SEMI ANNUAL REPORT June 30, 1994
Prudential
National
Municipals Fund
(LOGO)
<PAGE>
Letter to Shareholders
August 11, 1994
Dear Shareholder:
The first six months of 1994 have been a difficult time for most
U.S. financial markets. While falling interest rates in 1993
pushed municipal bond returns to double-digit levels, rising rates
this year sent bond prices down sharply. In these
unusually volatile markets, your Prudential National Municipals Fund
sought to achieve a high level of tax-exempt income with a minimum
amount of risk. Although free from federal income tax, for some
investors income may be subject to state and local taxes, and if
applicable, the federal alternative minimum tax.
<TABLE>
HISTORICAL PERFORMANCE
As of June 30, 1994
<CAPTION>
6-Month 30-day Taxable Equivalent NAV
Total Return1 SEC Yield 28% 31% 39.6% 6/30/94 12/31/93
<S> <C> <C> <C> <C> <C> <C> <C>
Class A -5.4% 5.16% 7.17% 7.48% 8.54% $14.92 $16.30
Class B -5.6% 5.00% 6.94% 7.25% 8.28% $14.95 $16.33
</TABLE>
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS2
As of June 30, 1994
<CAPTION>
One Year Five Year Ten Year Since Inception*
<S> <C> <C> <C> <C>
Class A -5.6% N/A N/A +6.8%
Class B -6.6% +6.8% +9.6% +9.1%
</TABLE>
Note: An investment in the Fund is neither insured nor guaranteed by
the U.S. government. Past performance is no guarantee of future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
1 These figures do not take into account applicable sales charges.
2 These figures take into account applicable sales charges. As of June
30, 1994, the Fund charged a maximum sales load of 4.50% for Class A
shares, Class B shares are subject to a declining contingent deferred
sales charge of 5%, 4%, 3%, 2%, 1% and 1%, respectively over a
six-year period.
* Inception of Class A shares 1/22/90; Class B shares 4/25/80.
The Fear Was Inflation
In January, as interest rates began rising slowly, we moved to a
defensive posture by shortening the Fund's weighted average maturity
and raising our cash position. Price declines hit the bond markets
and accelerated in
-1-
<PAGE>
February when the Federal Reserve took the first of several steps
to increase the federal funds rate (the overnight interbank lending
rate) to 4.25% from 3%. These actions, which were intended to quell
inflation fears, also caused long-term rates to rise by about the
same amount -- roughly 130 basis points. Municipal bond prices
fell accordingly.
Defensive Position Cushions Impact
In response to rising interest rates we raised cash from about
2% of net assets on December 31, 1993 to a high of 11% on March
31, 1994. As prices fell, we reinvested some of our cash holdings.
But given continued market volatility, we still held
7% of net assets in cash as of June 30, 1994. In addition, by
raising our cash position, we shortened our weighted average maturity.
Our cash holdings and hedge positions are important, because
municipal bonds, under certain market conditions, are not always
easy to sell quickly at the best price. In addition, the market
often appears to temporarily over-react to large interest
rate and price swings. So it is prudent in times of volatile
interest rates to maintain a conservative cash position.
Credit Concerns Reduce Returns
The Fund's six-month performance was diminished by the market's
reaction to various credit concerns such as resource recovery bonds,
which accounted for 5.4% of our holdings as of June 30, 1994.
Resource recovery bonds were impacted earlier this
year by a U.S. Supreme Court ruling that limited revenue from
burnable waste delivered to certain facilities. With Congress
moving to grandfather existing agreements, we expect this issue to be
resolved favorably by year-end. Of course, there is
no guarantee that this outcome will occur. At the end of June,
resource recovery holdings were 5.4% of net assets comprised of
issues from Camden, Union and Hudson counties in New Jersey, as
well as Broward County, Florida. In addition, other
credit concerns related to the Fund's holdings in Denver Airport
bonds (3.7% of net assets).
Premium and Non-Callable Bonds
The Fund has increased its holdings of premium, non-callable bonds to
about 25% of net assets with coupons ranging from 6% to 7.5%. We have
also built up the Fund's insured bonds, which now comprise 27% of net
assets. As always, such insurance does not afford protection against
market risk. Since the prices of higher quality bonds fell more than
lower quality issues during the reporting period, we believe that high
quality bonds are currently attractive. Conversely, we will probably
add more lower quality securities to the portfolio if yields decline
in the future.
-2-
<PAGE>
The Fund now holds more Puerto Rican issues than in previous years. We
have also been able to purchase secondary market insurance on these
general obligation and public buildings bonds in order to enhance
their trading value.
The Outlook
We remain cautious about interest rates. Investors who believe interest
rates will move higher, should expect continued price volatility from
municipal bonds. In addition, we expect the short supply of municipal
bonds to become an increasingly important factor in the tax-exempt bond
market. Through the first half of 1994, new issue volume is off about
40% from last year, according to Securities Data, a firm that tracks
municipal bond issuance. During June, for example, supply was down
56% from the same time a year ago. As growing numbers of taxpayers
seek the advantages of municipal bonds, we expect supply to tighten
even further.
As always, it is a pleasure to have you has a shareholder of the
Prudential National Municipals Fund and to have the opportunity to
report our activities to you.
Sincerely,
Lawrence C. McQuade
President
Patricia Dolan
Portfolio Manager
-3-
<PAGE>
PRUDENTIAL NATIONAL MUNICIPALS FUND Portfolio of Investments
June 30 ,1994 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
LONG-TERM INVESTMENTS--93.0%
Alabama--1.1%
Courtland Ind. Dev. Brd. Rev.,
Champion Int'l. Corp.,
Baa1 $ 6,000 7.20%, 12/1/13, Ser.
A................... $ 6,163,740
Univ. So. Alabama
Hosp. &
Auxiliary Rev.,
A.M.B.A.C.,
Aaa 2,000(D) 7.00%, 5/15/04........ 2,184,300
------------
8,348,040
------------
Alaska--0.5%
Anchorage Gen. Oblig.,
A.M.B.A.C.,
Aaa 1,755(D) 7.00%, 8/1/04......... 1,872,673
Aaa 2,075 7.00%, 8/1/06......... 2,203,173
------------
4,075,846
------------
Arizona--2.8%
Maricopa Cnty. Unified
Sch. Dist., No. 69,
Paradise Valley,
F.G.I.C.,
Aaa 3,700 6.80%, 7/1/12, Ser.
E................... 3,993,299
Aaa 9,000 4.80%, 7/1/13, Ser.
E................... 7,542,630
Mesa Ind. Dev. Auth.,
Hlth. Care Facs. Rev.,
Aaa 3,805 7.50%, 1/1/04,
B.I.G............... 4,193,300
Salt River Proj., Elec. Sys.
Rev., Agricultural
Imp. & Pwr. Dist.,
Aa 6,000 5.25%, 1/1/11, Ser.
B................... 5,416,200
------------
21,145,429
------------
California--1.4%
California St. Pub.
Wks. Brd.
Lease Rev., Dept. of
Corrections,
A.M.B.A.C.,
Aaa 6,500 5.25%, 12/1/13........ 5,754,385
Riverside Elec. Rev.,
Aa $ 3,000 6.00%, 10/1/15........ $ 2,869,620
West Contra Costa School Dist.,
Cert. of Part.,
Ba 1,600 7.125%, 1/1/24........ 1,581,520
------------
10,205,525
------------
Colorado--5.7%
Colorado Springs Arpt.
Rev.,
BBB* 3,700 6.90%, 1/1/12, Ser.
A................... 3,710,878
BBB* 7,960 7.00%, 1/1/22, Ser.
A................... 7,983,402
Denver City & Cnty.
Arpt. Rev.,
Baa 9,500 7.25%, 11/15/12, Ser.
B................... 9,172,250
Baa 1,050 7.75%, 11/15/13, Ser.
D................... 1,056,143
Baa 8,750 7.75%, 11/15/21, Ser.
D................... 8,612,012
Baa 2,000 6.75%, 11/15/22, Ser.
C................... 1,753,040
Baa 5,000 7.25%, 11/15/25, Ser.
A................... 4,740,000
Arpt. & Marina Rev.,
Baa1 2,715 6.75%, 11/15/13, Ser.
C................... 2,429,654
Denver City & Cnty.
Sch. Dist. No. 1,
A 3,500 6.50%, 6/1/10......... 3,619,350
------------
43,076,729
------------
Connecticut--1.4%
Connecticut St. Spec.
Tax Oblig. Rev.,
Trans. Infrastructure,
A1 7,000 5.25%, 9/1/07......... 6,592,880
A1 2,000 7.125%, 6/1/10, Ser.
A................... 2,215,440
A1 1,865 5.00%, 10/1/13, Ser.
C................... 1,598,398
------------
10,406,718
------------
District Of Columbia--0.5%
Dist. of Columbia,
Cert. of Part.,
BBB* 4,000 7.30%, 1/1/13......... 4,109,080
------------
</TABLE>
-4- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL NATIONAL MUNICIPALS FUND
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
Florida--3.3%
Broward Cnty. Res.
Rec. Rev., Broward
Waste
Energy, L.P. South,
A $ 14,045 7.95%, 12/1/08........ $ 15,132,083
Florida St. Brd. Ed.
Cap. Outlay,
Aa 195 9.125%, 6/1/14,
E.T.M............... 258,898
Aa 1,260 9.125%, 6/1/14........ 1,665,871
Manatee Cnty.,
Aaa 9,525 4.75%, 10/1/13,
F.G.I.C............. 7,862,697
------------
24,919,549
------------
Georgia--2.9%
Atlanta Urban Res.
Fin.
Auth., Clark Atlanta
Univ. Dorm. Proj.,
NR 4,755(D) 9.25%, 6/1/10......... 5,762,822
Atlanta Wtr. & Swr.
Rev.,
Aa 4,410 6.00%, 1/1/11......... 4,315,185
Georgia St. Gen.
Oblig.,
Aaa 5,000 6.50%, 12/1/09, Ser.
F................... 5,313,700
Georgia St. Res. Fin.
Auth.,
Sngl. Fam. Insured
Mtge., Ser. C-C1,
Aa 6,550 8.00%, 12/1/16........ 6,857,916
------------
22,249,623
------------
Illinois--1.9%
Chicago O'Hare Int'l.
Arpt.,
Spec. Fac. Rev.,
Ref. 2nd Lien,
Ser. C, M.B.I.A.,
Aaa 8,750 5.75%, 1/1/09......... 8,482,425
Illinois Hlth. Facs.
Auth. Rev.,
Westlake Cmnty. Hosp.,
Baa1 $ 5,450 7.75%, 1/1/04......... $ 5,732,964
------------
14,215,389
------------
Kansas--1.1%
Burlington Poll. Ctrl.
Rev.,
Gas & Elec. Co.
Aaa 7,870 7.00%, 6/1/31,
M.B.I.A............. 8,460,643
------------
Kentucky--2.8%
Kentucky St. Prpty. &
Bldgs. Comm. Rev.,
A 19,100 6.25%, 9/1/07......... 19,354,412
Perry Cnty., Solid
Waste
Disp. Res.,
T.J. Int'l. Proj.,
NR 2,250 7.00%, 6/1/24......... 2,222,032
------------
21,576,444
------------
Louisiana--5.0%
Louisiana St. Offshore
Term. Auth.,
Deepwater Port Rev.,
A3 3,000 7.45%, 9/1/04, Ser.
E................... 3,310,290
New Orleans, Cap.
Appr.,
A.M.B.A.C.,
Aaa 13,500 Zero Coupon, 9/1/09... 5,228,955
Orleans Parish, Sch.
Brd.,
Aaa 5,780 8.90%, 2/1/07,
M.B.I.A............. 7,376,494
Pointe Coupee Parish
Poll. Ctrl. Rev.,
Gulf States Utils.,
Baa3 2,850 6.70%, 3/1/13......... 2,787,357
Regl. Louisiana Trans.
Auth. Rev.,
Aaa 3,700 8.00%, 12/1/08,
F.G.I.C............. 4,178,780
</TABLE>
-5- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL NATIONAL MUNICIPALS FUND
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
Louisiana--(cont'd.)
St. Charles Parish,
Poll. Ctrl. Rev.,
Louisiana Pwr. & Lt.
Co.,
NR $ 4,000 8.25%, 6/1/14......... $ 4,367,280
Baa3 5,000 8.00%, 12/1/14,
Ser. 1989........... 5,412,500
West Feliciana Parish
Poll. Ctrl. Rev.,
Gulf States Util.,
Baa3 5,000@ 7.00%, 11/1/15........ 5,057,800
------------
37,719,456
------------
Maryland--1.7%
Northeast Waste Disp. Auth.,
Baltimore City Sludge
Proj.,
NR 4,591 7.25%, 7/1/07......... 4,526,497
Washington Suburban
Sanitary Dist.,
Aa1 9,735 4.90%, 6/1/09......... 8,609,439
------------
13,135,936
------------
Massachusetts--0.6%
Mass. St. Hlth. & Edl.
Facs. Auth. Rev.,
Valley Regl. Hlth.
Sys.,
Baa 4,500 8.00%, 7/1/18, Ser.
B................... 4,831,920
------------
Michigan--2.6%
Detroit Sew. Disp.
Rev.,
Aaa 4,000 5.70%, 7/1/23,
F.G.I.C............. 3,613,520
Michigan St. Hsg. Dev.
Auth. Rev., Rental
Hsg.,
A* 1,000 7.55%, 4/1/23, Ser.
B................... 1,032,070
Sngl. Fam. Mtge.,
AA* 5,185 7.50%, 6/1/15, Ser.
A................... 5,311,617
AA* 3,130 7.75%, 12/1/19, Ser.
D................... 3,240,990
Monroe Cnty. Poll. Ctrl. Rev.,
Detroit Edison Co.,
Proj. 1,
Aaa $ 5,000 7.65%, 9/1/20,
F.G.I.C............. $ 5,502,600
Okemos Pub. Sch.
Dist.,
Cnty. of Ingham,
M.B.I.A.,
Aaa 1,100 Zero Coupon, 5/1/12... 351,417
Aaa 1,700 Zero Coupon, 5/1/13... 504,815
------------
19,557,029
------------
Minnesota--0.4%
Southern Minnesota
Mun. Pwr. Agcy. Pwr.
Supply Sys. Rev.,
A1 3,880 5.00%, 1/1/12, Ser.
A................... 3,345,957
------------
Mississippi--0.7%
Mississippi St., Highway Bd.,
Aaa 5,000 6.20%, 2/1/08......... 5,124,400
------------
Nevada--0.9%
Clark Cnty.,
Southwest Gas Corp.,
Ba1 6,500 7.50%, 9/1/32, Ser.
B................... 6,633,250
------------
New Jersey--7.1%
Bergen Cnty. Util.
Auth.,
Wtr. Poll. Ctrl. Rev.,
Ser. B, F.G.I.C.,
Aaa 7,640 Zero Coupon,
12/15/07............ 3,434,409
Aaa 4,695 Zero Coupon,
12/15/09............ 1,799,124
Camden Cnty. Poll.
Ctrl.
Fin. Auth., Solid
Waste
Res. Rec. Rev.,
Baa1 2,980 7.125%, 12/1/01, Ser.
C................... 3,022,465
Baa1 5,100 7.50%, 12/1/09, Ser.
B................... 5,067,258
</TABLE>
-6- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL NATIONAL MUNICIPALS FUND
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
New Jersey--(cont'd.)
Hudson Cnty. Impvt.
Auth.,
Solid Waste Sys.,
BBB-* $ 12,000 7.10%, 1/1/20......... $ 11,874,360
New Jersey Econ. Dist.
Heating & Cool.,
Trigen Trenton Proj.,
BBB-* 1,400 6.20%, 12/1/10........ 1,351,042
New Jersey Econ. Auth.
Dev. Wtr. Facs.,
Hackensack Wtr. Co.,
Aaa 6,300 5.90%, 3/1/24,
M.B.I.A............. 5,995,206
New Jersey Sports &
Exposition Auth.,
Convention Ctr. Luxury
Tax Rev., M.B.I.A.,
Aaa 5,500 6.00%, 7/1/13......... 5,420,360
New Jersey St. Hsg. &
Mtge. Fin. Agcy.,
Aaa 4,670 7.70%, 10/1/29,
M.B.I.A............. 4,819,207
New Jersey St. Tpke.
Auth. Rev.,
A 3,000 6.75%, 1/1/08, Ser.
A................... 3,137,940
New Jersey Waste Wtr. Treat.,
Trust Loan Rev.,
Aa 2,000 6.875%, 6/15/09....... 2,132,260
Union Cnty. Utils.
Auth.,
Solid Waste Rev.,
A-* 5,500 7.10%, 6/15/06, Ser.
A................... 5,763,560
------------
53,817,191
------------
New York--15.4%
Metro Trans. Auth. of
N.Y. Trans. Fac.,
Aaa 3,000 6.00%, 7/1/24,
M.B.I.A............. 2,846,250
New York City, Gen.
Oblig.,
Baa1 5,000 8.25%, 11/15/02, Ser.
F................... 5,804,650
Baa1 3,500 8.00%, 8/1/03, Ser.
D................... 3,972,535
New York City, Gen.
Oblig.,
Baa1 $ 1,500 8.00%, 8/1/04, Ser.
D................... $ 1,719,480
Baa1 2,000 7.75%, 8/15/04, Ser.
A................... 2,245,960
Baa1 1,500 8.25%, 6/1/06, Ser.
B................... 1,771,650
Baa1 3,000 5.50%, 10/1/14, Ser.
C................... 2,626,260
Baa1 2,750 5.50%, 10/1/15, Ser.
C................... 2,386,890
New York City, Mun.
Wtr. Fin. Auth.,
Wtr. & Swr. Sys.
Rev.,
Aaa 21,250 6.75%, 6/15/16,
F.G.I.C............. 21,840,112
New York St. Dorm.
Auth.
Rev., Court Facs.,
Baa1 6,070 5.20%, 5/15/05, Ser.
A................... 5,750,657
Baa1 5,000 5.625%, 5/15/13, Ser.
A................... 4,487,650
New York St. Energy
Resh. & Dev. Auth.
Rev.,
Gas Facs.,
Aaa 4,500 5.60%, 6/1/25,
M.B.I.A............. 3,984,480
New York St.
Environmental
Facs. Corp.,
Poll. Ctrl. Rev.,
Aa 5,000 5.75%, 6/15/12........ 4,778,900
New York St. Hsg. Fin.
Agcy. Rev.,
Multifamily Hsg.,
Aa 3,350 7.05%, 8/15/24, Ser.
A................... 3,405,309
New York St. Med. Care
Facs. Fin. Auth.
Rev.,
Mental Hlth. Svcs.,
Baa1 5,000 5.25%, 8/15/08, Ser.
F................... 4,508,850
Baa1 13,350 5.25%, 2/15/19, Ser.
F................... 11,113,608
New York St. Urban
Dev.
Corp. Rev., Corr.
Facs.
Baa1 2,955 5.45%, 1/1/07......... 2,766,560
Baa1 3,000 5.50%, 1/1/14......... 2,652,870
</TABLE>
-7- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL NATIONAL MUNICIPALS FUND
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
New York--(cont'd.)
Port Auth. New York &
New Jersey,
A1 $ 3,500 5.625%, 8/1/14, Ser.
81.................. $ 3,225,145
A1 2,000 5.00%, 7/15/16, Ser.
92.................. 1,673,600
A1 3,425 5.625%, 7/15/20,
Ser. 92............. 3,130,861
A1 10,000 7.35%, 10/1/27, Ser.
72.................. 10,983,300
Triborough Bridge &
Tunl. Auth.,
Aa 8,500 6.625%, 1/1/12, Ser.
X................... 8,910,380
------------
116,585,957
------------
Ohio--1.5%
Columbus Wtr. Sys.
Rev.,
Ctrl. Rev. Detroit
Ed.,
A1 2,000 6.375%, 11/1/10....... 2,018,640
Franklin Cnty. Hosp.
Rev.,
Holy Cross Hlth.
Sys. A.M.B.A.C.,
Ser. B,
Aaa 3,000(D) 7.65%, 6/1/10......... 3,421,050
Ohio St. Pub. Facs.,
Comm. of Higher Ed.,
A 5,000 7.25%, 5/1/04......... 5,522,100
------------
10,961,790
------------
Oklahoma--2.4%
Tulsa Mun. Arpt. Trust
Rev.,
American Airlines,
Inc.,
Baa2 19,000 7.375%, 12/1/20....... 18,534,880
------------
Oregon--0.1%
Washington Cnty. Sch.
Dist.,
Aaa 1,000 6.10%, 6/1/12,
F.S.A............... 997,230
------------
Pennsylvania--0.8%
Philadelphia Wtr. &
Waste Auth. Rev.,
M.B.I.A.,
Aaa 5,005 5.00%, 6/15/18........ 4,141,337
Aaa 2,200 5.00%, 6/15/19........ 1,813,834
------------
5,955,171
------------
Puerto Rico--8.7%
Puerto Rico Comnwlth.,
Aaa $ 6,000 7.50%, 7/1/04,
M.B.I.A............. $ 6,958,920
Baa1 5,000 5.50%, 7/1/13......... 4,499,050
Aaa 5,000 5.25%, 7/1/18,
M.B.I.A............. 4,453,500
Puerto Rico Elec. Pwr.
Auth., Pwr. Rev.,
Baa1 2,500 7.00%, 7/1/07, Ser.
S................... 2,753,200
Baa1 2,550 6.125%, 7/1/08, Ser.
S................... 2,582,283
Puerto Rico Hwy. &
Trans. Auth. Rev.,
Baa1 8,405 6.375%, 7/1/08, Ser.
V................... 8,658,495
Baa1 4,000 6.625%, 7/1/12, Ser.
V................... 4,134,320
Baa1 4,460 6.625%, 7/1/12, Ser.
T................... 4,609,767
Puerto Rico Public
Bldgs. Auth. Rev.,
F.S.A.,
Aaa 8,000 5.60%, 7/1/08......... 7,878,000
Aaa 5,065 5.75%, 7/1/10......... 4,946,023
Puerto Rico Tel. Auth.
Rev.,
Ser. I, M.B.I.A.,
Aaa 8,200 5.25%, 1/25/07........ 7,871,672
Aaa 7,600 5.45%, 1/16/15........ 6,984,324
------------
66,329,554
------------
South Carolina--1.4%
Charleston Waterworks
& Swr. Rev.,
Aaa 7,415 10.375%, 1/1/10....... 10,602,189
------------
Tennessee--0.9%
Metropolitan Gov't.
Nashville & Davidson
Cnty., Wtr. & Swr.
Rev.,
A1 6,575 7.30%, 1/1/08......... 6,951,682
------------
</TABLE>
-8- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL NATIONAL MUNICIPALS FUND
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
Texas--8.9%
Alliance Arpt. Auth.
Inc., Spec. Facs.
Rev.,
American Airlines,
Inc.,
Baa1 $ 4,500 7.50%, 12/1/29........ $ 4,422,825
Austin Combined Util.
Sys. Rev., Ser. B,
A 5,400 7.75%, 11/15/08....... 5,964,678
Brownsville Util. Sys.
Rev.,
Baa 5,000 11.625%, 9/1/14....... 5,215,750
Dallas Ft. Worth,
Regl. Arpt.
Rev., Ser. A,
F.G.I.C.,
Aaa 3,500 7.375%, 11/1/08....... 3,951,115
Aaa 3,500 7.375%, 11/1/09....... 3,939,845
Harris Cnty. Hlth.
Facs. Dev. Corp.,
Spec. Facs. Rev.,
Texas Med. Ctr.
Hosp.,
Aaa 4,100 7.25%, 5/15/07,
M.B.I.A............. 4,425,089
Harris Cnty., Toll
Rd.,
Aa 3,000 6.10%, 8/15/16........ 2,914,680
Plano Indpt. Sch.
Dist.,
F.G.I.C., Ser. B,
Aaa 2,000(D) 8.625%, 2/15/02....... 2,367,260
Texas Mun. Pwr. Agcy.
Rev.,
M.B.I.A.,
Aaa 13,980 Zero Coupon, 9/1/14... 3,765,653
Aaa 10,000 Zero Coupon, 9/1/15... 2,529,200
Texas Pub. Fin. Auth.,
Aa 10,000 5.50%, 10/1/13, Ser.
A................... 9,218,200
Texas Wtr. Res. Fin.
Auth. Rev.,
A 12,000@ 7.625%, 8/15/08....... 12,880,920
Univ. Texas Univ.
Rev.,
Fin. Sys.,
Aa $ 2,500 7.00%, 8/15/07, Ser.
A................... $ 2,684,375
Aa 3,000 6.75%, 8/15/13, Ser.
B................... 3,083,940
------------
67,363,530
------------
U. S. Virgin Islands--0.5%
Virgin Islands Pub. Fin. Auth. Rev.,
Matching Fund Loan Notes,
NR 3,900 7.25%, 10/1/18, Ser.
A................... 4,112,823
------------
Virginia--4.6%
Henrico Cnty. Ind.
Dev.
Auth. Rev., Secours
Hlth.
Sys., St. Mary's
Proj.,
A1 10,500 7.50%, 9/1/07, Ser.
B................... 11,436,915
Roanoke Cnty., Gen.
Oblig.,
Aa 3,000 5.50%, 6/1/13......... 2,755,290
Virginia St. Pub. Sch.
Auth.,
Aa 5,640 6.125%, 8/1/11, Ser.
A................... 5,630,694
Aa 5,635 6.125%, 8/1/12, Ser.
A................... 5,595,048
Virginia Trans. Brd.
Rev.,
Aa 5,000 5.50%, 5/15/15........ 4,517,150
West Point Ind. Dev.,
Chesapeake Corp.,
Baa3 5,150 6.375%, 3/1/19........ 4,871,642
------------
34,806,739
------------
Washington--3.4%
Tacoma Dept. Pub.
Util. &
Lt. Div., Lt. & Pwr.
Rev.,
A1 4,450 9.375%, 1/1/15........ 4,804,309
Washington St. Pub.
Pwr. Supply Sys.
Rev.,
Nuclear Proj. No. 1,
Aa 4,000 7.00%, 7/1/08, Ser.
A................... 4,238,800
Aa 5,000 7.25%, 7/1/09, Ser.
B................... 5,446,450
</TABLE>
-9- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL NATIONAL MUNICIPALS FUND
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
Washington--(cont'd.)
Washington St. Pub.
Pwr. Supply Sys.
Rev.,
Nuclear Proj. No. 2,
Aaa $ 6,000 Zero Coupon, 7/1/06,
M.B.I.A., Ser. A.... $ 2,896,560
Aa 2,000 7.25%, 7/1/06, Ser.
A................... 2,184,800
Aa 4,000 7.00%, 7/1/12, Ser.
B................... 4,113,200
Nuclear Proj. No. 3,
Aaa 5,000 Zero Coupon, 7/1/06,
F.G.I.C., Ser. B.... 2,413,800
------------
26,097,919
------------
Total long-term
investments
(cost
$701,430,533)....... 706,253,618
------------
SHORT-TERM INVESTMENTS--2.4%
Arizona--0.4%
Phoenix, Gen. Oblig.,
F.R.D.D., Ser. 94-1,
VMIG1 2,900 3.30%, 7/1/94......... 2,900,000
------------
California--0.3%
Los Angeles Int'l.
Arpt.,
LAX Two Proj.,
F.R.D.D.,
VMIG2 2,200 4.00%, 7/1/94......... 2,200,000
------------
Illinois--1.0%
Chicago O'Hare Int'l.
Arpt.,
Amer. Airlines Inc.,
F.R.D.D.,
P-2 4,200 3.55%, 7/1/94, Ser.
84B................. 4,200,000
P-2 3,300 3.55%, 7/1/94, Ser.
84C................. 3,300,000
------------
7,500,000
------------
Louisiana--0.1%
West Baton Rouge
Parish Ind. Dist.
Rev., F.R.D.D.,
Dow Chemical Co.
Proj.,
P-1 400 3.20%, 7/1/94, Ser.
93.................. 400,000
------------
Michigan--0.5%
Midland Cnty. Econ.
Dev. Auth.,
F.R.D.D.,
Dow Chemical Co.
Proj.,
P-1 $ 4,000 3.60%, 7/1/94, Ser.
93A................. $ 4,000,000
------------
Texas--0.1%
Brazos River Harbor
Nav. Dist. Harbor
Rev.,
Dow Chemical Co.
Proj., F.R.D.D.,
Ser. 93,
P-1 900 3.20%, 7/1/94......... 900,000
------------
Total short-term
investments
(cost
$17,900,000)........ 17,900,000
------------
Total Investments--95.4%
(cost $719,330,533;
Note 4)............. 724,153,618
Other assets in excess
of
liabilities--4.6%... 35,090,424
------------
Net Assets--100%...... $759,244,042
------------
------------
</TABLE>
- - - - ---------------
(a) The following abbreviations are used in portfolio
descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation
B.I.G.--Bond Investors Guaranty Insurance Company
E.T.M.--Escrowed to Maturity
F.G.I.C.--Financial Guaranty Insurance Company
F.R.D.D.--Floating Rate Daily Demand Note
F.S.A.--Financial Security Assurance
M.B.I.A.--Municipal Bond Insurance Association
(D) Prerefunded issues are secured by escrowed
cash and direct U.S. guaranteed obligations.
* Standard and Poor's Rating.
@ Pledged as initial margin on financial futures
contract.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information
contains a description of Moody's and Standard &
Poor's ratings.
-10- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL NATIONAL MUNICIPALS FUND
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
June 30,
Assets 1994
------------
<S> <C>
Investments, at value (cost $719,330,533)................................................. $724,153,618
Cash...................................................................................... 61,471
Receivable for investments sold........................................................... 33,456,346
Interest receivable....................................................................... 12,977,119
Due from broker - variation margin........................................................ 543,750
Receivable for Fund shares sold........................................................... 537,624
Deferred expenses and other assets........................................................ 114,003
------------
Total assets.......................................................................... 771,843,931
------------
Liabilities
Payable for investments purchased......................................................... 10,204,265
Payable for Fund shares reacquired........................................................ 1,296,223
Dividends payable......................................................................... 436,854
Distribution fee payable.................................................................. 313,575
Management fee payable.................................................................... 301,910
Accrued expenses.......................................................................... 47,062
------------
Total liabilities..................................................................... 12,599,889
------------
Net Assets................................................................................ $759,244,042
------------
------------
Net assets were comprised of:
Common stock, at par.................................................................... $ 507,912
Paid-in capital in excess of par........................................................ 762,733,977
------------
763,241,889
Accumulated net realized loss on investments............................................ (9,617,807)
Net unrealized appreciation on investments.............................................. 5,619,960
------------
Net assets, June 30 ,1994............................................................... $759,244,042
------------
------------
Class A:
Net asset value and redemption price per share
($14,024,195 / 939,850 shares of common stock issued and outstanding)................. $14.92
Maximum sales charge (4.5% of offering price)........................................... .70
------------
Maximum offering price to public........................................................ $15.62
------------
------------
Class B:
Net asset value, offering price and redemption price per share
($745,219,847 / 49,851,363 shares of common stock issued and outstanding)............. $14.95
------------
------------
</TABLE>
See Notes to Financial Statements.
-11-
<PAGE>
<PAGE>
PRUDENTIAL NATIONAL MUNICIPALS FUND
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
Net Investment Income 1994
------------
<S> <C>
Income
Interest............................ $ 24,258,940
------------
Expenses
Distribution fee--Class A........... 7,240
Distribution fee--Class B........... 1,963,285
Management fee...................... 1,892,515
Transfer agent's fees and
expenses............................ 345,000
Custodian's fees and expenses....... 90,000
Reports to shareholders............. 62,000
Registration fees................... 44,500
Audit fee........................... 25,500
Directors' fees..................... 18,850
Insurance expense................... 9,000
Legal fees.......................... 9,000
Miscellaneous....................... 29,272
------------
Total expenses.................... 4,496,162
------------
Net investment income................. 19,762,778
------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions............. (12,941,308)
Financial futures contracts......... 3,313,413
------------
(9,627,895)
------------
Net change in unrealized
appreciation/depreciation of:
Investments......................... (57,939,426)
Financial futures contracts......... 796,875
------------
(57,142,551)
------------
Net loss on investments............... (66,770,446)
------------
Net Decrease in Net Assets
Resulting from Operations............. $(47,007,668)
------------
------------
</TABLE>
PRUDENTIAL NATIONAL MUNICIPALS FUND
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) June 30, December 31,
in Net Assets 1994 1993
------------- -------------
<S> <C> <C>
Operations
Net investment
income................ $ 19,762,778 $ 44,152,405
Net realized gain
(loss) on investment
transactions........ (9,627,895) 38,512,754
Net change in
unrealized
appreciation/depreciation
of investments...... (57,142,551) 16,778,159
------------- -------------
Net increase
(decrease) in net
assets resulting
from operations..... (47,007,668) 99,443,318
------------- -------------
Dividends and distributions (Note 1)
Dividends from net
investment income
Class A............. (386,458) (645,048)
Class B............. (19,376,320) (43,507,357)
------------- -------------
(19,762,778) (44,152,405)
------------- -------------
Distributions from net
realized gains
Class A............. (95,056) (563,957)
Class B............. (5,131,497) (34,572,412)
------------- -------------
(5,226,553) (35,136,369)
------------- -------------
Fund share transactions (Note 5)
Net proceeds from
shares issued....... 39,143,708 201,764,486
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions....... 15,865,826 50,661,082
Cost of shares
reacquired............ (86,235,176) (246,514,570)
------------- -------------
Increase (decrease) in
net assets from Fund
share
transactions........ (31,225,642) 5,910,998
------------- -------------
Total increase
(decrease)............ (103,222,641) 26,065,542
Net Assets
Beginning of period..... 862,466,683 836,401,141
------------- -------------
End of period........... $ 759,244,042 $ 862,466,683
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-12-
<PAGE>
<PAGE>
PRUDENTIAL NATIONAL MUNICIPALS FUND
Notes to Financial Statements
(Unaudited)
Prudential-Bache National Municipals Fund, Inc., doing business as Prudential
National Municipals 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 to seek a high level of current income
exempt from federal income taxes by investing substantially all of its total
assets in carefully selected long-term municipal bonds of medium quality. The
ability of the issuers of debt securities held by the Fund to meet their
obligations may be affected by economic or political developments in a specific
state, industry or region.
Note 1. Accounting The following is a summary
Policies of significant accounting poli-
cies followed by the Fund in the preparation of
its financial statements.
Securities Valuations: The Fund values municipal securities (including
commitments to purchase such securities on a ``when-issued'' basis) on the basis
of prices provided by a pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining values. If market quotations are not readily available from such
pricing service, a security is valued at its fair value as determined under
procedures established by the Directors.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost which approximates market value.
Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of debt securities at a set
price for delivery on a future date. Upon entering into a financial futures
contract, the Fund is required to pledge to the broker an amount of cash and/or
other assets equal to a certain percentage of the contract amount. This amount
is known as the ``initial margin''. Subsequent payments, known as ``variation
margin'', are made or received by the Fund each day, depending on the daily
fluctuations in the value of the underlying security. Such variation margin is
recorded for financial statement purposes on a daily basis as unrealized gain or
loss.
The Fund invests in financial futures contracts solely for the purpose of
hedging its existing portfolio securities or securities the Fund intends to
purchase against fluctuations in value caused by changes in prevailing market
interest rates. Should market conditions move unexpectedly, the Fund may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts, interest rates and
the underlying hedged assets.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of portfolio
securities are calculated on an identified cost basis. Interest income is
recorded on an accrual basis. The Fund amortizes premiums and accretes original
issue discount on portfolio securities as adjustments to interest income.
Net investment income (other than distribution fees) and unrealized and
realized gains or losses are allocated daily to each class of shares based upon
the relative proportion of net assets of each class at the beginning of the day.
Federal Income Taxes: It is the intent of the Fund to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its net income to its shareholders. For this
reason and because substantially all of the Fund's gross income consists of
tax-exempt interest, no federal income tax provision is required.
Dividends and Distributions: Dividends from net investment income are declared
daily and paid monthly. The Fund will distribute at least annually 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.
Note 2. Agreements The Fund has a management
agreement with Prudential Mutual Fund Management,
Inc. (``PMF''). Pursuant to this agreement, PMF has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PMF has entered into a subadvisory agreement with The Prudential
Investment Corporation (``PIC''); PIC furnishes investment advisory services in
connection with the management of the Fund. PMF pays for the cost of the
subadviser's services, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.
-13-
<PAGE>
<PAGE>
The management fee paid PMF is computed daily and payable monthly at an
annual rate of .50% of the Fund's average daily net assets up to and including
$250 million, .475% of the next $250 million, .45% of the next $500 million,
.425% of the next $250 million, .40% of the next $250 million and .375% of the
Fund's average daily net assets in excess of $1.5 billion.
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as the distributor of the Class A
shares of the Fund, and with Prudential Securities Incorporated (``PSI''), which
acts as distributor of the Class B shares of the Fund (collectively the
``Distributors''). To reimburse the Distributors for their expenses incurred in
distributing and servicing the Fund's Class A and B shares, the Fund, pursuant
to plans of distribution, pays the Distributors a reimbursement, accrued daily
and payable monthly.
Pursuant to the Class A Plan, the Fund reimburses PMFD for its expenses with
respect to Class A shares at an annual rate of up to .30 of 1% of the average
daily net assets of the Class A shares. Such expenses under the Class A Plan
were .10 of 1% of the average daily net assets of the Class A shares for the six
months ended June 30, 1994. PMFD pays various broker-dealers, including PSI and
Pruco Securities Corporation (``Prusec''), affiliated broker-dealers, for
account servicing fees and other expenses incurred by such broker-dealers.
Pursuant to the Class B Plan, the Fund reimburses PSI for its
distribution-related expenses with respect to Class B shares at an annual rate
of up to .50 of 1% of the average daily net assets of the Class B Shares.
The Class B distribution expenses include commission credits for payment of
commissions and account servicing fees to financial advisers and an allocation
for overhead and other distribution-related expenses, interest and/or carrying
charges, the cost of printing and mailing prospectuses to potential investors
and of advertising incurred in connection with the distribution of shares.
The Distributors recover the distribution expenses and account servicing fees
incurred through the receipt of reimbursement payments from the Fund under the
plans and the receipt of initial sales charges (Class A only) and contingent
deferred sales charges (Class B only) from shareholders.
PMFD has advised the Fund that it has received approximately $72,000 in
front-end sales charges resulting from sales of Class A shares during the six
months ended June 30, 1994. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salespersons and
incurred other distribution costs.
With respect to the Class B Plan, at any given time the amount of expenses
incurred by PSI in distributing the Fund's shares and not recovered through the
imposition of contingent deferred sales charges in connection with certain
redemptions of shares may exceed the total payments made by the Fund pursuant to
the Class B Plan. PSI has advised the Fund that for the six months ended June
30, 1994, it received approximately $642,000 in contingent deferred sales
charges imposed upon certain redemptions by shareholders. PSI, as distributor,
has also advised the Fund that at June 30, 1994, the amount of distribution
expenses incurred by PSI and not yet reimbursed by the Fund or recovered through
contingent deferred sales charges approximated $17,860,000. This amount may be
recovered through future payments under the Class B Plan or contingent deferred
sales charges.
In the event of termination or noncontinuation of the Class B Plan, the Fund
would not be contractually obligated to pay PSI, as distributor, for any
expenses not previously reimbursed or recovered through contingent deferred
sales charges.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS''), a
with Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and
during the six months ended June 30, 1994, the Fund incurred fees of
approximately $236,300 for the services of PMFS. As of June 30, 1994, $39,000 of
such fees were due to PMFS. Transfer agent fees and expenses in the Statement of
Operations include certain out-of-pocket expenses paid to non-affiliates.
Note 4. Portfolio Purchases and sales of invest-
Securities ment securities, other than
short-term investments, for the six months ended
June 30, 1994, were $496,079,718 and $564,029,215, respectively.
At June 30, 1994, the Fund sold 475 financial futures contracts on the
Municipal Bond Index which expire in September 1994. The value at disposition of
such contracts is $47,010,156. The value of such contracts on June 30, 1994 was
$46,213,281, thereby resulting in an unrealized gain of $796,875. The Fund has
pledged $12,000,000 principal amount of Texas Wtr. Res. Fin. Auth. Rev. Bonds
and $5,000,000 principal amount of West Feliciana Parish Poll. Ctrl. Rev. Bonds
as initial margin on such contracts.
-14-
<PAGE>
<PAGE>
The cost basis of investments for federal income tax purposes is
substantially the same as for financial reporting purposes and, accordingly, as
of June 30, 1994, net unrealized appreciation for federal income tax purposes
was $4,823,085 (gross unrealized appreciation--$21,010,534 gross unrealized
depreciation--$16,187,449).
Note 5. Capital The Fund offers both Class A
and Class B shares. Class A shares are sold with a
front-end sales charge of up to 4.5%. 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. Both classes of shares have equal rights as to
earnings, assets and voting privileges except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan.
There are 500 million shares of common stock, $.01 par value, per share,
divided into two classes, designated Class A and Class B common stock, each of
which consists of 250 million authorized shares.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- - - - ---------------------------- ----------- -------------
<S> <C> <C>
Six months ended June 30,
1994:
Shares sold................. 946,596 $ 14,420,315
Shares issued in
reinvestment of dividends
and distributions......... 21,455 332,513
Shares reacquired........... (897,315) (13,602,777)
----------- -------------
Net increase in shares
outstanding............... 70,736 $ 1,150,051
----------- -------------
----------- -------------
Year ended December 31,
1993:
Shares sold................. 801,949 $ 13,267,418
Shares issued in
reinvestment of dividends
and distributions......... 52,588 854,996
Shares reacquired........... (468,357) (7,812,061)
----------- -------------
Net increase in shares
outstanding............... 386,180 $ 6,310,353
----------- -------------
----------- -------------
<CAPTION>
Class B Shares Amount
- - - - ---------------------------- ----------- -------------
<S> <C> <C>
Six months ended June 30,
1994:
Shares sold................. 1,584,779 $ 24,723,393
Shares issued in
reinvestment of dividends
and distributions......... 999,679 15,533,313
Shares reacquired........... (4,680,910) (72,632,399)
----------- -------------
Net decrease in shares
outstanding............... (2,096,452) $ (32,375,693)
----------- -------------
----------- -------------
Year ended December 31,
1993:
Shares sold................. 11,392,790 $ 188,497,068
Shares issued in
reinvestment of dividends
and distributions......... 3,054,242 49,806,086
Shares reacquired........... (14,390,713) (238,702,509)
----------- -------------
Net increase in shares
outstanding............... 56,319 $ (399,355)
----------- -------------
----------- -------------
</TABLE>
Note 6. Subsequent On July 19, 1994, a meeting
Event of the shareholders of the
Fund was held at which time the shareholders
approved among other things: a) amendments to the Fund's Articles of
Incorporation to permit a conversion feature for Class B shares to Class A
shares after seven years; b) amendments to the Class A and Class B Distribution
Plans, under which the Distribution Plans become compensation rather than
reimbursement plans, and c) a change in the Fund's name from Prudential-Bache
National Municipals Fund, Inc. to Prudential National Municipals Fund, Inc.
These changes were effective August 1, 1994.
-15-
<PAGE>
<PAGE>
PRUDENTIAL NATIONAL MUNICIPALS FUND
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A Class B
----------------------------------------------------- -------------------------------------------------------------------
PER January 22,
SHARE Six Months Year Ended 1990(D) Six Months
OPER- Ended December 31, through Ended Year Ended December 31,
ATING June 30, -------------------- December 31, June 30, ------------------------------------------------------
PERFORM- 1994 1993 1992 1991 1990 1994 1993 1992 1991 1990 1989
ANCE: --------- ------- ------ ------ ------------ ---------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net
asset
value,
beginning
of
period.. $ 16.30 $ 15.94 $16.00 $15.09 $14.98 $ 16.33 $ 15.97 $ 16.02 $ 15.11 $ 15.15 $ 15.04
--------- ------- ------ ------ ------------ ---------- -------- -------- -------- -------- ----------
Income
from
investment
operations
Net
investment
income... .41 .90 .94 .97 .90 .38 .84 .88 .91 .90 .96
Net
realized
and
unrealized
gain
(loss)
on
investment
trans-
actions.. (1.28) 1.05 .43 .91 .11 (1.28) 1.05 .44 .91 (.04) .11
--------- ------- ------ ------ ------------ ---------- -------- -------- -------- -------- ----------
Total
from
invest-
ment
opera-
tions.. (.87) 1.95 1.37 1.88 1.01 (.90) 1.89 1.32 1.82 .86 1.07
--------- ------- ------ ------ ------------ ---------- -------- -------- -------- -------- ----------
Less
distributions
Dividends
from
net
investment
income... (.41) (.90) (.94) (.97) (.90) (.38) (.84) (.88) (.91) (.90) (.96)
Distributions
from net
realized
gains.. (.10) (.69) (.49) -- -- (.10) (.69) (.49) -- -- --
--------- ------- ------ ------ ------------ ---------- -------- -------- -------- -------- ----------
Total
distri-
butions. (.51) (1.59) (1.43) (.97) (.90) (.48) (1.53) (1.37) (.91) (.90) (.96)
--------- ------- ------ ------ ------------ ---------- -------- -------- -------- -------- ----------
Net
asset
value,
end
of
period. $ 14.92 $ 16.30 $15.94 $16.00 $15.09 $ 14.95 $ 16.33 $ 15.97 $ 16.02 $ 15.11 $ 15.15
--------- ------- ------ ------ ------------ ---------- -------- -------- -------- -------- ----------
--------- ------- ------ ------ ------------ ---------- -------- -------- -------- -------- ----------
TOTAL
RETURN#:. (5.39)% 12.60% 8.88% 12.94% 6.88% (5.57)% 12.15% 8.50% 12.42% 5.96% 7.43%
RATIOS/SUPPLEMENTAL
DATA:
Net
assets,
end
of
period
(000)... $ 14,024 $14,167 $7,700 $3,819 $1,846 $ 745,220 $848,299 $828,702 $874,338 $882,212 $1,033,173
Average
net
assets
(000).. $ 14,600 $11,786 $5,401 $2,697 $1,161 $ 791,822 $854,919 $829,830 $862,249 $940,215 $1,027,726
Ratios
to
average
net
assets:
Expenses,
including
distribution
fees... .73%* .69% .72% .75% .75%* 1.13%* 1.09% 1.12% 1.15% 1.13% 1.01%
Expenses,
excluding
distribution
fees... .63%* .59% .62% .65% .65%* .63%* .59% .62% .65% .64% .66%
Net
investment
income... 5.33%* 5.49% 5.79% 6.27% 6.43%* 4.93%* 5.09% 5.39% 5.87% 6.03% 6.45%
Portfolio
turnover
rate... 65% 82% 114% 59% 110% 65% 82% 114% 59% 110% 198%
</TABLE>
- - - - ----
* Annualized.
(D) Commencement of offering of Class A shares.
# Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
See Notes to Financial Statements.
-16-
<PAGE>
Directors
Delayne Dedrick Gold
Arthur Hauspurg
Harry A. Jacobs, Jr.
Thomas J. McCormack
Lawrence C. McQuade
Stephen P. Munn
Richard A. Redeker
Louis A. Weil, III
Officers
Lawrence C. McQuade, President
David W. Drasnin, Vice President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
S. Jane Rose, Secretary
Ronald Amblard, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll free (800) 225-1852, Collect (908) 417-7555
The accompanying financial statements as of June 30, 1994 were
not audited and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a current prospectus.
743918203 MF104E2
743918104 (LOGO) Cat. #4303167
