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
<Page>
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)
<Page>
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
<Page>
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
<Page>
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
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2003 (Unaudited)
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements 3
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
<Table>
<Caption>
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
</Table>
4 See Notes to Financial Statements
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements 5
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
<Table>
<Caption>
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
</Table>
6 See Notes to Financial Statements
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements 7
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
<Table>
<Caption>
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
</Table>
8 See Notes to Financial Statements
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements 9
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
<Table>
<Caption>
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
</Table>
10 See Notes to Financial Statements
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
<Table>
<Caption>
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
</Table>
See Notes to Financial Statements 11
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
<Table>
<Caption>
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
</Table>
12 See Notes to Financial Statements
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
<Table>
<Caption>
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
--------------
</Table>
See Notes to Financial Statements 13
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Portfolio of Investments as of April 30, 2003 (Unaudited) Cont'd.
<Table>
<Caption>
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
</Table>
<Table>
<Caption>
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
--------------
--------------
</Table>
- ------------------------------
(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
<Page>
This page intentionally left blank
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Statement of Assets and Liabilities (Unaudited)
<Table>
<Caption>
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
----------------
----------------
</Table>
16 See Notes to Financial Statements
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Statement of Assets and Liabilities (Unaudited) Cont'd.
<Table>
<Caption>
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
----------------
----------------
</Table>
See Notes to Financial Statements 17
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Statement of Operations (Unaudited)
<Table>
<Caption>
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
----------------
----------------
</Table>
18 See Notes to Financial Statements
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Statement of Changes in Net Assets (Unaudited)
<Table>
<Caption>
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
-------------- ----------------
-------------- ----------------
</Table>
See Notes to Financial Statements 19
<Page>
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
<Page>
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
<Page>
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
<Page>
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
<Page>
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:
<Table>
<Caption>
Total Net
Tax Basis Unrealized
Of Investments Appreciation Depreciation Appreciation
- ---------------- ---------------- ---------------- ----------------
$224,243,232 $19,580,391 $16,173,600 $3,406,791
</Table>
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
<Page>
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:
<Table>
<Caption>
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)
----------- -------------
----------- -------------
</Table>
25
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Notes to Financial Statements (Unaudited) Cont'd.
<Table>
<Caption>
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)
----------- -------------
----------- -------------
<Caption>
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)
----------- -------------
----------- -------------
<Caption>
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)
----------- -------------
----------- -------------
</Table>
26
<Page>
SEMIANNUAL REPORT
APRIL 30, 2003
PRUDENTIAL
TAX-MANAGED EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Financial Highlights (Unaudited)
<Table>
<Caption>
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%
</Table>
- ------------------------------
(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
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Financial Highlights (Unaudited) Cont'd.
<Table>
<Caption>
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%
</Table>
See Notes to Financial Statements 29
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Financial Highlights (Unaudited) Cont'd.
<Table>
<Caption>
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)
</Table>
- ------------------------------
(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
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Financial Highlights (Unaudited) Cont'd.
<Table>
<Caption>
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)
</Table>
See Notes to Financial Statements 31
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Financial Highlights (Unaudited) Cont'd.
<Table>
<Caption>
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)
</Table>
- ------------------------------
(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
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Financial Highlights (Unaudited) Cont'd.
<Table>
<Caption>
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)
</Table>
See Notes to Financial Statements 33
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Financial Highlights (Unaudited) Cont'd.
<Table>
<Caption>
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)
</Table>
- ------------------------------
(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
<Page>
Prudential Tax-Managed Funds Prudential Tax-Managed Equity Fund
Financial Highlights (Unaudited) Cont'd.
<Table>
<Caption>
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)
</Table>
See Notes to Financial Statements 35
<Page>
This Page Intentionally Left Blank
<Page>
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.
<Page>
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.