<PAGE>
ANNUAL REPORT OCTOBER 31, 2000
Prudential
Value Fund
Fund Type Stock
Objective Capital appreciation
(GRAPHIC)
This report is not authorized for distribution to
prospective investors unless preceded or
accompanied by a current prospectus.
The views expressed in this report and information
about the Fund's portfolio holdings are for the
period covered by this report and are subject to
change thereafter.
(LOGO)
<PAGE>
Build on the Rock
INVESTMENT GOALS AND STYLE
The Prudential Value Fund seeks 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 New York Stock Exchange (NYSE) Composite Index.
Until September 2000, the Fund also had an
objective of current income (which was reflected in
its former name, the Prudential Equity Income
Fund). 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
objective.
Portfolio Composition
Sectors expressed as a percentage of
net assets as of 10/31/00
23.7% Finance
14.7 Basic Materials
11.4 Consumer Cyclical
11.0 Technology
6.9 Consumer Staples
6.8 Energy
6.3 Telecommunication Services
5.9 Health Care
3.5 Capital Goods
2.4 Utilities
1.4 Transportation
6.0 Cash & Equivalents
Ten Largest Holdings
Expressed as a percentage of
net assets as of 10/31/00
3.6% PaineWebber Group, Inc.
Financial Services
3.0 Nabisco Group Holding Corp.
Foods
2.9 Lehman Brothers Holdings, Inc.
Financial Services
2.8 Alcoa, Inc.
Metals
2.5 Allstate Corp.
Insurance
1.8 Equity Residential Properties Trust
Real Estate Investment Trust
1.8 Dow Chemical Co.
Chemicals
1.8 Philip Morris Companies, Inc.
Tobacco
1.8 Eastman Kodak Co.
Diversified Consumer Products
1.7 Humana, Inc.
Health Care Services
Holdings are subject to change.
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
Cumulative Total Returns1 As of 10/31/00
<TABLE>
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 17.60% 107.31% 332.87% 301.01%
Class B 16.71 99.78 300.93 353.90
Class C 16.71 99.78 N/A 121.32
Class Z 17.94 N/A N/A 88.93
Lipper Equity Income Fund Avg.3 6.02 94.77 321.43 ***
S&P 500 Index4 6.08 166.59 489.93 ****
</TABLE>
Average Annual Total Returns1 As of 10/31/00
<TABLE>
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 11.72% 14.52% 15.19% 13.22%
Class B 11.71 14.73 14.90 11.61
Class C 14.54 14.61 N/A 13.37
Class Z 17.94 N/A N/A 14.60
</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.
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,
1/22/87; Class C, 8/1/94; Class Z, 3/1/96.
3 Lipper average returns are for all funds in each
share class for the 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 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. These returns would be
lower if they included the effect of operating
expenses. Investors cannot invest directly in an
index.
***Lipper Since Inception returns are 272.70% for
Class A, 354.13% for Class B, 135.31% for
Class C, and 76.65% for Class Z, based on all funds
in each share class.
****The S&P 500 Index Since Inception returns are
459.99% for Class A, 643.51% for Class B, 249.88%
for Class C, and 140.09% for Class Z.
1
<PAGE>
(LOGO) December 15, 2000
DEAR SHAREHOLDER,
During the one-year reporting period ended October
31, 2000, the Prudential Value Fund's Class A
shares posted a 17.60% return--11.72% to those
paying the one-time Class A share sales charge.
This compares very favorably to the 6.02% Lipper
Equity Income Fund Average, and the 7.11% Lipper
Large-Cap Value Fund Average. Value stock
performance was lackluster during the first half of
the reporting period. However, in recent months,
value stocks have significantly outperformed growth
stocks as investors have been drawn to their
compelling fundamentals. During its fiscal year,
the Fund was able to generate strong absolute and
relative results for shareholders through astute
sector and security selection.
A NEW NAME AND OBJECTIVE
In our last report to shareholders, we explained
that the Fund's Board of Trustees had approved
changing the Fund's name from the Prudential Equity
Income Fund to the Prudential Value Fund. In
addition, a shareholder meeting has been held, at
which the shareholders approved removing "current
income" from the Fund's investment objective. With
many corporations de-emphasizing dividends, it was
becoming increasingly difficult for the Fund to
generate income and to stay competitive in its
ability to provide capital appreciation potential.
We believe this will provide your Fund's management
team with greater flexibility. Moreover, if the
Fund's performance in the last few months is any
indication, we believe the change can help lead to
solid performance results.
Sincerely,
David R. Odenath, Jr., President
Prudential Value Fund
2
<PAGE>
Prudential Value Fund
Annual Report October 31, 2000
INVESTMENT ADVISER'S REPORT
A RETURN TO VALUE
Throughout the reporting period, the financial
markets were characterized by a dramatic increase
in volatility and shifting investment preferences.
To a great extent, the first half of the period
favored growth stocks--in particular, large-
capitalization growth and technology stocks. Then
in mid-March, the markets abruptly corrected.
Continued strong economic growth, inflationary
pressures, and rising interest rates were the main
culprits.
While other types of stocks were dragged down
during the correction, technology issues
experienced the brunt of the decline. During this
period, value stocks performed relatively well,
outperforming growth stocks in April and May. Then
in June, indicators showed that economic growth was
finally beginning to moderate. The markets took
this as a sign that the Federal Reserve Board (the
Fed) would move to a more neutral monetary policy.
As a result, investors stampeded back to growth
stocks, and the Russell 1000 Growth Index
outperformed the Russell 1000 Value Index by more
than 12%--one of the highest monthly spreads between
growth and value since the inception of the
indexes.
However, in July, investor sentiment abruptly
changed again. The market became concerned that
slower economic growth could equate to falling
corporate profits. This led to a decline in the
price of many growth stocks, in particular those
with high valuations. At the same time, investors
began to anticipate that the Fed's next move would
be to lower interest rates to stimulate
economic growth. This proved beneficial for many
value stocks, especially cyclical companies and
financials, which typically constitute a large
component of the value index. All told, during
three of the last four months of the reporting
period, value stocks handily outperformed their
growth counterparts.
July August September October
Russell 1000 Value Index +1.2% +5.6% +0.9% +2.5%
Russell 1000 Growth Index -4.2% +9.1% -9.5% -4.8%
3
<PAGE>
Prudential Value Fund
Holdings expressed as a percentage of the Fund's net assets
Comments on Largest Holdings As of 10/31/00
---------------------------------------------------------------
3.6% PaineWebber Group, Inc./Financial Services
PaineWebber is a major U.S. brokerage firm, with an
emphasis in retail brokerage and over 300 offices
and 6,000 financial advisors. It is precisely for
this reason that Union Bank of Switzerland (UBS),
with an existing investment banking and capital
markets presence, is acquiring PaineWebber for a
combination of stock and cash worth $73 per share.
3.0% Nabisco Group Holding Corp./Foods
The company's major asset is an 80% share ownership
in Nabisco Group, a manufacturer and marketer of
cookies and crackers throughout the United States
and the world. Its holding in Nabisco Group is in
the process of being sold to Philip Morris, a deal
that is expected to close by year-end. Immediately
thereafter, Nabisco Group Holding is expected
to be purchased by R. J. Reynolds for $30 per share
in cash.
2.9% Lehman Brothers Holdings, Inc./Financial Services
A leading investment bank that has exhibited
exceptionally good cost control over the past five
years. The firm has built a large equity presence
in research, investment banking, and trading. More
importantly, it is also continuing to gain market
share in Europe, a rapidly developing market for
investment banking and mergers and acquisitions
comparable in potential size to the U.S. market.
Given these positive attributes, we believe the
firm's stock is trading at too large a discount (on
a P/E basis) versus industry leaders Morgan
Stanley, Merrill Lynch, and Goldman Sachs. Lastly,
Lehman Brothers would be a highly attractive merger
candidate for either a U.S. commercial bank or
other global players looking to gain a foothold in
the U.S. market.
2.8% Alcoa, Inc./Metals
Alcoa is the dominant global producer of bauxite,
aluminum alloy, and derivatives (i.e., fabricated
aluminum products). It is pursuing a strategy of
introducing higher-value end products, including
those in packages, to earn higher and more stable
returns on investment. As it stands, Alcoa has
significant cost advantages over its competition,
and the global supply/demand balance of aluminum is
tightening, given the absorption of all the excess
former Soviet Union capacity over the past decade.
2.5% Allstate Corp./Insurance
The parent company of Allstate Insurance Company,
which is engaged in the property-liability
insurance, life insurance, and annuity businesses.
The firm has good control over claims cost and is
aggressively buying back its stock. In addition,
we're seeing pricing improve in home and auto
insurance. Allstate has provided new incentives to
its agent force to boost sales and improve margins,
and results are coming in positively. It is also
strategically attractive to any financial
institution that wants access to Allstate's
millions of customers.
Holdings are subject to change.
4
<PAGE>
www.prudential.com (800) 225-1852
ASTUTE SECTOR POSITIONING
Throughout the reporting period, the Fund held
approximately one-quarter of its portfolio in the
financial sector. This position helped to enhance
performance, especially during the last four months
of the period. Stocks of many financial companies
performed well when perception changed that the
Fed's next move would be to lower interest rates.
Falling rates have the potential to enhance the
profitability of financial companies, as they would
lower the companies' costs of making loans. In
addition, the Fund's significant holdings in the
investment banking and brokerage industries, such
as Lehman Brothers (see Comments on Largest
Holdings), PaineWebber (see Comments on Largest
Holdings), Bear Stearns, and AG Edwards, rose
sharply, primarily due to rapid consolidation in
the industry.
The Fund also benefited from a shift by investors
to more defensive companies in the face of market
turbulence. Defensive companies can be
characterized as those firms that are not as
affected by movements in the economy. Some examples
include healthcare, packaged goods, and tobacco
companies. In the healthcare sector, the Fund's
HMO, pharmaceutical, and hospital stocks generated
solid returns. Fund holdings in this area included
Tenet Healthcare, HCA-The Healthcare Company, CVS
Corp., and Merck & Company, Inc. The Fund's
exposure to packaged goods company Nabisco Group
Holding (see Comments on Largest Holdings) was very
beneficial, as it appreciated substantially with
the announcement that it was to be acquired by R.
J. Reynolds Tobacco Holdings, Inc. The Fund also
held Philip Morris Companies, whose stock rose when
several high-profile lawsuits were settled. In
addition, its acquisition of Nabisco Group was
viewed positively, as it would lower Philip Morris'
exposure to tobacco.
REITS ON THE RISE
Another shining star amid the market turbulence was
the performance of real estate investment trusts
(REITs). Investors embraced these stocks, as they
offered relative safety, solid growth prospects,
strong cash flows, and dividends. In addition, the
operating results for many REITs were above
5
<PAGE>
Prudential Value Fund
Annual Report October 31, 2000
expectations, due to higher rental rate growth as a
result of extremely positive supply and demand
trends. The Fund maintained a strong presence in
this sector, with holdings that included Equity
Residential Properties Trust; Crescent Real Estate
Equities, Inc.; and Vornado Realty Trust.
ENERGY SECTOR REBOUNDS
Supply and demand trends in the energy sector also
enhanced the Fund's performance. Strong global
economic growth has resulted in increasing demand
for oil, while the OPEC nations have closely
rationed its supply. Consequently, the price of oil
rose from $11 a barrel in February 1999 to over $30
during the period under review. This subsequently
caused the stocks of many oil and gas companies to
appreciate. While the market has since priced
falling oil prices into many oil stocks, we believe
significant upside potential remains. With little
excess capacity in many parts of the world, an
increase in new exploration is likely to occur. We
hold several oil service companies that could
profit from such a scenario, including drilling
companies Ensco International, Inc. and Diamond
Offshore, and marine construction supplier
McDermott International.
SELECTED TROUBLE SPOTS
By and large, the Fund has been rewarded for its
sector and stock selection. However, there were
several issues that did not meet our expectations.
For example, Verizon Communications fell due to
delays in realizing cost synergies with its
acquisition of GTE. Computer Associates also
disappointed, as its price fell when it missed
its second-quarter earnings estimate and
projected a shortfall in the third quarter. In both
cases, we eliminated our position and later
repurchased the stocks at lower levels, as we
believe the underlying long-term fundamentals of
these companies are sound, and the temporary issues
have been resolved.
We also saw several of our basic industry holdings
in the chemical, aluminum, and paper areas decline
when economic growth began to moderate. We believe
our stocks in these industries have priced in a
recession, and that they could be poised for a
rebound when economic growth picks up steam.
6
<PAGE>
www.prudential.com (800) 225-1852
A POSITIVE OUTLOOK
Looking ahead, we believe the economy is likely to
experience a "soft landing," wherein growth slows,
but not to an extent that could cause a recession.
Based on our outlook, we feel that value stocks
could continue to offer solid returns for
investors. At this point, it's also our opinion
that the significant correction in the technology
and telecommunications sectors has presented
selective buying opportunities. We currently
anticipate purchasing sound companies in these
industries at attractive price-to-earnings
multiples that haven't been seen in several years.
As always, we will continue our strategy of
purchasing troubled stocks, not troubled companies.
That is, we look for stocks that are priced at a
discount due to a misconception in the marketplace.
To do this, we focus on firms that possess free
cash flow, a sound balance sheet, and a management
team that is proactively working to close the gap
between its stock price and the company's true
value in the marketplace. This is determined by
comparable takeover values, historical
relationships, or an analysis of a company's "sum
of its parts."
Prudential Value Fund Management Team
<PAGE>
Prudential Value Fund
Portfolio of Investments as of October 31, 2000
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 94.0%
Common Stocks
-------------------------------------------------------------------------------------
Aerospace/Defense 0.7%
150,400 Boeing Co. $ 10,199,000
-------------------------------------------------------------------------------------
Agricultural Products 1.0%
594,400 Monsanto Co.(a)(b) 15,157,200
-------------------------------------------------------------------------------------
Airlines 1.4%
639,300 AMR Corp.(a) 20,937,075
-------------------------------------------------------------------------------------
Automobiles & Trucks 4.0%
90,700 Borg-Warner Automotive, Inc. 3,423,925
191,800 Dana Corp. 4,255,563
441,602 Ford Motor Co. 11,536,852
182,746 General Motors Corp. 11,353,095
395,900 Navistar International Corp.(a) 13,089,444
548,700 Snap-On, Inc. 14,026,144
----------------
57,685,023
-------------------------------------------------------------------------------------
Banks 5.1%
413,200 Bank of America Corp. 19,859,425
330,700 Bank One Corp. 12,070,550
473,850 Chase Manhattan Corp. 21,560,175
334,600 Comerica, Inc. 20,180,563
----------------
73,670,713
-------------------------------------------------------------------------------------
Building & Construction 5.7%
471,900 Centex Corp.(b) 17,460,300
717,800 Hanson PLC., S.A., ADR (United Kingdom) 18,842,250
707,400 Kaufman & Broad Home Corp.(b) 21,045,150
343,900 Masco Corp. 6,426,631
582,600 Ryland Group, Inc. 18,788,850
----------------
82,563,181
-------------------------------------------------------------------------------------
Chemicals 3.5%
866,900 Dow Chemical Co.(b) 26,548,812
844,500 Lyondell Chemical Co. 12,139,688
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Value Fund
Portfolio of Investments as of October 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
717,328 Millennium Chemicals, Inc. $ 11,566,914
----------------
50,255,414
-------------------------------------------------------------------------------------
Communications Equipment 1.1%
241,341 General Motors Corp. (Class 'H' Stock) 7,819,448
355,200 Motorola, Inc. 8,857,800
----------------
16,677,248
-------------------------------------------------------------------------------------
Computers 2.7%
525,500 Compaq Computer Corp. 15,980,455
239,100 International Business Machines Corp. 23,551,350
----------------
39,531,805
-------------------------------------------------------------------------------------
Computer Software & Services 2.8%
715,000 Computer Associates International, Inc. 22,790,625
540,410 Sabre Holdings Corp.(a) 18,069,959
----------------
40,860,584
-------------------------------------------------------------------------------------
Diversfied Consumer Products 2.9%
587,000 Eastman Kodak Co. 26,341,625
705,400 R.R. Donnelley & Sons, Co. 15,166,100
----------------
41,507,725
-------------------------------------------------------------------------------------
Financial Services 14.9%
600,300 Associates First Capital Corp. 22,286,137
358,627 Bear, Stearns & Co. Inc. 21,741,762
401,200 Countrywide Mortgage Investments, Inc. 15,019,925
465,600 Edwards (A.G.), Inc. 23,629,200
659,000 Lehman Brothers Holdings, Inc. 42,505,500
725,000 PaineWebber Group, Inc. 51,656,250
280,200 PNC Financial Services Group 18,738,375
500,000 Washington Mutual, Inc. 22,000,000
----------------
217,577,149
-------------------------------------------------------------------------------------
Foods 3.0%
1,525,320 Nabisco Group Holding Corp. 44,043,615
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Value Fund
Portfolio of Investments as of October 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Health Care Services 4.4%
246,400 Aetna, Inc. $ 14,245,000
302,300 HCA Healthcare Co. 12,073,106
2,074,700 Humana, Inc.(a) 25,155,738
320,100 Tenet Healthcare Corp.(a) 12,583,931
----------------
64,057,775
-------------------------------------------------------------------------------------
Insurance 4.3%
893,900 Allstate Corp. 35,979,475
358,800 Aon Corp. 14,867,775
149,800 Lincoln National Corp. 7,246,575
313,800 Selective Insurance Group, Inc. 5,413,050
----------------
63,506,875
-------------------------------------------------------------------------------------
Machinery & Equipment 0.4%
90,100 Cascade Corp. 1,430,338
135,000 Caterpillar, Inc. 4,733,437
----------------
6,163,775
-------------------------------------------------------------------------------------
Metals 4.4%
1,422,998 Alcoa Inc. 40,822,255
153,600 Phelps Dodge Corp. 7,180,800
540,200 Stillwater Mining Co.(a) 15,665,800
----------------
63,668,855
-------------------------------------------------------------------------------------
Office Equipment & Supplies 0.8%
1,447,600 Xerox Corp. 12,214,125
-------------------------------------------------------------------------------------
Oil & Gas Exploration/Production 1.4%
64,700 Amerada Hess Corp. 4,011,400
459,200 Conoco, Inc. 11,853,100
178,200 USX - Marathon Group 4,844,813
----------------
20,709,313
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Value Fund
Portfolio of Investments as of October 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Oil Services 3.7%
580,800 ENSCO International, Inc. $ 19,311,600
1,924,900 McDermott International, Inc. 18,647,469
443,100 Noble Affiliates, Inc. 16,256,231
----------------
54,215,300
-------------------------------------------------------------------------------------
Paper & Forest Products 3.6%
779,100 Georgia-Pacific Corp. 20,938,312
973,900 Longview Fibre Co. 13,269,388
822,600 Louisiana-Pacific Corp. 6,992,100
308,200 Rayonier, Inc. 10,844,788
----------------
52,044,588
-------------------------------------------------------------------------------------
Pharmaceuticals 0.6%
96,700 Merck & Co., Inc. 8,696,956
-------------------------------------------------------------------------------------
Real Estate Investment Trust 5.5%
325,900 Boston Properties, Inc. 13,198,950
893,900 Crescent Real Estate Equities Co. 17,989,738
568,600 Equity Residential Properties Trust 26,759,737
626,900 Vornado Realty Trust 21,823,956
----------------
79,772,381
-------------------------------------------------------------------------------------
Restaurants 0.8%
395,600 McDonald's Corp. 12,263,600
-------------------------------------------------------------------------------------
Retail 2.0%
124,000 CVS Corp. 6,564,250
244,300 Dillard's, Inc. 2,565,150
582,300 Federated Department Stores, Inc.(a) 18,961,144
----------------
28,090,544
-------------------------------------------------------------------------------------
Steel 0.9%
598,200 AK Steel Holding Corp.(b) 5,533,350
483,000 USX Corp.-U.S. Steel Group 7,697,813
----------------
13,231,163
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Value Fund
Portfolio of Investments as of October 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Telephones 6.3%
361,800 AT&T Corp. $ 8,389,237
244,200 CenturyTel, Inc. 9,401,700
247,700 SBC Communications, Inc. 14,289,194
741,300 Sprint Corp. 18,903,150
274,900 Verizon Communications 15,892,656
1,047,100 WorldCom, Inc. 24,868,625
----------------
91,744,562
-------------------------------------------------------------------------------------
Tobacco 3.2%
724,100 Philip Morris Companies, Inc. 26,520,162
541,540 R.J. Reynolds Tobacco Holdings Inc. 19,360,055
----------------
45,880,217
-------------------------------------------------------------------------------------
Utilities 2.4%
321,100 Exelon Corp. 19,306,137
643,800 NiSource Inc.(b) 16,054,763
----------------
35,360,900
-------------------------------------------------------------------------------------
Waste Management 0.5%
337,400 Waste Management, Inc. 6,748,000
----------------
Total common stocks
(cost $1,151,423,074) 1,369,034,661
----------------
Total long-term investments (cost $1,151,423,074) 1,369,034,661
----------------
SHORT-TERM INVESTMENTS 4.9%
<CAPTION>
Principal
Amount
(000)
<C> <S> <C> <C>
-------------------------------------------------------------------------------------
Commercial Paper 4.0%
Phillips Petroleum Co.
$ 12,000 6.72%, 11/15/00(c) 11,968,640
Salomon Smith Barney Inc.
6,000 6.51%, 11/8/00(c) 5,992,405
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Value Fund
Portfolio of Investments as of October 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C> <C>
------------------------------------------------------------------------------------------
Sears Roebuck & Co.
$ 1,700 6.70%, 11/6/00(c) $ 1,678,437
2,600 6.75%, 11/16/00(c) 2,592,687
3,500 6.85%, 11/1/00(c) 3,480,000
Sprint Capital Corp.
2,500 6.69%, 11/10/00(c) 2,450,894
Tennessee Gas
14,320 6.72%, 12/6/00(c) 14,226,443
TRW Inc.
2,000 6.71%, 11/17/00(c) 1,994,035
Viacom Inc.
13,500 6.85%, 11/1/00(c) 13,500,000
----------------
Total commercial paper (cost $57,883,541) 57,883,541
----------------
-------------------------------------------------------------------------------------
Repurchase Agreement 0.9%
12,950 Joint Repurchase Agreement Account,
6.55%, 11/1/00
(cost $12,950,000; Note 5) 12,950,000
----------------
Total short-term investments (cost $70,833,541) 70,833,541
----------------
Total Investments 98.9%
(cost $1,222,256,615; Note 4) 1,439,868,202
Other assets in excess of liabilities 1.1% 16,155,733
----------------
Net Assets 100% $ 1,456,023,935
----------------
----------------
</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.
PLC--Public Limited Company.
See Notes to Financial Statements 13
<PAGE>
Prudential Value Fund
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
October 31, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $1,222,256,615) $1,439,868,202
Cash 139,667
Receivable for investments sold 91,742,825
Dividends and interest receivable 1,771,923
Receivable for Fund shares sold 508,025
Receivable for securities lending 462,224
Prepaid expenses 25,413
----------------
Total assets 1,534,518,279
----------------
LIABILITIES
Payable to broker for collateral for securities on loan 57,449,650
Payable for investments purchased 15,037,014
Payable for Fund shares reacquired 3,318,018
Securities lending rebate payable 794,391
Distribution fee payable 666,735
Management fee payable 622,518
Accrued expenses 606,018
----------------
Total liabilities 78,494,344
----------------
NET ASSETS $1,456,023,935
----------------
----------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 789,576
Paid-in capital in excess of par 1,145,241,569
----------------
1,146,031,145
Undistributed net investment income 3,948,546
Accumulated net realized gains 88,432,657
Net unrealized appreciation on investments 217,611,587
----------------
Net assets, October 31, 2000 $1,456,023,935
----------------
----------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Value Fund
Statement of Assets and Liabilities Cont'd.
<TABLE>
<CAPTION>
October 31, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share
($634,991,095 / 34,346,885 shares of beneficial interest
issued and outstanding) $18.49
Maximum sales charge (5% of offering price) .97
----------------
Maximum offering price to public $19.46
----------------
----------------
Class B:
Net asset value, offering price and redemption price per
share ($639,755,239 / 34,810,604 shares of beneficial
interest issued and outstanding) $18.38
----------------
----------------
Class C:
Net asset value and redemption price per share
($28,031,905 / 1,525,289 shares of beneficial interest
issued and outstanding) $18.38
Sales charge (1% of offering price) .19
----------------
Offering price to public $18.57
----------------
----------------
Class Z:
Net asset value, offering price and redemption price per
share ($153,245,696 / 8,274,807 shares of beneficial
interest issued and outstanding) $18.52
----------------
----------------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Value Fund
Statement of Operations
<TABLE>
<CAPTION>
Year
Ended
October 31, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $279,767) $ 43,252,730
Interest 2,127,236
Income from securities loaned, (net) 407,849
----------------
Total income 45,787,815
----------------
Expenses
Management fee 7,960,211
Distribution fee--Class A 1,427,621
Distribution fee--Class B 7,787,217
Distribution fee--Class C 277,821
Transfer agent's fees and expenses 4,895,000
Reports to shareholders 496,000
Custodian's fees and expenses 180,000
Registration fees 129,000
Legal fees and expenses 65,000
Insurance 30,000
Trustees' fees and expenses 26,000
Audit fee 25,000
Miscellaneous 28,154
----------------
Total operating expenses 23,327,024
Loan interest expense 24,905
----------------
Total expenses 23,351,929
----------------
Net investment income 22,435,886
----------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES
Net realized gain on:
Investment transactions 125,879,403
----------------
Net change in unrealized appreciation of:
Investments 77,604,439
Foreign currencies 875
----------------
77,605,314
----------------
Net gain on investments and foreign currencies 203,484,717
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $225,920,603
----------------
----------------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Prudential Value Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Year
Ended Ended
October 31, 2000 October 31, 1999
<S> <C> <C> <C>
-------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 22,435,886 $ 26,176,349
Net realized gain (loss) on investments and
foreign currency transactions 125,879,403 216,506,120
Net change in unrealized appreciation
(depreciation) of investments and
foreign currencies 77,605,314 (142,075,336)
---------------- ----------------
Net increase (decrease) in net assets
resulting from operations 225,920,603 100,607,133
---------------- ----------------
Dividends and distributions (Note 1)
Dividends from net investment income
Class A (8,414,130) (11,212,454)
Class B (7,631,516) (11,757,902)
Class C (265,034) (360,445)
Class Z (2,338,544) (2,845,548)
---------------- ----------------
(18,649,224) (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>
See Notes to Financial Statements 17
<PAGE>
Prudential Value Fund
Statement of Changes in Net Assets Cont'd.
<TABLE>
<CAPTION>
Year Year
Ended Ended
October 31, 2000 October 31, 1999
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund share transactions (net of share
conversions)
(Note 6)
Proceeds from shares sold $ 390,599,191 $ 495,723,387
Net asset value of shares issued in
reinvestment of dividends and
distributions 213,734,690 138,241,458
Cost of shares reacquired (941,250,989) (908,444,366)
---------------- ----------------
Net increase (decrease) in net assets from
Fund share transactions (336,917,108) (274,479,521)
---------------- ----------------
Total increase (decrease) (340,004,367) (323,386,368)
NET ASSETS
Beginning of year 1,796,028,302 2,119,414,670
---------------- ----------------
End of year(a) $1,456,023,935 $1,796,028,302
---------------- ----------------
---------------- ----------------
(a) Includes undistributed net investment
income of $ 3,948,546 $ --
---------------- ----------------
</TABLE>
18 See Notes to Financial Statements
<PAGE>
Prudential Value Fund
Notes to Financial Statements
Prudential Value Fund (the 'Fund'), formerly known as Prudential Equity
Income 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 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 more than one 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.
Repurchase Agreements: 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.
To the extent that any repurchase transaction exceeds one business day, the
value of the collateral is marked to market on a daily basis to ensure the
adequacy of the collateral. If the seller defaults and the value of the
collateral declines or if bankruptcy proceedings are commenced with respect to
the seller of the security, realization of the collateral by the Fund may be
delayed or limited.
19
<PAGE>
Prudential Value Fund
Notes to Financial Statements Cont'd.
All securities are valued as of 4:15 p.m., New York time.
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 year, 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 year 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 portfolio 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 gains or losses on foreign currency transactions represent
net foreign exchange gains or losses from forward currency contracts,
disposition 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, dividends 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
and liabilities at period end exchange rates are reflected as a component of
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 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.
20
<PAGE>
Prudential Value Fund
Notes to Financial Statements Cont'd.
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.
Dividends and Distributions: The Fund expects to pay dividends of net
investment income and distributions of net realized capital gains, if any,
annually. Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in
accordance with federal 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 Fund 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.
Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with the 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 increase undistributed net investment income by $161,884,
decrease accumulated net realized gains on investments by $35,576,564 and
increase paid-in capital by $35,414,680 for redemptions utilized as
distributions for federal income tax purposes and reclassification of dividend
income. Net investment income, net realized gains and net assets were not
affected by these changes.
21
<PAGE>
Prudential Value Fund
Notes to Financial Statements Cont'd.
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 furnished investment advisory services in
connection with the management of the Fund from November 1, 1999 through
September 6, 2000. Effective September 7, 2000, the Board of Trustees terminated
the subadvisory agreement with PIC, and PIFM entered into a subadvisory
agreement with Jennison Associates LLC ('Jennison'), pursuant to which Jennison
is paid under the same terms as PIC was paid by PIFM. PIFM paid for the services
of PIC and Jennison, 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.
Prior to January 1, 2000, PIC was reimbursed by PIFM for reasonable costs
and expenses incurred in furnishing investment advisory services. From January
1, through September 6, 2000, the subadvisory fee paid to PIC, and from
September 7 through October 31, 2000, the subadvisory fee paid to Jennison, by
PIFM, was computed daily and payable monthly at an annual rate of .30 of 1% of
the Fund's average daily net assets up to $500 million, .238 of 1% of the next
$500 million, .214 of 1% of the next $500 million and .191 of 1% of the average
daily net assets in excess of $1.5 billion. The change in subadvisory fee
structure has no impact on the management fee charged to the Fund or its
shareholders.
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 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 year ended October 31, 2000,
respectively.
22
<PAGE>
Prudential Value Fund
Notes to Financial Statements Cont'd.
PIMS has advised the Fund that it has received approximately $171,300 and
$15,500 in front-end sales charges resulting from sales of Class A shares and
Class C shares, respectively, during the year ended October 31, 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 year ended October 31, 2000, it
received approximately $1,831,300 and $9,100 in contingent deferred sales
charges imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PIFM, PIC, PIMS and Jennison 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 year ended October 31, 2000, the
Fund incurred fees of approximately $3,965,000 for the services of PMFS. As of
October 31, 2000, approximately $297,000 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 nonaffiliates.
Prudential Securities Incorporated ('PSI'), which is an indirect wholly
owned subsidiary of Prudential, is the securities lending agent for the Fund.
For the year ended October 31, 2000, PSI has been compensated approximately
$117,600 for these services, of which $15,248 is payable to PSI as of October
31, 2000.
For the year ended October 31, 2000, PSI earned approximately $121,000 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 year ended October 31, 2000 were $958,893,626 and $1,576,805,762,
respectively.
The cost basis of investments for federal income tax purposes at October
31, 2000 was $1,224,529,246 and, accordingly, net unrealized appreciation for
federal income tax purposes was $215,338,956 (gross unrealized
appreciation--$314,589,318; gross unrealized depreciation--$99,250,362).
As of October 31, 2000, the Fund had securities on loan with an aggregate
market value of $56,964,153. The Fund received $57,449,650 in cash as collateral
for securities on loan which was used to purchase highly liquid short-term
investments in accordance with the Fund's securities lending procedures.
23
<PAGE>
Prudential Value Fund
Notes to Financial Statements Cont'd.
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 October 31, 2000, the Fund
had a 2% undivided interest in repurchase agreements in the joint account. The
undivided interest for the Fund represented $12,950,000 in principal amount. As
of such date, each repurchase agreement in the joint account and the value of
the collateral therefore were as follows:
ABN AMRO Incorporated, 6.56%, in the principal amount of $150,000,000,
repurchase price $150,027,333, due 11/1/00. The value of the collateral
including accrued interest was $153,000,176.
Bear, Stearns & Co. Inc., 6.56%, in the principal amount of $175,000,000,
repurchase price $175,031,889, due 11/1/00. The value of the collateral
including accrued interest was $184,628,570.
Chase Securities Inc., 6.56%, in the principal amount of $115,000,000,
repurchase price $115,020,956, due 11/1/00. The value of the collateral
including accrued interest was $117,304,831.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 6.375%, in the principal
amount of $43,782,000, repurchase price $43,789,753, due 11/1/00. The value of
the collateral including accrued interest was $44,659,885.
UBS Warburg, 6.56%, in the principal amount of $175,000,000, repurchase
price $175,031,889, due 11/1/00. The value of the collateral including accrued
interest was $178,501,724.
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 subject to
any sales or redemption charge and are offered exclusively for sale to a limited
group of investors.
24
<PAGE>
Prudential Value Fund
Notes to Financial Statements Cont'd.
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>
Year ended October 31, 2000:
Shares sold 16,239,578 $ 271,651,321
Shares issued in reinvestment of dividends and
distributions 4,655,162 74,741,526
Shares reacquired (29,324,857) (487,357,080)
----------- -------------
Net increase (decrease) in shares outstanding before
conversion (8,430,117) (140,964,233)
Shares issued upon conversion from Class B 8,585,962 146,809,863
----------- -------------
Net increase (decrease) in shares outstanding 155,845 $ 5,845,630
----------- -------------
----------- -------------
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 increase (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 increase (decrease) in shares outstanding (79,037) $ (878,475)
----------- -------------
----------- -------------
<CAPTION>
Class B
----------------------------------------------------------
<S> <C> <C>
Year ended October 31, 2000:
Shares sold 3,064,228 $ 50,419,268
Shares issued in reinvestment of dividends and
distributions 7,244,525 115,969,688
Shares reacquired (22,608,200) (368,841,352)
----------- -------------
Net increase (decrease) in shares outstanding before
conversion (12,299,447) (202,452,396)
Shares reacquired upon conversion into Class A (8,623,583) (146,809,863)
----------- -------------
Net increase (decrease) in shares outstanding (20,923,030) $(349,262,259)
----------- -------------
----------- -------------
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 increase (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 increase (decrease) in shares outstanding (14,265,451) $(268,358,527)
----------- -------------
----------- -------------
</TABLE>
25
<PAGE>
Prudential Value Fund
Notes to Financial Statements Cont'd.
<TABLE>
<CAPTION>
Class C Shares Amount
---------------------------------------------------------- ----------- -------------
Year ended October 31, 2000:
<S> <C> <C>
Shares sold 585,057 $ 9,888,624
Shares issued in reinvestment of dividends and
distributions 253,477 4,057,806
Shares reacquired (1,178,817) (19,309,480)
----------- -------------
Net increase (decrease) in shares outstanding (340,283) $ (5,363,050)
----------- -------------
----------- -------------
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 increase (decrease) in shares outstanding (179,957) $ (3,238,168)
----------- -------------
----------- -------------
<CAPTION>
Class Z
----------------------------------------------------------
<S> <C> <C>
Year ended October 31, 2000:
Shares sold 3,548,279 $ 58,639,978
Shares issued in reinvestment of dividends and
distributions 1,180,252 18,965,670
Shares reacquired (3,982,546) (65,743,077)
----------- -------------
Net increase (decrease) in shares outstanding 745,985 $ 11,862,571
----------- -------------
----------- -------------
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 increase (decrease) in shares outstanding (136,989) $ (2,004,351)
----------- -------------
----------- -------------
</TABLE>
Note 7. 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 year ended October 31,
2000. The average daily balance the Fund had outstanding during the year was
approximately $6,041,211 at a weighted average interest rate of approximately
6.31%.
26
<PAGE>
Prudential Value Fund
Notes to Financial Statements Cont'd.
Note 8. Change in Subadvisor
On November 28, 2000, the Board of Trustees approved a change in the subadvisor
of the Fund from Jennison to Deutsche Asset Management Inc. and Key Asset
Management Inc. Each will replace Jennison as to a portion of the Fund's assets
effective in early February 2001.
27
<PAGE>
Prudential Value Fund
Financial Highlights
<TABLE>
<CAPTION>
Class A
----------------
Year Ended
October 31, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 18.12
----------------
Income from investment operations
Net investment income .31
Net realized and unrealized gain (loss) on investment
transactions 2.49
----------------
Total from investment operations 2.80
----------------
Less distributions
Dividends from net investment income (.25)
Dividends in excess of net investment income --
Distributions from net realized gains (2.18)
----------------
Total distributions (2.43)
----------------
Net asset value, end of year $ 18.49
----------------
----------------
TOTAL RETURN(a): 17.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $634,991
Average net assets (000) $571,048
Ratios to average net assets:
Expenses, including distribution and service (12b-1)
fees(b) 1.16%
Expenses, excluding distribution and service (12b-1) fees .91%
Net investment income 1.83%
For Class A, B, C and Z shares:
Portfolio turnover rate 64%
</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) The distributor of the Fund has agreed to limit its distribution and service
(12b-1) fees to .25 of 1% of the average daily net assets of the Class A
shares.
28 See Notes to Financial Statements
<PAGE>
Prudential Value Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------------------------
Year Ended October 31,
-------------------------------------------------------------------------------------
1999 1998 1997 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 18.63 $ 21.00 $ 15.43 $ 14.40
---------------- ---------------- ---------------- ----------------
.33 .45 .45 .47
.58 (.49) 6.29 1.75
---------------- ---------------- ---------------- ----------------
.91 (.04) 6.74 2.22
---------------- ---------------- ---------------- ----------------
(.33) (.44) (.43) (.49)
(.03) -- -- --
(1.06) (1.89) (.74) (.70)
---------------- ---------------- ---------------- ----------------
(1.42) (2.33) (1.17) (1.19)
---------------- ---------------- ---------------- ----------------
$ 18.12 $ 18.63 $ 21.00 $ 15.43
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
5.03% (.65)% 45.68% 15.97%
$619,469 $638,547 $570,146 $341,717
$653,798 $655,776 $454,892 $310,335
1.02% .91% .94% .98%
.77% .66% .69% .73%
1.71% 2.19% 2.32% 3.26%
17% 22% 36% 36%
</TABLE>
See Notes to Financial Statements 29
<PAGE>
Prudential Value Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class B
----------------
Year Ended
October 31, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 18.06
----------------
Income from investment operations
Net investment income .20
Net realized and unrealized gain (loss) on investment
transactions 2.46
----------------
Total from investment operations 2.66
----------------
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 year $ 18.38
----------------
----------------
TOTAL RETURN(a): 16.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $639,755
Average net assets (000) $778,722
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees 1.91%
Expenses, excluding distribution and service (12b-1) fees .91%
Net investment income 1.13%
</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.
30 See Notes to Financial Statements
<PAGE>
Prudential Value Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------------------------------------
Year Ended October 31,
-------------------------------------------------------------------------------------
1999 1998 1997 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 18.57 $ 20.93 $ 15.39 $ 14.36
---------------- ---------------- ---------------- ----------------
.19 .29 .29 .39
.58 (.48) 6.29 1.71
---------------- ---------------- ---------------- ----------------
.77 (.19) 6.58 2.10
---------------- ---------------- ---------------- ----------------
(.19) (.28) (.30) (.37)
(.03) -- -- --
(1.06) (1.89) (.74) (.70)
---------------- ---------------- ---------------- ----------------
(1.28) (2.17) (1.04) (1.07)
---------------- ---------------- ---------------- ----------------
$ 18.06 $ 18.57 $ 20.93 $ 15.39
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
4.25% (1.35)% 44.60% 15.12%
$1,006,346 $1,299,962 $1,250,216 $929,948
$1,200,663 $1,391,826 $1,072,118 $951,220
1.77% 1.66% 1.69% 1.73%
.77% .66% .69% .73%
.98% 1.44% 1.60% 2.51%
</TABLE>
See Notes to Financial Statements 31
<PAGE>
Prudential Value Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class C
----------------
Year Ended
October 31, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 18.06
--------
Income from investment operations
Net investment income .19
Net realized and unrealized gain (loss) on investment
transactions 2.47
--------
Total from investment operations 2.66
--------
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 year $ 18.38
--------
--------
TOTAL RETURN(a): 16.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 28,032
Average net assets (000) $ 27,782
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees 1.91%
Expenses, excluding distribution and service (12b-1) fees .91%
Net investment income 1.10%
</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.
32 See Notes to Financial Statements
<PAGE>
Prudential Value Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------------------------------------
Year Ended October 31,
-------------------------------------------------------------------------------------
1999 1998 1997 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 18.57 $ 20.93 $ 15.39 $14.36
-------- -------- -------- -------
.19 .30 .37 .38
.58 (.49) 6.21 1.72
-------- -------- -------- -------
.77 (.19) 6.58 2.10
-------- -------- -------- -------
(.19) (.28) (.30) (.37)
(.03) -- -- --
(1.06) (1.89) (.74) (.70)
-------- -------- -------- -------
(1.28) (2.17) (1.04) (1.07)
-------- -------- -------- -------
$ 18.06 $ 18.57 $ 20.93 $15.39
-------- -------- -------- -------
-------- -------- -------- -------
4.25% (1.35)% 44.60% 15.12%
$ 33,685 $ 37,988 $ 17,911 $8,511
$ 36,981 $ 31,345 $ 11,432 $6,730
1.77% 1.66% 1.69% 1.73%
.77% .66% .69% .73%
.98% 1.47% 1.53% 2.51%
</TABLE>
See Notes to Financial Statements 33
<PAGE>
Prudential Value Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class Z
----------------
Year Ended
October 31, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 18.13
----------------
Income from investment operations
Net investment income .35
Net realized and unrealized gain (loss) on investment
transactions 2.50
----------------
Total from investment operations 2.85
----------------
Less distributions
Dividends from net investment income (.28)
Dividends in excess of net investment income --
Distributions from net realized gains (2.18)
----------------
Total distributions (2.46)
----------------
Net asset value, end of year $ 18.52
----------------
----------------
TOTAL RETURN(a): 17.94%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $153,246
Average net assets (000) $141,384
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees .91%
Expenses, excluding distribution and service (12b-1) fees .91%
Net investment income 2.07%
</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 Value Fund
Financial Highlights 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)
</TABLE>
See Notes to Financial Statements 35
<PAGE>
Prudential Value Fund
Report of Independent Accountants
To the Shareholders and Board of Trustees of
Prudential Value Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential Value Fund (the 'Fund'),
formerly, Prudential Equity Income Fund, at October 31, 2000, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the four years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as 'financial
statements') are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at October 31, 2000 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion. The accompanying financial
highlights for the period ended October 31, 1996 were audited by other
independent accountants, whose opinion dated December 5, 1996 was unqualified.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
December 15, 2000
36
<PAGE>
Prudential Value Fund
Federal Income Tax Information (Unaudited)
We are required by the Internal Revenue Code to advise you within 60 days
of the Fund's fiscal year end (October 31, 2000) as to the federal tax status of
dividends paid by the Fund during its fiscal year ended October 31, 2000.
During the fiscal year ended October 31, 2000, the Fund paid dividends of
$2.43 per Class A share, $2.34 per Class B share, $2.34 per Class C share and
$2.46 per Class Z share. Of these amounts, $2.15 per Class A, B, C and Z shares
represent distributions from long-term capital gains which is taxable at 20%
rate gain. The remaining $.28 per Class A share, $.19 per Class B share, $.19
per Class C share and $.31 per Class Z share represents dividends from ordinary
income (net investment income and short-term capital gains). The Fund utilized
redemptions as distributions in the amount of $.48 per Class A, Class B, Class C
and Class Z shares of long-term capital gains. Further, we wish to advise you
that 100% of the ordinary income dividends paid in the fiscal year ended October
31, 2000 qualified for the corporate dividends received deduction available to
corporate taxpayers.
For the purpose of preparing your annual federal income tax return,
however, you should report the amounts as reflected on the appropriate Form
1099-DIV or substitute Form 1099.
37
<PAGE>
Prudential Value Fund
Prudential Mutual Funds
Prudential offers a broad range of mutual funds
designed to meet your individual needs. For
information about these funds, contact your
financial professional or call us at (800)
225-1852. Read the prospectus carefully
before you invest or send money.
STOCK FUNDS
Large Capitalization Stock Funds
Prudential 20/20 Focus Fund
Prudential Equity Fund, Inc.
Prudential Stock Index Fund
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund
Strategic Partners Focused Growth Fund
Target Funds
Large Capitalization Growth Fund
Large Capitalization Value Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Prudential Value Fund
Small- to Mid-Capitalization Stock Funds
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Prudential Small Company Fund, Inc.
Prudential Tax-Managed Small-Cap Fund, Inc.
Prudential U.S. Emerging Growth Fund, Inc.
Target Funds
Small Capitalization Growth Fund
Small Capitalization Value Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Equity Opportunity Fund
Sector Stock Funds
Prudential Natural Resources Fund, Inc.
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Global/International Stock Funds
Global Utility Fund, Inc.
Prudential Europe Growth Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Prudential Global Growth Fund
Prudential International Value Fund
Prudential Jennison International Growth Fund
Target Funds
International Equity Fund
BALANCED/ALLOCATION FUNDS
Prudential Diversified Funds
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund
<PAGE>
www.prudential.com (800) 225-1852
BOND FUNDS
Taxable Bond Funds
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential High Yield Total Return Fund, Inc.
Prudential Short-Term Corporate Bond Fund, Inc.
Income Portfolio
Prudential Total Return Bond Fund, Inc.
Target Funds
Total Return Bond Fund
Tax-Free Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Income Series
Insured Series
Prudential Municipal Series Fund
Florida Series
New Jersey Series
New York Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
Global/International Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
MONEY MARKET FUNDS
Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Prudential MoneyMart Assets, Inc.
Prudential Special Money Market Fund, Inc.
Money Market Series
Tax-Free Money Market Funds
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
Prudential Tax-Free Money Fund, Inc.
Other Money Market Funds
COMMAND Government Fund
COMMAND Money Fund
COMMAND Tax-Free Fund
<PAGE>
Prudential Value Fund
Getting the Most from Your Prudential Mutual Fund
How many times have you read these reports--or other
financial materials--and stumbled across a word that
you don't understand?
Many shareholders have run into the same problem.
We'd like to help. So we'll use this space from
time to time to explain some of the words you might
have read, but not understood. And if you have a
favorite word that no one can explain to your
satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half
of one percent is 50 basis points.
Collateralized Mortgage Obligations (CMOs):
Mortgage-backed bonds that separate mortgage pools
into different maturity classes called tranches.
These instruments are sensitive to changes in
interest rates and homeowner refinancing activity.
They are subject to prepayment and maturity
extension risk.
Derivatives: Securities that derive their value
from other securities. The rate of return of these
financial instruments rises and falls--sometimes
very suddenly--in response to changes in some
specific interest rate, currency, stock, or other
variable.
Discount Rate: The interest rate charged by the
Federal Reserve on loans to member banks.
Federal Funds Rate: The interest rate charged by
one bank to another on overnight loans.
Futures Contract: An agreement to purchase or sell
a specific amount of a commodity or financial
instrument at a set price at a specified date in
the future.
<PAGE>
www.prudential.com (800) 225-1852
Leverage: The use of borrowed assets to enhance
return. The expectation is that the interest rate
charged on borrowed funds will be lower than the
return on the investment. While leverage can
increase profits, it can also magnify losses.
Liquidity: The ease with which a financial
instrument (or product) can be bought or sold
(converted into cash) in the financial markets.
Price/Earnings Ratio: The price of a share of stock
divided by the earnings per share for a 12-month
period.
Option: An agreement to purchase or sell something,
such as shares of stock, by a certain time for a
specified price. An option need not be exercised.
Spread: The difference between two values; often
used to describe the difference between "bid" and
"asked" prices of a security, or between the
yields of two similar maturity bonds.
Yankee Bond: A bond sold by a foreign company or
government on the U.S. market and denominated in
U.S. dollars.
<PAGE>
Prudential Value Fund
Class A Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 10/31/00
Since Inception
One Year Five Years Ten Years (1/22/90)
With Sales Charge 11.72% 14.52% 15.19% 13.22%
Without Sales Charge 17.60% 15.70% 15.78% 13.76%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return for the
ten-year period. The graph compares a $10,000
investment in the Prudential Value Fund (Class A
shares) with a similar investment in the Standard
& Poor's 500 Composite Stock Price Index (S&P 500
Index) by portraying the initial account value
at October 31, 1990, and the account value at
the end of the current fiscal year (October 31,
2000), as measured on a quarterly basis. For
purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the
maximum applicable front-end sales charge was
deducted from the initial $10,000 investment in
Class A shares; (b) all recurring fees (including
management fees) were deducted; and (c) all
dividends and distributions were reinvested.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The S&P
500 Index's total returns include the reinvestment
of all dividends, but do not include the effect of
sales charges or operating expenses of a mutual fund.
The securities that comprise the Index may differ
substantially from the securities in the Fund. The
Index is not the only one that may be used to
characterize performance of large-capitalization
stock funds. Other indexes may portray different
comparative performance. Investors cannot invest
directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class B Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 10/31/00
Since Inception
One Year Five Years Ten Years (1/22/87)
With Sales Charge 11.71% 14.73% 14.90% 11.61%
Without Sales Charge 16.71% 14.84% 14.90% 11.61%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return for the
ten-year period. The graph compares a $10,000
investment in the Prudential Value Fund (Class
B shares) with a similar investment in the S&P
500 Index by portraying the initial account value
at October 31, 1990, and the account value at
the end of the current fiscal year (October 31,
2000), as measured on a quarterly basis. For
purposes of the graph, and unless otherwise
indicated, it has been assumed that (a)
the maximum applicable contingent deferred sales
charge was deducted from the value of the
investment in Class B shares, assuming full
redemption on October 31, 2000; (b) all recurring
fees (including management fees) were deducted; and
(c) all dividends and distributions were
reinvested. Class B shares will automatically
convert to Class A shares, on a quarterly basis,
beginning approximately seven years after purchase.
This conversion feature is not reflected in the
graph.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The S&P
500 Index's total returns include the reinvestment
of all dividends, but do not include the effect of
sales charges or operating expenses of a mutual fund.
The securities that comprise the Index may differ
substantially from the securities in the Fund. The
Index is not the only one that may be used to
characterize performance of large-capitalization
stock funds. Other indexes may portray different
comparative performance. Investors cannot invest
directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
Prudential Value Fund
Class C Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 10/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge 14.54% 14.61% N/A 13.37%
Without Sales Charge 16.71% 14.84% N/A 13.55%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since
inception of the share class. The graph compares a
$10,000 investment in the Prudential Value Fund
(Class C shares) with a similar investment in the
S&P 500 Index by portraying the initial account
value at the commencement of operations of Class C
shares, and the account value at the end of the
current fiscal year (October 31, 2000), as measured
on a quarterly basis. For purposes of the graph,
and unless otherwise indicated, it has been assumed
that (a) the maximum applicable front-end sales
charge was deducted from the initial $10,000
investment in Class C shares; (b) the maximum
applicable contingent deferred sales charge was
deducted from the value of the investment in Class
C shares, assuming full redemption on October 31,
2000; (c) all recurring fees (including management
fees) were deducted; and (d) all dividends and
distributions were reinvested.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The S&P
500 Index's total returns include the reinvestment
of all dividends, but do not include the effect of
sales charges or operating expenses of a mutual fund.
The securities that comprise the Index may differ
substantially from the securities in the Fund. The
Index is not the only one that may be used to
characterize performance of large-capitalization
stock funds. Other indexes may portray different
comparative performance. Investors cannot invest
directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class Z Growth of a $10,000 Investment
(GRAPH)
Average Annual Total Returns as of 10/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge 17.94% N/A N/A 14.60%
Without Sales Charge 17.94% N/A N/A 14.60%
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. The best- and worst-year information
within the graph is designed to give you an idea of
how much the Fund's returns can fluctuate from year
to year by measuring the best and worst calendar
years in terms of total annual return since
inception of the share class. The graph compares a
$10,000 investment in the Prudential Value Fund
(Class Z shares) with a similar investment in the
S&P 500 Index by portraying the initial account
value at the commencement of operations of Class Z
shares, and the account value at the end of the
current fiscal year (October 31, 2000), as measured
on a quarterly basis. For purposes of the graph, and
unless otherwise indicated, it has been assumed
that (a) all recurring fees (including management
fees) were deducted, and (b) all dividends and
distributions were reinvested. Class Z shares are
not subject to a sales charge or distribution and
service (12b-1) fees.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The S&P
500 Index's total returns include the reinvestment
of all dividends, but do not include the effect of
sales charges or operating expenses of a mutual fund.
The securities that comprise the Index may differ
substantially from the securities in the Fund. The
Index is not the only one that may be used to
characterize performance of large-capitalization
stock funds. Other indexes may portray different
comparative performance. Investors cannot invest
directly in an index.
This graph is furnished to you in accordance with
SEC regulations.
<PAGE>
FOR MORE INFORMATION
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Visit Prudential's website at:
http://www.prudential.com
Trustees
Saul K. Fenster
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
W. Scott McDonald, Jr.
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
Judy A. Rice
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
Officers
David R. Odenath, Jr., President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Marguerite E.H. Morrison, Secretary
William V. Healey, Assistant Secretary
Jonathan D. Shain, Assistant Secretary
Manager
Prudential Investments
Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
Jennison Associates LLC
466 Lexington Avenue
New York, NY 10017
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
P.O. Box 8098
Philadelphia, PA 19101
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 74438J105
Class B PBQIX 74438J204
Class C PEICX 74438J303
Class Z PEIZX 74438J402
MF131E
(LOGO) Printed on Recycled Paper
