PRUDENTIAL EQUITY INCOME FUND, N-30D, 1997-07-09

PRUDENTIAL EQUITY INCOME FUND
N-30D, 1997-07-09

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(ICON)

Prudential
Equity Income
Fund

SEMI
ANNUAL
REPORT
April 30, 1997

(LOGO)

<PAGE>

Prudential Equity Income Fund

Performance At A Glance.
Healthy corporate earnings plus moderate economic growth propelled the stock
market into the seventh year of its bull market run. Yes, there was a market
stutter-step in late March when stock prices tumbled, but as mid-year
approached the Dow Jones Industrial Average was once again setting new records.
The Prudential Equity Income Fund followed this trend and thanks to strong
stock selection and concentrations in the better performing sectors, your Fund
significantly outperformed similar funds tracked by Lipper Analytical Services
for the six-month period ended April 30, 1997.

Cumulative Total Returns1 As of 4/30/97

<TABLE>
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A 14.8% 17.1% 100.9% N/A 157.5%
Class B 14.4 16.3 93.5 188.0% 199.3
Class C 14.4 16.3 N/A N/A 45.9
Class Z 15.0 17.2 N/A N/A 20.2
Lipper Eq. Inc.
Fund Average3 10.0 17.6 92.6 191.3 ***
</TABLE>

Average Annual Total Returns1 As of 3/31/97

<TABLE>
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 11.2% 13.8% N/A 13.1%
Class B 11.3 14.0 11.2% 11.3
Class C 15.3 N/A N/A 14.8
Class Z 17.2 N/A N/A 17.2
</TABLE>

Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.

1Source: Prudential Investments Fund Management and Lipper Analytical Services.
The cumulative total returns do not take into account sales charges. The
average annual returns do take into account applicable sales charges. The Fund
charges a maximum front-end sales load of 5% for Class A shares and a declining
contingent deferred sales charge (CDSC) of 5%, 4%, 3%, 2%, 1% and 1% for six
years for Class B shares. Class C shares have a 1% CDSC for one year. Class B
shares will automatically convert to Class A shares on a quarterly basis,
approximately seven years after purchase. Class Z shares are not subject to a
sales charge or a distribution fee.

2Inception dates: 1/22/90 Class A; 1/22/87 Class B; 8/1/94 Class C; 3/1/96
Class Z.

3Lipper average returns are 186 funds for six months; 167 funds for one year;
59 funds for five years; and 28 funds for ten years.

*** Lipper Since Inception category cumulative total returns were: Class A,
142.8% for 49 funds; Class B, 196.5% for 27 funds; Class C 54.8% for 108 funds
and Class Z, 19.0% for 165 funds.

How Investments Compared.
(As of 4/30/97)
(GRAPH)

Source: Lipper Analytical Services. Financial markets change, so a mutual
fund's past performance should never be used to predict future results. The
risks to each of the investments listed above are different -- we provide
12-month total returns for several Lipper mutual fund categories to show you
that reaching for higher returns means tolerating more risk. The greater the
risk, the larger the potential reward or loss. In addition, we've included
historical 20-year average annual returns. These returns assume the
reinvestment of dividends.

U.S. Growth Funds will fluctuate a great deal. Investors have received higher
historical total returns from stocks than from most other investments. Smaller
capitalization stocks offer greater potential for long-term growth but may be
more volatile than larger capitalization stocks.

General Bond Funds provide more income than stock funds, which can help smooth
out their total returns year by year. But their prices still fluctuate
(sometimes significantly) and their returns have been historically lower than
those of stock funds.

General Municipal Debt Funds invest in bonds issued by state governments, state
agencies and/or municipalities. This investment provides income that is usually
exempt from federal and state income taxes.

Money Market Funds attempt to preserve a constant share value; they don't
fluctuate much in price but, historically, their returns have been generally
among the lowest of the major investment categories.

<PAGE>

Warren E. Spitz, Fund Manager (PICTURE)

Portfolio
Manager's Report

The Prudential Equity Income Fund seeks both current income and capital
appreciation by investing primarily in stocks and convertible securities that
provide investment income returns above those of the Standard & Poor's 500 or
NYSE Composite Index. It emphasizes stocks that are considered undervalued
given their earnings, cash flow, or asset values. There can be no assurance
that the Fund will achieve its investment objective.

Value Investing.
Portfolio Manager Warren Spitz uses a value investment style in managing the
Prudential Equity Income Fund. He looks for securities priced at bargain levels
considering the company's earnings, cash flow or asset values. Warren often
finds these values in out-of-favor industries or sectors that he believes could
appreciate more than others once investors realize the underlying value and
start to bid for them.

Strategy Session.
- -------------------------------------------------------------------------
Strong and sustained corporate earnings plus vigorous, non-inflationary
economic growth powered the bull market in stocks over the last six months.
Your Fund performed better than its peers by a significant margin during the
period and beat the overall market (as measured by the S&P 500 Index) as well
because of its substantial holdings in financial services stocks, the
second-highest performing group in the market.

We hold more than twice as much in financial services stocks as the market
index does, emphasizing securities brokers and real estate investment trusts
(REITs). REITs are companies that buy real estate. These companies, in turn,
manage and sell interests in the portfolio to investors. REITs are required by
law to pay out 95% of their earnings in dividends, so they offer dividends that
are well above average. We continue to hold a sizable interest in securities
brokers, which appreciated nicely over the last six months, benefitting from
the consolidation trend in the industry. Several mergers that were announced
in recent months -- such as Dean Witter Discover/Morgan Stanley and Bankers
Trust/Alex Brown -- intensified interest in the industry.

In technology, we have changed our opinion somewhat. After a sustained rally,
technology stocks and semiconductor stocks in particular started to close in on
our price targets. While we believed many might still appreciate further, we
weren't sure how long the good news could continue. Consequently, we reduced
our technology holdings during the past six months.

We increased holdings in select industrial stocks, including aluminum makers
Reynolds Metals and Alcoa. The industry has benefited from the increasing use
of aluminum in automobile manufacturing and a reduction in Russian aluminum
production.

Portfolio Breakdown.
Expressed as a percentage of
total investments as of 4/30/97.
(GRAPH)

<PAGE>

What Went Well.
- ----------------------------------------------
Cashing in Our Chips.
It's not always easy to get your timing right in the volatile technology
sector, but we were pleased with our decisions to sell our positions in
semiconductor makers National Semiconductor and Micron Technology and Texas
Instruments.

We became interested in these when they were battered in late 1995 as orders
for semiconductors bottomed out. Once the supply and demand imbalance in the
chip market sorted itself out and orders began to increase again, these
companies bounced back. Our holdings appreciated as investors anticipated
improved earnings. We sold after they rallied.

Money Talks.
We have believed for some time now that financial services stocks are the
assets of choice in the 1990s. That's why we hold 35% of total investments in
financial services companies. And that's largely why we performed far better
than any other competing fund during the reporting period.

Several of our securities brokerage holdings performed impressively.
PaineWebber rose 49%, Bear Stearns increased 39%, and Lehman Brothers was up
37%. We've thought for some time now that these firms were potential takeover
candidates. We're glad to see that the broader market now seems to share our
conclusion.

Our REIT stocks are the largest subset of our financial services assets,
comprising 18% of net assets on April 30. We benefited from the performance of
two of the Fund's top holdings: Crescent Real Estate, which climbed 27%, and
Equity Residential -- our largest holding at 4.8% of total net assets -- which
rose 20% during the period.

Five Largest Holdings.
4.8% Equity Residential
Real Estate Investment Trust
4.7% Lehman Brothers
Financial Services
4.3% IBM
Computer hardware &
software
3.7% AMR Corp.
Airlines
3.2% Elf Aquitaine (ADR)
Integrated Producers

Expressed as a percentage of total investments as of 4/30/97.

And Not So Well.
- ----------------------------------------------
No Food or
Drink, Please.
We continue to hold less in consumer growth stocks such as food and beverages
than the S&P 500 market index. Since these were among the better performers in
the overall market, our lighter position may have held back performance
somewhat. Companies in the consumer growth sector continue to show strong
earnings growth, leading investors to pay higher prices for these stocks. But
because prices have been growing faster than earnings, we believe many of these
stocks are becoming overvalued, even considering their strong earnings growth.
Consequently, we don't consider them value buys.

Looking Ahead.
- ----------------------------------------------
The prolonged bull market has made finding inexpensive stocks the favorites of
value investors like us increasingly difficult. For example, consumer growth
and consumer nondurable stocks seem expensive. We believe success in the coming
months will belong to those investors who can find stocks at more reasonable
prices. Consequently, we hold stocks that we believe are better values,
including financial services and industrial companies, and continue to look
for more.
1

<PAGE>

President's Letter June 9, 1997
(PICTURE)

Staying The Course.

Dear Shareholder:
With the midpoint of 1997 upon us, I'm pleased to report that the recent news
from the financial markets has been decidedly upbeat. The Dow Jones Industrial
Average has gained nearly 17% through mid-June, while lower long-term interest
rates have made bonds an attractive investment.

This stands in contrast to April when the Dow fell 10% from a record high on
fears of higher interest rates and surging inflation. Interest rates have
since fallen as the economy slowed and the Dow has reached several new highs.

The market swings we've seen this year illustrate the importance of "staying
the course" to your financial goal. We realize that maintaining investment
discipline when faced with market uncertainty isn't easy. Here are some
thoughts that may help:

- - Keep Your Expectations Realistic. The best investors know that financial
markets rise and fall -- and so too, will the value of their investments.
Over time, however, stocks have been shown to produce very attractive returns
that were well ahead of inflation.

- - Remember Your Time Horizon. If your investment goals are long term (several
years or more), so should your time horizon. During this period, it's not
unusual for stocks and bonds to experience several periods of market
uncertainty.

- - We're On Your Side. Your Prudential Securities Financial Advisor or Pruco
Securities Registered Representative can help you understand what's happening
in the financial markets. They can assist you in making informed decisions
based upon a thorough knowledge of your financial needs and long-term goals.
Call him or her today.

Thank you for your continued confidence in Prudential mutual funds. We'll do
everything we can to keep you informed and to earn your trust.

Sincerely,

Brian M. Storms
President, Prudential Mutual Funds & Annuities

<PAGE>
Portfolio of Investments as
of April 30, 1997 (Unaudited) PRUDENTIAL EQUITY INCOME FUND
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
LONG-TERM INVESTMENTS--98.7%
COMMON STOCKS--87.7%
------------------------------------------------------------
Aerospace/Defense--3.4%
363,800 Northrop Grumman Corp. $ 30,377,300
303,500 Thiokol Corp. 19,803,375
---------------
50,180,675
- ------------------------------------------------------------
Airlines--3.6%
573,000 AMR Corp.* 53,360,625
- ------------------------------------------------------------
Aluminum--3.4%
440,000 Aluminum Co. of America 30,745,000
282,984 Reynolds Metals Co. 19,207,539
---------------
49,952,539
- ------------------------------------------------------------
Apparel--1.0%
572,700 Kellwood Co. 13,601,625
40,800 Oxford Industries, Inc. 989,400
---------------
14,591,025
- ------------------------------------------------------------
Automobiles & Trucks--3.4%
1,493,558 Chrysler Corp. 44,806,740
150,000 Ford Motor Co. 5,212,500
---------------
50,019,240
- ------------------------------------------------------------
Building & Construction--1.0%
463,000 Kaufman & Broad Home Corp. 6,424,125
750,000 Ryland Group, Inc. 8,718,750
---------------
15,142,875
- ------------------------------------------------------------
Chemicals--3.5%
448,600 Dow Chemical Co. 38,074,925
756,628 Millennium Chemicals, Inc. 13,430,147
---------------
51,505,072
- ------------------------------------------------------------
Computer Hardware--5.7%
590,400 Amdahl Corp.* 5,055,300
354,500 Digital Equipment Corp* 10,590,687
719,800 Intergraph Corp.* $ 4,588,725
391,100 International Business Machines
Corp. 62,869,325
---------------
83,104,037
- ------------------------------------------------------------
Electrical Equipment--4.3%
301,000 Esterline Technologies Corp.* 8,503,250
455,800 IMO Industries Inc.* 1,481,350
700,000 Kuhlman Corp. 17,675,000
355,300 Newport Corp. 2,931,225
210,200 Pacific Scientific Co. 2,653,775
1,770,200 Westinghouse Electric Corp. 30,093,400
---------------
63,338,000
- ------------------------------------------------------------
Energy--0.6%
274,100 Energy Group Plc., ADR*
(United Kingdom) 8,599,888
- ------------------------------------------------------------
Energy Systems--2.3%
1,782,300 McDermott International, Inc. 32,972,550
- ------------------------------------------------------------
Financial Services--11.7%
959,577 Bear Stearns Cos., Inc. 29,267,103
217,200 Edwards (A.G.), Inc. 7,602,000
2,032,000 Lehman Brothers Holdings, Inc. 68,834,000
943,900 PaineWebber Group, Inc. 32,092,600
660,000 Salomon, Inc. 33,000,000
---------------
170,795,703
- ------------------------------------------------------------
Forest & Paper--0.4%
72,600 Fletcher Challenge Forest Ltd.,
ADR
(New Zealand) 989,175
71,600 Louisiana-Pacific Corp. 1,333,550
81,900 Potlatch Corp. 3,357,900
---------------
5,680,625
- ------------------------------------------------------------
Gas Distribution--1.9%
518,200 BG Plc., ADR (United Kingdom) 15,092,575
2,782,000 Centrica Plc.* 2,568,557
</TABLE>
- --------------------------------------------------------------------------------
-----
See Notes to Financial Statements. 3

<PAGE>
Portfolio of Investments as
of April 30, 1997 (Unaudited) PRUDENTIAL EQUITY INCOME FUND
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
Gas Distribution (cont'd.)
224,950 KN Energy, Inc. $ 8,379,387
51,450 Yankee Energy System, Inc. 1,093,313
---------------
27,133,832
- ------------------------------------------------------------
Gas Pipelines--1.5%
280,100 Sonat, Inc. 16,000,713
360,800 TransCanada Pipelines Ltd. 6,584,600
---------------
22,585,313
- ------------------------------------------------------------
Insurance--4.0%
293,100 Marsh & McLennan Cos., Inc. 35,318,550
393,400 Ohio Casualty Corp. 15,293,425
178,400 Selective Insurance Group, Inc. 7,180,600
---------------
57,792,575
- ------------------------------------------------------------
Integrated Producers--3.2%
970,000 Elf Aquitaine, ADR (France) 47,166,250
- ------------------------------------------------------------
Media--0.4%
220,000 Dun & Bradstreet Corp. 5,417,500
- ------------------------------------------------------------
Mining--0.3%
194,678 Coeur D'Alene Mines Corp. 2,676,823
298,499 Echo Bay Mines, Ltd. 1,623,088
---------------
4,299,911
- ------------------------------------------------------------
Miscellaneous Industrial--0.5%
274,100 Hanson Plc., ADR (United
Kingdom) 6,646,925
- ------------------------------------------------------------
Oil & Gas Exploration/Production--1.8%
850,000 Mesa, Inc. 4,356,250
662,400 Parker & Parsley Petroleum Co. 21,859,200
---------------
26,215,450
- ------------------------------------------------------------
Paper & Packaging--1.3%
910,700 Gibson Greetings Inc.* 18,669,350
Realty Investment Trust--18.4%
271,000 AMLI Residential Properties
Trust $ 5,995,875
231,200 Beacon Properties Corp. 7,138,300
300,000 Bradley Real Estate, Inc. 5,737,500
1,617,800 Crescent Real Estate Equities,
Inc. 42,467,250
1,279,800 Crown American Realty Trust 9,758,475
1,605,100 Equity Residential Properties
Trust 70,223,125
567,700 Gables Residential Trust 14,050,575
585,000 Glimcher Realty Trust 10,456,875
500,000 Haagen (Alexander) Properties
Inc. 6,750,000
73,668 Homestead Village Inc.* 1,270,773
392,000 Irvine Apartment Communities,
Inc. 10,486,000
353,500 JDN Realty Corp. 9,898,000
96,000 JP Realty, Inc. 2,436,000
62,550 Kimco Realty Corp. 1,946,869
230,000 Malan Realty Investors, Inc. 3,938,750
632,600 Manufactured Home Communities,
Inc. 13,284,600
62,600 Pennsylvania Real Estate
Investment Trust 1,392,850
586,093 Security Capital Pacific Trust 13,333,616
285,700 Simon De Bartolo Group, Inc. 8,178,162
300,000 Sunstone Hotel Investors, Inc. 4,012,500
166,600 Tri Net Corporate Realty Trust,
Inc. 5,560,275
286,300 Vornado Realty Trust 18,215,837
5,000 Walden Residential Properties,
Inc. 110,000
40,700 Weingarten Realty Investors,
Inc. 1,734,838
---------------
268,377,045
- ------------------------------------------------------------
Retail--2.6%
352,000 K-Mart Corp.* 4,796,000
538,400 Penney (J.C.) Co., Inc. 25,708,600
140,100 Tandy Corp. 7,337,737
---------------
37,842,337
- ------------------------------------------------------------
Shipbuilding--0.0%
5,280 Newport News Shipbuilding, Inc. 79,200
- ------------------------------------------------------------
Steel--2.4%
1,206,200 USX-U.S. Steel Group, Inc. 35,281,350
</TABLE>
- --------------------------------------------------------------------------------
-----
See Notes to Financial Statements. 4

<PAGE>
Portfolio of Investments as
of April 30, 1997 (Unaudited) PRUDENTIAL EQUITY INCOME FUND
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
------------------------------------------------------------
Telecommunication Services--0.7%
247,700 Telefonos de Mexico, S.A. de
C.V.,
ADR (Mexico) $ 10,217,625
- ------------------------------------------------------------
Tobacco--3.1%
606,500 B.A.T Industries Plc., ADR
(United Kingdom) 10,462,125
548,200 Imperial Tobacco Group Plc.,
ADR*
(United Kingdom) 7,143,731
739,500 RJR Nabisco Holdings Corp. 22,000,125
228,400 UST, Inc. 5,966,950
---------------
45,572,931
- ------------------------------------------------------------
Trucking & Shipping--0.9%
287,950 Alexander & Baldwin Inc. 7,630,675
315,000 Yellow Corp.* 6,063,750
---------------
13,694,425
- ------------------------------------------------------------
Wood Processing--0.4%
150,000 Rayonier Inc. 6,056,250
---------------
Total common stocks
(cost $1,014,807,935) 1,282,291,123
---------------
PREFERRED STOCKS--7.2%
- ------------------------------------------------------------
Aluminum--0.3%
371,800 Kaiser Aluminum Corp., Conv.
$8.255 3,996,850
- ------------------------------------------------------------
Electrical Equipment--1.8%
1,743,000 Westinghouse Electric Corp.,
Conv. $1.30 26,471,812
- ------------------------------------------------------------
Energy Systems--0.2%
88,000 McDermott International, Inc.,
Conv. $5.75, Ser. C 3,520,000
Integrated Producers--0.5%
48,099 Unocal Corp., Conv. 6.25% $ 2,645,445
118,900 USX-Marathon Group., Conv. 6.50% 5,216,738
---------------
7,862,183
- ------------------------------------------------------------
Manufacturing--0.3%
262,500 Worthington Industries Inc.
Conv. 7.25% 4,134,375
- ------------------------------------------------------------
Mining--0.2%
60,000 Hecla Mining Co., Conv. 7.00%,
Ser. B 2,760,000
- ------------------------------------------------------------
Oil & Gas Exploration/Production--0.3%
74,800 Parker & Parsley Petroleum Co.,
Conv. 6.25% 4,525,400
- ------------------------------------------------------------
Realty Investment Trust--0.1%
54,600 Security Capital Pacific Trust,
Conv. $1.75, Ser. A 1,658,475
- ------------------------------------------------------------
Retail--1.0%
251,700 K-Mart Financing I, Trust, Conv.
7.75% 14,504,213
- ------------------------------------------------------------
Steel--0.6%
250,800 Bethlehem Steel Corp., Conv.
$3.50 9,467,700
- ------------------------------------------------------------
Textiles--0.3%
90,200 Fieldcrest Cannon, Inc.,
Conv. $3.00, Ser. A 3,923,700
- ------------------------------------------------------------
Tobacco--1.6%
3,911,200 RJR Nabisco Holdings Corp.,
Conv. $0.60, PERCS 22,978,300
---------------
Total preferred stocks
(cost $112,306,129) 105,803,008
---------------
WARRANTS*--0.0%
49,422 Homestead Village Inc. exp.
10/29/97
(cost $213,009) 389,198
---------------
</TABLE>
- --------------------------------------------------------------------------------
-----
See Notes to Financial Statements. 5

<PAGE>
Portfolio of Investments as
of April 30, 1997 (Unaudited) PRUDENTIAL EQUITY INCOME FUND
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
<C> <C> <S> <C>
- ------------------------------------------------------------
CONVERTIBLE BONDS--1.1%
- ------------------------------------------------------------
Integrated Oil--0.1%
B1 $ 1,871 Oryx Energy Co., Sub.
Deb.,
7.50%, 5/15/14 $ 1,796,160
- ------------------------------------------------------------
Realty Investment Trust--0.4%
Haagen (Alexander)
Properties Inc.,
Sub. Deb.
NR 1,200 7.50%, 1/15/01 1,116,000
B3 700 Sub. Deb., Ser. A,
7.50%, 1/15/01 651,000
B3 3,800 Malan Realty
Investors, Inc.,
Sub. Deb.
9.50%, 7/15/04 3,895,000
---------------
5,662,000
- ------------------------------------------------------------
Retail--0.6%
B2 8,000 Charming Shoppes Inc.
7.50%, 7/15/06 8,296,240
---------------
Total convertible
bonds
(cost $15,427,249) 15,754,400
---------------
FOREIGN GOVERNMENT OBLIGATIONS--0.7%
NR NZ$ 15,580 New Zealand Gov't.
Bonds,
8.00%, 4/15/04
(cost $10,819,084) 10,862,389
U.S. GOVERNMENT SECURITIES--2.0%
Aaa $ 30,000 United States Treasury
Bonds,
6.75%, 8/15/26
(cost $29,014,643) $ 29,029,800
---------------
Total long-term
investments
(cost $1,182,588,049) 1,444,129,918
---------------
SHORT-TERM INVESTMENTS--1.1%
- ------------------------------------------------------------
REPURCHASE AGREEMENT--1.1%
16,047 Joint Repurchase
Agreement Account
5.42%, 5/1/97, (Note
5)
(cost $16,047,000) 16,047,000
---------------
- ------------------------------------------------------------
Total Investments--99.8%
(cost $1,198,635,049;
Note 4) 1,460,176,918
Other assets in excess
of
liabilities--0.2% 2,422,106
---------------
Net Assets--100% $ 1,462,599,024
---------------
---------------
</TABLE>
- ---------------
* Non-income producing security.
ADR--American Depository Receipt.
PERCS--Preferred Equity Redemption Cumulative Stock.
NR--Not rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information contains a description of
Moody's ratings.
- --------------------------------------------------------------------------------
-----
See Notes to Financial Statements. 6

<PAGE>
Statement of Assets and Liabilities (Unaudited) PRUDENTIAL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets April 30, 1997
Investments, at value (cost $1,198,635,049)................................................................. $1,460,176,918
Foreign currency, at value (cost $428,371).................................................................. 432,315
Cash........................................................................................................ 72,630
Receivable for investments sold............................................................................. 13,064,382
Dividends and interest receivable........................................................................... 3,819,974
Receivable for Fund shares sold............................................................................. 1,244,450
Other assets................................................................................................ 23,263
--------------
Total assets............................................................................................. 1,478,833,932
--------------
Liabilities
Payable for investments purchased........................................................................... 11,426,958
Payable for Fund shares reacquired.......................................................................... 3,076,587
Distribution fee payable.................................................................................... 883,870
Management fee payable...................................................................................... 621,944
Accrued expenses............................................................................................ 184,600
Foreign withholding tax payable............................................................................. 40,949
--------------
Total liabilities........................................................................................ 16,234,908
--------------
Net Assets.................................................................................................. $1,462,599,024
--------------
--------------
Net assets were comprised of:
Shares of beneficial interest, at par.................................................................... $ 875,181
Paid-in capital in excess of par......................................................................... 1,150,814,924
--------------
1,151,690,105
Undistributed net investment income...................................................................... 2,553,275
Accumulated net realized gains........................................................................... 46,810,827
Net unrealized appreciation on investments and foreign currencies........................................ 261,544,817
--------------
Net assets, April 30, 1997.................................................................................. $1,462,599,024
--------------
--------------
Class A:
Net asset value and redemption price per share
($419,624,190 / 25,062,689 shares of beneficial interest issued and outstanding)...................... $16.74
Maximum sales charge (5% of offering price).............................................................. .88
--------------
Maximum offering price to public......................................................................... $17.62
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($980,134,243 / 58,699,973 shares of beneficial interest issued and outstanding)...................... $16.70
--------------
--------------
Class C:
Net asset value, offering price and redemption price per share
($9,934,772 / 594,981 shares of beneficial interest issued and outstanding)........................... $16.70
--------------
--------------
Class Z:
Net asset value, offering price and redemption price per share
($52,905,819 / 3,160,434 shares of beneficial interest issued and outstanding)........................ $16.74
--------------
--------------
</TABLE>

- --------------------------------------------------------------------------------
-----
See Notes to Financial Statements. 7

<PAGE>
PRUDENTIAL EQUITY INCOME FUND
Statement of Operations (Unaudited)
- --------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income April 30, 1997
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $109,239)................... $ 23,093,956
Interest (net of foreign withholding
taxes of $1,252)..................... 2,611,608
-----------------
Total income......................... 25,705,564
-----------------
Expenses
Management fee.......................... 3,767,455
Distribution fee--Class A............... 490,411
Distribution fee--Class B............... 4,891,168
Distribution fee--Class C............... 47,261
Transfer agent's fees and expenses...... 893,000
Reports to shareholders................. 141,000
Custodian's fees and expenses........... 77,000
Registration fees....................... 50,000
Insurance............................... 19,000
Trustees' fees and expenses............. 19,000
Legal fees and expenses................. 14,000
Audit fee and expenses.................. 12,500
Miscellaneous........................... 1,473
-----------------
Total expenses....................... 10,423,268
-----------------
Net investment income...................... 15,282,296
-----------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions................. 46,710,381
Foreign currencies...................... (16,698)
-----------------
46,693,683
-----------------
Net change in unrealized appreciation
(depreciation) on:
Investments............................. 128,027,616
Foreign currencies...................... (6,146)
-----------------
128,021,470
-----------------
Net gain on investments and foreign
currency transactions................... 174,715,153
-----------------
Net Increase in Net Assets
Resulting from Operations.................. $ 189,997,449
-----------------
-----------------
</TABLE>

PRUDENTIAL EQUITY INCOME FUND
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) April 30, October 31,
in Net Assets 1997 1996
<S> <C> <C>
Operations
Net investment income....... $ 15,282,296 $ 34,699,725
Net realized gain on
investments.............. 46,693,683 61,035,712
Net change in unrealized
appreciation of
investments and foreign
currencies............... 128,021,470 84,686,616
-------------- --------------
Net increase in net assets
resulting from
operations............... 189,997,449 180,422,053
-------------- --------------
Dividends and distributions (Note 1)
Dividends from net
investment income
Class A.................. (5,170,085) (10,168,241)
Class B.................. (9,303,896) (23,129,087)
Class C.................. (89,526) (166,270)
Class Z.................. (718,789) (610,849)
-------------- --------------
(15,282,296) (34,074,447)
-------------- --------------
Distributions in excess of
net investment income
Class A.................. (135,566) --
Class B.................. (642,674) --
Class C.................. (5,544) --
Class Z.................. (21,635) --
-------------- --------------
(805,419) --
-------------- --------------
Distributions from net
realized gains
Class A.................. (15,385,919) (13,884,497)
Class B.................. (42,389,909) (43,458,487)
Class C.................. (389,824) (241,179)
Class Z.................. (2,054,429) --
-------------- --------------
(60,220,081) (57,584,163)
-------------- --------------
Fund share transactions (net of
share conversion) (Note 6)
Proceeds from shares sold... 326,938,731 396,300,467
Net asset value of shares
issued in reinvestment of
dividends and
distributions............ 69,779,425 83,809,013
Cost of shares reacquired... (372,493,828) (432,557,290)
-------------- --------------
Net increase in net assets
from Fund share
transactions............. 24,224,328 47,552,190
-------------- --------------
Total increase................. 137,913,981 136,315,633
Net Assets
Beginning of period............ 1,324,685,043 1,188,369,410
-------------- --------------
End of period.................. $1,462,599,024 $1,324,685,043
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
-----
See Notes to Financial Statements. 8

<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
Prudential Equity Income Fund (the 'Fund') is registered under the Investment
Company Act of 1940 as a diversified, open-end, management investment company.
The investment objective of the Fund is both current income and capital
appreciation. It seeks to achieve this objective by investing primarily in
common stocks and convertible securities that provide investment income returns
above those of the Standard & Poor's 500 Stock Index or the NYSE Composite
Index. The ability of the issuers of the debt securities held by the Fund to
meet their obligations may be affected by economic developments in a specific
industry or country.
- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Securities Valuation: Investments in securities traded on a national securities
exchange (or reported on the NASDAQ national market) are valued at the last sale
price on such exchange on the day of valuation or, if there was no sale on such
day, the mean between the last bid and asked prices quoted on such day.
Convertible debt securities that are actively traded in the over-the-counter
market, including listed securities for which the primary market is believed to
be over-the-counter, are valued at the mean between the most recently quoted bid
and asked prices provided by principal market makers. Other securities are
valued at the mean between the most recently quoted bid and asked prices.
Securities which are otherwise not readily marketable or securities for which
market quotations are not readily available are valued in good faith at fair
value in accordance with procedures adopted by the Fund's Board of Trustees.
Short-term securities which mature in more than 60 days are valued based upon
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost which approximates market value.
In connection with transactions in repurchase agreements, it is the Fund's
policy that its custodian or designated subcustodians under triparty repurchase
agreements, as the case may be, take possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. If the seller defaults and the value of
the collateral declines or if bankruptcy proceedings are commenced with respect
to the seller of the security, realization of the collateral by the Fund may be
delayed or limited.
Foreign Currency Translation: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and liabilities--at the
current rates of exchange;
(ii) purchases and sales of investment securities, income and expenses--at the
rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates
and market values at the close of the period, the Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of the securities held at period end. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of long-term debt securities sold
during the period. Accordingly, such realized foreign currency gains and losses
are included in the reported net realized gains/losses on investment
transactions.
Net realized losses on foreign currency transactions of $16,698 represents net
foreign exchange gains and losses from sales and maturities of short-term
securities and forward currency contracts, holding of foreign currencies,
currency gains or losses realized between the trade and settlement dates on
securities transactions, and the difference between the amounts of interest and
foreign taxes recorded on the Fund's books and the U.S. dollar equivalent
amounts actually received or paid. Net currency gains and losses from valuing
foreign currency denominated assets (excluding investments) and liabilities at
period end exchange rates are reflected as a component of net unrealized
appreciation/depreciation on investments and foreign currencies.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. companies as a result of,
among other factors, the possibility of political or economic instability and
the level of governmental supervision and regulation of foreign securities
markets.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income is recorded on the accrual basis. Expenses are
recorded on the accrual basis which may require the use of certain estimates by
management.
Net investment income (other than distribution fees) and unrealized and realized
gains or losses are allocated daily to each class of shares of the
- --------------------------------------------------------------------------------
-----
9

<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
Fund based upon the relative proportion of net assets of each class at the
beginning of the day.
Federal Income Taxes: It is the Fund's policy to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable net income to its shareholders.
Therefore, no federal income tax provision is required.
Withholding taxes on foreign dividends have been provided for in accordance with
the Fund's understanding of the applicable country's tax rates.
Dividends and Distributions: The Fund expects to pay dividends out of net
investment income quarterly and make distributions at least annually of any net
capital gains. Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with American Institute of Certified
Public Accountants (AICPA) Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to decrease undistributed net investment income and increase
accumulated net realized gains on investments by $16,698 relating to net
realized foreign currency losses. Net investment income, net realized gains and
net assets were not affected by these changes.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM has entered into a subadvisory agreement with The Prudential
Investment Corporation ('PIC'); PIC furnishes investment advisory services in
connection with the management of the Fund. PIFM pays for the cost of the
subadviser's services, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.
The management fee paid PIFM is computed daily and payable monthly at an annual
rate of .60% of 1% of the Fund's average daily net assets up to $500 million,
.50 of 1% of the next $500 million, .475 of 1% of the next $500 million and .45
of 1% of the average daily net assets in excess of $1.5 billion.
The Fund has a distribution agreement with Prudential Securities Incorporated
('PSI'), which acts as the distributor of the Class A, Class B, Class C and
Class Z shares of the Fund. The Fund compensates PSI for distributing and
servicing the Fund's Class A, Class B and Class C shares, pursuant to plans of
distribution (the 'Class A, B and C Plans') regardless of expenses actually
incurred by them. The distribution fees are accrued daily and payable monthly.
No distribution or service fees are paid to PSI as distributor for Class Z
shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PSI for
distribution-related activities at an annual rate of up to .30 of 1%, 1% and 1%,
of the average daily net assets of the Class A, B and C shares, respectively.
Such expenses under the Plans were .25 of 1% of the average daily net assets of
Class A shares and 1% of the average daily net assets of both the Class B and C
shares for the six months ended April 30, 1997.
PSI has advised the Fund that it has received approximately $263,600 in
front-end sales charges resulting from sales of Class A shares during the six
months ended April 30, 1997. From these fees, PSI paid such sales charges to
dealers, which in turn paid commissions to salespersons and incurred other
distribution costs.
PSI has advised the Fund that for the six months ended April 30, 1997, it
received approximately $889,000 and $3,900 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PSI, PIFM and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America.
The Fund, along with other affiliated registered investment companies (the
'Funds'), entered into a credit agreement (the 'Agreement') on December 31, 1996
with an unaffiliated lender. The maximum commitment under the Agreement is
$200,000,000. The Agreement expires on December 30, 1997. Interest on any such
borrowings outstanding will be at market rates. The purpose of the Agreement is
to serve as an alternative source of funding for capital share redemptions. The
Fund has not borrowed any amounts pursuant to the Agreement as of April 30,
1997. The Funds pay a commitment fee at an annual rate of .055 of 1% on the
unused portion of the credit facility. The commitment fee is accrued and paid
quarterly on a pro-rata basis by the Funds.
- --------------------------------------------------------------------------------
-----
10

<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services, Inc. ('PMFS'), a wholly-owned subsidiary of
PIFM, serves as the Fund's transfer agent and during the six months ended April
30, 1997, the Fund incurred fees of approximately $803,000 for the services of
PMFS. As of April 30, 1997, approximately $137,000 of such fees were due to
PMFS. Transfer agent fees and expenses in the Statement of Operations include
certain out-of-pocket expenses paid to non-affiliates.
For the six months ended April 30, 1997, PSI earned approximately $113,600 in
brokerage commissions from portfolio transactions executed on behalf of the
Fund.
- ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the six months ended April 30, 1997 were $213,940,013 and $251,342,825
respectively.
The cost basis of investments for federal income tax purposes at April 30, 1997
was $1,199,428,891 and, accordingly, net unrealized appreciation for federal
income tax purposes was $260,748,027 (gross unrealized
appreciation--$308,857,609; gross unrealized depreciation--$48,109,582).
- ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. government or federal agency obligations. At April 30, 1997, the Fund
had a 1.98% undivided interest in repurchase agreements in the joint account.
The undivided interest for the Fund represented $16,047,000 in principal amount.
As of such date, each repurchase agreement in the joint account and the value of
the collateral therefor were as follows:
CS First Boston Corp., 5.50% dated 4/30/97, in the principal amount of
$208,000,000, repurchase price $208,031,778, due 5/1/97. The value of the
collateral including accrued interest is $214,501,123.
J.P. Morgan Securities, 5.42% dated 4/30/97, in the principal amount of
$208,000,000, repurchase price $208,031,316, due 5/1/97. The value of the
collateral including accrued interest is $212,160,231.
SBC Warburg, 5.30% dated 4/30/97, in the principal amount of $144,000,000,
repurchase price $144,021,200, due 5/1/97. The value of the collateral including
accrued interest is $146,969,072.
Smith Barney, Inc., 5.25% and 5.44%, both dated 4/30/97 in the principal amount
of $43,121,000 and $208,000,000 respectively, repurchase price $43,127,288 and
$208,031,431 respectively, both due 5/1/97. The value of the combined collateral
including accrued interest is $256,144,337.
- ------------------------------------------------------------
Note 6. Capital
The Fund offers Class A, Class B, Class C and Class Z shares. Class A shares are
sold with a front-end sales charge of up to 5%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Class C shares are sold with a contingent
deferred sales charge of 1% during the first year. Class B shares will
automatically convert to Class A shares on a quarterly basis approximately seven
years after purchase. Special exchange privileges are also available for
shareholders who qualify to purchase Class A shares at net asset value or Class
Z shares. 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
$.01 par value divided into four classes, designated Class A, Class B, Class C
and Class Z.
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- --------------------------------- ----------- -------------
<S> <C> <C>
Six months ended April 30, 1997:
Shares sold...................... 14,354,197 $ 238,563,634
Shares issued in reinvestment of
dividends and distributions.... 1,175,725 19,099,980
Shares reacquired................ (15,475,449) (257,080,360)
----------- -------------
Net increase in shares
outstanding before
conversion..................... 54,473 583,254
Shares issued upon conversion
and/or exchange from Class B... 2,861,510 46,957,562
----------- -------------
Net increase in shares
outstanding.................... 2,915,983 $ 47,540,816
----------- -------------
----------- -------------
</TABLE>
- --------------------------------------------------------------------------------
-----
11
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Amount
- --------------------------------- ----------- -------------
<S> <C> <C>
Year ended October 31, 1996:
Shares sold...................... 12,763,330 $ 192,448,233
Shares issued in reinvestment of
dividends and distributions.... 1,507,878 22,207,619
Shares reacquired................ (14,423,817) (217,449,877)
----------- -------------
Net decrease in shares
outstanding before
conversion..................... (152,609) (2,794,025)
Shares issued upon conversion
and/or exchange from Class B... 3,062,717 46,622,970
----------- -------------
Net increase in shares
outstanding.................... 2,910,108 $ 43,828,945
----------- -------------
----------- -------------
<CAPTION>
Class B
- ---------------------------------
<S> <C> <C>
Six months ended April 30, 1997:
Shares sold...................... 4,450,652 $ 73,750,727
Shares issued in reinvestment of
dividends and distributions.... 2,930,052 47,420,709
Shares reacquired................ (6,231,336) (102,819,673)
----------- -------------
Net increase in shares
outstanding before
conversion..................... 1,149,368 18,351,763
Shares reacquired upon conversion
and/or exchange into Class A... (2,868,679) (46,957,562)
----------- -------------
Net decrease in shares
outstanding.................... (1,719,311) $ (28,605,799)
----------- -------------
----------- -------------
Year ended October 31, 1996:
Shares sold...................... 9,998,793 $ 149,942,657
Shares issued in reinvestment of
dividends and distributions.... 4,135,093 60,601,069
Shares reacquired................ (13,775,123) (206,554,247)
----------- -------------
Net increase in shares
outstanding before
conversion..................... 358,763 3,989,479
Shares issued upon conversion
and/or exchange into Class A... (3,073,755) (46,622,970)
----------- -------------
Net decrease in shares
outstanding.................... (2,714,992) $ (42,633,491)
----------- -------------
----------- -------------
<CAPTION>
Class C Shares Amount
- --------------------------------- ----------- -------------
<S> <C> <C>
Six months ended April 30, 1997:
Shares sold...................... 112,775 $ 1,862,800
Shares issued in reinvestment of
dividends and distributions.... 28,654 463,889
Shares reacquired................ (99,383) (1,634,603)
----------- -------------
Net increase in shares
outstanding.................... 42,046 $ 692,086
----------- -------------
----------- -------------
Year ended October 31, 1996:
Shares sold...................... 325,017 $ 4,877,161
Shares issued in reinvestment of
dividends and distributions.... 26,486 389,591
Shares reacquired................ (117,902) (1,769,009)
----------- -------------
Net increase in shares
outstanding before
conversion..................... 233,601 $ 3,497,743
----------- -------------
----------- -------------
<CAPTION>
Class Z
- ---------------------------------
<S> <C> <C>
Six months ended April 30, 1997:
Shares sold...................... 763,826 $ 12,761,570
Shares issued in reinvestment of
dividends and distributions.... 172,143 2,794,847
Shares reacquired................ (661,039) (10,959,192)
----------- -------------
Net increase in shares
outstanding.................... 274,930 $ 4,597,225
----------- -------------
----------- -------------
March 1, 1996* through
October 31, 1996:
Shares sold...................... 3,294,056 $ 49,032,416
Shares issued in reinvestment of
dividends and distributions.... 39,927 610,734
Shares reacquired................ (448,479) (6,784,157)
----------- -------------
Net increase in shares
outstanding.................... 2,885,504 $ 42,858,993
----------- -------------
----------- -------------
- ---------------
* Commencement of offering of Class Z shares.
</TABLE>
- ------------------------------------------------------------
Note 7. Dividends
On June 17, 1997 the Board of Trustees of the Fund declared the following
dividends per share, payable on June 20, 1997 to shareholders of record on June
17, 1997.
<TABLE>
<CAPTION>
Class Class B Class
A and C Z
--------- --------- ------
<S> <C> <C> <C>
Ordinary Income................... $ .1125 $ .0825 $.1225
</TABLE>
- --------------------------------------------------------------------------------
-----
12

<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------------
Six Months
Ended Year Ended October 31,
April 30, -----------------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 15.43 $ 14.40 $ 14.03 $ 14.38 $ 12.16 $ 12.04
---------- -------- -------- -------- -------- -------
Income from investment operations
Net investment income......................... .22 .47 .48 .41 .47 .47
Net realized and unrealized gain on investment
transactions............................... 2.03 1.75 .95 .06 2.65 .60
---------- -------- -------- -------- -------- -------
Total from investment operations........... 2.25 2.22 1.43 .47 3.12 1.07
---------- -------- -------- -------- -------- -------
Less distributions
Dividends from net investment income.......... (.22) (.49) (.54) (.29) (.46) (.47)
Dividends in excess of net investment
income..................................... (.01) -- -- -- -- --
Distributions from net realized gains......... (.71) (.70) (.52) (.53) (.44) (.48)
---------- -------- -------- -------- -------- -------
Total distributions........................ (.94) (1.19) (1.06) (.82) (.90) (.95)
---------- -------- -------- -------- -------- -------
Net asset value, end of period................ $ 16.74 $ 15.43 $ 14.40 $ 14.03 $ 14.38 $ 12.16
---------- -------- -------- -------- -------- -------
---------- -------- -------- -------- -------- -------
TOTAL RETURN(a):.............................. 14.79% 15.97% 11.15% 3.48% 26.93% 9.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $419,624 $341,717 $276,990 $150,502 $104,017 $51,165
Average net assets (000)...................... $395,580 $310,335 $236,688 $131,398 $ 70,895 $21,931
Ratios to average net assets:
Expenses, including distribution fees...... .95%(b) .98% 1.03% 1.09% 1.07% 1.22%
Expenses, excluding distribution fees...... .70%(b) .73% .78% .85% .87% 1.02%
Net investment income...................... 2.64%(b) 3.26% 3.36% 2.97% 3.44% 3.22%
For Class A, B, C and Z shares:
Portfolio turnover............................ 15% 36% 74% 70% 57% 43%
Average commission rate paid per share........ $ .0485 $ .0563 N/A N/A N/A N/A
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Annualized.
- --------------------------------------------------------------------------------
-----
See Notes to Financial Statements. 13

<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Class Z
---------------------------------------------------------- ----------
August 1,
Six Months Year Year 1994(c) Six Months
Ended Ended Ended Through Ended
April 30, October 31, October 31, October 31, April 30,
1997 1996 1995 1994 1997
<S> <C> <C> <C> <C> <C>
---------- ----------- ----------- ----------- ----------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $15.39 $ 14.36 $ 14.00 $ 13.99 $ 15.42
----- ----- ----- ----- ----------
Income from investment operations
Net investment income......................... .16 .38 .40 .08 .24
Net realized and unrealized gain (loss) on
investment transactions.................... 2.03 1.72 .92 (.02) 2.04
----- ----- ----- ----- ----------
Total from investment operations........... 2.19 2.10 1.32 .06 2.28
----- ----- ----- ----- ----------
Less distributions
Dividends from net investment income.......... (.16) (.37) (.44) (.05) (.24)
Dividends in excess of net investment
income..................................... (.01) -- -- -- (.01)
Distributions from net realized gains......... (.71) (.70) (.52) -- (.71)
----- ----- ----- ----- ----------
Total distributions........................ (.88) (1.07) (.96) (.05) (.96)
----- ----- ----- ----- ----------
Net asset value, end of period................ $16.70 $ 15.39 $ 14.36 $ 14.00 $ 16.74
----- ----- ----- ----- ----------
----- ----- ----- ----- ----------
TOTAL RETURN(a):.............................. 14.42% 15.12% 10.29% 0.45% 15.00%
RATIOS/SUPPLEMENTAL DATA:(e)
Net assets, end of period (000)............... $9,935 $ 8,511 $ 4,586 $ 1,527 $ 52,906
Average net assets (000)...................... $9,531 $ 6,730 $ 3,132 $ 762 $ 50,097
Ratios to average net assets:
Expenses, including distribution fees...... 1.70%(b) 1.73% 1.78% 2.05%(b) .70%(b)
Expenses, excluding distribution fees...... .70%(b) .73% .78% 1.05%(b) .70%(b)
Net investment income...................... 1.89%(b) 2.51% 2.57% 2.42%(b) 2.89%(b)
<CAPTION>
March 1,
1996(d)
Through
October 31,
1996
<S> <C>
-----------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 15.13
-----------
Income from investment operations
Net investment income......................... .38
Net realized and unrealized gain (loss) on
investment transactions.................... .30
-----------
Total from investment operations........... .68
-----------
Less distributions
Dividends from net investment income.......... (.39)
Dividends in excess of net investment
income..................................... --
Distributions from net realized gains......... --
-----------
Total distributions........................ (.39)
-----------
Net asset value, end of period................ $ 15.42
-----------
-----------
TOTAL RETURN(a):.............................. 4.55%
RATIOS/SUPPLEMENTAL DATA:(e)
Net assets, end of period (000)............... $44,509
Average net assets (000)...................... $24,641
Ratios to average net assets:
Expenses, including distribution fees...... .73%(b)
Expenses, excluding distribution fees...... .73%(b)
Net investment income...................... 3.51%(b)
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Annualized.
(c) Commencement of offering of Class C shares.
(d) Commencement of offering of Class Z shares.
(e) Because of the event referred to in (d) and the timing of such, the ratios
of Class Z are not necessarily comparable to that of Class A, B and C shares
and are not necessarily indicative of future ratios.
- --------------------------------------------------------------------------------
-----
See Notes to Financial Statements. 15

<PAGE>
Change of Accountants PRUDENTIAL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
Effective March 1, 1997, Deloitte & Touche LLP was terminated as the Fund's
independent accountants. For the years ended October 31, 1992 through October
31, 1996, Deloitte & Touche LLP expressed an unqualified opinion on the Fund's
financial statements. There were no disagreements between Fund management and
Deloitte & Touche LLP prior to their termination. The Board of Directors
approved the termination of Deloitte & Touche LLP and the appointment of Price
Waterhouse LLP as the Fund's independent accountants.
- --------------------------------------------------------------------------------
-----
16

<PAGE>
Supplemental Proxy Information PRUDENTIAL EQUITY INCOME FUND
- --------------------------------------------------------------------------------
A Meeting of Shareholders of the Prudential Equity Income Fund was held on
Wednesday, October 30, 1996 at the offices of Prudential Securities
Incorporated, One Seaport Plaza, New York, New York. The meeting was held for
the following purposes:
(1) To elect Trustees as follows: Edward D. Beach, Delayne Dedrick Gold, Robert
F. Gunia, Donald D. Lennox, Douglas H. McCorkindale, Mendel A. Melzer,
Thomas T. Mooney, Stephen P. Munn, Richard A. Redeker, Robin B. Smith,
Louis A. Weil, III and Clay T. Whitehead.
(2a) Approval of amendment of the Fund's fundamental investment restrictions
regarding investment in shares of other investment companies.
(2b) Approval of amendment of the Fund's fundamental investment restrictions
regarding unseasoned issuers.
(3) To ratify the selection of Deloitte & Touche LLP as independent accountants
for the fiscal year ending October 31, 1997.
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
Trustee/Matter Votes for Votes against Abstentions
---------- ------------- -----------
<C> <S> <C> <C> <C>
(1) Edward D. Beach 42,139,218 0 1,676,801
Delayne Dedrick Gold 42,185,952 0 1,629,867
Robert F. Gunia 42,110,172 0 1,705,647
Donald D. Lennox 42,168,691 0 1,647,128
Douglas H. McCorkindale 42,173,768 0 1,642,051
Mendel A. Melzer 42,156,141 0 1,659,678
Thomas T. Mooney 42,188,691 0 1,627,128
Stephen P. Munn 42,187,615 0 1,628,204
Richard A. Redeker 42,177,575 0 1,638,244
Robin B. Smith 42,178,797 0 1,637,022
Louis A. Weil, III 42,188,821 0 1,626,998
Clay T. Whitehead 42,092,461 0 1,723,358
(2a) Amendment regarding investments in other investment companies 30,828,371 1,853,447 2,259,891
(2b) Amendment regarding unseasoned issuers 29,823,109 2,584,425 2,425,088
(3) Ratification of Deloitte & Touche LLP 41,374,283 463,171 1,869,278
</TABLE>
- --------------------------------------------------------------------------------
-----
17
<PAGE>

Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077

(800) 225-1852
http://www.prudential.com

(LOGO)

Trustees
Edward D. Beach
Delayne Dedrick Gold
Robert F. Gunia
Donald D. Lennox
Douglas H. McCorkindale
Mendel A. Melzer
Thomas T. Mooney
Stephen P. Munn
Richard A. Redeker
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead

Officers
Richard A. Redeker, President
Susan C. Cote, Vice President
Thomas A. Early, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Marguerite E.H. Morrison, Assistant Secretary
Caren A. Cunningham, Assistant Secretary

Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077

Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101

Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292

Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171

Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906

Independent Auditors
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036

Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795

The views expressed in this report and information about the Fund's portfolio
holdings are for the period covered by this report and are subject to change
thereafter.

The accompanying financial statements as of April 30, 1997 were not audited
and, accordingly, no opinion is expressed on them.

This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.

<PAGE>

(LOGO)

Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852

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