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011 A000001 PRUDENTIAL MUTUAL FUND DISTRIBUTORS, INC.
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<PAGE> PAGE 2
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012 A000001 PRUDENTIAL MUTUAL FUND SERVICES, INC.
012 B000001 84-4110019
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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SIGNATURE SUSAN C. COTE'
TITLE TREASURER
<TABLE> <S> <C>
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<NAME> PRUDENTIAL EQUITY INCOME FUND
<SERIES>
<NUMBER> 001
<NAME> PRUDENTIAL EQUITY INCOME FUND (CLASS A)
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 1,060,276,269
<INVESTMENTS-AT-VALUE> 1,084,363,229
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<SHARES-COMMON-PRIOR> 44,021,019
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 24,086,960
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<DIVIDEND-INCOME> 30,417,969
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<DISTRIBUTIONS-OF-INCOME> (13,488,790)
<DISTRIBUTIONS-OF-GAINS> (26,357,952)
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<NUMBER-OF-SHARES-SOLD> 668,069,397
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<TABLE> <S> <C>
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<NAME> PRUDENTIAL EQUITY INCOME FUND
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<NUMBER> 002
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<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-END> OCT-31-1994
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<DISTRIBUTIONS-OF-INCOME> (13,488,790)
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<NUMBER-OF-SHARES-SOLD> 668,069,397
<NUMBER-OF-SHARES-REDEEMED> (221,021,185)
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<TABLE> <S> <C>
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<CIK> 0000803191
<NAME> PRUDENTIAL EQUITY INCOME FUND
<SERIES>
<NUMBER> 003
<NAME> PRUDENTIAL EQUITY INCOME FUND (CLASS C)
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 1,060,276,269
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<OVERDISTRIB-NII-PRIOR> 0
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<PER-SHARE-NII> 0.08
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</TABLE>
For the fiscal year ended (a) 10/31/94
File number (c) 811-4864
SUB-ITEM 77C
Submission of Matters to a Vote of Security Holders
A special Meeting of Shareholders was called for July 19,
1994. At such meeting the shareholders approved the following
proposals.
a)Election of Trustees.
Affirmative Negative
votes cast votes cast
Edward D. Beach 35,692,887 2,227,279
Donald D. Lennox 35,689,168 2,230,998
Douglas H. McCorkindale 35,700,887 2,219,279
Lawrence C. McQuade 35,717,563 2,202,603
Thomas T. Mooney 35,723,625 2,196,541
Richard A. Redeker 35,695,996 2,224,170
Louis A. Weil, III 35,727,478 2,192,688
b)Approval of an amendment of the Fund's Articles of Incorporation to
permit a conversion feature for Class B shares.
Affirmative Negative
votes cast votes cast
34,499,567 810,045
c) Approval of an amended and restated Class A Distribution and
Service Plan.
Affirmative Negative
votes cast votes cast
Class A 4,532,329 207,198
Class B 29,278,087 892,351
d) Approval of an amended and restated Class B Distribution and
Service Plan.
Affirmative Negative
votes cast votes cast
Class B 29,341,109 952,741
e)Approval of the elimination of the Fund's investment restrictions
regarding restricted and illiquid securities.
Affirmative Negative
votes cast votes cast
33,117,283 1,713,304
f)Approval of an amendment of the Fund's investment restriction
limiting the Fund's ability to invest in a security if the Fund
would hold more than 10% of any class of securities of an issuer.
Affirmative Negative
votes cast votes cast
33,101,703 1,773,179
g)Approval of the elimination of the Fund's investment restriction
limiting the Fund's ability to invest in the securities of any
issuer in which officers and Directors of the Fund or officers and
directors of its investment adviser own more than a specified
interest.
Affirmative Negative
votes cast votes cast
32,153,066 2,697,154
h)Ratification of the selection by the Trustees of Deloitte & Touche
as independent accountants for the fiscal year ending December 31,
1994.
Affirmative Negative
votes cast votes cast
34,760,534 527,824
EIF1094.77C
NSAR#3
For the fiscal year ended (a) 10/31/94
File number (c) 811-4864
SUB-ITEM 77D
Policies With Respect to Security Investments
At a meeting of the Trustees held on August 16, 1994, the
Trustees approved revised procedures for the valuation of the
Fund's portfolio securities. The procedures have been revised
primarily to change the method of pricing options on stocks and
stock indices which will now be priced at the mean between the most
recently quoted bid and asked prices on the relevant exchange
rather than at the close of the trading.
For the fiscal year ended (a) October 31, 1994
File number (c) 811-4864
SUB-ITEM 77 D
Policies With Respect to Security Investments
At a meeting of the Trustees held on February 8, 1994 the Fund
approved (i) the use of tri-party repurchase agreements and (ii)
the use of Bank of New York, Chemical Bank, Morgan Guaranty Trust
Company and bankers Trust Company as subcustodians in connection
with effective tri-party repurchase transactions.
EIF1294.77D
For the fiscal year ended (a) October 31, 1994
File number (c) 811-4864
SUB-ITEM 77I
Terms of New or Amended Securities
The Trustees approved the offering of a new class of shares,
to be designated Class C shares, which was offered simultaneously
with the offering of Class B shares with the proposed conversion
feature as of August 1, 1994. [See Submission of Matters to a Vote
of Security Holders, Item 77C].
EIF1094.77I
NSAR#3
29For the fiscal year ended (a) 10/31/94
File number (c) 811-4864
SUB-ITEM 77 0
EXHIBITS
Transactions Effected Pursuant to Rule 10f-3
1. Name of Issuer
Case Equipment Corporation
2. Date of Purchase
6/24/94
3. Number of Securities Purchased
182,900
4. Dollar Amount of Purchase
$3,475,100
5. Price Per Unit
$19.00
6. Name(s) of Underwriter(s) or Dealer(s)
From whom Purchased
Goldman, Sachs & Co.
7. Other Members of the Underwriting Syndicate
Morgan Stanley & Co. Incorporated
Lazard Freres & Co.
CS First Boston Corporation
J.P. Morgan Securities Inc.
Smith Barney Inc.
Apex Securities, Inc.
Arnhold and S. Bleichroeder, Inc.
Robert W. Baird & Co. Incorporated
M.R. Beal & Company
Bear, Stearns & Co. Inc.
The Chicago Dearborn Company
Commerzbank Capital Markets Corporation
Credit Lyonnais Securities (USA) Inc.
Dain Bosworth Incorporated
Dean Witter Reynolds Inc.
Dillon, Read & Co. Inc.
A.G. Edwards & Sons, Inc.
First of Michigan Corporation
Goldman, Sachs & Co.
Harris-Nesbitt Thomson Securities Inc.
Janney Montgomery Scott Inc.
Edward D. Jones & Co.
Kemper Securities, Inc.
Kidder, Peabody & Co. Incorporated
C.J. Lawrence/Deutsche Bank Securities Corporation
Lehman Brothers Inc.
Mabon Securities Corp.
McDonald & Company Securities, Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
The Ohio Company
Oppenheimer & Co., Inc.
PaineWebber Incorporated
Petrie Parkman & Co., Inc.
Piper Jaffray Inc.
Prudential Securities Incorporated
RAS Securities, Corp.
Rauscher Pierce Refsnes, Inc.
RBC Dominion Securities Corporation
Salomon Brothers Inc.
Scotia McLeod (USA) Inc.
Southcoast Capital Corporation
Stifel, Nicolaus & Company Incorporated
Tucker Anthony Incorporated
S.G. Warburg & Co. Inc.
Wertheim Schroder & Co. Incorporated
Wheat, First Securities, Inc.
Williams Mackay Jordan & Co., Inc.
Wood Gundy Corp.
Managers:
Morgan Stanley & Co. International Limited
Lazard Brothers & Co., Limited
CS First Boston Limited
J.P. Morgan Securities Ltd.
Smith Barney Inc.
Barclays de Zoete Wedd Limited
Commerzbank Aktiengesellschaft
Credit Lyonnais Securities
Cazenove & Co.
Argentaria Bolsa, S.V.B., S.A.
DEUTSCHE BANK AKTIENGESELLSCHAFT
BMO Nesbitt Thomson Ltd.
LTCB International Limited
Nomura International Plc
RBC Dominion Securities Inc.
SCOTIAMACLEOD INC.
Toronto-Dominion Bank
S.G. Warburg Securities LTd.
Wood Gundy Inc.
Yamaichi International (Europe) Limited
For the fiscal year ended (a) 10/31/94
File number (c) 811-4864
SUB-ITEM 77 0
EXHIBITS
Transactions Effected Pursuant to Rule 10f-3
1. Name of Issuer
Beacon Properties Corporation
2. Date of Purchase
5/19/94
3. Number of Securities Purchased
138,900
4. Dollar Amount of Purchase
$2,361,300
5. Price Per Unit
$17.00
6. Name(s) of Underwriter(s) or Dealer(s)
From whom Purchased
Merrill Lynch & Co.
7. Other Members of the Underwriting Syndicate
Kidder, Peabody & Co. Incorporated
Lehman Bothers Inc.
Bear, Stearns & Co. Inc.
Alex. Brown & Sons Incorporated
Dean Witter Reynolds Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
A.G. Edwards & Sons, Inc.
Goldman, Sachs & Co.
Oppenheimer & Co., Inc.
PaineWebber Incorporated
Prudential Securities Incorporated
Salomon Brothers Inc.
Smith Barney Shearson Inc.
Wertheim Schroder & Co. Incorporated
Advest, Inc.
J.C. Bradford & Co.
Cowen & Company
Dain Bosworth Incorporated
Fahnestock & Co. Inc.
First Albany Corporation
Gruntal & Co., Incorporated
Interstate/Johnson Lane Corporation
Janney Montgomery Scott Inc.
Edward D. Jones & Co.
Kemper Securities, Inc.
Ladenburg, Thalmann & Co. Inc.
C.J. Lawrence/Deutsche Bank Securities Corporation
Legg Mason Wood Walker, Incorporated
McDonald & Company Securities, Inc.
Morgan Keegan & Company, Inc.
Piper Jaffray Inc.
Principal Financial Securities Inc.
Ragen MacKenzie Incorporated
Rauscher Pierce Refsnes, Inc.
Raymond James & Associates, Inc.
The Robinson-Humphrey Company, Inc.
Stifel, Nicolaus & Company, Incorporated
Sutro & Co. Incorporated
Tucker Anthony Incorporated
Wheat, First Securities, Inc.
Adams, Harkness & Hill, Inc.
Dickinson & Co.
Doft & Co., Inc.
Dominick & Dominick, Incorporated
Fechtor, Detwiler & Co., Inc.
Josephthal Lyon & Ross Incorporated
C.L. King & Associates, Inc.
Moors & Cabot, Inc.
Steiner Diamond & Co. Incorporated
Utendahl Capital Partners, L.P.
H.C. Wainwright & Co., Inc.
For the fiscal year ended (a) 10/31/94
File number (c) 811-4864
SUB-ITEM 77 0
EXHIBITS
Transactions Effected Pursuant to Rule 10f-3
1. Name of Issuer
Charles E. Smith Residential Realty, Inc.
2. Date of Purchase
6/23/94
3. Number of Securities Purchased
68,100
4. Dollar Amount of Purchase
$1,634,400
5. Price Per Unit
$24.00
6. Name(s) of Underwriter(s) or Dealer(s)
From whom Purchased
Goldman, Sachs & Co.
7. Other Members of the Underwriting Syndicate
A.G. Edwards & Sons, Inc.
PaineWebber Incorporated
Legg Mason Wood Walker, Incorporated
Advest, Inc.
Bear, Stearns & Co. Inc.
William Blair & company
Branch, Cabell and Company
Alex. Brown & Sons Incorporated
CS Fist Boston Corporation
Cowen & Company
Craigie Incorporated
Dain Bosworth Incorporated
Davenport & Co. of Virginia, Inc.
Dean Witter Reynolds Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Ewing Capital, Inc.
Ferris, Baker Watts, Incorporated
Folger Nolan Fleming Douglas, Inc.
Gerard Klauer Mattison & Co., Inc.
Interstate/Johnson Lane Corporation
Johnson, Lemon & Co. Incorporated
Edward D. Jones & Co., Inc.
Kemper Securities, Inc.
Ladenburg, Thalmann & Co., Inc.
Lehman Brothers Inc.
McDonald & Company Securities, Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Keegan & Company, Inc.
Morgan Stanley & Co. Incorporated
Oppenehimer & Co., Inc.
Piper Jaffray Inc.
Prudential Securities Incorporated
Rauscher Pierce Refsnes, Inc.
Raymond James & Associates, Inc.
The Robinson-Humphrey Company, Inc.
Salomon Brothers Inc.
Scott & Stringfellow, Inc.
Smith Barney Inc.
Stifel, Nicolaus & Comapny, Incorporated
Sutro & Co. Incorporated
Tucker Anthony Incorporated
Wheat, First Securities, Inc.
For the fiscal year ended (a) October 31, 1994
File number (c) 811-4864
SUB-ITEM 77 0
EXHIBITS
Transactions Effected Pursuant to Rule 10f-3
1. Name of Issuer
Avalon Properties, Inc.
2. Date of Purchase
11/10/93
3. Number of Securities Purchased
87,700
4. Dollar Amount of Purchase
$1,797,850
5. Price Per Unit
$20.50
6. Name(s) of Underwriter(s) or Dealer(s)
From whom Purchased
Kidder, Peabody & Co. Incorporated
7. Other Members of the Underwriting Syndicate
Goldman, Sachs & Co.
Smith Barney Shearson Inc.
Dean Witter Reynolds Inc.
Legg Mason Wood Walker, Incorporated
Bear, Stearns & Co. Inc.
Alex. Brown & Sons Incorporated
A.G. Edwards & Sons, Inc.
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co., Incorporated
Oppenheimer & Co., Inc.
Prudential Securities Incorporated
Advest, Inc.
J.C. Bradford & Co.
Cowen & Company
Kemper Securities, Inc.
Morgan Keegan & Company, Inc.
The Robinson-Humphrey Company, Inc.
Tucker Anthony Incorporated
Wheat, First Securities, Inc.
Branch, Cabell and Company
Brean Murray, Foster Securities, Inc.
Coburn & Meredith, Inc.
Craigie Incorporated
Doft & Co., Inc.
Dominick & Dominick, Incorporated
Fahnestock & Co. Inc.
First Albany Corporation
Janney Montogomery Scott Inc.
Johnston, Lemon & Co. Incorporated
Edward D. Jones & Co.
Ladenburg, Thalmann & Co. Inc.
Parker/Hunter Inc.
Pennsylvania Merchant Group Ltd.
Scott & Stringfellow, Inc.
For the fiscal year ended (a) October 31, 1994
File number (c) 811-4864
SUB-ITEM 77 0
EXHIBITS
Transactions Effected Pursuant to Rule 10f-3
1. Name of Issuer
Irvine Apartment Communities
2. Date of Purchase
12/1/93
3. Number of Securities Purchased
235,000
4. Dollar Amount of Purchase
$4,112,500
5. Price Per Unit
$17.50
6. Name(s) of Underwriter(s) or Dealer(s)
From whom Purchased
Morgan Stanley & Co. Inc.
7. Other Members of the Underwriting Syndicate
Smith Barney Shearson Inc.
Montgomery Securities
Advest, Inc.
Bear, Stearns & Co. Inc.
Alex. Brown & Sons Incorporated
Cowen & Company
Crowell, Weedon & Co.
Cruttenden & Co., Inc.
Doft & Co., Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
A.G. Edwards & Sons, Inc.
Fahnestock & Co., Inc.
First Albany Corporation
First Equity Corporation of Florida
First of Michigan Corporation
L.H. Friend, Weinress & Frankson, Inc.
Genesis Merchant Group Securities, L.P.
Goldman, Sahs & Co.
Interstate/Johnson Lane Corporation
Janney Montgomery Scott Inc.
Edward D. Jones & Co.
Kemper Securities, Inc.
Kidder, Peabody & Co. Incorporated
Ladenburg, Thalmann & Co. Inc.
Legg Mason Wood Walker, Incorporated
Lehman Brothers Inc.
McDonald & Company Securities, Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
J.P. Morgan Securities Inc.
The Ohio Company
Oppenheimer & Co., Inc.
PaineWebber Incorporated
Piper Jaffray Inc.
Prudential Securities Incorporated
Ragen MacKenzie Incorporated
Rauscher Pierce Refsnes, Inc.
The Robinson-Humphrey Company, Inc.
Roney & Co.
Scott & Stringfellow, Inc.
The Seidler Companies Incorporated
Stifel, Nicolaus & Company, Incorporated
Sutro & Co. Incorporated
Tucker Anthony Incorporated
Van Kasper & Company
Wedbush Morgan Securities
Wheat, First Securities, Inc.
International Underwriters:
Morgan Stanley International
Smith Barney Shearson Inc.
Montgomery Securities
Bayerische Landesbank Girozentrale
BNP Capital Markets Limited
Daiwa Europe Limited
Deutsche Bank Aktiengesellschaft
N M Rothchild & Sons Limited
For the fiscal year ended (a) October 31, 1994
File number (c) 811-4864
SUB-ITEM 77 0
EXHIBITS
Transactions Effected Pursuant to Rule 10f-3
1. Name of Issuer
Simon Property Group, Inc.
2. Date of Purchase
12/13/93
3. Number of Securities Purchased
285,700
4. Dollar Amount of Purchase
$6,356,825
5. Price Per Unit
$22.25
6. Name(s) of Underwriter(s) or Dealer(s)
From whom Purchased
Merrill Lynch, Pierce, Fenner & Smith Inc.
7. Other Members of the Underwriting Syndicate
Bear, Stearns & Co. Inc.
CS Fist Boston Corporation
Lehman Brothers Inc.
PaineWebber Incorporated
Dean Witter Reynolds Inc.
Kemper Securities, Inc.
Legg Mason Wood Walker, Incorporated
McDonald & Company Securities, Inc.
Alex. Brown & Sons Incorporated
Dillon, Read & Co. Inc.
A.G. Edwards & Sons, Inc.
Goldmas, Sachs & Co.
Kidder, Peabody & Co. Incorporated
Lazard Freres & Co.
Morgan Stanley & Co. Incorporated
Oppenheimer & Co., Inc.
Prudential Securities Incorporated
Salomon Brothers Inc.
Smith Barney Shearson Inc.
Wertheim Schroder & Co. Incorporated
The Chicago Dearborn Company
Advest, Inc.
Allen & Company Incorporated
Robert W. Baird & Co. Incorporated
William Blair & Company
J.C. Branford & Co.
Cowen & Company
Dain Bosworth Incorporated
D.A. Davidson & Co. Incorporated
Fahnestock & Co. Inc.
First Albany Corporation
First of Michigan Corporation
Gruntal & Co., Incorporated
Interstate/Johnson Lane Corporation
Janney Montgomery Scott Inc.
Edward D. Jones & Co.
Ladenburg, Thalmann & Co. Inc.
Morgan Keegan & Company, Inc.
Needham & Company, Inc.
Piper Jaffray Inc.
The Principal/Eppler, Guerin & Turner, Inc.
Raffensperger, Hughes & Co., Inc.
Ragen MacKenzie Incorporated
Rauscher Pierce Refsnes, Inc.
Raymond James & Associates, Inc.
The Robinson-Humphrey Company, Inc.
Stephens Inc.
Stifel, Nicolaus & Company, Incorporated
Sutro & Co. Incorporated
Tucker Anthony Incorporated
Wheat, First Securities, Inc.
The Chapman Company
Crowell, Weedon & Co.
Dickinson & Co.
Doft & Co., Inc.
Dominick & Dominick, Incorporated
Ferris, Baker Watts, Incorporated
Folger Nolan Fleming Douglas Incorporated
Genesis Merchant Group Securities
Hanifen, Imhoff Inc.
Jason MacKenzie Securities, Inc.
Johnston, Lemon & Co. Incorporated
Josephthal Lyon & Ross Incorporated
Laidlaw Equities, Inc.
Mesirow Financial, Inc.
The Ohio Company
Parker/Hunter Incorporated
Pryor, McClendon, Counts & Co., Inc.
Roney & Co.
Scott & Stringfellow, Inc.
The Seidler Companies Incorporated
Sturdivant & Co., Inc.
Traub and Company
Utendahl Capital Partners, L.P.
Van Kasper & Company
Wedbush Morgan Securities
Allen & Company of Florida, Inc.
Boenning & Scattergood Inc.
Branch, Cabell and Company
Brean Murray, Foster Securities Inc.
JW Charles Securities, Inc.
City Securities Corporation
Coburn & Meredith, Inc.
Craigie Incorporated
Davenport & Co. of Virginia, Inc.
First Equity Corporation
First Hanover Securities, Inc.
First Southwest Company
J.J.B. Hilliard, W.L. Lyons, Inc.
Howe Barnes Investments, Inc.
Huntleigh Securities Corporation
C.L. King Associates, Inc.
Luther, Smith & Small Inc.
Ormes Capital Markets Inc.
Samuel A. Ramirez & Co., Inc.
Sands Brothers & Co., Ltd.
Muriel Siebert & Co., Inc.
Southwest Securities, Inc.
Spencer Trask Securities Incorporated
For the fiscal year ended (a) October 31, 1994
File number (c) 811-4864
SUB-ITEM 77 0
EXHIBITS
Transactions Effected Pursuant to Rule 10f-3
1. Name of Issuer
Societe Nationale Elf Aquitaine ADR
2. Date of Purchase
2/14/94
3. Number of Securities Purchased
13,300
4. Dollar Amount of Purchase
$456,862
5. Price Per Unit
$34.35
6. Name(s) of Underwriter(s) or Dealer(s)
From whom Purchased
Merrill Lynch, Pierce, Fenner & Smith Inc.
7. Other Members of the Underwriting Syndicate
Banque Paribas
Credit Lyonnais
Merrill Lynch International Limited
Banque Nationale de Paris
Banque Indosuez
UBS S.A. Maison de Titres
Credit Commercial de France
Daiwa Europe limited
Deutsche Bank France SNC
Goldman Sachs International Limited
Morgan Stanley S.A.
Societe Generale
Banque S.G. Warburg
Caisse des Depots et Consignations
Donaldon, Lufkin & Jenrette Securities Corporation
Caisse Nationale de Credit Agricole
Rothschild et Cie Banque and
NM Rothschild & Sons Limited (acting jointly)
Lazard Freres & Cie
Barclays de Zoete Wedd Limited
J.P. Morgan & Cie S.A.
Banque Nomura France
Compagnie Financiere de CIC et de I'Union Europeenne-
J. Jenrey Schroeder Wagg & Co. Limited
RBC Dominion Securities Inc.
Banque Worms
CS First Boston France S.A.
Dresdner Bank Aktiengesellschaft
ABN AMRO Bank N.K.
Societe de Banque Suisse (France) S.A.
Bear Stearns International Limited
Caisse Centrale Des Banques Populaires
Enskilda Corporate
Skandinaviska Enskilada Banken
HSBC Investment Banking Group Limited
Kleinwort Benson Limited
Lehman Brothers International (Europe)
Nikko Europe Plc
PaineWebber International (U.K.) Ltd.
Prudential Securities Incorporated
Salomon Brothers Inc.
Smith Barney Shearson Inc.
Yamaichi International (Europe) Limited
Banco Central Hispanoamericano S.A.
Banque du Louvre
Banque Pallas Stern
CPR Compagnie Parisienne de Reescompte
La Compagnie Financiere Edmond de Rothschild Banque
Union de Garantie et de Placement
For the fiscal year ended (a) October 31, 1994
File number (c) 811-4864
SUB-ITEM 77 0
EXHIBITS
Transactions Effected Pursuant to Rule 10f-3
1. Name of Issuer
Equity Residential Properties
2. Date of Purchase
01/19/94
3. Number of Securities Purchased
57,000
4. Dollar Amount of Purchase
$1,653,000
5. Price Per Unit
$29.00
6. Name(s) of Underwriter(s) or Dealer(s)
From whom Purchased
Merrill Lynch, Pierce, Fenner & Smith Inc.
7. Other Members of the Underwriting Syndicate
Kidder, Peabody & Co. Incorporated
Smith Barney Shearson Inc.
Bear, Stearns & Co. Inc.
CS First Boston Corporation
Alex. Brown & Sons Incorporated
Dean Witter Reynolds Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
A.G. Edwards & Sons, Inc.
Dean Witter Reynolds Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
A.G. Edwards & Sons, Inc.
Goldman, Sachs & Co.
Lehman Brothers Inc.
Oppenheimer & Co., Inc.
PaineWebber Incorporated
Prudential Securities Incorporated
Wertheim Schroder & Co. Incorporated
The Chicago Dearborn Company
Advest, Inc.
Robert W. Baird & Co. Incorporated
William Blair & Company
J.C. Branford & Co.
Cowen & Company
Dain Bosworth Incorporated
Doft & Co., Inc.
Fahnestock & Co. Inc.
First Albany Corporation
First of Michigan Corporation
Genesis Merchant Group Securities
Gruntal & Co., Incorporated
Interstate/Johnson Lane Corporation
Janney Montgomery Scott Inc.
Jensen Securities Co.
Edward D. Jones & Co.
Kemper Securities, Inc.
Legg Mason Wood Walker, Incorporated
McDonald & Company Securities, Inc.
Morgan Keegan & Company, Inc.
Needham & Company, Inc.
Piper Jaffray Inc.
The Principal/Eppler, Guerin & Turner, Inc.
Ragen MacKenzie Incorporated
Rauscher Pierce Refsnes, Inc.
Raymond James & Associates, INc.
The Robinson-Humphrey Company, Inc.
Steiner Diamond & Co., Incorporated
Stephens Inc.
Stifel, Nicolaus & Company, Incorporated
Sutro & Co. Incorporated
Tucker Anthony Incorporated
Wheat, First Securities, Inc.
Hamilton Investments, Inc.
Mesirow Financial, Inc.
Board of Directors or Trustees of:
Prudential Adjustable Rate Securities Fund
The BlackRock Government Income Trust
Prudential California Municipal Fund
Prudential Equity Fund
Prudential Equity Income Fund
Prudential FlexiFund (2 Portfolios)
Prudential GNMA Fund
Prudential Global Fund
Prudential Global Genesis Fund
Prudential Global Natural Resources Fund
Prudential Government Plus Fund
Prudential Growth Fund
Prudential Growth Opportunity
Prudential High Yield Fund
Prudential IncomeVertible Fund
Prudential Intermediate Global Income Fund
Prudential Multi-Sector Fund
Prudential Municipal Bond Fund (3 Portfolios)
Prudential Municipal Series Fund (11 Portfolios)
Prudential National Municipals Fund
Prudential Pacific Growth Fund
Prudential Short-Term Global Income Fund (2 Portfolios)
Prudential Strategic Income Fund
Prudential Structured Maturity Fund
Prudential U.S. Government Fund
Prudential Utility Fund
Global Utility Fund, Inc.
Nicholas-Appelgate Fund, Inc.
We have examined the accompanying description of the Prudential Dual Pricing
Worksheet (the "Worksheet") application of State Street Bank and Trust Company
("State Street"), custodian and recordkeeper for the Prudential Mutual Funds
(the "Funds"). Our examination included procedures to obtain reasonable
assurance about whether (1) the accompanying description presents fairly, in
all material respects, the aspects of State Street's policies and procedures
that may be relevant to a Fund's internal control structure relating to the
Worksheet, (2) the control structure policies and procedures included in the
description were suitably designed to achieve the control objectives specified
in the description, if those policies and procedures were complied with
satisfactorily, and (3) such policies and procedures had been placed in
operation as of June 30, 1993. The control objectives were specified by
Prudential Mutual Fund Management. Our examination was performed in accordance
with standards established by the American Institute of Certified Public
Accountants and included those procedures we considered necessary in the
circumstances to obtain a reasonable basis for rendering our opinion.
In our opinion, the accompanying description of the aforementioned application
presents fairly, in all material respects, the relevant aspects of State
Street's policies and procedures that had been placed in operation as of June
30, 1993. Also, in our opinion, the policies and procedures, as described, are
suitably designed to provide reasonable assurance that the specified control
objectives would be achieved if the described policies and procedures were
complied with satisfactorily.
In addition to the procedures we considered necessary to render our opinion as
expressed in the previous paragraph, we applied tests to specific policies and
procedures, listed in Section I, to obtain evidence about their effectiveness
in meeting the control objectives, described in Section I during the period
from July 1, 1992 to June 30, 1993. The nature, timing, extent, and results of
the tests are listed in Section II. In our opinion the policies and procedures
that were tested, as described in Section II, were operating with sufficient
effectiveness to provide reasonable, but not absolute, assurance that the
control objectives specified in Section I were achieved during the period from
July 1, 1992 to June 30, 1993.
The relative effectiveness and significance of specific policies and procedures
at State Street, and their effect on assessments of control risk on the Funds
are dependent on their interaction with the policies, procedures, and other
factors present at individual Funds. We have performed no procedures to
evaluate the effectiveness of policies and procedures at individual Funds in
connection with this report.
The description of policies and procedures at State Street is as of June 30,
1993, and information about tests of the operating effectiveness of specified
policies and procedures covers the period from July 1, 1992 to June 30, 1993.
Any projection of such information to the future is subject to the risk that,
because of change, the description may no longer portray the system in
existence. The potential effectiveness of specified policies and procedures at
State Street is subject to inherent limitations and, accordingly, errors or
irregularities may occur and not be detected. Furthermore, the projection of
any conclusions, based on our findings, to future periods is subject to the
risk that changes may alter the validity of such conclusions.
This report is intended solely for use by the management and Boards of
Directors/Trustees of the Funds, the independent auditors of the Funds and the
Securities and Exchange Commission.
DELOITTE & TOUCHE
August 13, 1993
SECTION I
Policies and Procedures Placed in Operation
Prudential Dual Pricing Worksheet
Effective January 22, 1990, the Funds, offered by Prudential Securities
Incorporated (formerly Prudential-Bache Securities, Inc.) and Prudential Mutual
Fund Distributors, Inc., adopted a dual pricing system. The dual pricing
system consists of two classes of shares (Class A and Class B) for the Funds.
The Class A shares are subject to a front-end sales load and the Class B shares
are subject to a contingent deferred sales charge. The two classes of shares
represent interests in the same portfolio of investments of the respective Fund
and are identical in all respects, except that each class is subject to
different distribution expenses and has exclusive voting rights with respect to
the Rule 12b-1 distribution plan pursuant to which such distribution expenses
are paid.
In order to allocate income and expenses between the two classes of shares,
State Street Bank and Trust Company (the Funds' custodian and recordkeeper)
utilizes the Prudential Dual Pricing Worksheet (the "Worksheet") (see Exhibit
I). The Worksheet is a manual supplementary application that extracts relevant
data from the Funds' primary accounting system, allocates income and expenses
between the two classes of shares and computes the daily net asset value and,
if applicable, the dividend/distribution for each class of shares. Internal
accounting controls that are relevant to the Fund can be divided into two
components - controls related to the mutual fund accounting system resident at
State Street Bank and Trust Company (the "primary accounting system") and
controls related to the Worksheet.
The specific control objectives and policies and procedures relating to the
Worksheet are described on pages 4 and 5. A description of the tests of the
policies and procedures designed to obtain evidence about the operating
effectiveness of those policies and procedures in achieving the specific
control objectives is included in Section II.
Control Objectives and Policies and Procedures
Prudential Dual Pricing Worksheet
The Worksheet is a supplementary manual application to the Funds' primary
accounting system. Certain data is extracted from the primary accounting
system to allocate income and expenses and to calculate the daily net asset
value and, if applicable, dividends/distributions for each class of shares.
The primary accounting system includes the details of transactions in
accordance with the Investment Company Act of 1940, as amended.
The following represents the internal accounting control objectives and
policies and procedures for the allocation of income and expenses and the
computation of the net asset value and, if applicable, the
dividend/distribution for each class of shares utilizing the Worksheet. It
does not cover the internal accounting control policies and procedures
surrounding the processing of information into the Funds' primary accounting
system.
CONTROL OBJECTIVES CONTROL POLICIES AND PROCEDURES
A. Capital share activity 1. Daily, the transfer agent forwards
as reported by the Fund's reports of capital share capital share
transfer agent is recorded activity for each class which includes
for each class in an accurate a summary of subscriptions,
and timely manner by the fund. redemptions, exchanges and other
information (the "Supersheet"). The
opening day's balance for shares
outstanding and for shares eligible for
dividends are recorded on the
Worksheet. shares eligible for
dividends are recorded on
2. Estimated interim share activity
for the current day not recorded in the
Supersheet is received via telefax from
the transfer agent and is recorded for
each class on the Worksheet.
B. Net Asset Value ("NAV") 1. The prior days ending NAV per
and, if applicable, the share (unrounded) for each class is
dividend/distribution for agreed to the prior day's Worksheet.
each class are accurately
computed on a daily basis. 2. The daily net capital stock
activity for each class for the current
day is agreed to the Supersheet as
described in Control Procedures A.1 and
2., above.
3. Percentage Assets by Class and
Percentage Dividend Assets by Class are
calculated for each class based upon
information from the prior day
Worksheet and information recorded on
the Supersheet.
CONTROL OBJECTIVES CONTROL POLICIES AND PROCEDURES
4. Allocate investment income between
classes based on the appropriate asset
allocation percentage for each class.
5. Agree composite dividend income,
interest income, income amortization,
income equalization, management fees,
other expenses, realized gains and
losses, and unrealized
appreciation/depreciation to the
primary accounting system of the Fund.
6. Allocate expenses between classes
as follows:
a. Expenses directly
attributable to each class (12b-1
distribution expenses) are calculated
and recorded to that class.
b. Expenses attributable to both
classes are allocated in accordance
with the appropriate asset allocation
percentage for each class.
7. Allocate realized and
unrealized gains and losses between the
classes in accordance with the
appropriate asset allocation percentage
of each class.
8. Record dividends/distributions to
shareholders of each class in the
primary accounting system.
9. Aggregate the net assets for each
class and agree to the total net assets
per the primary accounting system.
10. For each class, reconcile the
current day's NAV and, if applicable,
the dividend/distribution to the
previous day's NAV and
dividend/distribution for each class.
11. The above procedures are reviewed
by the Fund supervisor or manager.
SECTION II
Tests of Operating Effectiveness
Prudential Dual Pricing Worksheet
July 1, 1992 to June 30, 1993
We reviewed the methodology and procedures for calculating the daily net asset
value and, if applicable, the dividends/distributions of the two classes of
shares and the allocation of income and expenses between the two classes of
shares.
The following are the detailed procedures which we performed with respect to
the Worksheet. These procedures were performed for selected days encompassing
all Funds subject to dual pricing during the year ended June 30, 1993, which we
believe is a representative sample, to test compliance with the control
policies and procedures as described in Section I.
Prudential Mutual Fund Management, Inc. is the manager of the Funds and has
represented to us that adequate facilities are in place to ensure
implementation of the methodology and procedures for calculating the net asset
value and dividends/distributions of the two classes of shares and the
allocation of income and expenses between the two classes of shares. Based on
our review of the description of the policies and procedures of the Worksheet,
as described in Section I, and performance of tests of operating effectiveness
as described in Section II, we concur with such representation.
Agreed "Prior Day NAV Per Share" to the previous day's Worksheet and
to the rounded NAV included on the Supersheet for each class.
Agreed "Shares Outstanding Beginning of the Day" to the Supersheet
for each class.
Agreed "Activity/Estimate" to the estimated interim share activity
reported via fax from the transfer agent for each class.
Recalculated "Current Shares Outstanding" by adding "Shares
Outstanding Beginning of the Day" and "Activity/Estimate" for each
class.
Recalculated for each class "Adjusted Total Assets" by multiplying
"Prior Day NAV Per Share" by "Current Shares Outstanding."
Recalculated "Percentage Assets-Class A/Front End" by dividing
"Adjusted Total Assets-Class A/Front End" by "Adjusted Total Assets
Composite."
Recalculated "Percentage Assets-Class B/Back End" by dividing
"Adjusted Total Assets-Class B/Back End" by "Adjusted Total Assets
Composite."
Agreed "Dividend Shares Beginning of Day" to the Supersheet for each
class.
Agreed "Activity/Estimate" to the estimated interim share activity
reported via fax from the transfer agent for each class.
Recalculated "Current Dividend Shares" by adding "Dividend Shares
Beginning of Day" and "Activity/Estimate" for each class.
Recalculated for each class "Adjusted Dividend Assets" by multiplying
"Prior Day NAV Per Share" by "Current Dividend Shares."
Recalculated "Percentage Dividend Assets-Class A/Front End" by
dividing "Adjusted Dividend Assets-Class A/Front End" by "Adjusted
Dividend Assets Composite."
Recalculated "Percentage Dividend Assets-Class B/Back End" by
dividing "Adjusted Dividend Assets-Class B/Back End" by "Adjusted
Dividend Assets Composite."
Agreed composite total "Dividend Income", "Interest Income",
"Amortization" and "Income Equalization" to the primary accounting
system.
Recalculated the allocation for each class of "Dividend Income",
"Interest Income" and "Amortization" for daily dividend funds by
multiplying the composite total by "Percentage Dividend Assets-Class
A/Front End" and "Percentage Dividend Assets-Class B/Back End," and
for non-daily dividend funds by multiplying the composite total by
"Percentage Assets-Class A/Front End" and "Percentage Assets-Class
B/Back End."
Recalculated "Daily Income", composite and for each class, by
totaling "Dividend Income", "Interest Income", "Amortization" and
"Income Equalization."
Agreed composite total "Management Fee" and "Other Fixed Expenses" to
the primary accounting system.
Recalculated the allocation for each class of "Management Fee" and
"Other Fixed Expenses" for daily dividend funds by multiplying the
composite total by "Percentage Dividend Assets-Class A/Front End" and
"Percentage Dividend Assets-Class B/Back End," and non-daily dividend
funds by multiplying the composite total by "Percentage Assets-Class
A/Front End" and "Percentage Assets-Class B/Back End."
Agreed the "12b-1 Fee-Class A/Front End" and "12b-1 Fee-Class B/Back
End" to the respective "PC Expense Worksheet."
Recalculated "Daily Expense", composite and for each class, by
totaling "Management Fee", "12b-1 Fee" and "Other Fixed Expenses."
Recalculated "Daily Net Income" for each class by subtracting "Daily
Expense" from "Daily Income."
Recalculated "Dividend Rate" for each class for daily dividend funds
by dividing "Daily Net Income" by "Dividend Shares Beginning of
Day-Class A/Front End" and "Dividend Shares Beginning of Day-Class
B/Back End."
Agreed "Daily Income" and "Income Distribution" for each class to the
primary accounting system.
Recalculated "Undistributed Net Income" for each Class by subtracting
"Income Distribution" from "Income Available for Distribution."
Agreed "Capital Stock Activity" for each Class to the Supersheet.
Agreed the "Capital Gain Distribution" to the amount recorded in the
primary accounting system.
Agreed composite total "Realized Gain/Loss", "Unrealized
Appreciation/Depreciation", "Unrealized Appreciation/Depreciation -
Options" and "Unrealized Appreciation/Depreciation - Futures" to the
primary accounting system.
Recalculated the allocation for each class of "Realized Gain/Loss",
"Unrealized Appreciation/Depreciation", "Unrealized
Appreciation/Depreciation - Options" and "Unrealized
Appreciation/Depreciation - Futures" by multiplying the composite
amount by the "Percentage Assets-Class A/Front End" and "Percentage
Assets-Class B/Back End."
Agreed "Prior Days Net Assets" to the previous day's Worksheet.
Recalculated "Net Assets", composite and for each class, by totaling
"Undistributed Net Income", "Capital Stock Activity", "Capital Gain
Distribution", "Realized Gain/Loss", "Unrealized
Appreciation/Depreciation", "Unrealized Appreciation/Depreciation -
Options", "Unrealized Appreciation/Depreciation - Futures", and
"Prior Days Net Assets."
Recalculated "NAV Per Share" dividing the "Net Assets-Class A/Front
End" and "Net Assets - Class B/Back End" by "Current Shares
Outstanding - Class A/Front End" and 'Current Shares Outstanding -
Class B/Back End", respectively.
Recalculated "Offering Price" for Class A shares by applying the
"Load" percentage as stated in the fund's prospectus.
Board of Trustees
Prudential Equity Income Fund:
In planning and performing our audit of the financial statements of
Prudential Equity Income Fund ("Fund") for the year ended October
31, 1994, we considered its internal control structure, including
procedures for safeguarding securities, in order to determine our
auditing procedures for the purpose of expressing our opinion on
the financial statements and to comply with the requirements of
Form N-SAR, not to provide assurance on the internal control
structure.
The management of the Fund is responsible for establishing and
maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required
to assess the expected benefits and related costs of internal
control structure policies and procedures. Two of the objectives
of an internal control structure are to provide management with
reasonable, but not absolute, assurance that assets are safeguarded
against loss from unauthorized use or disposition and that
transactions are executed in accordance with management's
authorization and recorded properly to permit preparation of
financial statements in conformity with generally accepted
accounting principles.
Because of inherent limitations in any internal control structure,
errors or irregularities may occur and not be detected. Also,
projection of any evaluation of the structure to future periods is
subject to the risk that it may become inadequate because of
changes in conditions or that the effectiveness of the design and
operation may deteriorate.
Our consideration of the internal control structure would not
necessarily disclose all matters in the internal control structure
that might be material weaknesses under standards established by
the American Institute of Certified Public Accountants. A material
weakness is a condition in which the design or operation of the
specific internal control structure elements does not reduce to a
relatively low level the risk that errors or irregularities in
amounts that would be material in relation to the financial
statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing their
assigned functions. However, we noted no matters involving the
internal control structure, including procedures for safeguarding
securities, that we consider to be material weaknesses as defined
above as of October 31, 1994.
This report is intended solely for the information and use of
management and the Securities and Exchange Commission.
/S/Deloitte & Touche LLP
December 7, 1994
