<PAGE>
SEMIANNUAL REPORT APRIL 30, 2000
Prudential
Equity Income Fund
Fund Type Stock
Objective Capital appreciation and current income
(GRAPHIC)
The views expressed in this report and information
about the Fund's portfolio holdings are for the
period covered by this report and are subject to
change thereafter.
This report is not authorized for distribution to
prospective investors unless preceded or
accompanied by a current prospectus.
(LOGO)
<PAGE>
Build on the Rock
Investment Goals and Style
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 Composite
Stock Price Index (S&P 500 Index) or the NYSE
Composite Index. It emphasizes stocks that are
considered undervalued, given their earnings, cash
flow, or asset values, and looks for catalysts that
will help to unlock the inherent value. There can
be no assurance that the Fund will achieve its
investment objectives.
Should the proposal to delete current income from
the Fund's objective (see page 2 for more
information) be approved, the Fund will continue to
generate some income, as many value stocks still
pay dividends. However, the emphasis will not be on
generating as high a level of income. This could be
a consideration for shareholders who relied on the
Fund for regular income; we recommend that they
consult with their financial advisors.
Portfolio Composition
Sectors expressed as a percentage of
net assets as of 4/30/00
35.0% Finance
24.6 Industrial
16.6 Consumer Cyclicals
13.5 Consumer Growth & Stable
7.1 Energy
2.1 Utility
0.6 Technology
0.5 Cash & Equivalents
Ten Largest Holdings
Expressed as a percentage of
net assets as of 4/30/00
6.6% Lehman Brothers Hldgs., Inc.
Financial Services
4.1 Equity Residential Properties Trust
Real Estate
4.0 Hanson PLC ADR
Miscellaneous Industrial
3.1 Reynolds Metals Co.
Aluminum
3.1 PaineWebber Group, Inc.
Financial Services
3.1 Crescent Real Estate Equities, Inc.
Real Estate
2.9 USX Corp.- U.S. Steel Corp.
Steel
2.7 Vornado Realty Trust
Real Estate
2.5 Bear Stearns Cos., Inc.
Financial Services
2.4 Columbia/HCA Healthcare Corp.
Healthcare Services
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
Cumulative Total Returns1 As of 4/30/00
Six One Five Ten Since
Months Year Years Years Inception2
Class A 2.54% -10.31% 89.47% 259.24% 249.64%
Class B 2.17 -10.97 82.59 232.78 297.38
Class C 2.17 -10.97 82.59 N/A 93.76
Class Z 2.73 -10.06 N/A N/A 64.57
Lipper Equity Income
Fund Avg.3 -0.66 -4.04 99.67 242.18 ***
S&P 500 Index 4 7.18 10.12 208.27 458.14 ****
Average Annual Total Returns1 As of 4/30/00
One Five Ten Since
Year Years Years Inception2
Class A -14.80% 12.47% 13.06% 12.40%
Class B -15.97 12.67 12.78 10.96
Class C -12.86 12.57 N/A 12.00
Class Z -10.06 N/A N/A 12.71
Past performance is not indicative of future
results. Principal and investment return will
fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their
original cost.
1 Source: Prudential Investments Fund Management
LLC and Lipper Inc. The cumulative total returns do
not take into account sales charges. The average
annual total returns do take into account
applicable sales charges. The Fund charges a
maximum front-end sales charge of 5% for Class A
shares. Class B shares are subject to a declining
contingent deferred sales charge (CDSC) of 5%, 4%,
3%, 2%, 1%, and 1% for six years. Class B shares
will automatically convert to Class A shares, on a
quarterly basis, approximately seven years after
purchase. Class C shares are subject to a front-end
sales charge of 1% and a CDSC of 1% for 18 months.
Class Z shares are not subject to a sales charge or
distribution and service (12b-1) fees.
2 Inception dates: Class A, 1/22/90; Class B,
1/2/87; Class C, 8/1/94; Class Z, 3/1/96.
3 Lipper average returns are for all funds in each
share class for the six-month, one-, five-, and
ten-year periods in the Equity Income Fund category. The
Lipper average is unmanaged. Equity Income funds,
by prospectus and portfolio practice, seek
relatively high current income and growth of income
through investing 65% or more of their portfolios
in dividend-paying equity securities.
4 The Standard & Poor's 500 Composite Stock Price
Index (S&P 500(r) Index) is an unmanaged index of 500
stocks of large U.S. companies that gives a broad
look at how stock prices have performed. These
returns do not include the effect of any operating
expenses of a mutual fund, and would be lower if
they included the effect of operating expenses.
Investors cannot invest directly in an index.
"Standard & Poor's 500" and "S&P 500(r)" are
trademarks of The McGraw-Hill Companies, Inc.
*** Lipper Since Inception returns are 240.07% for
Class A, 323.52% for Class B, 117.89% for Class C,
and 63.38% for Class Z, based on all funds in each
share class.
**** The S&P 500 Index Since Inception returns are
465.83% for Class A, 651.27% for Class B, 253.53%
for Class C, and 142.59% for Class Z.
1
<PAGE>
(LOGO) June 15, 2000
Dear Shareholder,
Over the six months ended April 30, 2000, the
Prudential Equity Income Fund returned 2.54%,
beating the Lipper Equity Income Fund Average of -
0.66%. The return to those paying the maximum one-
time Class A share sales charge was a negative
2.46%. It gained its advantage in March when U.S.
stock markets did a very sharp about-face. Value
stocks, which had been trailing, shot ahead.
Although the Fund outperformed its peer group for
the period, the overall Lipper category of equity income funds
trailed other Lipper equity categories, as well as the unmanaged
Standard & Poor's large-cap and mid-cap benchmarks.
Lipper's Equity Income category has trailed the
other multi-cap U.S. stock categories over the past
three-, five-, and 10-year periods in performance, asset flows, and
investor interest. We believe this is a result of
the much smaller share of equity investors' total
return attributable to dividends and income in
recent years. Whereas 67% of publicly listed U.S.
companies issued dividends in 1978 (the peak year),
by 1998, only 21% offered them.
Consequently, the Fund's Board of Trustees proposed
to remove current income from the Fund's objective
and refocused it as a large-cap value fund. The
change in objective will be put to a shareholder
vote. In addition, it approved changing the Fund's
name to Prudential Value Fund effective on or about
September 14, 2000. If you have any questions
regarding the proposed changes, please contact your
financial advisor.
Yours sincerely,
John R. Strangfeld, President
Prudential Equity Income Fund
2
<PAGE>
www.prudential.com (800) 225-1852
Semiannual Report April 30, 2000
Investment Adviser's Report
At the beginning of this reporting period, less
than 1% of our assets were in the technology
sector, which is where market gains were narrowly
concentrated for much of the six months. When
leaders and laggards reversed late in the period,
our performance improved markedly. The Fund had
substantial weightings in financial services, real
estate investment trusts (REITs), housing-related
stocks, healthcare, forest products, and metals. We
are likely to reduce the emphases in these sectors
by adding some technology and telecommunications
stocks, trimming some of our larger positions, and
moving the average market capitalization of our
holdings toward the large-cap range from the
current mid-cap.
Financials still look good
Two of our largest holdings were investment banks--
Lehman Brothers and PaineWebber (see Comments on
Largest Holdings). We had smaller, but still
significant, positions in Bear Stearns and AG
Edwards. These holdings benefited from very active
stock markets over the reporting period. Moreover,
they are attractive acquisition candidates. They
made a modestly positive contribution to our six-
month return, although slightly behind the S&P 500.
REITs were our second-largest focus (see Comments
on Largest Holdings). Although this dividend-paying
sector was left behind when the stock markets
focused on the technology, media, and
telecommunications sectors, it began to recover
during our reporting period. Our REITs delivered a
return of more than 12%, on average, over the
period.
During the period, we added Countrywide Credit
Industries, a very efficient mortgage originator
that sells most of its mortgages to Fannie Mae. It
is the largest independent residential mortgage
firm in the United States. We think such
specialized financial firms will take market share
from banks, which are less focused on specific
lines of business. In mid-April, Countrywide
announced it was servicing loans for 2.5 million
customers.
3
<PAGE>
Prudential Equity Income Fund
Holdings expressed as a percentage of the Fund's
net assets
Comments on Largest Holdings As of 4/30/00
6.6% Lehman Brothers/Financial Services
A leading investment bank, it is maintaining good
cost control while growing. Robust earnings gains
over the past five years. Still sells for less than
10 times forward earnings estimates. Tremendous
appreciation potential if it should approach the
industry price/earnings multiple.
4.1% Equity Residential/Real Estate
Largest multi-unit housing REIT in the United
States (by sales). Exclusively in apartments. The
apartment sector of the market usually benefits
when interest rates rise because housing becomes
less affordable and potential buyers turn to
renting. Consistent modest growth in cash flow and
dividends.
4.0% Hanson PLC/Miscellaneous Industrial
The world's largest producer of aggregates.
Generating large quantities of free cash, much of
which is used for acquisitions that improve its
profits. Should be a major beneficiary of the U.S.
Highway Bill.
3.1% Reynolds Metals/Aluminum
The world's third largest aluminum producer,
Reynolds was acquired by Alcoa on May 3 as part of
the global consolidation of the industry. Reynolds
returned 11% for the six months. We now hold the
Alcoa stock. Peer companies have been discussing
arrangements to further consolidate the industry,
which should improve pricing and provide a firmer
floor for prices in the next downturn. We believe
these structural changes will make aluminum stocks
more attractive.
3.1% PaineWebber Group/Financial Services
In a period of financial industry consolidation,
PaineWebber has a great retail franchise that makes
it a very attractive acquisition candidate.
Meanwhile, it is benefiting from the active equity
markets in the United States, efforts to control
its costs, and Internet initiatives that should
help it compete with larger competitors.
Holdings are subject to change.
4
<PAGE>
www.prudential.com (800) 225-1852
Semiannual Report April 30, 2000
Management recently indicated the company is for sale, and we believe
it is an attractive acquisition for a bank or other
large financial company.
Basic needs: housing and healthcare
Our exposure to the housing industry was primarily
in Hanson PLC (see Comments on Largest Holdings),
but also home builders Kaufman & Broad, Centex, and
Ryland Group. Housing stocks suffered from the
threat of rising interest rates and the fear that
the market had been saturated. On average, we had a
small loss in this sector.
Our healthcare holdings began to recover from
investor neglect, as they demonstrated better
control of their costs and their pricing improved.
Columbia/HCA Healthcare was our largest holding in
this sector. Its stock had fallen due to the
overhang of a government investigation and expected
penalties, but it recovered 19% over our reporting
period. Our healthcare stocks, which include Tenet
Healthcare and Humana, returned 16% for the half-
year.
Industrials mixed
Industrials made up about a quarter of our assets
on April 30, down from a third as we entered the
period. We thought they were underpriced as a group
and would benefit when it became apparent that the
global economy was growing soundly. Moreover, many
basic materials industries have been undergoing a
global consolidation that is likely to bring supply
and demand into a more attractive balance. Paper
companies had a large upward move before our period
began, and had more modest gains over this
reporting period. We expect to diversify our paper
holdings further. We still see room for improved
pricing in this industry, as capacity additions are
modest and consolidation continued at a fast pace
in the last few months.
We focused our aluminum exposure in Reynolds
Metals, which was taken over at an attractive price
by Alcoa in exchange for stock (see Comments on
Largest Holdings). We had a more substantial gain
in Stillwater Mining (platinum and palladium),
while our steel exposure had a negative impact on
our return.
5
<PAGE>
Prudential Equity Income Fund
Semiannual Report April 30, 2000
We expected our energy holdings to benefit from the
improvement in oil and gas pricing due to
tightening supply and demand, and they did. Strong
performances were turned in by Noble Affiliates,
Pioneer Natural Resources, and Anadarko Petroleum.
Electric utilities with ample generating capacity
should also benefit from the tighter North American
natural gas market. For example, new acquisition
PECO Energy has 44% of its capacity based in
nuclear energy. It should profit from selling spot
electricity at high prices in the summer when gas
supplies to other utilities will be tight.
We were hurt by our holdings in McDermott
International, a diversified company with a major
oil service business. A lawsuit pushed one of its
subsidiaries to file for bankruptcy protection, and
McDermott's shares fell sharply. We think investors
overestimated the threat to the parent company.
Looking Ahead
In recent years, a value style that focused on a
few traditional measures of value was at a
disadvantage. We are now using a greater number of
ways to measure investment value, in part to permit
us to construct a more diverse portfolio. Our goal
is to reduce the deviations in performance from our
benchmarks and from our competition while
outperforming them over the long term. We look for
troubled stocks, not troubled companies. We will
focus not only on quantitative measures of value,
but on indications that a firm's management has the
willingness and ability to close the market's
misperception of the stock's true value.
The current uncertainty over how high interest
rates will go can restrain the recovery of value
stocks, particularly in the economically sensitive
industrial sector. We expect this uncertainty to be
resolved by election time. We think the U.S. economy will have a "soft
landing"--a slowing of economic growth to a sustainable rate, without
stifling growth altogether. Since economically
sensitive stocks are priced as if a recession were
in order, continuing growth should make them very
attractive to investors.
Prudential Equity Income Fund Management Team
6
<PAGE>
Prudential Equity Income Fund
Financial
Statements
<PAGE>
Prudential Equity Income Fund
Portfolio of Investments as of April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 99.4%
Common Stocks 95.7%
-------------------------------------------------------------------------------------
Airlines 1.6%
689,400 AMR Corp.(a) $ 23,482,687
-------------------------------------------------------------------------------------
Aluminum 3.9%
172,200 Alcoa Inc.(b) 11,171,475
683,584 Reynolds Metals Co. 45,458,336
----------------
56,629,811
-------------------------------------------------------------------------------------
Apparel 0.8%
659,400 Kellwood Co. 11,292,225
-------------------------------------------------------------------------------------
Automobiles & Trucks 3.2%
97,800 Borg-Warner Automotive, Inc. 4,089,263
206,800 Dana Corp. 6,281,550
272,400 Ford Motor Co. 14,896,875
223,100 General Motors Corp. 20,887,737
----------------
46,155,425
-------------------------------------------------------------------------------------
Building & Construction 3.1%
554,500 Centex Corp. 13,377,313
888,600 Kaufman & Broad Home Corp. 17,105,550
694,900 Ryland Group, Inc. 13,984,862
----------------
44,467,725
-------------------------------------------------------------------------------------
Business Services 1.4%
582,710 Sabre Group Holdings, Inc. 20,358,431
-------------------------------------------------------------------------------------
Chemicals 3.0%
167,100 Dow Chemical Co.(b) 18,882,300
466,900 Lyondell Chemical Co.(b) 8,579,288
812,728 Millennium Chemicals, Inc. 16,203,764
----------------
43,665,352
-------------------------------------------------------------------------------------
Containers & Packaging 0.7%
670,400 Crown Cork & Seal Co., Inc. 10,894,000
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Equity Income Fund
Portfolio of Investments as of April 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Diversfied Consumer Products 3.4%
610,900 Eastman Kodak Co. $ 34,172,219
705,400 R.R. Donnelley & Sons, Co. 14,989,750
----------------
49,161,969
-------------------------------------------------------------------------------------
Diversified Operations 0.7%
785,500 Tomkins PLC, ADR (United Kingdom)(b) 9,573,281
-------------------------------------------------------------------------------------
Electrical Equipment 0.6%
691,900 Esterline Technologies Corp.(a) 8,475,775
-------------------------------------------------------------------------------------
Energy Systems 1.5%
2,706,500 McDermott International, Inc. 21,990,313
-------------------------------------------------------------------------------------
Financial Services 18.9%
759,600 Associates First Capital Corp. 16,853,625
847,727 Bear Stearns Cos., Inc. 36,346,295
360,800 Comerica, Inc. 15,288,900
326,200 Countrywide Credit Industries, Inc. 9,011,275
599,000 Edwards (A.G.), Inc. 22,537,375
1,434,300 Hanvit Bank, GDR (South Korea)(a)(b) 4,159,470
1,178,100 Lehman Brothers Holdings, Inc. 96,677,831
1,031,200 PaineWebber Group, Inc. 45,243,900
302,200 PNC Bank Corp. 13,183,475
651,600 Washington Mutual, Inc. 16,656,525
----------------
275,958,671
-------------------------------------------------------------------------------------
Forest & Paper 2.7%
706,900 Georgia-Pacific Corp.(b) 25,978,575
1,045,500 Louisiana-Pacific Corp. 13,983,562
----------------
39,962,137
-------------------------------------------------------------------------------------
Funeral Services 0.4%
1,039,000 Service Corp. International 5,324,875
-------------------------------------------------------------------------------------
Health Care Services 6.9%
265,700 Aetna, Inc. 15,377,387
1,218,500 Columbia/HCA Healthcare Corp. 34,651,094
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Equity Income Fund
Portfolio of Investments as of April 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
2,521,100 Humana, Inc.(a) $ 19,380,956
90 Lifepoint Hospitals, Inc.(a) 1,541
1,201,000 Tenet Healthcare Corp.(a) 30,625,500
----------------
100,036,478
-------------------------------------------------------------------------------------
Insurance 3.1%
495,700 Allstate Corp. 11,710,913
746,600 Ohio Casualty Corp. 12,412,225
665,000 SAFECO Corp. 14,713,125
338,400 Selective Insurance Group, Inc. 6,408,450
----------------
45,244,713
-------------------------------------------------------------------------------------
Machinery 1.4%
244,100 Cascade Corp. 2,517,281
157,200 Graco, Inc. 5,325,150
143,800 Regal-Beloit Corp. 2,597,388
580,100 United Dominion Industries, Ltd. (Canada) 10,115,494
----------------
20,555,313
-------------------------------------------------------------------------------------
Machinery & Equipment 0.5%
163,000 Ingersoll-Rand Co. 7,650,813
-------------------------------------------------------------------------------------
Metals 0.7%
376,600 Stillwater Mining Co.(a) 10,544,800
-------------------------------------------------------------------------------------
Miscellaneous Industrial 4.0%
1,608,700 Hanson PLC, ADR (United Kingdom) 58,818,094
-------------------------------------------------------------------------------------
Oil & Gas Exploration/Production 5.6%
199,700 Anadarko Petroleum Corp. 8,674,469
677,500 Noble Affiliates, Inc. 24,432,344
948,700 Occidental Petroleum Corp. 20,337,756
2,365,527 Pioneer Natural Resources Co. 24,394,497
192,200 USX - Marathon Group 4,480,662
----------------
82,319,728
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Equity Income Fund
Portfolio of Investments as of April 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Packaged Foods 3.2%
2,359,920 Nabisco Group Holding Corp. $ 30,383,970
1,276,600 Longview Fibre Co. 16,276,650
----------------
46,660,620
-------------------------------------------------------------------------------------
Real Estate Investment Trust 12.8%
2,629,800 Crescent Real Estate Equities, Inc. 45,035,325
1,095,300 Crown American Realty Trust 6,092,606
530,726 Equity Office Properties Trust 14,429,113
1,300,800 Equity Residential Properties Trust 59,186,400
343,400 Gables Residential Trust 8,241,600
503,100 Glimcher Realty Trust 6,917,625
286,900 Manufactured Home Communities, Inc. 7,172,500
1,133,900 Vornado Realty Trust 39,119,550
----------------
186,194,719
-------------------------------------------------------------------------------------
Retail 0.3%
1,654,500 Heilig-Meyers Co. 5,066,906
-------------------------------------------------------------------------------------
Steel 3.9%
645,100 AK Steel Holding Corp. 7,136,419
1,138,500 Bethlehem Steel Corp. 6,119,437
251,500 Rouge Industries, Inc. 1,430,406
1,661,100 USX Corp.-U.S. Steel Group 41,631,319
----------------
56,317,581
-------------------------------------------------------------------------------------
Tobacco 2.4%
887,000 Philip Morris Companies, Inc. 19,403,125
786,640 R.J. Reynolds Tobacco Holdings, Inc. 16,322,780
----------------
35,725,905
-------------------------------------------------------------------------------------
Tools 1.1%
591,700 Snap-On, Inc. 15,643,069
-------------------------------------------------------------------------------------
Trucking & Shipping 0.7%
560,300 Yellow Corp.(a) 10,680,719
-------------------------------------------------------------------------------------
Utilities 2.1%
785,900 Nisource, Inc. 14,539,150
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Equity Income Fund
Portfolio of Investments as of April 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
382,800 PECO Energy Co. $ 15,957,975
----------------
30,497,125
-------------------------------------------------------------------------------------
Wood Processing 1.1%
356,300 Rayonier, Inc. 16,723,831
----------------
Total common stocks (cost $1,329,993,526) 1,396,073,091
----------------
-------------------------------------------------------------------------------------
PREFERRED STOCKS 3.0%
-------------------------------------------------------------------------------------
Mining
33,100 Hecla Mining Co., Conv. 7.00%, Ser. B 769,575
-------------------------------------------------------------------------------------
Retail 1.6%
585,500 K-Mart Financing I, Trust, Conv. 7.75% 23,420,000
-------------------------------------------------------------------------------------
Steel 0.7%
242,400 Bethlehem Steel Corp., Conv. $3.50 5,575,200
114,400 USX-Capital Trust I, Conv., 6.75% 4,247,100
----------------
9,822,300
-------------------------------------------------------------------------------------
Transportation-Road & Rail 0.7%
232,400 Union Pacific Capital Trust 9,877,000
----------------
Total preferred stocks (cost $66,020,952) 43,888,875
----------------
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE BONDS 0.7%
Principal
Moody's Amount
Rating (000) Description
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real Estate Investment Trust 0.2%
Malan Realty Investors, Inc.,
B3 $ 3,650 Conv. 9.50%, 7/15/04, Sub. Deb. 3,216,563
-------------------------------------------------------------------------------------
Retail 0.5%
Charming Shoppes Inc.
B2 7,655 7.50%, 7/15/06 7,731,550
---------------
Total convertible bonds
(cost $11,418,724) 10,948,113
---------------
Total long-term investments
(cost $1,407,433,202) 1,450,910,079
---------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Equity Income Fund
Portfolio of Investments as of April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C> <C>
------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 3.2%
-------------------------------------------------------------------------------------
Commercial Paper 3.0%
Bombardier Capital, Inc.
$ 5,000 7.00%, 5/1/00(c) $ 4,997,083
GPU Capital, Inc.
1,000 6.25%, 5/15/00(c) 996,885
12,000 6.22%, 5/10/00(c) 11,976,856
Sprint Capital Corp.
14,000 6.25%, 5/10/00(c) 13,972,926
TRW, Inc.
12,000 6.24%, 5/19/00(c) 11,958,063
----------------
Total commercial paper (cost $43,901,813) 43,901,813
----------------
-------------------------------------------------------------------------------------
Time Deposit 0.1%
1,238 State Street Bank(c)
5.875%, 5/1/00 (cost $1,238,000) 1,238,000
-------------------------------------------------------------------------------------
Repurchase Agreement 0.1%
Joint Repurchase Agreement Account,
5.71%, 5/1/00
(cost $1,335,000; Note 5) 1,335,000
1,335
----------------
Total Investments 102.6%
(cost $1,453,908,015; Note 4) 1,497,384,892
Liabilities in excess of other assets (2.6%) (38,392,363)
----------------
Net Assets 100% $ 1,458,992,529
----------------
----------------
</TABLE>
--------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Portion of securities on loan, see Note 4.
(c) Represents security, or portion thereof, purchased with cash collateral
received for securities on loan.
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
PLC--Public Limited Company.
The Fund's current Statement of Additional Information contains a description of
Moody's ratings.
See Notes to Financial Statements 13
<PAGE>
Prudential Equity Income Fund
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
April 30, 2000
<S> <C> <C>
--------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $1,453,908,015) $1,497,384,892
Cash 475,527
Receivable for investments sold 7,277,645
Dividends and interest receivable 4,347,082
Receivable for securities lending 1,454,743
Receivable for Fund shares sold 699,581
Prepaid expenses 27,007
--------------
Total assets 1,511,666,477
--------------
LIABILITIES
Payable to broker for collateral for securities on loan 44,874,500
Payable for Fund shares reacquired 4,344,849
Accrued expenses 1,604,586
Distribution fee payable 762,375
Management fee payable 637,222
Securities lending rebate payable 247,168
Foreign withholding tax payable 203,248
--------------
Total liabilities 52,673,948
--------------
NET ASSETS $1,458,992,529
--------------
--------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 901,696
Paid-in capital in excess of par 1,301,397,863
--------------
1,302,299,559
Undistributed net investment income 2,164,778
Accumulated net realized gains 111,051,315
Net unrealized appreciation on investments 43,476,877
--------------
Net assets, April 30, 2000 $1,458,992,529
--------------
--------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Equity Income Fund
Statement of Assets and Liabilities (Unaudited) Cont'd.
<TABLE>
<CAPTION>
April 30, 2000
<S> <C> <C>
--------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share
($535,090,404 / 33,003,000 shares of beneficial interest
issued and outstanding) $16.21
Maximum sales charge (5% of offering price) .85
--------------
Maximum offering price to public $17.06
--------------
--------------
Class B:
Net asset value, offering price and redemption price per
share ($756,586,394 / 46,849,611 shares of beneficial
interest issued and outstanding) $16.15
--------------
--------------
Class C:
Net asset value and redemption price per share
($25,969,136 / 1,608,147 shares of beneficial interest
issued and outstanding) $16.15
Sales charge (1% of offering price) .16
--------------
Offering price to public $16.31
--------------
--------------
Class Z:
Net asset value, offering price and redemption price per
share ($141,346,595 / 8,708,843 shares of beneficial
interest issued and outstanding) $16.23
--------------
--------------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Equity Income Fund
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
April 30, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $280,250) $ 25,665,088
Interest 694,982
Income from securities loaned, net 216,919
--------------
Total income 26,576,989
--------------
Expenses
Management fee 4,145,839
Distribution fee--Class A 709,088
Distribution fee--Class B 4,308,353
Distribution fee--Class C 145,845
Transfer agent's fees and expenses 2,473,000
Reports to shareholders 219,000
Custodian's fees and expenses 92,000
Registration fees 65,000
Trustees' fees and expenses 18,000
Legal fees and expenses 17,000
Insurance 17,000
Audit fee and expenses 12,000
Miscellaneous 13,298
--------------
Total expenses 12,235,423
--------------
Net investment income 14,341,566
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCIES
Net realized gain (loss) on:
Investment transactions 112,921,496
--------------
Net change in unrealized appreciation (depreciation) of:
Investments (96,530,270)
Foreign currencies 875
--------------
(96,529,395)
--------------
Net gain on investments and foreign currencies 16,392,101
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 30,733,667
--------------
--------------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
This page intentionally left blank
<PAGE>
Prudential Equity Income Fund
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
April 30, 2000 October 31, 1999
<S> <C> <C> <C>
-----------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 14,341,566 $ 26,176,349
Net realized gain on investments and
foreign currency transactions 112,921,496 216,506,120
Net change in unrealized depreciation of
investments and foreign currencies (96,529,395) (142,075,336)
-------------- ----------------
Net increase in net assets resulting from
operations 30,733,667 100,607,133
-------------- ----------------
Dividends and distributions (Note 1)
Dividends from net investment income
Class A (5,379,068) (11,212,454)
Class B (5,136,142) (11,757,902)
Class C (173,166) (360,445)
Class Z (1,488,412) (2,845,548)
-------------- ----------------
(12,176,788) (26,176,349)
-------------- ----------------
Dividends in excess of net investment
income
Class A -- (1,032,878)
Class B -- (1,796,239)
Class C -- (55,705)
Class Z -- (189,062)
-------------- ----------------
-- (3,073,884)
-------------- ----------------
Distributions from net realized gains
Class A (72,440,679) (36,735,180)
Class B (117,327,735) (73,406,073)
Class C (3,915,411) (2,177,750)
Class Z (16,674,813) (7,944,744)
-------------- ----------------
(210,358,638) (120,263,747)
-------------- ----------------
</TABLE>
18 See Notes to Financial Statements
<PAGE>
Prudential Equity Income Fund
Statement of Changes in Net Assets (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
April 30, 2000 October 31, 1999
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund share transactions (net of share
conversions)
(Note 6)
Proceeds from shares sold $ 217,611,296 $ 495,723,387
Net asset value of shares issued in
reinvestment of dividends and
distributions 207,678,075 138,241,458
Cost of shares reacquired (570,523,385) (908,444,366)
-------------- ----------------
Net decrease in net assets from Fund share
transactions (145,234,014) (274,479,521)
-------------- ----------------
Total decrease (337,035,773) (323,386,368)
NET ASSETS
Beginning of period 1,796,028,302 2,119,414,670
-------------- ----------------
End of period(a) $1,458,992,529 $1,796,028,302
-------------- ----------------
-------------- ----------------
(a) Includes undistributed net investment
income of $ 2,164,778 $ --
-------------- ----------------
</TABLE>
See Notes to Financial Statements 19
<PAGE>
Prudential Equity Income Fund
Notes to Financial Statements (Unaudited)
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 Composite Stock Price 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 or at the bid price in the absence of an asked price. Securities that are
actively traded in the over-the-counter market, including listed securities for
which the primary market is believed to be over-the-counter, are valued by an
independent pricing agent or principal market maker. Securities for which
reliable market quotations are not available or for which the pricing agent or
principal market maker does not provide a valuation or methodology or provides a
valuation or methodology that does not represent fair value, are valued 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.
20
<PAGE>
Prudential Equity Income Fund
Notes to Financial Statements (Unaudited) Cont'd.
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.
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 Net Investment Income: Securities
transactions are recorded on the trade date. Realized gains and losses on sales
of investments are calculated on the identified cost basis. Dividend income is
recorded on the ex-dividend date, 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 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.
21
<PAGE>
Prudential Equity Income Fund
Notes to Financial Statements (Unaudited) Cont'd.
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. These differences are primarily due to differing
treatment of distributions from Real Estate Investment Trusts.
Securities Lending: The Fund may lend securities to broker-dealers. The
loans are secured by collateral at least equal at all times to the market value
of the securities loaned. Loans are subject to termination at the option of the
borrower or the Fund. Upon termination of the loan, the borrower will return to
the lender securities identical to the loaned securities. The Fund may bear the
risk of delay in recovery of, or even loss of rights in, the securities loaned
should the borrower of the securities fail financially. The Fund receives
compensation, net of any rebate, for lending its securities in the form of fees
or it retains a portion of interest on the investment of any cash received as
collateral. The Fund also continues to receive interest and dividends on the
securities loaned and any gain or loss in the market price of the securities
loaned that may occur during the term of the loan. Prudential Securities
Incorporated ('PSI') is the securities lending agent for the Fund. For the six
months ended April 30, 2000, PSI has been compensated approximately $58,898 for
these services.
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. Pursuant to a subadvisory agreement between PIFM and The Prudential
Investment Corporation ('PIC'), PIC furnishes investment advisory services in
connection with the management of the Fund. PIFM pays for the services of PIC,
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 Investment
Management Services LLC ('PIMS'), which acts as the distributor of the Class A,
Class B, Class C and Class Z shares. The Fund compensates PIMS for distributing
and servicing the Fund's Class A, Class B and Class C shares, pursuant to plans
of distribution (the 'Class A, B and
22
<PAGE>
Prudential Equity Income Fund
Notes to Financial Statements (Unaudited) Cont'd.
C Plans'), regardless of expenses actually incurred. The distribution fees are
accrued daily and payable monthly. No distribution or service fees are paid to
PIMS as distributor of the Class Z shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, 1% and 1%,
of the average daily net assets of the Class A, B and C shares, respectively.
Such expenses under the Plans were .25 of 1%, 1% and 1% of the average daily net
assets of the Class A, B and C shares for the six months ended April 30, 2000,
respectively.
PIMS has advised the Fund that it has received approximately $119,700 and
$8,200 in front-end sales charges resulting from sales of Class A shares and
Class C shares, respectively, during the six months ended April 30, 2000. From
these fees, PIMS paid such sales charges to affiliated broker-dealers, which in
turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the six months ended April 30, 2000, it
received approximately $1,154,700 and $5,300 in contingent deferred sales
charges imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PIFM, PIC and PIMS are wholly owned subsidiaries of The Prudential
Insurance Company of America ('Prudential').
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the six months ended April 30, 2000,
the Fund incurred fees of approximately $2,069,000 for the services of PMFS. As
of April 30, 2000, approximately $353,300 of such fees were due to PMFS.
Transfer agent fees and expenses in the Statement of Operations include certain
out-of-pocket expenses paid to nonaffiliates.
For the six months ended April 30, 2000, PSI, which is an indirect, wholly
owned subsidiary of Prudential, earned approximately $72,300 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, 2000 were $388,483,624 and $738,226,111,
respectively.
The cost basis of investments for federal income tax purposes at April 30,
2000 was $1,454,210,250 and, accordingly, net unrealized appreciation for
federal income tax purposes was $43,174,642 (gross unrealized
appreciation--$285,406,645; gross unrealized depreciation--$242,232,003).
As of April 30, 2000, the Fund had securities on loan with an aggregate
market value of $42,668,495. The Fund received $44,874,500 in cash as collateral
for
23
<PAGE>
Prudential Equity Income Fund
Notes to Financial Statements (Unaudited) Cont'd.
securities on loan which was used to purchase highly liquid short-term
investments in accordance with the Fund's securities lending procedures.
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or Federal agency obligations. As of April 30, 2000, the Fund
had a .2% undivided interest in repurchase agreements in the joint account. The
undivided interest for the Fund represented $1,335,000 in principal amount. As
of such date, each repurchase agreement in the joint account and the value of
the collateral therefor were as follows:
ABN AMRO, Inc., 5.72%, in the principal amount of $160,000,000, repurchase
price $160,076,267, due 5/1/00. The value of the collateral including accrued
interest was $163,200,995.
Bear, Stearns & Co. Inc., 5.72%, in the principal amount of $160,000,000,
repurchase price $160,076,267, due 5/1/00. The value of the collateral including
accrued interest was $166,727,544.
Credit Suisse First Boston Corp., 5.75%, in the principal amount of
$160,000,000, repurchase price $160,076,667, due 5/1/00. The value of the
collateral including accrued interest was $165,506,481.
Morgan (J.P.) Securities Inc., 5.72%, in the principal amount of
$210,000,000, repurchase price $210,100,100, due 5/1/00. The value of the
collateral including accrued interest was $214,200,036.
Salomon Smith Barney, Inc., 5.65%, in the principal amount of
$162,577,000, repurchase price $162,653,547, due 5/1/00. The value of the
collateral including accrued interest was $165,893,849.
Note 6. Capital
The Fund offers Class A, Class B, Class C and Class Z shares. Class A shares are
sold with a front-end sales charge of up to 5%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Class C shares are sold with a front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18 months. Class B shares will automatically convert to Class A shares on a
quarterly basis approximately seven years after purchase. A special exchange
privilege is also available for shareholders who qualify to purchase Class A
shares at net asset value or Class Z shares. Class Z shares are not
24
<PAGE>
Prudential Equity Income Fund
Notes to Financial Statements (Unaudited) Cont'd.
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, 2000:
Shares sold 8,565,255 $ 138,117,392
Shares issued in reinvestment of dividends and
distributions 4,484,388 71,939,128
Shares reacquired (15,976,936) (257,400,002)
----------- -------------
Net decrease in shares outstanding before conversion (2,927,293) (47,343,482)
Shares issued upon conversion from Class B 1,739,253 26,911,979
----------- -------------
Net decrease in shares outstanding (1,188,040) $ (20,431,503)
----------- -------------
----------- -------------
Year ended October 31, 1999:
Shares sold 16,694,821 $ 317,280,599
Shares issued in reinvestment of dividends and
distributions 2,467,403 44,364,034
Shares reacquired (22,063,847) (415,812,468)
----------- -------------
Net decrease in shares outstanding before conversion (2,901,623) (54,167,835)
Shares issued upon conversion from Class B 2,822,586 53,289,360
----------- -------------
Net decrease in shares outstanding (79,037) $ (878,475)
----------- -------------
----------- -------------
<CAPTION>
Class B
----------------------------------------------------------
<S> <C> <C>
Six months ended April 30, 2000:
Shares sold 2,124,720 $ 34,306,578
Shares issued in reinvestment of dividends and
distributions 7,102,787 113,650,862
Shares reacquired (16,366,675) (261,062,730)
----------- -------------
Net decrease in shares outstanding before conversion (7,139,168) (113,105,290)
Shares reacquired upon conversion into Class A (1,744,855) (26,911,979)
----------- -------------
Net decrease in shares outstanding (8,884,023) $(140,017,269)
----------- -------------
----------- -------------
Year ended October 31, 1999:
Shares sold 5,716,752 $ 108,733,754
Shares issued in reinvestment of dividends and
distributions 4,509,403 80,447,105
Shares reacquired (21,658,431) (404,250,026)
----------- -------------
Net decrease in shares outstanding before conversion (11,432,276) (215,069,167)
Shares reacquired upon conversion into Class A (2,833,175) (53,289,360)
----------- -------------
Net decrease in shares outstanding (14,265,451) $(268,358,527)
----------- -------------
----------- -------------
</TABLE>
25
<PAGE>
Prudential Equity Income Fund
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C Shares Amount
---------------------------------------------------------- ----------- -------------
Six months ended April 30, 2000:
<S> <C> <C>
Shares sold 296,665 $ 4,848,599
Shares issued in reinvestment of dividends and
distributions 248,043 3,968,908
Shares reacquired (802,133) (12,876,495)
----------- -------------
Net decrease in shares outstanding (257,425) $ (4,058,988)
----------- -------------
----------- -------------
Year ended October 31, 1999:
Shares sold 736,586 $ 14,065,037
Shares issued in reinvestment of dividends and
distributions 139,408 2,487,645
Shares reacquired (1,055,951) (19,790,850)
----------- -------------
Net decrease in shares outstanding (179,957) $ (3,238,168)
----------- -------------
----------- -------------
<CAPTION>
Class Z
----------------------------------------------------------
<S> <C> <C>
Six months ended April 30, 2000:
Shares sold 2,503,644 $ 40,338,727
Shares issued in reinvestment of dividends and
distributions 1,128,732 18,119,177
Shares reacquired (2,452,355) (39,184,158)
----------- -------------
Net increase in shares outstanding 1,180,021 $ 19,273,746
----------- -------------
----------- -------------
Year ended October 31, 1999:
Shares sold 2,860,602 $ 55,643,997
Shares issued in reinvestment of dividends and
distributions 607,453 10,942,674
Shares reacquired (3,605,044) (68,591,022)
----------- -------------
Net decrease in shares outstanding (136,989) $ (2,004,351)
----------- -------------
----------- -------------
</TABLE>
Note 7. Dividends
On June 27, 2000 the Board of Trustees of the Fund declared the following
dividends per share, payable on June 30, 2000 to shareholders of record on June
29, 2000.
<TABLE>
<CAPTION>
Class Class B Class
A and C Z
--------- --------- ---------
<S> <C> <C> <C>
Ordinary Income $ .09 $ .06 $ .10
</TABLE>
Note 8. Borrowings
The Fund, along with other affiliated registered investment companies (the
'Funds'), entered into a syndicated credit agreement ('SCA') with an
unaffiliated lender. The maximum commitment under the SCA is $1 billion.
Interest on any such borrowings will be at market rates. The purpose of the
agreement is to serve as an alternative source of funding for capital share
redemptions. The Funds pay a commitment fee of .080 of 1% of the unused portion
of the credit facility. The commitment fee is accrued and paid quarterly on a
pro rata basis by the Funds. The expiration date of the SCA is March 9, 2001.
Prior to March 9, 2000, the commitment fee was .065 of 1% of the unused portion
of the credit facility.
The Fund utilized the line of credit during the six months ended April 30,
2000. The average daily balance the Fund had outstanding during the period was
approximately $6,027,786 at a weighted average interest rate of approximately
6.21%.
26
<PAGE>
Prudential Equity Income Fund
Financial
Highlights
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '
<PAGE>
Prudential Equity Income Fund
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Class A
----------------
Six Months Ended
April 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 18.12
----------------
Income from investment operations
Net investment income .19
Net realized and unrealized gain (loss) on investment
transactions .24
----------------
Total from investment operations .43
----------------
Less distributions
Dividends from net investment income (.16)
Dividends in excess of net investment income --
Distributions from net realized gains (2.18)
----------------
Total distributions (2.34)
----------------
Net asset value, end of period $ 16.21
----------------
----------------
TOTAL RETURN(a): 2.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $535,090
Average net assets (000) $570,387
Ratios to average net assets:
Expenses, including distribution fees 1.14%(b)
Expenses, excluding distribution fees .89%(b)
Net investment income 2.20%(b)
Portfolio turnover rate 24%
</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.
(b) Annualized.
28 See Notes to Financial Statements
<PAGE>
Prudential Equity Income Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------------------------------------------------
Year Ended October 31,
----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 18.63 $ 21.00 $ 15.43 $ 14.40 $ 14.03
---------------- ---------------- ---------------- ---------------- ----------------
.33 .45 .45 .47 .48
.58 (.49) 6.29 1.75 .95
---------------- ---------------- ---------------- ---------------- ----------------
.91 (.04) 6.74 2.22 1.43
---------------- ---------------- ---------------- ---------------- ----------------
(.33) (.44) (.43) (.49) (.54)
(.03) -- -- -- --
(1.06) (1.89) (.74) (.70) (.52)
---------------- ---------------- ---------------- ---------------- ----------------
(1.42) (2.33) (1.17) (1.19) (1.06)
---------------- ---------------- ---------------- ---------------- ----------------
$ 18.12 $ 18.63 $ 21.00 $ 15.43 $ 14.40
---------------- ---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ---------------- ----------------
5.03% (.65)% 45.68% 15.97% 11.15%
$619,469 $638,547 $570,146 $341,717 $276,990
$653,798 $655,776 $454,892 $310,335 $236,688
1.02% .91% .94% .98% 1.03%
.77% .66% .69% .73% .78%
1.71% 2.19% 2.32% 3.26% 3.36%
17% 22% 36% 36% 74%
</TABLE>
See Notes to Financial Statements 29
<PAGE>
Prudential Equity Income Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
----------------
Six Months Ended
April 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 18.06
----------------
Income from investment operations
Net investment income .13
Net realized and unrealized gain (loss) on investment
transactions .24
----------------
Total from investment operations .37
----------------
Less distributions
Dividends from net investment income (.10)
Dividends in excess of net investment income --
Distributions from net realized gains (2.18)
----------------
Total distributions (2.28)
----------------
Net asset value, end of year $ 16.15
----------------
----------------
TOTAL RETURN(a): 2.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $756,586
Average net assets (000) $866,405
Ratios to average net assets:
Expenses, including distribution fees 1.89%(b)
Expenses, excluding distribution fees .89%(b)
Net investment income 1.45%(b)
Portfolio turnover rate 24%
</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.
(b) Annualized.
30 See Notes to Financial Statements
<PAGE>
Prudential Equity Income Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
----------------------------------------------------------------------------------------------------------
Year Ended October 31,
----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 18.57 $ 20.93 $ 15.39 $ 14.36 $ 14.00
---------------- ---------------- ---------------- ---------------- ----------------
.19 .29 .29 .39 .37
.58 (.48) 6.29 1.71 .95
---------------- ---------------- ---------------- ---------------- ----------------
.77 (.19) 6.58 2.10 1.32
---------------- ---------------- ---------------- ---------------- ----------------
(.19) (.28) (.30) (.37) (.44)
(.03) -- -- -- --
(1.06) (1.89) (.74) (.70) (.52)
---------------- ---------------- ---------------- ---------------- ----------------
(1.28) (2.17) (1.04) (1.07) (.96)
---------------- ---------------- ---------------- ---------------- ----------------
$ 18.06 $ 18.57 $ 20.93 $ 15.39 $ 14.36
---------------- ---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ---------------- ----------------
4.25% (1.35)% 44.60% 15.12% 10.29%
$1,006,346 $1,299,962 $1,250,216 $929,948 $906,793
$1,200,663 $1,391,826 $1,072,118 $951,220 $911,856
1.77% 1.66% 1.69% 1.73% 1.78%
.77% .66% .69% .73% .78%
.98% 1.44% 1.60% 2.51% 2.66%
17% 22% 36% 36% 74%
</TABLE>
See Notes to Financial Statements 31
<PAGE>
Prudential Equity Income Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
<S> <C> <C>
----------------
<CAPTION>
Six Months Ended
April 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 18.06
--------
Income from investment operations
Net investment income .12
Net realized and unrealized gain (loss) on investment
transactions .25
--------
Total from investment operations .37
--------
Less distributions
Dividends from net investment income (.10)
Dividends in excess of net investment income --
Distributions from net realized gains (2.18)
--------
Total distributions (2.28)
--------
Net asset value, end of period $ 16.15
--------
--------
TOTAL RETURN(a): 2.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 25,969
Average net assets (000) $ 29,329
Ratios to average net assets:
Expenses, including distribution fees 1.89%(b)
Expenses, excluding distribution fees .89%(b)
Net investment income 1.45%(b)
Portfolio turnover rate 24%
</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.
(b) Annualized.
32 See Notes to Financial Statements
<PAGE>
Prudential Equity Income Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
----------------------------------------------------------------------------------------------------------
Year Ended October 31,
----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 18.57 $ 20.93 $ 15.39 $14.36 $14.00
-------- -------- -------- ------- -------
.19 .30 .37 .38 .40
.58 (.49) 6.21 1.72 .92
-------- -------- -------- ------- -------
.77 (.19) 6.58 2.10 1.32
-------- -------- -------- ------- -------
(.19) (.28) (.30) (.37) (.44)
(.03) -- -- -- --
(1.06) (1.89) (.74) (.70) (.52)
-------- -------- -------- ------- -------
(1.28) (2.17) (1.04) (1.07) (.96)
-------- -------- -------- ------- -------
$ 18.06 $ 18.57 $ 20.93 $15.39 $14.36
-------- -------- -------- ------- -------
-------- -------- -------- ------- -------
4.25% (1.35)% 44.60% 15.12% 10.29%
$ 33,685 $ 37,988 $ 17,911 $8,511 $4,586
$ 36,981 $ 31,345 $ 11,432 $6,730 $3,132
1.77% 1.66% 1.69% 1.73% 1.78%
.77% .66% .69% .73% .78%
.98% 1.47% 1.53% 2.51% 2.57%
17% 22% 36% 36% 74%
</TABLE>
See Notes to Financial Statements 33
<PAGE>
Prudential Equity Income Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
----------------
Six Months Ended
April 30, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 18.13
----------------
Income from investment operations
Net investment income .20
Net realized and unrealized gain (loss) on investment
transactions .26
----------------
Total from investment operations .46
----------------
Less distributions
Dividends from net investment income (.18)
Dividends in excess of net investment income --
Distributions from net realized gains (2.18)
----------------
Total distributions (2.36)
----------------
Net asset value, end of period $ 16.23
----------------
----------------
TOTAL RETURN(a): 2.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $141,347
Average net assets (000) $136,597
Ratios to average net assets:
Expenses, including distribution fees .89%(b)
Expenses, excluding distribution fees .89%(b)
Net investment income 2.45%(b)
Portfolio turnover rate 24%
</TABLE>
------------------------------
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each period reported and includes reinvestment
of dividends and distributions. Total returns for periods of less than a
full year are not annualized.
(b) Annualized.
(c) Commencement of offering of Class Z shares.
34 See Notes to Financial Statements
<PAGE>
Prudential Equity Income Fund
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
----------------------------------------------------------------------------------------
Year Ended October 31, March 1, 1996(c)
---------------------------------------------------------- Through
1999 1998 1997 October 31,1996
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 18.64 $ 21.00 $ 15.42 $ 15.13
---------------- ---------------- ---------------- ----------
.38 .52 .36 .38
.58 (.51) 6.43 .30
---------------- ---------------- ---------------- ----------
.96 .01 6.79 .68
---------------- ---------------- ---------------- ----------
(.38) (.48) (.47) (.39)
(.03) -- -- --
(1.06) (1.89) (.74) --
---------------- ---------------- ---------------- ----------
(1.47) (2.37) (1.21) (.39)
---------------- ---------------- ---------------- ----------
$ 18.13 $ 18.64 $ 21.00 $ 15.42
---------------- ---------------- ---------------- ----------
---------------- ---------------- ---------------- ----------
5.28% (.40)% 46.12% 4.55%
$136,529 $142,918 $ 74,956 $ 44,509
$144,747 $103,474 $ 57,369 $ 24,641
.77% .66% .69% .73%(b)
.77% .66% .69% .73%(b)
1.97% 2.49% 2.58% 3.51%(b)
17% 22% 36% 36%
</TABLE>
See Notes to Financial Statements 35
<PAGE>
Prudential Equity Income Fund
Getting the Most from Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds,
you receive financial advice from a Prudential
Securities Financial Advisor or Pruco Securities
registered representative. Your advisor or
representative can provide you with the following
services:
There's No Reward Without Risk; but Is This Risk
Worth It?
Your financial advisor or registered representative
can help you match the reward you seek with the
risk you can tolerate. Risk can be difficult to
gauge--sometimes even the simplest investments bear
surprising risks. The educated investor knows that
markets seldom move in just one direction. There
are times when a market sector or asset class will
lose value or provide little in the way of total
return. Managing your own expectations is easier
with help from someone who understands the markets
and who knows you!
Keeping Up With the Joneses
A financial advisor or registered representative
can help you wade through the numerous available
mutual funds to find the ones that fit your
individual investment profile and risk tolerance.
While the newspapers and popular magazines are full
of advice about investing, they are aimed at
generic groups of people or representative
individuals--not at you personally. Your financial
advisor or registered representative will review
your investment objectives with you. This means you
can make financial decisions based on the assets
and liabilities in your current portfolio and your
risk tolerance--not just based on the current
investment fad.
Buy Low, Sell High
Buying at the top of a market cycle and selling at
the bottom are among the most common investor
mistakes. But sometimes it's difficult to hold on
to an investment when it's losing value every
month. Your financial advisor or registered
representative can answer questions when you're
confused or worried about your investment, and
should remind you that you're investing for the
long haul.
<PAGE>
www.prudential.com (800) 225-1852
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Trustees
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
Robin B. Smith
John R. Strangfeld
Louis A. Weil, III
Clay T. Whitehead
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Marguerite E.H. Morrison, Secretary
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
194 Wood Avenue South
Iselin, NJ 08830
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
Fund Symbols NASDAQ CUSIP
Class A PBEAX 743916207
Class B PBQIX 743916108
Class C PEICX 743916306
Class Z PEIZX 743916405
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, 2000, were not audited and,
accordingly, no opinion is expressed on them.
<PAGE>
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Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
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(800) 225-1852
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