NOTES TO FINANCIAL STATEMENTS
Prudential Equity Income Fund (the "Fund") is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The Fund was organized as an unincorporated business
trust in Massachusetts on September 18, 1986 and had no operations until December 22, 1986 when 10,309
shares of beneficial interest were sold at $9.70 per share to Prudential Securities Incorporated ("PSI").
Investment operations commenced on January 22, 1987. The investment objective of the Fund is both current
income and capital appreciation. It seeks to achieve this objective by investing primarily in common stocks and
convertible securities that provide investment income returns above those of the Standard & Poor's 500 Stock
Index or the NYSE Composite Index. The ability of the issuers of the debt securities held by the Fund to meet
their obligations may be affected by economic developments in a specific industry or region.
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. Corporate bonds
(other than convertible debt securities) and U.S. Government 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 on the basis of valuations provided by a pricing service which uses information with respect to transactions
in bonds, quotations from bond dealers, agency ratings, market transactions in comparable securities and various
relationships between securities in determining value. Convertible debt securities that are actively