(ICON)
Prudential
Municipal
Series Fund
Michigan Series
SEMI
ANNUAL
REPORT
Feb. 28, 1998
(LOGO)
<PAGE>
Prudential Municipal Series Fund
Michigan Series
Performance At A Glance.
Municipal bond prices rose higher during the six
months
ended February 28, as investors cheered the
unusually
subdued inflation in the U.S., but fretted over an
economic crisis in Asia. Your Prudential Municipal
Series Fund -- Michigan Series returned more than
the comparable fund tracked by Lipper Analytical
Services by an ample margin because we invested
substantially in noncallable bonds that gained
sharply as tax-exempt interest rates fell. In
addition, some of our school district bonds gained
after their interest and principal payments became
backed by direct U.S. government obligations.
<TABLE>
Cumulative Total Returns1
As of 2/28/98
<CAPTION>
Six One Five
Ten Since
Months Year Years
Years Inception2
<S> <C> <C> <C>
<C> <C>
Class A 5.36% 9.03% 33.02%
N/A 80.65% (80.36)
Class B 5.15 8.60 30.26 (30.05)
101.63% (101.14) 193.41 (189.58)
Class C 5.02 8.34 N/A
N/A 25.38 (25.17)
Lipper MI
Muni Avg.3 4.87 8.57 32.74
110.39 ***
</TABLE>
<TABLE>
Average Annual Total Returns1
As of 3/31/98
<CAPTION>
One Five Ten
Since
Year Years Years
Inception2
<S> <C> <C> <C>
<C>
Class A 7.20% 5.57% (5.53) N/A
7.10% (7.08)
Class B 5.08 5.61 (5.57) 7.50% (7.47)
8.29 (8.18)
Class C 8.81 N/A N/A
6.37 (6.32)
</TABLE>
<TABLE>
Distributions & Yields
As of 2/28/98
<CAPTION>
Taxable Equivalent Yield4
Total Distributions 30-Day
At Tax Rates Of
Paid for Six Mos. SEC Yield
36% 39.6%
<S> <C>
Class A $0.37 3.62%
5.92% 6.27%
Class B $0.35 3.34
5.46 5.78
Class C $0.33 3.09
5.05 5.35
</TABLE>
Past performance is not indicative of future
results. Principal
and investment return will fluctuate so that an
investor's
shares, when redeemed, may be worth more or less
than their original cost.
1 Source: Prudential Investments Fund Management
and Lipper Analytical
Services. The cumulative total returns do not take
into account
sales charges. The average annual returns do take
into account
applicable sales charges. The Series charges a
maximum front-end
sales load of 3% for Class A shares and a six-year
declining
contingent deferred sales charge (CDSC) of 5%, 4%,
3%, 2%, 1%
and 1% for Class B shares. Class C shares have a
1% CDSC for
one year. Without waiver of management fees and/or
expense
subsidization, the Series' cumulative and average
annual
total returns would have been lower, as indicated
in
parentheses ( ). Class B shares will
automatically convert
to Class A shares on a quarterly basis, after
approximately
seven years.
2 Inception dates: Class A, 1/22/90; Class B,
9/22/84; and
Class C, 8/1/94.
3 The Lipper Michigan Municipal Bond fund average
is for all
funds in each share class for the six-month, 1-, 5-
and
10-year categories.
4 Taxable equivalent yields reflect federal and
applicable
state tax rates.
***The Lipper Since Inception category return for
Class A
shares is 82.39%; for Class B is 234.05%; and for
Class C
is 28.13% for all funds in each share class.
How Investments Compared.
(As of 2/28/98)
(GRAPH)
Source: Lipper Analytical Services. Financial
markets change, so
a mutual fund's past performance should never be
used to predict
future results. The risks to each of the
investments listed
above are different -- we provide 12-month total
returns for
several Lipper mutual fund categories to show you
that
reaching for higher returns means tolerating more
risk.
The greater the risk, the larger the potential
reward or
loss. In addition, we've included historical 20-
year
average annual returns. These returns assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal.
Investors
have received higher historical total returns from
stocks
than from most other investments. Smaller
capitalization
stocks offer greater potential for long-term
growth but
may be more volatile than larger capitalization
stocks.
General Bond Funds provide more income than stock
funds,
which can help smooth out their total returns year
by year.
But their prices still fluctuate (sometimes
significantly)
and their returns have been historically lower
than those
of stock funds.
General Municipal Debt Funds invest in bonds
issued by
state governments, state agencies and/or
municipalities.
This investment provides income that is usually
exempt
from federal and state income taxes.
U.S. Tax-Exempt Money Funds attempt to preserve a
constant
share value; they don't fluctuate much in price
but,
historically, their returns have been generally
among
the lowest of the major investment categories.
*18 years for Tax-Exempt Money Funds.
<PAGE>
James M. Murphy, Fund Manager (PICTURE)
Portfolio
Manager's Report
The Series invests primarily in carefully
selected, long-term
municipal bonds that offer a high level of income
that is
exempt from Michigan state and federal income
taxes,
while still attempting to preserve capital.
Certain
shareholders may be subject to the federal
alternative
minimum tax (AMT), however, because the Series
holds
some bonds that are AMT eligible. There can be no
assurance that the Series will achieve its
investment objective.
Is Inflation Conquered?
Inflation inched up a mere 1.7% in 1997 and will
likely remain tame this year as U.S. companies
face
increased competition from cheaper Asian imports.
This
is good news for bondholders because inflation
hurts
the value of their bonds' fixed interest and
principal payments.
Strategy Session.
Asian Contagion
Lifts Muni Bonds.
Significant improvement in Michigan's financial
reserve
levels, an improved economic performance, and
progress on
funding of state pension liabilities were among
the factors
that prompted Standard & Poor's to upgrade the
Wolverine
state's general obligation bonds one notch to AA+,
the
highest S&P has rated it in at least two decades.
The
credit rating agency noted that the state
unemployment
rate has stayed below the national average since
1994,
reflecting improved economic diversification.
On the opposite side of the globe, however,
economic
turbulence engulfed Asian markets as a series of
financial
shocks, caused by imprudent lending practices by
major
financial institutions, racked the region.
Investors began
selling Asian stocks and emerging market bonds and
sought
refuge in U.S. Treasury securities. The ensuing
rally in
Treasuries spilled over into the municipal
securities
market, driving tax-exempt bond prices higher and
yields
lower. Investors also bid up municipal bonds,
believing
that Asian difficulties would help keep a lid on
inflation
in the U.S., protecting the value of their fixed
income
investments.
By mid-January, the Bond Buyer Revenue Bond
Index, a widely
watched gauge of tax-exempt yields, reached a
record low
of 5.25%. This occurred during the same week that
the 30-year
Treasury bond yield sank to 5.66%, its lowest
point since
1977. Cash poured into U.S. Treasuries as
investors fretted
over the failure of Hong Kong's largest
investment bank.
Thus, developments in Asia indirectly aided
municipal bonds
by boosting U.S.Treasury bond prices.
Portfolio Composition.
Expressed as a percentage of
total investments as of 2/28/98.
(PIE CHART)
<PAGE>
What Went Well.
School Days,
School Pays.
Besides our emphasis on noncallable bonds, your
Series' performance
was enhanced when its Brandon School District
bonds were
pre-refunded -- the district issued new bonds
whose proceeds
will be used to retire the older bonds before
their maturity
date. Until then, proceeds from the new bonds were
invested
in direct U.S. guaranteed obligations held in an
escrow fund.
Prices of the older Brandon School District bonds
surged because
they are now backed by direct U.S. guaranteed
obligations and
have virtually no credit risk. Of course, this
sharp price
appreciation benefited your Series, while pre-
refunding the
older bonds at recent low interest rates reduced
the district's
interest payment expense. After the pre-refunding,
we took
profits on some of the bonds.
Hold All Calls.
To take better advantage of tax-exempt bond gains,
we
increased your Series' holdings of noncallable
bonds to
32% of total investments as of February 28 from
25% at
the start of the reporting period. Noncallable
bond prices
climb rapidly when interest rates decline because
the bonds
cannot be retired early. By contrast, investors
worry that
callable bonds will be taken away when interest
rates fall,
leaving them to reinvest their money at lower
rates.
Credit Quality.
Expressed as a percentage of
total investments as of 2/28/98.
(PIE CHART)
And Not So Well.
Higher Yields
Were Scarce.
Although we welcomed the improvement in the rating
of
Michigan general obligation bonds, lower credit
quality
bonds that offer higher yields were increasingly
difficult to find in the tax-exempt securities
market. As a result, your Series had to get along
with fewer higher yielding bonds than we
preferred.
Five Largest
Issuers.
4.7% Michigan State Trunk
Line Highway
4.0% Wyandotte Electric
Revenue
3.9% Michigan Underground
Storage Tank, Finance
Assurance Authority
3.9% Michigan State Hospital
Bay Medical Center
3.8% Monroe County Detroit
Edison Co. Project
Expressed as a percentage of net assets
as of 2/28/98.
Looking Ahead.
The U.S. economic expansion remained firmly on
track in
the first two months of the year as more than
650,000
new jobs were created and the unemployment rate
edged
down to 4.6%. While the economy got off to a good
start,
growth may decelerate because demand for U.S.
exports is
already dwindling in Asian countries such as
Indonesia.
This slackening supports our belief that U.S.
monetary
policy will stay unchanged in the near future as
the
economy gradually loses steam and inflation
remains
subdued. Although this scenario will likely
benefit
the bond market, we plan to keep your Series'
duration
more in line with its competition while we monitor
the
situation and hunt for bonds with hefty yields.
1
<PAGE>
President's Letter
April 3, 1998
(PICTURE)
Investing Smart.
Dear Shareholder:
This is the season when many investors receive
income
tax refunds or have a CD or two maturing. What
will you
do with these assets? Investing smart can be a
challenge
especially given today's new investment choices.
The Federal Taxpayer Relief Act of 1997 is
changing the way
Americans invest and accumulate wealth, save for
college
or build a nest egg for retirement. While the law
offers
opportunity, it is also complex. You may need help
to put
things in perspective.
Now may be an excellent time for you and your
Prudential
Financial Professional to update your investment
strategy
and retirement plan. A wise investor does so
periodically.
You could find the tax law opening doors that may
benefit
you now or over the long term, such as --
- -- Revised Capital Gains Tax Rates & Exclusions.
Long-term
rates are down. Is your portfolio positioned to
benefit? Also,
new rules allow you to keep more of the profit
from the sale
of your home (perhaps up to $500,000 more).
- -- New Roth IRAs. The Roth IRA features tax-free
distributions and does not require mandatory
withdrawals,
which should be of particular interest to retirees
seeking
to shelter assets in a tax-free account.
- -- New Education IRAs. Similar to a traditional
IRA,
but specifically designed for higher education.
The new
law also creates credits and deductions to help
defray
college costs.
- -- Expanded IRAs. Rules governing traditional
IRAs have
been extensively revised. Deductibility and
contribution
limits have been broadened as has the list for
penalty-free
early withdrawals, including first-time home
buyers.
As you can see, what you don't know may cost you!
That's
why I recommend you call your Prudential Financial
Professional and get a free investment plan
checkup.
Let us give you the information and tools to
invest smart.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds & Annuities
2
<PAGE>
Portfolio of Investments as
of February 28, 1998 PRUDENTIAL
MUNICIPAL SERIES FUND
(Unaudited) MICHIGAN
SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
LONG-TERM INVESTMENTS--101.0%
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Avondale Sch. Dist., A.M.B.A.C.,
Oakland Cnty., Gen. Oblig.
Aaa 5.75% 5/01/14 $ 665
$ 711,909
Oakland Cnty., Gen. Oblig.
Aaa 5.80 5/01/15 525
562,196
Oakland Cnty., Gen. Oblig.
Aaa 5.80 5/01/16 550
587,703
Brandon Sch. Dist. Gen. Oblig., F.G.I.C.,
Oakland & Lapeer Cnty.
Aaa 5.70 5/01/12 1,155
(e) 1,271,390
Oakland & Lapeer Cnty.
Aaa 5.875 5/01/26 1,310
(e) 1,457,270
Breitung Twnshp. Sch. Dist. Rev., Gen. Oblig.,
M.B.I.A. Aaa 6.30
5/01/15 250 272,600
Detroit Downtown Dev. Ser. A, A.M.B.A.C
Aaa 5.75 7/15/15 1,000
1,065,730
Detroit Econ. Dev. Corp., Res. Rec. Rev., Ser.
1991-A,
F.S.A., A.M.T.
Aaa 6.875 5/01/09 1,000
1,084,700
Detroit Swr. Disp. Rev., Ser. 1993A, F.G.I.C.
Aaa 7.516 7/01/23 1,000
(c) 1,096,250
Detroit Wtr. Supply Sys. Rev., Ser. B, M.B.I.A.
Aaa 5.55 7/01/12 1,000
1,082,460
Dickinson Cnty. Mem. Hosp. Sys. Rev.
Ba1 8.00 11/01/14 1,000
1,148,620
East Detroit Sch. Dist. Rfdg., F.G.I.C.
Aaa 6.625 5/01/07 1,600
1,862,368
Ferris St. Univ., Gen. Rev., A.M.B.A.C.
Aaa 5.80 10/01/05 440
479,657
Grand Rapids San. Swr. Sys. Impt. & Rev.
A1 7.00 1/01/16 500
535,770
Guam Pwr. Auth. Rev., Ser. 1994
BBB(b) 6.625 10/01/14 1,000
1,110,080
Holland Sch. Dist., Gen. Oblig., A.M.B.A.C.
Aaa Zero 5/01/15 2,400
1,010,448
Huron Valley Sch. Dist., Gen. Oblig., F.G.I.C.
Aaa Zero 5/01/10 3,500
1,973,650
Kalamazoo Econ. Dev. Corp. Rev., Friendship
Village, Ltd.
Oblig.
BBB(b) 6.125 5/15/17 1,000
1,059,440
Kent Hosp. Fac. Fin. Auth. Rev., Blodgette Mem.
Med. Ctr.,
Ser. A
A2 7.25 7/01/05 500
527,065
Lanse Creuse Pub. Schs., Gen. Oblig., F.G.I.C.
Aaa 5.25 5/01/16 1,000
1,015,940
Lincoln Park Sch. Dist.,
F.G.I.C.
Aaa 7.00 5/01/20 1,500
(e) 1,781,505
F.G.I.C.
Aaa 5.90 5/01/26 750
801,885
Michigan Higher Ed. Student Loan Auth. Rev., Ser.
XIII-A,
M.B.I.A., A.M.T
Aaa 7.55 10/01/08 345
365,372
Michigan St. Hosp. Fin. Auth. Rev.,
Bay Med. Ctr., Ser. A
A3 8.25 7/01/12 2,000
2,216,120
Hosp. Genesys Hlth. Sys.
Baa 8.125 10/01/21 1,000
1,198,560
Hosp. Genesys Hlth. Sys.
Baa 7.50 10/01/27 500
573,050
Presbyterian Village Oblig.
NR 6.375 1/01/25 800
860,936
Michigan St. Hsg. Dev. Auth. Rev.,
Multi-family Mtge. Insured Hsg., Ser. A, A.M.T
AA-(b) 7.15 4/01/10 500
534,690
Multi-family Mtge. Insured Hsg., Ser. A, A.M.T
AA-(b) 7.70 4/01/23 500
535,485
Sngl. Fam. Mtge., Ser. A
AA+(b) 7.70 12/01/16 370
379,753
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as
of February 28, 1998 PRUDENTIAL
MUNICIPAL SERIES FUND
(Unaudited) MICHIGAN
SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Michigan St. Strategic Fund Ltd. Oblig. Rev.,
NSF Proj., Ser. A
A1 5.75% 8/01/19 $ 1,000
$ 1,036,850
Porter Hills Strategic Vlg.
A(b) 5.375 7/01/28 800
787,000
Waste Mgmt. Inc. Proj., A.M.T
Baa3 6.625 12/01/12 1,500
1,624,380
Worthington Armstrong Venture, A.M.T.
A+(b) 5.75 10/01/22 1,000
1,057,130
Michigan St. Trunk Line Hwy., A.M.B.A.C.,
Ser. A
Aaa Zero 10/01/05 2,600
1,864,044
Ser. A
Aaa Zero 10/01/06 1,250
854,162
Michigan St. Underground Storage Tank, Fin.
Assurance Auth.
Rev., A.M.B.A.C.
Aaa 6.00 5/01/06 2,000
2,224,900
Michigan St. Univ., Gen. Rev., Ser. A, A.M.B.A.C.
Aaa 5.125 2/15/16 1,000
1,002,070
Monroe Cnty. Poll. Ctrl. Rev., Detroit Edison Co.
Proj. 1,
F.G.I.C., A.M.T.
Aaa 7.65 9/01/20 2,000
2,187,280
Mt. Pleasant Wtr. Rev., Wtr. & Swr.,
M.B.I.A
Aaa 5.00 2/01/22 520
505,835
M.B.I.A
Aaa 4.00 2/01/23 550
459,707
M.B.I.A
Aaa 4.00 2/01/24 585
487,106
Oak Park, A.M.B.A.C.,
Gen. Oblig.
Aaa 7.00 5/01/11 375
(e) 422,010
Gen. Oblig.
Aaa 7.00 5/01/12 400
(e) 450,144
Posen Cons. Sch. Dist., Sch. Dist. No. 9, M.B.I.A.
Aaa 6.75 5/01/22 1,000
)/(e) 1,136,090
Puerto Rico Commonwlth., Gen. Oblig.
Baa1 Zero 7/01/15 1,250
526,300
Puerto Rico Commonwlth., Hwy. & Trans., A.M.B.A.C.
Ser. A
Aaa Zero 7/01/15 1,000
428,230
Ser. A
Aaa Zero 7/01/16 1,000
404,560
Puerto Rico Commonwlth., Hwy. Auth. Rev., Ser. Q
AAA(b) 7.75 7/01/16 1,000
(e) 1,105,320
Puerto Rico Elec. Pwr. Auth. Rev., Ser. N
Baa1 7.125 7/01/14 920
974,786
Redford Union Sch. Dist. No. 1 Ref., A.M.B.A.C
Aaa 5.50 5/01/14 1,155
1,239,754
Rochester Cmnty. Sch. Dist., Gen. Oblig., M.B.I.A.
Aaa 5.00 5/01/19 1,500
1,496,010
Romulus Cmnty. Sch. Dist., Gen. Oblig., F.G.I.C
Aaa Zero 5/01/21 500
150,765
St. Clair Cnty., Wtr. Supply Sys. No. VII, IRA
Township,
A.M.B.A.C.
Aaa 5.25 7/01/15 1,000
1,016,920
Tawas City Hosp. Fin. Auth. Ref., St. Joseph Hlth.
Sys.,
Ser. A
NR 5.75 2/15/23 1,000
983,690
Virgin Islands Wtr. & Pwr. Auth., Elec. Sys. Rev.,
Ser. A NR 7.40
7/01/11 480 525,504
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as
of February 28, 1998 PRUDENTIAL
MUNICIPAL SERIES FUND
(Unaudited) MICHIGAN
SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Wayne Cnty. Bldg. Auth., Ser. A
Baa2 8.00% 3/01/17 $ 1,250
$ 1,446,338
Wyandotte Elec. Rev., M.B.I.A.
Aaa 6.25 10/01/08 2,000
2,297,740
- -----------
Total Investments--101.0%
(cost $52,559,589; Note 4)
57,857,227
Liabilities in excess of other assets--(1.0)%
(566,061)
- -----------
Net Assets--100%
$57,291,166
- -----------
- -----------
</TABLE>
- ---------------
(a) The following abbreviations are used in
portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance
Corporation.
A.M.T.--Alternative Minimum Tax.
F.G.I.C.--Financial Guaranty Insurance Company.
F.S.A.--Financial Security Assurance.
M.B.I.A.--Municipal Bond Insurance Corporation.
(b) Standard & Poor's Rating.
(c) Inverse floating rate bond. The coupon is
inversely indexed to a floating
interest rate. The rate shown is the rate at
period end.
(d) Pledged as initial margin on financial futures
contracts.
(e) Prerefunded issues are secured by escrowed
cash and/or direct U.S.
guaranteed obligations.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional
Information contains a description of
Moody's and Standard & Poor's ratings.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND
Statement of Assets and Liabilities
(Unaudited)
MICHIGAN SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Assets
February 28, 1998
<S>
<C>
Investments, at value (cost
$52,559,589)......................................
............................ $ 57,857,227
Cash..............................................
..................................................
...... 535,085
Interest
receivable........................................
...............................................
899,433
Receivable for Series shares
sold..............................................
........................... 56,130
Other
assets............................................
..................................................
1,239
- -----------------
Total
assets............................................
...............................................
59,349,114
- -----------------
Liabilities
Payable for investments
purchased.........................................
................................
1,818,580
Payable for Series shares
reacquired........................................
..............................
115,509
Accrued
expenses..........................................
................................................
59,984
Dividends
payable...........................................
..............................................
24,284
Management fee
payable...........................................
.........................................
22,088
Distribution fee
payable...........................................
.......................................
12,600
Deferred trustee's
fees..............................................
.....................................
3,778
Due to broker - variation
margin............................................
..............................
1,125
- -----------------
Total
liabilities.......................................
...............................................
2,057,948
- -----------------
Net
Assets............................................
..................................................
.. $ 57,291,166
- -----------------
- -----------------
Net assets were comprised of:
Shares of beneficial interest, at
par...............................................
................... $ 46,728
Paid-in capital in excess of
par...............................................
........................ 51,782,524
- -----------------
51,829,252
Accumulated net realized gain on
investments.......................................
.................... 167,276
Net unrealized appreciation on
investments.......................................
...................... 5,294,638
- -----------------
Net assets, February 28,
1998..............................................
............................... $
57,291,166
- -----------------
- -----------------
Class A:
Net asset value and redemption price per share
($30,964,645 / 2,524,851 shares of
beneficial interest issued and
outstanding)......................
$12.26
Maximum sales charge (3% of offering
price)............................................
................ .38
- -----------------
Maximum offering price to
public............................................
........................... $12.64
- -----------------
- -----------------
Class B:
Net asset value, offering price and redemption
price per share
($25,888,032 / 2,112,255 shares of
beneficial interest issued and
outstanding)......................
$12.26
- -----------------
- -----------------
Class C:
Net asset value, offering price and redemption
price per share
($438,489 / 35,778 shares of beneficial
interest issued and
outstanding)............................
$12.26
- -----------------
- -----------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND
MICHIGAN SERIES
Statement of Operations (Unaudited)
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income
February 28, 1998
<S> <C>
Income
Interest................................ $
1,681,990
----
- -------------
Expenses
Management fee..........................
142,804
Distribution fee--Class A...............
15,115
Distribution fee--Class B...............
66,253
Distribution fee--Class C...............
1,463
Custodian's fees and expenses...........
35,000
Transfer agent's fees and expenses......
23,000
Reports to shareholders.................
14,000
Registration fees.......................
13,000
Audit fee...............................
5,000
Legal fees and expenses.................
2,000
Trustees' fees and expenses.............
2,000
Insurance expense.......................
1,000
Miscellaneous...........................
1,231
----
- -------------
Total expenses.......................
321,866
----
- -------------
Net investment income......................
1,360,124
----
- -------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions.................
428,246
Financial futures contract
transactions.........................
(75,297)
----
- -------------
352,949
----
- -------------
Net change in unrealized appreciation
(depreciation) on:
Investments.............................
1,207,114
Financial futures contracts.............
(3,000)
----
- -------------
1,204,114
----
- -------------
Net gain on investments....................
1,557,063
----
- -------------
Net Increase in Net Assets
Resulting from Operations.................. $
2,917,187
----
- -------------
----
- -------------
</TABLE>
PRUDENTIAL MUNICIPAL SERIES FUND
MICHIGAN SERIES
Statement of Changes in Net Assets (Unaudited)
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Six Months
Ended
Year Ended
Increase (Decrease) February 28,
August 31,
in Net Assets 1998
1997
<S> <C>
<C>
Operations
Net investment income.......... $ 1,360,124
$ 2,983,196
Net realized gain on investment
transactions................ 352,949
345,600
Net change in unrealized
appreciation/depreciation of
investments................. 1,204,114
1,386,469
------------
- ------------
Net increase in net assets
resulting from operations... 2,917,187
4,715,265
------------
- ------------
Dividends and distributions (Note
1):
Dividends from net investment
income
Class A..................... (748,679)
(1,511,057)
Class B..................... (603,004)
(1,464,990)
Class C..................... (8,441)
(7,149)
------------
- ------------
(1,360,124)
(2,983,196)
------------
- ------------
Distributions in excess of net
investment income
Class A..................... (2,538)
(5,093)
Class B..................... (2,130)
(5,425)
Class C..................... (33)
(19)
------------
- ------------
(4,701)
(10,537)
------------
- ------------
Distributions from net realized
gains
Class A..................... (182,721)
(101,868)
Class B..................... (153,367)
(108,497)
Class C..................... (2,420)
(387)
------------
- ------------
(338,508)
(210,752)
------------
- ------------
Series share transactions (net of
share conversions) (Note 5):
Net proceeds from shares
sold........................ 1,291,673
1,545,990
Net asset value of shares
issued in reinvestment of
dividends and
distributions............... 1,052,855
1,945,329
Cost of shares reacquired...... (4,150,489)
(10,932,206)
------------
- ------------
Net decrease in net assets from
Series share transactions... (1,805,961)
(7,440,887)
------------
- ------------
Total decrease.................... (592,107)
(5,930,107)
Net Assets
Beginning of period............... 57,883,273
63,813,380
------------
- ------------
End of period..................... $ 57,291,166
$ 57,883,273
------------
- ------------
------------
- ------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND
Notes to Financial Statements
(Unaudited) MICHIGAN
SERIES
- --------------------------------------------------
- ------------------------------
Prudential Municipal Series Fund (the 'Fund') is
registered under the Investment
Company Act of 1940, as an open-end investment
company. The Fund was organized
as a Massachusetts business trust on May 18, 1984
and consists of 13 series. The
monies of each series are invested in separate,
independently managed
portfolios. The Michigan Series (the 'Series')
commenced investment operations
in September, 1984. The Series is diversified and
seeks to achieve its
investment objective of obtaining the maximum
amount of income exempt from
federal and applicable state income taxes with the
minimum of risk by investing
in 'investment grade' tax-exempt securities whose
ratings are within the four
highest ratings categories by a nationally
recognized statistical rating
organization or, if not rated, are of comparable
quality. The ability of the
issuers of the securities held by the Series to
meet their obligations may be
affected by economic or political developments in
a specific state, industry or
region.
- --------------------------------------------------
- ----------
Note 1. Accounting Policies
The following is a summary of significant
accounting policies followed by the
Fund, and the Series, in the preparation of its
financial statements.
Securities Valuations: The Fund values municipal
securities (including
commitments to purchase such securities on a 'when-
issued' basis) on the basis
of prices provided by a pricing service which uses
information with respect to
transactions in bonds, quotations from bond
dealers, market transactions in
comparable securities and various relationships
between securities in
determining values. If market quotations are not
readily available from such
pricing service, a security is valued at its fair
value as determined under
procedures established by the Trustees.
Short-term securities which mature in more than 60
days are valued at current
market quotations. Short-term securities which
mature in 60 days or less are
valued at amortized cost.
All securities are valued as of 4:15 p.m., New
York time.
Financial Futures Contracts: A financial futures
contract is an agreement to
purchase (long) or sell (short) an agreed amount
of securities at a set price
for delivery on a future date. Upon entering into
a financial futures contract,
the Series is required to pledge to the broker an
amount of cash and/or other
assets equal to a certain percentage of the
contract amount. This amount is
known as the 'initial margin.' Subsequent
payments, known as 'variation margin,'
are made or received by the Series each day,
depending on the daily fluctuations
in the value of the underlying security. Such
variation margin is recorded for
financial statement purposes on a daily basis as
unrealized gain or loss. When
the contract expires or is closed, the gain or
loss is realized and is presented
in the statement of operations as net realized
gain (loss) on financial futures
contracts.
The Series invests in financial futures contracts
in order to hedge its existing
portfolio securities, or securities the Series
intends to purchase, against
fluctuations in value caused by changes in
prevailing interest rates. Should
interest rates move unexpectedly, the Series may
not achieve the anticipated
benefits of the financial futures contracts and
may realize a loss. The use of
futures transactions involves the risk of
imperfect correlation in movements in
the price of futures contracts, interest rates and
the underlying hedged assets.
Securities Transactions and Net Investment Income:
Securities transactions are
recorded on the trade date. Realized gains and
losses on sales of securities are
calculated on the identified cost basis. Interest
income is recorded on the
accrual basis. The Series amortizes premiums and
accretes original issue
discount on portfolio securities as adjustments to
interest income. Expenses are
recorded on the accrual basis which may require
the use of certain estimates by
management.
Net investment income (other than distribution
fees) and unrealized and realized
gains or losses are allocated daily to each class
of shares based upon the
relative proportion of net assets of each class at
the beginning of the day.
Reclassification of Capital Accounts: The Fund
accounts and reports for
distributions to shareholders in accordance with
Statement of Position 93-2:
Determination, Disclosure, and Financial Statement
Presentation of Income,
Capital Gain, and Return of Capital Distributions
by Investment Companies. The
effect of applying this statement for the six
months ended February 28, 1998 was
to increase undistributed net investment income
and decrease accumulated net
realized gain by $4,701 due to the sale of
securities purchased with market
discount. Net investment income, net realized
gains and net assets were not
affected by this change.
Federal Income Taxes: For federal income tax
purposes, each series in the Fund
is treated as a separate taxpaying entity. It is
the intent of the Series to
meet the requirements of the Internal Revenue Code
applicable to regulated
investment companies and to distribute all of its
net income to shareholders.
For this reason, no federal income tax provision
is required.
Dividends and Distributions: The Series declares
daily dividends from net
investment income. Payment of dividends is made
monthly. Distributions of net
capital gains, if any, are made annually.
- --------------------------------------------------
- ------------------------------
8
<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND
Notes to Financial Statements
(Unaudited) MICHIGAN
SERIES
- --------------------------------------------------
- ------------------------------
Income distributions and capital gain
distributions are determined in accordance
with income tax regulations which may differ from
generally accepted accounting
principles.
- --------------------------------------------------
- ----------
Note 2. Agreements
The Fund has a management agreement with
Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has
responsibility for all
investment advisory services and supervises the
subadviser's performance of such
services. PIFM has entered into a subadvisory
agreement with The Prudential
Investment Corporation ('PIC'). PIC furnishes
investment advisory services in
connection with the management of the Fund. PIFM
pays for the services of PIC,
the cost of compensation of officers of the Fund,
occupancy and certain clerical
and bookkeeping costs of the Fund. The Fund bears
all other costs and expenses.
The management fee paid PIFM is computed daily and
payable monthly, at an annual
rate of .50 of 1% of the average daily net assets
of the Series.
The Fund has a distribution agreement with
Prudential Securities Incorporated
('PSI'), which acts as the distributor of the
Class A, Class B and Class C
shares of the Fund. The Fund compensates PSI for
distributing and servicing the
Fund's Class A, Class B and Class C shares,
pursuant to plans of distribution,
(the 'Class A, B and C Plans'), regardless of
expenses actually incurred by PSI.
The distribution fees are accrued daily and
payable monthly.
Pursuant to the Class A, B and C Plans, the Fund
compensates PSI for
distribution-related activities at an annual rate
of up to .30 of 1%, .50 of 1%
and 1% of the average daily net assets of the
Class A, B and C shares,
respectively. Such expenses under the Plans were
.10 of 1%, .50 of 1% and .75 of
1% of the average daily net assets of the Class A,
B and C shares, respectively,
for the six months ended February 28, 1998.
PSI has advised the Series that it has received
approximately $10,500 in
front-end sales charges resulting from sales of
Class A shares during the six
months ended February 28, 1998. From these fees,
PSI paid such sales charges to
affiliated broker-dealers, which in turn paid
commissions to salespersons and
incurred other distribution costs.
PSI has advised the Series that for the six months
ended February 28, 1998, it
received approximately $10,400 in contingent
deferred sales charges imposed upon
certain redemptions by Class B and Class C
shareholders.
PSI, PIFM and PIC are indirect, wholly owned
subsidiaries of The Prudential
Insurance Company of America.
The Series, along with other affiliated registered
investment companies (the
'Funds'), entered into a credit agreement (the
'Agreement') with an unaffiliated
lender. The maximum commitment under the Agreement
is $200,000,000. Interest on
any such borrowings outstanding will be at market
rates. The purpose of the
Agreement is to serve as an alternative source of
funding for capital share
redemptions. The Series has not borrowed any
amounts pursuant to the Agreement
as of February 28, 1998. The Funds pay a
commitment fee at an annual rate of
.055 of 1% on the unused portion of the credit
facility. The commitment fee is
accrued and paid quarterly on a pro rata basis by
the Funds. The Agreement
expired on December 30, 1997 and has been extended
through December 29, 1998
under the same terms.
- --------------------------------------------------
- ----------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a
wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the
six months ended February 28,
1998, the Series incurred fees of approximately
$15,700 for the services of
PMFS. As of February 28, 1998, approximately
$2,600 of such fees were due to
PMFS. Transfer agent fees and expenses in the
Statement of Operations include
certain out-of-pocket expenses paid to
nonaffiliates.
- --------------------------------------------------
- ----------
Note 4. Portfolio Securities
Purchases and sales of portfolio securities of the
Series, excluding short-term
investments, for the six months ended February 28,
1998 were $7,902,583 and
$7,910,555, respectively.
As of February 28, 1998, the Series had sold 12
financial futures contracts on
U.S. Treasury Notes expiring in June 1998 and 15
financial futures contracts, on
the Municipal Bond Index expiring in March 1998.
The value at disposition of
such contracts is $2,922,375. The value of such
contracts on February 28, 1998
was $2,925,375, thereby resulting in an unrealized
gain of $3,000.
The cost basis of investments for federal income
tax purposes at February 28,
1998 was substantially the same as for financial
reporting purposes and
accordingly, net unrealized appreciation for
federal income tax purposes was
$5,297,638 (gross unrealized appreciation--
$5,313,178; gross unrealized
depreciation--$15,540).
- --------------------------------------------------
- ----------
Note 5. Capital
The Series offers Class A, Class B and Class C
shares. Class A shares are sold
with a front-end sales charge of up to 3%. Class B
shares are sold with
- --------------------------------------------------
- ------------------------------
9
<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND
Notes to Financial Statements
(Unaudited) MICHIGAN
SERIES
- --------------------------------------------------
- ------------------------------
a contingent deferred sales charge which declines
from 5% to zero depending on
the period of time the shares are held. Class C
shares are sold with a
contingent deferred sales charge of 1% during the
first year. Class B shares
will automatically convert to Class A shares on a
quarterly basis approximately
seven years after purchase. A special exchange
privilege is also available for
shareholders who qualify to purchase Class A
shares at net asset value.
The Fund has authorized an unlimited number of
shares of beneficial interest of
each class at $.01 par value per share.
Transactions in shares of beneficial
interest for the six months ended February 28,
1998 and the fiscal year ended
August 31, 1997 were as follows:
<TABLE>
<CAPTION>
Class A Shares
Amount
- ------------------------------------ ----------
- ------------
<S> <C>
<C>
Six months ended February 28, 1998:
Shares sold......................... 45,284
$ 552,938
Shares issued in reinvestment of
dividends
and distributions................. 49,752
606,690
Shares reacquired................... (202,937)
(2,468,783)
----------
- ------------
Net decrease in shares outstanding
before conversion................. (107,901)
(1,309,155)
Shares issued upon conversion from
Class B........................... 153,630
1,870,700
----------
- ------------
Net increase in shares
outstanding....................... 45,729
$ 561,545
----------
- ------------
----------
- ------------
Year ended August 31, 1997:
Shares sold......................... 10,493
$ 124,433
Shares issued in reinvestment of
dividends
and distributions................. 85,984
1,021,115
Shares reacquired................... (444,372)
(5,272,879)
----------
- ------------
Net decrease in shares outstanding
before conversion................. (347,895)
(4,127,331)
Shares issued upon conversion from
Class B........................... 375,039
4,454,862
----------
- ------------
Net increase in shares
outstanding....................... 27,144
$ 327,531
----------
- ------------
----------
- ------------
Class B Shares
Amount
- ------------------------------------ ----------
- ------------
Six months ended February 28, 1998:
Shares sold......................... 51,918
$ 631,735
Shares issued in reinvestment of
dividends
and distributions................. 35,793
436,127
Shares reacquired................... (137,745)
(1,679,706)
----------
- ------------
Net decrease in shares outstanding
before conversion................. (50,034)
(611,844)
Shares reacquired upon conversion
into Class A...................... (153,756)
(1,870,700)
----------
- ------------
Net decrease in shares
outstanding....................... (203,790)
$ (2,482,544)
----------
- ------------
----------
- ------------
Year ended August 31, 1997:
Shares sold......................... 102,845
$ 1,219,555
Shares issued in reinvestment of
dividends
and distributions................. 77,395
918,312
Shares reacquired................... (475,575)
(5,648,809)
----------
- ------------
Net decrease in shares outstanding
before conversion................. (295,335)
(3,510,942)
Shares reacquired upon conversion
into Class A...................... (375,355)
(4,454,862)
----------
- ------------
Net decrease in shares
outstanding....................... (670,690)
$ (7,965,804)
----------
- ------------
----------
- ------------
Class C
- ------------------------------------
Six months ended February 28, 1998:
Shares sold......................... 8,842
$ 107,000
Shares issued in reinvestment of
dividends
and distributions................. 823
10,038
Shares reacquired................... (165)
(2,000)
----------
- ------------
Net increase in shares
outstanding....................... 9,500
$ 115,038
----------
- ------------
----------
- ------------
Year ended August 31, 1997:
Shares sold......................... 17,060
$ 202,002
Shares issued in reinvestment of
dividends
and distributions................. 496
5,902
Shares reacquired................... (880)
(10,518)
----------
- ------------
Net increase in shares
outstanding....................... 16,676
$ 197,386
----------
- ------------
----------
- ------------
</TABLE>
- --------------------------------------------------
- ------------------------------
10
<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND
Financial Highlights (Unaudited)
MICHIGAN SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class A
- --------------------------------------------------
- --------------------
Six Months
Ended Year Ended August
31,
February 28, ---------------------------------
- --------------------
1998 1997 1996 1995
1994 1993
- ------ ------- ------- ------- -
- ----- ------
PER SHARE OPERATING PERFORMANCE:
<S>
<C> <C> <C> <C>
<C> <C>
Net asset value, beginning of
period................ $ 12.01 $ 11.72
$ 11.89 $ 11.75 $12.51 $11.90
- ------ ------- ------- ------- -
- ----- ------
Income from investment operations
Net investment
income...............................
.30 .61(a) .62(a) .64(a)
.64 .67
Net realized and unrealized gain (loss) on
investment
transactions..........................
.32 .33 (.02) .17
(.69) .71
- ------ ------- ------- ------- -
- ----- ------
Total from investment
operations................. .62
.94 .60 .81 (.05) 1.38
- ------ ------- ------- ------- -
- ----- ------
Less distributions
Dividends from net investment
income................ (.30)
(.61) (.62) (.64) (.64)
(.67)
Distributions in excess of net investment
income.... --(c) --(c) --
- -- -- --
Distributions from net realized
gains............... (.07) (.04)
(.15) (.03) (.07) (.10)
- ------ ------- ------- ------- -
- ----- ------
Total
distributions..............................
(.37) (.65) (.77) (.67)
(.71) (.77)
- ------ ------- ------- ------- -
- ----- ------
Net asset value, end of
period...................... $ 12.26 $
12.01 $ 11.72 $ 11.89 $11.75
$12.51
- ------ ------- ------- ------- -
- ----- ------
- ------ ------- ------- ------- -
- ----- ------
TOTAL
RETURN(b):....................................
5.36% 8.18% 5.07% 7.13%
(0.38)% 11.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $30,965
$29,772 $28,730 $27,024 $4,706
$3,814
Average net assets
(000)............................ $30,481
$29,737 $27,978 $16,932 $4,505
$2,285
Ratios to average net assets:
Expenses, including distribution
fees............ .94%(d) .91%(a)
.91%(a) 1.02%(a) .91% .96%
Expenses, excluding distribution
fees............ .84%(d) .81%(a)
.81%(a) .92%(a) .81% .86%
Net investment
income............................
4.95%(d) 5.08%(a) 5.18%(a) 5.31%(a)
5.27% 5.51%
For Class A, B and C shares:
Portfolio turnover
rate.......................... 14%
20% 36% 33% 12% 14%
</TABLE>
- ---------------
(a) Net of management fee waiver.
(b) 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.
(c) Less than $.005 per share.
(d) Annualized.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 11
<PAGE>
PRUDENTIAL
MUNICIPAL SERIES FUND
Financial Highlights (Unaudited) MICHIGAN
SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class B
- --------------------------------------------------
- ----------------------
Six Months
Ended Year Ended August
31,
February 28, ---------------------------------
- ----------------------
1998 1997 1996 1995
1994 1993
- ------------ ------- ------- -------
- ------- -------
<S>
<C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 12.00 $ 11.71
$ 11.88 $ 11.75 $ 12.51 $ 11.90
- ------ ------- ------- ------- -
- ------ -------
Income from investment operations
Net investment
income...............................
.28 .56(a) .57(a) .59(a)
.59 .62
Net realized and unrealized gain (loss) on
investment
transactions..........................
.33 .33 (.02) .16
(.69) .71
- ------ ------- ------- ------- -
- ------ -------
Total from investment
operations................. .61
.89 .55 .75 (.10)
1.33
- ------ ------- ------- ------- -
- ------ -------
Less distributions
Dividends from net investment
income................ (.28)
(.56) (.57) (.59) (.59)
(.62)
Distributions in excess of net investment
income.... --(c) --(c) --
- -- -- --
Distributions from net realized
gains............... (.07) (.04)
(.15) (.03) (.07) (.10)
- ------ ------- ------- ------- -
- ------ -------
Total
distributions..............................
(.35) (.60) (.72) (.62)
(.66) (.72)
- ------ ------- ------- ------- -
- ------ -------
Net asset value, end of
period...................... $ 12.26 $
12.00 $ 11.71 $ 11.88 $ 11.75 $
12.51
- ------ ------- ------- ------- -
- ------ -------
- ------ ------- ------- ------- -
- ------ -------
TOTAL
RETURN(b):....................................
5.15% 7.76% 4.66% 6.60%
(0.78)% 11.51%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $25,888
$27,796 $34,971 $41,459 $70,112
$70,302
Average net assets
(000)............................ $26,721
$31,302 $39,052 $52,216 $72,095
$61,548
Ratios to average net assets:
Expenses, including distribution
fees............ 1.34%(d) 1.31%(a)
1.31%(a) 1.37%(a) 1.31% 1.36%
Expenses, excluding distribution
fees............ .84%(d) .81%(a)
.81%(a) .87%(a) .81% .86%
Net investment
income............................
4.55%(d) 4.68%(a) 4.77%(a) 5.04%(a)
4.87% 5.11%
</TABLE>
- ---------------
(a) Net of management fee waiver.
(b) 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.
(c) Less than $.005 per share.
(d) Annualized.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 12
<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND
Financial Highlights (Unaudited)
MICHIGAN SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class C
- --------------------------------------------------
- --------------------
August 1,
Six Months
1994(e)
Ended Year Ended August 31,
Through
February 28, ---------------------------------
- ----- August 31,
1998 1997 1996 1995
1994
- ------------ ------ ------------ -----
- ----- ----------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 12.00 $11.71
$11.88 $11.75 $11.78
- ------ ------ ----- -----
- -----
Income from investment operations
Net investment
income...............................
.26 .53(a) .54(a) .56(a)
.04
Net realized and unrealized gain (loss) on
investment
transactions..........................
.33 .33 (.02) .16
(.03)
- ------ ------ ----- -----
- -----
Total from investment
operations................. .59
.86 .52 .72 .01
- ------ ------ ----- -----
- -----
Less distributions
Dividends from net investment
income................ (.26) (.53)
(.54) (.56) (.04)
Distributions in excess of net investment
income.... --(c) --(c) -
- - -- --
Distributions from net realized
gains............... (.07) (.04)
(.15) (.03) --
- ------ ------ ----- -----
- -----
Total
distributions..............................
(.33) (.57) (.69) (.59)
(.04)
- ------ ------ ----- -----
- -----
Net asset value, end of
period...................... $ 12.26
$12.00 $11.71 $11.88
$11.75
- ------ ------ ----- -----
- -----
- ------ ------ ----- -----
- -----
TOTAL
RETURN(b):....................................
5.02% 7.49% 4.39% 6.29%
0.06%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $438
$315 $112 $100
$200(f)
Average net assets
(000)............................ $393
$161 $95 $61
$199(f)
Ratios to average net assets:
Expenses, including distribution
fees............ 1.59%(d) 1.56%(a)
1.56%(a) 1.68%(a) 2.15%(d)
Expenses, excluding distribution
fees............ .84%(d) .81%(a)
.81%(a) .93%(a) 1.39%(d)
Net investment
income............................
4.33%(d) 4.43%(a) 4.53%(a)
4.66%(a) 4.56%(d)
</TABLE>
- ---------------
(a) Net of management fee waiver.
(b) 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.
(c) Less than $.005 per share.
(d) Annualized.
(e) Commencement of offering of Class C shares.
(f) Figures are actual and not rounded to the
nearest thousand.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 13
<PAGE>
Trustees
Edward D. Beach
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Harry A. Jacobs, Jr.
Mendel A. Melzer, CFA
Thomas T. Mooney
Thomas H. O'Brien
Richard A. Redeker
Nancy H. Teeters
Louis A. Weil, III
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Deborah A. Docs, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, NY 10022
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
The views expressed in this report and information
about
the Series' portfolio holdings are for the period
covered
by this report and are subject to change
thereafter.
The accompanying financial statements as of
February 28,
1998 were not audited and, accordingly, no opinion
is
expressed on them.
This report is not authorized for distribution to
prospective
investors unless preceded or accompanied by a
current prospectus.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
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