(ICON)
Prudential
National
Municipals
Fund, Inc.
SEMI
ANNUAL
REPORT
June 30, 1998
(LOGO)
<PAGE>
Prudential National Municipals Fund, Inc.
Performance At A Glance.
A bountiful supply of new municipal bonds were issued by state and local
governments to take advantage of low borrowing costs over the past six months.
Despite the large supply, we encountered difficulty finding attractively
priced, medium-quality bonds to enhance our return to you. Then too, portfolio
duration (a measure of sensitivity to changing interest rates) was not longer
than the average fund so the Prudential National Municipal Fund did not gain
as rapidly as it could have when bond prices rose. As a result, the Fund's
Class A shares returned 2.21% compared to 2.26% for the Lipper General
Municipal Average.
<TABLE>
Cumulative Total Returns1 As of 6/30/98
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A 2.21% 8.78% 32.17% (32.01) N/A 87.28% (87.04)
Class B 2.00 8.34 29.64 (29.48) 102.59% (102.34) 351.30 (350.74)
Class C 1.88 8.07 N/A N/A 28.28 (28.13)
Lipper General
Muni Average3 2.26 8.39 32.41 115.27 ***
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 6/30/98
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 5.52% 5.10% (5.07) N/A 7.33% (7.32)
Class B 3.34 5.17 (5.14) 7.32% (7.30) 8.64
Class C 7.07 N/A N/A 6.57 (6.54)
</TABLE>
<TABLE>
<CAPTION>
Distributions & Yields As of 6/30/98
Total Taxable Equivalent Yield4
Distributions 30-Day At Tax Rates Of
Paid for Six Mos. SEC Yield 36% 39.6%
<S> <C> <C> <C> <C>
Class A $0.40 4.17% 6.52% 6.90%
Class B $0.37 3.90 6.09 6.46
Class C $0.35 3.65 5.70 6.04
</TABLE>
Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
1Source: Prudential Investments Fund Management and Lipper Analytical
Services. 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 3% for Class A
shares and a declining contingent deferred sales charge (CDSC) of 5%, 4%, 3%,
2%, 1% and 1% for six years for Class B shares. Class B shares will
automatically convert to Class A shares, on a quarterly basis, approximately
seven years after purchase. Class C shares have a 1% CDSC for one year.
Without waiver of management fees and/or expense subsidization, the Fund's
cumulative and average annual total returns and yields would have been lower,
as indicated in parentheses ( ).
2Inception dates: Class A, 1/22/90; Class B, 4/25/80; and Class C, 8/1/94.
3Lipper average returns are for all funds in each share class for the six-
month, one-, five-, and ten-year periods.
4Some investors may be subject to the federal alternative minimum tax and/or
state and local taxes. Taxable equivalent yields reflect federal taxes only.
***Lipper Since Inception returns are 87.68% for Class A; 387.11% for Class B;
and 31.05% for Class C based on all funds in each share class.
How Investments Compared.
(As of 6/30/98)
(GRAPH)
U.S. General General U.S.
Growth Bond Muni Debt Taxable
Funds Funds Funds Money Funds
Source: Lipper Analytical Services. 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 returns means tolerating more risk. The greater the risk,
the larger the potential reward or loss. In addition, we've included historical
20-year average annual returns. These returns assume the reinvestment of
dividends.
U.S. Growth Funds will fluctuate a great deal. Investors have received higher
historical total returns from stocks than from most other investments. Smaller
capitalization stocks offer greater potential for long-term growth but may be
more volatile than larger capitalization stocks.
General 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 significantly) and their returns have been historically lower than
those of stock funds.
General Municipal Debt Funds invest in bonds issued by state governments,
state agencies and/or municipalities. This investment provides income that is
usually exempt from federal and state income taxes.
U.S. Taxable Money Funds attempt to preserve a constant share value; they
don't fluctuate much in price but, historically, their returns have been
generally among the lowest of the major investment categories.
<PAGE>
Peter J. Allegrini, Fund Manager
(PHOTO)
Portfolio
Manager's Report
We invest in carefully selected, medium-quality, long-term municipal bonds
that offer a high level of current income that is exempt from federal income
taxes. These bonds are varied among the states, maturities and types of
activity they support. There can be no assurance that the Fund will achieve
its investment objective.
A Record Breaker?
Municipal bond issuance in 1998 could surpass the record $292.2 billion sold
in 1993. Half of that total has already been issued in the first six months
of this year. With long-term interest rates expected to linger at low levels
as U.S. economic growth moderates, state and local governments could easily
sell enough bonds in the second half of the year to beat the record tally.
Strategy Session.
When It Rains...
Investors fleeing a worsening economic crisis in Asia and domestic stock
market volatility purchased U.S. Treasuries, which sent the 30-year bond
yield tumbling in June to its lowest level since regular sales of the
securities began in 1977. (Yields fall as bond prices rise and vice versa.)
Indeed the 30-year bond yield hovered near rock-bottom levels throughout the
first half of 1998, which helped keep a lid on municipal bond yields.
Savvy state and local governments took advantage of the low borrowing costs
by issuing $146.4 billion of long-term, tax-exempt bonds in the first six
months of the year, a whopping 51% increase over the comparable period in
1997. Most notably, the Long Island Power Authority sold $3.4 billion of bonds
in May, the largest municipal debt issue in the history of the market.
Proceeds from some of the new, lower interest rate bonds were used to
prerefund or arrange for the early retirement of older bonds with higher
interest rates. This strategy enabled state and local governments to lower
their borrowing costs even more. Meanwhile, as a result of being prerefunded,
prices of the older bonds climbed sharply because the bonds became backed by
direct U.S. government obligations.
The heavy supply of new debt, among other factors, caused municipal bonds to
cheapen relative to Treasuries. For example, the yield ratio of 30-year Aaa-
rated insured tax-exempt securities to 30-year Treasuries stood at 93% on
June 30, the widest since the data began to be compiled in January 1989,
according to the Bond Buyer newspaper. Tax-exempt securities returned 2.69%
for the six-month period, based on a Lehman Brothers' Index.
Portfolio Composition
Sectors expressed as a percentage of
total investments as of 6/30/98
(PIE CHART)
<PAGE>
What Went Well.
Prerefunded and Noncallable.
The Fund benefited when some of its bonds increased in value after being
prerefunded. As you remember, bonds that are prerefunded become backed by
direct obligations of the U.S. government, which significantly improves their
credit quality and prices. In fact, credit rating agencies such as Standard
and Poor's often award prerefunded bonds their highly prized AAA rating.
Prerefunded bonds accounted for as much as 8.6% of the Fund's total investments
during the reporting period.
Noncallable bonds perform well when the tax-exempt market rallies because they
are free to appreciate in value without the risk of being retired prior to
maturity. Nearly 48% of the Fund's total investments were in noncallable bonds
as of June 30, 1998. Some of our noncallable bonds were also zero coupon bonds
that also gained nicely because they typically trade at deep discounts to their
maturity value.
And Not So Well.
Needle In A Haystack.
The Bond Buyer Revenue Bond Index, a widely watched barometer of municipal
yields, remained below 5.60% during the first half of the year. Finding
municipal bonds with solid yields when interest rates are this low can prove
challenging because investors compete fiercely for these attractively priced
securities.
Your Fund is principally invested in medium-quality bonds such as those rated
BBB. Demand for these bonds was so great that their yields (which move in the
opposite direction of prices) fell more in line with yields on bonds rated
AAA. Over the past six months, BBB-rated bonds comprised less than 25% of the
Fund's total investments. Owning more would have boosted the Fund's returns
because these bonds appreciated in value and provided a good stream of
interest income.
The Fund could have also performed better when bonds rallied if we had
maintained a longer-than-average duration.
Five Largest Issuers.
3.3% Tulsa Municipal
Airport Trust Revenue
2.7% Metro Pier & Expo Authority
2.4% Ohio Water Development Authority
2.1% NJ Tpke. Auth. Rev.
1.9% NY City Muni Water Finance Authority
Expressed as a percentage of net assets as of 6/30/98.
Looking Ahead.
We expect the Federal Reserve to leave monetary policy unchanged for the
remainder of the year. Concerns about mounting wage pressures and potentially
higher commodity prices are offset by the fact that continued Asian financial
problems caused U.S. economic growth to slow. Under these conditions, the
Federal Reserve has little reason to act. If monetary policy holds steady as
expected and the U.S. Treasury keeps paying down debt, Treasuries could
rally further and municipal bonds would go along for the ride.
Credit Quality.
Expressed as a percentage of
total investments as of 6/30/98.
(PIE CHART)
- -------------------------------------------------------------------------------
1
<PAGE>
President's Letter August 4, 1998
(PHOTO)
Managing Expectations.
Dear Shareholder:
For nearly eight years we've enjoyed above-average, double-digit returns from
stocks--a bull market of unprecedented duration. As a result, many of us have
grown accustomed to seeing the Dow Jones Industrial Average, the S&P 500 and
other market indexes set new records. That's why the fluctuations normally
seen in financial markets may take investors by surprise.
Although the media has given ample coverage to the factors that have caused
concern in 1998, we'd like to remind you that there is also good news to
report: the US economy is healthy and continues to grow. Inflation remains
subdued and employment is strong.
Even with a sound economy, it isn't easy to maintain your investment
discipline when the market is fluctuating. Here are some thoughts that may
help:
- - Manage Your Expectations. Experienced mutual fund investors understand that
financial markets rise and fall. Over time, however, stocks and bonds have
produced attractive returns that have kept ahead of inflation.
- - Don't Invest Emotionally. If you have long-term (several years or longer)
investment goals, it may be counter-productive to sell an investment in
reaction to short-term market fluctuation. Over the course of several years,
it's not unusual for stocks and bonds to experience several periods of
market uncertainty.
- - Diversification Lessens Risk. Market sectors seldom move in tandem. A well-
diversified portfolio that includes stock, bond, and money market mutual
funds can lessen the effects of market volatility over time.
- - We're On Your Side. Your Prudential professional can help you understand
what's happening in the markets. He or she can assist you in making informed
decisions based upon a thorough knowledge of your financial needs and long-
term goals. Call your Prudential professional today.
Thank you for your continued confidence in Prudential mutual funds. We'll do
everything we can to keep you informed and to earn your trust.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds & Annuities
- -------------------------------------------------------------------------------
2
<PAGE>
Portfolio of Investments
as of June 30, 1998 (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--97.0%
- ------------------------------------------------------------------------------------------------------------------------------
Alaska--1.8%
Anchorage Elec. Utility Rev.,
M.B.I.A. Aaa 6.50% 12/01/12 $ 3,400 (h) $ 4,011,966
M.B.I.A. Aaa 6.50 12/01/13 2,500 (h) 2,959,200
M.B.I.A. Aaa 6.50 12/01/14 3,455 (h) 4,095,073
------------
11,066,239
- ------------------------------------------------------------------------------------------------------------------------------
Arizona--4.2%
Arizona St. Mun. Fin. Proj., Cert. of Part., Ser. 25, B.I.G. Aaa 7.875 8/01/14 2,250 (h) 3,000,960
Maricopa Cnty. Sch. Dist., A.M.B.A.C.,
No. 3 Tempe Elem., Aaa Zero 7/01/09 1,500 896,820
No. 3 Tempe Elem., Aaa Zero 7/01/14 1,500 671,070
Maricopa Cnty. Unified Sch. Dist.,
No. 80 Chandler, F.G.I.C. Aaa Zero 7/01/09 1,330 795,180
No. 80 Chandler, M.B.I.A. Aaa Zero 7/01/10 1,050 594,899
No. 80 Chandler, M.B.I.A. Aaa Zero 7/01/11 1,200 640,272
No. 80 Chandler, F.G.I.C. NR 6.25 7/01/11 1,000 1,155,605
Phoenix St. & Hwy. User Rev., Ser. A, F.G.I.C. Aaa Zero 7/01/12 2,500 1,253,725
Pima Cnty. Ind. Dev. Auth. Rev., F.S.A. Aaa 7.25 7/15/10 2,095 (h) 2,335,087
Pima Cnty. Unified Sch. Dist., Gen. Oblig., F.G.I.C.,
No. 1, Tuscan Aaa 7.50 7/01/10 3,000 (f) 3,795,600
No. 16, Catalina Foothills Aaa Zero 7/01/09 3,455 2,065,675
Tucson, Gen. Oblig.,
Ser. A Aa3 7.375 7/01/11 1,000 1,261,420
Ser. A Aa3 7.375 7/01/12 1,100 1,390,268
Ser. A Aa3 7.375 7/01/13 4,500 5,706,810
------------
25,563,391
- ------------------------------------------------------------------------------------------------------------------------------
California--8.5%
Abag Fin. Auth. for Nonprofit Corps. Ref., Amer. Baptist
Homes., Ser. A BBB(d) 6.20 10/01/27 2,200 2,337,214
Anaheim Pub. Fin. Auth. Lease Rev., F.S.A.,
Sr. Pub. Impvts. Proj., Ser. A Aaa 6.00 9/01/24 5,500 6,306,300
Sub. Pub. Impvts. Proj., Ser. C Aaa 6.00 9/01/16 6,690 7,542,105
Encinitas Union Cap. Sch. Dist., M.B.I.A. Aaa Zero 8/01/21 3,810 1,153,516
Kern High Sch. Dist., Ser. A, M.B.I.A. Aaa 6.30 2/01/10 2,490 2,869,202
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3
<PAGE>
<PAGE>
Portfolio of Investments as of June 30, 1998 (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>
- ------------------------------------------------------------------------------------------------------------------------------
California (cont'd.)
Long Beach Aquarium of the Pacific Rev., Ser. A, A.M.T. BBB(d) 6.125% 7/01/23 $ 6,000 $ 6,289,500
Long Beach Harbor Rev., F.G.I.C., A.M.T. Aaa 6.00 5/15/18 4,000 4,467,560
Los Angeles Unified Sch. Distr., Ser. A, F.G.I.C. Aaa 6.00 7/01/15 1,000 1,128,400
San Jose Redev. Proj., Agcy. Tax Alloc., M.B.I.A. Aaa 6.00 8/01/11 5,000 5,655,950
Santa Cruz Cnty. Pub. Fin. Auth. Rev., Ser. A A-(d) 6.20 9/01/23 2,000 2,119,200
Santa Margarita/Dana Point Auth., M.B.I.A.,
Impvt. Dists. 3-3A-484A, Ser. B Aaa 7.25 8/01/09 2,000 2,469,920
Impvt. Dists. 3-3A-484A, Ser. B Aaa 7.25 8/01/10 2,450 3,044,100
Impvt. Dists. 3-3A-484A, Ser. B Aaa 7.25 8/01/14 2,000 2,531,720
So. Orange Cnty. Pub. Fin. Auth. Rev., Foothill Area Proj.,
Ser. C, F.G.I.C. Aaa 6.50 8/15/10 2,000 2,352,060
West Contra Costa Sch. Dist., Cert. of Part., Ref. Baa3 7.125 1/01/24 1,600 1,752,784
------------
52,019,531
- ------------------------------------------------------------------------------------------------------------------------------
Colorado--4.7%
Arapahoe Cnty. Cap. Impvt. Trust Fund, Pub. Hwy. Rev., Ser.
E-470 Aaa 7.00 8/31/26 3,000(b) 3,565,260
Colorado Hsg. Fin. Auth., A.M.T.
Singl. Fam. Proj., Ser. A-2 Aa2 7.25 5/01/27 2,000 2,255,260
Singl. Fam. Proj., Ser. B-1 Aa2 7.90 12/01/25 2,290 2,536,885
Singl. Fam. Proj., Ser. C-1, M.B.I.A. Aaa 7.65 12/01/25 4,920 5,532,147
Singl. Fam. Proj., Ser. C-2 Aa2 6.875 11/01/28 2,000 2,233,540
Singl. Fam. Proj. Aa2 8.00 6/01/25 3,610 3,999,230
Colorado Springs Arpt. Rev., Ser. A., A.M.T. BBB+(d) 7.00 1/01/22 5,000(f) 5,500,100
Colorado Springs Arpt. Rev., Ser. A., A.M.T. BBB+(d) 7.00 1/01/22 2,960 3,256,059
------------
28,878,481
- ------------------------------------------------------------------------------------------------------------------------------
Connecticut--2.9%
Connecticut St. Hlth. & Edu. Facs. Auth. Rev.,
St. Mary's Hosp. Issue, Ser. E A3 5.50 7/01/20 5,650 5,729,156
St. Mary's Hosp. Issue, Ser. E A3 5.875 7/01/22 1,750 1,815,048
The Griffin Hosp., Ser. A Baa2 5.75 7/01/23 3,280 3,298,368
Univ. of Hartford Ba2 6.75 7/01/12 5,475 5,810,070
Connecticut St. Spec. Tax Oblig. Rev., Trans. Infrastructure,
Ser. A A1 7.125 6/01/10 1,000 1,227,570
------------
17,880,212
- ------------------------------------------------------------------------------------------------------------------------------
District of Columbia--1.8%
Dist. of Columbia, Gen. Oblig. Ref., Ser. B, M.B.I.A. Aaa 6.00 6/01/21 10,075 11,291,859
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments
as of June 30, 1998 (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>
- ------------------------------------------------------------------------------------------------------------------------------
Florida--2.7%
Broward Cnty. Res. Rec. Rev., Broward Co. L.P. South Proj. A-(d) 7.95% 12/01/08 $ 8,300 $ 8,922,334
Florida St. Brd. of Ed., Admin. Cap. Outlay Aa2 9.125 6/01/14 1,260 (h) 1,806,512
Hillsborough Cnty. Ind. Dev. Auth., Poll. Ctrl. Rev., Tampa
Elec. Proj., Ser. 92 Ser. 9 Aa3 8.00 5/01/22 5,000 5,767,050
------------
16,495,896
- ------------------------------------------------------------------------------------------------------------------------------
Georgia--2.4%
Burke Cnty. Dev. Auth., M.B.I.A.,
Georgia Pwr. Plant Co., Vogtle Proj., Ser. 7 Aaa 6.625 10/01/24 500 (h) 524,130
Oglethorpe Pwr. Corp. Aaa 8.00 1/01/22 5,000 b)(h) 5,903,350
Forsyth Cnty. Sch. Dist. Dev. Rev., Ser. A Aa3 6.75 7/01/16 500 603,065
Fulton Cnty. Sch. Dist. Rev., Lindbrook Square Fndtn. Aa2 6.375 5/01/17 750 (h) 876,848
Georgia Mun. Elec. Auth. Pwr. Rev. Ref.,
Ser. B A 6.25 1/01/17 475 536,246
Ser. B, M.B.I.A. Aaa 6.375 1/01/16 5,000 5,818,750
Green Cnty. Dev. Auth. Indl. Park Rev. NR 6.875 2/01/04 460 496,220
------------
14,758,609
- ------------------------------------------------------------------------------------------------------------------------------
Hawaii--1.5%
Hawaii St. Arpt. Sys. Rev.,
2nd Ser. 90, F.G.I.C., A.M.T. Aaa 7.50 7/01/20 500 538,370
2nd Ser., A.M.T. A 7.00 7/01/18 365 394,711
Hawaii St. Dept. of Budget & Fin.,
Hawaiian Elec. Co., Ser. A, M.B.I.A., A.M.T. Aaa 5.65 10/01/27 5,000 5,197,000
Hawaiian Elec. Co., Ser. C, M.B.I.A., A.M.T. Aaa 7.375 12/01/20 500 542,885
Kapiolani Hlth. Care Sys. A 6.30 7/01/08 500 545,095
Kapiolani Hosp. A 6.00 7/01/11 250 270,513
Hawaii St. Gen., Oblig., Ser. CJ Aaa 6.25 1/01/15 650 (b) 721,630
Hawaii St. Harbor Cap. Impvt. Rev.,
F.G.I.C., A.M.T. Aaa 6.25 7/01/10 250 272,885
F.G.I.C., A.M.T. Aaa 6.25 7/01/15 500 542,215
------------
9,025,304
- ------------------------------------------------------------------------------------------------------------------------------
Illinois--4.8%
Cook and Du Page Cntys., Cap. Apprec., High Sch. Dist. No.
210, F.S.A. Aaa Zero 12/01/11 3,035 1,578,777
Illinois Dev. Fin. Auth. Rev.,
Cmnty. Rehab. Providers-A BBB(d) 6.00 7/01/15 2,000 2,083,400
Cmnty. Rehab. Providers-A BBB(d) 5.70 7/01/19 1,600 1,614,960
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments
as of June 30, 1998 (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>
- ------------------------------------------------------------------------------------------------------------------------------
Illinois (cont'd.)
Illinois Educ. Facs. Auth. Rev., Univ. of Chicago, Ser. A Aa1 5.125% 7/01/25 $ 4,000 $ 3,933,920
Illinois Hlth. Facs. Auth. Rev., Loyola Univ. Hlth. Sys., Ser.
A, M.B.I.A. Aaa 6.00 7/01/14 3,500 3,911,180
Metropolitan Pier & Expo. Auth., Hosp. Fac. Rev., McCormick
Place Convention BBB-(d) 7.00 7/01/26 12,910 16,283,641
------------
29,405,878
- ------------------------------------------------------------------------------------------------------------------------------
Kentucky--1.1%
Henderson Cnty. Solid Waste Disp. Rev., Macmillan Bloedel
Proj., A.M.T. Baa2 7.00 3/01/25 6,000 6,549,120
- ------------------------------------------------------------------------------------------------------------------------------
Louisiana--5.0%
New Orleans, Gen. Oblig., Cap. Apprec., A.M.B.A.C. Aaa Zero 9/01/09 13,500 7,870,095
Orleans Parish Sch. Brd., E.T.M., M.B.I.A. Aaa 8.90 2/01/07 5,780 (h) 7,614,052
St. Charles Parish, Environ. Impt. Rev., Louisiana Pwr. & Lt.
Co., Ser. A, A.M.T. Baa2 6.875 7/01/24 5,000 5,536,100
St. Charles Parish, Lousiana Poll. Ctrl. Rev.,
Lousiana Pwr. & Lt. Co. Baa3 8.25 6/01/14 4,000 4,248,760
Lousiana Pwr. & Lt. Co., Ser. 1989 Baa3 8.00 12/01/14 5,000 5,379,850
------------
30,648,857
- ------------------------------------------------------------------------------------------------------------------------------
Maryland--0.6%
Northeast Waste Disp. Auth., Baltimore City Sludge Proj. NR 7.25 7/01/07 3,370 3,728,871
- ------------------------------------------------------------------------------------------------------------------------------
Massachusetts--2.5%
Mass. St. Hlth. & Edl. Facs. Auth. Rev., Mass. Inst. of Tech.
Ser. I-1 Aaa 5.20 1/01/28 1,500 1,550,745
Mass. St. Wtr. Res. Auth. Rev.,
Ser. B, M.B.I.A. Aaa 6.25 12/01/11 6,720 7,776,854
Ser. B, M.B.I.A. Aaa 6.25 12/01/12 5,000 5,776,300
------------
15,103,899
- ------------------------------------------------------------------------------------------------------------------------------
Michigan--3.2%
Dexter Cmnty. Schs., F.G.I.C. Aaa 5.10 5/01/28 8,000 8,122,800
Michigan St. Hosp. Fin. Auth. Rev., Genesys Regl. Hosp., Ser.
A Baa2 5.50 10/01/27 3,000 2,969,580
Michigan St. Hsg. Dev. Auth. Rev.,
Rental Hsg. Rev., Ser. B AA-(d) 7.55 4/01/23 1,000 1,069,870
Sngl. Fam. Mtge., Ser. A AA+(d) 7.50 6/01/15 5,185 5,412,414
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
<PAGE>
Portfolio of Investments
as of June 30, 1998 (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>
- ------------------------------------------------------------------------------------------------------------------------------
Michigan (cont'd)
Okemos Pub. Sch. Dist., M.B.I.A.,
Cnty. of Ingham Aaa Zero 5/01/12 $ 1,100 $ 559,966
Cnty. of Ingham Aaa Zero 5/01/13 1,000 481,310
St. John's Public Schs. Ref., F.G.I.C. Aaa 5.10% 5/01/25 1,000 1,010,180
------------
19,626,120
- ------------------------------------------------------------------------------------------------------------------------------
Minnesota--0.7%
Anoka Hennepin Indpt. Sch. Dist., No. 11, Ser. C, F.S.A. Aaa Zero 2/01/12 1,575 (h) 817,000
Minneapolis St. Paul Hsg. Fin. Brd. Rev., Sngl. Fam. Mtge.,
G.N.M.A., A.M.T. AAA(d) 7.30 8/01/31 775 816,757
Minneapolis St. Paul Met. Arpts. Comm., Ser. 7, A.M.T. Aaa 7.80 1/01/14 1,000 (h) 1,039,720
St. Paul Science Museum, Cert. of Part., E.T.M. AAA(d) 7.50 12/15/01 685 (h) 723,116
Univ. of Minnesota, Ser. A, E.T.M. Aa3 6.00 2/01/11 1,000 987,080
------------
4,383,673
- ------------------------------------------------------------------------------------------------------------------------------
Mississipi--0.4%
Mississippi Hosp. Equip. & Facs, Auth. Rev.,
Rush Med. Fndtn. Proj., Ser. B Baa3 6.00 1/01/16 1,480 1,530,083
Rush Med. Fndtn. Proj., Ser. B Baa3 6.00 1/01/22 1,000 1,029,840
------------
2,559,923
- ------------------------------------------------------------------------------------------------------------------------------
Missouri--0.9%
Missouri St. Hsg. Dev. Comn. Mtge Rev., Sngl. Fam. Homeowner
Ln., Ser. A, G.N.M.A., A.M.T. AAA(d) 7.20 9/01/26 4,920 5,531,015
- ------------------------------------------------------------------------------------------------------------------------------
Nevada--2.4%
Clark Cnty. Indl. Dev. Rev., Southwest Gas Corp., Ser. A,
A.M.T. Baa2 6.50 12/01/33 10,000 10,728,600
Nevada Hsg. Div., Multi Unit Hsg., Arville Et Cetera Proj.,
F.N.M.A., A.M.T. AAA(d) 6.60 10/01/23 3,475 3,730,343
------------
14,458,943
- ------------------------------------------------------------------------------------------------------------------------------
New Hampshire--0.3%
New Hampshire Higher Ed. & Hlth. Facs. Auth. Rev.,
New Hampshire College BBB-(d) 6.30 1/01/16 500 534,885
New Hampshire College BBB-(d) 6.375 1/01/27 1,000 1,069,110
------------
1,603,995
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7
<PAGE>
Portfolio of Investments
as of June 30, 1998 (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--2.5%
New Jersey St. Hsg. & Mtge. Fin. Agcy., Ser. D, M.B.I.A.,
A.M.T. Aaa 7.70% 10/01/29 $ 2,035 $ 2,119,941
New Jersey St. Tpke. Auth. Rev., Ser. C, M.B.I.A. Aaa 6.50 1/01/16 11,000 13,002,220
------------
15,122,161
- ------------------------------------------------------------------------------------------------------------------------------
New Mexico--0.9%
New Mexico Mtge. Fin. Auth., Sngl. Fam. Mtge., A.M.T. AAA(d) 6.30 7/01/28 5,000 5,297,250
- ------------------------------------------------------------------------------------------------------------------------------
New York--13.9%
Greece Central Sch. Dist.,
F.G.I.C. Aaa 6.00 6/15/16 950 1,070,175
F.G.I.C. Aaa 6.00 6/15/17 950 1,071,743
F.G.I.C. Aaa 6.00 6/15/18 950 1,072,949
Metropolitan Trans. Auth., Trans. Facs. Rev., Ser. A, F.S.A. Aaa 6.00 7/01/16 2,500 2,721,150
New York City Ind. Dev. Agcy.,
Brooklyn Navy Yard Cogen Partners, A.M.T. Baa3 5.65 10/01/28 3,000 3,026,670
Brooklyn Navy Yard Cogen Partners, A.M.T. Baa3 5.75 10/01/36 5,000 5,094,250
Spec. Fac. Rev., Terminal One Group Assoc. Proj., A.M.T. A1 6.00 1/01/19 2,500 2,643,600
New York City Mun. Wtr. Fin. Auth.,
F.G.I.C. Aaa 6.75 6/15/16 6,000 (b) 6,518,400
F.G.I.C. Aaa 6.75 6/15/16 10,565 (f) 11,381,991
New York City, Gen. Oblig.,
Ser. A A-(d) 7.75 8/15/04 1,875 (b) 2,101,988
Ser. A A3 7.75 8/15/04 125 138,246
Ser. B A3 8.25 6/01/06 1,500 1,851,795
Ser. B A3 7.25 8/15/07 3,500 4,148,690
Ser. D Aaa 8.00 8/01/03 1,635 (b) 1,846,242
Ser. D A3 8.00 8/01/03 385 430,923
Ser. D Aaa 8.00 8/01/04 1,005 (b) 1,134,846
Ser. D A3 8.00 8/01/04 165 184,681
Ser. D Aaa 7.65 2/01/07 4,605 (b) 5,214,932
Ser. D A3 7.65 2/01/07 395 442,250
Ser. F A-(d) 8.25 11/15/02 4,185 (b) 4,790,234
Ser. F A3 8.25 11/15/02 815 924,748
New York St. Dorm. Auth. Rev., Mem. Sloan Kettering Cancer
Ctr., M.B.I.A. Aaa 5.75 7/01/20 4,000 4,386,280
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 8
<PAGE>
Portfolio of Investments
as of June 30, 1998 (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 York (cont'd.)
New York St. Local Gov't. Assist. Corp., Ref., Ser. E A3 6.00% 4/01/14 $ 5,000 $ 5,627,850
New York St. Urban Dev. Corp., Rev., Ref., F.S.A.,
Correctional Facs. Aaa 6.50 1/01/09 3,000 3,476,010
Correctional Facs., Ser. A Aaa 5.50 1/01/14 3,000 3,210,780
Triborough Bridge & Tunl. Auth., Ser. X, M.B.I.A. Aaa 6.625 1/01/12 8,500 (h) 10,070,545
------------
84,581,968
- ------------------------------------------------------------------------------------------------------------------------------
North Dakota--1.8%
Mercer Cnty., Antelope Valley Station, A.M.B.A.C. Aaa 7.20 6/30/13 9,000 11,082,870
- ------------------------------------------------------------------------------------------------------------------------------
Ohio--2.4%
Ohio St. Wtr. Dev. Auth., Poll. Ctrl. Facs. Rev., Buckeye Pwr.
Inc. Proj., A.M.B.A.C. Aaa 7.80 11/01/14 12,585 14,933,613
- ------------------------------------------------------------------------------------------------------------------------------
Oklahoma--4.6%
McGee Creek Auth. Wtr. Rev., M.B.I.A. Aaa 6.00 1/01/23 7,000 7,950,250
Tulsa Mun. Arpt. Trust Rev., American Airlines, Inc., A.M.T. Baa2 7.375 12/01/20 19,000 20,436,020
------------
28,386,270
- ------------------------------------------------------------------------------------------------------------------------------
Pennsylvania--1.0%
Delaware Cnty. Ind. Dev. Auth. Rev., Res. Rec. Fac., Ser. A Baa1 6.20 7/01/19 3,000 3,246,450
Philadelphia Wtr. & Waste Auth. Rev., M.B.I.A. Aaa 6.25 8/01/11 2,500 2,864,875
------------
6,111,325
- ------------------------------------------------------------------------------------------------------------------------------
Puerto Rico--3.4%
Puerto Rico Comnwlth., Gen. Oblig., M.B.I.A. Baa1 6.50 7/01/13 3,000 3,502,260
Puerto Rico Comnwlth., Hwy. & Trans. Auth., Hwy. Rev.,
Ser. V Baa1 6.625 7/01/12 4,000 4,392,360
Ser. V Baa1 6.375 7/01/08 500 540,840
Puerto Rico Ind., Tourist Ed. Med. & Env. Ctrl. Facs.,
Doctor Pila Hosp. Proj., F.H.A. AAA(d) 6.125 8/01/25 500 550,755
Hosp. Auxilio Mutuo Oblig. Grp. Proj., M.B.I.A. Aaa 6.25 7/01/16 500 555,145
Puerto Rico Mun. Fin. Agcy., Ser. A, F.S.A. Aaa 6.00 7/01/14 250 272,268
Puerto Rico Tel. Auth. Rev.,
Ser. I, M.B.I.A. Aaa 6.667(c) 1/25/07 4,100 4,504,875
Ser. I, M.B.I.A. Aaa 6.996(c) 1/16/15 6,150 6,557,437
------------
20,875,940
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9
<PAGE>
Portfolio of Investments
as of June 30, 1998 (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>
- ------------------------------------------------------------------------------------------------------------------------------
South Carolina--1.7%
Charleston Wtrwks. & Swr. Rev., E.T.M. Aaa 10.375% 1/01/10 $ 7,415(h) $ 10,319,159
- ------------------------------------------------------------------------------------------------------------------------------
Tennessee--1.9%
Bristol Hlth. & Edl. Fac. Rev., Bristol Memorial Hosp.,
F.G.I.C. Aaa 6.75 9/01/10 5,000(f) 5,982,500
McMinn Cnty. Ind. Dev. Brd. Solid Waste Rev., Calhoun Nwsprnt.
Recycling Fac., A.M.T. Baa1 7.40 12/01/22 5,000 5,580,250
------------
11,562,750
- ------------------------------------------------------------------------------------------------------------------------------
Texas--4.8%
Bexar Cnty. Hlth. Facs. Dev. Corp. Rev., Baptist Hlth. Sys.,
Ser. A, M.B.I.A. Aaa 6.00 11/15/14 5,695 6,367,010
Dallas Ft. Worth, Regl. Arpt. Rev., F.G.I.C.,
Ser. A Aaa 7.375 11/01/08 3,500 4,094,720
Ser. A Aaa 7.375 11/01/09 3,500 4,094,720
Keller Indpt. Sch. Dist. Rev. Aaa 6.00 8/15/23 3,970 4,534,137
New Braunfels Indpt. Sch. Dist.,
Cap. Apprec. Aaa Zero 2/01/10 2,335 1,344,727
Cap. Apprec. Aaa Zero 2/01/11 2,365 1,282,776
Port Corpus Christi Auth. Rev., A2 7.50 8/01/12 2,000 2,174,460
San Antonio Elec. & Gas Rev., Ser. B, F.G.I.C. Aaa Zero 2/01/09 5,000 3,038,750
Univ. of Texas Rev., Fen. Sys., Ser. B Aa1 6.75 8/15/13 2,035 2,217,336
------------
29,148,636
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Virgin Islands--0.1%
Virgin Islands Pub. Fin. Auth. Rev.,
Gov't. Dev. Proj., Ser. B, A.M.T. NR 7.375 10/01/10 300 353,409
Matching Loan Notes, Ser. A NR 7.25 10/01/18 250 (b) 284,738
------------
638,147
- ------------------------------------------------------------------------------------------------------------------------------
Virginia--0.4%
Pocahontas Parkway Assoc. Toll Road, Variable Ref., Kinder
Care Ctrs., Ser. B. Baa3 Zero 8/15/16 7,000 (g) 2,500,960
- ------------------------------------------------------------------------------------------------------------------------------
Washington--4.8%
Chelan Cnty. Pub. Util., Dist. No. 1, Columbia River Rock
Hydro Elec. Sys. Rev., Ser. A, M.B.I.A. Aaa Zero 6/01/15 15,000 6,314,100
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 10
<PAGE>
Portfolio of Investments
as of June 30, 1998 (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>
- ------------------------------------------------------------------------------------------------------------------------------
Washington (cont'd.)
Pierce Cnty. Sch. Dist. No. 1, F.G.I.C. Aaa 6.00% 12/01/10 $ 1,000 $ 1,129,270
Washington St. Pub. Pwr. Supply Sys. Rev.,
Nuclear Proj. No. 1, Ser. A, F.S.A. Aaa 7.00 7/01/08 4,000 4,734,560
Nuclear Proj. No. 1, Ser. B, F.S.A. Aaa 7.25 7/01/09 5,000 6,037,700
Nuclear Proj. No. 2, F.S.A. Aaa 5.40 7/01/12 5,400 5,627,340
Nuclear Proj. No. 3, Ser. B, F.G.I.C. Aaa Zero 7/01/06 3,000 2,068,530
Washington St. Rev., Ser. R-97A Aa1 Zero 7/01/16 8,000 3,180,400
------------
29,091,900
- ------------------------------------------------------------------------------------------------------------------------------
Wisconsin--0.4%
Wisconsin Hsg. & Econ. Dev. Auth., Home Ownership Rev., A.M.T. Aa 6.20 3/01/27 2,100 2,206,470
------------
Total long-term investments (cost $545,571,656) 592,439,235
------------
SHORT-TERM INVESTMENTS--2.4%
- ------------------------------------------------------------------------------------------------------------------------------
District of Columbia--0.7%
Dist. of Columbia, Gen. Oblig. Ref., Ser. 92A-4, F.R.D.D. VMIG1 4.00 7/01/98 4,300 4,300,000
- ------------------------------------------------------------------------------------------------------------------------------
Louisiana--1.6%
Calcasieu Parish Inc. Ind. Dev. Brd. Environ. Rev., F.R.D.D.,
A.M.T. VMIG1 4.00 7/01/98 500 500,000
Plaquemines Parish Environ. Rev., A.M.T.,
British Petroleum Co., Expl. & Oil Proj., F.R.D.D., Ser. 94 P1 3.95 7/01/98 100 100,000
British Petroleum Co., Expl. & Oil Proj., F.R.D.D., Ser. 95 P1 3.95 7/01/98 300 300,000
West Baton Rouge Parish Ind. Dist. No. 3 Rev., Dow Chemical
Co. Proj., Ser. 93, F.R.D.D., A.M.T. P1 4.05 7/01/98 8,600 8,600,000
------------
9,500,000
- ------------------------------------------------------------------------------------------------------------------------------
Virginia--0.1%
Hopewell Ind. Dev. Auth. Rev., Hadson Pwr. Prog. 13, Ser. 90A,
F.R.D.D., A.M.T. P1 4.05 7/01/98 600 600,000
King George Cnty. Ind. Dev. Auth., Birchwood Pwr. Proj., Ser.
94A, F.R.D.D., A.M.T. A1+(d) 4.10 7/01/98 100 100,000
------------
700,000
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 11
<PAGE>
<PAGE>
Portfolio of Investments
as of June 30, 1998 (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description(a) Contracts (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
CALL OPTIONS PURCHASED--0.1%
United States Treasury Bond Future, expiring 11/20/98 @$125. 300 $ 496,875
------------
Total short-term investments (cost $14,891,687) 14,996,875
------------
Total Investments--99.5%
(cost $560,463,343) 607,436,110
Other assets in excess of liabilities--0.5% 2,877,396
------------
Net Assets--100% $610,313,506
------------
------------
</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
B.I.G.--Bond Investors Guaranty Insurance Company
E.T.M.--Escrowed to Maturity
F.G.I.C.--Financial Guaranty Insurance Company
F.H.A.--Federal Housing Authority
F.N.M.A.--Federal National Mortgage Association
F.R.D.D.--Floating Rate Daily Demand Note(e)
F.S.A.--Financial Security Assurance
G.N.M.A.--Government National Mortgage Association
M.B.I.A.--Municipal Bond Insurance Association
(b) Prerefunded issues are secured by escrowed cash and direct U.S. guaranteed
obligations.
(c) Inverse floating rate bond. The coupon is inversely indexed to a floating
interest rate. The rate shown is the rate at year-end.
(d) Standard and Poor's Rating.
(e) 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.
(f) Pledged as initial margin on financial futures contracts.
(g) Represents when-issued or extended settlement security.
(h) Pledged as collateral for when-issued or extended settlement security.
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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 12
<PAGE>
Statement of Assets and Liabilities
(Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
Assets June 30, 1998
<S> <C>
Investments, at value (cost $560,463,343)................................................................... $607,436,110
Cash........................................................................................................ 421,300
Interest receivable......................................................................................... 9,841,509
Receivable for investments sold............................................................................. 555,924
Receivable for Fund shares sold............................................................................. 229,100
Due from broker--variation margin........................................................................... 56,250
Deferred expenses and other assets.......................................................................... 10,648
-------------
Total assets............................................................................................. 618,550,841
-------------
Liabilities
Payable for investments purchased........................................................................... 6,442,790
Payable for Fund shares reacquired.......................................................................... 801,123
Dividends payable........................................................................................... 408,837
Accrued expenses............................................................................................ 258,571
Management fee payable...................................................................................... 226,301
Distribution fee payable.................................................................................... 94,295
Deferred director's fee..................................................................................... 5,418
-------------
Total liabilities........................................................................................ 8,237,335
-------------
Net Assets.................................................................................................. $610,313,506
-------------
-------------
Net assets were comprised of:
Common stock, at par..................................................................................... $ 379,486
Paid-in capital in excess of par......................................................................... 559,713,928
-------------
560,093,414
Accumulated net realized gain on investments............................................................. 3,131,700
Net unrealized appreciation on investments............................................................... 47,088,392
-------------
Net assets, June 30, 1998................................................................................... $610,313,506
-------------
-------------
Class A:
Net asset value and redemption price per share
($480,442,843 / 29,888,170 shares of common stock issued and outstanding)............................. $16.07
Maximum sales charge (3% of offering price).............................................................. .50
-------------
Maximum offering price to public......................................................................... $16.57
-------------
-------------
Class B:
Net asset value, offering price and redemption price per share
($128,212,019 / 7,957,475 shares of common stock issued and outstanding).............................. $16.11
-------------
Class C:
Net asset value, offering price and redemption price per share
($1,658,644 / 102,944 shares of common stock issued and outstanding).................................. $16.11
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13
<PAGE>
PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income June 30, 1998
<S> <C>
Income
Interest................................... $17,592,359
-------------
Expenses
Management fee............................. 1,485,469
Distribution fee--Class A.................. 240,983
Distribution fee--Class B.................. 339,402
Distribution fee--Class C.................. 4,343
Transfer agent's fees and expense.......... 268,000
Custodian's fees and expenses.............. 71,000
Reports to shareholders.................... 45,000
Registration fees.......................... 25,000
Audit fees and expenses.................... 17,000
Legal fees and expenses.................... 16,000
Directors' fees and expenses............... 14,000
Insurance expense.......................... 4,000
Miscellaneous.............................. 3,548
-------------
Total expenses.......................... 2,533,745
Less: Custodian fee credit................. (2,205)
-------------
Net expenses............................ 2,531,540
-------------
Net investment income......................... 15,060,819
-------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions.................... 3,469,738
Financial futures contracts................ (1,380,883)
-------------
2,088,855
-------------
Net change in unrealized appreciation
(depreciation) of:
Investments................................ (4,234,051)
Futures.................................... 228,125
-------------
(4,005,926)
-------------
Net loss on investment transactions........... (1,917,071)
-------------
Net Increase in Net Assets
Resulting from Operations..................... $13,143,748
-------------
-------------
</TABLE>
PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) June 30, December 31,
in Net Assets 1998 1997
<S> <C> <C>
Operations
Net investment income........ $ 15,060,819 $ 32,548,931
Net realized gain on
investment transactions... 2,088,855 8,329,425
Net change in unrealized
appreciation
(depreciation) of
investments............... (4,005,926) 19,312,987
------------- -------------
Net increase in net assets
resulting from
operations................ 13,143,748 60,191,343
------------- -------------
Dividends and distributions
(Note 1)
Dividends from net investment
income
Class A................... (11,943,682) (25,293,360)
Class B................... (3,092,086) (7,221,480)
Class C................... (25,051) (34,091)
------------- -------------
(15,060,819) (32,548,931)
------------- -------------
Distributions paid from
capital gains
Class A................... -- (3,169,156)
Class B................... -- (905,674)
Class C................... -- (5,317)
------------- -------------
-- (4,080,147)
------------- -------------
Distributions in excess of
net investment income
Class A................... -- (152,363)
Class B................... -- (43,542)
Class C................... -- (256)
------------- -------------
-- (196,161)
------------- -------------
Fund share transactions (net of
share conversions) (Note 5):
Net proceeds from shares
sold...................... 14,267,923 143,282,681
Net asset value of shares
issued in reinvestment of
dividends and
distributions............. 9,285,437 22,849,312
Cost of shares reacquired.... (46,854,022) (225,662,512)
------------- -------------
Net decrease in net assets
from Fund share
transactions.............. (23,300,662) (59,530,519)
------------- -------------
Total decrease.................. (25,217,733) (36,164,415)
Net Assets
Beginning of period............. 635,531,239 671,695,654
------------- -------------
End of period................... $ 610,313,506 $ 635,531,239
------------- -------------
------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 14
<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 Board of Directors. All Securities are valued as
of 4:15 p.m., New York time.
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.
Options: The Fund may either purchase or write options in order to hedge against
adverse market movements or fluctuations in value caused by changes in
prevailing interest rates with respect to securities which the Fund currently
owns or intends to purchase. The Fund's principal reason for writing options is
to realize, through receipt of premiums, a greater current return than would be
realized on the underlying security alone. When the Fund purchases an option, it
pays a premium and an amount equal to that premium is recorded as an investment.
When the Fund writes an option, it receives a premium and an amount equal to
that premium is recorded as a liability. The investment or liability is adjusted
daily to reflect the current market value of the option. If an option expires
unexercised, the Fund realizes a gain or loss to the extent of the premium
received or paid. If an option is exercised, the premium received or paid is an
adjustment to the proceeds from the sale or the cost of the purchase in
determining whether the Fund has realized a gain or loss. The difference between
the premium and the amount received or paid on effecting a closing purchase or
sale transaction is also treated as a realized gain or loss. Gain or loss on
purchased options is included in net realized gain (loss) on investment
transactions. Gain or loss on written options is presented separately as net
realized gain (loss) on written option transactions.
The Fund, as writer of an option, may have no control over whether the
underlying securities may be sold (called) or purchased (put). As a result, the
Fund bears the market risk of an unfavorable change in the price of the security
underlying the written option. The Fund, as purchaser of an option, bears the
risk of the potential inability of the counterparties to meet the terms of their
contracts.
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 Net 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.
Expenses are recorded on the accrual basis which may require the use of certain
estimates by management.
Net investment income (other than distribution fees) and unrealized and realized
gains or losses are allocated daily to each class of shares based upon the
relative proportion of net assets of each class at the beginning of the day.
- --------------------------------------------------------------------------------
15
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
- --------------------------------------------------------------------------------
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, 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.
Custody Fee Credits: The Fund has an arrangement with its custodian bank,
whereby uninvested monies earn credits which reduce the fees charged by the
custodian.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM 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. PIFM 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.
The management fee paid PIFM 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 had a distribution agreement with Prudential Securities Incorporated
('PSI'), which acted as the distributor of the Class A, Class B and Class C
shares of the Fund. The Fund compensated PSI 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 were accrued daily and payable monthly. Effective
July 1, 1998, Prudential Investment Management Services LLC ('PIMS') became the
distributor of the Fund and is serving the Fund under the same terms and
conditions as under the arrangment with PSI.
Pursuant to the Class A, B and C Plans, the Fund compensated PSI with respect to
Class A, B and C shares, 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, 1998.
PSI has advised the Fund that it received approximately $39,700 in front-end
sales charges resulting from sales of Class A shares during the six months ended
June 30, 1998. From these fees, PSI paid such sales charges to 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, 1998, it
received approximately $71,500 in contingent deferred sales charges imposed upon
certain redemptions by Class B and Class C shareholders.
PSI, PIFM, PIC and PIMS are indirect, wholly owned subsidiaries of The
Prudential Insurance Company of America.
The Fund, along with other affiliated registered investment companies (the
'Funds'), has a credit agreement (the 'Agreement') with an unaffiliated lender.
The maximum commitment under the Agreement is $200,000,000. Interest on any such
borrowings outstanding will be at market rates. The purpose of the Agreement is
to serve as an alternative source of funding for capital share redemptions. The
Fund did not borrow any amounts pursuant to the Agreement during the six months
ended June 30, 1998. The Funds pay a commitment fee at an annual rate of .055 of
1% on the unused portion of the credit facility. The commitment fee is accrued
and paid quarterly on a pro rata basis by the Funds. The Agreement expires on
December 29, 1998.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent and during the six months ended June 30,
1998, the Fund incurred fees of approximately $196,200 for the services of PMFS.
As of June 30, 1998, $32,400 of such fees were due to PMFS. Transfer agent fees
and expenses in the Statement of Operations include certain out-of-pocket
expenses paid to nonaffiliates.
- --------------------------------------------------------------------------------
16
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
- --------------------------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the six months ended June 30, 1998, were $86,131,037 and $113,863,128,
respectively.
The federal income tax basis of the Fund's investments at June 30, 1998 was
substantially the same as for financial reporting purposes and, accordingly, net
unrealized appreciation for federal income tax purposes was $46,972,767 (gross
unrealized appreciation--$47,016,655; gross unrealized depreciation--$43,888).
During the six months ended June 30, 1998, the Fund entered into financial
futures contracts. Details of open contracts at June 30, 1998 are as follows:
<TABLE>
<CAPTION>
Value at Value at Unrealized
Number of Expiration Trade June 30, Appreciation
Contracts Type Date Date 1998 (Depreciation)
- --------- ----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Long
Position:
U.S.
Treasury
200 Index Sep. 1998 $24,603,125 $24,718,750 $ 115,625
--------------
--------------
</TABLE>
- ------------------------------------------------------------
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%. 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. A special exchange privilege is also available for
shareholders who qualify to purchase Class A shares at net asset value.
There are 750 million shares of common stock, $.01 par value per share,
authorized 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, 1998:
Shares sold...................... 479,047 $ 7,720,930
Shares issued in reinvestment of
dividends and distributions.... 460,284 7,397,481
Shares reaquired................. (1,968,482) (31,655,706)
----------- -------------
Net decrease in shares
outstanding before
conversion..................... (1,029,151) (16,537,295)
Shares issued upon conversion
and/or exchange from Class B... 329,309 5,300,294
----------- -------------
Net decrease in shares
outstanding.................... (699,842) $ (11,237,001)
----------- -------------
----------- -------------
<CAPTION>
Shares Amount
----------- -------------
<S> <C> <C>
Year ended December 31, 1997:
Shares sold...................... 7,770,406 $ 121,265,504
Shares issued in connection with
the acquisition of Prudential
Municipal Series Fund-Hawaii
Income Series (Note 6)......... 896,395 14,045,247
Shares issued in reinvestment of
dividends and distributions.... 1,127,948 17,779,927
Shares reacquired................ (12,541,415) (197,015,549)
----------- -------------
Net decrease in shares
outstanding before
conversion..................... (2,746,666) (43,924,871)
Shares issued upon conversion
from Class B................... 1,028,246 16,211,378
----------- -------------
Net decrease in shares
outstanding.................... (1,718,420) $ (27,713,493)
----------- -------------
----------- -------------
<CAPTION>
Class B
- ---------------------------------
Six months ended June 30, 1998:
Shares sold...................... 353,556 $ 5,705,840
Shares issued in reinvestment of
dividends and distributions.... 115,968 1,868,184
Shares reaquired................. (941,016) (15,171,468)
----------- -------------
Net decrease in shares
outstanding before
conversion..................... (471,492) (7,597,444)
Shares reacquired upon conversion
and/or exchange from Class A... (328,493) (5,300,294)
----------- -------------
Net decrease in shares
outstanding.................... (799,985) $ (12,897,738)
----------- -------------
----------- -------------
Year ended December 31, 1997:
Shares sold...................... 493,868 $ 7,772,752
Shares issued in reinvestment of
dividends and distributions.... 319,319 5,042,204
Shares reaquired................. (1,812,567) (28,445,531)
----------- -------------
Net decrease in shares
outstanding before
conversion..................... (999,380) (15,630,575)
Shares issued upon conversion
and/or exchange from Class A... (1,025,835) (16,211,378)
----------- -------------
Net decrease in shares
outstanding.................... (2,025,215) $ (31,641,953)
----------- -------------
----------- -------------
<CAPTION>
Class C
- ---------------------------------
Six months ended June 30, 1998:
Shares sold...................... 52,310 $ 841,153
Shares issued in reinvestment of
dividends and distributions.... 1,229 19,772
Shares reacquired................ (1,668) (26,848)
----------- -------------
Net increase in shares
outstanding.................... 51,871 $ 834,077
----------- -------------
----------- -------------
Year ended December 31, 1997:
Shares sold...................... 12,662 $ 199,178
Shares issued in reinvestment of
dividends and distributions.... 1,717 27,181
Shares reacquired................ (12,783) (201,432)
----------- -------------
Net increase in shares
outstanding.................... 1,596 $ 24,927
----------- -------------
----------- -------------
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------------
Six Months
Ended Year Ended December 31,
June 30, ----------------------------------------------------------
1998 1997 1996 1995 1994 1993
---------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 16.12 $ 15.56 $ 15.98 $ 14.42 $ 16.30 $ 15.94
---------- -------- -------- -------- ------- -------
Income from investment operations
Net investment income............................... .40 .81(b) .82(b) .81(b) .81 .90
Net realized and unrealized gain (loss) on
investment transactions.......................... (.05) .67 (.42) 1.57 (1.78) 1.05
---------- -------- -------- -------- ------- -------
Total from investment operations................. .35 1.48 .40 2.38 (.97) 1.95
---------- -------- -------- -------- ------- -------
Less distributions
Dividends from net investment income................ (.40) (.81) (.82) (.81) (.81) (.90)
Distributions in excess of net investment income.... -- (.01) -- (c) (.01) -- --
Distributions from net realized gains............... -- (.10) -- -- (.10) (.69)
---------- -------- -------- -------- ------- -------
Total distributions.............................. (.40) (.92) (.82) (.82) (.91) (1.59)
---------- -------- -------- -------- ------- -------
Net asset value, end of period...................... $ 16.07 $ 16.12 $ 15.56 $ 15.98 $ 14.42 $ 16.30
---------- -------- -------- -------- ------- -------
---------- -------- -------- -------- ------- -------
TOTAL RETURN(a):.................................... 2.21% 9.80% 2.66% 16.91% (6.04)% 12.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $ 480,443 $493,178 $502,739 $538,145 $12,721 $14,167
Average net assets (000)............................ $ 485,960 $491,279 $508,159 $446,350 $14,116 $11,786
Ratios to average net assets:
Expenses, including distribution fees............ .73%(d) .70%(b) .68%(b) .75%(b) .77% .69%
Expenses, excluding distribution fees............ .63%(d) .60%(b) .58%(b) .65%(b) .67% .59%
Net investment income............................ 4.96%(d) 5.15%(b) 5.31%(b) 5.34%(b) 5.38% 5.49%
For Class A, B and C shares:
Portfolio turnover rate.......................... 14% 38% 46% 98% 120% 82%
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Net of management fee waiver.
(c) Less than $.005 per share.
(d) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 18
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------------------
Six Months
Ended Year Ended December 31,
June 30, ------------------------------------------------------------
1998 1997 1996 1995 1994 1993
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 16.16 $ 15.60 $ 16.02 $ 14.45 $ 16.33 $ 15.97
---------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income............................... .36 .75(b) .76(b) .76(b) .75 .84
Net realized and unrealized gain (loss) on
investment transactions.......................... (.05) .67 (.42) 1.58 (1.78) 1.05
---------- -------- -------- -------- -------- --------
Total from investment operations................. .31 1.42 .34 2.34 (1.03) 1.89
---------- -------- -------- -------- -------- --------
Less distributions
Dividends from net investment income................ (.36) (.75) (.76) (.76) (.75) (.84)
Distributions in excess of net investment income.... -- (.01) -- (c) (.01) -- --
Distributions from net realized gains............... -- (.10) -- -- (.10) (.69)
---------- -------- -------- -------- -------- --------
Total distributions.............................. (.36) (.86) (.76) (.77) (.85) (1.53)
---------- -------- -------- -------- -------- --------
Net asset value, end of period...................... $ 16.11 $ 16.16 $ 15.60 $ 16.02 $ 14.45 $ 16.33
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
TOTAL RETURN(a):.................................... 2.00% 9.35% 2.26% 16.49% (6.39)% 12.15%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $128,212 $141,528 $168,185 $222,865 $672,272 $848,299
Average net assets (000)............................ $138,886 $151,938 $193,312 $252,313 $751,623 $854,919
Ratios to average net assets:
Expenses, including distribution fees............ 1.13%(d) 1.10%(b) 1.08%(b) 1.15%(b) 1.17% 1.09%
Expenses, excluding distribution fees............ .63%(d) .60%(b) .58%(b) .65%(b) .67% .59%
Net investment income............................ 4.56%(d) 4.75%(b) 4.91%(b) 4.96%(b) 4.96% 5.09%
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Net of management fee waiver.
(c) Less than $.005 per share.
(d) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 19
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------------
Six Months
Ended Year Ended December 31,
June 30, --------------------------------------------------
1998 1997 1996 1995 1994
---------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 16.16 $ 15.60 $ 16.02 $14.44 $15.13
---------- ------- ------- ------ ------
Income from investment operations
Net investment income............................... .34 .71(b) .72(b) .72(b) .29
Net realized and unrealized gain (loss) on
investment transactions.......................... (.05) .67 (.42) 1.59 (.69)
---------- ------- ------- ------ ------
Total from investment operations................. .29 1.38 .30 2.31 (.40)
---------- ------- ------- ------ ------
Less distributions
Dividends from net investment income................ (.34) (.71) (.72) (.72) (.29)
Distributions in excess of net investment income.... -- (.01) -- (c) (.01) --
Distributions from net realized gains............... -- (.10) -- -- --
---------- ------- ------- ------ ------
Total distributions.............................. (.34) (.82) (.72) (.73) (.29)
---------- ------- ------- ------ ------
Net asset value, end of period...................... $ 16.11 $ 16.16 $ 15.60 $16.02 $14.44
---------- ------- ------- ------ ------
---------- ------- ------- ------ ------
TOTAL RETURN(a):.................................... 1.88% 9.08% 2.01% 16.22% (2.63)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $1,659 $825 $772 $403 $141
Average net assets (000)............................ $1,168 $758 $674 $247 $103
Ratios to average net assets:
Expenses, including distribution fees............ 1.38%(d) 1.35%(b) 1.33%(b) 1.40%(b) 1.51%(d)
Expenses, excluding distribution fees............ .63%(d) .60%(b) .58%(b) .65%(b) .76%(d)
Net investment income............................ 4.31%(d) 4.50%(b) 4.67%(b) 4.66%(b) 4.84%(d)
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Net of management fee waiver.
(c) Less than $.005 per share.
(d) Annualized.
(e) Commencement of offering of Class C shares.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 20
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Directors
Edward D. Beach
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Harry A. Jacobs, Jr.
Mendel A. Melzer, CFA
Thomas T. Mooney
Thomas H. O'Brien
Richard A. Redeker
Nancy H. Teeters
Louis A. Weil, III
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Deborah A. Docs, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, NY 10022
The views expressed in this report and information about the Fund's portfolio
holdings are for the period covered by this report and are subject to change
thereafter.
The accompanying financial statements as of June 30, 1998 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.
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
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New York, NY
743918203 MF104E2
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743918302
