(ICON)
Prudential
National
Municipals
Fund, Inc.
SEMI
ANNUAL
REPORT
June 30, 1995
Prudential Mutual Funds
Building Your Future
On Our StrengthSM (LOGO)
<PAGE>
Prudential National Municipals Fund, Inc.
Performance At A Glance.
Municipal bonds turned in a strong performance in the first six months of the
year, more than making up ground lost last year. A slowing economy pushed
interest rates down, lifting bond prices sharply higher in one of the strongest
bond market rallies in years. We're pleased to report that Prudential National
Municipals Fund performed in line with the average municipal bond fund,
according to Lipper Analytical Services.
<TABLE>
Cumulative Total Returns1 As of 6/30/95
<CAPTION>
----------------------------------------------------------------------------
Six One Five Ten Since
Months Year Years Years Inception2
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 8.5% 7.8% 47.0% N/A 50.9%
----------------------------------------------------------------------------
Class B 8.3 7.4 44.2 117.1 267.8
----------------------------------------------------------------------------
Class C 8.2 N/A N/A N/A 5.3
----------------------------------------------------------------------------
*Lipper Gen. Debt. Avg 9.0 7.6 45.4 129.4 287.5
----------------------------------------------------------------------------
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 6/30/95
<CAPTION>
----------------------------------------------------------------------------
One Five Ten Since
Year Years Years Inception2
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 4.6% 7.4% N/A 7.3%
----------------------------------------------------------------------------
Class B 2.4 7.4 8.1 9.0
----------------------------------------------------------------------------
Class C N/A N/A N/A N/A
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------
30-Day
Dividend SEC-Yield
<S> <C> <C> <C>
Your Class A $0.071 4.88%
Dividend -------------------------------------
As of 6/30/95 Class B $0.066 4.60
-------------------------------------
Class C $0.063 4.32
------------------------------------------------------
</TABLE>
Past performance is not a 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.
1Source: Prudential Mutual Fund Management, Inc. and Lipper Analytical
Services, 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 load 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 C shares have
a 1% CDSC for one year. Class B shares will automatically convert to Class A
shares a quarterly basis, after approximately seven years.
2Inception dates: 1/22/90 Class A; 4/25/80 Class B; 8/1/94 Class C.
*These are the average returns of 230 funds in the general municipal debt fund
category for six months; 201 funds for one year; 95 funds for five years; 153
funds for 10 years; and 31 funds since inception, as determined by Lipper
Analytical Services, Inc.
GRAPH
Source: Lipper Analytical Services, Inc. Financial markets change, so a
mutual fund's past performance should never be used to predict future results.
The risks to each of the investments listed above are different -- we provide
12-month total returns for several Lipper mutual fund categories to show you
that reaching for higher yields means tolerating more risk. The greater the
risk, the larger the potential reward or loss. In addition, we've added
historical 20-year average annual returns to show that 1995's returns (so far)
are higher than normal. These returns assume the reinvestment of dividends.
Stock funds will fluctuate a great deal. Smaller capitalization stocks offer
greater potential for long term growth but may be more volatile than larger
capitalization stocks. Investors receive higher historical total returns from
stocks than from most other investments.
Bond funds provide more income than stock funds, which can help smooth out their
total returns year by year. But their prices still fluctuate (sometimes a good
deal) and their returns are historically lower than those of stock funds.
Sector or specialty stock funds usually entail the greatest risks because they
are not widely diversified. They are designed for sophisticated investors who
can tolerate additional risk in exchange for higher potential rewards or losses.
Money market funds attempt to preserve a constant share value; they don't
fluctuate much in price but their returns are generally among the lowest of
the major investment categories.
<PAGE>
Patricia Dolan, Fund Manager
Portfolio Manager's Report PICTURE
The Prudential National Municipals Fund invests in carefully selected, medium
quality, long-term municipal bonds that offer a high level of current income
exempt from federal income taxes. The Fund invests in bonds that are well-priced
considering their underlying value. These bonds are varied among the states,
sectors and maturities.
1. Strategy Session.
What We See Now.
As interest rates fell, we purchased bonds with longer maturities, locking in
current high yields and increasing the Fund's potential for price increases.
The portfolio's duration, a measure of its potential to increase in price as
interest rates fall, increased to 8.1 years from 7.6 years. Bonds with longer
maturities generally carry higher interest rates.
As interest rates dropped, though, municipal bond funds faced challenges.
While the prices of the bonds we held rose, the yields on those same bonds
declined. Since dividends are paid out of the bonds' income, we needed to
enhance income so we increased our investments in higher yielding BBB and
A-rated industrial development bonds to 23% from 15% of assets. These bonds
were issued by economic development authorities and backed by companies in the
airline and paper industries like American Airlines, Federal Express, United
Airlines, Champion International and Weyerhauser. They should benefit from a
growing economy. We also hold 18% of assets in utility bonds and 10% in
transportation issues.
We are also well-diversified geographically.
We hold 13% of assets in New York, 11% in Texas, 10% in Puerto Rico, and 6% in
California. These bonds are valuable because they offer higher yields or are
in high demand but in low supply.
<PAGE>
2. What Went Well.
Many Of Our Bonds
Couldn't Be Called.
We increased assets invested in non-callable bonds (those that can not be paid
off prematurely by the issuer to save on interest costs) to 30% from 25%. These
bonds not only offer attractive yields but also appreciate well when interest
rates decline. They are valuable because not many municipal bonds offer
protection from call risk -- only about a third of the Lehman Brothers'
Municipal Bond Index is not callable.
It Paid To Buy
Puerto Rico Bonds.
This year, the supply of new municipal bonds in the 50 states has declined
sharply. So, we looked elsewhere. We bought bonds sold by Puerto Rico, because
they are tax-exempt federally and in virtually all states. We think these bonds
are attractively priced, but to make them even more so, we purchased insurance
on them in the secondary market. For example, we bought insurance on some
Puerto Rico Highway Authority bonds, and as a result their market value
appreciated substantially -- by more than the cost of their insurance.
3. And Not So Well.
We Would Have Benefited From
A Longer Duration.
In the first quarter, our duration was shorter than that of some competing
funds, because we overestimated the economy's strength. As the slowdown became
apparent in the second quarter, we extended duration, but should have done so
sooner. Duration generally ranged from 7.6 years to 8.3 years, and was 8.1
years on June 30.
Municipals Suffered From Tax Talk.
Congress is considering various plans to reduce the value of the tax exemption
enjoyed by municipal bonds, perhaps by lowering or eliminating income taxes on
other types of bonds. Clearly, this created uncertainty in the market -- one
reason why municipal bonds did not rise in tandem with taxable bonds in the
second quarter. We believe it is unlikely that a flat tax proposal -- under
which everyone would pay a single-rate income tax -- will pass Congress.
4. Looking Ahead.
Municipal bonds yields are very attractive now. In the second quarter, when
U.S. government and corporate bond yields fell, municipal yields did not
follow to the same extent. The results are some very good buying opportunities
now in the municipal market. Plus, if interest rates continue to fall,
investors in municipal bonds could reasonably expect a bit more price
appreciation in addition to coupon income.
We expect municipal bond prices to be sensitive to any proposal designed to
reduce the federal income tax paid by the nation's wealthier individuals.
Municipal bond investors should be prepared to weather some volatility this
year as a consequence. Overall, we believe municipal bonds still offer good
value, and that volatility can offer some attractive buying opportunities.
1
<PAGE>
President's Letter
(PICTURE)
July 31, 1995
Dear Shareholder:
You've probably noticed your shareholder report looks different this month.
We've designed it to provide clear, concise and forthright information about
your investment, its performance, risks and potential rewards. And, from time
to time, I'll share some thoughts with you about the industry, mutual fund
trends and how we're responding to them at Prudential Mutual Funds.
On The Hill
One recent trend we like is part of the "Contract with America." It's called
the American Dream Savings Account and it was approved by the House of
Representatives earlier in the year. The Senate has now taken up the proposal,
which would improve the traditional Individual Retirement Account program by
allowing higher non-working spouse contributions. The proposed law would also
allow tax-free and penalty-free withdrawals from the account before age 59 1/2,
for certain expenses. Prudential Mutual Funds supports the proposal and we urge
you to share your opinion about it with your Senator. You can reach your
Senator's office by calling 202-224-3121.
In Closing
One final note: if you're a Class B shareholder, you'll begin noticing a
change on your statements once you've held your shares for seven years. At
that time they will automatically begin to convert to Class A shares on a
quarterly basis. Since Class A shares carry lower annual distribution charges
than Class B shares, your total returns will automatically rise after the
conversion. Conversions started earlier this year and will occur each calendar
quarter -- beginning in December, 1995, they'll take place every March, June,
September and December.
I hope you'll find this information useful as you work with your financial
advisor or registered representative to develop your personal investment plan.
Thank you for choosing Prudential Mutual Funds for your mutual fund investment.
Sincerely,
Richard A. Redeker
President
2
<PAGE>
Portfolio of Investments as
of June 30, 1995 (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's
Interest Maturity Amount Value
Description(a) Rating
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
-----------------------------------------------------------------------------
-------------------------------------------------
LONG-TERM INVESTMENTS--91.0%
-----------------------------------------------------------------------------
-------------------------------------------------
Alabama--1.2%
Courtland Ind. Dev. Brd. Rev., Champion Int'l. Corp.,
Ser. A Baa1
7.20% 12/01/13 $ 6,000 $ 6,414,360
Solid Waste Disp. Rev. Baa1
5.90 2/01/17 2,000 1,892,640
------------
8,307,000
-----------------------------------------------------------------------------
-------------------------------------------------
Arizona--1.7%
Pima Cnty. Unified Sch. Dist., No. 1, Tuscon, F.G.I.C. Aaa
7.50 7/01/10 3,000@ 3,580,230
Tucson, Gen. Oblig.,
Ser. A A1
7.375 7/01/11 1,000 1,161,640
Ser. A A1
7.375 7/01/12 1,100 1,287,033
Ser. A A1
7.375 7/01/13 4,500 5,279,850
------------
11,308,753
-----------------------------------------------------------------------------
-------------------------------------------------
California--5.6%
Foothill/Eastern Trans. Corr. Agcy., Toll Rd. BBB-*
Zero 1/01/20 10,000 1,767,200
Glendale Redev. Agcy. Tax Alloc. Rev., Central Glendale Redev.
Proj., A.M.B.A.C. Aaa
5.50 12/01/13 2,400 2,282,568
Los Angeles Metro Trans. Auth., Sales Tax Rev., F.G.I.C., Ser.
A Aaa
5.00 7/01/21 5,000 4,304,650
San Bernardino Cnty., Cert. of Part., Med. Ctr. Fin. Proj.,
Ser. A, M.B.I.A. Aaa
5.50 8/01/22 10,000 9,196,400
San Jose Redev. Proj., Tax Alloc., M.B.I.A. Aaa
6.00 8/01/11 5,000 5,124,400
Santa Margarita/Dana Point Auth., M.B.I.A.,
Impvt. Dists. 3-3A-4 + 4A Aaa
7.25 8/01/09 2,000 2,301,520
Impvt. Dists. 3-3A-4 + 4A Aaa
7.25 8/01/10 2,450 2,822,596
Impvt. Dists. 3-3A-4 + 4A Aaa
7.25 8/01/14 2,000 2,306,640
So. Orange Cnty. Pub. Fin. Auth., F.G.I.C.,
Foothill Area Proj. Aaa
8.00 8/15/09 3,650 4,472,746
Foothill Area Proj. Aaa
6.50 8/15/10 2,000 2,158,460
West Contra Costa Sch. Dist., Cert. of Part. Ba
7.125 1/01/24 1,600 1,638,560
------------
38,375,740
-----------------------------------------------------------------------------
-------------------------------------------------
Colorado--3.1%
Colorado Hsg. Fin. Auth.,
Sngl. Fam. Prog. Aa
8.00 6/01/25 5,000 5,681,250
Sngl. Fam. Prog. Aa
7.90 12/01/25 3,000 3,382,890
Colorado Springs Arpt. Rev., A.M.T.,
Ser. A BBB*
6.90 1/01/12 3,700 3,803,674
Ser. A BBB*
7.00 1/01/22 7,960 8,182,004
------------
21,049,818
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 3 -----
<PAGE>
<PAGE>
Portfolio of Investments as
of June 30, 1995 (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's
Interest Maturity Amount Value
Description(a) Rating
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
-----------------------------------------------------------------------------
-------------------------------------------------
Connecticut--0.3%
Connecticut St. Spec. Tax Oblig. Rev., Trans. Infrastructure,
Ser. A. A1
7.125% 6/01/10 $ 2,000 $ 2,283,680
-----------------------------------------------------------------------------
-------------------------------------------------
Florida--3.4%
Broward Cnty. Res. Rec. Rev., Broward Waste Energy, L.P.
South. A
7.95 12/01/08 13,645 14,967,883
Florida St. Brd. Ed.,
Cap. Outlay Aa
9.125 6/01/14 1,260 1,719,371
Cap. Outlay, E.T.M. Aa
9.125 6/01/14 195 271,693
Hillsborough Cnty. Ind. Dev. Auth., Poll. Ctrl. Rev, Tampa
Elec. Proj. Aa2
8.00 5/01/22 5,000 5,892,500
------------
22,851,447
-----------------------------------------------------------------------------
-------------------------------------------------
Georgia--3.4%
Atlanta Urban Res. Fin. Auth., Clark Atlanta Univ. Dorm. Proj. NR
9.25 6/01/10 4,655D 5,620,214
Atlanta Wtr. & Swr. Rev. Aa
6.00 1/01/11 4,410 4,494,805
Burke Cnty. Dev. Auth., Oglethorpe Pwr. Corp., 1st Mtg.,
M.B.I.A. Aaa
8.00 1/01/22 5,000 5,918,000
Georgia St. Res. Fin. Auth., Sngl. Fam. Insured Mtge., Ser.
C-C1 Aa
8.00 12/01/16 6,550 7,073,738
------------
23,106,757
-----------------------------------------------------------------------------
-------------------------------------------------
Illinois--0.2%
Kane & De Kalb Cntys. Illinois Cmnty. Unit Sch., A.M.B.A.C.,
Dist. No. 301 Aaa
Zero 12/01/10 3,055 1,182,713
Dist. No. 301 Aaa
Zero 12/01/14 1,600 473,440
------------
1,656,153
-----------------------------------------------------------------------------
-------------------------------------------------
Indiana--2.0%
Indianapolis Int'l. Arpt. Auth. Rev., A.M.T.,
Federal Express Corp. Proj. Baa2
7.10 1/15/17 9,000 9,319,860
United Air Lines Proj., Ser. A Baa2
6.50 11/15/31 4,250 4,037,500
------------
13,357,360
-----------------------------------------------------------------------------
-------------------------------------------------
Kentucky--1.8%
Henderson Cnty. Solid Waste Disp. Rev., Macmillan Bloedel
Proj., A.M.T. Baa2
7.00 3/01/25 6,000 6,222,060
Jefferson Cnty. Poll. Ctrl. Rev., Louisville Gas & Elec., Ser.
A, 1st Mtg., A.M.T. Aa2
7.75 2/01/19 5,700 6,194,247
------------
12,416,307
-----------------------------------------------------------------------------
-------------------------------------------------
Louisiana--4.2%
New Orleans, Louisiana Cap. Apprec., A.M.B.A.C. Aaa
Zero 9/01/09 13,500 5,777,730
Orleans Parish, Sch. Brd., E.T.M., M.B.I.A. Aaa
8.90 2/01/07 5,780 7,575,673
</TABLE>
--------------------------------------------------------------------------------
----- 4 See Notes to Financial Statements.
<PAGE>
<PAGE>
Portfolio of Investments as
of June 30, 1995 (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's
Interest Maturity Amount Value
Description(a) Rating
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
-----------------------------------------------------------------------------
-------------------------------------------------
Louisiana (cont'd.)
St. Charles Parish, Louisiana Pwr. & Lt. Co., 1st Mtg., A.M.T. Baa2
6.875% 7/01/24 $ 5,000 $ 5,114,150
St. Charles Parish, Poll. Ctrl. Rev.,
Louisiana Pwr. & Lt. Co. NR
8.25 6/01/14 4,000 4,412,680
Louisiana Pwr. & Lt. Co., Ser. 1989 Baa3
8.00 12/01/14 5,000 5,502,600
------------
28,382,833
-----------------------------------------------------------------------------
-------------------------------------------------
Maryland--2.3%
Maryland St. Hlth. & Higher Ed. Facs., Auth. Rev.,
Doctor's Comm. Hosp. Baa
5.50 7/01/24 4,000 3,180,880
Univ. of Maryland Med. Ctr., F.G.I.C. Aaa
5.00 7/01/20 4,400 3,778,060
Francis Scott Key Med. Ctr., F.G.I.C. Aaa
5.00 7/01/18 5,000 4,341,200
Northeast Waste Disp. Auth., Baltimore City Sludge Compositing
Fac. NR
7.25 7/01/07 4,096 4,181,483
------------
15,481,623
-----------------------------------------------------------------------------
-------------------------------------------------
Michigan--2.3%
Dickinson Cnty. Economic Dev. Auth., Poll. Ctrl. Rev.,
Champion Int'l. Corp. Proj. Baa1
5.85 10/01/18 4,000 3,726,040
Holland Sch. Dist., A.M.B.A.C. Aaa
Zero 5/01/12 4,000 1,419,240
Michigan St. Hsg. Dev. Auth. Rev.,
Rental Hsg., Ser. B A*
7.55 4/01/23 1,000 1,067,400
Sngl. Fam. Mtge., Ser. A AA*
7.50 6/01/15 5,185 5,527,625
Sngl. Fam. Mtge., Ser. D, A.M.T. AA*
7.75 12/01/19 3,130 3,331,165
Okemos Pub. Sch. Dist., M.B.I.A.,
Cnty. of Ingham Aaa
Zero 5/01/12 1,100 390,291
Cnty. of Ingham Aaa
Zero 5/01/13 1,700 564,247
------------
16,026,008
-----------------------------------------------------------------------------
-------------------------------------------------
Minnesota--0.6%
Southern Mun. Pwr. Agcy., Pwr. Supply Sys. Rev., M.B.I.A. Aaa
Zero 1/01/21 9,950 2,122,833
St. Louis Park Hlth. Care Facs. Rev., Hlth. Sys. Oblig. Group,
Ser. A, A.M.B.A.C. Aaa
5.20 7/01/23 2,045 1,816,798
------------
3,939,631
-----------------------------------------------------------------------------
-------------------------------------------------
Nevada--0.7%
Clark Cnty. Southwest Gas Corp., Ser. A, A.M.T. Baa3
6.50 12/01/33 5,000 4,769,850
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 5 -----
<PAGE>
<PAGE>
Portfolio of Investments as
of June 30, 1995 (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's
Interest Maturity Amount Value
Description(a) Rating
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
-----------------------------------------------------------------------------
-------------------------------------------------
New Jersey--6.4%
Bergen Cnty. Util. Auth., Wtr. Poll. Ctrl. Rev., F.G.I.C.,
Ser. B Aaa
Zero 12/15/07 $7,640 $3,886,162
Ser. B Aaa
Zero 12/15/09 4,695 2,071,481
Camden Cnty. Poll. Ctrl. Fin. Auth., Solid Waste Res. Rec.
Rev., Ser. B, A.M.T. Ba
7.50% 12/01/09 2,600 2,636,946
Hudson Cnty. Impvt. Auth., Solid Waste Sys. BBB-*
7.10 1/01/20 7,000 6,896,120
New Jersey St. Hsg. & Mtge. Fin. Agcy., A.M.T., M.B.I.A. Aaa
7.70 10/01/29 3,420 3,627,218
New Jersey St. Tpke. Auth. Rev.,
Ser. A A
6.75 1/01/08 3,000 3,230,910
Ser. C, M.B.I.A. Aaa
6.50 1/01/16 10,000 10,820,500
Ser. C, F.S.A. Aaa
6.50 1/01/16 2,500 2,705,125
New Jersey Waste Wtr.Treat., Trust Loan Rev. Aa
6.875 6/15/09 2,000 2,186,820
Union Cnty. Utils. Auth., Solid Waste Rev., Ser. A, A.M.T. A-*
7.10 6/15/06 5,500 5,668,575
------------
43,729,857
-----------------------------------------------------------------------------
-------------------------------------------------
New York--12.6%
New York City, Gen. Oblig.,
Ser. F Baa1
8.25 11/15/02 5,000 5,688,200
Ser. D Baa1
8.00 8/01/03 3,500 3,921,190
Ser. D Baa1
8.00 8/01/04 1,500 1,687,080
Ser. A Baa1
7.75 8/15/04 2,000 2,225,060
Ser. B Baa1
8.25 6/01/06 1,500 1,751,025
Ser. D Baa1
7.65 2/01/07 5,000 5,437,000
New York City, Mun. Wtr. Fin. Auth., Wtr. & Swr. Sys. Rev.,
F.G.I.C. Aaa
6.75 6/15/16 21,250 22,838,437
New York St. Dorm. Auth. Rev., St. Univ. Edl. Facs., Ser. A Baa1
5.50 5/15/13 5,725 5,243,070
New York St. Environmental Facs. Corp., Poll. Ctrl. Rev. Aa
5.75 6/15/12 5,000 4,883,500
New York St. Local Gov't. Assist. Corp.,
Ser. C A
Zero 4/01/13 6,750 2,251,935
Ser. O A
6.00 4/01/14 5,500 5,733,200
New York St. Urban Dev. Corp. Rev., F.S.A.,
Corr. Facs. Aaa
6.50 1/01/09 3,000 3,256,380
Corr. Facs. Aaa
5.50 1/01/14 3,000 2,827,260
Port Auth. of New York & New Jersey, Ser. 91 A1
5.20 11/15/16 5,000 4,488,050
Triborough Bridge & Tunl. Auth., M.B.I.A.,
Ser. X Aaa
6.625 1/01/12 8,500 9,266,870
Ser. A Aaa
5.00 1/01/15 5,000 4,471,900
------------
85,970,157
-----------------------------------------------------------------------------
-------------------------------------------------
North Carolina--1.0%
Charlotte, Cert. of Part., Ref. Conv. Fac. Proj., Ser. C.,
A.M.B.A.C. Aaa
5.00 12/01/21 8,000 6,936,400
</TABLE>
--------------------------------------------------------------------------------
----- 6 See Notes to Financial Statements.
<PAGE>
<PAGE>
Portfolio of Investments as
of June 30, 1995 (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's
Interest Maturity Amount Value
Description(a) Rating
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
-----------------------------------------------------------------------------
-------------------------------------------------
North Dakota--0.8%
Mercer Cnty., Antelope Valley Station, A.M.B.A.C. Aaa
7.20% 6/30/13 $5,000 $5,745,200
-----------------------------------------------------------------------------
-------------------------------------------------
Ohio--3.3%
Cleveland Pub. Pwr. Sys. Rev., First Mgte., Ser. A, M.B.I.A. Aaa
Zero 11/15/10 2,685 1,080,310
Ohio Mun. Elec. Generation Agcy., A.M.B.A.C. Aaa
5.375 2/15/24 5,230 4,765,105
Ohio St. Wtr. Dev. Auth. Poll. Ctrl. Fac. Rev., Buckeye Pwr.
Inc. Proj., A.M.B.A.C. Aaa
7.80 11/01/14 13,500 16,507,395
------------
22,352,810
-----------------------------------------------------------------------------
-------------------------------------------------
Oklahoma--2.9%
Tulsa Mun. Arpt. Trust Rev., American Airlines, Inc., A.M.T. Baa2
7.375 12/01/20 19,000 19,649,230
-----------------------------------------------------------------------------
-------------------------------------------------
Pennsylvania--3.9%
Allegheny Cnty. Arpt. Rev., Greater Pittsburgh Int'l. Arpt.,
Ser. C, M.B.I.A., A.M.T. Aaa
8.25 1/01/16 8,535 9,397,376
Pennsylvania St. Univ., Gen. Oblig. A1
5.50 8/15/16 6,000 5,615,580
Philadelphia Wtr. & Waste Auth. Rev.,
M.B.I.A. Aaa
6.25 8/01/07 4,840 5,192,546
M.B.I.A. Aaa
6.25 8/01/09 3,400 3,599,512
M.B.I.A. Aaa
6.25 8/01/11 2,500 2,627,175
------------
26,432,189
-----------------------------------------------------------------------------
-------------------------------------------------
Puerto Rico--9.9%
Puerto Rico Comnwlth., M.B.I.A. Aaa
5.25 7/01/18 5,000 4,605,400
Puerto Rico Elec. Pwr. Auth.,
Pwr. Rev., Ser. S Baa1
7.00 7/01/07 2,500 2,745,475
Pwr. Rev., C.G.I.C. Aaa
6.125 7/01/08 1,500 1,591,995
Pwr. Rev., Ser. S Baa1
6.125 7/01/08 1,050 1,065,508
Puerto Rico Hwy. & Trans. Auth. Rev.,
Ser. T Baa1
6.625 7/01/12 4,460 4,639,114
Ser. V Baa1
6.625 7/01/12 4,000 4,160,640
Ser. W, F.S.A. Aaa
5.25 7/01/20 2,900 2,634,012
Ser.W Baa1
5.25 7/01/20 4,000 3,534,000
Ser. X, F.S.A. Aaa
5.25 7/01/21 4,000 3,646,560
Ser. X, F.S.A. Aaa
5.00 7/01/22 1,400 1,227,422
Puerto Rico Public Bldgs. Auth. Rev. Baa1
5.60 7/01/08 5,000 4,909,550
Puerto Rico Public Bldgs. Auth. Rev.,
F.S.A. Aaa
5.75 7/01/10 5,065 5,125,932
A.M.B.A.C. Aaa
5.75 7/01/15 9,200 9,060,252
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 7 -----
<PAGE>
<PAGE>
Portfolio of Investments as
of June 30, 1995 (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's
Interest Maturity Amount Value
Description(a) Rating
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
-----------------------------------------------------------------------------
-------------------------------------------------
Puerto Rico (cont'd.)
Puerto Rico Tel. Auth. Rev., M.B.I.A.,
Ser. I Aaa
5.25% 1/25/07 $8,200 $8,108,898
Ser. I Aaa
5.45 1/16/15 7,600 7,352,848
Univ. of Puerto Rico Sys. Rev., Cap. Apprec., Ser. N, M.B.I.A. Aaa
Zero 6/01/11 6,865 2,784,238
------------
67,191,844
-----------------------------------------------------------------------------
-------------------------------------------------
South Carolina--2.1%
Charleston Waterworks & Swr. Rev., E.T.M. Aaa
10.375 1/01/10 7,415 9,901,769
Piedmont Mun. Pwr. Agcy., Elec. Rev., F.G.I.C. Aaa
6.75 1/01/19 4,300 4,697,793
------------
14,599,562
-----------------------------------------------------------------------------
-------------------------------------------------
Tennessee--1.6%
Bristol Tenn. Hlth. & Ed. Fac. Brd. Rev., Bristol Memorial
Hosp., F.G.I.C. Aaa
6.75 9/01/10 5,000 5,538,600
Mcminn Cnty. Ind. Dev. Rev., Bowater Inc., A.M.T. Baa1
7.40 12/01/22 5,000 5,298,500
------------
10,837,100
-----------------------------------------------------------------------------
-------------------------------------------------
Texas--7.5%
Alliance Arpt. Auth. Inc., Spec. Facs Rev., American Airlines
Proj., A.M.T. Baa2
7.50 12/01/29 1,500 1,561,170
Austin Combined Util. Sys. Rev., Ser. B88 A
7.75 11/15/08 5,400 5,927,688
Dallas Ft. Worth, Regl. Arpt. Rev., F.G.I.C.,
Ser. A Aaa
7.375 11/01/08 3,500 4,002,775
Ser. A Aaa
7.375 11/01/09 3,500 3,989,510
Harris Cnty. Hlth. Facs. Dev. Corp., Spec. Facs. Rev., Texas
Med. Ctr. Hosp., M.B.I.A. Aaa
7.25 5/15/07 4,100 4,535,543
Harris Cnty., Toll Rd., F.G.I.C. Aaa
5.00 8/15/16 3,000 2,636,640
New Braunfels Indpt. Sch. Dist., Gen. Oblig.,
Cap. Appre. Aaa
Zero 2/01/10 2,335 959,638
Cap. Appre. Aaa
Zero 2/01/11 2,365 910,360
Northwest Indpt. Sch. Dist., Cap. Apprec., A.M.B.A.C. Aaa
Zero 8/15/12 4,890 1,704,458
San Antonio Texas Elec. & Gas Rev.,
Ser. B, F.G.I.C. Aaa
Zero 2/01/09 5,000 2,216,000
Ser. A Aa
5.00 2/01/16 4,055 3,561,588
Texas Mun. Pwr. Agcy. Rev., M.B.I.A Aaa
Zero 9/01/14 9,980 3,033,321
Texas Wtr. Res. Fin. Auth. Rev. A
7.625 8/15/08 11,970 12,648,220
Univ. Texas Univ. Rev., Fin. Sys., Ser. B Aa
6.75 8/15/13 3,000 3,238,860
------------
50,925,771
</TABLE>
--------------------------------------------------------------------------------
----- 8 See Notes to Financial Statements.
<PAGE>
<PAGE>
Portfolio of Investments as
of June 30, 1995 (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's
Interest Maturity Amount Value
Description(a) Rating
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
-----------------------------------------------------------------------------
-------------------------------------------------
Virginia--3.0%
Henrico Cnty. Ind. Dev. Auth. Rev., Secours Hlth. Sys., St.
Mary's Proj.,
Ser. B A1
7.50% 9/01/07 $10,100 $11,202,314
Prince William Cnty. Va. Park Auth. Rev. A
7.50 7/15/20 4,570 5,037,191
West Point Ind. Dev., Chesapeake Corp. Baa3
6.25 3/01/19 4,000 3,874,840
------------
20,114,345
-----------------------------------------------------------------------------
-------------------------------------------------
Washington--3.2%
Washington St., Gen. Oblig. Aa
5.50 5/01/18 2,705 2,547,353
Washington St. Pub. Pwr. Supply Sys. Rev.,
Nuclear Proj. No. 2, Ser. A, M.B.I.A. Aaa
Zero 7/01/06 6,000 3,174,600
Nuclear Proj. No. 2, Ser. A, F.S.A. Aaa
7.25 7/01/06 2,000 2,271,900
Nuclear Proj. No. 3, Ser. B, F.G.I.C. Aaa
Zero 7/01/06 5,000 2,645,500
Nuclear Proj. No. 1, Ser. A, F.S.A. Aaa
7.00 7/01/08 4,000 4,461,240
Nuclear Proj. No. 1, Ser. B, F.S.A. Aaa
7.25 7/01/09 5,000 5,709,400
Nuclear Proj. No. 3 Aa
Zero 7/01/17 5,500 1,273,690
------------
22,083,683
------------
Total Long-Term Investments (cost $594,680,171)
619,881,108
-----------------------------------------------------------------------------
-------------------------------------------------
SHORT-TERM INVESTMENTS--4.8%
District Of Columbia--0.3%
Dist. of Columbia Rev., Gen. Oblig., Ser. 92A-4, F.R.D.D. VMIG1
4.40 7/03/95 2,000 2,000,000
-----------------------------------------------------------------------------
-------------------------------------------------
Florida--0.3%
Manatee Cnty. Hsg. Fin. Auth., Sngl. Fam. Mtge. Rev., Ser. 94 MIG1
3.87 7/17/95 2,200 2,200,000
-----------------------------------------------------------------------------
-------------------------------------------------
Iowa--0.9%
Iowa Fin. Auth. Solid Waste Disp. Rev. Cedar River Paper Co.
Proj.,
Ser. 93A, F.R.D.D. A1+*
4.45 7/03/95 6,000 6,000,000
-----------------------------------------------------------------------------
-------------------------------------------------
Texas--3.2%
Brazos River Auth., Poll. Ctrl. Rev., Elec. Co., Ser. 95C,
F.R.D.D. VMIG1
4.35 7/03/95 5,800 5,800,000
Gulf Coast Ind. Dev. Auth., Citgo Petroleum, Ser. 95, F.R.D.D. VMIG1
4.40 7/03/95 15,900 15,900,000
------------
21,700,000
-----------------------------------------------------------------------------
-------------------------------------------------
Wyoming--0.1%
Lincoln Cnty. Poll. Ctrl. Rev., Exxon Corp. Project, Ser. 87B,
F.R.D.D. P-1
4.35 7/03/95 500 500,000
------------
Total Short-Term Investments (cost $32,400,000)
32,400,000
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 9 -----
<PAGE>
PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
(Note 1)
<S> <C>
<C> <C> <C> <C>
-----------------------------------------------------------------------------
-------------------------------------------------
Total Investments--95.8% (cost $627,080,171; Note 4)
$652,281,108
Other assets in excess of liabilities--4.2%
28,812,941
------------
Net Assets--100%
$681,094,049
------------
------------
</TABLE>
---------------
(a) The following abbreviations are used in portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation
A.M.T.--Alternative Minimum Tax
C.G.I.C.--Capital Guaranty Insurance Corporation
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.
** For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be the later of the next date on which the
security can be redeemed at par or the next date on which the rate of
interest is adjusted.
@ 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>
<PAGE>
Statement of Assets and
Liabilities (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<S>
<C>
Assets
June 30, 1995
-------------
Investments, at value (cost
$627,080,171)...................................................................
$652,281,108
Cash.........................................................................
............................... 125,020
Receivable for investments
sold.........................................................................
.... 21,053,284
Interest
receivable...................................................................
...................... 11,532,235
Receivable for Fund shares
sold.........................................................................
.... 85,665
Due from Broker-variation
margin.......................................................................
..... 50,000
Deferred expenses and other
assets..........................................................................
30,179
-------------
Total
assets.......................................................................
...................... 685,157,491
-------------
Liabilities
Payable for investments
purchased....................................................................
....... 1,634,527
Payable for Fund shares
reacquired...................................................................
....... 1,343,834
Dividends
payable......................................................................
..................... 674,725
Management fee
payable......................................................................
................ 244,773
Distribution fee
payable......................................................................
.............. 124,113
Accrued
expenses.....................................................................
....................... 41,470
-------------
Total
liabilities..................................................................
...................... 4,063,442
-------------
Net
Assets.......................................................................
........................... $681,094,049
-------------
-------------
Net assets were comprised of:
Common stock, at
par..........................................................................
........... $ 446,924
Paid-in capital in excess of
par.........................................................................
671,859,070
-------------
672,305,994
Accumulated net realized loss on
investments.............................................................
(16,254,382 )
Net unrealized appreciation on
investments...............................................................
25,042,437
-------------
Net assets, June 30,
1995.........................................................................
....... $681,094,049
-------------
-------------
Class A:
Net asset value and redemption price per share
($482,613,726 / 31,690,006 shares of common stock issued and
outstanding)............................. $15.23
Maximum sales charge (3.0% of offering
price)............................................................
.47
-------------
Maximum offering price to
public.........................................................................
$15.70
Class B:
Net asset value, offering price and redemption price per share
($198,229,654 / 12,985,987 shares of common stock issued and
outstanding)............................. $15.26
Class C:
Net asset value, offering price and redemption price per share
($250,669 / 16,421 shares of common stock issued and
outstanding)..................................... $15.26
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 11 -----
<PAGE>
<PAGE>
PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
Statement of Operations (Unaudited)
------------------------------------------------------------
------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
Net Investment Income 1995
-----------
<S> <C>
Income
Interest.................................... $21,595,153
-----------
Expenses
Management fee, net of waiver of $171,894... 1,468,135
Distribution fee--Class A................... 195,010
Distribution fee--Class B................... 743,429
Distribution fee--Class C................... 701
Transfer agent's fees and expenses.......... 310,000
Custodian's fees and expenses............... 96,000
Reports to shareholders..................... 35,000
Registration fees........................... 32,000
Audit fee................................... 26,000
Directors' fees............................. 19,000
Legal fees.................................. 11,000
Insurance expense........................... 9,000
Miscellaneous............................... 5,422
-----------
Total expenses........................... 2,950,697
-----------
Net investment income.......................... 18,644,456
-----------
Net Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions..................... 10,414,894
Financial futures contracts................. (2,989,000)
-----------
7,425,894
-----------
Net change in unrealized
appreciation/depreciation of:
Investments................................. 30,550,723
Financial futures contracts................. (204,031)
-----------
30,346,692
-----------
Net gain on investment transactions............ 37,772,586
-----------
Net Increase in Net Assets
Resulting from Operations...................... $56,417,042
-----------
-----------
</TABLE>
PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year Ended
Increase (Decrease) Ended December 31,
in Net Assets June 30, 1995 1994
------------- -------------
<S> <C> <C>
Operations
Net investment income........ $ 18,644,456 $ 38,071,772
Net realized gain (loss) on
investment transactions... 7,425,894 (23,690,364)
Net change in unrealized
appreciation
(depreciation) of
investments............... 30,346,692 (68,066,766)
------------- -------------
Net increase (decrease) in
net assets resulting from
operations................ 56,417,042 (53,685,358)
------------- -------------
Dividends and distributions
(Note 1)
Dividends from net investment
income
Class A................... (10,991,883) (758,853)
Class B................... (7,647,900) (37,310,847)
Class C................... (4,673) (2,072)
------------- -------------
(18,644,456) (38,071,772)
------------- -------------
Distributions from net
realized gains
Class A................... -- (95,056)
Class B................... -- (5,131,497)
------------- -------------
-- (5,226,553)
------------- -------------
Fund share transactions (net of
share conversions) (Note 5)
Net proceeds from shares
sold...................... 61,261,875 86,309,362
Net asset value of shares
issued
in reinvestment of
dividends
and distributions......... 10,946,409 27,093,049
Cost of shares reacquired.... (114,020,716) (193,751,516)
------------- -------------
Decrease in net assets from
Fund share transactions... (41,812,432) (80,349,105)
------------- -------------
Total decrease.................. (4,039,846) (177,332,788)
Net Assets
Beginning of period............. 685,133,895 862,466,683
------------- -------------
End of period................... $ 681,094,049 $ 685,133,895
------------- -------------
------------- -------------
</TABLE>
--------------------------------------------------------------------------------
----- 12 See Notes to Financial Statements.
<PAGE>
<PAGE>
Notes to Financial
Statements (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
--------------------------------------------------------------------------------
Prudential National Municipals Fund, Inc. (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 Policies
The following is a summary of significant accounting policies 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 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. When the contract expires or is closed, the gain or loss is realized and
is presented in the statement of operations as net realized gain(loss) on
financial futures contracts.
The Fund invests in financial futures contracts in order to hedge its existing
portfolio securities, or securities the Fund intends to purchase, against
fluctuations in value caused by changes in prevailing interest rates. Should
interest rates 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>
Notes to Financial
Statements (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
--------------------------------------------------------------------------------
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. Effective January 1, 1995,
PMF has agreed to waive a portion (.05 of 1% of the Fund's average daily net
assets) of its management fee which amounted to $171,894 ($0.004 per share for
Class A, B and C shares; .05% of averge net assets). The Fund is not required
to
reimburse PMF for such waiver.
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 and Class C shares of the Fund (collectively the
``Distributors''). The Fund compensates the Distributors for distributing and
servicing the Fund's Class A, Class B and Class C shares, pursuant to plans of
distribution (the ``Class A, B and C Plans''), regardless of expenses actually
incurred by them. The distribution fees are accrued daily and payable monthly.
Pursuant to the Class A, B and C Plans, the Fund compensates the Distributors
for distribution-related activities at an annual rate of up to .30 of 1%, .50
of
1% and 1%, of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Plans were .10 of 1%, .50 of 1% and .75
of
1% of the average daily net assets of the Class A, B and C shares, respectively,
for the six months ended June 30, 1995.
PMFD has advised the Fund that it has received approximately $13,300 in
front-end sales charges resulting from sales of Class A shares during the six
months ended June 30, 1995. From these fees, PMFD paid such sales charges to PSI
and Pruco Securities Corporation, affiliated broker-dealers, which in turn paid
commissions to salespersons and incurred other distribution costs.
PSI has advised the Fund that for the six months ended June 30, 1995, it
received approximately $226,100 in contingent deferred sales charges imposed
upon certain redemptions by Class B shareholders.
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 Transactions with Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and during the six months ended June
30, 1995, the Fund incurred fees of approximately $224,100 for the services of
PMFS. As of June 30, 1995, $37,300 of such fees were due to PMFS. Transfer agent
fees and expenses in the Statement of Operations include certain out-of-pocket
expenses paid to non-affiliates.
------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the six months ended June 30, 1995, were $347,299,886 and $375,277,244,
respectively.
At June 30, 1995, the Fund sold 150 financial futures contracts on the Municipal
Bond Index which expire in September, 1995. The value at disposition of such
contracts is $17,188,188. The value of such contracts on June 30, 1995 was
$17,029,688, thereby resulting in an unrealized loss of $158,500. The Fund has
pledged $3,000,000 principal amount of Pima County Unified School District Bonds
as initial margin on such contracts.
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,
1995, net unrealized appreciation for federal income tax purposes was
$25,200,937 (gross unrealized appreciation--$28,074,406 gross unrealized
depreciation--$2,873,469).
For federal income tax purposes, the Fund has a capital loss carryforward as of
December 31, 1994 of approximately $19,372,500 which expires in 2002.
Accordingly, no capital gains distribution is expected to be paid until net
gains have been realized in excess of such amount.
The Fund will elect to treat net capital losses of approximately $3,999,200
incurred in the two month period ended December 31, 1994 as having been incurred
in the following fiscal year.
------------------------------------------------------------
Note 5. Capital
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge of up to 3.0%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Class C shares are sold with a contingent
deferred sales charge of 1% during the first year. Class B shares will
automatically convert to Class A shares on a quarterly basis approximately seven
years after purchase.
--------------------------------------------------------------------------------
----- 14
<PAGE>
<PAGE>
Notes to Financial
Statements (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
--------------------------------------------------------------------------------
There are 750 million shares of common stock, $.01 par value, per share, divided
into three classes, designated Class A, Class B and Class C 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, 1995:
Shares sold...................... 3,445,052 $ 51,685,578
Shares issued in reinvestment of
dividends...................... 424,805 6,488,026
Shares reacquired................ (5,372,877) (81,131,086)
----------- -------------
Net decrease in shares
outstanding before
conversion..................... (1,503,020) (22,957,482)
Shares issued upon conversion
from Class B................... 32,311,151 480,932,260
----------- -------------
Net increase in shares
outstanding.................... 30,808,131 $ 457,974,778
----------- -------------
----------- -------------
Year ended December 31, 1994:
Shares sold...................... 2,875,693 $ 42,583,262
Shares issued in reinvestment of
dividends and distributions.... 37,934 573,468
Shares reacquired................ (2,900,866) (42,851,546)
----------- -------------
Net increase in shares
outstanding.................... 12,761 $ 305,184
----------- -------------
----------- -------------
<CAPTION>
Class B
---------------------------------
<S> <C> <C>
Six months ended June 30, 1995:
Shares sold...................... 627,104 $ 9,478,179
Shares issued in reinvestment of
dividends...................... 296,797 4,455,705
Shares reacquired................ (2,209,349) (32,889,630)
----------- -------------
Net decrease in shares
outstanding before
conversion..................... (1,285,448) (18,955,746)
Shares reacquired upon conversion
into Class A................... (32,268,420) (480,932,260)
----------- -------------
Net decrease in shares
outstanding.................... (33,553,868) $(499,888,006)
----------- -------------
----------- -------------
Year ended December 31, 1994:
Shares sold...................... 2,885,324 $ 43,581,881
Shares issued in reinvestment of
dividends and distributions.... 1,749,682 26,518,677
Shares reacquired................ (10,042,966) (150,899,970)
----------- -------------
Net decrease in shares
outstanding.................... (5,407,960) $ (80,799,412)
----------- -------------
----------- -------------
<CAPTION>
Class C Shares Amount
--------------------------------- ----------- -------------
<S> <C> <C>
Six months ended June 30, 1995:
Shares sold...................... 6,448 $ 98,118
Shares issued in reinvestment of
dividends...................... 175 2,678
----------- -------------
Increase in shares outstanding... 6,623 $ 100,796
----------- -------------
----------- -------------
August 1, 1994* through
December 31, 1994:
Shares sold...................... 9,735 $ 144,219
Shares issued in reinvestment of
dividends...................... 63 904
----------- -------------
Increase in shares outstanding... 9,798 $ 145,123
----------- -------------
----------- -------------
</TABLE>
---------------
* Commencement of offering of Class C shares.
------------------------------------------------------------
Note 6. Proposed Reorganization
On July 25, 1995, the Directors of the Fund approved an Agreement and Plan of
Reorganization (the ``Plan'') which provides for the transfer of substantially
all of the assets and liabilities of the Prudential Municipal Series Fund;
Arizona Series, Georgia Series and Minnesota Series (``The Series'') to the
Fund. Class A, Class B shares and Class C shares of The Series would be
exchanged at net asset value for Class A, Class B and Class C shares,
respectively, of equivalent value of the Fund.
It is expected that the reorganization will take place in late October 1995. The
Fund and The Series will each bear their pro-rata share of the costs of the
reorganization, including costs of proxy solicitation.
--------------------------------------------------------------------------------
15 -----
<PAGE>
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------------
January 22,
Six Months
1990(b)
Ended Year
Ended December 31, through
June 30,
----------------------------------------- December 31,
1995 1994
1993 1992 1991 1990
<S> <C> <C> <C>
<C> <C> <C>
---------- -------
------- ------ ------ ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 14.42 $ 16.30 $
15.94 $16.00 $15.09 $14.98
---------- -------
------- ------ ------ ------
Income from investment operations
Net investment income......................... .42 .81
.90 .94 .97 .90
Net realized and unrealized gain (loss) on
investment transactions..................... .81 (1.78)
1.05 .43 .91 .11
---------- -------
------- ------ ------ ------
Total from investment operations............ 1.23 (.97)
1.95 1.37 1.88 1.01
---------- -------
------- ------ ------ ------
Less distributions
Dividends from net investment income.......... (.42) (.81)
(.90) (.94) (.97) (.90)
Distributions from net realized gains......... -- (.10)
(.69) (.49) -- --
---------- -------
------- ------ ------ ------
Total distributions......................... (.42) (.91)
(1.59) (1.43) (.97) (.90)
---------- -------
------- ------ ------ ------
Net asset value, end of period................ $ 15.23 $ 14.42 $
16.30 $15.94 $16.00 $15.09
---------- -------
------- ------ ------ ------
---------- -------
------- ------ ------ ------
TOTAL RETURN(c):.............................. 8.53% (6.04)%
12.60% 8.88% 12.94% 6.88%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $482,614 $12,721
$14,167 $7,700 $3,819 $1,846
Average net assets (000)...................... $393,252 $14,116
$11,786 $5,401 $2,697 $1,161
Ratios to average net assets:
Expenses, including distribution fees....... .69%(a) .77%
.69% .72% .75% .75%(a)
Expenses, excluding distribution fees....... .59%(a) .67%
.59% .62% .65% .65%(a)
Net investment income....................... 5.64%(a) 5.38%
5.49% 5.79% 6.27% 6.43%(a)
Portfolio turnover rate....................... 54% 120%
82% 114% 59% 110%
</TABLE>
---------------
(a) Annualized.
(b) Commencement of offering of Class A shares.
(c) 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.
--------------------------------------------------------------------------------
----- 16 See Notes to Financial Statements.
<PAGE>
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------------------
Six Months
Ended
Year Ended December 31,
June 30,
------------------------------------------------------------
1995 1994
1993 1992 1991 1990
<S> <C> <C>
<C> <C> <C> <C>
---------- --------
-------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 14.45 $ 16.33
$ 15.97 $ 16.02 $ 15.11 $ 15.15
---------- --------
-------- -------- -------- --------
Income from investment operations
Net investment income......................... .39 .75
.84 .88 .91 .90
Net realized and unrealized gain (loss) on
investment transactions..................... .81 (1.78)
1.05 .44 .91 (.04)
---------- --------
-------- -------- -------- --------
Total from investment operations............ 1.20 (1.03)
1.89 1.32 1.82 .86
---------- --------
-------- -------- -------- --------
Less distributions
Dividends from net investment income.......... (.39) (.75)
(.84) (.88) (.91) (.90)
Distributions from net realized gains......... -- (.10)
(.69) (.49) -- --
---------- --------
-------- -------- -------- --------
Total distributions......................... (.39) (.85)
(1.53) (1.37) (.91) (.90)
---------- --------
-------- -------- -------- --------
Net asset value, end of period................ $ 15.26 $ 14.45
$ 16.33 $ 15.97 $ 16.02 $ 15.11
---------- --------
-------- -------- -------- --------
---------- --------
-------- -------- -------- --------
TOTAL RETURN(c):.............................. 8.30% (6.39)%
12.15% 8.50% 12.42% 5.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $198,230 $672,272
$848,299 $828,702 $874,338 $882,212
Average net assets (000)...................... $299,836 $751,623
$854,919 $829,830 $862,249 $940,215
Ratios to average net assets:
Expenses, including distribution fees....... 1.08%(a) 1.17%
1.09% 1.12% 1.15% 1.13%
Expenses, excluding distribution fees....... .58%(a) .67%
.59% .62% .65% .64%
Net investment income....................... 5.14%(a) 4.96%
5.09% 5.39% 5.87% 6.03%
Portfolio turnover rate....................... 54% 120%
82% 114% 59% 110%
<CAPTION>
Class C
August 1,
Six Months 1994(b)
Ended through
June 30, December 31,
1995 1994
<S> <C> <C>
---------- ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $14.44 $15.13
----- -----
Income from investment operations
Net investment income......................... .37 .29
Net realized and unrealized gain (loss) on
investment transactions..................... .82 (.69)
----- -----
Total from investment operations............ 1.19 (.40)
----- -----
Less distributions
Dividends from net investment income.......... (.37) (.29)
Distributions from net realized gains......... -- --
----- -----
Total distributions......................... (.37) (.29)
----- -----
Net asset value, end of period................ $15.26 $14.44
----- -----
----- -----
TOTAL RETURN(c):.............................. 8.17% (2.63)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $251 $141
Average net assets (000)...................... $188 $103
Ratios to average net assets:
Expenses, including distribution fees....... 1.34%(a) 1.51%(a)
Expenses, excluding distribution fees....... .59%(a) .76%(a)
Net investment income....................... 5.00%(a) 4.84%(a)
Portfolio turnover rate....................... 54% 120%
</TABLE>
---------------
(a) Annualized.
(b) Commencement of offering of Class C shares.
(c) 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. 17 -----
<PAGE>
<PAGE>
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<PAGE>
[This page intentionally left blank]
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
Directors
Delayne Dedrick Gold
Arthur Hauspurg
Harry A. Jacobs, Jr.
Steven P. Munn
Richard A. Redeker
Louis A. Weil, III
Officers
Richard A. Redeker, President
David W. Drasnin, Vice President
Robert F. Gunia, Vice President
Grace Torres, Treasurer
Stephen M. Ungerman, Assistant 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 LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
The accompanying financial statements as of June 30, 1995 were not audited
and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
<PAGE>
The Prudential National Municipals Fund and the Lehman Bros. Index:
Comparing a $10,000 Investment.
Class A
Chart
Class B
Chart
Class C
Chart
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so an investor's shares, when redeemed, will
be worth more or less than their original cost. The charts on the right are
designed to give you an idea how much the Fund's returns can fluctuate from
year to year by measuring the best and worst years in terms of total annual
return since inception of each share class.
These graphs are furnished to you in accordance with SEC regulations. They
compare a $10,000 investment in the Prudential National Municipals Fund (Class
A, Class B and Class C) with a similar investment in the Lehman Brothers
Municipal Bond Index by portraying the initial account values at the
commencement of operations of each class, and subsequent account values at the
end of this reporting period (June 30), as measured on a quarterly basis,
beginning in 1990 for Class A shares, in 1985 for Class B shares and in 1994
for Class C shares. For purposes of the graphs, and unless otherwise indicated,
in the accompanying tables it has been assumed (a) that the maximum applicable
front-end sales charge was deducted from the initial $10,000 investment in
Class A shares; (b) the maximum applicable contingent deferred sales charge was
deducted from the value of the investment in Class B and Class C shares,
assuming full redemption on June 30, 1995; (c) all recurring fees (including
management fees) were deducted; and (d) 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 Index is a weighted index of 21,000 municipal bonds (general obligation
bonds, revenue bonds, insured bonds and prerefunded bonds) selected by Lehman
Brothers as representative of the long-term investment grade municipal bond
market. The index is unmanaged and includes the reinvestment of all dividends,
but does not reflect the payment of transaction costs and advisory fees
associated with an investment in the Fund. The securities in 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 municipal bond funds and
other indexes may portray different comparative performance.
<PAGE>
Prudential Mutual Funds
Building Your Future
On Our StrengthSM (LOGO)
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One Seaport Plaza
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