Net decrease in shares outstanding before conversions (16,037,656) (287,675,676)
Shares issued upon conversion from Class B 10,204,047 182,813,666
------------ ---------------
Net decrease in shares outstanding (5,833,609) $ (104,862,010)
------------ ---------------
------------ ---------------
Year ended December 31, 1999:
Shares sold 177,649,766 $ 3,645,037,492
Shares issued in reinvestment of dividends 14,887,348 287,460,109
Shares reacquired (203,602,465) (4,166,822,984)
------------ ---------------
Net decrease in shares outstanding before conversions (11,065,351) (234,325,383)
Shares issued upon conversion from Class B 11,272,942 232,069,406
------------ ---------------
Net increase (decrease) in shares
outstanding 207,591 $ (2,255,977)
------------ ---------------
------------ ---------------
<CAPTION>
Class B
-------------------------------------------------------
<S> <C> <C>
Six months ended June 30, 2000:
Shares sold 11,319,244 $ 204,233,121
Shares issued in reinvestment of dividends 2,886,189 51,576,204
Shares reacquired (31,186,785) (557,937,096)
------------ ---------------
Net decrease in shares outstanding before conversions (16,981,352) (302,127,771)
Shares reacquired upon conversion into Class A (10,251,609) (182,813,666)
------------ ---------------
Net decrease in shares outstanding (27,232,961) $ (484,941,437)
------------ ---------------
------------ ---------------
Year ended December 31, 1999:
Shares sold 28,723,418 $ 588,852,845
Shares issued in reinvestment of
dividends 16,308,918 313,982,958
Shares reacquired (59,782,294) (1,212,006,187)
------------ ---------------
Net decrease in shares outstanding before conversions (14,749,958) (309,170,384)
Shares reacquired upon conversion
into Class A (11,310,483) (232,069,406)
------------ ---------------
Net decrease in shares outstanding (26,060,441) $ (541,239,790)
------------ ---------------
------------ ---------------
</TABLE>
22
<PAGE>
Prudential Equity Fund, Inc.
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C Shares Amount
------------------------------------------------------- ------------ ---------------
Six months ended June 30, 2000:
<S> <C> <C>
Shares sold 975,410 $ 17,522,040
Shares issued in reinvestment of dividends 108,398 1,937,072
Shares reacquired (1,835,774) (32,786,584)
------------ ---------------
Net decrease in shares outstanding (751,966) $ (13,327,472)
------------ ---------------
------------ ---------------
Year ended December 31, 1999:
Shares sold 2,648,837 $ 54,352,108
Shares issued in reinvestment of
dividends 555,178 10,671,295
Shares reacquired (3,410,316) (69,046,229)
------------ ---------------
Net decrease in shares outstanding (206,301) $ (4,022,826)
------------ ---------------
------------ ---------------
<CAPTION>
Class Z
-------------------------------------------------------
<S> <C> <C>
Six months ended June 30, 2000:
Shares sold 3,456,001 $ 62,634,489
Shares issued in reinvestment of dividends 538,093 9,631,871
Shares reacquired (5,096,279) (91,899,988)
------------ ---------------
Net decrease in shares outstanding (1,102,185) $ (19,633,628)
------------ ---------------
------------ ---------------
Year ended December 31, 1999:
Shares sold 5,576,859 $ 114,719,826
Shares issued in reinvestment of
dividends 2,230,904 43,089,014
Shares reacquired (7,591,295) (153,915,628)
------------ ---------------
Net increase in shares outstanding 216,468 $ 3,893,212
------------ ---------------
------------ ---------------
</TABLE>
23
<PAGE>
Prudential Equity Fund, Inc.
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Class A
<S> <C>
----------------
<CAPTION>
Six Months Ended
June 30, 2000
----------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 19.29
----------------
Income from investment operations
Net investment income .10
Net realized and unrealized gain (loss) on investments (1.25)
----------------
Total from investment operations (1.15)
----------------
Less distributions
Dividends from net investment income (.12)
Distributions in excess of net investment income --
Distributions from net realized capital gains (.52)
----------------
Total distributions (.64)
----------------
Net asset value, end of period $ 17.50
----------------
----------------
TOTAL RETURN(a): (5.95)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $1,930,063
Average net assets (000) $1,963,028
Ratios to average net assets:
Expenses, including distribution fees .88%(b)
Expenses, excluding distribution fees .63%(b)
Net investment income 1.13%(b)
Portfolio turnover 3%
</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 return for periods of less than a full year are not
annualized.
(b) Annualized.
24 See Notes to Financial Statements
<PAGE>
Prudential Equity Fund, Inc.
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 19.76 $ 19.85 $ 17.26 $ 16.44 $ 13.24
---------------- ---------------- ---------------- ---------------- ----------------
.26 .31 .38 .35 .27
2.15 1.37 3.70 2.52 3.88
---------------- ---------------- ---------------- ---------------- ----------------
2.41 1.68 4.08 2.87 4.15
---------------- ---------------- ---------------- ---------------- ----------------
(.27) (.28) (.36) (.35) (.27)
-- -- -- (.01) --
(2.61) (1.49) (1.13) (1.69) (.68)
---------------- ---------------- ---------------- ---------------- ----------------
(2.88) (1.77) (1.49) (2.05) (.95)
---------------- ---------------- ---------------- ---------------- ----------------
$ 19.29 $ 19.76 $ 19.85 $ 17.26 $ 16.44
---------------- ---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ---------------- ----------------
12.50% 8.41% 23.88% 17.94% 31.58%
$2,240,250 $2,290,659 $1,912,802 $1,443,466 $1,158,111
$2,217,410 $2,088,616 $1,709,030 $1,233,792 $ 908,365
.86% .85% .88% .89% .91%
.61% .60% .63% .64% .66%
1.25% 1.41% 1.87% 2.07% 1.82%
9% 25% 13% 19% 18%
</TABLE>
See Notes to Financial Statements 25
<PAGE>
Prudential Equity Fund, Inc.
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
----------------
Six Months Ended
June 30, 2000
----------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 19.26
----------------
Income from investment operations
Net investment income .08
Net realized and unrealized gain (loss) on investments (1.30)
----------------
Total from investment operations (1.22)
----------------
Less distributions
Dividends from net investment income (.04)
Distributions in excess of net investment income --
Distributions from net realized capital gains (.52)
----------------
Total distributions (.56)
----------------
Net asset value, end of period $ 17.48
----------------
----------------
TOTAL RETURN(a): (6.31)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $1,657,951
Average net assets (000) $1,947,907
Ratios to average net assets:
Expenses, including distribution fees 1.63%(b)
Expenses, excluding distribution fees .63%(b)
Net investment income .38%(b)
Portfolio turnover 3%
</TABLE>
------------------------------
(a) 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 return for periods of less than a full
year are not annualized.
(b) Annualized.
26 See Notes to Financial Statements
<PAGE>
Prudential Equity Fund, Inc.
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 19.73 $ 19.83 $ 17.24 $ 16.43 $ 13.24
---------------- ---------------- ---------------- ---------------- ----------------
.13 .14 .22 .22 .16
2.12 1.37 3.72 2.51 3.87
---------------- ---------------- ---------------- ---------------- ----------------
2.25 1.51 3.94 2.73 4.03
---------------- ---------------- ---------------- ---------------- ----------------
(.11) (.12) (.22) (.22) (.16)
-- -- -- (.01) --
(2.61) (1.49) (1.13) (1.69) (.68)
---------------- ---------------- ---------------- ---------------- ----------------
(2.72) (1.61) (1.35) (1.92) (.84)
---------------- ---------------- ---------------- ---------------- ----------------
$ 19.26 $ 19.73 $ 19.83 $ 17.24 $ 16.43
---------------- ---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ---------------- ----------------
11.69% 7.55% 23.05% 17.14% 30.62%
$2,351,200 $2,923,060 $3,090,767 $2,626,479 $2,140,895
$2,666,269 $3,135,980 $2,924,413 $2,417,900 $1,891,160
1.61% 1.60% 1.63% 1.64% 1.66%
.61% .60% .63% .64% .66%
.49% .66% 1.12% 1.37% .99%
9% 25% 13% 19% 18%
</TABLE>
See Notes to Financial Statements 27
<PAGE>
Prudential Equity Fund, Inc.
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
----------------
Six Months Ended
June 30, 2000
----------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 19.26
--------
Income from investment operations
Net investment income .02
Net realized and unrealized gain (loss) on investments (1.24)
--------
Total from investment operations (1.22)
--------
Less distributions
Dividends from net investment income (.04)
Distributions in excess of net investment income --
Distributions from net realized capital gains (.52)
--------
Total distributions (.56)
--------
Net asset value, end of period $ 17.48
--------
--------
TOTAL RETURN(a): (6.31)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 61,950
Average net assets (000) $ 69,880
Ratios to average net assets:
Expenses, including distribution fees 1.63%(b)
Expenses, excluding distribution fees .63%(b)
Net investment income .38%(b)
Portfolio turnover 3%
</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 return for periods of less than a full year are not
annualized.
(b) Annualized.
28 See Notes to Financial Statements
<PAGE>
Prudential Equity Fund, Inc.
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
---------------------------------------------------------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 19.73 $ 19.83 $ 17.24 $ 16.43 $ 13.24
-------- -------- -------- -------- --------
.10 .16 .25 .22 .16
2.15 1.35 3.69 2.51 3.87
-------- -------- -------- -------- --------
2.25 1.51 3.94 2.73 4.03
-------- -------- -------- -------- --------
(.11) (.12) (.22) (.22) (.16)
-- -- -- (.01) --
(2.61) (1.49) (1.13) (1.69) (.68)
-------- -------- -------- -------- --------
(2.72) (1.61) (1.35) (1.92) (.84)
-------- -------- -------- -------- --------
$ 19.26 $ 19.73 $ 19.83 $ 17.24 $ 16.43
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
11.69% 7.55% 23.05% 17.14% 30.62%
$ 82,737 $ 88,839 $ 72,244 $ 47,477 $ 23,894
$ 86,078 $ 82,907 $ 60,434 $ 36,745 $ 12,190
1.61% 1.60% 1.63% 1.64% 1.66%
.61% .60% .63% .64% .66%
.50% .67% 1.11% 1.37% 1.03%
9% 25% 13% 19% 18%
</TABLE>
See Notes to Financial Statements 29
<PAGE>
Prudential Equity Fund, Inc.
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
----------------
Six Months Ended
June 30, 2000
----------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 19.30
----------------
Income from investment operations
Net investment income .13
Net realized and unrealized gain (loss) on investments (1.26)
----------------
Total from investment operations (1.13)
----------------
Less distributions
Dividends from net investment income (.15)
Distributions in excess of net investment income --
Distributions from net realized capital gains (.52)
----------------
Total distributions (.67)
----------------
Net asset value, end of period $ 17.50
----------------
----------------
TOTAL RETURN(a): (5.87)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $257,251
Average net assets (000) $273,685
Ratios to average net assets:
Expenses, including distribution fees .63%(b)
Expenses, excluding distribution fees .63%(b)
Net investment income 1.38%(b)
Portfolio turnover 3%
</TABLE>
------------------------------
(a) 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 return for periods of less than a full
year are not annualized.
(b) Annualized.
(c) Commencement of offering of Class Z shares.
30 See Notes to Financial Statements
<PAGE>
Prudential Equity Fund, Inc.
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
----------------------------------------------------------------------------------------
Year Ended December 31, March 1, 1996(c)
--------------------------------------------------------- Through December 31,
1999 1998 1997 1996
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 19.76 $ 19.87 $ 17.26 $ 17.10
---------------- ---------------- ---------------- ----------
.31 .35 .42 .37
2.16 1.36 3.72 1.88
---------------- ---------------- ---------------- ----------
2.47 1.71 4.14 2.25
---------------- ---------------- ---------------- ----------
(.32) (.33) (.40) (.39)
-- -- -- (.01)
(2.61) (1.49) (1.13) (1.69)
---------------- ---------------- ---------------- ----------
(2.93) (1.82) (1.53) (2.09)
---------------- ---------------- ---------------- ----------
$ 19.30 $ 19.76 $ 19.87 $ 17.26
---------------- ---------------- ---------------- ----------
---------------- ---------------- ---------------- ----------
12.81% 8.56% 24.29% 13.65%
$304,906 $307,921 $267,121 $128,752
$302,528 $311,816 $ 57,646 $124,631
.61% .60% .63% .64%(b)
.61% .60% .63% .64%(b)
1.50% 1.67% 2.11% 2.43%(b)
9% 25% 13% 19%
</TABLE>
See Notes to Financial Statements 31
<PAGE>
Prudential Equity Fund, Inc.
www.prudential.com (800) 225-1852
Prudential Mutual Funds
Prudential offers a broad range of mutual funds designed to meet your
individual needs. For information about these funds, contact your financial
adviser or call us at (800) 225-1852. Read the prospectus carefully before
you invest or send money.
STOCK FUNDS
Large Capitalization Stock Funds
Prudential 20/20 Focus Fund
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Stock Index Fund
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund
Strategic Partners Focused Growth Fund
Target Funds
Large Capitalization Growth Fund
Large Capitalization Value Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Small- to Mid-Capitalization Stock Funds
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Prudential Small Company Fund, Inc.
Prudential Tax-Managed Small-Cap Fund, Inc.
Prudential U.S. Emerging Growth Fund, Inc.
Target Funds
Small Capitalization Growth Fund
Small Capitalization Value Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Equity Opportunity Fund
Sector Stock Funds
Prudential Natural Resources Fund, Inc.
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Global/International Stock Funds
Global Utility Fund, Inc.
Prudential Europe Growth Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Prudential Global Growth Fund
Prudential International Value Fund
Prudential Jennison International Growth Fund
Target Funds
International Equity Fund
BALANCED/ALLOCATION FUNDS
Prudential Diversified Funds
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund
BOND FUNDS
Taxable Bond Funds
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential High Yield Total Return Fund, Inc.
Prudential Short-Term Corporate Bond Fund, Inc.
Income Portfolio
Prudential Total Return Bond Fund, Inc.
Target Funds
Total Return Bond Fund
Tax-Free Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Income Series
Insured Series
Prudential Municipal Series Fund
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
Global/International Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
MONEY MARKET FUNDS
Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Prudential MoneyMart Assets, Inc.
Prudential Special Money Market Fund, Inc.
Money Market Series
Tax-Free Money Market Funds
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
Prudential Tax-Free Money Fund, Inc.
Other Money Market Funds
COMMAND Government Fund
COMMAND Money Fund
COMMAND Tax-Free Fund
<PAGE>
Prudential Equity Fund, Inc.
www.prudential.com (800) 225-1852
Getting the Most From Your Prudential Mutual Fund
How many times have you read these reports-or other financial materials-and
stumbled across a word that you don't understand?
Many shareholders have run into the same problem. We'd like to help. So we'll
use this space from time to time to explain some of the words you might have
read, but not understood. And if you have a favorite word that no one can
explain to your satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half of one percent is 50 basis
points.
Collateralized Mortgage Obligations (CMOs): Mortgage-backed bonds that separate
mortgage pools into different maturity classes called tranches. These
instruments are sensitive to changes in interest rates and homeowner
refinancing activity. They are subject to prepayment and maturity extension
risk.
Derivatives: Securities that derive their value from other securities. The rate
of return of these financial instruments rises and falls-sometimes very
suddenly-in response to changes in some specific interest rate, currency,
stock, or other variable.
Discount Rate: The interest rate charged by the Federal Reserve on loans to
member banks.
Federal Funds Rate: The interest rate charged by one bank to another on
overnight loans.
Futures Contract: An agreement to purchase or sell a specific amount of a
commodity or financial instrument at a set price at a specified date in the
future.
Leverage: The use of borrowed assets to enhance return. The expectation is that
the interest rate charged on borrowed funds will be lower than the return on
the investment. While leverage can increase profits, it can also magnify
losses.
Liquidity: The ease with which a financial instrument (or product) can be
bought or sold (converted into cash) in the financial markets.
Price/Earnings Ratio: The price of a share of stock divided by the earnings
per share for a 12-month period.
Option: An agreement to purchase or sell something, such as shares of stock,
by a certain time for a specified price. An option need not be exercised.
Spread: The difference between two values; often used to describe the
difference between "bid" and "asked" prices of a security, or between the
yields of two similar maturity bonds.
Yankee Bond: A bond sold by a foreign company or government on the U.S. market
and denominated in U.S. dollars.
<PAGE>
Prudential Equity Fund, Inc.
www.prudential.com (800) 225-1852
Getting the Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds, you receive financial advice
from a Prudential Securities Financial Advisor or Pruco Securities registered
representative. Your advisor or representative can provide you with the
following services:
There's No Reward Without Risk; but Is This Risk Worth It?
Your financial advisor or registered representative can help you match the
reward you seek with the risk you can tolerate. Risk can be difficult to
gauge-sometimes even the simplest investments bear surprising risks. The
educated investor knows that markets seldom move in just one direction. There
are times when a market sector or asset class will lose value or provide little
in the way of total return. Managing your own expectations is easier with help
from someone who understands the markets and who knows you!
Keeping Up With the Joneses
A financial advisor or registered representative can help you wade through the
numerous available mutual funds to find the ones that fit your individual
investment profile and risk tolerance. While the newspapers and popular
magazines are full of advice about investing, they are aimed at generic groups
of people or representative individuals-not at you personally. Your financial
advisor or registered representative will review your investment objectives
with you. This means you can make financial decisions based on the assets and
liabilities in your current portfolio and your risk tolerance-not just based on
the current investment fad.
Buy Low, Sell High
Buying at the top of a market cycle and selling at the bottom are among the
most common investor mistakes. But sometimes it's difficult to hold on to an
investment when it's losing value every month. Your financial advisor or
registered representative can answer questions when you're confused or worried
about your investment, and should remind you that you're investing for the
long haul.
<PAGE>
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Directors
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
Robin B. Smith
John R. Strangfeld
Louis A. Weil, III
Clay T. Whitehead
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Marguerite E.H. Morrison, Secretary
William V. Healey, 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
194 Wood Avenue South
Iselin, NJ 08830
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
Fund Symbols NASDAQ CUSIP
Class A PBQAX 744316100
Class B PBQFX 744316209
Class C PRECX 744316308
Class Z PEQZX 744316407
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, 2000, were not audited
and, accordingly, no opinion is expressed on them.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
MF101E2 744316100 744316209 744316308 744316407
(LOGO) Printed on Recycled Paper