<PAGE>
(ICON)
Prudential
National
Municipals
Fund, Inc.
SEMI
ANNUAL
REPORT
June 30, 1999
(LOGO)
<PAGE>
A Message from the Fund's President August 20, 1999
(PHOTO)
Dear Shareholder,
Prudential National Municipals Fund's Class A shares declined
1.67% for the six-month period that ended on June 30, 1999.
However, the Fund managed to outperform its benchmark, which
lost 1.82%. The following report takes a close look at bond market
events that occurred during the six-month reporting period,
and explains how Prudential National Municipals Fund performed.
Our integrated and expanded team
I would like to take this opportunity to tell you about some
changes we've made to our Fixed Income Group. Earlier in the
year, we combined our fixed-income areas into one integrated
group that will manage money for Prudential's retail and
institutional investors, as well as its policyholders. This
integrated group now manages approximately $145 billion in
assets, making it one of the three largest fixed-income
money managers in the country. The expanded depth, breadth,
and scale of our investment team also allow us to tap the
best talent and share investment ideas, proprietary research,
and analytical tools. The group is co-headed by Senior Managing
Directors Jim Sullivan, who is responsible for portfolio
management and credit research, and Jack Gaston, who is
in charge of risk management and quantitative research.
To utilize these integrated resources more effectively,
Mr. Sullivan recently organized the group into teams,
each specializing in a different sector of the fixed-income
market. The Municipal Bond Sector team will now be responsible
for the day-to-day management of your Prudential National
Municipals Fund. Many of the investment professionals who
supported the management of the Fund in the past are part
of this new team that will work together to share their
knowledge and strive to enhance performance.
Thank you for your continued confidence in Prudential
mutual funds. I firmly believe that the group's combined
resources and our new team approach will make us a
powerhouse in the world of fixed-income investing
across all sectors.
Sincerely,
John R. Strangfeld
President and Chief Investment Officer
Prudential National Municipals Fund, Inc.
<PAGE>
Performance Review
<TABLE>
Cumulative Total Returns1 As of 6/30/99
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A -1.67% 1.41% 35.67% (35.49) N/A 89.93% (89.68)
Class B -1.85 1.02 33.07 (32.90) 86.36% (86.11) 355.93 (355.33)
Class C -1.97 0.77 N/A N/A 29.28 (29.11)
Class Z N/A N/A N/A N/A -2.33
Lipper Gen.
Muni Avg.3 -1.82 1.14 35.05 94.12 ***
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 6/30/99
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A -1.63% 5.64% (5.62) N/A 6.69% (6.68)
Class B -3.98 5.72 (5.69) 6.42% (6.41) 8.23 (8.22)
Class C -1.23 N/A N/A 5.15 (5.12)
Class Z N/A N/A N/A N/A
</TABLE>
<TABLE>
Distributions and Yields As of 6/30/99
<CAPTION>
Total Taxable Equivalent Yield
Distributions 30-Day at Tax Rates of
Paid for Six Mos. SEC Yield 36% 39.6%
<S> <C> <C> <C> <C>
Class A $0.38 4.26% 6.66% 7.05%
Class B $0.36 4.14 6.47 6.85
Class C $0.34 3.85 6.02 6.37
Class Z $0.35 4.65 7.27 7.70
</TABLE>
Past performance is not indicative of future results. Principal
and investment return will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
1 Source: Prudential Investments Fund Management LLC and Lipper,
Inc. The cumulative total returns do not take into account sales
charges. The average annual total returns do take into account
applicable sales charges. The Fund charges a maximum
front-end sales charge of 3% for Class A shares. Class B shares
are subject to a declining contingent deferred sales charge (CDSC)
of 5%, 4%, 3%, 2%, 1%, and 1% for six years. Class B shares will
automatically convert to Class A shares, on a quarterly basis,
approximately seven years after purchase. Class C shares are
subject to a front-end sales charge of 1% and a CDSC of 1%
for 18 months. Class C shares bought before November 2, 1998,
have a 1% CDSC if sold within one year. Without
waiver of management fees and/or expense subsidization, the
Fund's cumulative and average annual total returns would have
been lower, as indicated in parentheses ( ).
2 Inception dates: Class A, 1/22/90; Class B, 4/25/80; Class
C, 8/1/94; and Class Z, 1/22/99.
3 Lipper average returns are for all funds in each share class
for the six-month, one-, five-, and ten-year periods in the
General Muni category.
***Lipper Since Inception returns are 90.26% for Class A,
397.21% for Class B, 32.58% for Class C, and -2.90% for
Class Z, based on all funds in each share class.
Fundamentals hurt the Fund
The Fund typically has more exposure to longer-term debt
securities than shorter-term debt securities. This hurt our
performance during the reporting period because one- to
five-year (short-term) bonds fared better than 10- to
15-year (long-term) bonds over the first six months of
1999. When bond markets sell off, prices of short-term
bonds typically decline less than prices of long-term
bonds. Most bond markets sold off during the first half
of the year as inflation fears were again sparked
by the strong U.S. economy, global economic recovery,
and rising oil prices. Mounting inflationary pressures
erode the value of bonds' fixed interest payments. To
compensate for this risk, investors began to push bond
yields higher and their prices lower.
Risk over quality
AAA-rated bonds were the worst-performing bonds in the
municipal market during the reporting period, further
hurting performance. This was partly due to the fact
that investors felt confident that the world was now a
safer place to invest their money. Riskier, higher-yielding
investments were sought over high-quality fixed-income
securities. Since the Fund had heavier exposure to
AAA-rated bonds, performance suffered. However, the
Fund did hold more lower-quality BBB-rated bonds than the
comparable fund in its competitive universe. This helped
performance because these bonds offer significant yield
potential.
The Fund also held noncallable bonds, a portion of them
being zero-coupon bonds. Noncallable bonds tend to perform
better than callable bonds when debt markets rally, since
they are free to appreciate in value without the risk of
being retired early by the issuer. Furthermore, prices of
zero-coupon bonds have plenty of room to rise when
fixed-income markets rally, since they typically trade
at deep discounts to their maturity value. However, when
fixed-income markets perform poorly, as they did
in the first half of 1999, the prices of these bonds
usually fall further and faster than those of other
debt securities.
<PAGE>
A move to neutral
In March, as interest rates continued to rise, the Fund
sought to achieve a closer to neutral duration stance in
relation to its competitive universe. By mid-April, the
Fund had achieved this neutral duration stance by selling
some of its noncallable and zero-coupon bonds, as well as
some of its longer-term, high-grade corporate bonds. This
strategy helped the Fund bounce back from the tough first
three months of the year and positioned it positively going
forward. Furthermore, in the second quarter, since the prices
of high-quality, AAA-rated bonds had already dropped
substantially, we were able to add these bonds to the
Fund's portfolio at attractive levels. Consequently,
the Fund put in a very strong performance during
that time.
A strong finish
By the middle of the second quarter, the Fund achieved a
shorter-than-average duration stance. This move was made
because we anticipated that the Federal Reserve would have
to raise interest rates to quell inflation fears and slow
the pace of the U.S. economy. Therefore, if the economy
kept growing and the Fed eventually raised rates, holding
bonds with shorter maturities would benefit the Fund. This
strategy paid off as the Federal Reserve did indeed raise
the Federal funds rate by 0.25%, or 25 basis points, on
June 30, 1999. The Fund also benefited by steering clear
of holding bonds in the much-maligned healthcare sector.
Looking Ahead
There is good value out there
We feel there is good value in the high-grade municipal bond
sector, and plan to add some of these bonds to our portfolio
going forward. High-grade bonds are now cheap relative to
other sectors of the fixed-income arena, and should be one
of the top performers over the next year. Moreover, if the
anticipated slowdown in the U.S. economy takes place, a
longer-duration stance could benefit the Fund. We will
look to extend our duration by adding bonds to the Fund
with longer maturities, as well as noncallable bonds.
Five Largest Issuers
Expressed as a percentage of net assets as of 6/30/99
New York City General Obligation 3.4%
New York City Municipal Water Finance Authority 2.7%
Illinois Metro Pier & Expo Authority 2.3%
Ohio State Water Development Authority 2.1%
Anaheim Public Finance Authority 2.0%
Portfolio Composition
Expressed as a percentage of total investments as of 6/30/99
General Obligation 23.2%
Utility 19.7
Other Revenue 18.0
Industrial Development 13.9
Transportation 10.4
Prerefunded 8.9
Miscellaneous 4.2
Cash Equivalents 1.7
Credit Quality
Expressed as a percentage of total investments as of 6/30/99
AAA 10.5%
AA 6.4
A 10.6
BBB 18.0
Insured 51.6
Not Rated 2.9
Investment Goals and Style
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.
1
<PAGE>
Portfolio of Investments as of
June 30, 1999 (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--97.7%
- ------------------------------------------------------------------------------------------------------------------------------
Alaska--1.8%
Alaska Ind. Dev. & Expt. Auth. Rev., Revolving Fd. A2 5.40% 4/01/01 $ 900 $ 916,479
Anchorage Elec. Util. Rev.,
M.B.I.A. Aaa 6.50 12/01/12 3,400 (h) 3,844,142
M.B.I.A. Aaa 6.50 12/01/13 2,500 (h) 2,834,925
M.B.I.A. Aaa 6.50 12/01/14 3,455 (h) 3,927,160
------------
11,522,706
- ------------------------------------------------------------------------------------------------------------------------------
Arizona--3.4%
Arizona St. Mun. Fin. Proj., Cert. of Part., Ser. 25, B.I.G. Aaa 7.875 8/01/14 2,250 (h) 2,830,500
Maricopa Cnty. Sch. Dist., A.M.B.A.C.,
No. 3 Tempe Elem. Aaa Zero 7/01/09 1,500 903,750
No. 3 Tempe Elem. Aaa Zero 7/01/14 1,500 670,470
Maricopa Cnty. Uni. Sch. Dist.,
No. 80 Chandler, F.G.I.C. Aaa Zero 7/01/09 1,330 801,325
No. 80 Chandler, M.B.I.A. Aaa Zero 7/01/10 1,050 596,243
No. 80 Chandler, M.B.I.A. Aaa Zero 7/01/11 1,200 641,976
No. 80 Chandler, F.G.I.C., E.T.M. Aaa 6.25 7/01/11 375 417,281
No. 80 Chandler, F.G.I.C. Aaa 6.25 7/01/11 625 685,394
Phoenix Str. & Hwy. User Rev., Ser. A, F.G.I.C. Aaa Zero 7/01/12 2,500 1,259,925
Pima Cnty. Ind. Dev. Auth. Rev., F.S.A. Aaa 7.25 7/15/10 1,935 (h) 2,102,474
Pima Cnty. Uni. Sch. Dist., Gen. Oblig., F.G.I.C. Aaa 7.50 7/01/10 3,000 (f) 3,613,260
Tucson Cnty. Gen. Oblig.,
Ser. A Aa3 7.375 7/01/11 1,000 1,200,950
Ser. A Aa3 7.375 7/01/12 1,100 1,330,593
Ser. A Aa3 7.375 7/01/13 4,500 5,478,075
------------
22,532,216
- ------------------------------------------------------------------------------------------------------------------------------
California--8.0%
Abag Fin. Auth. for Nonprofit Corps., Cert. of Part., Amer.
Baptist Homes., Ser. A BBB(d) 6.20 10/01/27 2,200 2,286,020
Anaheim Pub. Fin. Auth. Lease Rev., F.S.A.,
Sr. Pub. Impvts. Proj., Ser. A Aaa 6.00 9/01/24 5,500 6,006,935
Sub. Pub. Impvts. Proj., Ser. C Aaa 6.00 9/01/16 6,690 7,300,329
Encinitas Union Sch. Dist., Gen. Oblig., M.B.I.A Aaa Zero 8/01/21 3,810 1,128,674
Kern High Sch. Dist., Ser. A, M.B.I.A. Aaa 6.30 2/01/10 2,490 2,781,679
Long Beach Aquarium of the Pacific Rev., Ser. A, A.M.T. BBB(d) 6.125 7/01/23 6,000 6,154,320
Long Beach Harbor Rev., Ser. A, F.G.I.C., A.M.T. Aaa 6.00 5/15/18 4,000 4,306,280
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 2
<PAGE>
Portfolio of Investments as of
June 30, 1999 (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.)
Los Angeles Uni. Sch. Dist., Ser. A, F.G.I.C. Aaa 6.00% 7/01/15 $ 1,000 $ 1,089,610
San Jose Redev. Agcy., Tax Alloc., M.B.I.A. Aaa 6.00 8/01/11 5,000 5,473,000
Santa Cruz Cnty. Pub. Fin. Auth. Rev., Ser. B A-(d) 6.20 9/01/23 2,000 2,088,580
Santa Margarita Dana Point Auth., M.B.I.A.,
Impvt. Dists. 3-3A-4 & 4A, Ser. B Aaa 7.25 8/01/09 2,000 2,385,020
Impvt. Dists. 3-3A-4 & 4A, Ser. B Aaa 7.25 8/01/10 2,450 2,939,706
Impvt. Dists. 3-3A-4 & 4A, Ser. B Aaa 7.25 8/01/14 2,000 2,440,740
Santa Monica Malibu Uni. Sch. Dist., Gen. Oblig., F.G.I.C. Aaa Zero 8/01/21 7,280 2,156,627
So. Orange Cnty. Pub. Fin. Auth. Rev., Ser. C, F.G.I.C. Aaa 6.50 8/15/10 2,000 2,260,780
So. Whittier Elem. Sch. Dist., Gen. Oblig., Ser. A, F.G.I.C. Aaa Zero 8/01/12 810 410,071
West Contra Costa Sch. Dist., Cert. of Part. Baa3 7.125 1/01/24 1,600 1,758,896
------------
52,967,267
- ------------------------------------------------------------------------------------------------------------------------------
Colorado--3.7%
Arapahoe Cnty. Cap. Impvt. Trust Fund, Hwy. Rev., Ser. E-470 Aaa 7.00 8/31/26 3,000 (b) 3,459,300
Colorado Hsg. Fin. Auth., A.M.T.
Singl. Fam. Proj. Aa2 8.00 6/01/25 2,440 2,596,282
Singl. Fam. Proj., Ser. A-2 Aa2 7.25 5/01/27 2,000 2,210,080
Singl. Fam. Proj., Ser. B-1 Aa2 7.90 12/01/25 1,485 1,609,398
Singl. Fam. Proj., Ser. C-1, M.B.I.A. Aaa 7.65 12/01/25 3,640 4,046,588
Singl. Fam. Proj., Ser. C-2 Aa2 6.875 11/01/28 2,000 2,210,920
Colorado Springs Arpt. Rev., Ser. A., A.M.T. BBB+(d) 7.00 1/01/22 7,960 (f) 8,565,040
------------
24,697,608
- ------------------------------------------------------------------------------------------------------------------------------
Connecticut--2.3%
Connecticut St. Hlth. & Edu. Facs. Auth. Rev.,
St. Mary's Hosp. Issue, Ser. E A3 5.50 7/01/20 5,650 5,406,089
St. Mary's Hosp. Issue, Ser. E A3 5.875 7/01/22 1,750 1,724,608
Univ. of Hartford, Ser. D Ba1 6.75 7/01/12 5,725 5,943,180
Connecticut St. Spec. Tax Oblig. Rev.,
Trans. Infrastructure, Ser. A AA-(d) 7.00 6/01/03 1,000 (b) 1,063,610
Trans. Infrastructure, Ser. A A1 7.125 6/01/10 1,000 1,164,330
------------
15,301,817
- ------------------------------------------------------------------------------------------------------------------------------
District Of Columbia--1.0%
Dist. of Columbia, M.B.I.A,
Gen. Oblig., Ser. B Aaa 6.00 6/01/13 1,000 1,073,360
Gen. Oblig., Ser. B Aaa 6.00 6/01/21 5,000 5,394,600
------------
6,467,960
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of
June 30, 1999 (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--2.4%
Broward Cnty. Res. Rec. Rev., Broward Co. L.P. South Proj. A3 7.95% 12/01/08 $ 7,895 $ 8,244,196
Florida St. Brd. of Ed., Gen. Oblig. Aa2 9.125 6/01/14 1,260 (h) 1,715,376
Hillsborough Cnty. Ind. Dev. Auth. Poll. Ctrl. Rev., Tampa
Elec. Proj. Aa3 8.00 5/01/22 5,000 5,587,100
Palm Beach Cnty. Hlth. Facs. Auth. Rev., Abbey Delray So.
Proj. BBB(d) 5.30 10/01/07 500 503,325
------------
16,049,997
- ------------------------------------------------------------------------------------------------------------------------------
Georgia--2.7%
Atlanta Wtr. & Wastewtr. Rev., Ser. A, F.G.I.C. Aaa 5.50 11/01/22 3,000 3,075,510
Burke Cnty. Dev. Auth., Poll. Cntrl. Rev., M.B.I.A.,
Georgia Pwr. Co. Aaa 6.625 10/01/24 500 (h) 513,260
Oglethorpe Pwr. Co. Aaa 8.00 1/01/22 5,000 b)(h) 5,712,500
Oglethorpe Pwr. Co., E.T.M. Aaa 7.50 1/01/03 712 755,233
Forsyth Cnty. Sch. Dist. Dev. Rev. Aa3 6.75 7/01/16 500 580,880
Fulton Cnty. Sch. Dist. Rev. Aa2 6.375 5/01/17 750 (h) 848,745
Georgia Mun. Elec. Auth. Pwr. Rev.,
Ser. B A3 6.25 1/01/17 475 515,270
Ser. B, M.B.I.A. Aaa 6.375 1/01/16 5,000 5,604,050
Green Cnty. Dev. Auth. Indl. Park Rev. NR 6.875 2/01/04 395 415,911
------------
18,021,359
- ------------------------------------------------------------------------------------------------------------------------------
Guam--0.2%
Guam Pwr. Auth. Rev., Ser. A BBB(d) 6.625 10/01/14 1,000 (b) 1,110,690
- ------------------------------------------------------------------------------------------------------------------------------
Hawaii--1.2%
Hawaii St. Dept. Budget & Fin. Spl. Purp. Mtg. Rev.,
Hawaiian Elec. Co., Ser. A, M.B.I.A., A.M.T. Aaa 5.65 10/01/27 5,000 5,033,600
Hawaiian Elec. Co., Ser. C, M.B.I.A., A.M.T. Aaa 7.375 12/01/20 500 530,005
Kapiolani Hlth. Care Sys. A2 6.30 7/01/08 500 534,725
Kapiolani Hlth. Care Sys. A2 6.00 7/01/11 250 262,035
Hawaii St., Gen. Oblig., Ser. CJ Aaa 6.25 1/01/15 650 (b) 702,930
Hawaii St. Harbor Cap. Impvt. Rev., A.M.T.,
F.G.I.C. Aaa 6.25 7/01/10 250 267,702
F.G.I.C. Aaa 6.25 7/01/15 500 533,340
------------
7,864,337
- ------------------------------------------------------------------------------------------------------------------------------
Illinois--4.5%
Chicago Brd. of Ed., Gen. Oblig., F.G.I.C.,
Sch. Reform, Ser. A Aaa Zero 12/01/29 15,600 2,740,296
Sch. Reform, Ser. B-1 Aaa Zero 12/01/12 1,500 726,135
Sch. Reform, Ser. B-1 Aaa Zero 12/01/17 10,000 (f) 3,577,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as of
June 30, 1999 (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.)
Cook and Du Page Cntys., High Sch. Dist No. 210, Gen. Oblig.,
F.S.A. Aaa Zero 12/01/11 $ 3,035 $ 1,573,496
Illinois Dev. Fin. Auth. Rev., Cmnty. Rehab. Providers, Ser. A BBB(d) 6.00% 7/01/15 2,000 2,010,440
Illinois Hlth. Facs. Auth. Rev., Loyola Univ. Hlth. Sys., Ser.
A, M.B.I.A. Aaa 6.00 7/01/14 3,500 3,758,895
Metropolitan Pier & Expo. Auth., Hosptlty. Fac. Rev.,
McCormick Pl. Conv. BBB-(d) 7.00 7/01/26 12,910 15,049,961
------------
29,436,223
- ------------------------------------------------------------------------------------------------------------------------------
Indiana--0.6%
Gary Ind. Mtge. Rev.,
Lakeshore Dunes Apts., Ser. A, G.N.M.A. NR 5.875 2/20/23 2,000 1,999,820
Lakeshore Dunes Apts., Ser. A, G.N.M.A. NR 6.00 8/20/34 2,000 1,999,820
------------
3,999,640
- ------------------------------------------------------------------------------------------------------------------------------
Kentucky--1.0%
Henderson Cnty. Solid Waste Disp. Rev., Macmillan Bloedel
Proj., A.M.T. Baa2 7.00 3/01/25 6,000 6,366,840
- ------------------------------------------------------------------------------------------------------------------------------
Louisiana--4.6%
New Orleans, Gen. Oblig., A.M.B.A.C. Aaa Zero 9/01/09 13,500 8,025,480
Orleans Parish Sch. Brd., E.T.M., M.B.I.A. Aaa 8.90 2/01/07 5,780 (h) 7,272,396
St. Charles Parish, Env. Impt. Rev., Louisiana Pwr. & Lt. Co.
Proj.,
Ser. A, A.M.T. Baa2 6.875 7/01/24 5,000 5,368,800
St. Charles Parish, Poll. Ctrl. Rev.,
Lousiana Pwr. & Lt. Co. Proj. Baa3 8.25 6/01/14 4,000 4,122,920
Lousiana Pwr. & Lt. Co. Proj. Baa3 8.00 12/01/14 5,000 5,209,350
------------
29,998,946
- ------------------------------------------------------------------------------------------------------------------------------
Maryland--3.4%
Baltimore Constr. Pub. Imprvt., Gen. Oblig., Ser. C, F.G.I.C. Aaa 5.50 10/15/16 1,000 1,036,180
Baltimore Conv. Ctr. Rev., F.G.I.C. Aaa 5.75 9/01/08 1,075 (b) 1,138,834
Baltimore Econ. Dev. Lease Rev., Armistead Partnership, Ser. A BBB+(d) 7.00 8/01/11 1,000 1,078,390
Harford Cnty., Gen. Oblig. Aa2 5.50 3/01/06 750 788,340
Maryland St. Hlth. & Higher Edu. Facs. Auth. Rev.,
Doctor's Cmnty. Hosp. Baa1 5.50 7/01/24 3,000 2,832,930
Howard Cnty. Gen. Hosp., E.T.M. Aaa 5.50 7/01/21 500 506,880
Mercy Medical Center, F.S.A. Aaa 5.75 7/01/26 1,000 1,024,690
Maryland St. Ind. Dev. Fin. Auth. Rev., Amer. Ctr. Physics
Headqrtrs. BBB(d) 6.625 1/01/17 1,000 1,063,790
Maryland St. Trans. Auth. Rev., Balt. Int'l. Arpt. Proj., Ser.
A, A.M.T., F.G.I.C. Aaa 6.25 7/01/14 1,750 (h) 1,867,495
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as of
June 30, 1999 (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>
- ------------------------------------------------------------------------------------------------------------------------------
Maryland (cont'd.)
Montgomery Cnty.,
Gen. Oblig. Aaa 9.75% 6/01/01 $ 450 (f) $ 496,471
Gen. Oblig., Constr. Pub. Impvt., Ser. A Aaa 5.75 10/01/07 1,300 (h) 1,385,033
Northeast Waste Disp. Auth. Rev.,
Baltimore City Sludge Corp. Proj. NR 7.25 7/01/07 3,813 4,120,900
Montgomery Cnty. Res. Rec. Proj., Ser. A A2 6.00 7/01/07 1,000 1,058,530
Prince Georges Cnty., Gen. Oblig., Constr. Pub. Impvt. A1 5.25 10/01/11 1,000 1,014,370
Prince Georges Cnty. Hsg. Auth. Mtge. Rev., Langley Gardens
Apts. Proj., Ser. A., G.N.M.A., A.M.T. AAA(d) 5.75 8/20/29 500 512,785
Prince Georges Cnty. Poll. Cntrl. Rev., Potomac Elec. Proj.,
M.B.I.A. Aaa 5.75 3/15/10 1,100 1,168,607
Takoma Park Hosp. Facs. Rev., Washington Adventist Hosp.,
F.S.A. Aaa 6.50 9/01/12 1,000 (h) 1,129,910
------------
22,224,135
- ------------------------------------------------------------------------------------------------------------------------------
Massachusetts--2.3%
Mass. Edu. Fin. Auth., Edu. Ln. Rev., Issue G., Ser. A.,
M.B.I.A., A.M.T. AAA(d) 5.10 12/01/13 1,000 971,630
Mass. St. Hlth. & Edl. Facs. Auth. Rev., Mass. Inst. of Tech.
Ser. I-1 Aaa 5.20 1/01/28 1,500 1,475,895
Mass. St. Wtr. Res. Auth. Rev., M.B.I.A.,
Ser. B Aaa 6.25 12/01/11 6,720 7,450,397
Ser. B Aaa 6.25 12/01/12 5,000 5,558,750
------------
15,456,672
- ------------------------------------------------------------------------------------------------------------------------------
Michigan--7.1%
Brandon Sch. Dist., Gen. Oblig., F.G.I.C. Aaa 5.875 5/01/26 1,310 (b) 1,411,735
Breitung Twnshp. Sch. Dist. Ref., Gen. Oblig., M.B.I.A. Aaa 6.30 5/01/15 250 265,625
Detroit Econ. Dev. Corp., Res. Rec. Rev., Ser. A, F.S.A.,
A.M.T. Aaa 6.875 5/01/09 920 973,461
Detroit Sewage. Disp. Rev.,
Prerefunded Inflos AAA(d) 7.871 7/01/23 800 (b) 891,000
Unrefunded Balance Inflos Aaa 7.871 7/01/23 200 206,250
Detroit Wtr. Supply Sys. Rev., Ser. B, M.B.I.A. Aaa 5.55 7/01/12 1,000 1,036,610
Dexter Cmnty. Schs., Gen. Oblig., F.G.I.C. Aaa 5.10 5/01/28 10,000 9,605,500
Dickinson Cnty. Mem. Hosp. Sys. Rev. Ba1 8.00 11/01/14 1,000 1,164,500
Hillsdale Hosp. Fin. Auth. Rev., Hillsdale Cmnty. Hlth. Ctr. BBB-(d) 5.25 5/15/26 1,000 896,780
Holland Sch. Dist., Gen. Oblig., A.M.B.A.C. Aaa Zero 5/01/15 2,400 1,014,816
Huron Valley Sch. Dist., Gen. Oblig., F.G.I.C. Aaa Zero 5/01/10 3,500 (h) 1,998,220
Kalamazoo Econ. Dev. Corp. Rev., Friendship Vlg. Proj., Ser. A BBB(d) 6.125 5/15/17 1,000 1,027,500
Kent Hosp. Fac. Fin. Auth. Rev., Blodgett Mem. Med. Ctr., Ser.
A A2 7.25 7/01/05 500 510,050
Lincoln Park Sch. Dist., Gen. Oblig., F.G.I.C. Aaa 7.00 5/01/20 1,500 (b) 1,714,290
Michigan Higher Ed. Rev., Ser. XIII-A, M.B.I.A., A.M.T. Aaa 7.55 10/01/08 345 363,137
Michigan Mun. Bd. Auth. Rev., Wayne Cnty. Proj., M.B.I.A.,
E.TM. Aaa 7.40 12/01/02 500 536,515
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
Portfolio of Investments as of
June 30, 1999 (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.)
Michigan St. Hosp. Fin. Auth. Rev.,
Bay Med. Ctr., Ser. A A3 8.25% 7/01/12 $ 1,920 $ 2,036,525
Genesys Hlth. Sys., Ser. A Baa2 8.125 10/01/21 1,000 (b) 1,201,930
Genesys Hlth. Sys., Ser. A Baa2 7.50 10/01/27 500 (b) 577,085
Presbyterian Vlg. Oblig. NR 6.375 1/01/25 800 830,872
Michigan St. Hsg. Dev. Auth. Rev.,
Rental Hsg., Ser. A, A.M.T. AA-(d) 7.15 4/01/10 335 356,932
Rental Hsg., Ser. A, A.M.T. AA-(d) 7.70 4/01/23 500 528,550
Rental Hsg., Ser. B AA-(d) 7.55 4/01/23 1,000 1,056,350
Sngl. Fam. Mtge., Ser. A. AA+(d) 7.50 6/01/15 3,305 3,407,753
Michigan St. Strategic Fd., Ltd. Oblig. Rev.,
NSF Intl. Proj., Ser. A Aa3 5.75 8/01/19 1,000 1,008,620
Waste Mgmt. Inc. Proj., A.M.T. Baa3 6.625 12/01/12 1,500 1,593,930
Worthington Armstrong Venture, A.M.T. A-(d) 5.75 10/01/22 1,000 1,006,300
Monroe Cnty. Poll. Ctrl. Rev., Detroit Edison Co. Proj.,
F.G.I.C., A.M.T. Aaa 7.65 9/01/20 2,000 (h) 2,114,000
Oak Park, A.M.B.A.C.,
Gen. Oblig. Aaa 7.00 5/01/11 375 (b) 407,876
Gen. Oblig. Aaa 7.00 5/01/12 400 (b) 435,068
Okemos Pub. Sch. Dist.,
M.B.I.A. Aaa Zero 5/01/12 1,100 557,161
M.B.I.A. Aaa Zero 5/01/13 1,000 477,140
Posen Cons. Sch. Dist. No. 9, Gen. Oblig., M.B.I.A. Aaa 6.75 5/01/22 1,000 b)(f) 1,097,710
Redford Uni. Sch. Dist., Gen. Oblig., A.M.B.A.C. Aaa 5.50 5/01/14 655 676,464
Wayne Cnty. Bldg. Auth., Gen. Oblig., Ser. A A3 8.00 3/01/17 1,250 1,384,087
Wyandotte Elec. Rev., M.B.I.A. Aaa 6.25 10/01/08 2,000 (b) 2,185,980
------------
46,556,322
- ------------------------------------------------------------------------------------------------------------------------------
Minnesota--0.3%
Anoka Hennepin Indpt. Sch. Dist. No.11, Gen. Oblig., Ser. C,
F.S.A. Aaa Zero 2/01/12 1,575 (h) 815,362
Minneapolis St. Paul Hsg. Fin. Brd. Rev., Sngl. Fam. Mtge.,
G.N.M.A., A.M.T. AAA(d) 7.30 8/01/31 690 719,352
St. Paul Science Museum, Cert. of Part., E.T.M. AAA(d) 7.50 12/15/01 507 (h) 532,955
------------
2,067,669
- ------------------------------------------------------------------------------------------------------------------------------
Missouri--0.8%
Clayton Sch. Dist., F.S.A. Aaa Zero 2/01/07 750 516,413
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 4,105 4,438,490
------------
4,954,903
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7
<PAGE>
Portfolio of Investments as of
June 30, 1999 (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>
- ------------------------------------------------------------------------------------------------------------------------------
Nevada--2.2%
Clark Cnty. Indl. Dev. Rev., Southwest Gas Corp. Proj., Ser.
A, A.M.T. Baa2 6.50% 12/01/33 $ 10,000 $ 10,509,400
Nevada Hsg. Div. Multi Unit Hsg. Rev., F.N.M.A., A.M.T. AAA(d) 6.60 10/01/23 3,475 3,707,512
------------
14,216,912
- ------------------------------------------------------------------------------------------------------------------------------
New Hampshire--0.2%
New Hampshire Higher Ed. & Hlth. Facs. Auth. Rev.,
New Hampshire College BBB-(d) 6.30 1/01/16 500 505,695
New Hampshire College BBB-(d) 6.375 1/01/27 1,000 1,015,290
------------
1,520,985
- ------------------------------------------------------------------------------------------------------------------------------
New Jersey--2.3%
New Jersey Econ. Dev. Auth. Rev., Performing Arts Ctr. Proj.,
Ser. A, A.M.B.A.C. Aaa 6.00 6/15/08 1,410 1,523,463
New Jersey St. Hsg. & Mtge. Fin. Agcy. Rev., Ser. D, M.B.I.A.,
A.M.T. Aaa 7.70 10/01/29 1,415 1,447,191
New Jersey St. Tpke. Auth. Rev., Ser. C, M.B.I.A. Aaa 6.50 1/01/16 11,000 12,497,320
------------
15,467,974
- ------------------------------------------------------------------------------------------------------------------------------
New Mexico--0.8%
New Mexico Mtge. Fin. Auth., Singl. Fam. Mtge., A.M.T. AAA(d) 6.30 7/01/28 4,985 5,233,901
- ------------------------------------------------------------------------------------------------------------------------------
New York--11.7%
Greece Central Sch. Dist.,
F.G.I.C. Aaa 6.00 6/15/16 950 1,036,051
F.G.I.C. Aaa 6.00 6/15/17 950 1,035,662
F.G.I.C. Aaa 6.00 6/15/18 950 1,034,873
Metropolitan Trans. Auth., Trans. Facs. Rev.,
Ser. A, F.S.A. Aaa 5.75 7/01/11 675 706,360
Ser. A, F.S.A. Aaa 6.00 7/01/16 2,500 2,636,825
New York City Ind. Dev. Agcy., Spec. Fac. Rev., Terminal One
Group Assoc. Proj., A.M.T. A3 6.00 1/01/19 2,500 2,585,500
New York City Mun. Wtr. Fin. Auth. Rev.,
F.G.I.C. Aaa 6.75 6/15/16 6,000 (b) 6,363,420
F.G.I.C. Aaa 6.75 6/15/16 10,565 (f) 11,141,109
New York City, Gen. Oblig.,
Ser. A A-(d) 7.75 8/15/04 1,950 (b) 2,121,386
Ser. A A3 7.75 8/15/04 50 53,678
Ser. B A3 8.25 6/01/06 1,500 1,785,495
Ser. B A3 7.25 8/15/07 3,500 4,008,970
Ser. D Aaa 8.00 8/01/03 1,870 (b) 2,042,826
Ser. D A3 8.00 8/01/03 150 162,855
Ser. D Aaa 8.00 8/01/04 1,110 (b) 1,212,586
Ser. D A3 8.00 8/01/04 60 65,142
Ser. D Aaa 7.65 2/01/07 4,955 (b) 5,434,644
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 8
<PAGE>
Portfolio of Investments as of
June 30, 1999 (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 City, Gen. Oblig., (cont'd.)
Ser. D A3 7.65% 2/01/07 $ 45 $ 48,954
Ser. F A3 8.25 11/15/02 4,185 (b) 4,632,627
Ser. F A3 8.25 11/15/02 815 894,536
New York St. Dorm. Auth. Rev., Mem. Sloan Kettering Cancer
Ctr., M.B.I.A. Aaa 5.75 7/01/20 4,000 4,231,640
New York St. Env. Facs. Corp., Poll. Ctrl. Rev. Aaa 5.80 1/15/14 1,280 1,342,835
New York St. Local Gov't. Assist. Corp. Rev., Ser. E A3 6.00 4/01/14 5,000 5,418,800
New York St. Urban Dev. Corp. Rev., F.S.A.,
Correctional Facs. Aaa 6.50 1/01/09 3,000 3,334,710
Correctional Facs., Ser. A Aaa 5.50 1/01/14 3,000 3,097,050
Suffolk Cnty., Gen. Oblig., Ser. A, F.G.I.C. Aaa 5.25 8/01/13 1,325 1,336,766
Triborough Bridge & Tunl. Auth. Rev., Ser. X, M.B.I.A. Aaa 6.625 1/01/12 8,500 (h) 9,679,035
------------
77,444,335
- ------------------------------------------------------------------------------------------------------------------------------
North Dakota--1.6%
Mercer Cnty. Poll. Ctrl. Rev., Antelope Valley Station,
A.M.B.A.C. Aaa 7.20 6/30/13 9,000 10,629,900
- ------------------------------------------------------------------------------------------------------------------------------
Ohio--2.8%
Franklin Cnty. Hosp. Rev., Doctors Ohio Hlth. Corp., Ser. A Baa3 5.60 12/01/28 5,000 4,659,850
Ohio St. Wtr. Dev. Auth. Poll. Ctrl. Facs. Rev., Buckeye Pwr.
Inc. Proj., A.M.B.A.C. Aaa 7.80 11/01/14 12,220 14,060,088
------------
18,719,938
- ------------------------------------------------------------------------------------------------------------------------------
Oklahoma--2.8%
McGee Creek Auth. Wtr. Rev., M.B.I.A. Aaa 6.00 1/01/23 7,000 7,546,280
Tulsa Mun. Arpt. Trust Rev., A.M.T. Baa1 7.375 12/01/20 10,000 10,561,200
------------
18,107,480
- ------------------------------------------------------------------------------------------------------------------------------
Pennsylvania--3.0%
Beaver Cnty. Ind. Dev. Auth., Poll. Cntrl. Rev., Ohio Edison
Co. Proj., Ser. A Baa3 4.65 6/01/33 5,000 4,951,750
Clarion Cnty. Hosp. Auth. Rev., Clarion Hosp. Proj. BBB-(d) 5.60 7/01/10 685 682,383
Delaware Cnty. Ind. Dev. Auth. Rev., Res. Rec. Fac., Ser. A B2 6.20 7/01/19 3,000 3,054,210
Montgomery Cnty. Ind. Dev. Auth., Retirement Cmnty. Rev. A-(d) 5.25 11/15/28 2,000 1,809,160
Montgomery Cnty. Redev. Auth., Multifam. Hsg. Rev., KBF Assoc.
L.P. Proj., Ser. A NR 5.75 7/01/99 395 395,008
Pennsylvania St., Cert. of Part., F.S.A. Aaa 6.25 11/01/06 600 635,874
Pennsylvania Econ. Dev. Fin. Auth., Solid Waste Disp. Rev.,
A.M.T. Baa2 6.00 6/01/31 4,500 (g) 4,499,730
Philadelphia Hosp. & Higher Edl. Facs. Auth. Rev., Children's
Seashore House, Ser. A A-(d) 7.00 8/15/03 1,000 1,067,040
Philadelphia Wtr. & Waste Auth. Rev., M.B.I.A. Aaa 6.25 8/01/11 2,500 2,749,750
------------
19,844,905
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9
<PAGE>
Portfolio of Investments as of
June 30, 1999 (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--3.6%
Puerto Rico Comnwlth., Gen. Oblig. Baa1 6.50% 7/01/13 $ 3,000 $ 3,387,720
Puerto Rico Comnwlth. Hwy. & Trans. Auth. Rev.,
Ser. A, A.M.B.A.C. Aaa Zero 7/01/18 2,500 918,375
Ser. V Baa1 6.375 7/01/08 500 530,300
Ser. V Baa1 6.625 7/01/12 4,000 4,301,600
Puerto Rico Comnwlth. Hwy. Auth. Rev., Ser. Q AAA(d) 7.75 7/01/16 1,000 b)(h) 1,061,760
Puerto Rico Ind., Tourist Ed. Med. & Env. Ctrl. Facs. Rev.,
Dr. Pila Hosp. Proj., F.H.A. AAA(d) 6.125 8/01/25 500 534,730
Hosp. Auxilio Mutuo Oblig. Grp. Proj., M.B.I.A. Aaa 6.25 7/01/16 500 536,615
Puerto Rico Mun. Fin. Agcy. Rev., Ser. A, F.S.A. Aaa 6.00 7/01/14 250 263,760
Puerto Rico Tel. Auth. Rev.,
M.B.I.A. Aaa 7.127(c) 1/25/07 4,100 (b) 4,366,500
M.B.I.A. Aaa 7.29 (c) 1/16/15 7,150 b)(h) 7,730,938
------------
23,632,298
- ------------------------------------------------------------------------------------------------------------------------------
South Carolina--1.5%
Charleston Wtrwks. & Swr. Rev., E.T.M. Aaa 10.375 1/01/10 7,415 (h) 9,845,563
- ------------------------------------------------------------------------------------------------------------------------------
Tennessee--1.7%
Bristol Hlth. & Edl. Fac. Rev., Bristol Memorial Hosp.,
F.G.I.C. Aaa 6.75 9/01/10 5,000 (f) 5,718,400
McMinn Cnty. Ind. Dev. Brd. Solid Waste Rev., Recycling Fac.,
A.M.T. Baa1 7.40 12/01/22 5,000 5,443,050
------------
11,161,450
- ------------------------------------------------------------------------------------------------------------------------------
Texas--5.9%
Bexar Cnty. Hlth. Facs. Dev. Corp. Rev., Baptist Hlth. Sys.,
Ser. A, M.B.I.A. Aaa 6.00 11/15/14 5,695 6,128,902
Dallas Ft. Worth, Regl. Arpt. Rev., F.G.I.C.,
Ser. A Aaa 7.375 11/01/08 3,500 3,966,200
Ser. A Aaa 7.375 11/01/09 3,500 3,966,200
Houston Higher Ed. Fin. Corp. Rev., Rice Univ. Proj., Ser. A Aaa 5.375 11/15/29 4,150 (g) 4,091,651
Houston Indpt. Sch. Dist., Gen. Oblig., Ser. A Aaa 5.00 2/15/24 3,000 2,783,520
Keller Indpt. Sch. Dist. Rev. Aaa 6.00 8/15/23 3,970 4,328,451
Lakeway Mun. Util. Dist., Gen. Oblig., Ser. A, F.G.I.C. Aaa Zero 9/01/11 1,425 751,289
Leander Indpt. Sch. Dist., Gen. Oblig. AAA(d) 5.40 8/15/22 2,000 (g) 1,983,440
New Braunfels Indpt.,
Sch. Dist. Rev. Aaa Zero 2/01/10 2,335 1,347,669
Sch. Dist. Rev. Aaa Zero 2/01/11 2,365 1,285,732
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 10
<PAGE>
Portfolio of Investments as of
June 30, 1999 (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>
- ------------------------------------------------------------------------------------------------------------------------------
Texas (cont'd.)
Port Corpus Christ. Auth. Rev., A2 7.50% 8/01/12 $ 2,000 $ 2,113,240
San Antonio Elec. & Gas Rev., Ser. B, F.G.I.C. Aaa Zero 2/01/09 5,000 3,079,600
Tyler Tex. Hlth. Facs. Dev. Corp. Rev., Mother Frances Hosp.,
Ser. A Baa2 5.50 7/01/09 1,000 987,750
Univ. of Texas, Univ. Rev., Ser. B Aa1 6.75 8/15/13 2,035 2,172,403
------------
38,986,047
- ------------------------------------------------------------------------------------------------------------------------------
U. S. Virgin Islands--0.1%
Virgin Islands Pub. Fin. Auth. Rev., Matching Ln. Nts., Ser. A NR 7.25 10/01/18 250 (b) 277,140
Virgin Islands Wtr. & Pwr. Auth., Elec. Sys. Rev., Ser. A NR 7.40 7/01/11 435 (b) 465,611
------------
742,751
- ------------------------------------------------------------------------------------------------------------------------------
Utah--0.2%
Utah St. Brd. of Regents, Student Ln. Rev., Ser. F,
A.M.B.A.C., A.M.T. Aaa 7.00 11/01/01 1,000 (f) 1,057,980
- ------------------------------------------------------------------------------------------------------------------------------
Washington--4.1%
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 (f) 6,207,300
Washington St. Pub. Pwr. Supply Sys. Rev.,
Nuclear Proj. No. 1, Ser. A, F.S.A. Aaa 7.00 7/01/08 4,000 4,552,480
Nuclear Proj. No. 1, Ser. B, F.S.A. Aaa 7.25 7/01/09 5,000 5,811,550
Nuclear Proj. No. 2, F.S.A. Aaa 5.40 7/01/12 5,400 5,424,192
Nuclear Proj. No. 3, Ser. B, F.G.I.C. Aaa Zero 7/01/06 3,000 2,131,620
Washington St., Gen. Oblig., Ser. R-97A Aa1 Zero 7/01/16 8,000 3,159,120
------------
27,286,262
- ------------------------------------------------------------------------------------------------------------------------------
Wisconsin--1.9%
Southeast Wisconsin Professional Baseball Park Dist. Sales Tax
Rev., M.B.I.A. Aaa 5.50 12/15/26 2,500 2,535,500
Wisconsin Hsg. & Econ. Dev. Auth., Home Ownership Rev., A.M.T. Aa2 6.20 3/01/27 2,100 2,170,938
Wisconsin St. Hlth. & Edu. Fac. Auth. Rev.,
Aurora Hlth. Care Inc. Proj., Ser. A A-(d) 5.60 2/15/29 2,000 1,873,920
Aurora Hlth. Care Inc. Proj., Ser. B A-(d) 5.625 2/15/29 1,000 939,080
Howard Young Med. Ctr. Inc. Proj. A-(d) 5.125 8/15/28 5,710 5,047,069
------------
12,566,507
------------
Total long-term investments (cost $615,176,619) 644,062,495
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 11
<PAGE>
Portfolio of Investments as of
June 30, 1999 (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>
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--1.2%
- ------------------------------------------------------------------------------------------------------------------------------
Nevada--0.2%
Washoe Cnty. Wtr. Facs. Rev., Sierra Pac. Pwr. Co. Proj.,
F.R.D.D. P-1 3.55% 7/01/99 $ 1,800 (e) $ 1,800,000
- ------------------------------------------------------------------------------------------------------------------------------
Texas--0.9%
Brazos Riv. Hbr. Rev., Nav. Dist., Dow Chemical Co. Proj.,
Ser. 92A, F.R.D.D. P-1 3.60 7/01/99 2,200 (e) 2,200,000
Gulf Coast Ind. Dev. Auth. Rev.,
CITGO Petroleum Proj., Ser. 94, F.R.D.D. VMIG1 3.55 7/01/99 100 (e) 100,000
CITGO Petroleum Proj., Ser. 95, F.R.D.D. VMIG1 3.55 7/01/99 3,500 (e) 3,500,000
------------
5,800,000
- ------------------------------------------------------------------------------------------------------------------------------
Virginia--0.1%
Hopewell Va. Ind. Dev. Auth. Rev., Hadson Pwr. Prog. 13, Ser.
90A, F.R.D.D. P-1 3.65 7/01/99 700 (e) 700,000
------------
Total short-term investments (cost $8,300,000) 8,300,000
------------
Total Investments--98.9%
(cost $623,476,619; Note 4) 652,362,495
Other assets in excess of liabilities--1.1% 6,954,525
------------
Net Assets--100% $659,317,020
------------
------------
</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 Administration
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) Segregated 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>
<CAPTION>
Assets June 30, 1999
<S> <C>
Investments, at value (cost $623,476,619)................................................................... $652,362,495
Interest receivable......................................................................................... 10,855,579
Receivable for investments sold............................................................................. 8,639,751
Due from broker-variation margin............................................................................ 131,250
Receivable for Fund shares sold............................................................................. 55,532
Deferred expenses and other assets.......................................................................... 11,000
-------------
Total assets............................................................................................. 672,055,607
-------------
Liabilities
Bank overdraft.............................................................................................. 33,788
Payable for investments purchased........................................................................... 10,598,292
Payable for Fund shares reacquired.......................................................................... 1,159,800
Dividends payable........................................................................................... 270,655
Accrued expenses............................................................................................ 259,154
Management fee payable...................................................................................... 245,072
Distribution fee payable.................................................................................... 161,851
Deferred director's fee..................................................................................... 9,975
-------------
Total liabilities........................................................................................ 12,738,587
-------------
Net Assets.................................................................................................. $659,317,020
-------------
-------------
Net assets were comprised of:
Common stock, at par..................................................................................... $ 427,756
Paid-in capital in excess of par......................................................................... 628,609,177
-------------
629,036,933
Accumulated net realized gain on investments............................................................. 1,183,274
Net unrealized appreciation on investments............................................................... 29,096,813
-------------
Net assets, June 30, 1999................................................................................... $659,317,020
-------------
-------------
Class A:
Net asset value and redemption price per share
($538,995,357 / 34,983,889 shares of common stock issued and outstanding)............................. $15.41
Maximum sales charge (3% of offering price).............................................................. .48
-------------
Maximum offering price to public......................................................................... $15.89
-------------
-------------
Class B:
Net asset value, offering price and redemption price per share
($116,182,578 / 7,523,412 shares of common stock issued and outstanding).............................. $15.44
-------------
-------------
Class C:
Net asset value and redemption price per share
($2,587,215 / 167,531 shares of common stock issued and outstanding).................................. $15.44
Sales charge (1% of offering price)...................................................................... .16
-------------
Offering price to public................................................................................. $15.60
-------------
-------------
Class Z:
Net asset value, offering price and redemption price per share
($1,551,870 / 100,787 shares of common stock issued and outstanding).................................. $15.40
-------------
-------------
</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, 1999
<S> <C>
Income
Interest................................... $19,099,861
-------------
Expenses
Management fee............................. 1,611,563
Distribution fee--Class A.................. 678,024
Distribution fee--Class B.................. 320,709
Distribution fee--Class C.................. 9,765
Transfer agent's fees and expenses......... 247,000
Custodian's fees and expenses.............. 71,000
Reports to shareholders.................... 50,000
Audit fees and expenses.................... 19,000
Registration fees.......................... 17,000
Directors' fees............................ 16,000
Legal fees and expenses.................... 16,000
Insurance expense.......................... 4,000
Miscellaneous.............................. 2,197
-------------
Total expenses.......................... 3,062,258
Custodian fee credit....................... (6,841)
-------------
Net expenses............................ 3,055,417
-------------
Net investment income......................... 16,044,444
-------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain on:
Investment transactions.................... 1,884,741
Financial futures contracts................ 27,719
-------------
1,912,460
-------------
Net change in unrealized appreciation on:
Investments................................ (21,699,800)
Financial futures.......................... 321,874
-------------
(21,377,926)
-------------
Net loss on investment transactions........... (19,465,466)
-------------
Net Decrease in Net Assets
Resulting from Operations..................... $(3,421,022)
-------------
-------------
</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 1999 1998
<S> <C> <C>
Operations
Net investment income........ $ 16,044,444 $ 29,590,250
Net realized gain on
investment transactions... 1,912,460 2,809,051
Net change in unrealized
appreciation on
investments............... (21,377,926) (619,579)
------------- -------------
Net increase (decrease) in
net assets resulting from
operations................ (3,421,022) 31,779,722
------------- -------------
Dividends and distributions
(Note 1)
Dividends from net investment
income
Class A................... (13,028,100) (23,636,186)
Class B................... (2,918,918) (5,888,290)
Class C................... (56,105) (65,774)
Class Z................... (41,321) --
------------- -------------
(16,044,444) (29,590,250)
------------- -------------
Distributions in excess of
net investment income
Class A................... -- (17,881)
Class B................... -- (4,429)
Class C................... -- (86)
------------- -------------
-- (22,396)
------------- -------------
Distributions from net
realized capital gains
Class A................... -- (3,635,575)
Class B................... -- (906,642)
Class C................... -- (16,469)
------------- -------------
-- (4,558,686)
------------- -------------
Fund share transactions (net of share
conversions) (Note 5 & 6):
Net proceeds from shares
sold...................... 202,553,842 76,423,080
Net asset value of shares
issued in reinvestment of
dividends and
distributions............. 10,061,116 21,262,728
Cost of shares reacquired.... (137,752,903) (126,905,006)
------------- -------------
Increase (decrease) in net
assets from Fund share
transactions.............. 74,862,055 (29,219,198)
------------- -------------
Total increase (decrease)....... 55,396,589 (31,610,808)
Net Assets
Beginning of period............. 603,920,431 635,531,239
------------- -------------
End of period................... $ 659,317,020 $ 603,920,431
------------- -------------
------------- -------------
</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 the 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 has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS'), which acts as the distributor of the Class A, B, C and Z
shares of the Fund. The Fund compensates PIMS for distributing and servicing the
Fund's Class A, Class B and Class C shares, pursuant to plans of distribution
(the 'Class A, B and C Plans'), regardless of expenses actually incurred by
them. The distribution fees were accrued daily and payable monthly. No
distribution or service fees are paid to PIMS as distributor of the Class Z
shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS 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
.25 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, 1999. PIMS
has advised the Fund that it received approximately $35,400 and $3,600 in
front-end sales charges resulting from sales of Class A and Class C shares,
respectively, during the six months ended June 30, 1999. From these fees, PIMS
paid such sales charges to dealers, which in turn paid commissions to
salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the six months ended June 30, 1999, it
received approximately $76,500 and $1,000 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PIFM, PIC and PIMS are indirect, wholly owned subsidiaries of The Prudential
Insurance Company of America.
As of March 11, 1999, the Company along with other unaffiliated registered
investment companies (the 'Funds'), entered into a syndicated agreement ('SCA')
with an unaffiliated lender. The maximum commitment under the SCA is $1 billion.
The Funds pay a commitment fee at an annual rate of .065 of 1% on the unused
portion of the credit facility, which is accrued and paid quarterly on a pro
rata basis by the Funds. The SCA expires on March 9, 2000. Prior to March 11,
1999, the Funds had a credit agreement with a maximum commitment of
$200,000,000. Interest on any such borrowings outstanding will be at market
rates. The commitment fee was .055 of 1% on the unused portion of the credit
facility. The Fund did not borrow any amounts pursuant to either agreement
during the six months ended June 30, 1999. The purpose of the agreements is to
serve as an alternative source of funding for capital share redemptions.
- ------------------------------------------------------------
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,
1999, the Fund incurred fees of approximately $206,800 for the services of PMFS.
As of June 30, 1999, approximately $34,000 of such fees were due to PMFS.
Transfer agent fees and expenses in the Statement of Operations include certain
out-of-pocket expenses paid to nonaffiliates.
- --------------------------------------------------------------------------------
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, 1999, were $154,552,618 and $81,972,888,
respectively.
The federal income tax basis of the Fund's investments at June 30, 1999 was
substantially the same as for financial reporting purposes and, accordingly, net
unrealized appreciation for federal income tax purposes was $28,885,876 (gross
unrealized appreciation--$32,469,005; gross unrealized
depreciation--$3,583,129).
In addition, the Fund elected to treat net capital losses of approximately
$860,000 incurred in the two month period ended December 31, 1998 as having
occurred in the current fiscal year.
During the six months ended June 30, 1999, the Fund entered into financial
futures contracts. Details of open contracts at June 30, 1999 are as follows:
<TABLE>
<CAPTION>
Value at Value at
Number of Expiration Trade June 30, Unrealized
Contracts Type Date Date 1999 Appreciation
- --------- ----------- ----------- ----------- ----------- ------------
<C> <S> <C> <C> <C> <C>
Long
Position:
U.S.
Treasury
150 Index Sept. 1999 $17,175,000 $17,385,937 $210,937
------------
------------
</TABLE>
- ------------------------------------------------------------
Note 5. Capital
The Fund offers Class A, Class B, Class C and Class Z shares. Class A shares are
sold with a front-end sales charge of up to 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 front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18 months. Class B shares will automatically convert to Class A shares on a
quarterly basis approximately seven years after purchase. A special exchange
privilege is also available for shareholders who qualify to purchase Class A
shares at net asset value. Class Z shares are not subject to any sales or
redemption charge and are offered exclusively for sale to a limited group of
investors.
There are 1 billion shares of common stock, $.01 par value per share, authorized
divided into four classes, designated Class A, Class B, Class C and Class Z
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, 1999:
Shares sold...................... 5,606,789 $ 81,712,977
Shares issued in connection with
reorganization (Note 6)........ 5,719,568 92,139,437
Shares issued in reinvestment of
dividends and distributions.... 519,672 8,222,200
Shares reacquired................ (7,188,185) (114,304,144)
----------- -------------
Net increase in shares
outstanding before
conversion..................... 4,657,844 67,770,470
Shares issued upon conversion
from Class B................... 317,499 4,980,706
----------- -------------
Net increase in shares
outstanding.................... 4,975,343 $ 72,751,176
----------- -------------
----------- -------------
Year ended December 31, 1998:
Shares sold...................... 3,824,658 $ 61,874,353
Shares issued in reinvestment of
dividends and distributions.... 1,059,215 17,057,270
Shares reacquired................ (6,037,193) (97,515,280)
----------- -------------
Net decrease in shares
outstanding before
conversion..................... (1,153,320) (18,583,657)
Shares issued upon conversion
from Class B................... 573,854 9,271,697
----------- -------------
Net decrease in shares
outstanding.................... (579,466) $ (9,311,960)
----------- -------------
----------- -------------
<CAPTION>
Class B
- ---------------------------------
<S> <C> <C>
Six months ended June 30, 1999:
Shares sold...................... 348,270 $ 3,778,694
Shares issued in connection with
reorganization (Note 6)........ 1,236,086 19,953,535
Shares issued in reinvestment of
dividends and distributions.... 110,742 1,757,204
Shares reacquired................ (1,290,758) (20,407,778)
----------- -------------
Net increase in shares
outstanding before
conversion..................... 404,340 5,081,655
Shares reacquired upon conversion
into Class A................... (316,791) (4,980,706)
----------- -------------
Net increase in shares
outstanding.................... 87,549 $ 100,949
----------- -------------
----------- -------------
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Shares Amount
- --------------------------------- ----------- -------------
<S> <C> <C>
Year ended December 31, 1998:
Shares sold...................... 797,807 $ 12,909,659
Shares issued in reinvestment of
dividends and distributions.... 256,538 4,140,932
Shares reacquired................ (1,803,505) (29,167,324)
----------- -------------
Net decrease in shares
outstanding before
conversion..................... (749,160) (12,116,733)
Shares reacquired upon conversion
into Class A................... (572,437) (9,271,697)
----------- -------------
Net decrease in shares
outstanding.................... (1,321,597) $ (21,388,430)
----------- -------------
----------- -------------
<CAPTION>
Class C
- ---------------------------------
<S> <C> <C>
Six months ended June 30, 1999:
Shares sold...................... 24,700 $ 390,959
Shares issued in connection with
reorganization (Note 6)........ 29,355 473,862
Shares issued in reinvestment of
dividends and distributions.... 2,903 46,059
Shares reacquired................ (32,041) (511,018)
----------- -------------
Net increase in shares
outstanding.................... 24,917 $ 399,862
----------- -------------
----------- -------------
Year ended December 31, 1998:
Shares sold...................... 101,316 $ 1,639,068
Shares issued in reinvestment of
dividends and distributions.... 3,998 64,526
Shares reacquired................ (13,773) (222,402)
----------- -------------
Net increase in shares
outstanding.................... 91,541 $ 1,481,192
----------- -------------
----------- -------------
<CAPTION>
Class Z
- ---------------------------------
<S> <C> <C>
January 22, 1999(a) through
June 30, 1999:
Shares sold...................... 121,470 $ 1,912,211
Shares issued in connection with
reorganization (Note 6)........ 136,091 2,192,167
Shares issued in reinvestment of
dividends and distributions.... 2,255 35,653
Shares reacquired................ (159,029) (2,529,963)
----------- -------------
Net increase in shares
outstanding.................... 100,787 $ 1,610,068
----------- -------------
----------- -------------
</TABLE>
- ---------------
(a) Commencement of offering of Class Z shares.
- ------------------------------------------------------------
Note 6. Reorganization
On August 26, 1998, the Board of Directors of the Fund approved an Agreement and
Plan of Reorganization (the 'Plan') which provided for the transfer of all of
the assets of the Prudential Municipal Series Fund Maryland Series ('Maryland
Series') and the Prudential Municipal Series Fund Michigan Series ('Michigan
Series') in exchange for Class A shares of the Fund and the Fund's assumption of
the liabilities of the Maryland and Michigan Series. The Plan also provided for
the transfer of all of the assets of the Class A, B, C and Z shares of the
Prudential Municipal Bond Fund--Intermediate Series ('Intermediate Series') in
exchange for like shares of the Fund and the Fund's assumption of the
liabilities of the Intermediate Series.
The Plan was approved by the shareholders of the Maryland, Michigan and
Intermediate Series at a shareholder meeting held on January 14, 1999. The
reorganization took place on January 22, 1999. The Maryland, Michigan and
Intermediate Series and the Fund incurred their pro rata share of the costs of
the reorganization, including the cost of proxy solicitation.
The acquisition was accomplished by a tax-free exchange of the following shares:
<TABLE>
<CAPTION>
National Municipals
Maryland Series: Fund Value
<S> <C> <C> <C> <C>
Class A 1,545,436 Class A 1,074,419 $17,304,069
B 930,543 A 647,510 10,432,984
C 11,019 A 7,667 123,541
<CAPTION>
Michigan Series:
<S> <C> <C> <C> <C>
Class A 2,459,122 A 1,845,487 29,729,243
B 1,640,985 A 1,230,484 19,826,554
C 43,799 A 32,842 529,193
<CAPTION>
Intermediate Series:
<S> <C> <C> <C> <C>
Class A 1,302,336 A 881,159 14,193,853
B 1,830,315 B 1,236,086 19,953,535
C 43,467 C 29,355 473,862
Z 201,141 Z 136,091 2,192,167
</TABLE>
The aggregate net assets and unrealized appreciation of the funds immediately
before the acquisition were:
<TABLE>
<CAPTION>
Unrealized
Net Assets Appreciation
----------- -------------
<S> <C> <C>
Maryland Series $27,860,594 $ 2,342,040
Michigan Series 50,084,990 4,856,230
Intermediate Series 36,813,417 1,858,582
</TABLE>
The aggregate net assets of the National Municipals Fund immediately before the
acquisition was $607,552,044.
- --------------------------------------------------------------------------------
18
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------------
Six Months
Ended Year Ended December 31,
June 30, -----------------------------------------------------------
1999 1998 1997 1996 1995 1994
---------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 16.06 $ 16.12 $ 15.56 $ 15.98 $ 14.42 $ 16.30
---------- -------- -------- -------- -------- -------
Income from investment operations
Net investment income......................... .38 .79 .81(b) .82(b) .81(b) .81
Net realized and unrealized gain (loss) on
investment transactions.................... (.65) .06 .67 (.42) 1.57 (1.78)
---------- -------- -------- -------- -------- -------
Total from investment operations........... (.27) .85 1.48 .40 2.38 (.97)
---------- -------- -------- -------- -------- -------
Less distributions
Dividends from net investment income.......... (.38) (.79) (.81) (.82) (.81) (.81)
Distributions in excess of net investment
income..................................... -- --(c) (.01) --(c) (.01) --
Distributions from net realized gains......... -- (.12) (.10) -- -- (.10)
---------- -------- -------- -------- -------- -------
Total distributions........................ (.38) (.91) (.92) (.82) (.82) (.91)
---------- -------- -------- -------- -------- -------
Net asset value, end of period................ $ 15.41 $ 16.06 $ 16.12 $ 15.56 $ 15.98 $ 14.42
---------- -------- -------- -------- -------- -------
---------- -------- -------- -------- -------- -------
TOTAL RETURN(a):.............................. (1.67)% 5.41% 9.80% 2.66% 16.91% (6.04)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $538,995 $481,926 $493,178 $502,739 $538,145 $12,721
Average net assets (000)...................... $546,914 $483,759 $491,279 $508,159 $446,350 $14,116
Ratios to average net assets:
Expenses, including distribution fees...... .86%(d) .73% .70%(b) .68%(b) .75%(b) .77%
Expenses, excluding distribution fees...... .61%(d) .63% .60%(b) .58%(b) .65%(b) .67%
Net investment income...................... 4.80%(d) 4.89% 5.15%(b) 5.31%(b) 5.34%(b) 5.38%
For Class A, B, C and Z shares:
Portfolio turnover rate.................... 12% 23% 38% 46% 98% 120%
</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 B
---------------------------------------------------------------------------
Six Months
Ended Year Ended December 31,
June 30, ------------------------------------------------------------
1999 1998 1997 1996 1995 1994
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 16.10 $ 16.16 $ 15.60 $ 16.02 $ 14.45 $ 16.33
---------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income......................... .36 .73 .75(b) .76(b) .76(b) .75
Net realized and unrealized gain (loss) on
investment transactions.................... (.66) .06 .67 (.42) 1.58 (1.78)
---------- -------- -------- -------- -------- --------
Total from investment operations........... (.30) .79 1.42 .34 2.34 (1.03)
---------- -------- -------- -------- -------- --------
Less distributions
Dividends from net investment income.......... (.36) (.73) (.75) (.76) (.76) (.75)
Distributions in excess of net investment
income..................................... -- --(c) (.01) --(c) (.01) --
Distributions from net realized gains......... -- (.12) (.10) -- -- (.10)
---------- -------- -------- -------- -------- --------
Total distributions........................ (.36) (.85) (.86) (.76) (.77) (.85)
---------- -------- -------- -------- -------- --------
Net asset value, end of period................ $ 15.44 $ 16.10 $ 16.16 $ 15.60 $ 16.02 $ 14.45
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
TOTAL RETURN(a):.............................. (1.85)% 4.99% 9.35% 2.26% 16.49% (6.39)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $116,183 $119,698 $141,528 $168,185 $222,865 $672,272
Average net assets (000)...................... $129,347 $131,195 $151,938 $193,312 $252,313 $751,623
Ratios to average net assets:
Expenses, including distribution fees...... 1.11%(d) 1.13% 1.10%(b) 1.08%(b) 1.15%(b) 1.17%
Expenses, excluding distribution fees...... .61%(d) .63% .60%(b) .58%(b) .65%(b) .67%
Net investment income...................... 4.55%(d) 4.49% 4.75%(b) 4.91%(b) 4.96%(b) 4.96%
</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. 20
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------------------
August 1,
Six Months 1994(e)
Ended Year Ended December 31, through
June 30, --------------------------------------- December 31,
1999 1998 1997 1996 1995 1994
---------- ------ ------ ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $16.10 $16.16 $15.60 $16.02 $14.44 $15.13
----- ------ ------ ------ ------ -----
Income from investment operations
Net investment income......................... .34 .69 .71(b) .72(b) .72(b) .29
Net realized and unrealized gain (loss) on
investment transactions.................... (.66) .06 .67 (.42) 1.59 (.69)
----- ------ ------ ------ ------ -----
Total from investment operations........... (.32) .75 1.38 .30 2.31 (.40)
----- ------ ------ ------ ------ -----
Less distributions
Dividends from net investment income.......... (.34) (.69) (.71) (.72) (.72) (.29)
Distributions in excess of net investment
income..................................... -- --(c) (.01) --(c) (.01) --
Distributions from net realized gains......... -- (.12) (.10) -- -- --
----- ------ ------ ------ ------ -----
Total distributions........................ (.34) (.81) (.82) (.72) (.73) (.29)
----- ------ ------ ------ ------ -----
Net asset value, end of period................ $15.44 $16.10 $16.16 $15.60 $16.02 $14.44
----- ------ ------ ------ ------ -----
----- ------ ------ ------ ------ -----
TOTAL RETURN(a):.............................. (1.97)% 4.73% 9.08% 2.01% 16.22% (2.63)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $2,587 $2,296 $825 $772 $403 $141
Average net assets (000)...................... $2,626 $1,555 $758 $674 $247 $103
Ratios to average net assets:
Expenses, including distribution fees...... 1.36%(d) 1.38% 1.35%(b) 1.33%(b) 1.40%(b) 1.51%(d)
Expenses, excluding distribution fees...... .61%(d) .63% .60%(b) .58%(b) .65%(b) .76%(d)
Net investment income...................... 4.31%(d) 4.23% 4.50%(b) 4.67%(b) 4.66%(b) 4.84%(d)
<CAPTION>
Class Z
-----------
January 22,
1999(f)
through
June 30,
1999
-----------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 16.11
-----
Income from investment operations
Net investment income......................... .35
Net realized and unrealized gain (loss) on
investment transactions.................... (.71)
-----
Total from investment operations........... (.36)
-----
Less distributions
Dividends from net investment income.......... (.35)
Distributions in excess of net investment
income..................................... --
Distributions from net realized gains......... --
-----
Total distributions........................ (.35)
-----
Net asset value, end of period................ $ 15.40
-----
-----
TOTAL RETURN(a):.............................. (2.33)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $1,552
Average net assets (000)...................... $1,633
Ratios to average net assets:
Expenses, including distribution fees...... .61%(d)
Expenses, excluding distribution fees...... .61%(d)
Net investment income...................... 5.10%(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.
(f) Commencement of offering of Class Z shares.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 21
<PAGE>
Getting the Most from Your Prudential Mutual Fund
Some mutual fund shareholders won't ever read this--they don't
read annual and semiannual reports. It's quite understandable.
These annual and semiannual reports are prepared to comply with
federal regulations, and are often written in language that
is difficult to understand. So when most people run into those
particularly daunting sections of these reports, they don't
read them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some changes to our report
to make it easier to understand and more pleasant to read. We hope
you'll find it profitable to spend a few minutes familiarizing
yourself with your investment. Here's what you'll
find in the report:
Performance at a Glance
Since an investment's performance is often a shareholder's primary
concern, we present performance information in two different
formats. You'll find it first on the "Performance at a Glance"
page where we compare the Fund and the comparable average
calculated by Lipper, Inc., a nationally recognized mutual
fund rating agency. We report both the cumulative total
returns and the average annual total returns. The cumulative
total return is the total amount of income and appreciation
the Fund has achieved in various time periods. The average
annual total return is an annualized representation of the
Fund's performance. It gives you an idea of how much the Fund
has earned in an average year for a given time period. Under
the performance box, you'll see legends that explain the
performance information, whether fees and sales charges
have been included in returns, and the inception dates for
the Fund's share classes.
See the performance comparison charts at the back of the
report for more performance information. Please keep in
mind that past performance is not indicative of future results.
Portfolio Manager's Report
The portfolio manager, who invests your money for you, reports
on successful--and not-so-successful--strategies in this section
of your report. Look for recent purchases and sales here, as well
as information about the sectors the portfolio manager
favors, and any changes that are on the drawing board.
Portfolio of Investments
This is where the report begins to appear technical, but it's
really just a listing of each security held at the end of the
reporting period, along with valuations and other information.
Please note that sometimes we discuss a security in the
Portfolio Manager's Report that doesn't appear in this listing
because it was sold before the close of the reporting period.
<PAGE>
Statement of Assets and Liabilities
The balance sheet shows the assets (the value of the Fund's
holdings), liabilities (how much the Fund owes), and net assets
(the Fund's equity, or holdings after the Fund pays its debts)
as of the end of the reporting period. It also shows how we
calculate the net asset value per share for each class of shares.
The net asset value is reduced by payment of your dividend,
capital gain, or other distribution, but remember that the
money or new shares are being paid or issued to you. The net
asset value fluctuates daily, along with the value of every
security in the portfolio.
Statement of Operations
This is the income statement, which details income (mostly
interest and dividends earned) and expenses (including what
you pay us to manage your money). You'll also see capital
gains here--both realized and unrealized.
Statement of Changes in Net Assets
This schedule shows how income and expenses translate into
changes in net assets. The Fund is required to pay out the
bulk of its income to shareholders every year, and this
statement shows you how we do it--through dividends and
distributions--and how that affects the net assets. This
statement also shows how money from investors flowed into
and out of the Fund.
Notes to Financial Statements
This is the kind of technical material that can intimidate
readers, but it does contain useful information. The Notes
provide a brief history and explanation of your Fund's
objectives. In addition, they outline how Prudential Mutual
Funds prices securities. The Notes also explain who manages
and distributes the Fund's shares and, more importantly,
how much they are paid for doing so. Finally, the Notes
explain how many shares are outstanding and the number
issued and redeemed over the period.
Financial Highlights
This information contains many elements from prior pages,
but on a per-share basis. It is designed to help you understand
how the Fund performed, and to compare this year's performance
and expenses to those of prior years.
Independent Auditor's Report
Once a year, an outside auditor looks over our books and
certifies that the information is fairly presented and
complies with generally accepted accounting principles.
Tax Information
This is information which we report annually about how
much of your total return is taxable. Should you have
any questions, you may want to consult a tax adviser.
Performance Comparison
These charts are included in the annual report and are
required by the Securities Exchange Commission. Performance
is presented here as a hypothetical $10,000 investment in the
Fund since its inception or for 10 years (whichever is shorter).
To help you put that return in context, we are required to
include the performance of an unmanaged, broad-based securities
index as well. The index does not reflect the cost of buying the
securities it contains or the cost of managing a mutual fund. Of
course, the index holdings do not mirror those of the Fund--the
index is a broad-based reference point commonly used by investors
to measure how well they are doing. A definition of the selected
index is also provided. Investors cannot invest
directly in an index.
<PAGE>
Getting the Most from Your Prudential Mutual Fund
How many times have you read these reports--or other financial
materials-- and stumbled across a word that you don't understand?
Many shareholders have run into the same problem. We'd like to
help. So we'll use this space from time to time to explain some
of the words you might have read, but not understood. And if you
have a favorite word that no one can explain to your
satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half of one
percent is 50 basis points.
Collateralized Mortgage Obligations (CMOs): Mortgage-backed
bonds that separate mortgage pools into different maturity
classes, called tranches. These instruments are sensitive
to changes in interest rates and homeowner refinancing activity. They
are subject to prepayment and maturity extension risk.
Derivatives: Securities that derive their value from other
securities. The rate of return of these financial instruments
rises and falls--sometimes very suddenly--in response to
changes in some specific interest rate, currency, stock,
or other variable.
Discount Rate: The interest rate charged by the Federal
Reserve on loans to member banks.
Federal Funds Rate: The interest rate charged by one bank
to another on overnight loans.
Futures Contract: An agreement to purchase or sell a specific
amount of a commodity or financial instrument at a set price
at a specified date in the future.
Leverage: The use of borrowed assets to enhance return. The
expectation is that the interest rate charged on borrowed
funds will be lower than the return on the investment. While
leverage can increase profits, it can also magnify losses.
Liquidity: The ease with which a financial instrument (or
product) can be bought or sold (converted into cash) in the
financial markets.
Price/Earnings Ratio: The price of a share of stock divided
by the earnings per share for a 12-month period.
Option: An agreement to purchase or sell something, such as
shares of stock, by a certain time for a specified price. An
option need not be exercised.
Spread: The difference between two values; often used to
describe the difference between "bid" and "asked" prices
of a security, or between the yields of two similar maturity bonds.
Yankee Bond: A bond sold by a foreign company or government
in the U.S. market and denominated in U.S. dollars.
<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
Thomas T. Mooney
Thomas H. O'Brien
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, 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, 1999,
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>
(LOGO)
Prudential Mutual Funds BULK RATE
Gateway Center Three U.S. POSTAGE
100 Mulberry Street PAID
Newark, NJ 07102-4077 Permit 6807
New York, NY
(800) 225-1852
743918203 MF104E2
743918104
743918302
