PRUDENTIAL MUNICIPAL SERIES FUND, 497, 1996-12-02

PRUDENTIAL MUNICIPAL SERIES FUND
497, 1996-12-02

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<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND

(MASSACHUSETTS SERIES)
(CLASS Z SHARES)
- --------------------------------------------------------------------------------

PROSPECTUS DATED DECEMBER 2, 1996

- ----------------------------------------------------------------

Prudential Municipal Series Fund (the "Fund") (Massachusetts Series) (the
"Series") is one of fourteen series of an open-end, management investment
company, or mutual fund. This Series is diversified and is designed to provide
the maximum amount of income that is exempt from Massachusetts state and federal
income taxes consistent with the preservation of capital and, in conjunction
therewith, the Series may invest in debt securities with the potential for
capital gain. The net assets of the Series are invested in obligations within
the four highest ratings of Moody's Investors Service, Standard & Poor's Ratings
Group or another nationally recognized statistical rating organization or in
unrated obligations which, in the opinion of the Fund's investment adviser, are
of comparable quality. Subject to the limitations described herein, the Series
may utilize derivatives, including buying and selling futures contracts and
options thereon for the purpose of hedging its portfolio securities. There can
be no assurance that the Series' investment objective will be achieved. See "How
the Fund Invests-- Investment Objective and Policies." The Fund's address is
Gateway Center Three, Newark, New Jersey 07102, and its telephone number is
(800) 225-1852.

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Class Z shares are offered exclusively for sale to a limited group of investors.
Only Class Z shares are offered through this Prospectus. The Series also offers
Class A, Class B and Class C shares through the attached Prospectus dated
November 1, 1996 (the Retail Class Prospectus), which is a part hereof.
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Fund and the
Massachusetts Series that a prospective investor should know before investing.
Additional information about the Fund has been filed with the Securities and
Exchange Commission in a Statement of Additional Information dated November 1,
1996, which information is incorporated herein by reference (is legally
considered a part of this Prospectus) and is available without charge upon
request to the Fund at the address or telephone number noted above.
- --------------------------------------------------------------------------------

INVESTORS ARE ADVISED TO READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE
REFERENCE.
- --------------------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>

- --------------------------------------------------------------------------------
FUND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS Z SHARES
----------------
<S> <C>
Maximum Sales Load Imposed on Purchases......................................................... None
Maximum Deferred Sales Load..................................................................... None
Maximum Sales Load Imposed on Reinvested Dividends.............................................. None
Redemption Fees................................................................................. None
Exchange Fee.................................................................................... None

<CAPTION>
ANNUAL FUND OPERATING EXPENSES* CLASS Z SHARES
----------------
<S> <C>
(as a percentage of average net assets)
Management Fees (Before Waiver)................................................................. .50%
12b-1 Fees...................................................................................... None
Other Expenses.................................................................................. .51%
----------------
Total Fund Operating Expenses (Before Waiver)................................................... 1.01%
----------------
----------------
</TABLE>

<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end
of each time period:....................................... $ 10 $ 32 $ 56 $ 124
The above example is based on expenses expected to have been incurred if Class Z shares had been in existence
throughout the fiscal year ended August 31, 1996. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist investors in understanding the various costs and expenses that an investor
in Class Z shares of the Massachusetts Series will bear, whether directly or indirectly. For more complete
descriptions of the various costs and expenses, see "How the Fund is Managed." "Other Expenses" includes
operating expenses of the Series, such as Trustees' and professional fees, registration fees, reports to
shareholders and transfer agency and custodian fees.
</TABLE>

- ------------
*Estimated based on expenses expected to have been incurred if Class Z shares
had been in existence throughout the fiscal year ended August 31, 1996,
without taking into account the management fee waiver. At the current level of
management fee waiver (.05% of 1), Management Fees would be .45% and Total
Fund Operating Expenses would be .96% of average net assets of the Series'
Class Z shares.

2
<PAGE>
THE FOLLOWING INFORMATION SUPPLEMENTS "HOW THE FUND IS MANAGED--DISTRIBUTOR"
IN THE RETAIL CLASS PROSPECTUS:

Prudential Securities Incorporated (Prudential Securities) serves as the
Distributor of Class Z shares and incurs the expenses of distributing the
Series' Class Z shares under a Distribution Agreement with the Fund, none of
which is reimbursed by or paid for by the Series.

THE FOLLOWING INFORMATION SUPPLEMENTS "TAXES, DIVIDENDS AND
DISTRIBUTIONS--TAXATION OF SHAREHOLDERS" IN THE RETAIL CLASS PROSPECTUS:

The Fund has obtained opinions of counsel to the effect that neither (i) the
conversion of Class B shares into Class A shares nor (ii) the exchange of any
class of the Series' shares for any other class of its shares constitutes a
taxable event for federal income tax purposes. However, such opinions are not
binding on the Internal Revenue Service.

THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION UNDER "SHAREHOLDER
GUIDE--HOW TO BUY SHARES OF THE FUND" AND "SHAREHOLDER GUIDE--HOW TO SELL YOUR
SHARES" IN THE RETAIL CLASS PROSPECTUS:

Class Z shares of the Series are available for purchase by participants in
any fee-based program sponsored by Prudential Securities or its affiliates which
includes mutual funds as investment options and for which the Series is an
available option.

In connection with the sale of Class Z shares, the Manager, the Distributor
or one of their affiliates may pay dealers, financial advisers and other persons
which distribute shares a finders' fee based on a percentage of the net asset
value of shares sold by such persons.

THE FOLLOWING INFORMATION SUPPLEMENTS "SHAREHOLDER GUIDE--HOW TO EXCHANGE
YOUR SHARES" IN THE RETAIL CLASS PROSPECTUS:

Class Z shareholders of the Series may exchange their Class Z shares for
Class Z shares of another Series or other Prudential Mutual Funds on the basis
of relative net asset value. Shareholders who qualify to purchase Class Z shares
(other than participants in any fee-based program) will have their Class B and
Class C shares which are not subject to contingent deferred sales charges and
their Class A shares exchanged for Class Z shares on a quarterly basis.
Participants in any fee-based program for which the Series is an available
option will have their Class A shares, if any, exchanged for Class Z shares when
they elect to have those assets become a part of the fee-based program. Upon
leaving the program (whether voluntarily or not), such Class Z shares (and, to
the extent provided for in the program, Class Z shares acquired through
participation in the program) will be exchanged for Class A shares at net asset
value. See "Shareholder Guide--How to Exchange Your Shares--Special Exchange
Privilege."

THE INFORMATION ABOVE ALSO SUPPLEMENTS THE INFORMATION UNDER "FUND
HIGHLIGHTS" IN THE RETAIL CLASS PROSPECTUS AS APPROPRIATE.

3
<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND

(MASSACHUSETTS SERIES)
- --------------------------------------------------------------------------------

PROSPECTUS DATED NOVEMBER 1, 1996

- ----------------------------------------------------------------

Prudential Municipal Series Fund (the "Fund") (Massachusetts Series) (the
"Series") is one of fourteen series of an open-end, management investment
company, or mutual fund. This Series is diversified and is designed to provide
the maximum amount of income that is exempt from Massachusetts state and federal
income taxes consistent with the preservation of capital and, in conjunction
therewith, the Series may invest in debt securities with the potential for
capital gain. The net assets of the Series are invested in obligations within
the four highest ratings of Moody's Investors Service, Standard & Poor's Ratings
Group or another nationally recognized statistical rating organization or in
unrated obligations which, in the opinion of the Fund's investment adviser, are
of comparable quality. Subject to the limitations described herein, the Series
may utilize derivatives, including buying and selling futures contracts and
options thereon for the purpose of hedging its portfolio securities. There can
be no assurance that the Series' investment objective will be achieved. See "How
the Fund Invests--Investment Objective and Policies." The Fund's address is
Gateway Center Three, Newark, New Jersey 07102, and its telephone number is
(800) 225-1852.

This Prospectus sets forth concisely the information about the Fund and the
Massachusetts Series that a prospective investor should know before investing.
Additional information about the Fund has been filed with the Securities and
Exchange Commission in a Statement of Additional Information dated November 1,
1996, which information is incorporated herein by reference (is legally
considered a part of this Prospectus) and is available without charge upon
request to the Fund at the address or telephone number noted above.
- --------------------------------------------------------------------------------

INVESTORS ARE ADVISED TO READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE
REFERENCE.
- --------------------------------------------------------------------------------

FUND HIGHLIGHTS

- --------------------------------------------------------------------------------
The following summary is intended to highlight certain information contained
in this Prospectus and is qualified in its entirety by the more detailed
information appearing elsewhere herein.

WHAT IS PRUDENTIAL MUNICIPAL SERIES FUND?

Prudential Municipal Series Fund is a mutual fund whose shares are offered
in fourteen series, each of which operates as a separate fund. A mutual fund
pools the resources of investors by selling its shares to the public and
investing the proceeds of such sale in a portfolio of securities designed to
achieve its investment objective. Technically, the Fund is an open-end,
management investment company. Only the Massachusetts Series is offered
through this Prospectus.

WHAT IS THE SERIES' INVESTMENT OBJECTIVE?

The Series' investment objective is to maximize current income that is
exempt from Massachusetts state and federal income taxes consistent with the
preservation of capital. It seeks to achieve this objective by investing
primarily in Massachusetts state, municipal and local government obligations
and obligations of other qualifying issuers, such as issuers located in
Puerto Rico, the Virgin Islands and Guam, which pay income exempt, in the
opinion of counsel, from Massachusetts state and federal income taxes
(Massachusetts Obligations). There can be no assurance that the Series'
investment objective will be achieved. See "How the Fund Invests--Investment
Objective and Policies" at page 8.

RISK FACTORS AND SPECIAL CHARACTERISTICS

In seeking to achieve its investment objective, the Series will invest at
least 80% of the value of its total assets in Massachusetts Obligations.
This degree of investment concentration makes the Series particularly
susceptible to factors adversely affecting issuers of Massachusetts
Obligations. See "How the Fund Invests--Investment Objective and
Policies--Special Considerations" at page 12. To hedge against changes in
interest rates, the Series may also purchase put options and engage in
transactions involving derivatives, including financial futures contracts
and options thereon. See "How the Fund Invests-- Investment Objective and
Policies--Futures Contracts and Options Thereon" at page 11.

WHO MANAGES THE FUND?

Prudential Mutual Fund Management LLC (PMF or the Manager) is the Manager
of the Fund and is compensated for its services at an annual rate of .50 of
1% of the Series' average daily net assets. As of September 30, 1996, PMF
served as manager or administrator to 60 investment companies, including 38
mutual funds, with aggregate assets of approximately $52 billion. The
Prudential Investment Corporation (PIC or the Subadviser) furnishes
investment advisory services in connection with the management of the Fund
under a Subadvisory Agreement with PMF. See "How the Fund is Managed--
Manager" at page 13.

WHO DISTRIBUTES THE SERIES' SHARES?

Prudential Securities Incorporated (Prudential Securities or PSI), a major
securities underwriter and securities and commodities broker, acts as the
Distributor of the Series' Class A, Class B and Class C shares and is paid a
distribution and service fee with respect to Class A shares which is
currently being charged at the annual rate of .10 of 1% of the average daily
net assets of the Class A shares and is paid a distribution and service fee
with respect to Class B shares at the annual rate of .50 of 1% of the
average daily net assets of the Class B shares and is paid an annual
distribution and service fee with respect to Class C shares which is
currently being charged at the rate of .75 of 1% of the average daily net
assets of the Class C shares.

See "How the Fund is Managed--Distributor" at page 14.

2
<PAGE>

WHAT IS THE MINIMUM INVESTMENT?

The minimum initial investment for Class A and Class B shares is $1,000
per class and $5,000 for Class C shares. The minimum subsequent investment
is $100 for Class A, Class B and Class C shares. There is no minimum
investment requirement for certain employee savings plans. For purchases
made through the Automatic Savings Accumulation Plan, the minimum initial
and subsequent investment is $50. See "Shareholder Guide--How to Buy Shares
of the Fund" at page 21 and "Shareholder Guide--Shareholder Services" at
page 29.

HOW DO I PURCHASE SHARES?

You may purchase shares of the Series through Prudential Securities, Pruco
Securities Corporation (Prusec) or directly from the Fund through its
transfer agent, Prudential Mutual Fund Services, Inc. (PMFS or the Transfer
Agent), at the net asset value per share (NAV) next determined after receipt
of your purchase order by the Transfer Agent or Prudential Securities plus a
sales charge which may be imposed either (i) at the time of purchase (Class
A shares) or (ii) on a deferred basis (Class B or Class C shares). See "How
the Fund Values its Shares" at page 17 and "Shareholder Guide--How to Buy
Shares of the Fund" at page 21.

WHAT ARE MY PURCHASE ALTERNATIVES?

The Series offers three classes of shares:

- Class A Shares: Sold with an initial sales charge of up to 3%
of the offering price.

- Class B Shares: Sold without an initial sales charge but are
subject to a contingent deferred sales charge
or CDSC (declining from 5% to zero of the lower
of the amount invested or the redemption
proceeds) which will be imposed on certain
redemptions made within six years of purchase.
Although Class B shares are subject to higher
ongoing distribution-related expenses than Class
A shares, Class B shares will automatically
convert to Class A shares (which are subject to
lower ongoing distribution-related expenses)
approximately seven years after purchase.

- Class C Shares: Sold without an initial sales charge and, for
one year after purchase, are subject to a 1%
CDSC on redemptions. Like Class B shares, Class C
shares are subject to higher ongoing
distribution-related expenses than Class A shares
but do not convert to another class.

See "Shareholder Guide--Alternative Purchase Plan" at page 22.

HOW DO I SELL MY SHARES?

You may redeem your shares at any time at the NAV next determined after
Prudential Securities or the Transfer Agent receives your sell order.
However, the proceeds of redemptions of Class B and Class C shares may be
subject to a CDSC. See "Shareholder Guide--How to Sell Your Shares" at page
24.

HOW ARE DIVIDENDS AND DISTRIBUTIONS PAID?

The Series expects to declare daily and pay monthly dividends of net
investment income, if any, and make distributions of any net capital gains
at least annually. Dividends and distributions will be automatically
reinvested in additional shares of the Series at NAV without a sales charge
unless you request that they be paid to you in cash. See "Taxes, Dividends
and Distributions" at page 18.

3
<PAGE>
- --------------------------------------------------------------------------------

FUND EXPENSES
(Massachusetts Series)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES+ CLASS A SHARES CLASS B SHARES CLASS C SHARES
--------------------- ------------------------- -------------------------
<S> <C> <C> <C>
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price)................. 3% None None
Maximum Deferred Sales Load (as a
percentage of original purchase
price or redemption proceeds,
whichever is lower)............. None 5% during the first year, 1% on redemptions made
decreasing by 1% annually within one year of
to 1% in the fifth and purchase
sixth years and 0% the
seventh year*
Maximum Sales Load Imposed on
Reinvested Dividends............ None None None
Redemption Fees.................. None None None
Exchange Fee..................... None None None
</TABLE>

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES**
(as a percentage of average
net assets) CLASS A SHARES CLASS B SHARES CLASS C SHARES
----------------- ----------------- -----------------
<S> <C> <C> <C>
Management Fees (Before
Waiver).................. .50% .50% .50%
12b-1 Fees (After
Reduction)............... .10++ .50 .75++
Other Expenses............ .51 .51 .51
--- --- ---
Total Fund Operating
Expenses (Before Waiver
and After Reduction)..... 1.11% 1.51% 1.76%
--- --- ---
--- --- ---
</TABLE>

<TABLE>
<CAPTION>
1 3 5 10
EXAMPLE YEAR YEARS YEARS YEARS
------- -------- -------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period:
Class A...................................... $41 $64 $89 $161
Class B...................................... $65 $78 $92 $164
Class C...................................... $28 $55 $95 $207
You would pay the following expenses on the same
investment, assuming no redemption:
Class A...................................... $41 $64 $89 $161
Class B...................................... $15 $48 $82 $164
Class C...................................... $18 $55 $95 $207
</TABLE>

The above examples are based on restated data for the Series' fiscal year
ended August 31, 1996. THE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN.

The purpose of this table is to assist investors in understanding the
various costs and expenses that an investor in the Series will bear,
whether directly or indirectly. For more complete descriptions of the
various costs and expenses, see "How the Fund is Managed." "Other
Expenses" includes operating expenses of the Series, such as Trustees' and
professional fees, registration fees, reports to shareholders and transfer
agency and custodian fees.
---------------------

* Class B shares will automatically convert to Class A shares
approximately seven years after purchase. See "Shareholder
Guide--Conversion Feature--Class B Shares."

** Based on expenses incurred during the fiscal year ended August 31,
1996, without taking into account the management fee waiver. At the
current level of management fee waiver (.05 of 1%), Management Fees and
Total Fund Operating Expenses would be .45% and 1.06%, respectively, of
the average net assets of the Series' Class A shares, .45% and 1.46%,
respectively, of the average net assets of the Series' Class B shares
and .45% and 1.71%, respectively, of the average net assets of the
Series' Class C shares. See "How the Fund is Managed--Manager--Fee
Waivers."

+ Pursuant to rules of the National Association of Securities Dealers,
Inc., the aggregate initial sales charges, deferred sales charges and
asset-based sales charges on shares of the Series may not exceed 6.25%
of total gross sales, subject to certain exclusions. This 6.25%
limitation is imposed on each class of the Series rather than on a per
shareholder basis. Therefore, long-term shareholders of the Series may
pay more in total sales charges than the economic equivalent of 6.25%
of such shareholders' investment in such shares. See "How the Fund is
Managed-- Distributor."

++ Although the Class A and Class C Distribution and Service Plans provide
that the Fund may pay a distribution fee of up to .30 of 1% and 1% per
annum of the average daily net assets of the Class A and Class C
shares, respectively, the Distributor has agreed to limit its
distribution fees with respect to the Class A and Class C shares of the
Series to no more than .10 of 1% and .75 of 1% of the average daily net
asset value of the Class A shares and Class C shares, respectively, for
the fiscal year ending August 31, 1997. Total Fund Operating Expenses
(Before Waiver) of the Class A and Class C shares without such
limitations would be 1.31% and 2.01%, respectively. See "How the Fund
is Managed--Distributor."

4
<PAGE>
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FINANCIAL HIGHLIGHTS
(for a share of beneficial interest outstanding throughout each of the indicated
periods)
(Class A Shares)

<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------
JANUARY 22,
YEAR ENDED 1990 (A)
AUGUST 31, THROUGH
----------------------------------------------------------- AUGUST 31,
1996 1995 1994 1993 1992 1991 1990
------- ------- ------ ------ ------ ------ -----------
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 11.63 $ 11.37 $12.17 $11.50 $10.94 $10.44 $ 10.70
------- ------- ------ ------ ------ ------ -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.............. .59(d) .65(d) .67 .68 .69 .70 .41
Net realized and unrealized gain
(loss) on
investment transactions........... (.02) .26 (.73) .67 .56 .50 (.26)
------- ------- ------ ------ ------ ------ -----------
Total from investment
operations...................... .57 .91 (.06) 1.35 1.25 1.20 .15
------- ------- ------ ------ ------ ------ -----------
LESS DISTRIBUTIONS
Dividends from net investment
income............................ (.59) (.65) (.67) (.68) (.69) (.70) (.41)
Distributions from net realized
gains............................. (.07) -- (.07) -- -- -- --
------- ------- ------ ------ ------ ------ -----------
Total distributions.............. (.66) (.65) (.74) (.68) (.69) (.70) (.41)
------- ------- ------ ------ ------ ------ -----------
Net asset value, end of period..... $ 11.54 $ 11.63 $11.37 $12.17 $11.50 $10.94 $ 10.44
------- ------- ------ ------ ------ ------ -----------
------- ------- ------ ------ ------ ------ -----------
TOTAL RETURN (C):.................. 4.93% 8.33% (.58)% 12.10% 11.76% 11.81% 1.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).... $28,058 $27,525 $2,293 $2,325 $ 903 $ 665 $ 257
Average net assets (000)........... $28,091 $15,837 $2,578 $1,336 $ 770 $ 344 $ 127
Ratios to average net assets:
Expenses, including distribution
fee............................. 1.06%(d) .97%(d) .87% .95% .99% 1.05% 1.04%(b)
Expenses, excluding distribution
fee............................. .96%(d) .87%(d) .77% .85% .89% .95% .95%(b)
Net investment income............ 5.06%(d) 5.59%(d) 5.60% 5.79% 6.14% 6.53% 6.60%(b)
Portfolio turnover rate............ 18% 36% 33% 56% 32% 34% 33%
</TABLE>

----------------

(a) Commencement of offering of Class A shares.

(b) Annualized.

(c) Total return does not consider the effects of sales loads. Total
return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total returns for periods
of less than a full year are not annualized.

(d) Net of management fee waiver.

5
<PAGE>
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS
(for a share of beneficial interest outstanding throughout each of the indicated
periods)
(Class B Shares)

- --------------------------------------------------------------------------------
The following financial highlights, with respect to the five-year period ended
August 31, 1996, have been audited by Deloitte & Touche LLP, independent
accountants, whose report thereon was unqualified. This information should be
read in conjunction with the financial statements and the notes thereto, which
appear in the Statement of Additional Information. The following financial
highlights contain selected data for a Class B share of beneficial interest
outstanding, total return, ratios to average net assets and other supplemental
data for the periods indicated. This information is based on data contained in
the financial statements. Further performance information is contained in the
annual report, which may be obtained without charge. See "Shareholder Guide--
Shareholder Services--Reports to Shareholders."
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
---------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 (B)
-------- -------- ------- -------- -------- -------- -------- -------------
PER SHARE OPERATING
PERFORMANCE:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period..... $ 11.62 $ 11.36 $ 12.17 $ 11.49 $ 10.94 $ 10.44 $ 10.74 $ 10.53
-------- -------- ------- -------- -------- -------- -------- -------------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.... .54(d) .60(d) .61 .63 .64 .65 .65 .68
Net realized and
unrealized gain (loss)
on investment
transactions............ (.02) .26 (.74) .68 .55 .50 (.30) .21
-------- -------- ------- -------- -------- -------- -------- -------------
Total from investment
operations............ .52 .86 (.13) 1.31 1.19 1.15 .35 .89
-------- -------- ------- -------- -------- -------- -------- -------------
LESS DISTRIBUTIONS
Dividends from net
investment income....... (.54) (.60) (.61) (.63) (.64) (.65) (.65) (.68)
Distributions from net
realized gains.......... (.07) -- (.07) -- -- -- -- --
-------- -------- ------- -------- -------- -------- -------- -------------
Total distributions.... (.61) (.60) (.68) (.63) (.64) (.65) (.65) (.68)
-------- -------- ------- -------- -------- -------- -------- -------------
Net asset value, end of
period.................. $ 11.53 $ 11.62 $ 11.36 $ 12.17 $ 11.49 $ 10.94 $ 10.44 $ 10.74
-------- -------- ------- -------- -------- -------- -------- -------------
-------- -------- ------- -------- -------- -------- -------- -------------
TOTAL RETURN (C):........ 4.51% 7.90% (1.15)% 11.77% 11.23% 11.38% 3.40% 8.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)................... $ 22,758 $ 28,367 $55,420 $ 61,121 $ 53,449 $ 49,641 $ 50,575 $52,754
Average net assets
(000)................... $ 25,751 $ 39,455 $59,544 $ 55,965 $ 50,607 $ 49,083 $ 52,974 $49,841
Ratios to average net
assets:
Expenses, including
distribution fee...... 1.46%(d) 1.34%(d) 1.27% 1.35% 1.39% 1.45% 1.37% 1.34%
Expenses, excluding
distribution fee...... .96%(d) .84%(d) .77% .85% .89% .95% .90% .87%
Net investment
income................ 4.66%(d) 5.37%(d) 5.20% 5.39% 5.74% 6.13% 6.21% 6.24%
Portfolio turnover
rate.................... 18% 36% 33% 56% 32% 34% 33% 23%

1988 1987
-------- --------
PER SHARE OPERATING
PERFORMANCE:
<S> <C> <C>
Net asset value,
beginning of period..... $ 10.58 $ 11.47
-------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.... .71(a) .71(a)
Net realized and
unrealized gain (loss)
on investment
transactions............ (.05) (.67)
-------- --------
Total from investment
operations............ .66 .04
-------- --------
LESS DISTRIBUTIONS
Dividends from net
investment income....... (.71) (.71)
Distributions from net
realized gains.......... -- (.22)
-------- --------
Total distributions.... (.71) (.93)
-------- --------
Net asset value, end of
period.................. $ 10.53 $ 10.58
-------- --------
-------- --------
TOTAL RETURN (C):........ 6.54% 0.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)................... $ 45,278 $ 40,655
Average net assets
(000)................... $ 41,357 $ 38,462
Ratios to average net
assets:
Expenses, including
distribution fee...... 1.22%(a) 1.15%(a)
Expenses, excluding
distribution fee...... .72%(a) .65%(a)
Net investment
income................ 6.76%(a) 6.34%(a)
Portfolio turnover
rate.................... 41% 116%
</TABLE>

----------------

(a) Net of expense subsidy.

(b) On December 31, 1988, Prudential Mutual Fund Management, Inc.
succeeded The Prudential Insurance Company of America as manager of
the Fund.

6
<PAGE>
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS
(for a share of beneficial interest outstanding throughout each of the indicated
periods)
(Class C Shares)

- --------------------------------------------------------------------------------
The following financial highlights have been audited by Deloitte & Touche
LLP, independent accountants, whose report thereon was unqualified. This
information should be read in conjunction with the financial statements and the
notes thereto, which appear in the Statement of Additional Information. The
following financial highlights contain selected data for a Class C share of
beneficial interest outstanding, total return, ratios to average net assets and
other supplemental data for the periods indicated. This information is based on
data contained in the financial statements. Further performance information is
contained in the annual report, which may be obtained without charge. See
"Shareholder Guide--Shareholder Services--Reports to Shareholders."

<TABLE>
<CAPTION>
CLASS C
------------------------------------
AUGUST 1,
YEAR ENDED 1994 (a)
AUGUST 31, THROUGH
-------------------- AUGUST 31,
1996 1995 1994
------- ------- ----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 11.62 $ 11.36 $ 11.41
------- ----------

INCOME FROM INVESTMENT OPERATIONS
Net investment income....................................... .51(d) .57(d) .04
Net realized and unrealized gain (loss) on
investment transactions.................................... (.02) .26 (.05)
------- ------- ----------
Total from investment operations........................ .49 .83 (.01)
------- ------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income........................ (.51) (.57) (.04)
Distributions from net realized gains....................... (.07) -- --
------- ------- ----------
Total distributions..................................... (.58) (.57) (.04)
------- ------- ----------

Net asset value, end of period.............................. $11.53 $11.62 $11.36
------- ------- ----------
------- ------- ----------
TOTAL RETURN (c):........................................... 4.26% 7.60% (.27)%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period................................... $45,000 $14,000 $ 216
Average net assets.......................................... $41,000 $14,000 $ 15
Ratios to average net assets:
Expenses, including distribution fee...................... 1.72%(d) 1.60%(d) 1.57%(b)
Expenses, excluding distribution fee...................... .97%(d) .85%(d) .82%(b)
Net investment income..................................... 4.39%(d) 5.07%(d) 5.06%(b)
Portfolio turnover rate..................................... 18% 36% 33%
</TABLE>

-----------------------

(a) Commencement of offering of Class C shares.

(b) Annualized.

(c) Total return does not consider the effects of sales loads. Total
return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions. Total returns for
periods of less than a full year are not annualized.

(d) Net of management fee waiver.

7
<PAGE>
- --------------------------------------------------------------------------------

HOW THE FUND INVESTS

- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES

PRUDENTIAL MUNICIPAL SERIES FUND (THE FUND) IS AN OPEN-END, MANAGEMENT
INVESTMENT COMPANY, OR MUTUAL FUND, CONSISTING OF FOURTEEN SEPARATE SERIES. EACH
OF THESE SERIES IS MANAGED INDEPENDENTLY. THE MASSACHUSETTS SERIES (THE SERIES)
IS DIVERSIFIED AND ITS INVESTMENT OBJECTIVE IS TO MAXIMIZE CURRENT INCOME THAT
IS EXEMPT FROM MASSACHUSETTS STATE AND FEDERAL INCOME TAXES CONSISTENT WITH THE
PRESERVATION OF CAPITAL AND, IN CONJUNCTION THEREWITH, THE SERIES MAY INVEST IN
DEBT SECURITIES WITH THE POTENTIAL FOR CAPITAL GAIN. See "Investment Objectives
and Policies" in the Statement of Additional Information.

THE SERIES' INVESTMENT OBJECTIVE IS A FUNDAMENTAL POLICY AND, THEREFORE, MAY
NOT BE CHANGED WITHOUT THE APPROVAL OF THE HOLDERS OF A MAJORITY OF THE SERIES'
OUTSTANDING VOTING SECURITIES AS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940,
AS AMENDED (THE INVESTMENT COMPANY ACT). THE SERIES' POLICIES THAT ARE NOT
FUNDAMENTAL MAY BE MODIFIED BY THE TRUSTEES.

THE SERIES WILL INVEST PRIMARILY IN MASSACHUSETTS STATE, MUNICIPAL AND LOCAL
GOVERNMENT OBLIGATIONS AND OBLIGATIONS OF OTHER QUALIFYING ISSUERS, SUCH AS
ISSUERS LOCATED IN PUERTO RICO, THE VIRGIN ISLANDS AND GUAM, WHICH PAY INCOME
EXEMPT, IN THE OPINION OF COUNSEL, FROM MASSACHUSETTS STATE AND FEDERAL INCOME
TAXES (MASSACHUSETTS OBLIGATIONS). THERE CAN BE NO ASSURANCE THAT THE SERIES
WILL BE ABLE TO ACHIEVE ITS INVESTMENT OBJECTIVE.

Interest on certain municipal obligations may be a preference item for
purposes of the federal alternative minimum tax. The Series may invest without
limit in municipal obligations that are "private activity bonds" (as defined in
the Internal Revenue Code) the interest on which would be a preference item for
purposes of the federal alternative minimum tax. See "Taxes, Dividends and
Distributions." Under Massachusetts law, dividends paid by the Series are exempt
from Massachusetts personal income tax for resident individuals and other
resident noncorporate shareholders to the extent they are derived from interest
payments on Massachusetts Obligations or from long-term capital gains on certain
Massachusetts Obligations. Massachusetts Obligations could include general
obligation bonds of the Commonwealth, counties, cities, towns, etc., revenue
bonds of utility systems, highways, bridges, port and airport facilities,
colleges, hospitals, etc., and industrial development and pollution control
bonds. The Series will invest in long-term obligations, and the dollar-weighted
average maturity of the Series' portfolio will generally range between 10-20
years. The Series also may invest in certain short-term, tax-exempt notes such
as Tax Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation Notes,
Construction Loan Notes and variable and floating rate demand notes.

Generally, municipal obligations with longer maturities produce higher yields
and are subject to greater price fluctuations as a result of changes in interest
rates (market risk) than municipal obligations with shorter maturities. The
prices of municipal obligations vary inversely with interest rates. Interest
rates are currently much lower than in recent years. If rates were to rise
sharply, the prices of bonds in the Series' portfolio might be adversely
affected.

THE SERIES MAY INVEST ITS ASSETS IN FLOATING RATE AND VARIABLE RATE
SECURITIES, INCLUDING PARTICIPATION INTERESTS THEREIN AND INVERSE FLOATERS.
There is no limit on the amount of such securities that the Series may purchase.
Floating rate securities normally have a rate of interest which is set as a
specific percentage of a designated base rate, such as the rate on Treasury
bonds or bills or the prime rate at a major commercial bank. The interest rate
on floating rate securities changes periodically when there is a change in the
designated base interest rate. Variable rate securities provide for a specified
periodic adjustment in the interest rate based on prevailing market rates and
generally allow the Series to demand payment of the obligation on short notice
at par plus accrued interest, which amount may be more or less than the amount
the Series paid for them. An inverse floater is a debt instrument with a
floating or variable interest rate that moves in the opposite direction of the

8
<PAGE>
interest rate on another security or the value of an index. Changes in the
interest rate on the other security or index inversely affect the residual
interest rate paid on the inverse floater, with the result that the inverse
floater's price will be considerably more volatile than that of a fixed rate
bond. The market for inverse floaters is relatively new.

THE SERIES MAY ALSO INVEST IN MUNICIPAL LEASE OBLIGATIONS. A MUNICIPAL LEASE
OBLIGATION IS A MUNICIPAL SECURITY THE INTEREST ON AND PRINCIPAL OF WHICH IS
PAYABLE OUT OF LEASE PAYMENTS MADE BY THE PARTY LEASING THE FACILITIES FINANCED
BY THE ISSUE. Typically, municipal lease obligations are issued by a state or
municipal financing authority to provide funds for the construction of
facilities (E.G., schools, dormitories, office buildings or prisons) or the
acquisition of equipment. The facilities are typically used by the state or
municipality pursuant to a lease with a financing authority. Certain municipal
lease obligations may trade infrequently. Accordingly, the investment adviser
will monitor the liquidity of municipal lease obligations under the supervision
of the Trustees. Municipal lease obligations will not be considered illiquid for
purposes of the Series' 15% limitation on illiquid securities provided the
investment adviser determines that there is a readily available market for such
securities. See "Other Investments and Policies--Illiquid Securities" below.

ALL MASSACHUSETTS OBLIGATIONS PURCHASED BY THE SERIES WILL BE "INVESTMENT
GRADE" SECURITIES. In other words, all of the Massachusetts Obligations will, at
the time of purchase, be rated within the four highest quality grades as
determined by Moody's Investors Service (Moody's) (currently Aaa, Aa, A, Baa for
bonds, MIG 1, MIG 2, MIG 3, MIG 4 for notes and Prime-1 for commercial paper),
Standard & Poor's Ratings Group (S&P) (currently AAA, AA, A, BBB for bonds,
SP-1, SP-2 for notes and A-1 for commercial paper) or another nationally
recognized statistical rating organization (NRSRO) or, if unrated, will possess
creditworthiness, in the opinion of the investment adviser, comparable to
securities in which the Series may invest. Securities rated Baa may have
speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade securities. Subsequent
to its purchase by the Series, a municipal obligation may be assigned a lower
rating or cease to be rated. Such an event would not require the elimination of
the issue from the portfolio, but the investment adviser will consider such an
event in determining whether the Series should continue to hold the security in
its portfolio. See "Description of Tax-Exempt Security Ratings" in the Statement
of Additional Information. The Series may purchase Massachusetts Obligations
which, in the opinion of the investment adviser, offer the opportunity for
capital appreciation. This may occur, for example, when the investment adviser
believes that the issuer of a particular Massachusetts Obligation might receive
an upgraded credit standing, thereby increasing the market value of the bonds it
has issued or when the investment adviser believes that interest rates might
decline. As a general matter, bond prices and the Series' net asset value will
vary inversely with interest rate fluctuations.

From time to time, the Series may own the majority of a municipal issue. Such
majority-owned holdings may present market and credit risks.

UNDER NORMAL MARKET CONDITIONS, THE SERIES WILL ATTEMPT TO INVEST
SUBSTANTIALLY ALL OF THE VALUE OF ITS ASSETS IN MASSACHUSETTS OBLIGATIONS. As a
matter of fundamental policy, during normal market conditions the Series' assets
will be invested so that at least 80% of the income will be exempt from
Massachusetts and federal income taxes or the Series will have at least 80% of
its total assets invested in Massachusetts Obligations. During abnormal market
conditions or to provide liquidity, the Series may hold cash or cash equivalents
or investment grade taxable obligations, including obligations that are exempt
from federal, but not state, taxation and the Series may invest in tax-free cash
equivalents, such as floating rate demand notes, tax-exempt commercial paper and
general obligation and revenue notes or in taxable cash equivalents, such as
certificates of deposit, bankers acceptances and time deposits or other
short-term taxable investments such as repurchase agreements. When, in the
opinion of the investment adviser, abnormal market conditions require a
temporary defensive position, the Series may invest more than 20% of the value
of its assets in debt securities other than Massachusetts Obligations or may
invest its assets so that more than 20% of the income is subject to
Massachusetts state or federal income taxes. The Series will treat an investment
in a municipal bond refunded with escrowed U.S. Government securities as U.S.
Government securities for purposes of the Investment Company Act's
diversification requirements provided certain conditions are met. See
"Investment Objectives and Policies--In General" in the Statement of Additional
Information.

9
<PAGE>
THE SERIES MAY ACQUIRE PUT OPTIONS (PUTS) GIVING THE SERIES THE RIGHT TO SELL
SECURITIES HELD IN THE SERIES' PORTFOLIO AT A SPECIFIED EXERCISE PRICE ON A
SPECIFIED DATE. Such puts may be acquired for the purpose of protecting the
Series from a possible decline in the market value of the security to which the
put applies in the event of interest rate fluctuations or, in the case of
liquidity puts, for the purpose of shortening the effective maturity of the
underlying security. The aggregate value of premiums paid to acquire puts held
in the Series' portfolio (other than liquidity puts) may not exceed 10% of the
net asset value of the Series. The acquisition of a put may involve an
additional cost to the Series by payment of a premium for the put, by payment of
a higher purchase price for securities to which the put is attached or through a
lower effective interest rate.

In addition, there is a credit risk associated with the purchase of puts in
that the issuer of the put may be unable to meet its obligation to purchase the
underlying security. Accordingly, the Series will acquire puts only under the
following circumstances: (1) the put is written by the issuer of the underlying
security and such security is rated within the four highest quality grades as
determined by an NRSRO; or (2) the put is written by a person other than the
issuer of the underlying security and such person has securities outstanding
which are rated within such four highest quality grades; or (3) the put is
backed by a letter of credit or similar financial guarantee issued by a person
having securities outstanding which are rated within the two highest quality
grades of an NRSRO.

THE SERIES MAY PURCHASE MUNICIPAL OBLIGATIONS ON A "WHEN-ISSUED" OR "DELAYED
DELIVERY" BASIS, IN EACH CASE WITHOUT LIMIT. When municipal obligations are
offered on a when-issued or delayed delivery basis, the price and coupon rate
are fixed at the time the commitment to purchase is made, but delivery and
payment for the securities take place at a later date. Normally, the settlement
date occurs within one month of purchase. The purchase price for such securities
includes interest accrued during the period between purchase and settlement and,
therefore, no interest accrues to the economic benefit of the purchaser during
such period. In the case of purchases by the Series, the price that the Series
is required to pay on the settlement date may be in excess of the market value
of the municipal obligations on that date. While securities may be sold prior to
the settlement date, the Series intends to purchase these securities with the
purpose of actually acquiring them unless a sale would be desirable for
investment reasons. At the time the Series makes the commitment to purchase a
municipal obligation on a when-issued or delayed delivery basis, it will record
the transaction and reflect the value of the obligation each day in determining
its net asset value. This value may fluctuate from day to day in the same manner
as values of municipal obligations otherwise held by the Series. If the seller
defaults in the sale, the Series could fail to realize the appreciation, if any,
that had occurred. The Series will establish a segregated account with its
Custodian in which it will maintain cash, U.S. Government securities, equity
securities or other liquid, unencumbered assets, marked-to-market daily, equal
in value to its commitments for when-issued or delayed delivery securities.

THE SERIES MAY ALSO PURCHASE MUNICIPAL FORWARD CONTRACTS. A municipal forward
contract is a municipal security which is purchased on a when-issued basis with
delivery taking place up to five years from the date of purchase. No interest
will accrue on the security prior to the delivery date. The investment adviser
will monitor the liquidity, value, credit quality and delivery of the security
under the supervision of the Trustees.

THE SERIES MAY PURCHASE SECONDARY MARKET INSURANCE ON MASSACHUSETTS
OBLIGATIONS WHICH IT HOLDS OR ACQUIRES. Secondary market insurance would be
reflected in the market value of the municipal obligation purchased and may
enable the Series to dispose of a defaulted obligation at a price similar to
that of comparable municipal obligations which are not in default.

Insurance is not a substitute for the basic credit of an issuer, but
supplements the existing credit and provides additional security therefor. While
insurance coverage for the Massachusetts Obligations held by the Series reduces
credit risk by providing that the insurance company will make timely payment of
principal and interest if the issuer defaults on its obligation to make such
payment, it does not afford protection against fluctuation in the price, I.E.,
the market value, of the municipal obligations caused by changes in interest
rates and other factors, nor in turn against fluctuations in the net asset value
of the shares of the Series.

10
<PAGE>
FUTURES CONTRACTS AND OPTIONS THEREON

THE SERIES IS AUTHORIZED TO PURCHASE AND SELL CERTAIN DERIVATIVES, INCLUDING
FINANCIAL FUTURES CONTRACTS (FUTURES CONTRACTS) AND OPTIONS THEREON FOR THE
PURPOSE OF HEDGING ITS PORTFOLIO SECURITIES AGAINST FLUCTUATIONS IN VALUE CAUSED
BY CHANGES IN PREVAILING MARKET INTEREST RATES AND HEDGING AGAINST INCREASES IN
THE COST OF SECURITIES THE SERIES INTENDS TO PURCHASE. THE SUCCESSFUL USE OF
FUTURES CONTRACTS AND OPTIONS THEREON BY THE SERIES INVOLVES ADDITIONAL
TRANSACTION COSTS AND IS SUBJECT TO VARIOUS RISKS AND DEPENDS UPON THE
INVESTMENT ADVISER'S ABILITY TO PREDICT THE DIRECTION OF THE MARKET (INCLUDING
INTEREST RATES).

A FUTURES CONTRACT OBLIGATES THE SELLER OF THE CONTRACT TO DELIVER TO THE
PURCHASER OF THE CONTRACT CASH EQUAL TO A SPECIFIC DOLLAR AMOUNT TIMES THE
DIFFERENCE BETWEEN THE VALUE OF A SPECIFIC FIXED-INCOME SECURITY OR INDEX AT THE
CLOSE OF THE LAST TRADING DAY OF THE CONTRACT AND THE PRICE AT WHICH THE
AGREEMENT IS MADE. No physical delivery of the underlying securities is made.
The Series will engage in transactions in only those futures contracts and
options thereon that are traded on a commodities exchange or a board of trade.

The Series intends to engage in futures contracts and options thereon as a
hedge against changes, resulting from market conditions, in the value of
securities which are held in the Series' portfolio or which the Series intends
to purchase, in accordance with the rules and regulations of the Commodity
Futures Trading Commission (the CFTC). The Series also intends to engage in such
transactions when they are economically appropriate for the reduction of risks
inherent in the ongoing management of the Series.

THE SERIES MAY NOT PURCHASE OR SELL FUTURES CONTRACTS OR OPTIONS THEREON IF,
IMMEDIATELY THEREAFTER, (I) THE SUM OF INITIAL AND NET CUMULATIVE VARIATION
MARGIN ON OUTSTANDING FUTURES CONTRACTS, TOGETHER WITH PREMIUMS PAID FOR OPTIONS
THEREON, WOULD EXCEED 20% OF THE TOTAL ASSETS OF THE SERIES, OR (II) IN THE CASE
OF RISK MANAGEMENT TRANSACTIONS, THE SUM OF THE AMOUNT OF INITIAL MARGIN
DEPOSITS ON THE SERIES' FUTURES POSITIONS AND PREMIUMS PAID FOR OPTIONS THEREON
WOULD EXCEED 5% OF THE LIQUIDATION VALUE OF THE SERIES' TOTAL ASSETS. There are
no limitations on the percentage of the portfolio which may be hedged and no
limitations on the use of the Series' assets to cover futures contracts and
options thereon, except that the aggregate value of the obligations underlying
put options will not exceed 50% of the Series' assets. Certain requirements for
qualification as a regulated investment company under the Internal Revenue Code
may limit the Series' ability to engage in futures contracts and options
thereon. See "Distributions and Tax Information--Federal Taxation" in the
Statement of Additional Information.

Currently, futures contracts are available on several types of fixed-income
securities, including U.S. Treasury bonds and notes, three-month U.S. Treasury
bills and Eurodollars. Futures contracts are also available on a municipal bond
index, based on THE BOND BUYER Municipal Bond Index, an index of 40 actively
traded municipal bonds. The Series may also engage in transactions in other
futures contracts that become available, from time to time, in other
fixed-income securities or municipal bond indices and in other options on such
contracts if the investment adviser believes such contracts and options would be
appropriate for hedging the Series' portfolio.

THERE CAN BE NO ASSURANCE THAT VIABLE MARKETS WILL CONTINUE OR THAT A LIQUID
SECONDARY MARKET WILL EXIST TO TERMINATE ANY PARTICULAR FUTURES CONTRACT AT ANY
SPECIFIC TIME. If it is not possible to close a futures position entered into by
the Series, the Series will continue to be required to make daily cash payments
of variation margin in the event of adverse price movements. In such a
situation, if the Series had insufficient cash, it might have to sell portfolio
securities to meet daily variation margin requirements at a time when it might
be disadvantageous to do so. The inability to close futures positions also could
have an adverse impact on the ability of the Series to hedge effectively. There
is also a risk of loss by the Series of margin deposits in the event of
bankruptcy of a broker with whom the Series has an open position in a futures
contract.

THE SUCCESSFUL USE OF FUTURES CONTRACTS AND OPTIONS THEREON BY THE SERIES IS
SUBJECT TO VARIOUS ADDITIONAL RISKS. Any use of futures transactions involves
the risk of imperfect correlation in movements in the price of futures contracts
and movements in interest rates and, in turn, the prices of the securities that
are the subject of the hedge. If the price of the futures

11
<PAGE>
contract moves more or less than the price of the security that is the subject
of the hedge, the Series will experience a gain or loss that will not be
completely offset by movements in the price of the security. The risk of
imperfect correlation is greater where the securities underlying futures
contracts are taxable securities (rather than municipal securities), are issued
by companies in different market sectors or have different maturities, ratings
or geographic mixes than the security being hedged. In addition, the correlation
may be affected by additions to or deletions from the index which serves as the
basis for a futures contract. Finally, if the price of the security that is
subject to the hedge were to move in a favorable direction, the advantage to the
Series would be partially offset by the loss incurred on the futures contract.

SPECIAL CONSIDERATIONS

BECAUSE THE SERIES WILL INVEST AT LEAST 80% OF THE VALUE OF ITS TOTAL ASSETS
IN MASSACHUSETTS OBLIGATIONS AND BECAUSE IT SEEKS TO MAXIMIZE INCOME DERIVED
FROM MASSACHUSETTS OBLIGATIONS, IT IS MORE SUSCEPTIBLE TO FACTORS ADVERSELY
AFFECTING ISSUERS OF MASSACHUSETTS OBLIGATIONS THAN IS A COMPARABLE MUNICIPAL
BOND MUTUAL FUND THAT IS NOT CONCENTRATED IN SUCH OBLIGATIONS TO THIS DEGREE.
The most recent recession had serious adverse effects on Massachusetts'
financial operations and led to a massive accumulated deficit of $1.45 billion
at the close of fiscal 1990. However, since that time, Massachusetts has adopted
more conservative revenue forecasting procedures and has moderated spending
growth resulting in the achievement of balanced budgets in both fiscal 1991-1992
and fiscal 1992-1993. On a statutory accounting basis, the Commonwealth reported
that the Budgeted Operating Funds ended fiscal year 1993 with balances of $562.5
million and ended fiscal year 1994 with balances of $589.3 million. Fiscal year
1995 tax revenue collections totaled $11.163 billion, which exeeded estimates by
$13 million and exceeded fiscal 1994 tax revenues by $556 million. On September
16, 1996, the Commonwealth released its preliminary financial report for fiscal
year 1996. The Budgeted Operating Funds of the Commonwealth ended fiscal 1996
with a surplus of revenues and other sources over expenditures and other uses of
$426.4 million resulting in aggregate ending fund balances in the Budgeted
Operating Funds of the Commonwealth of approximately $1.152 billion. Budgeted
revenues and other sources for fiscal 1996 totaled approximately $17.323
billion, including tax revenues of approximately $12.049 billion, approximately
$365 million higher than the most recent estimate. Budgeted expenditures and
other uses in fiscal 1996 totaled approximately $16.896 billion, an increase of
approximately $645.7 million, or 4.0%, over fiscal 1995. The largest single
spending increase in the fiscal 1996 budget is approximately $232 million to
continue funding the comprehensive education reform legislation enacted in 1993.
The Commonwealth estimates total spending in fiscal 1997 to be approximately
$17.704 billion, including $235.5 million in continuing appropriations from
fiscal 1996. Fiscal 1997 total revenues are estimated to be approximately
$17.296 billion, including approximately $12.197 billion in tax revenues. The
tax revenue estimate amounts to an increase of approximately $146 million, or
1.2%, over estimated fiscal 1996 tax collections. Inflexibility dictated by a
heavy debt load and other substantial fixed costs, particularly pension
contributions and transit subsidies, pose significant obstacles to continued
progress. If either Massachusetts or any of its local government entities is
unable to meet its financial obligations, the income derived by the Series, the
ability to preserve or realize appreciation of the Series' capital and the
Series' liquidity could be adversely affected. See "Investment Objectives and
Policies--Special Considerations Regarding Investments in Tax-Exempt Securities"
in the Statement of Additional Information.

OTHER INVESTMENTS AND POLICIES

REPURCHASE AGREEMENTS

The Series may on occasion enter into repurchase agreements whereby the seller
of a security agrees to repurchase that security from the Series at a mutually
agreed-upon time and price. The period of maturity is usually quite short,
possibly overnight or a few days, although it may extend over a number of
months. The resale price is in excess of the purchase price, reflecting an
agreed-upon rate of return effective for the period of time the Series' money is
invested in the security. The Series' repurchase agreements will at all times be
fully collateralized in an amount at least equal to the resale price. The
instruments held as collateral are valued daily and if the value of the
instruments declines, the Series will require additional collateral. If the
seller

12
<PAGE>
defaults and the value of the collateral securing the repurchase agreement
declines, the Series may incur a loss. The Series participates in a joint
repurchase account with other investment companies managed by Prudential Mutual
Fund Management LLC pursuant to an order of the Securities and Exchange
Commission (SEC).

BORROWING

The Series may borrow an amount equal to no more than 33 1/3% of the value of
its total assets (calculated when the loan is made) for temporary, extraordinary
or emergency purposes or for the clearance of transactions. The Series may
pledge up to 33 1/3% of the value of its total assets to secure these
borrowings. The Series will not purchase portfolio securities if its borrowings
exceed 5% of its total assets.

PORTFOLIO TURNOVER

The Series does not expect to trade in securities for short-term gain. It is
anticipated that the annual portfolio turnover rate will not exceed 150%. The
portfolio turnover rate is calculated by dividing the lesser of sales or
purchases of portfolio securities by the average monthly value of the portfolio
securities, excluding securities having a maturity at the date of purchase of
one year or less.

ILLIQUID SECURITIES

The Series may hold up to 15% of its net assets in illiquid securities
including repurchase agreements which have a maturity of longer than seven days,
securities with legal or contractual restrictions on resale (restricted
securities) and securities that are not readily marketable. Restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended (the Securities Act), privately placed commercial paper and
municipal lease obligations that have a readily available market are not
considered illiquid for the purposes of this limitation. The investment adviser
will monitor the liquidity of such restricted securities under the supervision
of the Trustees. The Series' investment in Rule 144A securities could have the
effect of increasing illiquidity to the extent that qualified institutional
buyers become, for a limited time, uninterested in purchasing Rule 144A
securities. See "Investment Objectives and Policies--Illiquid Securities" and
"Investment Restrictions" in the Statement of Additional Information. Repurchase
agreements subject to demand are deemed to have a maturity equal to the notice
period.

INVESTMENT RESTRICTIONS

The Series is subject to certain investment restrictions which, like its
investment objective, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of the holders of a majority of the
Series' outstanding voting securities, as defined in the Investment Company Act.
See "Investment Restrictions" in the Statement of Additional Information.

- --------------------------------------------------------------------------------

HOW THE FUND IS MANAGED

- --------------------------------------------------------------------------------
THE FUND HAS TRUSTEES WHO, IN ADDITION TO OVERSEEING THE ACTIONS OF THE FUND'S
MANAGER, SUBADVISOR AND DISTRIBUTOR, AS SET FORTH BELOW, DECIDE UPON MATTERS OF
GENERAL POLICY. THE FUND'S MANAGER CONDUCTS AND SUPERVISES THE DAILY BUSINESS
OPERATIONS OF THE FUND. THE FUND'S SUBADVISER FURNISHES DAILY INVESTMENT
ADVISORY SERVICES.

For the fiscal year ended August 31, 1996, total expenses of the Series as a
percentage of average net assets, net of fee waivers, were 1.06%, 1.46% and
1.72% for the Series' Class A, Class B and Class C shares, respectively. See
"Financial Highlights."

MANAGER

PRUDENTIAL MUTUAL FUND MANAGEMENT LLC (PMF OR THE MANAGER), GATEWAY CENTER
THREE, NEWARK, NEW JERSEY 07102, IS THE MANAGER OF THE FUND AND IS COMPENSATED
FOR ITS SERVICES AT AN ANNUAL RATE OF .50 OF 1% OF THE AVERAGE

13
<PAGE>
NET ASSETS OF THE SERIES. PMF is organized in New York as a limited liability
company. It is the successor to Prudential Mutual Fund Management, Inc., which
transferred its assets to PMF in September 1996. For the fiscal year ended
August 31, 1996, the Series paid PMF a management fee of .45 of 1% of the
Series' average net assets. See "Fee Waivers" below and "Manager" in the
Statement of Additional Information.

As of September 30, 1996, PMF served as the manager to 37 open-end investment
companies, constituting all of the Prudential Mutual Funds, and as manager or
administrator to 22 closed-end investment companies with aggregate assets of
approximately $52 billion.

UNDER THE MANAGEMENT AGREEMENT WITH THE FUND, PMF MANAGES THE INVESTMENT
OPERATIONS OF EACH SERIES OF THE FUND AND ALSO ADMINISTERS THE FUND'S BUSINESS
AFFAIRS. See "Manager" in the Statement of Additional Information.

UNDER A SUBADVISORY AGREEMENT BETWEEN PMF AND THE PRUDENTIAL INVESTMENT
CORPORATION (PIC OR THE SUBADVISER), PIC FURNISHES INVESTMENT ADVISORY SERVICES
IN CONNECTION WITH THE MANAGEMENT OF THE FUND AND IS REIMBURSED BY PMF FOR ITS
REASONABLE COSTS AND EXPENSES INCURRED IN PROVIDING SUCH SERVICES. Under the
Management Agreement, PMF continues to have responsibility for all investment
advisory services and supervises PIC's performance of such services.

The current portfolio manager is Marie Conti, a Vice President of Prudential
Investments. Ms. Conti has responsibility for the day-to-day management of the
portfolio. Ms. Conti has managed the portfolio since April 19, 1995 and has been
employed by PIC as a portfolio manager since September 1989 and prior thereto
was employed in an administrative capacity at PIC since August 1988.

PMF and PIC are wholly-owned subsidiaries of The Prudential Insurance Company
of America (Prudential), a major diversified insurance and financial services
company, and are part of Prudential Investments, a business group of Prudential.

FEE WAIVERS

Effective January 1, 1995, PMF agreed to waive 10% of its management fee. The
Series is not required to reimburse PMF for such management fee waiver.
Thereafter, PMF may from time to time agree to waive all or a portion of its
management fee and subsidize certain operating expenses of the Series. Fee
waivers and expense subsidies will increase the Series' yield and total return.
See "Fund Expenses."

DISTRIBUTOR

PRUDENTIAL SECURITIES INCORPORATED (PRUDENTIAL SECURITIES OR PSI), ONE SEAPORT
PLAZA, NEW YORK, NEW YORK 10292, IS A CORPORATION ORGANIZED UNDER THE LAWS OF
THE STATE OF DELAWARE AND SERVES AS THE DISTRIBUTOR OF THE CLASS A, CLASS B AND
CLASS C SHARES OF THE SERIES. It is an indirect, wholly-owned subsidiary of
Prudential. Prior to January 2, 1996, Prudential Mutual Fund Distributors, Inc.
(PMFD), One Seaport Plaza, New York, New York 10292, acted as distributor of the
Class A shares of the Series.

UNDER SEPARATE DISTRIBUTION AND SERVICE PLANS (THE CLASS A PLAN, THE CLASS B
PLAN AND THE CLASS C PLAN, COLLECTIVELY, THE PLANS) ADOPTED BY THE FUND UNDER
RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT AND A DISTRIBUTION AGREEMENT (THE
DISTRIBUTION AGREEMENT), PRUDENTIAL SECURITIES (THE DISTRIBUTOR) INCURS THE
EXPENSES OF DISTRIBUTING THE CLASS A, CLASS B AND CLASS C SHARES OF THE SERIES.
These expenses include commissions and account servicing fees paid to, or on
account of, financial advisers of Prudential Securities and representatives of
Pruco Securities Corporation (Prusec), an affiliated broker-dealer, commissions
and account servicing fees paid to, or on account of, other broker-dealers or
financial institutions (other than national banks) which have entered into
agreements with the Distributor, advertising expenses, the cost of printing and
mailing prospectuses to potential investors and indirect and overhead costs of
Prudential Securities and Prusec

14
<PAGE>
associated with the sale of Series shares, including lease, utility,
communications and sales promotion expenses. The State of Texas requires that
shares of the Series may be sold in that state only by dealers or other
financial institutions which are registered there as broker-dealers.

Under the Plans, the Series is obligated to pay distribution and/or service
fees to the Distributor as compensation for its distribution and service
activities, not as reimbursement for specific expenses incurred. If the
Distributor's expenses exceed its distribution and service fees, the Series will
not be obligated to pay any additional expenses. If the Distributor's expenses
are less than such distribution and service fees, it will retain its full fees
and realize a profit.

UNDER THE CLASS A PLAN, THE SERIES MAY PAY PRUDENTIAL SECURITIES FOR ITS
DISTRIBUTION-RELATED ACTIVITIES WITH RESPECT TO CLASS A SHARES AT AN ANNUAL RATE
OF UP TO .30 OF 1% OF THE AVERAGE DAILY NET ASSETS OF THE CLASS A SHARES OF THE
SERIES. The Class A Plan provides that (i) up to .25 of 1% of the average daily
net assets of the Class A shares may be used to pay for personal service and/or
the maintenance of shareholder accounts (service fee) and (ii) total
distribution fees (including the service fee of .25 of 1%) may not exceed .30 of
1% of the average daily net assets of the Class A shares. Prudential Securities
has agreed to limit its distribution-related fees payable under the Class A Plan
to .10 of 1% of the average daily net assets of the Class A shares for the
fiscal year ending August 31, 1997.

UNDER THE CLASS B AND CLASS C PLANS, THE SERIES MAY PAY PRUDENTIAL SECURITIES
FOR ITS DISTRIBUTION-RELATED ACTIVITIES WITH RESPECT TO CLASS B AND CLASS C
SHARES AT AN ANNUAL RATE OF UP TO .50 OF 1% AND UP TO 1% OF THE AVERAGE DAILY
NET ASSETS OF THE CLASS B AND CLASS C SHARES, RESPECTIVELY. The Class B Plan
provides for the payment to Prudential Securities of (i) an asset-based sales
charge of up to .50 of 1% of the average daily net assets of the Class B shares,
and (ii) a service fee of up to .25 of 1% of the average daily net assets of the
Class B shares; provided that the total distribution-related fee does not exceed
.50 of 1%. The Class C Plan provides for the payment to Prudential Securities of
(i) an asset-based sales charge of up to .75 of 1% of the average daily net
assets of the Class C shares, and (ii) a service fee of up to .25 of 1% of the
average daily net assets of the Class C shares. The service fee is used to pay
for personal service and/or the maintenance of shareholder accounts. Prudential
Securities has agreed to limit its distribution-related fees payable under the
Class C Plan to .75 of 1% of the average daily net assets of the Class C shares
for the fiscal year ending August 31, 1997. Prudential Securities also receives
contingent deferred sales charges from certain redeeming shareholders. See
"Shareholder Guide--How to Sell Your Shares--Contingent Deferred Sales Charges."

For the fiscal year ended August 31, 1996, the Series paid distribution
expenses of .10 of 1%, .50 of 1% and .75 of 1% of the average daily net assets
of the Class A, Class B and Class C shares, respectively. The Series records all
payments made under the Plans as expenses in the calculation of net investment
income. See "Distributor" in the Statement of Additional Information.

Distribution expenses attributable to the sale of Class A, Class B or Class C
shares of the Series will be allocated to each class based upon the ratio of
sales of each class to the sales of all shares of the Series other than expenses
allocable to a particular class. The distribution fee and sales charge of one
class will not be used to subsidize the sale of another class.

Each Plan provides that it shall continue in effect from year to year provided
that a majority of the Trustees of the Fund, including a majority of the
Trustees who are not "interested persons" of the Fund (as defined in the
Investment Company Act) and who have no direct or indirect financial interest in
the operation of the Plan or any agreement related to the Plan (the Rule 12b-1
Trustees), vote annually to continue the Plan. Each Plan may be terminated with
respect to the Series at any time by vote of a majority of the Rule 12b-1
Trustees or of a majority of the outstanding shares of the applicable class of
the Series. The Series will not be obligated to pay distribution and service
fees incurred under any Plan if it is terminated or not continued.

In addition to distribution and service fees paid by the Series under the
Class A, Class B and Class C Plans, the Manager (or one of its affiliates) may
make payments out of its own resources to dealers (including Prudential
Securities) and other persons who distribute shares of the Series. Such payments
may be calculated by reference to the net asset value of shares sold by such
persons or otherwise.

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<PAGE>
The Distributor is subject to the rules of the National Association of
Securities Dealers, Inc. (the NASD) governing maximum sales charges. See
"Distributor" in the Statement of Additional Information.

On October 21, 1993, PSI entered into an omnibus settlement with the SEC,
state securities regulators (with the exception of the Texas Securities
Commissioner who joined the settlement on January 18, 1994) and the NASD to
resolve allegations that from 1980 through 1990 PSI sold certain limited
partnership interests in violation of securities laws to persons for whom such
securities were not suitable and misrepresented the safety, potential returns
and liquidity of these investments. Without admitting or denying the allegations
asserted against it, PSI consented to the entry of an SEC Administrative Order
which stated that PSI's conduct violated the federal securities laws, directed
PSI to cease and desist from violating the federal securities laws, pay civil
penalties, and adopt certain remedial measures to address the violations.

Pursuant to the terms of the SEC settlement, PSI agreed to the imposition of a
$10,000,000 civil penalty, established a settlement fund in the amount of
$330,000,000 and procedures to resolve legitimate claims for compensatory
damages by purchasers of the partnership interests. PSI has agreed to provide
additional funds, if necessary, for the purpose of the settlement fund. PSI's
settlement with the state securities regulators included an agreement to pay a
penalty of $500,000 per jurisdiction. PSI consented to a censure and to the
payment of a $5,000,000 fine in settling the NASD action.

In October 1994, a criminal complaint was filed with the United States
Magistrate for the Southern District of New York alleging that PSI committed
fraud in connection with the sale of certain limited partnership interests in
violation of federal securities laws. An agreement was simultaneously filed to
defer prosecution of these charges for a period of three years from the signing
of the agreement, provided that PSI complies with the terms of the agreement.
If, upon completion of the three year period, PSI has complied with the terms of
the agreement, no prosecution will be instituted by the United States for the
offenses charged in the complaint. If on the other hand, during the course of
the three year period, PSI violates the terms of the agreement, the U.S.
Attorney can then elect to pursue these charges. Under the terms of the
agreement, PSI agreed, among other things, to pay an additional $330,000,000
into the fund established by the SEC to pay restitution to investors who
purchased certain PSI limited partnership interests.

For more detailed information concerning the foregoing matters, see
"Distributor" in the Statement of Additional Information, a copy of which may be
obtained at no cost by calling 1-800-225-1852.

The Fund is not affected by PSI's financial condition and is an entirely
separate legal entity from PSI, which has no beneficial ownership therein and
the Fund's assets which are held by State Street Bank and Trust Company, an
independent custodian, are separate and distinct from PSI.

PORTFOLIO TRANSACTIONS

Prudential Securities may act as a broker or futures commission merchant for
the Fund, provided that the commissions, fees or other remuneration it receives
are fair and reasonable. See "Portfolio Transactions and Brokerage" in the
Statement of Additional Information.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT

State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the portfolio securities of the
Series and cash and, in that capacity, maintains certain financial and
accounting books and records pursuant to an agreement with the Fund. Its mailing
address is P.O. Box 1713, Boston, Massachusetts 02105.

Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as Transfer Agent and Dividend Disbursing Agent and, in
those capacities, maintains certain books and records for the Fund. PMFS is a
wholly-owned subsidiary of PMF. Its mailing address is P.O. Box 15005, New
Brunswick, New Jersey 08906-5005.

16
<PAGE>
- --------------------------------------------------------------------------------

HOW THE FUND VALUES ITS SHARES

- --------------------------------------------------------------------------------
THE SERIES' NET ASSET VALUE PER SHARE OR NAV IS DETERMINED BY SUBTRACTING ITS
LIABILITIES FROM THE VALUE OF ITS ASSETS AND DIVIDING THE REMAINDER BY THE
NUMBER OF OUTSTANDING SHARES. NAV IS CALCULATED SEPARATELY FOR EACH CLASS. THE
TRUSTEES HAVE FIXED THE SPECIFIC TIME OF DAY FOR THE COMPUTATION OF THE NET
ASSET VALUE OF THE SERIES TO BE AS OF 4:15 P.M., NEW YORK TIME.

Portfolio securities are valued based on market quotations or, if not readily
available, at fair value as determined in good faith under procedures
established by the Trustees. Securities may also be valued based on values
provided by a pricing service. See "Net Asset Value" in the Statement of
Additional Information.

The Series will compute its NAV once daily on days that the New York Stock
Exchange is open for trading except on days on which no orders to purchase, sell
or redeem shares have been received by the Series or days on which changes in
the value of the Series' portfolio securities do not materially affect the NAV.
The New York Stock Exchange is closed on the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

Although the legal rights of each class of shares are substantially identical,
the different expenses borne by each class will result in different dividends.
As long as the Series declares dividends daily, the NAV of the Class A, Class B
and Class C shares will generally be the same. It is expected, however, that the
Series' dividends will differ by approximately the amount of any distribution
and/or service fee expense accrual differential among the classes.

- --------------------------------------------------------------------------------

HOW THE FUND CALCULATES PERFORMANCE

- --------------------------------------------------------------------------------
FROM TIME TO TIME THE FUND MAY ADVERTISE THE "YIELD," "TAX EQUIVALENT YIELD"
AND "TOTAL RETURN" (INCLUDING "AVERAGE ANNUAL" TOTAL RETURN AND "AGGREGATE"
TOTAL RETURN) OF THE SERIES IN ADVERTISEMENTS OR SALES LITERATURE. "YIELD," "TAX
EQUIVALENT YIELD" AND "TOTAL RETURN" ARE CALCULATED SEPARATELY FOR CLASS A,
CLASS B AND CLASS C SHARES. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND
ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "yield" refers to the
income generated by an investment in the Series over a one-month or 30-day
period. This income is then "annualized;" that is, the amount of income
generated by the investment during that 30-day period is assumed to be generated
each 30-day period for twelve periods and is shown as a percentage of the
investment. The income earned on the investment is also assumed to be reinvested
at the end of the sixth 30-day period. The "tax equivalent yield" is calculated
similarly to the "yield," except that the yield is increased using a stated
income tax rate to demonstrate the taxable yield necessary to produce an
after-tax yield equivalent to the Series. The "total return" shows how much an
investment in the Series would have increased (decreased) over a specified
period of time (I.E., one, five or ten years or since inception of the Series)
assuming that all distributions and dividends by the Series were reinvested on
the reinvestment dates during the period and less all recurring fees. The
"aggregate" total return reflects actual performance over a stated period of
time. "Average annual" total return is a hypothetical rate of return that, if
achieved annually, would have produced the same aggregate total return if
performance had been constant over the entire period. "Average annual" total
return smooths out variations in performance and takes into account any
applicable initial or contingent deferred sales charges. Neither "average
annual" total return nor "aggregate" total return takes into account any federal
or state income taxes which may be payable upon redemption. The Fund also may
include comparative performance information in advertising or marketing the
shares of the Series. Such performance information may include data from Lipper
Analytical Services, Inc., Morningstar Publications, Inc., other industry
publications, business periodicals and market indices. See

17
<PAGE>
"Performance Information" in the Statement of Additional Information. Further
performance information is contained in the Series' annual and semi-annual
reports to shareholders, which may be obtained without charge. See "Shareholder
Guide--Shareholder Services--Reports to Shareholders."

- --------------------------------------------------------------------------------

TAXES, DIVIDENDS AND DISTRIBUTIONS

- --------------------------------------------------------------------------------

TAXATION OF THE FUND

THE SERIES HAS ELECTED TO QUALIFY AND INTENDS TO REMAIN QUALIFIED AS A
REGULATED INVESTMENT COMPANY UNDER THE INTERNAL REVENUE CODE. ACCORDINGLY, THE
SERIES WILL NOT BE SUBJECT TO FEDERAL INCOME TAXES ON ITS NET INVESTMENT INCOME
AND CAPITAL GAINS, IF ANY, THAT IT DISTRIBUTES TO ITS SHAREHOLDERS. TO THE
EXTENT NOT DISTRIBUTED BY THE SERIES, NET TAXABLE INVESTMENT INCOME AND CAPITAL
GAINS AND LOSSES ARE TAXABLE TO THE SERIES.

To the extent the Series invests in taxable obligations, it will earn taxable
investment income. Also, to the extent the Series engages in hedging
transactions in futures contracts and options thereon, it may earn both
short-term and long-term capital gain or loss. Under the Internal Revenue Code,
special rules apply to the treatment of certain options and futures contracts
(Section 1256 contracts). At the end of each year, such investments held by the
Series will be required to be "marked to market" for federal income tax
purposes; that is, treated as having been sold at market value. Sixty percent of
any gain or loss recognized on these "deemed sales" and on actual dispositions
will be treated as long-term capital gain or loss, and the remainder will be
treated as short-term capital gain or loss. See "Distributions and Tax
Information" in the Statement of Additional Information.

Gain or loss realized by the Series from the sale of securities generally will
be treated as capital gain or loss; however, gain from the sale of certain
securities (including municipal obligations) will be treated as ordinary income
to the extent of any "market discount." Market discount generally is the
difference, if any, between the price paid by the Series for the security and
the principal amount of the security (or, in the case of a security issued at an
original issue discount, the revised issue price of the security). The market
discount rule does not apply to any security that was acquired by the Series at
its original issue. See "Distributions and Tax Information" in the Statement of
Additional Information.

TAXATION OF SHAREHOLDERS

In general, the character of tax-exempt interest distributed by the Series
will flow through as tax-exempt interest to its shareholders provided that 50%
or more of the value of its assets at the end of each quarter of its taxable
year is invested in state, municipal and other obligations, the interest on
which is excluded from gross income for federal income tax purposes. During
normal market conditions, at least 80% of the Series' total assets will be
invested in such obligations. See "How the Fund Invests--Investment Objective
and Policies."

Any dividends out of net taxable investment income, together with
distributions of net short-term gains (I.E., the excess of net short-term
capital gains over net long-term capital losses) distributed to shareholders,
will be taxable as ordinary income to the shareholder whether or not reinvested.
Any net capital gains (I.E., the excess of net long-term capital gains over net
short-term capital losses) distributed to shareholders will be taxable as
long-term capital gains to the shareholders, whether or not reinvested and
regardless of the length of time a shareholder has owned his or her shares. The
maximum long-term capital gains rate for individuals is 28%. The maximum
long-term capital gains rate for corporate shareholders is currently the same as
the maximum tax rate for ordinary income.

Any gain or loss realized upon a sale or redemption of Series shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held more than one year and
otherwise as short-term capital gain

18
<PAGE>
or loss. Any such loss with respect to shares that are held for six months or
less, however, will be treated as long-term capital loss to the extent of any
capital gain distributions received by the shareholder. In addition, any
short-term capital loss will be disallowed to the extent of any tax-exempt
dividends received by the shareholder on shares that are held for six months or
less.

The Fund has obtained opinions of counsel to the effect that neither (i) the
conversion of Class B shares into Class A shares nor (ii) the exchange of Class
B or Class C shares for Class A shares constitutes a taxable event for federal
income tax purposes. However, such opinions are not binding on the Internal
Revenue Service.

CERTAIN INVESTORS MAY INCUR FEDERAL ALTERNATIVE MINIMUM TAX LIABILITY AS A
RESULT OF THEIR INVESTMENT IN THE FUND. Tax-exempt interest from certain
municipal obligations (I.E., certain private activity bonds issued after August
7, 1986) will be treated as an item of tax preference for purposes of the
alternative minimum tax. The Fund anticipates that, under regulations to be
promulgated, items of tax preference incurred by the Series will be attributed
to the Series' shareholders, although some portion of such items could be
allocated to the Series itself. Depending upon each shareholder's individual
circumstances, the attribution of items of tax preference incurred by the Series
could result in liability for the shareholder for the alternative minimum tax.
Similarly, the Series could be liable for the alternative minimum tax for items
of tax preference attributed to it. The Series is permitted to invest in
municipal obligations of the type that will produce items of tax preference.

Corporate shareholders in the Series also will have to take into account the
adjustment for current earnings for alternative minimum tax purposes. Corporate
shareholders should consult with their tax advisers with respect to this
potential adjustment.

Under Massachusetts law, dividends paid by the Series are exempt from
Massachusetts personal income tax for individuals and other noncorporate
shareholders resident in Massachusetts to the extent such dividends are excluded
from gross income for federal income tax purposes and are derived from interest
payments on Massachusetts Obligations or are capital gain dividends for federal
income tax purposes and are derived from long-term capital gains on certain
Massachusetts Obligations.

WITHHOLDING TAXES

Under the Internal Revenue Code, the Series is required to withhold and remit
to the U.S. Treasury 31% of redemption proceeds on the accounts of those
shareholders who fail to furnish their tax identification numbers on IRS Form
W-9 (or IRS Form W-8 in the case of certain foreign shareholders) with the
required certifications regarding the shareholder's status under the federal
income tax law. Such withholding is also required on taxable dividends and
capital gain distributions made by the Series unless it is reasonably expected
that at least 95% of the distributions of the Series are comprised of tax-exempt
dividends.

Shareholders are advised to consult their own tax advisers regarding specific
questions as to federal, state or local taxes. See "Distributions and Tax
Information" in the Statement of Additional Information.

DIVIDENDS AND DISTRIBUTIONS

THE SERIES EXPECTS TO DECLARE DAILY AND PAY MONTHLY DIVIDENDS OF NET
INVESTMENT INCOME, IF ANY, AND MAKE DISTRIBUTIONS AT LEAST ANNUALLY OF ANY
CAPITAL GAINS IN EXCESS OF CAPITAL LOSSES. For federal income tax purposes, the
Series has a capital loss carryforward as of August 31, 1995 of approximately
$10,600, which expires in 2003. Accordingly, no capital gains distribution is
expected to be paid to shareholders until future net gains have been realized in
excess of such carryforward. Dividends paid by the Series with respect to each
class of shares, to the extent any dividends are paid, will be calculated in the
same manner, at the same time, on the same day and will be in the same amount
except that each class will bear its own distribution charges, generally
resulting in lower dividends for Class B and Class C shares. Distributions of
net capital gains, if any, will be paid in the same amount for each class of
shares. See "How the Fund Values its Shares."

DIVIDENDS AND DISTRIBUTIONS WILL BE PAID IN ADDITIONAL SHARES OF THE SERIES
BASED ON THE NAV OF EACH CLASS OF THE SERIES ON THE PAYMENT DATE AND RECORD
DATE, RESPECTIVELY, OR SUCH OTHER DATE AS THE TRUSTEES MAY DETERMINE, UNLESS THE
SHAREHOLDER ELECTS IN WRITING NOT LESS THAN FIVE BUSINESS DAYS PRIOR TO THE
RECORD DATE TO RECEIVE SUCH DIVIDENDS AND DISTRIBUTIONS IN CASH. Such election
should be submitted to Prudential Mutual Fund Services, Inc., Attention: Account

19
<PAGE>
Maintenance, P.O. Box 15015, New Brunswick, New Jersey 08906-5015. If you hold
shares through Prudential Securities, you should contact your financial adviser
to elect to receive dividends and distributions in cash. The Fund will notify
each shareholder after the close of the Fund's taxable year of both the dollar
amount and the taxable status of that year's dividends and distributions on a
per share basis.

Any taxable dividends or distributions of capital gains paid shortly after a
purchase by an investor will have the effect of reducing the per share net asset
value of the investor's shares by the per share amount of the dividends or
distributions. Such dividends or distributions, although in effect a return of
invested principal, are subject to federal income taxes. Accordingly, prior to
purchasing shares of the Series, an investor should carefully consider the
impact of taxable dividends and capital gains distributions which are expected
to be or have been announced.

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GENERAL INFORMATION

- --------------------------------------------------------------------------------

DESCRIPTION OF SHARES

THE FUND WAS ESTABLISHED AS A MASSACHUSETTS BUSINESS TRUST ON MAY 18, 1984, BY
A DECLARATION OF TRUST. The Fund's activities are supervised by its Trustees.
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares in separate series, currently designated as the
Connecticut Money Market Series, Florida Series, Hawaii Income Series, Maryland
Series, Massachusetts Series, Massachusetts Money Market Series, Michigan
Series, New Jersey Series, New Jersey Money Market Series, New York Income
Series (not presently being offered), New York Series, New York Money Market
Series, North Carolina Series, Ohio Series and Pennsylvania Series. The Series
is authorized to issue an unlimited number of shares, divided into three
classes, designated Class A, Class B and Class C. Each class of shares
represents an interest in the same assets of the Series, and is identical in all
respects except that (i) each class is subject to different sales charges and
distribution and/or service fees, which may affect performance, (ii) each class
has exclusive voting rights on any matter submitted to shareholders that relates
solely to its arrangement and has separate voting rights on any matter submitted
to shareholders in which the interests of one class differ from the interests of
any other class, (iii) each class has a different exchange privilege and (iv)
only Class B shares have a conversion feature. See "How the Fund is
Managed--Distributor." In accordance with the Fund's Declaration of Trust, the
Trustees may authorize the creation of additional series and classes within such
series, with such preferences, privileges, limitations and voting and dividend
rights as the Trustees may determine.

Shares of the Fund, when issued, are fully paid, nonassessable, fully
transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of the Fund under certain circumstances as described
under "Shareholder Guide--How to Sell Your Shares." Each share of each class of
the Series is equal as to earnings, assets and voting privileges, except as
noted above, and each class bears the expenses related to the distribution of
its shares. Except for the conversion feature applicable to the Class B shares,
there are no conversion, preemptive or other subscription rights. In the event
of liquidation, each share of beneficial interest of each series is entitled to
its portion of all of the Fund's assets after all debt and expenses of the Fund
have been paid. Since Class B and Class C shares generally bear higher
distribution expenses than Class A shares, the liquidation proceeds to
shareholders of those classes are likely to be lower than to Class A
shareholders. The Fund's shares do not have cumulative voting rights for the
election of Trustees.

THE FUND DOES NOT INTEND TO HOLD ANNUAL MEETINGS OF SHAREHOLDERS UNLESS
OTHERWISE REQUIRED BY LAW. THE FUND WILL NOT BE REQUIRED TO HOLD MEETINGS OF
SHAREHOLDERS UNLESS, FOR EXAMPLE, THE ELECTION OF TRUSTEES IS REQUIRED TO BE
ACTED UPON BY SHAREHOLDERS UNDER THE INVESTMENT COMPANY ACT. SHAREHOLDERS HAVE
CERTAIN RIGHTS, INCLUDING THE RIGHT TO CALL A MEETING UPON A VOTE OF 10% OF THE
FUND'S OUTSTANDING SHARES FOR THE PURPOSE OF VOTING ON THE REMOVAL OF ONE OR
MORE TRUSTEES OR TO TRANSACT ANY OTHER BUSINESS.

20
<PAGE>
The Declaration of Trust and the By-Laws of the Fund are designed to make the
Fund similar in certain respects to a Massachusetts business corporation. The
principal distinction between a Massachusetts business corporation and a
Massachusetts business trust relates to shareholder liability. Under
Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
fund, which is not the case with a corporation. The Declaration of Trust of the
Fund provides that shareholders shall not be subject to any personal liability
for the acts or obligations of the Fund and that every written obligation,
contract, instrument or undertaking made by the Fund shall contain a provision
to the effect that the shareholders are not individually bound thereunder.

ADDITIONAL INFORMATION

This Prospectus, including the Statement of Additional Information which has
been incorporated by reference herein, does not contain all the information set
forth in the Registration Statement filed by the Fund with the SEC under the
Securities Act of 1933. Copies of the Registration Statement may be obtained at
a reasonable charge from the SEC or may be examined, without charge, at the
office of the SEC in Washington, D.C.

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SHAREHOLDER GUIDE

- --------------------------------------------------------------------------------

HOW TO BUY SHARES OF THE FUND

YOU MAY PURCHASE SHARES OF THE SERIES THROUGH PRUDENTIAL SECURITIES, PRUSEC OR
DIRECTLY FROM THE FUND, THROUGH ITS TRANSFER AGENT, PRUDENTIAL MUTUAL FUND
SERVICES, INC. (PMFS OR THE TRANSFER AGENT), ATTENTION: INVESTMENT SERVICES,
P.O. BOX 15020, NEW BRUNSWICK, NEW JERSEY 08906-5020. The purchase price is the
NAV next determined following receipt of an order by the Transfer Agent or
Prudential Securities plus a sales charge which, at your option, may be imposed
either (i) at the time of purchase (Class A shares) or (ii) on a deferred basis
(Class B or Class C shares). See "Alternative Purchase Plan" below. See also
"How the Fund Values its Shares."

An investment in the Series may not be appropriate for tax-exempt or
tax-deferred investors. Such investors should consult their own tax advisers.

The minimum initial investment for Class A and Class B shares is $1,000 per
class and $5,000 for Class C shares. The minimum subsequent investment is $100
for all classes. All minimum investment requirements are waived for certain
employee savings plans. For purchases made through the Automatic Savings
Accumulation Plan, the minimum initial and subsequent investment is $50. See
"Shareholder Services" below.

Application forms can be obtained from PMFS, Prudential Securities or Prusec.
If a share certificate is desired, it must be requested in writing for each
transaction. Certificates are issued only for full shares. Shareholders who hold
their shares through Prudential Securities will not receive share certificates.

The Fund reserves the right to reject any purchase order (including an
exchange into the Series) or to suspend or modify the continuous offering of its
shares. See "How to Sell Your Shares" below.

Your dealer is responsible for forwarding payment promptly to the Fund. The
Distributor reserves the right to cancel any purchase order for which payment
has not been received by the third business day following the investment.

Transactions in shares of the Series may be subject to postage and handling
charges imposed by your dealer.

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<PAGE>
PURCHASE BY WIRE. For an initial purchase of shares of the Series by wire, you
must first telephone PMFS at (800) 225-1852 (toll-free) to receive an account
number. The following information will be requested: your name, address, tax
identification number, class election, dividend distribution election, amount
being wired and wiring bank. Instructions should then be given by you to your
bank to transfer funds by wire to State Street Bank and Trust Company (State
Street), Boston, Massachusetts, Custody and Shareholder Services Division,
Attention: Prudential Municipal Series Fund, specifying on the wire the account
number assigned by PMFS and your name and identifying the sales charge
alternative (Class A, Class B or Class C shares) and the name of the Series.

If you arrange for receipt by State Street of Federal Funds prior to the
calculation of NAV (4:15 P.M., New York time), on a business day, you may
purchase shares of the Series as of that day. See "Net Asset Value" in the
Statement of Additional Information.

In making a subsequent purchase order by wire, you should wire State Street
directly and should be sure that the wire specifies Prudential Municipal Series
Fund, the name of the Series, Class A, Class B or Class C shares and your name
and individual account number. It is not necessary to call PMFS to make
subsequent purchase orders utilizing Federal Funds. The minimum amount which may
be invested by wire is $1,000.

ALTERNATIVE PURCHASE PLAN

THE SERIES OFFERS THROUGH THIS PROSPECTUS THREE CLASSES OF SHARES (CLASS A,
CLASS B AND CLASS C SHARES) WHICH ALLOWS YOU TO CHOOSE THE MOST BENEFICIAL SALES
CHARGE STRUCTURE FOR YOUR INDIVIDUAL CIRCUMSTANCES, GIVEN THE AMOUNT OF THE
PURCHASE, THE LENGTH OF TIME YOU EXPECT TO HOLD THE SHARES AND OTHER RELEVANT
CIRCUMSTANCES (ALTERNATIVE PURCHASE PLAN).

<TABLE>
<CAPTION>
ANNUAL 12b-1 FEES
(AS A % OF AVERAGE
DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
-------------------------------------- ----------------------- --------------------------------------
<S> <C> <C> <C>
CLASS A Maximum initial sales charge of 3% of .30 of 1% (currently Initial sales charge waived or reduced
the public offering price being charged at a rate for certain purchases
of .10 of 1%)
CLASS B Maximum contingent deferred sales .50 of 1% Shares convert to Class A shares
charge or CDSC of 5% of the lesser of approximately seven years after
the amount invested or the redemption purchase
proceeds; declines to zero after six
years
CLASS C Maximum CDSC of 1% of the lesser of 1% (currently being Shares do not convert to another class
the amount invested or the redemption charged at a rate of
proceeds on redemptions made within .75 of 1%)
one year of purchase
</TABLE>

The three classes of shares represent an interest in the same portfolio of
investments of the Series and have the same rights, except that (i) each class
bears the separate expenses of its Rule 12b-1 distribution and service plan,
(ii) each class has exclusive voting rights on any matter submitted to
shareholders that relates solely to its arrangement and has separate voting
rights on any matter submitted to shareholders in which the interests of one
class differ from the interests of any other class, and (iii) only Class B
shares have a conversion feature. The three classes also have separate exchange
privileges. See "How to Exchange Your Shares" below. The income attributable to
each class and the dividends payable on the shares of each class will be reduced
by the amount of the distribution fee of each class. Class B and Class C shares
bear the expenses of a higher distribution fee which will generally cause them
to have higher expense ratios and to pay lower dividends than the Class A
shares.

22
<PAGE>
Financial advisers and other sales agents who sell shares of the Series will
receive different compensation for selling Class A, Class B and Class C shares
and will generally receive more compensation initially for selling Class A and
Class B shares than for selling Class C shares.

IN SELECTING A PURCHASE ALTERNATIVE, YOU SHOULD CONSIDER, AMONG OTHER THINGS,
(1) the length of time you expect to hold your investment, (2) the amount of any
applicable sales charge (whether imposed at the time of purchase or redemption)
and distribution-related fees, as noted above, (3) whether you qualify for any
reduction or waiver of any applicable sales charge, (4) the various exchange
privileges among the different classes of shares (see "How to Exchange Your
Shares" below) and (5) the fact that Class B shares automatically convert to
Class A shares approximately seven years after purchase (see "Conversion
Feature--Class B Shares" below).

The following is provided to assist you in determining which method of
purchase best suits your individual circumstances and is based on current fees
and expenses being charged to the Series:

If you intend to hold your investment in the Series for less than 5 years and
do not qualify for a reduced sales charge on Class A shares, since Class A
shares are subject to a maximum initial sales charge of 3% and Class B shares
are subject to a CDSC of 5% which declines to zero over a 6 year period, you
should consider purchasing Class C shares over either Class A or Class B shares.

If you intend to hold your investment for 5 years or more and do not qualify
for a reduced sales charge on Class A shares, since Class B shares convert to
Class A shares approximately 7 years after purchase and because all of your
money would be invested initially in the case of Class B shares, you should
consider purchasing Class B shares over either Class A or Class C shares.

If you qualify for a reduced sales charge on Class A shares, it may be more
advantageous for you to purchase Class A shares over either Class B or Class C
shares regardless of how long you intend to hold your investment. However,
unlike Class B and Class C shares, you would not have all of your money invested
initially because the sales charge on Class A shares is deducted at the time of
purchase.

If you do not qualify for a reduced sales charge on Class A shares and you
purchase Class C shares, you would have to hold your investment for more than 4
years for the higher cumulative annual distribution-related fee on those shares
to exceed the initial sales charge plus cumulative annual distribution-related
fee on Class A shares. This does not take into account the time value of money,
which further reduces the impact of the higher Class C distribution-related fee
on the investment, fluctuations in net asset value, the effect of the return on
investment over this period of time or redemptions when the CDSC is applicable.

ALL PURCHASES OF $1 MILLION OR MORE, EITHER AS PART OF A SINGLE INVESTMENT OR
UNDER RIGHTS OF ACCUMULATION OR LETTERS OF INTENT, MUST BE FOR CLASS A SHARES.
See "Reduction and Waiver of Initial Sales Charges" below.

CLASS A SHARES

The offering price of Class A shares for investors choosing the initial sales
charge alternative is the next determined NAV plus a sales charge (expressed as
a percentage of the offering price and of the amount invested) as shown in the
following table:

<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS DEALER CONCESSION
PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- --------------------- ----------------- ----------------- -------------------
<S> <C> <C> <C>
Less than $99,999 3.00% 3.09% 3.00%
$100,000 to $249,999 2.50 2.56 2.50
$250,000 to $499,999 1.50 1.52 1.50
$500,000 to $999,999 1.00 1.01 1.00
$1,000,000 and above None None None
</TABLE>

The Distributor may reallow the entire initial sales charge to dealers.
Selling dealers may be deemed to be underwriters, as that term is defined in the
Securities Act.

23
<PAGE>
In connection with the sale of Class A shares at NAV (without payment of an
initial sales charge), the Manager, the Distributor or one of their affiliates
will pay dealers, financial advisers and other persons which distribute shares a
finders' fee based on a percentage of the net asset value of shares sold by such
persons.

REDUCTION AND WAIVER OF INITIAL SALES CHARGES. Reduced sales charges are
available through Rights of Accumulation and Letters of Intent. Shares of the
Fund and shares of other Prudential Mutual Funds (excluding money market funds
other than those acquired pursuant to the exchange privilege) may be aggregated
to determine the applicable reduction. See "Purchase and Redemption of Fund
Shares--Reduction and Waiver of Initial Sales Charges--Class A Shares" in the
Statement of Additional Information.

OTHER WAIVERS. Class A shares may be purchased at NAV, through Prudential
Securities or the Transfer Agent, by the following persons: (a) officers and
current and former Directors/Trustees of the Prudential Mutual Funds (including
the Fund), (b) employees of Prudential Securities and PMF and their subsidiaries
and members of the families of such persons who maintain an "employee related"
account at Prudential Securities or the Transfer Agent, (c) employees and
special agents of Prudential and its subsidiaries and all persons who have
retired directly from active service with Prudential or one of its subsidiaries,
(d) registered representatives and employees of dealers who have entered into a
selected dealer agreement with Prudential Securities provided that purchases at
NAV are permitted by such person's employer and (e) investors who have a
business relationship with a financial adviser who joined Prudential Securities
from another investment firm, provided that (i) the purchase is made within 180
days of the commencement of the financial adviser's employment at Prudential
Securities or within one year in the case of benefit plans, (ii) the purchase is
made with proceeds of a redemption of shares of any open-end fund sponsored by
the financial adviser's previous employer (other than a money market fund or
other no-load fund which imposes a distribution or service fee of .25 of 1% or
less) and (iii) the financial adviser served as the client's broker on the
previous purchases.

You must notify the Transfer Agent either directly or through Prudential
Securities or Prusec that you are entitled to the reduction or waiver of the
sales charge. The reduction or waiver will be granted subject to confirmation of
your entitlement. No initial sales charges are imposed upon Class A shares
acquired upon the reinvestment of dividends and distributions. See "Purchase and
Redemption of Fund Shares--Reduction and Waiver of Initial Sales Charges--Class
A Shares" in the Statement of Additional Information.

CLASS B AND CLASS C SHARES

The offering price of Class B and Class C shares for investors choosing one of
the deferred sales charge alternatives is the NAV next determined following
receipt of an order by the Transfer Agent or Prudential Securities. Although
there is no sales charge imposed at the time of purchase, redemptions of Class B
and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares--Contingent Deferred Sales Charges" below. The Distributor will pay sales
commissions of up to 4% of the purchase price of Class B shares to dealers,
financial advisers and other persons who sell Class B shares at the time of sale
from its own resources. This facilitates the ability of the Fund to sell the
Class B shares without an initial sales charge being deducted at the time of
purchase. The Distributor anticipates that it will recoup its advancement of
sales commissions from the combination of the CDSC and the distribution fee. See
"Distributor." In connection with the sale of Class C shares, the Distributor
will pay dealers, financial advisers and other persons which distribute Class C
shares a sales commission of up to 1% of the purchase price at the time of the
sale.

HOW TO SELL YOUR SHARES

YOU CAN REDEEM YOUR SHARES OF THE SERIES AT ANY TIME FOR CASH AT THE NAV NEXT
DETERMINED AFTER THE REDEMPTION REQUEST IS RECEIVED IN PROPER FORM BY THE
TRANSFER AGENT OR PRUDENTIAL SECURITIES. SEE "HOW THE FUND VALUES ITS SHARES."
In certain cases, however, redemption proceeds will be reduced by the amount of
any applicable contingent deferred sales charge, as described below. See
"Contingent Deferred Sales Charges" below.

24
<PAGE>
IF YOU HOLD SHARES OF THE SERIES THROUGH PRUDENTIAL SECURITIES, YOU MUST
REDEEM SHARES BY CONTACTING YOUR PRUDENTIAL SECURITIES FINANCIAL ADVISER. IF YOU
HOLD SHARES IN NON-CERTIFICATE FORM, A WRITTEN REQUEST FOR REDEMPTION SIGNED BY
YOU EXACTLY AS THE ACCOUNT IS REGISTERED IS REQUIRED. IF YOU HOLD CERTIFICATES,
THE CERTIFICATES, SIGNED IN THE NAME(S) SHOWN ON THE FACE OF THE CERTIFICATES,
MUST BE RECEIVED BY THE TRANSFER AGENT IN ORDER FOR THE REDEMPTION REQUEST TO BE
PROCESSED. IF REDEMPTION IS REQUESTED BY A CORPORATION, PARTNERSHIP, TRUST OR
FIDUCIARY, WRITTEN EVIDENCE OF AUTHORITY ACCEPTABLE TO THE TRANSFER AGENT MUST
BE SUBMITTED BEFORE SUCH REQUEST WILL BE ACCEPTED. All correspondence and
documents concerning redemptions should be sent to the Fund in care of its
Transfer Agent, Prudential Mutual Fund Services, Inc., Attention: Redemption
Services, P.O. Box 15010, New Brunswick, New Jersey 08906-5010.

If the proceeds of the redemption (a) exceed $50,000, (b) are to be paid to a
person other than the record owner, (c) are to be sent to an address other than
the address on the Transfer Agent's records, or (d) are to be paid to a
corporation, partnership, trust or fiduciary, the signature(s) on the redemption
request and on the certificates, if any, or stock power must be guaranteed by an
"eligible guarantor institution." An "eligible guarantor institution" includes
any bank, broker, dealer or credit union. The Transfer Agent reserves the right
to request additional information from, and make reasonable inquiries of, any
eligible guarantor institution. For clients of Prusec, a signature guarantee may
be obtained from the agency or office manager of most Prudential Insurance and
Financial Services or Preferred Services offices.

PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE MADE BY CHECK WITHIN SEVEN
DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE CERTIFICATE AND/OR WRITTEN
REQUEST EXCEPT AS INDICATED BELOW. IF YOU HOLD SHARES THROUGH PRUDENTIAL
SECURITIES, PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE CREDITED TO YOUR
PRUDENTIAL SECURITIES ACCOUNT, UNLESS YOU INDICATE OTHERWISE. Such payment may
be postponed or the right of redemption suspended at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on such Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Series of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Series fairly
to determine the value of its net assets, or (d) during any other period when
the SEC, by order, so permits; provided that applicable rules and regulations of
the SEC shall govern as to whether the conditions prescribed in (b), (c) or (d)
exist.

PAYMENT FOR REDEMPTION OF RECENTLY PURCHASED SHARES WILL BE DELAYED UNTIL THE
FUND OR ITS TRANSFER AGENT HAS BEEN ADVISED THAT THE PURCHASE CHECK HAS BEEN
HONORED, UP TO 10 CALENDAR DAYS FROM THE TIME OF RECEIPT OF THE PURCHASE CHECK
BY THE TRANSFER AGENT. SUCH DELAY MAY BE AVOIDED BY PURCHASING SHARES BY WIRE OR
BY CERTIFIED OR OFFICIAL BANK CHECK.

REDEMPTION IN KIND. If the Trustees determine that it would be detrimental to
the best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption price in whole or in
part by a distribution in kind of securities from the investment portfolio of
the Series of the Fund, in lieu of cash, in conformity with applicable rules of
the SEC. Securities will be readily marketable and will be valued in the same
manner as in a regular redemption. See "How the Fund Values its Shares." If your
shares are redeemed in kind, you will incur transaction costs in converting the
assets into cash. The Fund, however, has elected to be governed by Rule 18f-1
under the Investment Company Act, under which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net asset value
of the Fund during any 90-day period for any one shareholder.

INVOLUNTARY REDEMPTION. In order to reduce expenses of the Fund, the Trustees
may redeem all of the shares of any shareholder, other than a shareholder which
is an IRA or other tax-deferred retirement plan, whose account has a net asset
value of less than $500 due to a redemption. The Fund will give such
shareholders 60 days' prior written notice in which to purchase sufficient
additional shares to avoid such redemption. No contingent deferred sales charge
will be imposed on any such involuntary redemption.

90-DAY REPURCHASE PRIVILEGE. If you redeem your shares and have not previously
exercised the repurchase privilege, you may reinvest any portion or all of the
proceeds of such redemption in shares of the Series at the NAV next determined
after the order is received, which must be within 90 days after the date of the
redemption. Any CDSC paid in connection with such

25
<PAGE>
redemption will be credited (in shares) to your account. (If less than a full
repurchase is made, the credit will be on a PRO RATA basis.) You must notify the
Fund's Transfer Agent, either directly or through Prudential Securities, at the
time the repurchase privilege is exercised to adjust your account for the CDSC
you previously paid. Thereafter, any redemptions will be subject to the CDSC
applicable at the time of the redemption. See "Contingent Deferred Sales
Charges" below. Exercise of the repurchase privilege will generally not affect
the federal tax treatment of any gain realized upon redemption. However, if the
redemption was made within a 30 day period of the repurchase and if the
redemption resulted in a loss, some or all of the loss, depending on the amount
reinvested, may not be allowed for federal income tax purposes.

CONTINGENT DEFERRED SALES CHARGES

Redemptions of Class B shares will be subject to a contingent deferred sales
charge or CDSC declining from 5% to zero over a six-year period. Class C shares
redeemed within one year of purchase will be subject to a 1% CDSC. The CDSC will
be deducted from the redemption proceeds and reduce the amount paid to you. The
CDSC will be imposed on any redemption by you which reduces the current value of
your Class B or Class C shares of the Series to an amount which is lower than
the amount of all payments by you for shares during the preceding six years, in
the case of Class B shares, and one year, in the case of Class C shares. A CDSC
will be applied on the lesser of the original purchase price or the current
value of the shares being redeemed. Increases in the value of your shares or
shares acquired through reinvestment of dividends or distributions are not
subject to a CDSC. The amount of any contingent deferred sales charge will be
paid to and retained by the Distributor. See "How the Fund is
Managed--Distributor" and "Waiver of the Contingent Deferred Sales
Charges--Class B Shares" below.

The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of shares until the time of redemption
of such shares. Solely for purposes of determining the number of years from the
time of any payment for the purchase of shares, all payments during a month will
be aggregated and deemed to have been made on the last day of the month. The
CDSC will be calculated from the first day of the month after the initial
purchase, excluding the time shares were held in a money market fund. See "How
to Exchange Your Shares."

The following table sets forth the rates of the CDSC applicable to redemptions
of Class B shares:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE
YEAR SINCE PURCHASE OF DOLLARS INVESTED OR
PAYMENT MADE REDEMPTION PROCEEDS
- ------------------------------------------------------------ ---------------------------
<S> <C>
First....................................................... 5.0%
Second...................................................... 4.0%
Third....................................................... 3.0%
Fourth...................................................... 2.0%
Fifth....................................................... 1.0%
Sixth....................................................... 1.0%
Seventh..................................................... None
</TABLE>

In determining whether a CDSC is applicable to a redemption, the calculation
will be made in a manner that results in the lowest possible rate. It will be
assumed that the redemption is made first of amounts representing shares
acquired pursuant to the reinvestment of dividends and distributions; then of
amounts representing the increase in net asset value above the total amount of
payments for the purchase of Series shares made during the preceding six years
(five years for Class B shares purchased prior to January 22, 1990); then of
amounts representing the cost of shares held beyond the applicable CDSC period;
and finally, of amounts representing the cost of shares held for the longest
period of time within the applicable CDSC period.

For example, assume you purchased 100 Class B shares at $10 per share for a
cost of $1,000. Subsequently, you acquired 5 additional Class B shares through
dividend reinvestment. During the second year after the purchase you decided to
redeem $500 of your investment. Assuming at the time of the redemption the NAV
had appreciated to $12 per share, the value of your Class B

26
<PAGE>
shares would be $1,260 (105 shares at $12 per share). The CDSC would not be
applied to the value of the reinvested dividend shares and the amount which
represents appreciation ($260). Therefore, $240 of the $500 redemption proceeds
($500 minus $260) would be charged at a rate of 4% (the applicable rate in the
second year after purchase) for a total CDSC of $9.60.

For federal income tax purposes, the amount of the CDSC will reduce the gain
or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.

WAIVER OF THE CONTINGENT DEFERRED SALES CHARGES--CLASS B SHARES. The CDSC will
be waived in the case of a redemption following the death or disability of a
shareholder or, in the case of a trust account, following the death or
disability of the grantor. The waiver is available for total or partial
redemptions of shares owned by a person, either individually or in joint tenancy
(with rights of survivorship), at the time of death or initial determination of
disability, provided that the shares were purchased prior to death or
disability. In addition, the CDSC will be waived on redemptions of shares held
by a Trustee of the Fund.

You must notify the Fund's Transfer Agent either directly or through
Prudential Securities or Prusec, at the time of redemption, that you are
entitled to waiver of the CDSC and provide the Transfer Agent with such
supporting documentation as it may deem appropriate. The waiver will be granted
subject to confirmation of your entitlement. See "Purchase and Redemption of
Fund Shares--Waiver of the Contingent Deferred Sales Charge--Class B Shares" in
the Statement of Additional Information.

A quantity discount may apply to redemptions of Class B shares purchased prior
to August 1, 1994. See "Purchase and Redemption of Fund Shares--Quantity
Discount--Class B Shares Purchased Prior to August 1, 1994" in the Statement of
Additional Information.

CONVERSION FEATURE--CLASS B SHARES

Class B shares will automatically convert to Class A shares on a quarterly
basis approximately seven years after purchase. Conversions will be effected at
relative net asset value without the imposition of any additional sales charge.
The first conversion of Class B shares occurred in February 1995, when the
conversion feature was first implemented.

Since the Fund tracks amounts paid rather than the number of shares bought on
each purchase of Class B shares, the number of Class B shares eligible to
convert to Class A shares (excluding shares acquired through the automatic
reinvestment of dividends and other distributions) (the Eligible Shares) will be
determined on each conversion date in accordance with the following formula: (i)
the ratio of (a) the amounts paid for Class B shares purchased at least seven
years prior to the conversion date to (b) the total amount paid for all Class B
shares purchased and then held in your account (ii) multiplied by the total
number of Class B shares purchased and then held in your account. Each time any
Eligible Shares in your account convert to Class A shares, all shares or amounts
representing Class B shares then in your account that were acquired through the
automatic reinvestment of dividends and other distributions will convert to
Class A shares.

For purposes of determining the number of Eligible Shares, if the Class B
shares in your account on any conversion date are the result of multiple
purchases at different net asset values per share, the number of Eligible Shares
calculated as described above will generally be either more or less than the
number of shares actually purchased approximately seven years before such
conversion date. For example, if 100 shares were initially purchased at $10 per
share (for a total of $1,000) and a second purchase of 100 shares was
subsequently made at $11 per share (for a total of $1,100), 95.24 shares would
convert approximately seven years from the initial purchase (I.E., $1,000
divided by $2,100 (47.62%) multiplied by 200 shares equals 95.24 shares). The
Manager reserves the right to modify the formula for determining the number of
Eligible Shares in the future as it deems appropriate on notice to shareholders.

Since annual distribution-related fees are lower for Class A shares than Class
B shares, the per share net asset value of the Class A shares may be higher than
that of the Class B shares at the time of conversion. Thus, although the
aggregate dollar value will be the same, you may receive fewer Class A shares
than Class B shares converted. See "How the Fund Values its Shares."

For purposes of calculating the applicable holding period for conversions, all
payments for Class B shares during a month will be deemed to have been made on
the last day of the month, or for Class B shares acquired through exchange or a
series of exchanges, on the last day of the month in which the original payment
for purchases of such Class B shares was made. For

27
<PAGE>
Class B shares previously exchanged for shares of a money market fund, the time
period during which such shares were held in the money market fund will be
excluded. For example, Class B shares held in a money market fund for one year
will not convert to Class A shares until approximately eight years from
purchase. For purposes of measuring the time period during which shares are held
in a money market fund, exchanges will be deemed to have been made on the last
day of the month. Class B shares acquired through exchange will convert to Class
A shares after expiration of the conversion period applicable to the original
purchase of such shares.

The conversion feature may be subject to the continuing availability of
opinions of counsel or rulings of the Internal Revenue Service (i) that the
dividends and other distributions paid on Class A, Class B and Class C shares
will not constitute "preferential dividends" under the Internal Revenue Code and
(ii) that the conversion of shares does not constitute a taxable event. The
conversion of Class B shares into Class A shares may be suspended if such
opinions or rulings are no longer available. If conversions are suspended, Class
B shares of the Series will continue to be subject, possibly indefinitely, to
their higher annual distribution and service fee.

HOW TO EXCHANGE YOUR SHARES

AS A SHAREHOLDER OF THE SERIES, YOU HAVE AN EXCHANGE PRIVILEGE WITH THE OTHER
SERIES OF THE FUND AND CERTAIN OTHER PRUDENTIAL MUTUAL FUNDS (THE EXCHANGE
PRIVILEGE), INCLUDING ONE OR MORE SPECIFIED MONEY MARKET FUNDS, SUBJECT TO THE
MINIMUM INVESTMENT REQUIREMENTS OF SUCH FUNDS. CLASS A, CLASS B AND CLASS C
SHARES OF THE SERIES MAY BE EXCHANGED FOR CLASS A, CLASS B AND CLASS C SHARES,
RESPECTIVELY, OF THE OTHER SERIES OF THE FUND OR ANOTHER FUND ON THE BASIS OF
THE RELATIVE NAV. No sales charge will be imposed at the time of the exchange.
Any applicable CDSC payable upon the redemption of shares exchanged will be
calculated from the first day of the month after the initial purchase, excluding
the time shares were held in a money market fund. Class B and Class C shares may
not be exchanged into money market funds other than Prudential Special Money
Market Fund. For purposes of calculating the holding period applicable to the
Class B conversion feature, the time period during which Class B shares were
held in a money market fund will be excluded. See "Conversion Feature--Class B
Shares" above. An exchange will be treated as a redemption and purchase for tax
purposes. See "Shareholder Investment Account--Exchange Privilege" in the
Statement of Additional Information.

IN ORDER TO EXCHANGE SHARES BY TELEPHONE, YOU MUST AUTHORIZE TELEPHONE
EXCHANGES ON YOUR INITIAL APPLICATION FORM OR BY WRITTEN NOTICE TO THE TRANSFER
AGENT AND HOLD SHARES IN NON-CERTIFICATE FORM. Thereafter, you may call the Fund
at (800) 225-1852 to execute a telephone exchange of shares, weekdays, except
holidays, between the hours of 8:00 A.M. and 6:00 P.M., New York time. For your
protection and to prevent fraudulent exchanges, your telephone call will be
recorded and you will be asked to provide your personal identification number. A
written confirmation of the exchange transaction will be sent to you. NEITHER
THE FUND NOR ITS AGENTS WILL BE LIABLE FOR ANY LOSS, LIABILITY OR COST WHICH
RESULTS FROM ACTING UPON INSTRUCTIONS REASONABLY BELIEVED TO BE GENUINE UNDER
THE FOREGOING PROCEDURES. (THE FUND OR ITS AGENTS COULD BE SUBJECT TO LIABILITY
IF THEY FAIL TO EMPLOY REASONABLE PROCEDURES.) All exchanges will be made on the
basis of the relative NAV of the two funds (or series) next determined after the
request is received in good order. The Exchange Privilege is available only in
states where the exchange may legally be made.

IF YOU HOLD SHARES THROUGH PRUDENTIAL SECURITIES, YOU MUST EXCHANGE YOUR
SHARES BY CONTACTING YOUR PRUDENTIAL SECURITIES FINANCIAL ADVISER.

IF YOU HOLD THE CERTIFICATES, THE CERTIFICATES, SIGNED IN THE NAME(S) SHOWN ON
THE FACE OF THE CERTIFICATES, MUST BE RETURNED IN ORDER FOR THE SHARES TO BE
EXCHANGED. SEE "HOW TO SELL YOUR SHARES" ABOVE.

You may also exchange shares by mail by writing to Prudential Mutual Fund
Services, Inc., Attention: Exchange Processing, P.O. Box 15010, New Brunswick,
New Jersey 08906-5010.

IN PERIODS OF SEVERE MARKET OR ECONOMIC CONDITIONS, THE TELEPHONE EXCHANGE OF
SHARES MAY BE DIFFICULT TO IMPLEMENT AND YOU SHOULD MAKE EXCHANGES BY MAIL BY
WRITING TO PRUDENTIAL MUTUAL FUND SERVICES, INC., AT THE ADDRESS NOTED ABOVE.

28
<PAGE>
SPECIAL EXCHANGE PRIVILEGE. A special exchange privilege is available for
shareholders who qualify to purchase Class A shares at NAV (see "Alternative
Purchase Plan--Class A Shares--Reduction and Waiver of Initial Sales Charges"
above). Under this exchange privilege, amounts representing any Class B and
Class C shares (which are not subject to a CDSC) held in such a shareholder's
account will be automatically exchanged for Class A shares on a quarterly basis,
unless the shareholder elects otherwise. Eligibility for this exchange privilege
will be calculated on the business day prior to the date of the exchange.
Amounts representing Class B or Class C shares which are not subject to a CDSC
include the following: (1) amounts representing Class B or Class C shares
acquired pursuant to the automatic reinvestment of dividends and distributions,
(2) amounts representing the increase in the net asset value above the total
amount of payments for the purchase of Class B or Class C shares and (3) amounts
representing Class B or Class C shares held beyond the applicable CDSC period.
Class B and Class C shareholders must notify the Transfer Agent either directly
or through Prudential Securities or Prusec that they are eligible for this
special exchange privilege.

The Fund reserves the right to reject any exchange order including exchanges
(and market timing transactions) which are of size and/or frequency engaged in
by one or more accounts acting in concert or otherwise, that have or may have an
adverse effect on the ability of the Subadviser to manage the portfolio. The
determination that such exchanges or activity may have an adverse effect and the
determination to reject any exchange order shall be in the discretion of the
Manager and the Subadviser.

The Exchange Privilege is not a right and may be suspended, modified or
terminated on 60 days' notice to shareholders.

SHAREHOLDER SERVICES

In addition to the Exchange Privilege, as a shareholder in the Series, you can
take advantage of the following services and privileges:

-AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS WITHOUT A
SALES CHARGE. For your convenience, all dividends and distributions are
automatically reinvested in full and fractional shares of the Series at NAV
without a sales charge. You may direct the Transfer Agent in writing not
less than 5 full business days prior to the record date to have subsequent
dividends and/or distributions sent in cash rather than reinvested. If you
hold shares through Prudential Securities, you should contact your financial
adviser.

-AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP). Under ASAP you may make
regular purchases of the Series' shares in amounts as little as $50 via an
automatic debit to a bank account or Prudential Securities account
(including a Command Account). For additional information about this
service, you may contact your Prudential Securities financial adviser,
Prusec representative or the Transfer Agent directly.

-SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available
to shareholders which provides for monthly or quarterly checks. Withdrawals
of Class B and Class C shares may be subject to a CDSC. See "How to Sell
Your Shares-- Contingent Deferred Sales Charges" above.

-REPORTS TO SHAREHOLDERS. The Fund will send you annual and semi-annual
reports. The financial statements appearing in annual reports are audited by
independent accountants. In order to reduce duplicate mailing and printing
expenses, the Fund will provide one annual and semi-annual shareholder
report and annual prospectus per household. You may request additional
copies of such reports by calling (800) 225-1852 or by writing to the Fund
at Gateway Center Three, Newark, New Jersey 07102. In addition, monthly
unaudited financial data is available upon request from the Fund.

-SHAREHOLDER INQUIRIES. Inquiries should be addressed to the Fund at
Gateway Center Three, Newark, New Jersey 07102, or by telephone, at (800)
225-1852 (toll-free) or, from outside the U.S.A., at (908) 417-7555
(collect).

For additional information regarding the services and privileges described
above, see "Shareholder Investment Account" in the Statement of Additional
Information.

29
<PAGE>
- --------------------------------------------------------------------------------

THE PRUDENTIAL MUTUAL FUND FAMILY

- --------------------------------------------------------------------------------
Prudential Mutual Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the investment
options available through our family of funds. For more information on the
Prudential Mutual Funds, including charges and expenses, contact your Prudential
Securities financial adviser or Prusec representative or telephone the Funds at
(800) 225-1852 for a free prospectus. Read the prospectus carefully before you
invest or send money.

-----------------------

TAXABLE BOND FUNDS
-----------------------------------------------

Prudential Diversified Bond Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Mortgage Income Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
The BlackRock Government Income Trust

--------------------------

TAX-EXEMPT BOND FUNDS
-----------------------------------------------

Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Intermediate Series
Prudential Municipal Series Fund
Florida Series
Hawaii Income Series
Maryland Series
Massachusetts Series
Michigan Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.

-----------------

GLOBAL FUNDS
-----------------------------------------------

Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Limited Maturity Fund, Inc.
Limited Maturity Portfolio
Prudential Intermediate Global Income Fund, Inc.
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Global Series
International Stock Series
The Global Government Plus Fund, Inc.
The Global Total Return Fund, Inc.
Global Utility Fund, Inc.

-----------------

EQUITY FUNDS
-----------------------------------------------

Prudential Allocation Fund
Balanced Portfolio
Strategy Portfolio
Prudential Distressed Securities Fund, Inc.
Prudential Dryden Fund
Prudential Active Balanced Fund
Prudential Stock Index Fund
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Jennison Series Fund, Inc.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Multi-Sector Fund, Inc.
Prudential Small Companies Fund, Inc.
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund

-----------------------

MONEY MARKET FUNDS
-----------------------------------------------

- -TAXABLE MONEY MARKET FUNDS
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund, Inc.
Money Market Series
Prudential MoneyMart Assets, Inc.
- -TAX-FREE MONEY MARKET FUNDS
Prudential Tax-Free Money Fund, Inc.
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
- -COMMAND FUNDS
Command Money Fund
Command Government Fund
Command Tax-Free Fund
- -INSTITUTIONAL MONEY MARKET FUNDS
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series

A-1
<PAGE>
No dealer, sales representative or any other person has been authorized to give
any information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained herein, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund or the Distributor. This Prospectus does not
constitute an offer by the Fund or by the Distributor to sell or a solicitation
of any offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such jurisdiction.

-------------------------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
FUND HIGHLIGHTS......................... 2
Risk Factors and Special
Characteristics...................... 2
FUND EXPENSES........................... 4
FINANCIAL HIGHLIGHTS.................... 5
HOW THE FUND INVESTS.................... 8
Investment Objective and Policies..... 8
Other Investments and Policies........ 12
Investment Restrictions............... 13
HOW THE FUND IS MANAGED................. 13
Manager............................... 13
Distributor........................... 14
Portfolio Transactions................ 16
Custodian and Transfer and Dividend
Disbursing Agent..................... 16
HOW THE FUND VALUES ITS SHARES.......... 17
HOW THE FUND CALCULATES PERFORMANCE..... 17
TAXES, DIVIDENDS AND DISTRIBUTIONS...... 18
GENERAL INFORMATION..................... 20
Description of Shares................. 20
Additional Information................ 21
SHAREHOLDER GUIDE....................... 21
How to Buy Shares of the Fund......... 21
Alternative Purchase Plan............. 22
How to Sell Your Shares............... 24
Conversion Feature--Class B Shares.... 27
How to Exchange Your Shares........... 28
Shareholder Services.................. 29
THE PRUDENTIAL MUTUAL FUND FAMILY....... A-1
</TABLE>

- -------------------------------------------
MF119A 44404AW
Class A: 74435M-65-5
CUSIP Nos.: Class B: 74435M-66-3
Class C: 74435M-56-4

PROSPECTUS
NOVEMBER 1,
1996

PRUDENTIAL
MUNICIPAL
SERIES FUND

MASSACHUSETTS SERIES
- --------------------------------------

[LOGO]
<PAGE>
No dealer, sales representative or any other person has been authorized to give
any information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained herein, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund or the Distributor. This Prospectus does not
constitute an offer by the Fund or by the Distributor to sell or a solicitation
of any offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such jurisdiction.

-------------------------------------------

TABLE OF CONTENTS

- -------------------------------------------
MF119Z 44404AW

CUSIP No.: Class Z: 74435M-35-6

PROSPECTUS
DECEMBER 2,
1996

Prudential
Municipal
Series Fund

- -------------------
Massachusetts Series
(Class Z Shares)

[LOGO]
<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND
(MASSACHUSETTS SERIES)
Supplement dated December 2, 1996 to
Statement of Additional Information dated
November 1, 1996
THE FOLLOWING INFORMATION SUPPLEMENTS "PURCHASE AND REDEMPTION OF FUND SHARES"
IN THE STATEMENT OF ADDITIONAL INFORMATION:
Shares of each series of the Fund, other than the money market series, may
be purchased at a price equal to the next determined net asset value per share
plus a sales charge which, at the election of the investor, may be imposed
either (i) at the time of purchase (Class A shares) or (ii) on a deferred basis
(Class B or Class C shares). Class Z shares are offered to a limited group of
investors at net asset value without any sales charges. See "Shareholder
Guide--How to Buy Shares of the Fund" in each series' Prospectus.
SPECIMEN PRICE MAKE-UP
Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold with a maximum sales charge of 3% and Class
B*, Class C* and Class Z** shares are sold at net asset value. Using the
Massachusetts Series' net asset value at August 31, 1996, the maximum offering
price of the Series' shares is as follows:

<TABLE>
<S> <C>
CLASS A
Net asset value and redemption price per Class A share................................. $ 11.54
Maximum sales charge (3% of offering price)............................................ .36
-----------
Offering price to public............................................................... $ 11.90
-----------
-----------
CLASS B
Net asset value, offering price and redemption price per Class B share*................ $ 11.53
-----------
-----------
CLASS C
Net asset value, offering price and redemption price per Class C share*................ $ 11.53
-----------
-----------
CLASS Z
Net asset value, offering price and redemption price per Class Z share**............... $ 11.54
-----------
-----------
</TABLE>

- ------------------------
* Class B and Class C shares are subject to a contingent deferred sales charge
on certain redemptions. See "Shareholder Guide--How to Sell Your
Shares--Contingent Deferred Sales Charges" in the Prospectus.
**Class Z shares did not exist at August 31, 1996.

MF116C-2