-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PuLRRDNUz0/wm5HgG+RC5D4m4fyRxrZ/39OTFvvtrNi0qoANy2HFG0GvqNN4cR7+ 6iYpNERdgO74l3yVHnRtxA== 0000898733-03-000373.txt : 20030709 0000898733-03-000373.hdr.sgml : 20030709 20030709134300 ACCESSION NUMBER: 0000898733-03-000373 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030403 FILED AS OF DATE: 20030709 EFFECTIVENESS DATE: 20030709 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRUDENTIAL TAX MANAGED FUNDS CENTRAL INDEX KEY: 0001070287 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-09101 FILM NUMBER: 03779759 BUSINESS ADDRESS: STREET 1: GATEWAY CENTER 3 9TH FLOOR STREET 2: 100 MULBERRY ST CITY: NEWARK STATE: NJ ZIP: 07102-4077 BUSINESS PHONE: 9733677525 MAIL ADDRESS: STREET 1: GATEWAY CENTER 3 9TH FLOOR STREET 2: 100 MULBERRY ST CITY: NEWARK STATE: NJ ZIP: 07102-4077 FORMER COMPANY: FORMER CONFORMED NAME: PRUDENTIAL TAX MANAGED EQUITY FUND DATE OF NAME CHANGE: 19980911 N-CSR 1 mf16054ncsr.txt TAX-MANAGED EQUITY FUND -- 4/30/03 -- SEMI-ANNUAL UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-09101 Exact name of registrant as specified in charter: Prudential Tax-Managed Equity Fund Address of principal executive offices: Gateway Center 3, 100 Mulberry Street, Newark, New Jersey 07102 Name and address of agent for service: Ms. Maria Master Gateway Center 3, 100 Mulberry Street, Newark, New Jersey 07102 Registrant's telephone number, including area code: 973-367-3028 Date of fiscal year end: 10/31/03 Date of reporting period: 04/30/03 Item 1 -- Reports to Stockholders SEMIANNUAL REPORT APRIL 30, 2003 PRUDENTIAL TAX-MANAGED EQUITY FUND FUND TYPE Large-capitalization stock OBJECTIVE Long-term after-tax growth of capital This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. 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. Prudential Financial is a service mark of The Prudential Insurance Company of America, Newark, NJ, and its affiliates. PRUDENTIAL FINANCIAL (LOGO) Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Performance at a Glance FUND OBJECTIVE The investment objective of the Prudential Tax- Managed Equity Fund (the Fund) is long-term after-tax growth of capital. There can be no assurance that the Fund will achieve its investment objective. Cumulative Total Returns1 As of 4/30/03 Six Months One Year Since Inception2 Class A 5.01% -12.79% -18.20% Class B 4.61 -13.51 -20.60 Class C 4.61 -13.51 -20.60 Class Z 5.08 -12.57 -17.20 S&P 500 Index3 4.47 -13.30 -21.56 Lipper Large-Cap Core Funds Avg.4 2.96 -15.19 -23.59 Average Annual Total Returns1 As of 3/31/03 One Year Since Inception2 Class A -27.09% -7.79% Class B -27.67 -7.53 Class B-Return After Taxes on Distributions -27.67 -7.53 Class B-Return After Taxes on Distributions and Sale of Fund Shares -16.99 -5.87 Class C -25.37 -7.53 Class Z -23.04 -6.36 S&P 500 Index3 -24.75 -7.58 Lipper Large-Cap Core Funds Avg.4 -25.78 -8.23 Past performance is not indicative of future results. Principal value 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 LLC and Lipper Inc. The cumulative total returns do not take into account applicable sales charges. The average annual total returns do take into account applicable sales charges. Without the distribution and service (12b-1) fee waiver of 0.05% for Class A shares, the returns would have been lower. The Fund charges a maximum front-end sales charge of 5% for Class A shares in most circumstances, and a 12b-1 fee of up to 0.30% annually. In some circumstances, Class A shares may not be subject to a front-end sales charge, but may be subject to a 1% contingent deferred sales charge (CDSC) for the first year. Class B shares are subject to a declining CDSC of 5%, 4%, 3%, 2%, 1%, and 1% for the first six years respectively after purchase, and a 12b-1 fee of 1.00% annually. Approximately seven years after purchase, Class B shares will automatically convert to Class A shares on a quarterly basis. Class C shares are subject to a front-end sales charge of 1%, a CDSC of 1% for shares redeemed within 18 months of purchase, and a 12b-1 fee of 1.00% annually. Class Z shares are not subject to a sales charge or 12b-1 fee. After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class B shares. After-tax returns for other share classes will vary due to differing sales charges www.prudential.com (800) 225-1852 Semiannual Report April 30, 2003 and expenses. Past performance, before and after taxes, does not mean that the Fund will achieve similar results in the future. 2Inception date: 3/3/99. 3The Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index) is an unmanaged index of 500 stocks of large U.S. companies. It gives a broad look at how stock prices in the United States have performed. 4The Lipper Large-Cap Core Funds Average (Lipper Average) represents returns based on an average return of all funds in the Lipper Large-Cap Core Funds category for the periods noted. Funds in the Lipper Average invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-cap core funds have wide latitude in the companies in which they invest. These funds typically have a below- average price/earnings ratio, price-to-book ratio, and three-year sales-per-share growth value compared to the S&P 500 Index. Investors cannot invest directly in an index. The returns for the S&P 500 Index and the Lipper Average would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses, but not sales charges or taxes. 1 PRUDENTIAL FINANCIAL (LOGO) June 16, 2003 DEAR SHAREHOLDER, After fighting in Iraq ended in April 2003, U.S. consumer confidence rose significantly and a more optimistic tone pervaded the financial markets. Major stock market indexes have continued to improve, even as the long-standing bond market rally persisted. While we welcome these developments, it is important to remember that a wise investor plans for tomorrow's needs today regardless of the direction of financial markets. Whether you are investing for your retirement, your children's education, or for a new home for your family, Prudential mutual funds offer advantages that may help you reach your financial goals. Experienced asset managers, working closely with research analysts, employ time-tested investment processes that were honed under a variety of market conditions. We recommend that you consult a financial professional who can help you strike the right balance between your desire to obtain a particular return from an investment and your tolerance for risk. I was named president of the Prudential Tax-Managed Funds in March 2003. On behalf of the Prudential Financial family, I would like to thank you for your continued confidence in Prudential mutual funds. We look forward to serving your future investment needs. Sincerely, Judy A. Rice, President Prudential Tax-Managed Funds/Prudential Tax-Managed Equity Fund 2 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Portfolio of Investments as of April 30, 2003 (Unaudited)
Shares Description Value (Note 1) - ----------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS 99.8% COMMON STOCKS - ------------------------------------------------------------------------------------- CONSUMER DISCRETIONARY 14.9% Auto & Truck 0.9% 20,800 Ford Motor Co.(b) $ 214,240 34,700 General Motors Corp.(b) 1,250,935 8,200 Gentex Corp.(a) 247,640 2,800 Harley-Davidson, Inc. 124,432 -------------- 1,837,247 - ------------------------------------------------------------------------------------- Consumer Products 0.3% 14,400 Dial Corp. (The) 299,952 3,600 Eastman Kodak Co. 107,676 11,700 Mattel, Inc. 254,358 -------------- 661,986 - ------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure 0.7% 2,700 Applebee's International, Inc. 73,980 3,700 Brinker International, Inc.(a) 117,475 3,900 Harrah's Entertainment, Inc.(a) 153,621 23,900 Mandalay Resort Group(a)(b) 631,438 3,800 McDonald's Corp. 64,980 4,700 Papa John's International, Inc.(a) 111,766 10,000 Yum! Brands, Inc.(a) 247,000 -------------- 1,400,260 - ------------------------------------------------------------------------------------- Housing Construction 0.7% 12,600 KB HOME(b) 620,802 13,200 Pulte Homes, Inc. 765,468 1,200 Standard Pacific Corp. 36,300 -------------- 1,422,570 - ------------------------------------------------------------------------------------- Internet & Catalog Retail 0.3% 5,300 eBay, Inc.(a)(b) 491,681
See Notes to Financial Statements 3 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
Shares Description Value (Note 1) - ----------------------------------------------------------------------------------------- Media 4.9% 92,100 AOL Time Warner, Inc.(a) $ 1,259,928 32,300 Clear Channel Communications, Inc.(a) 1,263,253 7,600 Comcast Corp. (Class A)(a)(b) 242,516 45,300 Disney (Walt) Co. 845,298 17,300 Gannett Co., Inc. 1,309,956 5,100 Knight-Ridder, Inc. 329,205 21,200 Meredith Corp. 916,264 12,500 The McGraw Hill Cos., Inc. 729,875 7,300 Tribune Co. 357,554 56,500 Viacom, Inc. (Class B)(a) 2,452,665 -------------- 9,706,514 - ------------------------------------------------------------------------------------- Multiline Retail 3.4% 1 99 Cents Only Stores(a) 29 21,600 BJ's Wholesale Club, Inc.(a)(b) 304,992 1,400 Dillard's, Inc. (Class A) 19,572 16,600 Federated Department Stores, Inc. 508,292 7,200 J.C. Penney Co., Inc. 122,832 8,100 Sears, Roebuck & Co.(b) 229,554 101,300 Wal-Mart Stores, Inc. 5,705,216 -------------- 6,890,487 - ------------------------------------------------------------------------------------- Specialty Retail 3.7% 23,300 Abercrombie & Fitch Co. (Class A)(a)(b) 766,104 5,200 AutoZone, Inc.(a)(b) 420,212 900 Bed Bath & Beyond, Inc.(a) 35,559 25,300 Best Buy Co., Inc.(a)(b) 874,874 6,300 Coach, Inc.(a) 274,113 1,900 Harman International Industries, Inc. 126,521 56,300 Home Depot, Inc. 1,583,719 26,700 Jones Apparel Group, Inc.(a) 761,484 2,600 Liz Claiborne, Inc.(b) 84,578 46,400 Lowe's Companies, Inc. 2,036,496 26,100 PETsMART, Inc.(a) 394,893 -------------- 7,358,553
4 See Notes to Financial Statements Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
Shares Description Value (Note 1) - ----------------------------------------------------------------------------------------- CONSUMER STAPLES 8.0% Beverages 2.9% 31,500 Anheuser-Busch Cos., Inc. $ 1,571,220 35,800 Coca-Cola Co. 1,446,320 58,000 Pepsi Bottling Group, Inc. (The) 1,191,320 600 PepsiAmericas, Inc. 7,494 37,890 PepsiCo, Inc.(b) 1,639,879 -------------- 5,856,233 - ------------------------------------------------------------------------------------- Cosmetics & Soaps 2.4% 6,300 Avon Products, Inc. 366,471 8,500 Clorox Co. 384,370 5,300 Colgate-Palmolive Co. 303,001 26,400 Kimberly-Clark Corp. 1,313,928 27,000 Procter & Gamble Co. 2,425,950 2,100 The Gillette Co. 63,945 -------------- 4,857,665 - ------------------------------------------------------------------------------------- Food & Drug Retailing 0.6% 5,700 Albertson's, Inc.(b) 113,202 34,000 Kroger Co. (The)(a) 486,200 4,400 Safeway, Inc.(a)(b) 73,128 39,200 Winn-Dixie Stores, Inc.(a) 491,176 -------------- 1,163,706 - ------------------------------------------------------------------------------------- Food Products 1.2% 100 ConAgra Foods, Inc.(b) 2,100 11,100 General Mills, Inc. 500,721 12,700 H.J. Heinz Co. 379,476 9,400 Kellogg Co. 307,756 56,300 Sara Lee Corp. 944,714 1,100 Sensient Technologies Corp. 24,310 22,329 Tyson Foods, Inc. (Class A) 215,028 -------------- 2,374,105 - ------------------------------------------------------------------------------------- Tobacco 0.9% 57,100 Altria Group, Inc. 1,756,396
See Notes to Financial Statements 5 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
Shares Description Value (Note 1) - ----------------------------------------------------------------------------------------- ENERGY 5.2% Oil & Gas Exploration/Production 2.1% 15,900 Amerada Hess Corp. $ 717,885 15,700 Anadarko Petroleum Corp. 697,080 1,200 Baker Hughes, Inc. 33,600 5,400 Burlington Resources, Inc. 250,074 5,200 ConocoPhillips 261,560 21,600 Devon Energy Corp.(b) 1,020,600 7,400 Kinder Morgan, Inc. 347,948 17,500 Marathon Oil Corp. 398,475 2,800 Nabors Industries Ltd.(a) 109,760 1,600 Occidental Petroleum Corp. 47,760 12,400 Pioneer Natural Resources Co.(a) 296,608 2,900 Schlumberger Ltd. 121,597 400 Valero Energy Corp. 14,700 -------------- 4,317,647 - ------------------------------------------------------------------------------------- Petroleum & Coal 3.1% 23,011 ChevronTexaco Corp.(b) 1,445,321 134,706 Exxon Mobil Corp. 4,741,651 -------------- 6,186,972 - ------------------------------------------------------------------------------------- FINANCIALS 20.8% Banking 5.1% 5,300 Astoria Financial Corp. 132,606 38,200 Bank of America Corp. 2,828,710 9,800 BB&T Corp. 319,480 9,325 Charter One Financial, Inc. 270,891 3,200 Commerce Bancorp, Inc. 130,144 23,030 FleetBoston Financial Corp. 610,756 10,700 Golden West Financial Corp. 806,994 1,100 GreenPoint Financial Corp. 52,536 26,700 New York Community Bancorp, Inc. 927,024 8,900 North Fork Bancorp, Inc. 288,004 2,300 PNC Financial Services Group 100,970 4,300 SunTrust Banks, Inc.(b) 246,046 62,291 U.S. Bancorp(b) 1,379,746 27,300 Union Planters Corp. 779,142 26,100 Wells Fargo & Co. 1,259,586 -------------- 10,132,635
6 See Notes to Financial Statements Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
Shares Description Value (Note 1) - ----------------------------------------------------------------------------------------- Financial Services 11.1% 100 Ambac Financial Group, Inc. $ 5,835 16,500 American Express Co. 624,690 33,200 Bank One Corp. 1,196,860 113,800 Citigroup, Inc. 4,466,650 10,700 Countrywide Financial Corp. 723,320 4,600 Deluxe Corp. 202,446 42,000 Fannie Mae 3,040,380 34,200 Freddie Mac 1,980,180 11,400 Goldman Sachs Group, Inc. (The) 865,260 53,120 J.P. Morgan Chase & Co. 1,559,072 21,900 John Hancock Financial Services, Inc. 635,538 500 MBNA Corp. 9,450 4,900 Moody's Corp. 236,621 19,600 Morgan Stanley 877,100 31,300 National City Corp. 937,748 9,300 SLM Corp. 1,041,600 47,000 Wachovia Corp. 1,795,870 53,875 Washington Mutual, Inc. 2,128,062 -------------- 22,326,682 - ------------------------------------------------------------------------------------- Insurance 4.6% 4,000 ACE Ltd.(b) 132,320 2,500 AFLAC, Inc. 81,775 25,000 Allstate Corp. 944,750 900 American Financial Group, Inc. 19,962 47,996 American International Group, Inc. 2,781,368 3,600 AmerUs Group Co. 94,284 6,900 Brown & Brown, Inc. 246,813 680 Fidelity National Financial, Inc. 23,392 2,800 Loews Corp. 115,556 61,700 MetLife, Inc.(b) 1,772,641 26,200 Principal Financial Group, Inc. 762,420 2,700 St. Paul Cos., Inc. (The) 92,718 97,800 Travelers Property Casualty Corp. (Class B) 1,589,250 52,000 UnumProvident Corp. 598,000 -------------- 9,255,249
See Notes to Financial Statements 7 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
Shares Description Value (Note 1) - ----------------------------------------------------------------------------------------- HEALTHCARE 15.6% Biotechnology 1.1% 37,480 Amgen, Inc.(a) $ 2,297,899 - ------------------------------------------------------------------------------------- Healthcare Equipment & Supplies 2.1% 23,300 Becton, Dickinson & Co.(b) 824,820 14,400 Boston Scientific Corp.(a) 619,920 5,200 C.R. Bard, Inc. 329,576 11,600 Cytyc Corp.(a) 153,120 2,200 Edwards Lifesciences Corp.(a) 63,514 1,400 Hillenbrand Industries, Inc. 69,860 8,300 Medtronic, Inc. 396,242 25,200 Stryker Corp.(b) 1,688,652 -------------- 4,145,704 - ------------------------------------------------------------------------------------- Healthcare Providers & Services 2.1% 11,100 AdvancePCS(a) 333,666 3,300 Aetna, Inc. 164,340 13,800 Anthem, Inc.(a)(b) 947,232 4,150 Cardinal Health, Inc.(b) 229,412 10,400 Express Scripts, Inc. (Class A)(a) 613,184 14,500 Humana, Inc.(a) 160,225 6,600 PacifiCare Health Systems, Inc.(a) 210,144 8,100 Tenet Healthcare Corp.(a) 120,204 13,300 UnitedHealth Group, Inc. 1,225,329 700 Universal Health Services, Inc. (Class B)(a) 27,069 2,200 WellPoint Health Networks, Inc.(a) 167,068 -------------- 4,197,873 - ------------------------------------------------------------------------------------- Pharmaceuticals 10.3% 24,100 Abbott Laboratories 979,183 6,300 Allergan, Inc. 442,575 59,700 Bristol-Myers Squibb Co.(b) 1,524,738 27,300 Forest Laboratories, Inc.(a) 1,411,956 13,400 Genentech, Inc.(a) 509,066 79,904 Johnson & Johnson 4,503,390 10,000 Lilly Eli & Co. 638,200
8 See Notes to Financial Statements Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
Shares Description Value (Note 1) - ----------------------------------------------------------------------------------------- 71,100 Merck & Co., Inc. $ 4,136,598 155,435 Pfizer, Inc. 4,779,626 41,300 Wyeth 1,797,789 -------------- 20,723,121 - ------------------------------------------------------------------------------------- INDUSTRIALS 11.1% Aerospace/Defense 1.2% 27,600 Boeing Co. 752,928 2,000 General Dynamics Corp. 124,140 24,800 Honeywell International, Inc. 585,280 16,900 United Technologies Corp. 1,044,589 -------------- 2,506,937 - ------------------------------------------------------------------------------------- Airlines 0.1% 4,200 JetBlue Airways Corp.(a) 132,048 - ------------------------------------------------------------------------------------- Building Products 900 York International Corp. 21,510 - ------------------------------------------------------------------------------------- Business Services 0.4% 11,625 Apollo Group, Inc. (Class A)(a) 630,063 6,000 Convergys Corp.(a) 97,320 -------------- 727,383 - ------------------------------------------------------------------------------------- Data Processing/Management 0.6% 18,800 Automatic Data Processing, Inc. 632,244 8,200 CSG Systems International, Inc.(a) 86,346 14,200 First Data Corp. 557,066 -------------- 1,275,656 - ------------------------------------------------------------------------------------- Diversified Manufacturing Operations 0.6% 5,400 Crane Co. 105,462 12,900 Danaher Corp. 889,842 1,700 Pentair, Inc. 65,518 5,400 Trinity Industries, Inc. 89,370 -------------- 1,150,192
See Notes to Financial Statements 9 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
Shares Description Value (Note 1) - ----------------------------------------------------------------------------------------- Electrical Equipment 1.3% 5,800 Acuity Brands, Inc. $ 88,334 10,000 Emerson Electric Co. 507,000 38,200 Energizer Holdings, Inc.(a) 1,100,924 18,700 L-3 Communications Holdings, Inc.(a)(b) 830,280 -------------- 2,526,538 - ------------------------------------------------------------------------------------- Financial/Business Services 0.3% 13,700 Block (H&R), Inc. 529,094 - ------------------------------------------------------------------------------------- Industrial Conglomerates 4.7% 12,700 3M Co. 1,600,708 201,700 General Electric Co. 5,940,065 122,600 Tyco International Ltd. 1,912,560 -------------- 9,453,333 - ------------------------------------------------------------------------------------- Machinery 0.3% 2,600 Illinois Tool Works, Inc. 166,348 900 Tecumseh Products Co. (Class A) 36,216 9,700 W.W. Grainger, Inc. 447,655 -------------- 650,219 - ------------------------------------------------------------------------------------- Miscellaneous Basic Industry 3,000 Waste Management, Inc. 65,160 - ------------------------------------------------------------------------------------- Railroads 0.1% 3,700 Union Pacific Corp. 220,224 - ------------------------------------------------------------------------------------- Schools 0.1% 2,900 Education Management Corp.(a)(b) 141,578 - ------------------------------------------------------------------------------------- Transportation 1.4% 1,600 C.H. Robinson Worldwide, Inc. 58,864 10,000 EGL, Inc.(a) 160,400 1,900 Expeditors International of Washington, Inc. 69,082 4,900 FedEx Corp.(b) 293,412 8,700 J.B. Hunt Transport Services, Inc.(a) 300,585
10 See Notes to Financial Statements Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
Shares Description Value (Note 1) - ----------------------------------------------------------------------------------------- 9,100 Ryder System, Inc. $ 226,044 27,900 United Parcel Service, Inc. (Class B) 1,733,148 -------------- 2,841,535 - ------------------------------------------------------------------------------------- INFORMATION TECHNOLOGY 15.7% Communications Equipment 2.8% 267,300 Cisco Systems, Inc.(a) 4,020,192 48,600 QUALCOMM, Inc. 1,549,854 -------------- 5,570,046 - ------------------------------------------------------------------------------------- Computers 3.7% 66,800 Dell Computer Corp.(a) 1,931,188 43,850 Hewlett-Packard Co. 714,755 47,200 International Business Machines Corp. 4,007,280 9,300 Lexmark International, Inc.(a)(b) 692,943 24,000 Sun Microsystems, Inc.(a)(b) 79,200 -------------- 7,425,366 - ------------------------------------------------------------------------------------- Computer Software & Services 5.6% 9,500 CheckFree Corp.(a) 261,915 49,800 Citrix Systems, Inc.(a) 944,208 68,700 EMC Corp.(a) 624,483 23,700 Intuit, Inc.(a) 919,086 255,900 Microsoft Corp. 6,543,363 165,000 Oracle Corp.(a)(b) 1,960,200 -------------- 11,253,255 - ------------------------------------------------------------------------------------- Electronic Components 1.4% 1,500 Mentor Graphics Corp.(a) 15,630 22,300 QLogic Corp.(a) 980,977 99,100 Texas Instruments, Inc. 1,832,359 1,100 Waters Corp.(a) 26,411 -------------- 2,855,377 - ------------------------------------------------------------------------------------- Internet 0.6% 49,100 Yahoo!, Inc.(a)(b) 1,216,698
See Notes to Financial Statements 11 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
Shares Description Value (Note 1) - ----------------------------------------------------------------------------------------- Semiconductors 1.6% 150,600 Intel Corp. $ 2,771,040 9,800 Linear Technology Corp. 337,806 -------------- 3,108,846 - ------------------------------------------------------------------------------------- MATERIALS 1.8% Chemicals 0.7% 1,800 E.I. du Pont de Nemours & Co. 76,554 6,600 FMC Corp.(a) 119,592 20,500 Hercules, Inc.(a) 208,075 9,600 International Flavors & Fragrances, Inc. 305,088 28,800 Monsanto Co. 501,120 7,200 OM Group, Inc. 83,952 13,000 RPM International, Inc. 160,680 -------------- 1,455,061 - ------------------------------------------------------------------------------------- Containers & Packaging 0.4% 4,800 Ball Corp. 269,568 23,400 Pactiv Corp.(a) 480,168 -------------- 749,736 - ------------------------------------------------------------------------------------- Metals & Mining 0.5% 8,000 Alcoa, Inc. 183,440 53,300 United States Steel Corp. 763,256 -------------- 946,696 - ------------------------------------------------------------------------------------- Paper & Packaging 0.2% 100 Glatfelter 1,145 8,500 International Paper Co. 303,875 100 Longview Fibre Co. 763 8,600 Louisiana-Pacific Corp.(a) 69,488 -------------- 375,271 - ------------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES 4.5% Diversified Telecommunication Services 3.5% 1,900 ADTRAN, Inc.(a) 76,912 64,700 AT&T Corp. 1,103,135
12 See Notes to Financial Statements Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
Shares Description Value (Note 1) - ----------------------------------------------------------------------------------------- $ 88,800 BellSouth Corp. $ 2,263,512 1,100 CommScope, Inc.(a) 9,427 1,100 Price Communications Corp.(a) 13,431 35,764 SBC Communications, Inc. 835,447 67,300 Sprint Corp. (Fon Group)(b) 774,623 53,496 Verizon Communications, Inc. 1,999,681 -------------- 7,076,168 - ------------------------------------------------------------------------------------- Wireless Telecommunication Services 1.0% 65,200 AT&T Wireless Services, Inc.(a) 421,192 103,300 Nextel Communications, Inc. (Class A)(a)(b) 1,527,807 -------------- 1,948,999 - ------------------------------------------------------------------------------------- UTILITIES 2.2% Electric Utilities 1.6% 21,000 Alliant Energy Corp.(b) 368,760 1,200 CenterPoint Energy, Inc. 9,480 12,900 Cleco Corp. 193,500 44,600 Edison International(a) 650,714 19,488 Exelon Corp. 1,033,644 10,500 FirstEnergy Corp. 354,165 7,800 PG&E Corp.(a)(b) 116,844 9,400 PPL Corp. 340,280 -------------- 3,067,387 - ------------------------------------------------------------------------------------- Gas Utilities 0.6% 6,800 Nicor, Inc. 204,408 7,300 Praxair, Inc. 423,984 23,400 Sempra Energy(b) 628,056 -------------- 1,256,448 -------------- Total long-term investments (cost $194,212,552) 199,907,946 --------------
See Notes to Financial Statements 13 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
Shares Description Value (Note 1) - ----------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS 13.8% - ------------------------------------------------------------------------------------- Mutual Fund 13.6% 27,217,077 Prudential Core Investment Fund - Taxable Money Market Series(c) (cost $27,217,077; Note 3) $ 27,217,077
Principal Amount (000) Description Value (Note 1) - ---------------------------------------------------------------------------------------- Repurchase Agreement 0.2% $ 525 Joint Repurchase Agreement Account, 1.36%, 5/1/03 (cost $525,000; Note 6) 525,000 -------------- Total short-term investments (cost $27,742,077) 27,742,077 -------------- Total Investments 113.6% (cost $221,954,629; Note 5) 227,650,023 Liabilities in excess of other assets (13.6%) (27,262,243) -------------- Net Assets 100% $ 200,387,780 -------------- --------------
- ------------------------------ (a) Non-income producing security. (b) Securities, or portion thereof, on loan, see Note 4. (c) Represents security purchased with cash collateral received for securities on loan; see Note 4. 14 See Notes to Financial Statements This page intentionally left blank Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Statement of Assets and Liabilities (Unaudited)
April 30, 2003 - ---------------------------------------------------------------------------------------- ASSETS Investments, at value, including securities on loan of $26,053,344 (cost $221,954,629) $227,650,023 Receivable for investments sold 4,712,060 Receivable for Fund shares sold 361,509 Dividends and interest receivable 186,616 Receivable for securities lending income 31,265 Prepaid expenses 869 Foreign tax reclaim receivable 16 ---------------- Total assets 232,942,358 ---------------- LIABILITIES Payable to custodian 2,313 Payable to broker for collateral for securities on loan (Note 4) 27,217,077 Payable for investments purchased 4,162,531 Payable for Fund shares reacquired 617,671 Accrued expenses 296,398 Distribution fee payable 125,635 Management fee payable 104,094 Secuities lending rebate payable 28,859 ---------------- Total liabilities 32,554,578 ---------------- NET ASSETS $200,387,780 ---------------- ---------------- Net assets were comprised of: Shares of beneficial interest, at par $ 25,029 Paid-in capital in excess of par 282,289,666 ---------------- 282,314,695 Net investment loss (109,638) Accumulated net realized loss on investments (87,512,671) Net unrealized appreciation on investments 5,695,394 ---------------- Net assets, April 30, 2003 $200,387,780 ---------------- ----------------
16 See Notes to Financial Statements Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Statement of Assets and Liabilities (Unaudited) Cont'd.
April 30, 2003 - ---------------------------------------------------------------------------------------- Class A: Net asset value and redemption price per share ($48,351,424 / 5,911,037 shares of beneficial interest issued and outstanding) $8.18 Maximum sales charge (5% of offering price) .43 ---------------- Maximum offering price to public $8.61 ---------------- ---------------- Class B: Net asset value, offering price and redemption price per share ($93,637,043 / 11,796,471 shares of beneficial interest issued and outstanding) $7.94 ---------------- ---------------- Class C: Net asset value and redemption price per share ($51,458,489 / 6,482,855 shares of beneficial interest issued and outstanding) $7.94 Sales charge (1% of offering price) .08 ---------------- Offering price to public $8.02 ---------------- ---------------- Class Z: Net asset value, offering price and redemption price per share ($6,940,824 / 838,563 shares of beneficial interest issued and outstanding) $8.28 ---------------- ----------------
See Notes to Financial Statements 17 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Statement of Operations (Unaudited)
Six Months Ended April 30, 2003 - ---------------------------------------------------------------------------------------- NET INVESTMENT LOSS Income Dividends (net of foreign withholding taxes of $163) $ 1,686,006 Income from securities loaned, net 5,386 Interest 4,651 ---------------- Total income 1,696,043 ---------------- Expenses Management fee 647,832 Distribution fee--Class A 59,179 Distribution fee--Class B 469,743 Distribution fee--Class C 256,378 Transfer agent's fees and expenses 155,000 Reports to shareholders 69,000 Custodian's fees and expenses 68,000 Registration fees 40,000 Legal fees and expenses 15,000 Audit fee 14,000 Trustees' fees 7,000 Miscellaneous 4,549 ---------------- Total expenses 1,805,681 ---------------- Net investment loss (109,638) ---------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss on investment transactions (15,299,009) Net change in unrealized appreciation on investments 24,210,295 ---------------- Net gain on investments 8,911,286 ---------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 8,801,648 ---------------- ----------------
18 See Notes to Financial Statements Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Statement of Changes in Net Assets (Unaudited)
Six Months Year Ended Ended April 30, 2003 October 31, 2002 - ------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS Operations Net investment loss $ (109,638) $ (639,251) Net realized loss on investments (15,299,009) (10,832,007) Net change in unrealized appreciation/depreciation on investments 24,210,295 (26,433,361) -------------- ---------------- Net increase (decrease) in net assets resulting from operations 8,801,648 (37,904,619) -------------- ---------------- Fund share transactions (net of share conversions) (Note 7) Net proceeds from shares sold 9,663,919 25,809,770 Cost of shares reacquired (28,542,880) (90,556,074) -------------- ---------------- Net decrease in net assets from Fund share transactions (18,878,961) (64,746,304) -------------- ---------------- Total decrease (10,077,313) (102,650,923) NET ASSETS Beginning of period 210,465,093 313,116,016 -------------- ---------------- End of period $ 200,387,780 $ 210,465,093 -------------- ---------------- -------------- ----------------
See Notes to Financial Statements 19 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Notes to Financial Statements (Unaudited) Prudential Tax-Managed Equity Fund (the 'Fund') is a series of Prudential Tax-Managed Funds (the 'Trust'), which is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Trust was incorporated as a business trust in Delaware on September 18, 1998. The Fund commenced investment operations on March 3, 1999. The Fund's investment objective is to seek long-term after-tax growth of capital. It invests in a portfolio of equity-related securities, such as common stock and convertible securities of U.S. companies. 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 listed on a securities exchange or Nasdaq are valued at the last closing price on such exchange or system on the day of valuation or, if there was no sale on such day, at the mean between the last reported bid and asked prices or at the last bid price on such day in the absence of an asked price. Securities that are actively traded in the over-the-counter market, including listed securities for which the primary market is believed by Prudential Investments LLC ('PI' or 'Manager'), in consultation with the subadviser, to be over-the-counter are valued at market value using prices provided by an independent pricing agent or principal market maker (if available, otherwise a principal market maker or a primary market dealer). Securities for which reliable market quotations are not readily available or for which the pricing agent or market maker does not provide a valuation or valuation methodology, or provides a valuation methodology that, in the judgment of the Manager or subadviser, does not represent fair value, are valued at fair value by a Valuation Committee appointed by the Board of Trustees, in consultation with the Manager or subadviser. Investment in mutual funds are valued at their net asset value as of the close of the New York Stock Exchange on the date of valuation. 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. Repurchase Agreements: 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. To the extent that any repurchase transaction exceeds one business day, the 20 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Notes to Financial Statements (Unaudited) Cont'd. value of the collateral is marked-to-market on a daily basis to ensure the adequacy of the collateral. 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. Securities Lending: The Fund may lend its portfolio securities to qualified institutions. The loans are secured by collateral in an amount equal to at least the market value at all times of the loaned securities plus any accrued interest and dividends. During the time the securities are on loan, the Fund will continue to receive the interest and dividends or amounts equivalent thereto, on the loaned securities while receiving a fee from the borrower or earning interest on the investment of the cash collateral. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the lender securities identical to the loaned securities. The Fund may pay reasonable finders', administrative and custodial fees in connection with a loan of its securities and may share the interest earned on the collateral with the borrower. The Fund bears the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower of the securities fail financially. Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized and unrealized gains (losses) on sales of securities are calculated on an identified cost basis. Dividend income is recorded or the ex-dividend date and interest income is recorded on the accrual basis. The Fund amortizes premiums and discounts on purchases of debt securities as adjustments to interest income. Expenses are recorded on the accrual basis which may require the use of certain estimates by management. Net investment income (losses), (other than distribution fees) and unrealized and realized gains (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: The Fund expects to pay dividends of net investment income and distributions of net realized capital gains, if any, annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. 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 investment income and capital gains, if any, to shareholders. Therefore, no federal income tax provision is required. 21 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Notes to Financial Statements (Unaudited) Cont'd. 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 Trust has a management agreement for the Fund with PI. Pursuant to a subadvisory agreement between PI and PIM, PIM furnishes investment advisory services in connection with the management of the Fund. Under the subadvisory agreement, PIM, subject to the supervision of PI, is responsible for managing the assets of the Fund in accordance with its investment objective and policies. PI pays for the services of PIM, the cost of compensation of officers of the Trust, occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears all other costs and expenses. The management fee paid to PI is computed daily and payable monthly at an annual rate of .65 of 1% of the average daily net assets of the Fund up to and including $500 million and .60 of 1% of such assets in excess of $500 million. The Trust has a distribution agreement with Prudential Investment Management Services LLC ('PIMS'), which acts as the distributor of the Class A, Class B, Class C and Class Z shares of the Fund. 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. 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 Plans were .25 of 1%, 1% and 1% of the average daily net assets of the Class A, Class B and Class C shares, respectively, for the six months ended April 30, 2003. PIMS has advised the Fund that it received approximately $15,300 and $11,300 in front-end sales charges resulting from sales of Class A and Class C shares, respectively, during the six months ended April 30, 2003. 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 April 30, 2003, it received approximately $163,900 and $2,000 in contingent deferred sales charges imposed upon certain redemptions by Class B and Class C shareholders, respectively. PI, PIM and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. ('Prudential'). 22 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Notes to Financial Statements (Unaudited) Cont'd. The Fund, along with other affiliated registered investment companies (the 'Funds'), is a party to a syndicated credit agreement ('SCA') with a group of banks. For the six months ended April 30, 2003, the SCA provides for a commitment of $800 million and allows the Funds to increase the commitment to $1 billion, if necessary. Interest on any borrowings will be incurred at market rates. The Funds pay a commitment fee of.08 of 1% of the unused portion of the SCA. The commitment fee is accrued and paid quarterly on a pro rata basis by the Funds. The purpose of the SCA is to serve as an alternative source of funding for capital share redemptions. The expiration date of the SCA is May 2, 2003. The Fund did not borrow any amounts pursuant to the SCA during the six months ended April 30, 2003. On May 2, 2003, the SCA was renewed under the same terms and conditions ('May 2003 renewal'). The expiration date of the May 2003 renewal is April 30, 2004. Note 3. Other Transactions with Affiliates Prudential Mutual Fund Services LLC ('PMFS'), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential, serves as the Fund's transfer agent. During the six months ended April 30, 2003, the Fund incurred fees of approximately $98,400 for the services of PMFS. As of April 30, 2003, approximately $15,800 of such fees were due to PMFS. The Fund pays networking fees to affiliated and unaffiliated broker/dealers. These networking fees are payments made to broker/dealers that clear mutual fund transactions through a national clearing system. The Fund incurred approximately $21,400 in total networking fees, of which the amount relating to the services of Prudential Securities, Inc. ('PSI'), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential was approximately $20,600 for the six months ended April 30, 2003. As of April 30, 2003, approximately $3,300 of such fees were due to PSI. These amounts are included in transfer agent's fees and expenses in the Statement of Operations. PSI is the securities lending agent for the Fund. For the six months ended April 30, 2003, PSI has been compensated in the amount of $1,796 for these services, of which $602 is payable at April 30, 2003. The Fund invests in the Taxable Money Market Series (the 'Series'), a portfolio of the Prudential Core Investment Fund, pursuant to an exemptive order received from the Securities and Exchange Commission. The Series is a money market mutual fund registered under the Investment Company Act of 1940, as amended, and managed by PI. For the six months ended April 30, 2003, the Fund earned income of approximately $500 and $5,300 respectively, by investing its excess cash and collateral received from securities lending. 23 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Notes to Financial Statements (Unaudited) Cont'd. Note 4. Portfolio Securities Purchases and sales of investment securities, other than short-term investments, for the six months ended April 30, 2003 were $78,314,187 and $96,638,533 respectively. As of April 30, 2003, the Fund had securities on loan with an aggregate market value of $26,053,344. The Fund received $27,217,077 in cash collateral for securities on loan which was used to purchase highly liquid short-term investments in accordance with the Fund's securities lending procedures. Note 5. Distributions and Tax Information For federal income tax purposes, the Fund had a capital loss carryforward as of October 31, 2002, of approximately $70,642,200 of which $11,454,800 expires in 2007, $9,748,400 expires in 2008, $38,550,400 expires in 2009 and $10,888,600 expires in 2010. Accordingly, no capital gains distribution is expected to be paid to shareholders until net gains have been realized in excess of such carryforward. The tax basis differs from the amount shown on the Statement of Assets and Liabilities primarily due to the deferral of wash sales losses. The United States federal income tax basis of the Fund's investments and the net unrealized appreciation as of April 30, 2003 were as follows:
Total Net Tax Basis Unrealized Of Investments Appreciation Depreciation Appreciation - ---------------- ---------------- ---------------- ---------------- $224,243,232 $19,580,391 $16,173,600 $3,406,791
The difference between book basis and tax basis is primarily attributable to deferred losses on wash sales. Note 6. 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 April 30, 2003, the Fund had a .21% undivided interest in the repurchase agreements in the joint account. The undivided interest for the Fund represents $525,000 in the principal amount. As of such date, each repurchase agreement in the joint account and the collateral therefor were as follows: Bank of America, 1.36%, in the principal amount of $83,551,000, repurchase price $83,554,156, due 05/01/03. The value of the collateral including accrued interest was $85,222,020. 24 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Notes to Financial Statements (Unaudited) Cont'd. Credit Suisse First Boston, 1.35%, in the principal amount of $83,550,000, repurchase price $83,553,133, due 05/01/03. The value of the collateral including accrued interest was $85,224,740. Greenwich Capital Markets, Inc., 1.36% in the principal amount of $83,551,000, repurchase price $83,554,156, due 05/01/03. The value of the collateral including accrued interest was $85,224,454. Note 7. 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 upon 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 qualify to purchase Class A shares at net asset value. Class Z shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors. The Fund has authorized an unlimited number of shares of beneficial interest at $.001 par value. As of April 30, 2003, PI owned 2,500 shares each of Class A, Class B, Class C and Class Z shares. Transactions in shares of beneficial interest were as follows:
Class A Shares Amount - ---------------------------------------------------------- ----------- ------------- Six months ended April 30, 2003: Shares sold 349,699 $ 2,751,081 Shares reacquired (896,099) (7,017,492) ----------- ------------- Net increase (decrease) in shares outstanding before conversion (546,400) (4,266,411) Shares issued upon conversion from Class B 131,143 999,376 ----------- ------------- Net increase (decrease) in shares outstanding (415,257) $ (3,267,035) ----------- ------------- ----------- ------------- Year ended October 31, 2002: Shares sold 942,582 $ 8,696,498 Shares reacquired (2,197,498) (19,895,961) ----------- ------------- Net increase (decrease) in shares outstanding before conversion (1,254,916) (11,199,463) Shares issued upon conversion from Class B 209,776 1,917,286 ----------- ------------- Net increase (decrease) in shares outstanding (1,045,140) $ (9,282,177) ----------- ------------- ----------- -------------
25 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Notes to Financial Statements (Unaudited) Cont'd.
Class B Shares Amount - ---------------------------------------------------------- ----------- ------------- Six months ended April 30, 2003: Shares sold 330,757 $ 2,531,598 Shares reacquired (1,541,117) (11,664,229) ----------- ------------- Net increase (decrease) in shares outstanding before conversion (1,210,360) (9,132,631) Shares reacquired upon conversion into Class A (134,862) (999,376) ----------- ------------- Net increase (decrease) in shares outstanding (1,345,222) $ (10,132,007) ----------- ------------- ----------- ------------- Year ended October 31, 2002: Shares sold 934,863 $ 8,538,664 Shares reacquired (4,115,380) (35,438,243) ----------- ------------- Net increase (decrease) in shares outstanding before conversion (3,180,517) (26,899,579) Shares reacquired upon conversion into Class A (214,507) (1,917,286) ----------- ------------- Net increase (decrease) in shares outstanding (3,395,024) $ (28,816,865) ----------- ------------- ----------- ------------- Class C - ---------------------------------------------------------- Six months ended April 30, 2003: Shares sold 350,196 $ 2,687,520 Shares reacquired (1,034,699) (7,841,657) ----------- ------------- Net increase (decrease) in shares outstanding (684,503) $ (5,154,137) ----------- ------------- ----------- ------------- Year ended October 31, 2002: Shares sold 627,747 $ 5,684,101 Shares reacquired (3,116,279) (27,051,397) ----------- ------------- Net increase (decrease) in shares outstanding (2,488,532) $ (21,367,296) ----------- ------------- ----------- ------------- Class Z - ---------------------------------------------------------- Six months ended April 30, 2003: Shares sold 213,727 $ 1,693,720 Shares reacquired (259,813) (2,019,502) ----------- ------------- Net increase (decrease) in shares outstanding (46,086) $ (325,782) ----------- ------------- ----------- ------------- Year ended October 31, 2002: Shares sold 309,414 $ 2,890,507 Shares reacquired (899,808) (8,170,473) ----------- ------------- Net increase (decrease) in shares outstanding (590,394) $ (5,279,966) ----------- ------------- ----------- -------------
26 SEMIANNUAL REPORT APRIL 30, 2003 PRUDENTIAL TAX-MANAGED EQUITY FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Financial Highlights (Unaudited)
Class A --------------- Six Months Ended April 30, 2003 - ----------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE:(d) Net asset value, beginning of period $ 7.79 --------------- Income from investment operations Net investment income 0.02 Net realized and unrealized gain (loss) on investment transactions 0.37 --------------- Total from investment operations 0.39 --------------- Net asset value, end of period $ 8.18 --------------- --------------- TOTAL RETURN(b): 5.01% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000) $ 48,351 Average net assets (000) $ 47,736 Ratios to average net assets: Expenses, including distribution and service (12b-1) fees(f) 1.27%(c) Expenses, excluding distribution and service (12b-1) fees 1.02%(c) Net investment income 0.42%(c) For Class A, B, C and Z shares: Portfolio turnover rate(g) 39%
- ------------------------------ (a) Commencement of investment operations. (b) 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. (c) Annualized. (d) Based on average shares outstanding during the period. (e) Less than $.005 per share. (f) The distributor of the Fund contractually agreed to limit its distribution and service (12b-1) fees to .25 of 1% of the average net assets of Class A shares. (g) Portfolio turnover for periods of less than one full year is not annualized. 28 See Notes to Financial Statements Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Financial Highlights (Unaudited) Cont'd.
Class A - -------------------------------------------------------------------------------------- Year Ended October 31, March 3, 1999(a) - ---------------------------------------------------------- Through 2002 2001 2000 October 31, 1999 - -------------------------------------------------------------------------------------- $ 9.06 $ 12.41 $ 11.27 $ 10.00 -------- -------- -------- -------- 0.03 0.02 --(e) 0.01 (1.30) (3.37) 1.14 1.26 -------- -------- -------- -------- (1.27) (3.35) 1.14 1.27 -------- -------- -------- -------- $ 7.79 $ 9.06 $ 12.41 $ 11.27 -------- -------- -------- -------- -------- -------- -------- -------- (14.02)% (26.99)% 10.12% 12.70% $ 49,310 $ 66,778 $ 92,685 $78,169 $ 62,399 $ 81,887 $ 91,064 $66,701 1.16% 1.10% 1.09% 1.23%(c) 0.91% 0.85% 0.84% 0.98%(c) 0.32% 0.15% 0.03% 0.09%(c) 69% 73% 94% 67%
See Notes to Financial Statements 29 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Financial Highlights (Unaudited) Cont'd.
Class B -------------------- Six Months Ended April 30, 2003 - ----------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE:(d) Net asset value, beginning of period $ 7.59 ---------- Income/loss from investment operations Net investment loss (0.01) Net realized and unrealized gain (loss) on investment transactions 0.36 ---------- Total from investment operations 0.35 ---------- Net asset value, end of period $ 7.94 ---------- ---------- TOTAL RETURN(b): 4.61% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000) $ 93,637 Average net assets (000) $ 94,727 Ratios to average net assets: Expenses, including distribution and service (12b-1) fees 2.02%(c) Expenses, excluding distribution and service (12b-1) fees 1.02%(c) Net investment loss (0.32)%(c)
- ------------------------------ (a) Commencement of investment operations. (b) 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. (c) Annualized. (d) Based on average shares outstanding during the period. 30 See Notes to Financial Statements Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Financial Highlights (Unaudited) Cont'd.
Class B - -------------------------------------------------------------------------------------- Year Ended October 31, March 3, 1999(a) - ---------------------------------------------------------- Through 2002 2001 2000 October 31, 1999 - -------------------------------------------------------------------------------------- $ 8.89 $ 12.27 $ 11.22 $ 10.00 - ---------------- ---------------- ---------------- ----------------- (0.04) (0.06) (0.09) (0.05) (1.26) (3.32) 1.14 1.27 - ---------------- ---------------- ---------------- ----------------- (1.30) (3.38) 1.05 1.22 - ---------------- ---------------- ---------------- ----------------- $ 7.59 $ 8.89 $ 12.27 $ 11.22 - ---------------- ---------------- ---------------- ----------------- - ---------------- ---------------- ---------------- ----------------- (14.62)% (27.55)% 9.36% 12.20% $ 99,771 $147,021 $214,700 $ 175,129 $132,783 $184,943 $205,175 $ 144,221 1.91% 1.85% 1.84% 1.98%(c) 0.91% 0.85% 0.84% 0.98%(c) (0.43)% (0.60)% (0.72)% (0.67)%(c)
See Notes to Financial Statements 31 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Financial Highlights (Unaudited) Cont'd.
Class C -------------------- Six Months Ended April 30, 2003 - ----------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE:(d) Net asset value, beginning of period $ 7.59 ---------- Income/loss from investment operations Net investment loss (0.01) Net realized and unrealized gain (loss) on investment transactions 0.36 ---------- Total from investment operations 0.35 ---------- Net asset value, end of period $ 7.94 ---------- ---------- TOTAL RETURN(b): 4.61% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000) $ 51,459 Average net assets (000) $ 51,700 Ratios to average net assets: Expenses, including distribution and service (12b-1) fees 2.02%(c) Expenses, excluding distribution and service (12b-1) fees 1.02%(c) Net investment loss (0.32)%(c)
- ------------------------------ (a) Commencement of investment operations. (b) 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. (c) Annualized. (d) Based on average shares outstanding during the period. 32 See Notes to Financial Statements Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Financial Highlights (Unaudited) Cont'd.
Class C - -------------------------------------------------------------------------------------- Year Ended October 31, March 3, 1999(a) - ---------------------------------------------------------- Through 2002 2001 2000 October 31, 1999 - -------------------------------------------------------------------------------------- $ 8.89 $ 12.27 $ 11.22 $ 10.00 - ---------------- ---------------- ---------------- ----------------- (0.04) (0.06) (0.09) (0.05) (1.26) (3.32) 1.14 1.27 - ---------------- ---------------- ---------------- ----------------- (1.30) (3.38) 1.05 1.22 - ---------------- ---------------- ---------------- ----------------- $ 7.59 $ 8.89 $ 12.27 $ 11.22 - ---------------- ---------------- ---------------- ----------------- - ---------------- ---------------- ---------------- ----------------- (14.62)% (27.55)% 9.36% 12.20% $ 54,415 $ 85,848 $131,554 $ 110,895 $ 75,295 $109,346 $126,881 $ 91,235 1.91% 1.85% 1.84% 1.98%(c) 0.91% 0.85% 0.84% 0.98%(c) (0.43)% (0.60)% (0.72)% (0.67)%(c)
See Notes to Financial Statements 33 Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Financial Highlights (Unaudited) Cont'd.
Class Z -------------------- Six Months Ended April 30, 2003 - ----------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE:(d) Net asset value, beginning of period $ 7.88 ---------- Income from investment operations Net investment income 0.03 Net realized and unrealized gain (loss) on investment transactions 0.37 ---------- Total from investment operations 0.40 ---------- Net asset value, end of period $ 8.28 ---------- ---------- TOTAL RETURN(b): 5.08% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000) $ 6,941 Average net assets (000) $ 6,822 Ratios to average net assets: Expenses, including distribution and service (12b-1) fees 1.02%(c) Expenses, excluding distribution and service (12b-1) fees 1.02%(c) Net investment income 0.68%(c)
- ------------------------------ (a) Commencement of investment operations. (b) 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. (c) Annualized. (d) Based on average shares outstanding during the period. 34 See Notes to Financial Statements Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund Financial Highlights (Unaudited) Cont'd.
Class Z - -------------------------------------------------------------------------------------- Year Ended October 31, March 3, 1999(a) - ---------------------------------------------------------- Through 2002 2001 2000 October 31, 1999 - -------------------------------------------------------------------------------------- $ 9.13 $ 12.48 $ 11.30 $ 10.00 - ---------------- ---------------- ---------------- ----------------- 0.05 0.04 0.03 0.02 (1.30) (3.39) 1.15 1.28 - ---------------- ---------------- ---------------- ----------------- (1.25) (3.35) 1.18 1.30 - ---------------- ---------------- ---------------- ----------------- $ 7.88 $ 9.13 $ 12.48 $ 11.30 - ---------------- ---------------- ---------------- ----------------- - ---------------- ---------------- ---------------- ----------------- (13.69)% (26.84)% 10.44% 13.00% $ 6,969 $ 13,469 $ 18,167 $ 13,653 $ 11,218 $ 18,523 $ 17,464 $ 12,627 0.91% 0.85% 0.84% 0.98%(c) 0.91% 0.85% 0.84% 0.98%(c) 0.55% 0.39% 0.28% 0.35%(c)
See Notes to Financial Statements 35 This Page Intentionally Left Blank www.prudential.com (800) 225-1852 FOR MORE INFORMATION Prudential Mutual Funds Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 (800) 225-1852 Trustees Saul K. Fenster Delayne Dedrick Gold Robert F. Gunia Douglas H. McCorkindale W. Scott McDonald, Jr. Thomas T. Mooney Stephen P. Munn David R. Odenath, Jr. Richard A. Redeker Judy A. Rice Robin B. Smith Louis A. Weil, III Clay T. Whitehead Officers Judy A. Rice, President Robert F. Gunia, Vice President Grace C. Torres, Treasurer Marguerite E.H. Morrison, Chief Legal Officer and Assistant Secretary Maria G. Master, Secretary Maryanne Ryan, Anti-Money Laundering Compliance Officer Manager Prudential Investments LLC Gateway Center Three 100 Mulberry Street Newark, NJ 07102-4077 Investment Adviser Prudential Investment Management, Inc. Gateway Center Two Newark, NJ 07102 Distributor Prudential Investment Management Services LLC Gateway Center Three, 14th Floor 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 PO Box 8098 Philadelphia, PA 19101 Independent Auditors PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, NY 10036 Legal Counsel Sullivan & Cromwell LLP 125 Broad Street New York, NY 10004-2498 Fund Symbols Nasdaq CUSIP - ------------ ------ ----- Class A PTMAX 74437B103 Class B PTMBX 74437B202 Class C PTMCX 74437B301 Class Z PTEZX 74437B400 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 April 30, 2003, were not audited and, accordingly, no auditor's opinion is expressed on them. Mutual funds are not insured by the FDIC or any federal government agency, are not a deposit of or guaranteed by any bank or any bank affiliate, and may lose value. PRUDENTIAL FINANCIAL (LOGO) Fund Symbols Nasdaq CUSIP - ------------ ------ ----- Class A PTMAX 74437B103 Class B PTMBX 74437B202 Class C PTMCX 74437B301 Class Z PTEZX 74437B400 MF187E2 IFS-A080878 Item 2 -- Code of Ethics -- Not required in this filing Item 3 -- Audit Committee Financial Expert -- Not required in this filing Item 4 -- Principal Accountant Fees and Services -- Not required in this filing Item 5 -- Reserved Item 6 -- Reserved Item 7 -- Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies -- Not required in this filing Item 8 -- Reserved Item 9 -- Controls and Procedures (a) It is the conclusion of the registrant's principal executive officer and principal financial officer that the effectiveness of the registrant's current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission's rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant's principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure. (b) There have been no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Item 10 -- Exhibits (a) Code of Ethics -- Not required in this filing (b) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act -- Attached hereto Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Prudential Tax-Managed Equity Fund By: /s/ Maria Master --------------- Maria Master Secretary of Prudential Tax-Managed Equity Fund Date: July 8, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Judy A. Rice ---------------- Judy A. Rice, President and Principal Executive Officer of Prudential Tax-Managed Equity Fund Date: July 8 2003 By: /s/ Grace C. Torres ------------------- Grace C. Torres, Treasurer and Principal Financial Officer of Prudential Tax-Managed Equity Fund Date: July 8, 2003 Attached hereto as an exhibit are the certifications pursuant to Section 906 of the Sarbanes-Oxley Act. EX-99.CERT 3 mf16054ex99cert.txt SECTION 302 CERTIFICATIONS Item 10 Prudential Tax-Managed Funds Semi-Annual period ending 04/30/03 File No. 811-09101 CERTIFICATIONS I, Judy A. Rice, certify that: 1. I have reviewed this report on Form N-CSR of Prudential Tax-Managed Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 26, 2003 /s/ Judy A. Rice ------------------------- Judy A. Rice President and Principal Executive Officer Item 10 Prudential Tax-Managed Funds Semi-Annual period ending 04/30/03 File No. 811-09101 CERTIFICATIONS I, Grace C. Torres, certify that: 1. I have reviewed this report on Form N-CSR of Prudential Tax-Managed Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c. presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 26, 2003 /s/ Grace C. Torres -------------------------- Grace C. Torres Treasurer and Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----