<PAGE>
SEMIANNUAL REPORT FEBRUARY 29, 2000
Prudential
Municipal Series Fund/
Connecticut Money Market Series
Fund Type Money market
Objective The highest level of current income that
is exempt from Connecticut State and
federal income taxes, consistent with liquidity and
the preservation of capital
(GRAPHIC)
This report is not authorized for distribution to
prospective investors unless preceded or
accompanied by a current prospectus.
(LOGO)
<PAGE>
Investment Goals and Style
Prudential Municipal Series Fund/Connecticut Money
Market Series seeks to provide the highest level of
current income that is exempt from Connecticut
State and federal income taxes, consistent with
liquidity and the preservation of capital. The
Series intends to invest in a portfolio of short-
term municipal debt securities with maturities of
13 months or less from the state of Connecticut,
its municipalities, local governments, and other
qualifying issuers (such as Puerto Rico, Guam, and
the U.S. Virgin Islands). There can be no assurance
that the Series will achieve its investment
objective.
Contents
1 Message From the Fund's President
2 Performance Review
3 Performance at a Glance
6 Financial Statements
<PAGE>
www.prudential.com (800) 225-1852
Message From the Fund's President As of April 17, 2000
(PHOTO)
Dear Shareholder
The Federal Reserve increased short-term interest
rates twice to slow U.S. economic growth and fend
off higher inflation during the six months that
ended on February 29, 2000. Prudential's Money
Markets Sector team worked hard to anticipate these
changes in U.S. monetary policy, and acted quickly
to take advantage of good investment opportunities
that emerged as Connecticut money market yields
rose.
As a result, Prudential Municipal Series
Fund/Connecticut Money Market Series maintained a
$1.00 net asset value per share, and provided a
competitive yield. On February 29, 2000, the
Series' seven-day current yield was 2.95%, compared
with 2.87% for the average Connecticut money market
fund as tracked by iMoneyNet, Inc. The following
report takes a closer look at developments in the
municipal money market sector during the six-month
review period, and explains how the Series was
positioned throughout.
High-quality investments can help reduce risk
Having a conservative, high-quality investment
alternative, such as a money market fund, made good
sense for investors who were concerned about
volatile conditions in financial markets. Indeed,
investors may do well to consider investing in a
money market fund as part of their overall
investment strategy. For any of life's unexpected
events, it is reassuring to have quick access to
your money and an investment vehicle that
emphasizes safety of principal and liquidity.
Thank you for your continued confidence in
Prudential mutual funds.
Sincerely,
John R. Strangfeld
President
Prudential Municipal Series Fund
1
<PAGE>
Prudential Municipal Series Fund Connecticut Money Market Series
Performance Review
(PHOTO) (PHOTO) Portfolio Managers Joseph Tully (Money Markets
Sector Team Leader) and Richard S. Lynes
Fed tried to curb U.S. economic growth
Shortly before the Series' fiscal half year began
on September 1, 1999, the Federal Reserve increased
the federal funds rate (what U.S. banks charge each
other for overnight loans) by a quarter of a
percentage point to 5.25% from 5.00%. It also
raised the rate at which banks can borrow from the
Federal Reserve system (known as the discount rate)
to 4.75% from 4.50%.
The short-term rate hike rippled through the U.S.
economy, increasing borrowing costs for consumers
and businesses. In this way, the Fed hoped to rein
in the brisk pace of U.S. economic growth and avert
a buildup in inflationary pressures. Mounting
inflation is particularly hard on people who live
on fixed incomes, because their buying power
declines if their incomes are not adjusted for the
rise in prices.
We bought before the rate hike
Although we believed that the Fed would continue to
tighten monetary
policy, we purchased longer-term Connecticut money
market securities
in September 1999 that seemed to offer good value
at that time. Our purchases extended the Series'
weighted average maturity (WAM), which remained
longer than that of the average comparable fund
during September and early October 1999. (WAM is a
measurement tool that determines a portfolio's
sensitivity to changes in the level of interest
rates. It takes into account the maturity level of
each security held in a portfolio.)
2
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
<TABLE>
Fund Facts As of 2/29/00
<CAPTION>
7-Day Net Asset Taxable Equivalent Yield* Weighted Avg. Net Assets
Current Yld. Value (NAV) @31% @36% @39.6% Mat. (WAM) (Millions)
<S> <C> <C> <C> <C>
CT Money
Market Series 2.95% $1.00 4.48% 4.83% 5.11% 48 Days $83
iMoneyNet, Inc.
Tax-Free State Specific
Avg. (SB & GP--CT)** 2.87% $1.00 4.36% 4.70% 4.98% 48 Days N/A
</TABLE>
Note: Yields will fluctuate from time to time, and
past performance is not indicative of future
results. An investment in the Series is not insured
or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Although the Series seeks to preserve the value of
your investment at $1.00 per share, it is possible
to lose money by investing in the Series.
*Some investors may be subject to the federal
alternative minimum tax and/or state and local
taxes. Taxable equivalent yields reflect federal
and applicable state tax rates.
**iMoneyNet, Inc. reports the 7-Day Current Yield,
NAV, and WAM on Mondays. This is the data of all
funds in the iMoneyNet, Inc. Tax-Free State
Specific Average (Stock Broker (SB) & General
Purpose (GP)--Connecticut) category as of February
28, 2000.
Tracking Municipal Money Market Fund Yields
(GRAPH)
3
<PAGE>
Prudential Municipal Series Fund Connecticut Money Market Series
Performance Review
In hindsight, the Series would have been better
served had we reduced its WAM in September by
purchasing shorter-term Connecticut money market
securities. As these securities matured, we could
have reinvested the money in higher-yielding
Connecticut money market securities that became
available after the Fed again raised short-term
rates on November 16, 1999. The central bank
increased the federal funds rate to 5.50% and its
discount rate to 5.00%.
New year brought good buying opportunities
We again extended the Series' WAM in January 2000
by purchasing two kinds of bonds, both of which
provided attractive yields and were good
alternatives to tax-exempt notes and other
conventional municipal money market securities. We
bought one-year "prerefunded" bonds that are backed
by direct obligations of the U.S. government. We
also purchased one-year bonds that were rated AAA
because their interest and principal payments are
insured by a major bond insurance company. The
insured short-term bonds provided solid yields.
Owning these insured municipal bonds offering
higher yields met our fundamental buy-and-hold
strategy.
Fed stepped on brakes again
The year 2000 also brought renewed efforts by the
Fed to check the powerful U.S. economy, which sped
along at a more than 7% annualized pace in the
final three months of 1999. On February 2, 2000,
the central bank raised the federal funds rate to
5.75% and its discount rate to 5.25%. February
marked the 107th consecutive month of the economic
expansion, making it the longest in U.S. history.
In the statement released when it changed monetary
policy, the Fed warned that further rate hikes
might be necessary to keep the U.S. economy from
overheating.
4
<PAGE>
www.prudential.com (800) 225-1852
Looking Ahead
True to its word, the Fed again raised the federal
funds rate to 6.00% and the discount rate to 5.50%
on March 21, 2000. As the U.S. economy continues to
grow rapidly, we believe this may not be the last
time the Fed will take action this year.
With the approach of the tax season, we intend to
again increase the Series' exposure to very short-
term municipal money market securities in order to
accommodate seasonal cash outflows that usually
occur as shareholders pay their income taxes.
Adopting this strategy should position the Series
to lock in higher yields that become available as
the supply of municipal money market securities
balloons during the tax season.
Weighted Average Maturity Compared to the Average
Municipal Money Fund
(GRAPH)
5
<PAGE>
Prudential Municipal Series Fund Connecticut Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Ascension Parish Rev., BASF Corp.
Proj., Ser. 97, F.R.D.D., A.M.T. P-1 3.95% 3/01/00 $ 300 $ 300,000
Berkeley County Fac. Indl. Rev.,
Ser. 98, Amoco Chemical Co. Proj.,
F.R.D.D., A.M.T. VMIG1 3.90 3/01/00 500 500,000
Bridgeport Connecticut, Gen.
Oblig., Ser. 97A, A.M.B.A.C. Aaa 4.40 3/01/00 250 250,000
Connecticut St. Clean Water Fund
Rev.,
Ser. 92 NR 5.38 8/01/00 1,000 1,006,129
Ser. 91 NR 6.70 1/01/01 2,010(c) 2,093,757
Connecticut St. Dev. Auth.,
Bradley Airport Hotel, Ser. 97A,
F.R.W.D. VMIG1 3.80 3/02/00 900 900,000
Bradley Airport Hotel, Ser. 97B,
F.R.W.D. VMIG1 3.80 3/02/00 3,000 3,000,000
Bradley Airport Hotel, Ser. 97C,
F.R.W.D. VMIG1 3.80 3/02/00 1,300 1,300,000
Corp. for Independ. Living Proj.,
Ser. 99, F.R.W.D. VMIG1 3.70 3/01/00 2,560 2,560,000
Pierce Mem'l. Baptist Home,
Ser. 99, F.R.W.D. A-1+(d) 3.65 3/01/00 3,125 3,125,000
SHW Inc. Proj., Ser. 90, F.R.W.D.,
A.M.T. CPS1 3.80 3/01/00 5,150 5,150,000
Connecticut St. Gen., Oblig.,
Ser. 110, F.R.W.D. VMIG1 3.91 3/02/00 2,900 2,900,000
Ser. 1990C Aa3 6.90 9/15/00 1,000 1,017,096
Ser. 90A Aa3 6.20 3/01/00 150 150,000
Ser. 90A NR 6.90 3/15/00 1,500(c) 1,531,816
Ser. 90B NR 6.75 7/15/00 1,850(c) 1,907,633
Ser. 91A Aaa 6.60 3/01/00 300(c) 312,895
Connecticut St. Hlth. & Edl. Facs.
Auth. Rev.,
Ascention Hlth. Credit, Ser. 99B,
F.R.W.D. VMIG1 3.40 3/01/00 3,800 3,800,000
Covenant Ret., Ser. 1999A,
F.R.W.D. A-1+(d) 3.65 3/02/00 2,640 2,640,000
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Connecticut Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gaylord Hosp. Issue, Ser. A,
F.R.W.D. A-1(d) 3.70% 3/01/00 $ 3,000 $ 3,000,000
Pomfret School Issue, Ser. A,
F.R.W.D. VMIG1 3.70 3/01/00 1,000 1,000,000
Sharon Hosp. Issue, Ser. A,
F.R.W.D. VMIG1 3.80 3/02/00 1,700 1,700,000
Waterbury Hosp. Issue, Ser. B NR 7.00 7/01/00 1,750 1,801,714
Yale New Haven Hosp. Issue,
Ser. 90F, M.B.I.A. NR 6.65 7/01/00 400(c) 411,928
Yale New Haven Hosp. Issue,
Ser. 90F NR 7.10 7/01/00 3,000(c) 3,091,172
Yale University, Ser. S, T.E.C.P. VMIG1 3.30 3/14/00 5,000 5,000,000
Yale University, Ser. T, F.R.W.D. VMIG1 3.85 3/02/00 700 700,000
Connecticut St. Hsg. Fin. Auth.,
Ser. B3, T.E.C.P. VMIG1 3.90 9/15/00 1,600 1,600,000
Ser. 89D, T.E.C.P. NR 3.55 4/11/00 1,455 1,455,000
Connecticut St. Spec. Assmt.,
Second Injury Fund, T.E.C.P. P-1 3.50 3/06/00 7,000 7,000,000
Unemployment Comp., Rev.,
Ser. 96A NR 5.50 5/15/00 2,500 2,511,519
Unemployment Comp., Rev.,
Ser. 96A NR 5.50 11/15/00 2,500 2,525,703
Unemployment Comp., Ser. 93C,
A.N.N.M.T., F.G.I.C. VMIG1 3.38 7/01/00 1,800 1,800,000
Connecticut St. Spec. Tax Oblig.,
Transp. Infrastructure Rev.,
Ser. 90I, F.R.W.D. VMIG1 3.75 3/01/00 2,025 2,025,000
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Municipal Series Fund Connecticut Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dinwidie Co. Rev. Bonds--Chaparral
Steel, F.R.D.D., A.M.T. P-1 3.95% 3/01/00 $ 200 $ 200,000
Florida St. Brd. Ed., Ser. SGA 67,
F.R.D.D. A-1+(d) 3.90 3/01/00 1,000 1,000,000
Gulf Coast Indl. Dev. Auth., Citgo
Petroleum, Ser. 94, F.R.D.D.,
A.M.T. VMIG1 3.95 3/01/00 400 400,000
Hartford Connecticut, Redev. Agcy.,
Multi-family Mtge. Rev.,
Underwood Twrs. Proj., Ser. 90,
F.R.W.D., F.S.A. A-1+(d) 3.80 3/02/00 600 600,000
Iberville Parish Rev.,
Dow Chemical Co., Ser. 99,
F.R.D.D., A.M.T. P-1 4.00 3/01/00 500 500,000
Madison County Env. Impr. Rev.,
Ser. 97A, F.R.D.D., A.M.T. VMIG1 3.90 3/01/00 200 200,000
North Branford, Connecticut, B.A.N. NR 3.90 5/17/00 1,350 1,350,971
Old Saybrook Connecticut, B.A.N. NR 4.25 9/06/00 1,350 1,352,700
Puerto Rico Hsg. Fin. Corp.,
Multi-family Mtge. Rev., Port. A,
Ser. 90I, M.O.T., A.M.B.A.C. NR 3.40 3/15/00 2,455 2,455,000
Seymour Connecticut, Gen. Oblig.,
F.S.A. Aaa 5.75 3/01/00 805 805,000
South Windsor Connecticut,
Gen. Oblig., Ser. 99 NR 3.50 9/01/00 585 584,994
Stamford Connecticut, Gen. Oblig.,
Ser. 99A NR 3.50 8/01/00 2,280 2,281,290
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Connecticut Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Whiting Indl. Swr. & Solid Waste
Disp. Rev., Ser. 96, F.R.D.D.,
A.M.T. VMIG1 3.90% 3/01/00 $ 1,100 $ 1,100,000
------------
Total Investments 99.4%
(amortized cost $82,896,317(e)) 82,896,317
Other assets in excess of
liabilities 0.6% 507,248
------------
Net Assets 100% $ 83,403,565
------------
------------
</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.
A.N.N.M.T.--Annual Mandatory Tender.
B.A.N.--Bond Anticipation Note.
F.G.I.C.--Financial Guaranty Insurance Company.
F.R.D.D.--Floating Rate (Daily) Demand Note (b).
F.R.W.D.--Floating Rate (Weekly) Demand Note (b).
F.S.A.--Financial Security Assurance.
M.B.I.A.--Municipal Bond Insurance Association.
M.O.T.--Monthly Optional Tender.
T.E.C.P.--Tax-Exempt Commercial Paper.
(b) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be the later of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
(c) Prerefunded issues are secured by escrowed cash and/or direct U.S.
guaranteed obligations.
(d) Standard & Poor's rating.
(e) The cost of securities for federal income tax purposes is substantially the
same as for financial reporting purposes.
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 9
<PAGE>
Prudential Municipal Series Fund Connecticut Money Market Series
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
ASSETS
Investments, at amortized cost which approximates market value $ 82,896,317
Receivable for Series shares sold 2,747,213
Interest receivable 572,537
Other assets 1,517
-----------------
Total assets 86,217,584
-----------------
LIABILITIES
Bank overdraft 4,944
Payable for Series shares reacquired 2,684,063
Accrued expenses 68,592
Management fee payable 32,166
Dividends payable 14,309
Deferred trustee's fees 6,052
Distribution fee payable 3,893
-----------------
Total liabilities 2,814,019
-----------------
-----------------
NET ASSETS $ 83,403,565
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at $.01 par value $ 834,036
Paid-in capital in excess of par 82,569,529
-----------------
Net assets, February 29, 2000 $ 83,403,565
-----------------
-----------------
Net asset value, offering price and redemption price per share
($83,403,565 / 83,403,565 shares of beneficial interest
issued and outstanding; unlimited number of shares
authorized) $1.00
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Connecticut Money Market Series
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest earned $ 1,357,847
-----------------
Expenses
Management fee 197,794
Distribution fee 49,448
Custodian's fees and expenses 22,000
Reports to shareholders 19,000
Transfer agent's fees and expenses 11,000
Trustees' fees and expenses 5,000
Audit fees and expenses 4,000
Legal fees and expenses 3,000
Registration fees 3,000
Miscellaneous 1,786
-----------------
Total expenses 316,028
Less: Custodian fee credit (Note 1) (3,842)
-----------------
Net expenses 312,186
-----------------
Net investment income 1,045,661
-----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,045,661
-----------------
-----------------
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Municipal Series Fund Connecticut Money Market Series
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year Ended
Ended August 31,
February 29, 2000 1999
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 1,045,661 $ 2,014,902
Net realized gain on investment
transactions -- 5,471
----------------- --------------
Net increase in net assets resulting from
operations 1,045,661 2,020,373
----------------- --------------
Dividends and distributions (Note 1) (1,045,661) (2,020,373)
----------------- --------------
Series share transactions (at $1 per share)
Net proceeds from shares sold 151,881,502 311,218,175
Net asset value of shares issued in
reinvestment of dividends and
distributions 1,042,928 1,968,000
Cost of shares reacquired (152,595,598) (325,228,890)
----------------- --------------
Net increase (decrease) in net assets from
Series share transactions 328,832 (12,042,715)
----------------- --------------
Total increase (decrease) 328,832 (12,042,715)
NET ASSETS
Beginning of period 83,074,733 95,117,448
----------------- --------------
End of period $ 83,403,565 $ 83,074,733
----------------- --------------
----------------- --------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Connecticut Money Market Series
Notes to Financial Statements (Unaudited)
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 11
series. The monies of each series are invested in separate, independently
managed portfolios. The Connecticut Money Market Series (the 'Series') commenced
investment operations on August 5, 1991. The Series is nondiversified and seeks
to provide the highest level of income that is exempt from Connecticut state and
federal income taxes with the minimum of risk by investing in 'investment grade'
tax-exempt securities having a maturity of thirteen months or less and whose
ratings are within the two 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 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: Portfolio securities of the Series are valued at
amortized cost, which approximates market value. The amortized cost method of
valuation involves valuing a security at its cost on the date of purchase and
thereafter assuming a constant amortization to maturity of any discount or
premium.
All securities are valued as of 4:30 p.m., New York time.
Securities Transactions and Net Investment Income: Securities
transactions are recorded on the trade date. Realized gains and losses on sales
of investments 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.
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 continue 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: The Series declares daily dividends from net investment
income and net realized short-term capital gains or losses. Payment of dividends
is made monthly. Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles.
13
<PAGE>
Prudential Municipal Series Fund Connecticut Money Market Series
Notes to Financial Statements (Unaudited) Cont'd.
Custody Fee Credits: The Series has an arrangement with its custodian
bank, whereby uninvested monies earn credits which reduce the fees charged by
the custodian.
Note 2. Agreements The Fund has a management agreement with Prudential
Investments Fund Management LLC ('PIFM'). Pursuant to this agreement, PIFM has
responsibility for all investment advisory services and supervises the
subadviser's performance of such services. PIFM has entered into a subadvisory
agreement with The Prudential Investment Corporation ('PIC'); PIC furnishes
investment advisory services in connection with the management of the Fund. PIFM
pays for the services of the 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 Investment
Management Services LLC ('PIMS'), which acts as the distributor of the Fund. The
Fund compensates PIMS for distributing and servicing the Fund's shares pursuant
to the plan of distribution regardless of expenses actually incurred by them.
The Series reimburses PIMS for distributing and servicing the Series' shares
pursuant to the plan of distribution at an annual rate of .125 of 1% of the
Series' average daily net assets. The distribution fee is accrued daily and
payable monthly.
PIFM, PIC and PIMS are indirect, wholly owned subsidiaries of The
Prudential Insurance Company of America.
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 29, 2000, the Series incurred fees
of approximately $10,000 for the services of PMFS. As of February 29, 2000,
approximately $1,700 of such fees were due to PMFS. Transfer agent fees and
expenses in the Statement of Operations also include certain out-of-pocket
expenses paid to nonaffiliates.
14
<PAGE>
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15
<PAGE>
Prudential Municipal Series Fund Connecticut Money Market Series
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1.00
Net investment income and realized gains .01
Dividends and distributions to shareholders (.01)
-----------------
Net asset value, end of period $ 1.00
-----------------
-----------------
TOTAL RETURN(b): 1.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 83,404
Average net assets (000) $ 79,552
Ratios to average net assets:
Expenses, including distribution fee .80%(c)
Expenses, excluding distribution fee .67%(c)
Net investment income 2.64%(c)
</TABLE>
- ------------------------------
(a) Net of management fee waiver.
(b) Total return includes reinvestment of dividends and distributions. Total
returns for periods of less than a full year are not annualized.
(c) Annualized.
16 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Connecticut Money Market Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
.02 .03 .03(a) .03(a) .03(a)
(.02) (.03) (.03) (.03) (.03)
- ---------------- ---------------- ---------------- ---------------- ----------------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------- ---------------- ---------------- ---------------- ----------------
- ---------------- ---------------- ---------------- ---------------- ----------------
2.34% 2.72% 3.10% 3.17% 3.16%
$ 83,075 $ 95,117 $ 75,927 $ 77,683 $ 62,867
$ 87,744 $ 84,800 $ 77,500 $ 74,576 $ 57,103
.82% .86% .46%(a) .47%(a) .58%(a)
.69% .74% .34%(a) .35%(a) .46%(a)
2.30% 2.68% 3.06%(a) 3.12%(a) 3.17%(a)
</TABLE>
See Notes to Financial Statements 17
<PAGE>
<PAGE>
Prudential Municipal Series Fund Connecticut Money Market Series
Prudential Mutual Fund Family
Prudential offers a broad range of mutual funds
designed to meet your individual needs. For
information about these funds, contact your
financial adviser or call us at (800) 225-1852.
Read the prospectus carefully before you invest or
send money.
STOCK FUNDS
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Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Index Series Fund
Prudential Small-Cap Index Fund
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The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Mid-Cap Value Fund
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Tax-Managed Funds
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Prudential 20/20 Focus Fund
Nicholas-Applegate Fund, Inc.
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Prudential Global Genesis Fund, Inc.
Prudential Index Series Fund
Prudential Europe Index Fund
Prudential Pacific Index Fund
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Prudential Global Growth Fund
Prudential International Value Fund
Prudential Jennison International Growth Fund
Global Utility Fund, Inc.
Target Funds
International Equity Fund
Global Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
<PAGE>
www.prudential.com (800) 225-1852
BOND FUNDS
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 High Yield Total Return Fund, Inc.
Prudential Index Series Fund
Prudential Bond Market Index Fund
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Target Funds
Total Return Bond Fund
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Income Series
Insured Series
Prudential Municipal Series Fund
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
MONEY MARKET FUNDS
Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
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
<PAGE>
Prudential Municipal Series Fund Connecticut Money Market Series
Getting the Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds,
you receive financial advice from a Prudential
Securities Financial Advisor or Pruco Securities
registered representative. Your advisor or
representative can provide you with the following
services:
There's No Reward Without Risk; but Is This Risk
Worth It?
Your financial advisor or registered representative
can help you match the reward you seek with the
risk you can tolerate. Risk can be difficult to
gauge--sometimes even the simplest investments bear
surprising risks. The educated investor knows that
markets seldom move in just one direction. There
are times when a market sector or asset class will
lose value or provide little in the way of total
return. Managing your own expectations is easier
with help from someone who understands the markets
and who knows you!
Keeping Up With the Joneses
A financial advisor or registered representative
can help you wade through the numerous available
mutual funds to find the ones that fit your
individual investment profile and risk tolerance.
While the newspapers and popular magazines are full
of advice about investing, they are aimed at
generic groups of people or representative
individuals--not at you personally. Your financial
advisor or registered representative will review
your investment objectives with you. This means you
can make financial decisions based on the assets
and liabilities in your current portfolio and your
risk tolerance--not just based on the current
investment fad.
Buy Low, Sell High
Buying at the top of a market cycle and selling at
the bottom are among the most common investor
mistakes. But sometimes it's difficult to hold on
to an investment when it's losing value every
month. Your financial advisor or registered
representative can answer questions when you're
confused or worried about your investment, and
should remind you that you're investing for the
long haul.
<PAGE>
www.prudential.com (800) 225-1852
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Trustees
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, Secretary
David F. Connor, Assistant Secretary
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
194 Wood Avenue South
Iselin, NJ 08830
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Cusip Number 74435M648
The views expressed in this report and information
about the Fund's portfolio holdings are for the
period covered by this report and
are subject to change thereafter.
The accompanying financial statements as
of February 29, 2000, were not audited and,
accordingly, no opinion is expressed on them.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
MF154E2 74435M648
(LOGO) Printed on Recycled Paper
<PAGE>
SEMIANNUAL REPORT FEBRUARY 29, 2000
Prudential
Municipal Series Fund/
Florida Series
Fund Type Municipal bond
Objective Maximize current income that is exempt
from federal income taxes, consistent with the
preservation of capital, and to invest in
securities which will enable its shares to be
exempt from the Florida intangibles tax
(GRAPHIC)
(LOGO)
<PAGE>
Build on the Rock
Investment Goals and Style
Prudential Municipal Series Fund/Florida Series'
investment objective is to maximize current income
that is exempt from federal income taxes,
consistent with the preservation of capital, and to
invest in securities that will enable its shares to
be exempt from the Florida intangibles tax.
However, certain shareholders may be subject to the
federal alternative
minimum tax (AMT) because some of the Series' bonds
are AMT eligible. There can be no assurance the
Series will achieve its investment objective.
Contents
1 Message From the Fund's President
2 Performance Review
2 Portfolio Composition
3 Performance at a Glance
4 Credit Quality
5 Five Largest Issuers
7 Financial Statements
<PAGE>
www.prudential.com (800) 225-1852
Message From the Fund's President As of April 17, 2000
(PHOTO)
Dear Shareholder
The Class A shares of Prudential Municipal Series
Fund/Florida Series had a negative return of 0.72%
during its fiscal half year that ended February 29,
2000. For the same period, the return on the
Series' benchmark Lipper Average was a negative
1.36%. After the initial sales charge, the Class A
shares' return was a negative 3.70%. Prices of
municipal bonds declined primarily because
investors required higher yields in light of two
short-term rate increases implemented by the
Federal Reserve during our review period to slow
the rapid pace of U.S. economic growth.
Staying the course amid ups and downs of financial
markets
Many investors consider selling an asset class that
has performed poorly in favor of investments that
are currently gaining in value. That may not be the
best move. Changes in asset allocation should
reflect basic shifts in an investor's time horizon
and tolerance for risk--not recent fluctuations in
the performance of financial markets. One strategy
may be to own a diversified portfolio of mutual
funds that invests in stocks, bonds, and money
market instruments because this approach may help
to reduce risk.
Deciding on the correct level of diversification is
not easy. It requires
an understanding of an investor's risk tolerance
and overall investment strategy. In these volatile
times, we recommend consulting your financial
advisor to develop your asset allocation goals.
Thank you for your continued confidence in
Prudential mutual funds.
Sincerely,
John R. Strangfeld
President
Prudential Municipal Series Fund
1
<PAGE>
Prudential Municipal Series Fund Florida Series
Performance Review
(PHOTO) (PHOTO) Portfolio Managers Evan Lamp (Municipal Bonds
Sector Team Leader) and Scott Diamond
Bear market in municipal bonds continued
During our six-month review period, increases in
short-term interest
rates by the Federal Reserve and sales of municipal
bonds by investors who wanted to realize tax losses
pressured the prices of tax-exempt debt securities.
Given this bearish trend, we positioned the Series
so that it would be less vulnerable to the decline
in bond prices.
The Fed raised its target for the federal funds
rate (what U.S. banks charge each other for
overnight loans) by a quarter of a percentage point
in November 1999 and February 2000 to curb U.S.
economic growth and reduce the economic imbalances
that can lead to higher inflation. These moves
pushed up the rate to 5.75% by February 2000. The
Fed also
engineered two quarter-point increases that raised
its discount rate on loans to banks from the
Federal Reserve system to 5.25% by February 2000.
As short-term rates rose, investors required higher
yields on both short- and long-term municipal
bonds, which caused their prices to fall.
More selling pressure emerged in late December
1999. As interest rates climbed, investors realized
capital losses by selling bonds or bond funds. Many
investors reinvest in new bonds or other bond funds
with a lower cost basis for tax purposes (due to
the higher level of yields). This is called "tax
loss swapping." In the municipal bond market, the
capital loss often reduces taxes, while the higher
yields on the new bonds or other funds are
generally tax exempt.
Portfolio Composition
Expressed as a percentage of total investments
as of 2/29/00
47.00% Revenue Bonds
27.00 Prerefunded Bonds
25.00 General Obligations
1.00 Miscellaneous
2
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
<TABLE>
Cumulative Total Returns1 As of 2/29/00
<CAPTION>
Six One Five Since
Months Year Years Inception2
<S> <C> <C> <C> <C>
Class A -0.72% -3.13% 28.78% (27.21) 78.57% (69.14)
Class B -0.74 -3.27 26.59 (25.05) 30.41 (28.16)
Class C -0.87 -3.51 25.02 (23.49) 29.53 (25.72)
Class Z -0.49 -2.79 N/A 12.27 (12.04)
Lipper FL Muni
Debt Fund Avg.3 -1.36 -4.52 25.57 ***
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 3/31/00
<CAPTION>
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A -4.03% 4.81% (4.58) 6.33% (5.72)
Class B -6.31 4.90 (4.67) 4.99 (4.67)
Class C -3.54 4.60 (4.37) 4.07 (3.61)
Class Z -0.82 N/A 4.12 (4.06)
</TABLE>
<TABLE>
Distributions and Yields As of 2/29/00
<CAPTION>
Total Distributions 30-Day Taxable Equivalent Yield4 at tax rates of
Paid for Six Months SEC Yield 36% 39.6%
<S> <C> <C> <C>
Class A $0.25 4.81% 7.52% 7.96%
Class B $0.24 4.71 7.36 7.80
Class C $0.23 4.41 6.89 7.30
Class Z $0.27 5.21 8.14 8.63
</TABLE>
Past performance is not indicative of future
results. Principal and investment return will
fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their
original cost.
1 Source: Prudential Investments Fund Management
LLC and Lipper Inc. The cumulative total returns do
not take into account sales charges. The average
annual total returns do take into account
applicable sales charges. The Series charges a
maximum front-end sales charge of 3% for Class A
shares and a declining contingent deferred sales
charge (CDSC) of 5%, 4%, 3%, 2%, 1%, and 1% for six
years for Class B shares. Class B shares will
automatically convert to Class A shares, on a
quarterly basis, approximately seven years after
purchase. Class C shares are subject to a front-end
sales charge of 1% and a CDSC for 18 months. Class
Z shares are not subject to a sales charge or
distribution and service (12b-1) fees. 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 ( ).
2 Inception dates: Class A, 12/28/90; Class B,
8/1/94; Class C, 7/26/93; and Class Z, 12/6/96.
3 Lipper average returns are for all funds in each
share class for the six-month, one-, and five-year
periods in the Florida Municipal Debt Fund
category. Single-state Municipal Debt funds limit
their securities that are exempt from taxation in a
specified state (double tax exempt) or city (triple
tax exempt).
4 Taxable equivalent yields reflect federal and
applicable state tax rates.
***Lipper Since Inception returns are 72.54% for
Class A, 29.76% for Class B, 30.65% for Class C,
and 9.44% for Class Z, based on all funds in each
share class.
3
<PAGE>
Prudential Municipal Series Fund Florida Series
Performance Review
Although the bear market detracted from the Series'
returns, we were able to increase its distribution
yield in this rising-interest-rate environment.
We pursued a short-duration strategy
When bond markets sell off, lowering a portfolio's
duration generally
provides some degree of protection by making the
portfolio less sensitive to the rise in bond
yields. (Duration measures how much a portfolio's
bonds will fluctuate in price for a given change in
interest rates. It is expressed in years.) The
Series' share classes, without sales charges
factored in, performed better than its benchmark
Lipper Average, which does not consider sales
charges. This occurred largely because we kept its
duration shorter than average for most of its
fiscal half year.
In January 2000, however, we began to lengthen the
Series' duration because we believe the Fed's
monetary policy moves will keep inflation in check,
which could allow municipal bond yields to decline
as the year progresses.
The Series' relative performance was also enhanced
because it owns bonds issued by the Daughters of
Charity for the Sacred Heart Hospital. During our
review period, these debt securities rallied
because they were prerefunded. This means the bonds
are now backed by an escrow of direct obligations
of the U.S. government whose interest and principal
will be used to pay off the bonds at their first
call date.
Credit Quality
Expressed as a percentage of total investments
as of 2/29/00
5.00% AAA
11.00 AA
5.00 A
17.00 BBB
27.00 Not Rated
35.00 Insured
4
<PAGE>
www.prudential.com (800) 225-1852
We lessened the impact of "market-discount
taxation"
Another strategy that benefited the Series was
selling some of its municipal bonds before they
became subject to ordinary income taxes for
investors who might want to buy them. Here's how it
works: When yields climb beyond a certain point for
every municipal bond, the market discount on that
bond may become subject to ordinary income taxes
for new buyers. This lowers the value of the bond
because new buyers would want to purchase the bond
cheaply enough to compensate for the greater tax
liability.
Looking Ahead
Shortly after our six-month review period ended,
the Fed engineered
another quarter-point rate hike that raised its
target for the federal funds rate to 6.00% and its
discount rate to 5.50%. We believe the Fed's
efforts to tighten monetary policy will slow the
U.S. economic expansion in 2000 from its 7.30%
annual pace in the fourth quarter of 1999.
Moderating economic growth could help bolster the
performance of municipal bonds, but detract from
the performance of equities.
Meanwhile, the powerful U.S. economic expansion has
improved the credit quality of many state and local
governments and reduced their borrowing needs,
allowing them to issue fewer bonds. The supply of
new municipal bonds has also decreased because the
rising-interest-rate environment provided less
opportunity for issuers to save money by replacing
older higher-coupon bonds with new lower-coupon
bonds. With the declining supply, if investor
demand remains strong, the tax-exempt bond market
could perform better than other U.S. fixed-income
markets in 2000.
Five Largest Issuers
Expressed as a percentage of net assets
as of 2/29/00
9.02% Puerto Rico Commonwealth*
5.29 Puerto Rico Electric
Power Authority*
3.82 Dade County
Prof. Sports Facilities
3.72 Brevard County School Board
Cert. of Part.*
3.14 Lakeland Electric & Water*
* Prerefunded issues are secured by escrowed cash
and/or direct U.S. guaranteed obligations.
5
<PAGE>
Prudential Municipal Series Fund Florida Series
Financial
Statements
<PAGE>
Prudential Municipal Series Fund Florida Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 98.4%
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alachua Cnty. Ind. Dev. Auth. Rev.,
H.B. Fuller Co. Proj., A.M.T. NR 7.75% 11/01/16 $ 3,000(g) $ 3,052,440
Arbor Greene Cmty. Dev. Dist.,
Florida Assmt. Rev. NR 5.75 05/01/06 500 482,110
Florida Assmt. Rev. NR 6.30 05/01/19 350 322,931
Bayside Impvt. Cmty. Dev. Dist.,
Florida Cap. Impvt. Rev., Ser. A NR 6.30 05/01/18 1,000 923,890
Brevard Cnty. Edl. Facs. Auth. Rev.
Ref., Florida Inst. of Tech. NR 6.875 11/01/22 1,500 1,526,685
Brevard Cnty. Sch. Brd. Ctfs. of
Part., Ser. A, A.M.B.A.C. Aaa 6.50 07/01/12 3,500(f) 3,700,515
Broward Cnty. Edl. Facs. Auth. Rev.,
Nova Univ. Dorm. Proj., Ser. A NR 7.50 04/01/17 1,500(f) 1,578,750
Broward Cnty. Hlth. Facs. Auth.,
North Beach Hosp., M.B.I.A. Aaa 6.75 08/15/06 1,000 1,047,430
Clay Cnty. Hsg. Fin. Auth. Rev.,
Sngl. Fam. Mtge., Ser. A, A.M.T.,
G.N.M.A. Aa1 7.45 09/01/23 375 384,379
Cocoa Wtr. & Swr. Rev. Ref.,
F.G.I.C. Aaa 5.25 10/01/17 1,230 1,158,549
Dade Cnty. Aviation Dept. Rev., Ser.
B, A.M.T., M.B.I.A. Aaa 6.00 10/01/24 1,500 1,508,070
Dade Cnty. Hlth. Facs. Auth. Rev.,
Baptist Hosp. of Miami Proj., Ser.
A, E.T.M., M.B.I.A. Aaa 6.75 05/01/08 500 533,225
Dade Cnty. Hsg. Fin. Auth. Rev.,
Multi. Fam. Mtge., Golden Lakes
Apts. Proj., Ser. A, A.M.T. NR 6.05 11/01/39 1,000 897,360
Sngl. Fam. Mtge., Ser. B, A.M.T.,
G.N.M.A Aaa 7.25 09/01/23 285 291,372
Sngl. Fam. Mtge., Ser. C, A.M.T.,
G.N.M.A. Aaa 7.75 09/01/22 540 552,377
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Florida Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dade Cnty. Prof. Sports Franchise
Facs. Tax Rev., M.B.I.A. Aaa 5.25% 10/01/30 $ 4,200 $ 3,798,774
Duval Cnty. Hsg. Fin. Auth. Rev.,
Sngl. Fam. Mtge., A.M.T., G.N.M.A. NR 8.375 12/01/14 190 194,627
Florida Hsg. Fin. Corp. Rev.,
Cypress Trace Apts., Ser. G, A.M.T. NR 6.60 07/01/38 1,220 1,123,632
Westchase Apts., Ser. B, A.M.T. NR 6.61 07/01/38 1,510 1,390,846
Florida St. Mun. Pwr. Agcy. Ref.,
Stanton II Proj., A.M.B.A.C. Aaa 4.50 10/01/27 2,000 1,550,200
Greater Orlando Aviation Rev. Auth.
Facs., Orlando Arpt., A.M.T.,
F.G.I.C. Aaa 5.25 10/01/23 2,000 1,772,780
Hillsborough Cnty. Ind. Dev. Auth.
Poll. Ctrl. Rev., Tampa Elec.
Proj., Ser. 92 Aa3 8.00 05/01/22 1,750 1,909,110
Indigo Cmnty. Dev. Dist. Cap. Impt.
Rev., Ser. B NR 6.40 05/01/06 1,500 1,477,665
Jacksonville Elec. Auth. Rev., St.
Johns Rvr. Pwr. Park Issue 2,
Ser. 7 Aa2 Zero 10/01/10 3,000 1,681,980
Jacksonville Elec. Auth. Rev. Elec.
Sys., Ser. 3A Aa2 6.00 10/01/30 1,000 987,510
Jacksonville Hlth. Facs. Auth. Hosp.
Rev.,
Nat'l. Ben. Assoc. Baa1 7.00 12/01/22 1,825 1,826,989
St. Lukes Hosp. Assoc. Proj. NR 7.125 11/15/20 1,000 1,050,380
Jacksonville Swr. & Sld. Wste. Disp.
Facs. Rev., Anheuser Busch Proj.,
A.M.T. A1 5.875 02/01/36 1,000 951,030
Jacksonville Wtr. & Swr. Dev. Rev.,
Suburban Utils., A.M.T. A3 6.75 06/01/22 1,000 1,043,410
United Wtr. Proj., A.M.T.,
A.M.B.A.C. Aaa 6.35 08/01/25 1,500 1,534,410
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Municipal Series Fund Florida Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lake Cnty. Res. Rec. Ind. Dev. Rev.,
NRG Recov. Grp., Ser. A, A.M.T. Baa2 5.95% 10/01/13 $ 1,035 $ 968,574
Lakeland Elec. & Wtr. Rev. A1 5.625 10/01/36 3,000(f) 3,126,660
Lee Cnty. Ind. Dev. Auth. Hlth. Care
Facs. Rev., Shell Point Proj.,
Ser. A NR 5.50 11/15/29 1,500 1,100,355
Leon Cnty. Hsg. Fin. Auth. Rev.,
Sngl. Fam. Mtge., Ser. A, A.M.T.,
G.N.M.A. Aaa 7.30 04/01/21 250 255,075
Lexington Oaks Comnty. Dev. Dist.
Rev., Ser. B NR 6.70 05/01/07 500 498,815
Martin Cnty. Ind. Dev. Auth. Rev.,
Indiantown Cogen. Proj., Ser. A,
A.M.T. Baa3 7.875 12/15/25 1,200(e) 1,202,028
Miami-Dade Cnty. Ind. Dev. Auth.
Rev. Facs., United Air Lines Inc.
Proj. Baa3 6.05 03/01/35 1,000 1,002,970
Miami-Dade Cnty. Prof. Sports Fac.
Tax Cap. Apprec. Ref., M.B.I.A. Aaa Zero 10/01/16 2,650 997,089
Miami Parking Facs. Rev. Ref.,
M.B.I.A. Aaa 5.25 10/01/15 400 383,540
Miami Spec. Oblig., Admn. Bldg.
Acquis. Proj., F.G.I.C. Aaa 6.00 02/01/16 1,000 1,011,870
Mirimar Wste. Wtr. Impvt. Assmt.
Rev., F.G.I.C. Aaa 6.75 10/01/16 1,590(f) 1,716,103
Okaloosa Cnty. Cap. Impvt. Rev.,
M.B.I.A. Aaa Zero 12/01/06 450 314,379
Orange Cnty. Hsg. Fin. Auth. Mtge.
Rev., Ser. A, A.M.T., G.N.M.A. NR 7.375 09/01/24 420 433,222
Orange Cnty. Hsg. Fin. Auth. Rev.,
Multi. Fam. Ashley Point Apts.,
Ser. A, A.M.T. NR 6.85 10/01/16 1,200 1,206,648
Multi. Fam. Ashley Point Apts.,
Ser. A, A.M.T. NR 7.10 10/01/24 855 859,514
Orlando Util. Comm., Wtr. & Elec.
Rev., Ser. D Aa2 6.75 10/01/17 2,200 2,452,626
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Florida Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Palm Beach Cnty. Hlth. Facs. Auth.
Rev.,
Abbey Delray South Proj. NR 5.50% 10/01/11 $ 750 $ 672,458
Good Samaritan Hlth. Sys. Aaa 6.30 10/01/22 1,000(f) 1,059,940
Palm Beach Cnty. Hsg. Fin. Multi.
Fam. Auth. Rev., Windsor Pk. Apts.,
Ser. A, A.M.T. NR 5.80 12/01/28 2,680 2,358,400
Palm Beach Cnty., Gen. Oblig. Aa2 5.50 12/01/14 2,000 2,007,840
Pensacola Hlth. Facs. Auth. Rev.,
Daughters of Charity, M.B.I.A. Aaa 5.25 01/01/11 1,600(f) 1,608,704
Polk Cnty. Ind. Dev. Auth., Sld.
Wste. Disp. Fac. Rev.,
Tampa Elec. Co. Proj., A.M.T. Aa2 5.85 12/01/30 1,500 1,444,020
Puerto Rico Comnwlth.,
Cap. Apprec. Ref. Pub. Impvt., Gen.
Oblig. Baa1 Zero 07/01/15 1,955 794,180
Cap. Apprec. Ref. Pub. Impvt., Gen.
Oblig. Baa1 Zero 07/01/16 2,500 950,075
Cap. Apprec. Ref. Pub. Impvt., Gen.
Oblig. Baa1 Zero 07/01/17 5,300 1,885,634
Gen. Oblig. Aaa 5.75 07/01/12 3,000 3,115,380
Gen. Oblig. Aaa 6.45 07/01/17 1,400(f) 1,513,358
Gen. Oblig. Aaa 6.50 07/01/23 650(f) 703,891
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. R Baa1 6.25 07/01/17 5,000(f) 5,262,850
Puerto Rico Pub. Bldgs. Auth. Rev.
Gtd.
Gov. Fac., Ser. B, F.S.A. NR 5.25 07/01/21 1,915 1,762,700
Puerto Rico Tel. Auth. Rev., Ser. I,
M.B.I.A., R.I.B.S. Aaa 6.966 01/16/15 2,250(d)(f) 2,382,187
St. Petersburg Hlth. Facs. Auth.
Rev., Allegheny Hlth. Proj.,
M.B.I.A. Aaa 7.00 12/01/15 1,000(f) 1,056,660
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Municipal Series Fund Florida Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sunrise Pub. Facs. Rev. Cap.
Apprec., Ser. B, M.B.I.A. Aaa Zero 10/01/20 $ 1,120 $ 322,448
Sunrise Util. Sys. Rev. Ref.,
A.M.B.A.C. Aaa 5.50% 10/01/18 2,000 1,945,460
Tampa Gtd. Entitlement Rev.,
A.M.B.A.C. Aaa 7.05 10/01/07 2,000 2,107,880
Tampa Sports Auth. Rev., Tampa Bay
Arena Proj., M.B.I.A. Aaa 5.75 10/01/20 1,000 996,360
Tampa Util. Tax, Cap. Apprec.
Impvt., A.M.B.A.C. AAA(c) Zero 10/01/13 3,295 1,519,094
Virgin Islands Pub. Fin. Auth. Rev.,
Gross Rcpts. Taxes Loan, Ser. A NR 6.50 10/01/24 500 494,520
Volusia Cnty. Edl. Fac. Auth. Rev.,
Embry Riddle Univ. NR 6.625 10/15/22 1,000(f) 1,063,950
Volusia Cnty. Edl. Fac. Auth. Rev.,
Embry Riddle Univ.,
Aero A Baa2 5.75 10/15/29 1,000 909,150
Volusia Cnty. Hlth. Facs. Auth.
Rev., Mem. Hlth. Sys. Proj. NR 8.25 06/01/20 2,000(f) 2,058,660
-----------
Total long-term investments (cost
$98,585,042) 97,778,693
-----------
SHORT-TERM INVESTMENTS 0.3%
- ----------------------------------------------------------------------------------------
Manatee Cnty. Poll. Cont. Rev. Adj.
Ref., Florida Pwr. & Light Co.
Proj., F.R.D.D., (cost $300,000) VMIG1 3.85 03/01/00 300 300,000
-----------
Total Investments 98.7%
(cost $98,885,042; Note 4) 98,078,693
Other assets in excess of
liabilities 1.3% 1,260,885
-----------
Net Assets 100% $99,339,578
-----------
-----------
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Florida Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
(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.
E.T.M.--Escrowed to Maturity.
F.G.I.C.--Financial Guaranty Insurance Company.
F.R.D.D.--Floating Rate (Daily) Demand Note (b).
F.S.A.--Financial Security Assurance.
G.N.M.A.--Government National Mortgage Association.
M.B.I.A.--Municipal Bond Insurance Association.
R.I.B.S.--Residual Interest Bonds.
(b) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be the later of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
(c) Standard & Poor's Rating.
(d) Inverse floating rate bond. The coupon is inversely indexed to a floating
interest rate. The rate shown is the rate at period-end.
(e) Represents when issued or extended settlement security.
(f) Prerefunded issues are secured by escrowed cash and/or direct U.S.
guaranteed obligations.
(g) Pledged as collateral for when issued or extended settlement security.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information contains a description of
Moody's and Standard & Poor's ratings.
See Notes to Financial Statements 11
<PAGE>
Prudential Municipal Series Fund Florida Series
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
February
29, 2000
- ----------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at value (cost $98,885,042) $98,078,693
Cash 31,022
Interest receivable 1,611,822
Receivable for Series shares sold 62,870
Receivable for investment sold 30,000
Due from broker - variation margin 3,888
Other assets 2,474
-----------------
Total assets 99,820,769
-----------------
LIABILITIES
Payable for investments purchased 1,000,000
Payable for Series shares reacquired 312,104
Accrued expenses 68,526
Management fee payable 39,144
Dividends payable 28,898
Distribution fee payable 26,432
Deferred trustees' fees 6,087
-----------------
Total liabilities 1,481,191
-----------------
NET ASSETS $98,339,578
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 99,788
Paid-in capital in excess of par 99,871,872
-----------------
99,971,660
Accumulated net realized loss on investments (825,733)
Net unrealized depreciation on investments (806,349)
-----------------
Net assets, February 29, 2000 $98,339,578
-----------------
-----------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Florida Series
Statement of Assets and Liabilities (Unaudited) Cont'd.
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share ($69,097,724
/ 7,011,547 shares of beneficial interest issued and
outstanding) $9.85
Maximum sales charge (3% of offering price) .30
-----------------
Maximum offering price to public $10.15
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per
share ($23,129,796 / 2,347,059 shares of beneficial
interest issued and outstanding) $9.85
-----------------
-----------------
Class C:
Net asset value and redemption price per share ($5,882,664
/ 596,925 shares of beneficial interest issued and
outstanding) $9.85
Sales charge (1% of offering price) .10
-----------------
Offering price to public $9.95
-----------------
-----------------
Class Z:
Net asset value, offering price and redemption price per
share ($229,394 / 23,287 shares of beneficial interest
issued and outstanding) $9.85
-----------------
-----------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Municipal Series Fund Florida Series
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest $ 3,115,289
-----------------
Expenses
Management fee 258,036
Distribution fee--Class A 91,385
Distribution fee--Class B 58,989
Distribution fee--Class C 23,416
Custodian's fees and expenses 40,000
Reports to shareholders 22,000
Transfer agent's fees and expenses 17,000
Registration fees 17,000
Legal fees and expenses 6,000
Audit fees and expenses 5,000
Trustees' fees and expenses 3,000
Miscellaneous 3,712
-----------------
Total expenses 545,538
Custodian fee credit (122)
-----------------
Net expenses 545,416
-----------------
Net investment income 2,569,873
-----------------
-----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Investment transactions (729,373)
Financial futures transactions 4,650
-----------------
(724,723)
Net change in unrealized depreciation on:
Investments (2,655,099)
-----------------
Net loss on investments (3,379,822)
-----------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (809,949)
-----------------
-----------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Florida Series
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year Ended
Ended August 31,
February 29, 2000 1999
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
DECREASE IN NET ASSETS
Operations
Net investment income $ 2,569,873 $ 5,424,084
Net realized gain (loss) on investment
transactions (724,723) 447,190
Net change in unrealized depreciation of
investments (2,655,099) (6,574,512)
----------------- -------------
Net decrease in net assets resulting from
operations (809,949) (703,238)
----------------- -------------
Dividends and Distributions (Note 1):
Dividends from net investment income
Class A (1,851,641) (4,002,478)
Class B (568,752) (1,091,852)
Class C (142,435) (309,399)
Class Z (7,045) (20,355)
----------------- -------------
(2,569,873) (5,424,084)
----------------- -------------
Distributions in excess of net investment
income
Class A -- (8,316)
Class B -- (2,283)
Class C -- (710)
Class Z -- (45)
----------------- -------------
-- (11,354)
----------------- -------------
Distributions from net realized gains
Class A -- (8,316)
Class B -- (2,283)
Class C -- (710)
Class Z -- (46)
----------------- -------------
-- (11,355)
----------------- -------------
Series share transactions (net of share
conversions) (Note 5):
Net proceeds from shares sold 5,507,107 13,296,170
Net asset value of shares issued in
reinvestment of dividends and
distributions 1,166,282 2,387,979
Cost of shares reacquired (14,187,596) (19,003,105)
----------------- -------------
Net decrease in net assets from Series share
transactions (7,514,207) (3,318,956)
----------------- -------------
Total decrease (10,894,029) (9,468,987)
NET ASSETS
Beginning of period 109,233,607 118,702,594
----------------- -------------
End of period $ 98,339,578 $ 109,233,607
----------------- -------------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Municipal Series Fund Florida Series
Notes to Financial Statements (Unaudited)
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 11
series. The monies of each series are invested in separate, independently
managed portfolios. The Florida Series (the 'Series') commenced investment
operations on December 28, 1990. The Series is nondiversified and seeks to
achieve its investment objective of providing the maximum amount of income that
is exempt from federal income taxes with the minimum of risk, and investing in
securities which will enable its shares to be exempt from the Florida
intangibles tax 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 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 Series 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
16
<PAGE>
Prudential Municipal Series Fund Florida Series
Notes to Financial Statements (Unaudited) Cont'd.
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.
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.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
Custody Fee Credits: The Fund has an arrangement with its custodian
bank, whereby uninvested monies earn credits which reduce the fees charged by
the custodian.
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM has entered into a subadvisory agreement with The Prudential
Investment
17
<PAGE>
Prudential Municipal Series Fund Florida Series
Notes to Financial Statements (Unaudited) Cont'd.
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 to 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 Investment
Management Services LLC ('PIMS'), which acts as the distributor of the Class A,
Class B, Class C and Class Z shares of the Fund. The Fund compensates PIMS for
distributing and servicing the Fund's Class A, Class B and Class C shares,
pursuant to plans of distribution (the 'Class A, B and C Plans') regardless of
expenses actually incurred by them. The distribution fees are accrued daily and
payable monthly. No distribution or service fees are paid to PIMS as distributor
for Class Z shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, .50 of 1%
and .75 of 1% of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Plans were .25 of 1%, .50 of 1% and .75 of
1% of the average daily net assets of the Class A, B and C shares, respectively,
for the six months ended February 29, 2000.
PIMS has advised the Series that they have received approximately $5,800
and $100 in front-end sales charges resulting from sales of Class A and C
shares, respectively during the six months ended February 29, 2000. From these
fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn
paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Series that for the six months ended February 29,
2000, they received approximately $32,800 and $300 in contingent deferred sales
charges imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PIFM, PIMS and PIC are indirect, wholly owned subsidiaries of The
Prudential Insurance Company of America ('Prudential').
The Fund, along with other affiliated registered investment companies (the
'Funds'), entered into a syndicated credit agreement ('SCA') with an
unaffiliated lender. The maximum commitment under the SCA is $1 billion and
interest on any borrowings will be at market rates. For the period
3/11/99-3/9/00, the commitment fee on the unused portion of the credit facility
was .065 of 1%. Subsequent to March 9, 2000, the SCA was renewed with a maximum
commitment of $1 billion at a commitment fee of .080 of 1% of the unused portion
of the credit facility. The expiration date of the SCA is March 9, 2001. The
commitment fee is accrued and paid
18
<PAGE>
Prudential Municipal Series Fund Florida Series
Notes to Financial Statements (Unaudited) Cont'd.
quarterly on a pro rata basis by the Funds. Prior to March 11, 1999, the Funds
had a credit agreement with a mximum commitment of $200,000,000. The commitment
fee was .055 of 1% on the unused portion of the credit facility. The Fund did
not borrow any amounts during the six months ended February 29, 2000. The
purpose of the credit agreements is to serve as an alternative source of funding
for capital share redemptions.
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the six months ended February 29,
2000, the Series incurred fees of approximately $12,700 for the services of
PMFS. As of February 29, 2000, approximately $2,100 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 29, 2000 were $12,501,019 and
$18,766,932, respectively.
The cost basis of investments for federal income tax purposes at February
29, 2000 was substantially the same as for financial reporting purposes and
accordingly, net unrealized depreciation of investments for federal income tax
purposes was $806,349 (gross unrealized appreciation--$2,763,904 gross
unrealized depreciation--$3,570,253).
The Series elected, for United States federal income tax purposes, to
treat short-term capital losses of $44,975 and long-term capital losses of
$54,800 incurred in the ten months ended August 31, 1999 as having been incurred
in the current fiscal year.
Note 5. Capital
The Series offers Class A, Class B, Class C and Class Z shares. Class A shares
are sold with a front-end sales charge of up to 3%. Class B shares are sold with
a contingent deferred sales charge which declines from 5% to zero depending on
the period of time the shares are held. Class C shares are sold with a front-end
sales charge of 1% during the first 18 months. Class B shares will automatically
convert to Class A shares on a quarterly basis approximately seven years after
purchase. Special exchange privileges are also available for shareholders who
qualify to purchase Class A shares at net asset value. Class Z shares are not
subject to any sales or redemption charge and are offered exclusively for sale
to a limited group of investors. The Fund
19
<PAGE>
Prudential Municipal Series Fund Florida Series
Notes to Financial Statements (Unaudited) Cont'd.
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 29, 2000 and the fiscal year ended August 31, 1999 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------------------------------------ ---------- ------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold 251,684 $ 2,499,614
Shares issued in reinvestment of dividends 85,774 852,419
Shares reacquired (967,406) (9,612,113)
---------- ------------
Net decrease in shares outstanding before conversion (629,948) (6,260,080)
Shares issued upon conversion from Class B 35,687 359,848
---------- ------------
Net decrease in shares outstanding (594,261) $ (5,900,232)
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 459,241 $ 4,897,168
Shares issued in reinvestment of dividends 166,808 1,765,475
Shares reacquired (1,315,210) (13,931,649)
---------- ------------
Net decrease in shares outstanding before conversion (689,161) (7,269,006)
Shares issued upon conversion from Class B 94,743 1,008,731
---------- ------------
Net decrease in shares outstanding (594,418) $ (6,260,275)
---------- ------------
---------- ------------
Class B
- ------------------------------------------------------------
Six months ended February 29, 2000:
Shares sold 281,578 $ 2,791,672
Shares issued in reinvestment of dividends 22,862 227,183
Shares reacquired (341,440) (3,390,274)
---------- ------------
Net decrease in shares outstanding before conversion (37,000) (371,419)
Shares reacquired upon conversion into Class A (35,687) (359,848)
---------- ------------
Net decrease in shares outstanding (72,687) $ (731,267)
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 665,024 $ 7,087,108
Shares issued in reinvestment of dividends 41,768 441,754
Shares reacquired (311,472) (3,295,872)
---------- ------------
Net increase in shares outstanding before conversion 395,320 4,232,990
Shares reacquired upon conversion into Class A (94,763) (1,008,731)
---------- ------------
Net increase in shares outstanding 300,557 $ 3,224,259
---------- ------------
---------- ------------
</TABLE>
20
<PAGE>
Prudential Municipal Series Fund Florida Series
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C Shares Amount
- ------------------------------------------------------------ ---------- ------------
Six months ended February 29, 2000:
<S> <C> <C>
Shares sold 12,638 $ 124,666
Shares issued in reinvestment of dividends 8,143 80,940
Shares reacquired (95,245) (950,361)
---------- ------------
Net decrease in shares outstanding (74,464) $ (744,755)
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 57,676 $ 610,380
Shares issued in reinvestment of dividends 15,461 163,559
Shares reacquired (102,072) (1,072,067)
---------- ------------
Net decrease in shares outstanding (28,935) $ (298,128)
---------- ------------
---------- ------------
<CAPTION>
Class Z
- ------------------------------------------------------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold 9,027 $ 91,155
Shares issued in reinvestment of dividends 578 5,740
Shares reacquired (23,382) (234,848)
---------- ------------
Net decrease in shares outstanding (13,777) $ (137,953)
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 66,050 $ 701,514
Shares issued in reinvestment of dividends 1,623 17,191
Shares reacquired (66,254) (703,517)
---------- ------------
Net increase in shares outstanding 1,419 $ 15,188
---------- ------------
---------- ------------
</TABLE>
21
<PAGE>
Prudential Municipal Series Fund Florida Series
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Class A
<S> <C> <C>
-----------------
<CAPTION>
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.18
--------
Income from investment operations
Net investment income .25
Net realized and unrealized gain (loss) on investment
transactions (.33)
--------
Total from investment operations (.08)
--------
Less distributions
Dividends from net investment income (.25)
Distributions in excess of net investment income --
Distributions from net realized gains --
--------
Total distributions (.25)
--------
Net asset value, end of period $ 9.85
--------
--------
TOTAL RETURN(b): (0.72)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $69,098
Average net assets (000) $73,509
Ratios to average net assets:
Expenses, including distribution fees .97%(d)
Expenses, excluding distribution fees .72%(d)
Net investment income 5.07%(d)
For Class A, B and C shares:
Portfolio turnover rate 12%
</TABLE>
- ------------------------------
(a) Net of expense subsidy and 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.
22 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Florida Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class A
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 10.74 $ 10.41 $ 10.11 $ 10.06 $ 9.91
-------- -------- -------- ---------------- ----------------
.50 .52 .54(a) .57(a) .59(a)
(.56) .33 .31 .05 .15
-------- -------- -------- ---------------- ----------------
(.06) .85 .85 .62 .74
-------- -------- -------- ---------------- ----------------
(.50) (.52) (.54) (.57) (.59)
--(c) -- (.01) -- --
--(c) -- -- -- --
-------- -------- -------- ---------------- ----------------
(.50) (.52) (.55) (.57) (.59)
-------- -------- -------- ---------------- ----------------
$ 10.18 $ 10.74 $ 10.41 $ 10.11 $ 10.06
-------- -------- -------- ---------------- ----------------
-------- -------- -------- ---------------- ----------------
(.61)% 8.34% 8.65% 6.20% 7.85%
$ 77,398 $ 88,045 $ 92,579 $101,999 $120,963
$ 84,810 $ 90,437 $ 97,700 $112,266 $124,259
.89% .80% .57%(a) .37%(a) .24%(a)
.69% .70% .47%(a) .27%(a) .17%(a)
4.72% 4.89% 5.32%(a) 5.56%(a) 6.04%(a)
13% 35% 22% 68% 65%
</TABLE>
See Notes to Financial Statements 23
<PAGE>
Prudential Municipal Series Fund Florida Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.18
--------
Income from investment operations
Net investment income .24
Net realized and unrealized gain (loss) on investment
transactions (.33)
--------
Total from investment operations (.09)
--------
Less distributions
Dividends from net investment income (.24)
Distributions in excess of net investment income --
Distributions from net realized gains --
--------
Total distributions (.24)
--------
Net asset value, end of period $ 9.85
--------
--------
TOTAL RETURN(b): (0.74)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $23,130
Average net assets (000) $23,725
Ratios to average net assets:
Expenses, including distribution fees 1.22%(d)
Expenses, excluding distribution fees .72%(d)
Net investment income 4.82%(d)
</TABLE>
- ------------------------------
(a) Net of expense subsidy and 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.
24 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Florida Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 10.74 $ 10.41 $ 10.11 $ 10.06 $ 9.91
-------- -------- -------- -------- -------
.47 .48 .50(a) .53(a) .55(a)
(.56) .33 .31 .05 .15
-------- -------- -------- -------- -------
(.09) .81 .81 .58 .70
-------- -------- -------- -------- -------
(.47) (.48) (.50) (.53) (.55)
--(c) -- (.01) -- --
--(c) -- -- -- --
-------- -------- -------- -------- -------
(.47) (.48) (.51) (.53) (.55)
-------- -------- -------- -------- -------
$ 10.18 $ 10.74 $ 10.41 $ 10.11 $10.06
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
(.91)% 7.91% 8.22% 5.79% 7.39%
$ 24,626 $ 22,755 $ 18,820 $ 14,699 $8,326
$ 24,665 $ 21,154 $ 17,565 $ 12,570 $4,699
1.19% 1.20% .97%(a) .77%(a) .67%(a)
.69% .70% .47%(a) .27%(a) .17%(a)
4.43% 4.49% 4.92%(a) 5.16%(a) 5.56%(a)
</TABLE>
See Notes to Financial Statements 25
<PAGE>
Prudential Municipal Series Fund Florida Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.18
-------
Income from investment operations
Net investment income .23
Net realized and unrealized gain (loss) on investment
transactions (.33)
-------
Total from investment operations (.10)
-------
Less distributions
Dividends from net investment income (.23)
Distributions in excess of net investment income --
Distributions from net realized gains --
-------
Total distributions (.23)
-------
Net asset value, end of period $ 9.85
-------
-------
TOTAL RETURN(b): (0.87)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 5,883
Average net assets (000) $ 6,279
Ratios to average net assets:
Expenses, including distribution fees 1.47%(d)
Expenses, excluding distribution fees .72%(d)
Net investment income 4.55%(d)
</TABLE>
- ------------------------------
(a) Net of expense subsidy and 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.
26 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Florida Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
- ----------------------------------------------------------------------------------------------------------
Year Ended September 30,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$10.74 $10.41 $10.11 $10.06 $ 9.91
------- ------- ------- ------- --------
.44 .45 .48(a) .50(a) .53(a)
(.56) .33 .31 .05 .15
------- ------- ------- ------- --------
(.12) .78 .79 .55 .68
------- ------- ------- ------- --------
(.44) (.45) (.48) (.50) (.53)
--(c) -- (.01) -- --
--(c) -- -- -- --
------- ------- ------- ------- --------
(.44) (.45) (.49) (.50) (.53)
------- ------- ------- ------- --------
$10.18 $10.74 $10.41 $10.11 $ 10.06
------- ------- ------- ------- --------
------- ------- ------- ------- --------
(1.16)% 7.64% 7.95% 5.52% 7.12%
$6,833 $7,520 $7,336 $7,792 $ 9,028
$7,420 $7,325 $7,575 $8,293 $ 10,265
1.44% 1.45% 1.22%(a) 1.02%(a) .92%(a)
.69% .70% .47%(a) .27%(a) .17%(a)
4.17% 4.24% 4.67%(a) 4.91%(a) 5.35%(a)
</TABLE>
See Notes to Financial Statements 27
<PAGE>
Prudential Municipal Series Fund Florida Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.17
-------
Income from investment operations
Net investment income .27
Net realized and unrealized gain (loss) on investment
transactions (.32)
-------
Total from investment operations (.05)
-------
Less distributions
Dividends from net investment income (.27)
Distributions in excess of net investment income --
Distributions from net realized gains --
-------
Total distributions (.27)
-------
Net asset value, end of period $ 9.85
-------
-------
TOTAL RETURN(b): (0.49)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 229
Average net assets (000) $ 268
Ratios to average net assets:
Expenses, including distribution fees .72%(c)
Expenses, excluding distribution fees .72%(c)
Net investment income 5.28%(c)
</TABLE>
- ------------------------------
(a) Net of expense subsidy and fee waiver.
(b) 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) Annualized.
(d) Commencement of offering of Class Z shares.
(e) Less than $.005 per share.
28 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Florida Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
- ---------------------------------------------------------------------------------------
Year Ended August 31, September 18, 1996(d)
- ------------------------------------------ through August 31,
1999 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
$10.73 $10.41 $10.36
------- ------- -------
.52 .53 .41(a)
(.56) .32 .06
------- ------- -------
(.04) .85 .47
------- ------- -------
(.52) (.53) (.41)
--(e) -- (.01)
--(e) -- --
------- ------- -------
(.52) (.53) (.42)
------- ------- -------
$10.17 $10.73 $10.41
------- ------- -------
------- ------- -------
(.42)% 8.34% 4.57%
$ 377 $ 383 $ 94
$ 413 $ 373 $ 36
.69% .70% .47%(a)(c)
.69% .70% .47%(a)(c)
4.93% 4.99% 5.48%(a)(c)
</TABLE>
See Notes to Financial Statements 29
<PAGE>
Prudential Municipal Series Fund Florida Series
Prudential Mutual Fund Family
Prudential offers a broad range of mutual funds
designed to meet your individual needs. For
information about these funds, contact your
financial adviser or call us at (800) 225-1852.
Read the prospectus carefully before you invest or
send money.
STOCK FUNDS
Prudential Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Index Series Fund
Prudential Small-Cap Index Fund
Prudential Stock Index Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Mid-Cap Value Fund
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund
Prudential 20/20 Focus Fund
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Target Funds
Large Capitalization Growth Fund
Large Capitalization Value Fund
Small Capitalization Growth Fund
Small Capitalization Value Fund
Asset Allocation/Balanced Funds
Prudential Balanced Fund
Prudential Diversified Funds
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund
GLOBAL FUNDS
Global Stock Funds
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Prudential Latin America Equity Fund
Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Index Series Fund
Prudential Europe Index Fund
Prudential Pacific Index Fund
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Prudential Global Growth Fund
Prudential International Value Fund
Prudential Jennison International Growth Fund
Global Utility Fund, Inc.
Target Funds
International Equity Fund
Global Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
<PAGE>
www.prudential.com (800) 225-1852
BOND FUNDS
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 High Yield Total Return Fund, Inc.
Prudential Index Series Fund
Prudential Bond Market Index Fund
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Target Funds
Total Return Bond Fund
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Income Series
Insured Series
Prudential Municipal Series Fund
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
MONEY MARKET FUNDS
Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
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
<PAGE>
Prudential Municipal Series Fund Florida Series
Getting the Most From Your Prudential Mutual Fund
Some mutual fund shareholders won't ever read
this--they don't read annual and semiannual reports.
It's quite understandable. These annual and
semiannual reports are prepared to comply with
federal regulations, and are often written in
language that is difficult to understand. So when
most people run into those particularly daunting
sections of these reports, they don't read them.
We think that's a mistake
At Prudential Mutual Funds, we've made some changes
to our report to make it easier to understand and
more pleasant to read. We hope you'll find it
profitable to spend a few minutes familiarizing
yourself with your investment. Here's what you'll
find in the report:
Performance at a Glance
Since an investment's performance is often a
shareholder's primary concern, we present
performance information in two different formats.
You'll find it first on the "Performance at a
Glance" page where we compare the Fund and the
comparable average calculated by Lipper, Inc., a
nationally recognized mutual fund rating agency. We
report both the cumulative total returns and the
average annual total returns. The cumulative total
return is the total amount of income and
appreciation the Fund has achieved in various time
periods. The average annual total return is an
annualized representation of the Fund's
performance. It gives you an idea of how much the
Fund has earned in an average year for a given time
period. Under the performance box, you'll see
legends that explain the performance information,
whether fees and sales charges have been included
in returns, and the inception dates for the Fund's
share classes.
See the performance comparison charts at the back
of the report for more performance information.
Please keep in mind that past performance is not
indicative of future results.
<PAGE>
www.prudential.com
(800) 225-1852
Performance review
The portfolio manager, who invests your money for
you, reports on
successful--and not-so-successful--strategies in this
section of your report. Look for recent purchases
and sales here, as well as information about the
sectors the portfolio manager favors, and any
changes that are on the
drawing board.
Portfolio of Investments
This is where the report begins to appear
technical, but it's really just a
listing of each security held at the end of the
reporting period, along with valuations and other
information. Please note that sometimes we discuss
a security in the Performance Review that doesn't
appear in this listing because it was sold before
the close of the reporting period.
Statement of Assets and Liabilities
The balance sheet shows the assets (the value of
the Fund's holdings),
liabilities (how much the Fund owes), and net
assets (the Fund's
equity, or holdings after the Fund pays its debts)
as of the end of the reporting period. It also
shows how we calculate the net asset value per
share for each class of shares. The net asset value
is reduced by payment of your
dividend, capital gain, or other distribution, but
remember that the money or new shares are being
paid or issued to you. The net asset value
fluctuates daily, along with the value of every
security in the portfolio.
Statement of Operations
This is the income statement, which details income
(mostly interest and
dividends earned) and expenses (including what you
pay us to manage your money). You'll also see
capital gains here--both realized and unrealized.
<PAGE>
Prudential Municipal Series Fund Florida Series
Getting the Most From Your Prudential Mutual Fund
Statement of Changes in Net Assets
This schedule shows how income and expenses
translate into changes
in net assets. The Fund is required to pay out the
bulk of its income to shareholders every year, and
this statement shows you how we do it (through
dividends and distributions) and how that affects
the net assets. This statement also shows how money
from investors flowed into and out of the Fund.
Notes to Financial Statements
This is the kind of technical material that can
intimidate readers, but it does contain useful
information. The Notes provide a brief history and
explanation of your Fund's objectives. In addition,
they outline how Prudential Mutual Funds prices
securities. The Notes also explain who manages and
distributes the Fund's shares and, more
importantly, how much they are paid for doing so.
Finally, the Notes explain how many shares are
outstanding and the number issued and redeemed over
the period.
Financial Highlights
This information contains many elements from prior
pages, but on a
per-share basis. It is designed to help you
understand how the Fund
performed, and to compare this year's performance
and expenses to those of prior years.
Independent Auditor's Report
Once a year, an outside auditor looks over our
books and certifies that the information is fairly
presented and complies with generally accepted
accounting principles.
Tax Information
This is information that we report annually about
how much of your total return is taxable. Should
you have any questions, you may want to consult a
tax adviser.
<PAGE>
www.prudential.com (800) 225-1852
Performance Comparison
These charts are included in the annual report and
are required by the Securities Exchange Commission.
Performance is presented here as a hypothetical
$10,000 investment in the Fund since its inception
or for 10 years (whichever is shorter). To help you
put that return in context, we
are required to include the performance of an
unmanaged, broad-based securities index as well.
The index does not reflect the cost of buying the
securities it contains or the cost of managing a
mutual fund. Of course, the index holdings do not
mirror those of the Fund--the index is a broad-based
reference point commonly used by investors to
measure how well they are doing. A definition of
the selected index is also provided. Investors
cannot invest directly in an index.
<PAGE>
Prudential Municipal Series Fund Florida Series
Getting the Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds,
you receive financial advice from a Prudential
Securities Financial Advisor or Pruco Securities
registered representative. Your advisor or
representative can provide you with the following
services:
There's No Reward Without Risk; but Is This Risk
Worth It?
Your financial advisor or registered representative
can help you match the reward you seek with the
risk you can tolerate. Risk can be difficult to
gauge--sometimes even the simplest investments bear
surprising risks. The educated investor knows that
markets seldom move in just one direction. There
are times when a market sector or asset class will
lose value or provide little in the way of total
return. Managing your own expectations is easier
with help from someone who understands the markets
and who knows you!
Keeping Up With the Joneses
A financial advisor or registered representative
can help you wade through the numerous available
mutual funds to find the ones that fit your
individual investment profile and risk tolerance.
While the newspapers and popular magazines are full
of advice about investing, they are aimed at
generic groups of people or representative
individuals--not at you personally. Your financial
advisor or registered representative will review
your investment objectives with you. This means you
can make financial decisions based on the assets
and liabilities in your current portfolio and your
risk tolerance--not just based on the current
investment fad.
Buy Low, Sell High
Buying at the top of a market cycle and selling at
the bottom are among the most common investor
mistakes. But sometimes it's difficult to hold on
to an investment when it's losing value every
month. Your financial advisor or registered
representative can answer questions when you're
confused or worried about your investment, and
should remind you that you're investing for the
long haul.
<PAGE>
www.prudential.com (800) 225-1852
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Trustees
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, Secretary
David F. Connor, Assistant Secretary
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
194 Wood Avenue South
Iselin, NJ 08830
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Fund Symbols NASDAQ CUSIP
Class A PFLAX 74435M507
Class B -- 74435M606
Class C -- 74435M614
Class Z -- 74435M424
The views expressed in this report and information
about the Fund's portfolio holdings are for the
period covered by this report and
are subject to change thereafter.
The accompanying financial statements as
of February 29, 2000, were not audited and,
accordingly, no opinion is expressed on them.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
MF148E2 74435M507 74435M606 74435M614 74435M424
(LOGO) Printed on Recycled Paper
<PAGE>
SEMIANNUAL REPORT FEBRUARY 29, 2000
Prudential
Municipal Series Fund/
Massachusetts Series
Fund Type Municipal bond
Objective Maximize current income that is exempt
from Massachusetts State and federal income taxes,
consistent with the preservation of capital
(GRAPHIC)
This report is not authorized for distribution to
prospective investors unless preceded or
accompanied by a current prospectus.
(LOGO)
<PAGE>
Build on the Rock
Investment Goals and Style
Prudential Municipal Series Fund/Massachusetts
Series' investment objective is to maximize current
income that is exempt from Massachusetts State and
federal income taxes, consistent with the
preservation of capital. However, certain
shareholders may be subject to the federal
alternative minimum tax (AMT) because some of the
Series' bonds are AMT eligible. There can be no
assurance the Series will achieve its investment
objective.
Contents
1 Message From the Fund's President
2 Performance Review
2 Portfolio Composition
3 Performance at a Glance
4 Credit Quality
5 Five Largest Issuers
7 Financial Statements
<PAGE>
www.prudential.com (800) 225-1852
Message From the Fund's President As of April 17, 2000
(PHOTO)
Dear Shareholder
The Class A shares of Prudential Municipal Series
Fund/Massachusetts Series had a negative return of
1.16% during its fiscal half year that ended February 29,
2000. For the same period, the return on the
Series' benchmark Lipper Average was a negative
1.21%. After the initial sales charge, the Class A
shares' return was a negative 4.12%. Prices of
municipal bonds declined primarily because
investors required higher yields in light of two
short-term rate increases implemented by the
Federal Reserve during our review period to slow
the rapid pace of U.S. economic growth.
Staying the course amid ups and downs of financial
markets
Many investors consider selling an asset class that
has performed poorly in favor of investments that
are currently gaining in value. That may not be the
best move. Changes in asset allocation should
reflect basic shifts in an investor's time horizon
and tolerance for risk--not recent fluctuations in
the performance of financial markets. One strategy
may be to own a diversified portfolio of mutual
funds that invests in stocks, bonds, and money
market instruments because this approach may help
to reduce risk.
Deciding on the correct level of diversification is
not easy. It requires
an understanding of an investor's risk tolerance
and overall investment strategy. In these volatile
times, we recommend consulting your financial
advisor to develop your asset allocation goals.
Thank you for your continued confidence in
Prudential mutual funds.
Sincerely,
John R. Strangfeld
President
Prudential Municipal Series Fund
1
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Performance Review
(PHOTO) (PHOTO) Portfolio Managers Evan Lamp (Municipal Bonds
Sector Team Leader) and Lorely Machin
Bear market in municipal bonds continued
During our six-month review period, increases in
short-term interest
rates by the Federal Reserve and sales of municipal
bonds by investors who wanted to realize tax losses
pressured the prices of tax-exempt debt securities.
Given this bearish trend, we positioned the Series
so that it would be less vulnerable to the decline
in bond prices.
The Fed raised its target for the federal funds
rate (what U.S. banks charge each other for
overnight loans) by a quarter of a percentage point
in November 1999 and February 2000 to curb U.S.
economic growth and reduce the economic imbalances
that can lead to higher inflation. These moves
pushed up the rate to 5.75% by February 2000. The
Fed also engineered two quarter-point increases that raised
its discount rate on loans to banks from the
Federal Reserve system to 5.25% by February 2000.
As short-term rates rose, investors required higher
yields on both short- and long-term municipal
bonds, which caused their prices to fall.
More selling pressure emerged in late December
1999. As interest rates climbed, investors realized
capital losses by selling bonds or bond funds. Many
investors reinvest in new bonds or other bond funds
with a lower cost basis for tax purposes (due to
the higher level of yields). This is called "tax
loss swapping." In the municipal bond market, the
capital loss often reduces taxes, while the higher
yields on the new bonds or other funds are
generally tax exempt.
Portfolio Composition
Expressed as a percentage of total investments
as of 2/29/00
52.07% Revenue Bonds
26.19 Prerefunded Bonds
16.19 General Obligations
5.55 Miscellaneous
2
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
<TABLE>
Cumulative Total Returns1 As of 2/29/00
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A -1.16% -4.30% 24.99% (24.76) 82.17% (81.83) 82.77% 82.43)
Class B -1.29 -4.56 22.71 (22.49) 75.04 (74.71) 176.14 (167.87)
Class C -1.41 -4.80 21.21 (20.98) N/A 24.89 (24.65)
Class Z -1.03 -4.08 N/A N/A 10.64 (10.54)
Lipper MA Muni
Debt Fund Avg.3 -1.21 -4.42 25.21 84.29 ***
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 3/31/00
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A -5.35% 4.21% (4.17) 6.09% (6.07) 5.98% (5.97)
Class B -7.68 4.29 (4.25) 5.99 (5.97) 6.90 (6.68)
Class C -4.90 3.99 (3.96) N/A 4.17 (4.13)
Class Z -2.19 N/A N/A 3.71 (3.68)
</TABLE>
<TABLE>
Distributions and Yields As of 2/29/00
<CAPTION>
Total Distributions 30-Day Taxable Equivalent Yield4 At Tax Rates of
Paid for Six Months SEC Yield 36% 39.6%
<S> <C> <C> <C>
Class A $0.27 4.38% 7.78% 8.24%
Class B $0.26 4.27 7.58 8.03
Class C $0.24 3.99 7.08 7.51
Class Z $0.29 4.77 8.47 8.97
</TABLE>
Past performance is not indicative of future
results. Principal and investment return will
fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their
original cost.
1 Source: Prudential Investments Fund Management
LLC and Lipper Inc. The cumulative total returns do
not take into account sales charges. The average
annual total returns do take into account
applicable sales charges. The Series charges a
maximum front-end sales charge of 3% for Class A
shares and a declining contingent deferred sales
charge (CDSC) of 5%, 4%, 3%, 2%, 1%, and 1% for six
years for Class B shares. Class B shares will
automatically convert to Class A shares, on a
quarterly basis, approximately seven years after
purchase. Class C shares are subject to a front-end
sales charge of 1% and a CDSC for 18 months. Class
Z shares are not subject to a sales charge or
distribution and service
(12b-1) fees. 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 ( ).
2 Inception dates: Class A, 1/22/90; Class B,
9/25/84; Class C, 8/1/94; and Class Z, 12/6/96.
3 Lipper average returns are for all funds in each
share class for the six-month, one-, five-, and
ten-year periods in the Massachusetts Municipal
Debt Fund category. Single-state Municipal Debt
funds limit their securities that are exempt from
taxation in a specified state (double tax exempt)
or city (triple tax exempt).
4 Taxable equivalent yields reflect federal and
applicable state tax rates.
***Lipper Since Inception returns are 86.18% for
Class A, 206.86% for Class B, 29.56% for Class C,
and 9.43% for Class Z, based on all funds in each
share class.
3
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Performance Review
Although the bear market detracted from the Series'
returns, we were able to increase distribution
yield in this rising-interest-rate environment.
We pursued a short-duration strategy
When bond markets sell off, lowering a portfolio's
duration generally provides some degree of
protection by making the portfolio less sensitive
to the rise in bond yields. (Duration measures how
much a portfolio's bonds will fluctuate in price
for a given change in interest rates. It is
expressed in years.) We kept the Series' duration
shorter than average for much of our fiscal half
year.
In January 2000, however, we began to lengthen the
Series' duration because we believe the Fed's
monetary policy moves will keep inflation in check,
which could allow municipal bond yields to decline
as the year progresses.
We also maintained a considerable exposure to
prerefunded bonds, which made up 26% of the Series'
total investments as of February 29, 2000. Prices
of prerefunded bonds held up better due to their
high coupon rates and shorter-term maturities.
Massachusetts bonds upgraded
During our six-month review period, Moody's
Investors Service upgraded the Commonwealth of
Massachusetts' general obligation bonds to Aa2 from
Aa3. Moody's cited the economic strength of
Massachusetts that would enable it to accommodate a
lower tax rate if residents of the commonwealth
voted to cut taxes later in the year. We took
advantage of the improvement in rating by selling
our uninsured Massachusetts general obligation
bonds. As of February 29, 2000, Massachusetts
general obligation bonds accounted for nearly 7.00%
of the Series' total investments, its largest
position.
Credit Quality
Expressed as a percentage of total investments
as of 2/29/00
14.95% AAA
8.18 AA
7.04 A
23.51 BBB
1.67 BB
43.48 Insured
1.17 Cash Equivalents
4
<PAGE>
www.prudential.com (800) 225-1852
We lessened the impact of "market-discount
taxation"
Another strategy that benefited the Series was
selling some of its municipal bonds before they
became subject to ordinary income taxes for
investors who might want to buy them. Here's how it
works: When yields climb beyond a certain point for
every municipal bond, the market discount on that
bond may become subject to ordinary income taxes
for new buyers. This lowers the value of the bond
because new buyers would want to purchase the bond
cheaply enough to compensate for the greater tax
liability.
Looking Ahead
The powerful U.S. economic expansion has improved
the credit quality of many state and local
governments and reduced their borrowing needs,
allowing them to issue fewer bonds. The supply of
new municipal bonds has also decreased because the
rising-interest-rate environment has provided less
opportunity for issuers to save money by replacing
older higher-coupon bonds with new lower-coupon
bonds. With the declining supply, if investor
demand remains strong, the tax-exempt bond market
should perform better than other U.S. fixed-income
markets in 2000.
Five Largest Issuers
Expressed as a percentage of net assets
as of 2/29/00
6.97% Mass. General Obligation
5.75 Mass. Ind. Fin. Agency Rev.
Cape Cod Hlth. Sys.*
5.29 Mass. St. Port. Auth.
4.29 Mass. Hlth. & Edl. Facs.
Faulkner Hospital*
4.23 Boston, Mass. Ind. Fin. Auth.
Harbor Electric Energy
*Prerefunded issues are secured by escrowed cash
and/or direct U.S. guaranteed obligations.
5
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Financial
Statements
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 98.0%
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Boston Massachusetts Ind. Dev. Fin.
Auth., Swr. Fac. Rev., Harbor
Elec. Energy Co. Proj., A.M.T. Baa1 7.375% 05/15/15 $ 1,500 $ 1,546,020
Brockton Massachusetts, Gen. Oblig. A2 6.125 06/15/18 1,030 1,036,582
Everett Massachusetts, Gen. Oblig. Aaa 5.75 12/15/19 650 643,123
Holyoke Massachusetts, Gen. Oblig.,
School Proj., M.B.I.A. Aaa 8.10 06/15/05 700(e) 769,671
Lowell Massachusetts, Gen. Oblig. Aaa 7.625 02/15/10 750(e) 795,585
Lynn Mass. Wtr. & Swr. Comn., Gen.
Rev., Ser. A, M.B.I.A. Aaa 7.25 12/01/10 850(e) 885,989
Mass. Bay Trans. Auth., Gen. Trans.
Sys., Ser. A, M.B.I.A. Aaa 5.50 03/01/15 700 691,558
Mass. St. College Bldg. Auth. Proj.
Rev., Ser. A, M.B.I.A. Aaa Zero 05/01/22 2,250 576,112
Mass. St. Dev. Fin. Agy. Rev.,
Concord-Assabet Family Svcs. Ba2 6.00 11/01/28 750 605,475
Mass. St. Gen. Oblig.,
Ser. A, A.M.B.A.C. Aaa 5.00 07/01/12 1,000 963,360
Ser. C, F.G.I.C. Aaa 6.00 08/01/09 1,500 1,582,710
Mass. St. Hlth. & Edl. Facs. Auth.
Rev.,
Beth Israel Hospital, A.M.B.A.C. Aaa 8.268(d) 07/01/25 1,500 1,434,375
Dana Farber Cancer Proj., Ser. G-1 A1 6.25 12/01/22 625 593,706
Faulkner Hospital, Ser. C Baa1 6.00 07/01/23 1,500(e) 1,568,085
Holyoke Hospital, Ser. B Baa3 6.50 07/01/15 550 500,297
Jordan Hospital, Ser. C BBB+(c) 6.875 10/01/22 1,350(e) 1,436,305
Med. Academic & Scientific Co.,
Ser. A NR 6.625 01/01/15 1,000 985,330
Newton-Wellesley Hospital, Ser. E,
M.B.I.A. Aaa 5.875 07/01/15 1,000 1,000,790
Simmons College, Ser. D Aaa 6.05 10/01/20 1,000 1,010,730
Valley Regional Hlth. Sys., Ser. C NR 7.00 07/01/10 825 922,895
Winchester Hospital, Ser. D NR 5.75 07/01/24 1,000 946,140
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mass. St. Hsg. Fin. Agcy. Hsg.
Rev., Sngl. Fam. Mtge., Ser. 59,
A.M.B.A.C., A.M.T. Aaa 5.40% 06/01/20 $ 945 $ 852,730
Mass. St. Ind. Fin. Agcy. Rev.,
Bradford College NR 5.625 11/01/28 1,000 774,890
Brooks School A3 5.95 07/01/23 300(e) 314,580
Cambridge Friends School NR 5.80 09/01/28 700 618,408
Cape Cod Hlth. Sys. Aaa 8.50 11/15/20 2,000(e) 2,098,660
Phillips Academy Aaa 5.375 09/01/23 1,000 903,180
Mass. St. Port Auth. Rev.,
Ser. D, A.M.T. Aa3 6.25 07/01/17 1,000 1,033,300
Series 1999A Baa3 5.75 10/01/29 600 592,542
Mass. St. Port Auth. Rev., Ser. B,
A.M.T. Aa3 5.00 07/01/18 1,000 882,520
Mass. St. Tpk. Auth., Met. Hwy.
Sys. Rev., Ser. C, M.B.I.A. Aaa Zero 01/01/17 2,000 727,120
Mass. St. Water Poll. Abatement
Trust Rev., Ser. A Aa3 6.375 02/01/15 1,000 1,045,100
Mass. St. Water Res. Auth. Rev.,
Ser. B, M.B.I.A. Aaa 6.25 12/01/11 1,000 1,075,870
Ser. D, M.B.I.A. Aaa 6.00 08/01/13 500 524,940
Plymouth County Mass. Corr. Facs.,
Cert. of Part., Ser. A Aaa 7.00 04/01/22 500(e) 535,865
Puerto Rico Commonwealth, Gen.
Oblig., A.M.B.A.C. Aaa 7.00 07/01/10 1,000 1,140,740
Puerto Rico Electric Pwr. Auth.
Rev., Ser. T Baa1 6.375 07/01/24 1,000(e) 1,082,150
Rail Connections Inc. Mass. Rev.
Cap. Apprec. NR Zero 07/01/21 2,500 603,850
Virgin Islands Pub. Fin. Auth.
Rev., Gross Rcpts. Taxes Ln., Ser.
A BBB-(c) 6.50 10/01/24 500 494,520
------------
Total long-term investments
(cost $35,008,368) $ 35,795,803
------------
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 0.3%
<CAPTION>
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mass. St. Hlth. & Edl. Facs. Auth.
Rev., Ser. SGA-65, F.R.D.D. AA-(c) 3.90% 03/01/00 $ 100 $ 100,000
------------
Total short-term investment
(cost $100,000) 100,000
------------
Total Investments 98.3% (cost
$35,108,368; Note 4) 35,895,803
Other assets in excess of
liabilities 1.7% 625,739
------------
Net Assets 100% $ 36,521,542
------------
------------
</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.R.D.D.--Floating Rate (Daily) Demand Note(b).
M.B.I.A.--Municipal Bond Insurance Association.
(b) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be the later of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
(c) Standard & Poor's Rating.
(d) Inverse floating rate bond. The coupon is inversely indexed to a floating
interest rate. The rate shown is the rate at year end.
(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 9
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $35,108,368) $35,895,803
Cash 222,963
Interest receivable 497,558
Receivable for Series shares sold 100,392
Deferred expenses and other assets 929
-----------------
Total assets 36,717,645
-----------------
LIABILITIES
Accrued expenses 89,572
Payable for Series shares reacquired 67,986
Management fee payable 14,486
Distribution fee payable 9,332
Dividends payable 8,744
Deferred trustees' fees 5,983
-----------------
Total liabilities 196,103
-----------------
NET ASSETS $36,521,542
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 34,179
Paid-in capital in excess of par 36,363,472
-----------------
36,397,651
Accumulated net realized loss on investments (663,544)
Net unrealized appreciation on investments 787,435
-----------------
Net assets, February 29, 2000 $36,521,542
-----------------
-----------------
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Statement of Assets and Liabilities (Unaudited) Con't.
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share
($25,734,113 / 2,407,891 shares of beneficial interest
issued and outstanding) $10.69
Maximum sales charge (3% of offering price) .33
-----------------
Maximum offering price to public $11.02
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per
share ($10,356,076 / 969,620 shares of beneficial
interest issued and outstanding) $10.68
-----------------
-----------------
Class C:
Net asset value, offer price and redemption price per share
($254,902 / 23,865 shares of beneficial interest issued
and outstanding) $10.68
Sales charge (1% of offering price) .11
-----------------
Offering price to public $10.79
-----------------
-----------------
Class Z:
Net asset value, offering price and redemption price per
share ($176,451 / 16,524 shares of beneficial interest
issued and outstanding) $10.68
-----------------
-----------------
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest $ 1,181,464
-----------------
Expenses
Management fee 95,653
Distribution fee--Class A 33,553
Distribution fee--Class B 27,920
Distribution fee--Class C 661
Custodian's fees and expenses 37,000
Report to shareholders 20,000
Registration fees 15,000
Transfer agent's fees and expenses 9,000
Audit fee and expenses 5,000
Legal fees and expenses 3,000
Trustees' fees and expenses 2,500
Miscellaneous 2,418
-----------------
Total expenses 251,705
Less: Custodian fee credit (339)
-----------------
Net expenses 251,366
-----------------
Net investment income 930,098
-----------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on:
Investment transactions (454,745)
Financial futures transactions (10,365)
-----------------
(465,110)
Net change in unrealized appreciation of investments (983,587)
-----------------
Net loss on investments (1,448,697)
-----------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (518,599)
-----------------
-----------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year Ended
Ended August 31,
February 29, 2000 1999
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
DECREASE IN NET ASSETS
Operations
Net investment income $ 930,098 $ 2,069,644
Net realized loss on investment
transactions (465,110) (12,605)
Net change in unrealized appreciation of
investments (983,587) (2,713,045)
----------------- --------------
Net decrease in net assets resulting from
operations (518,599) (656,006)
----------------- --------------
Dividends and distributions (Note 1):
Dividends from net investment income
Class A (662,835) (1,418,190)
Class B (261,369) (640,864)
Class C (3,932) (8,016)
Class Z (1,962) (2,574)
----------------- --------------
(930,098) (2,069,644)
----------------- --------------
Distributions in excess of net investment
income
Class A -- (9,090)
Class B -- (4,519)
Class C -- (55)
Class Z -- (20)
----------------- --------------
-- (13,684)
----------------- --------------
Distributions from net realized gains
Class A -- (284,387)
Class B -- (141,295)
Class C -- (1,712)
Class Z -- (626)
----------------- --------------
-- (428,020)
----------------- --------------
Series share transactions (net of share
conversions) (Note 5):
Net proceeds from shares sold 1,521,575 7,872,665
Net asset value of shares issued in
reinvestment of dividends 531,334 1,388,189
Cost of shares reacquired (4,799,096) (10,782,045)
----------------- --------------
Net decrease in net assets from Series
share transactions (2,746,187) (1,521,191)
----------------- --------------
Total decrease (4,194,884) (4,688,545)
NET ASSETS
Beginning of period 40,716,426 45,404,971
----------------- --------------
End of period $ 36,521,542 $ 40,716,426
----------------- --------------
----------------- --------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Municipal Series Fund Masschusetts Series
Notes to Financial Statements (Unaudited)
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 11
series. The monies of each series are invested in separate, independently
managed portfolios. The Massachusetts 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 a 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 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 Series 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 which approximates market value.
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 debt 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. The Series invests in financial futures contracts
solely for the purpose of hedging its existing portfolio securities or
securities the Series intends to purchase against fluctuations in value caused
by changes in prevailing
14
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Notes to Financial Statements (Unaudited) Cont'd.
market 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 original issue
discount paid on purchases of 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.
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 continue 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.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
Custody Fee Credits: The Series has an arrangement with its custodian
bank, whereby uninvested monies earn credits which reduce the fees charged by
the custodian.
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM has entered into a subadvisory agreement with The Prudential
Investment Corporation ('PIC'). PIC furnishes investment advisory services in
connection with the management of the Fund. PIFM pays for the services of PIC,
the cost of compensation
15
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Notes to Financial Statements (Unaudited) Cont'd.
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 Investment
Management Services LLC ('PIMS'). The Fund compensates PIMS for distributing and
servicing the Fund's Class A, Class B and Class C shares pursuant to plans of
distribution, (the 'Class A, B and C Plans'), regardless of expenses actually
incurred by them. The distribution fees are accrued daily and payable monthly.
No distribution or service fees are paid to PIMS as distributor of the Class Z
shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, .50 of 1%
and 1% of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the plans were .25 of 1%, .50 of 1% and .75 of
1% of the average daily net assets of the Class A, B and C shares, respectively.
PIMS has advised the Series that it has received approximately $300 and
$600 in front-end sales charges resulting from sales of Class A and C shares,
respectively, during the six months ended February 29, 2000. From these fees
PIMS paid such sales charges to affiliated broker-dealers, which in turn paid
commissions to salespersons and incurred other distribution costs.
PIMS has advised the Series that for the six months ended February 29,
2000, they received approximately $8,100 in contingent deferred sales charges
imposed upon certain redemptions by Class B shareholders.
PIFM, PIMS and PIC are wholly owned subsidiaries of The Prudential
Insurance Company of America ('Prudential').
The Fund, along with other affiliated registered investment companies (the
'Funds'), entered into a syndicated credit agreement ('SCA') with an
unaffiliated lender. The maximum commitment under the SCA is $1 billion and
interest on any borrowings will be at market rates. For the period
3/11/99-3/9/00, the commitment fee on the unused portion of the credit facility
was .065 of 1%. Subsequent to March 9, 2000, the SCA was renewed with a maximum
commitment of $1 billion at a commitment fee of .080 of 1% of the unused portion
of the credit facility. The expiration date of the SCA is March 9, 2001. The
commitment fee is accrued and paid quarterly on a pro rata basis by the Funds.
Prior to March 11, 1999, the Funds had a credit agreement with a maximum
commitment of $200,000,000. The commitment fee was .055 of 1% on the unused
portion of the credit facility. The Fund did not borrow any amounts during the
six months ended February 29, 2000. The purpose of
16
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Notes to Financial Statements (Unaudited) Cont'd.
the credit agreements is to serve as an alternative source of funding for
capital share redemptions.
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the six months ended February 29,
2000, the Series incurred fees of approximately $7,400 for the services of PMFS.
As of February 29, 2000, approximately $1,200 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 investment securities of the Series, excluding short-term
investments, for the six months ended February 29, 2000, were $4,357,933 and
$6,734,646, respectively.
The United States federal income tax basis of the Fund's investments as of
February 29, 2000 was $35,108,368 and accordingly, net unrealized appreciation
on investments for federal income tax purposes was $787,435 (gross unrealized
appreciation--$1,662,328, gross unrealized depreciation--$874,893).
The Fund elected, for United States Federal income tax purposes, to treat
capital losses of approximately $54,800 incurred in the ten month period ended
August 31, 1999 as having incurred in the current fiscal year.
For federal income tax purposes, the Portfolio had a capital loss
carryforward as of August 31, 1999 of approximately $8,200 which expires in
2007. Accordingly, no capital gains distributions are expected to be paid to
shareholders until future net gains have been realized in excess of such
carryforward.
Note 5. Capital
The Series offers Class A, Class B, Class C and Class Z shares. Class A shares
are sold with a front-end sales charge of up to 3%. Class B shares are sold with
a contingent deferred sales charge which declines from 5% to zero depending on
the period of time the shares are held. Class C shares are sold with a front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18 months. Class B shares will automatically convert to Class A shares on a
quarterly basis approximately seven years after purchase. A special exchange
privilege is also available for shareholders who qualify to purchase Class A
shares at net asset value. Class Z shares are not subject to any sales or
redemption charge and are offered
17
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Notes to Financial Statements (Unaudited) Cont'd.
exclusively for sale to a limited group of investors. 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 29, 2000 and the fiscal year ended August 31, 1999 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------------------------------------ ---------- ------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold 75,063 $ 822,133
Shares issued in reinvestment of dividends 36,502 393,851
Shares reacquired (254,233) (2,738,975)
---------- ------------
Net decrease in shares outstanding before conversion (142,668) (1,522,991)
Shares issued upon conversion from Class B 68,405 751,692
---------- ------------
Net decrease in shares outstanding (74,263) $ (771,299)
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 478,960 $ 5,646,776
Shares issued in reinvestment of dividends and distributions 84,266 981,877
Shares reacquired (589,103) (6,781,033)
---------- ------------
Net decrease in shares outstanding before conversion (25,877) (152,380)
Shares issued upon conversion from Class B 69,112 806,972
---------- ------------
Net increase in shares outstanding 43,235 $ 654,592
---------- ------------
---------- ------------
<CAPTION>
Class B
- ------------------------------------------------------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold 46,606 $ 505,673
Shares issued in reinvestment of dividends 12,366 133,442
Shares reacquired (187,704) (2,043,850)
---------- ------------
Net decrease in shares outstanding before conversion (128,732) (1,404,735)
Shares reacquired upon conversion into Class A (68,431) (751,692)
---------- ------------
Net decrease in shares outstanding (197,163) $ (2,156,427)
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 170,635 $ 1,982,178
Shares issued in reinvestment of dividends and distributions 34,077 397,292
Shares reacquired (335,629) (3,901,106)
---------- ------------
Net decrease in shares outstanding before conversion (130,917) (1,521,636)
Shares reacquired upon conversion into Class A (69,125) (806,972)
---------- ------------
Net decrease in shares outstanding (200,042) $ (2,328,608)
---------- ------------
---------- ------------
</TABLE>
18
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C Shares Amount
- ------------------------------------------------------------ ---------- ------------
Six months ended February 29, 2000:
<S> <C> <C>
Shares sold 7,765 $ 82,757
Shares issued in reinvestment of dividends 191 2,062
Shares reacquired (998) (11,010)
---------- ------------
Net increase in shares outstanding 6,958 $ 73,809
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 13,079 $ 154,281
Shares issued in reinvestment of dividends and distributions 504 5,854
Shares reacquired (6,438) (74,609)
---------- ------------
Net increase in shares outstanding 7,145 $ 85,526
---------- ------------
---------- ------------
<CAPTION>
Class Z
- ------------------------------------------------------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold 10,418 $ 111,012
Shares issued in reinvestment of dividends 183 1,979
Shares reacquired (492) (5,261)
---------- ------------
Net increase in shares outstanding 10,109 $ 107,730
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 7,626 $ 89,430
Shares issued in reinvestment of dividends and distributions 273 3,166
Shares reacquired (2,210) (25,297)
---------- ------------
Net increase in shares outstanding 5,689 $ 67,299
---------- ------------
---------- ------------
</TABLE>
19
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Class A
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.09
-----------------
Income from investment operations
Net investment income .27
Net realized and unrealized gain (loss) on investment
transactions (.40)
-----------------
Total from investment operations (.13)
-----------------
Less distributions
Dividends from net investment income (.27)
Distributions in excess of net investment income --
Distributions from net realized gains --
-----------------
Total distributions (.27)
-----------------
Net asset value, end of period $ 10.69
-----------------
-----------------
TOTAL RETURN(b): (1.16)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 25,734
Average net assets (000) $ 26,990
Ratios to average net assets:
Expenses, including distribution fees 1.24%(d)
Expenses, excluding distribution fees .99%(d)
Net investment income 4.94%(d)
For Class A, B, C and Z shares:
Portfolio turnover rate 12%
</TABLE>
- ------------------------------
(a) Net of management fee waiver.
(b) 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.
20 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class A
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11.90 $ 11.69 $ 11.54 $ 11.63 $ 11.37
- ---------------- ---------------- ---------------- ---------------- ----------------
.53 .55 .58(a) .59(a) .65(a)
(.70) .37 .33 (.02) .26
- ---------------- ---------------- ---------------- ---------------- ----------------
(.17) .92 .91 .57 .91
- ---------------- ---------------- ---------------- ---------------- ----------------
(.53) (.55) (.58) (.59) (.65)
--(c) (.01) --(c) --(c) --(c)
(.11) (.15) (.18) (.07) --(c)
- ---------------- ---------------- ---------------- ---------------- ----------------
(.64) (.71) (.76) (.66) (.65)
- ---------------- ---------------- ---------------- ---------------- ----------------
$ 11.09 $ 11.90 $ 11.69 $ 11.54 $ 11.63
- ---------------- ---------------- ---------------- ---------------- ----------------
- ---------------- ---------------- ---------------- ---------------- ----------------
(1.44)% 8.10% 8.10% 4.93% 8.33%
$ 27,527 $ 29,024 $ 28,890 $ 28,058 $ 27,525
$ 30,705 $ 29,031 $ 29,096 $ 28,091 $ 15,837
1.11% 1.04% 1.00%(a) 1.06%(a) .97%(a)
.91% .94% .90%(a) .96%(a) .87%(a)
4.62% 4.75% 5.00%(a) 5.06%(a) 5.59%(a)
24% 33% 22% 18% 36%
</TABLE>
See Notes to Financial Statements 21
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.08
-----------------
Income from investment operations
Net investment income .26
Net realized and unrealized gain (loss) on investment
transactions (.40)
-----------------
Total from investment operations (.14)
-----------------
Less distributions
Dividends from net investment income (.26)
Distributions in excess of net investment income --
Distributions from net realized gains --
-----------------
Total distributions (.26)
-----------------
Net asset value, end of period $ 10.68
-----------------
-----------------
TOTAL RETURN(b): (1.29)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 10,356
Average net assets (000) $ 11,229
Ratios to average net assets:
Expenses, including distribution fees 1.49%(d)
Expenses, excluding distribution fees .99%(d)
Net investment income 4.68%(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.
22 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11.89 $ 11.68 $ 11.53 $ 11.62 $ 11.36
- ---------------- ---------------- ---------------- ---------------- ----------------
.50 .51 .53(a) .54(a) .60(a)
(.70) .37 .33 (.02) .26
- ---------------- ---------------- ---------------- ---------------- ----------------
(.20) .88 .86 .52 .86
- ---------------- ---------------- ---------------- ---------------- ----------------
(.50) (.51) (.53) (.54) (.60)
--(c) (.01) --(c) --(c) --(c)
(.11) (.15) (.18) (.07) --(c)
- ---------------- ---------------- ---------------- ---------------- ----------------
(.61) (.67) (.71) (.61) (.60)
- ---------------- ---------------- ---------------- ---------------- ----------------
$ 11.08 $ 11.89 $ 11.68 $ 11.53 $ 11.62
- ---------------- ---------------- ---------------- ---------------- ----------------
- ---------------- ---------------- ---------------- ---------------- ----------------
(1.76)% 7.67% 7.67% 4.51% 7.90%
$ 12,931 $ 16,256 $ 18,247 $ 22,758 $ 28,367
$ 14,837 $ 17,253 $ 20,301 $ 25,751 $ 39,455
1.41% 1.44% 1.40%(a) 1.46%(a) 1.34%(a)
.91% .94% .90%(a) .96%(a) .84%(a)
4.32% 4.35% 4.60%(a) 4.66%(a) 5.37%(a)
</TABLE>
See Notes to Financial Statements 23
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.08
-----------------
Income from investment operations
Net investment income .24
Net realized and unrealized gain (loss) on investment
transactions (.40)
-----------------
Total from investment operations (.16)
-----------------
Less distributions
Dividends from net investment income (.24)
Distributions in excess of net investment income --
Distributions from net realized gains --
-----------------
Total distributions (.24)
-----------------
Net asset value, end of period $ 10.68
-----------------
-----------------
TOTAL RETURN(b): (1.41)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 255
Average net assets (000) $ 177
Ratios to average net assets:
Expenses, including distribution fees 1.74%(d)
Expenses, excluding distribution fees .99%(d)
Net investment income 4.46%(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.
24 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11.89 $ 11.68 $ 11.53 $ 11.62 $ 11.36
- ---------------- ---------------- ---------------- ---------------- ----------------
.47 .48 .50(a) .51(a) .57(a)
(.70) .37 .33 (.02) .26
- ---------------- ---------------- ---------------- ---------------- ----------------
(.23) .85 .83 .49 .83
- ---------------- ---------------- ---------------- ---------------- ----------------
(.47) (.48) (.50) (.51) (.57)
--(c) (.01) --(c) --(c) --(c)
(.11) (.15) (.18) (.07) --(c)
- ---------------- ---------------- ---------------- ---------------- ----------------
(.58) (.64) (.68) (.58) (.57)
- ---------------- ---------------- ---------------- ---------------- ----------------
$ 11.08 $ 11.89 $ 11.68 $ 11.53 $ 11.62
- ---------------- ---------------- ---------------- ---------------- ----------------
- ---------------- ---------------- ----------------
- ---------------- ----------------
(2.00)% 7.41% 7.41% 4.26% 7.60%
$ 187 $ 116 $ 78 $ 45 $ 14
$ 196 $ 101 $ 48 $ 41 $ 14
1.66% 1.69% 1.65%(a) 1.72%(a) 1.60%(a)
.91% .94% .90%(a) .97%(a) .85%(a)
4.08% 4.08% 4.36%(a) 4.39%(a) 5.07%(a)
</TABLE>
See Notes to Financial Statements 25
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.08
-----------------
Income from investment operations
Net investment income .29
Net realized and unrealized gain (loss) on investment
transactions (.40)
-----------------
Total from investment operations (.11)
-----------------
Less distributions
Dividends from net investment income (.29)
Distributions in excess of net investment income --
Distributions from net realized gains --
-----------------
Total distributions (.29)
-----------------
Net asset value, end of period $ 10.68
-----------------
TOTAL RETURN(b): (1.03)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 177
Average net assets (000) $ 75
Ratios to average net assets:
Expenses, including distribution fees .99%(c)
Expenses, excluding distribution fees .99%(c)
Net investment income 5.27%(c)
</TABLE>
- ------------------------------
(a) Net of management fee waiver.
(b) 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 return for periods of less than a full
year is not annualized.
(c) Annualized.
(d) Commencement of offering of Class Z shares.
(e) Amounts are actual and not rounded to the nearest thousand.
(f) Less than .005 per share.
26 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
- ---------------------------------------------------------------------------------------
Year Ended August 31, December 6, 1996(d)
- ------------------------------------------ through August 31,
1999 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 11.89 $ 11.68 $ 11.80
- ---------------- ---------------- ----------
.56 .58 .47(a)
(.70) .37 .06
- ---------------- ---------------- ----------
(.14) .95 .53
- ---------------- ---------------- ----------
(.56) (.58) (.47)
--(f) (.01) --(f)
(.11) (.15) (.18)
- ---------------- ---------------- ----------
(.67) (.74) (.65)
- ---------------- ---------------- ----------
$ 11.08 $ 11.89 $ 11.68
- ---------------- ---------------- ----------
(1.26)% 8.31% 4.54%
$ 71 $ 9 $ 204(e)
$ 53 $ 7 $ 200(e)
.91% .94% .90%(a)(c)
.91% .94% .90%(a)(c)
4.86% 4.91% 5.55%(a)(c)
</TABLE>
See Notes to Financial Statements 27
<PAGE>
Prudential Municipal Series Fund Massachusetts Series
Getting the Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds,
you receive financial advice from a Prudential
Securities Financial Advisor or Pruco Securities
registered representative. Your advisor or
representative can provide you with the following
services:
There's No Reward Without Risk; but Is This Risk
Worth It?
Your financial advisor or registered representative
can help you match the reward you seek with the
risk you can tolerate. Risk can be difficult to
gauge--sometimes even the simplest investments bear
surprising risks. The educated investor knows that
markets seldom move in just one direction. There
are times when a market sector or asset class will
lose value or provide little in the way of total
return. Managing your own expectations is easier
with help from someone who understands the markets
and who knows you!
Keeping Up With the Joneses
A financial advisor or registered representative
can help you wade through the numerous available
mutual funds to find the ones that fit your
individual investment profile and risk tolerance.
While the newspapers and popular magazines are full
of advice about investing, they are aimed at
generic groups of people or representative
individuals--not at you personally. Your financial
advisor or registered representative will review
your investment objectives with you. This means you
can make financial decisions based on the assets
and liabilities in your current portfolio and your
risk tolerance--not just based on the current
investment fad.
Buy Low, Sell High
Buying at the top of a market cycle and selling at
the bottom are among the most common investor
mistakes. But sometimes it's difficult to hold on
to an investment when it's losing value every
month. Your financial advisor or registered
representative can answer questions when you're
confused or worried about your investment, and
should remind you that you're investing for the
long haul.
<PAGE>
www.prudential.com (800) 225-1852
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Trustees
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, Secretary
David F. Connor, Assistant Secretary
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
194 Wood Avenue South
Iselin, NJ 08830
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Fund Symbols
NASDAQ CUSIP
Class A PUMAX 74435M655
Class B PMUNX 74435M663
Class C -- 74435M564
Class Z -- 74435M416
The views expressed in this report and information
about the Fund's portfolio holdings are for the
period covered by this report and
are subject to change thereafter.
The accompanying financial statements as
of February 29, 2000, were not audited and,
accordingly, no opinion is expressed on them.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
MF119E2 74435M655 74435M663 74435M564 74435M416
(LOGO) Printed on Recycled Paper
<PAGE>
SEMIANNUAL REPORT FEBRUARY 29, 2000
Prudential
Municipal Series Fund/
Massachusetts Money Market Series
Fund Type Money market
Objective The highest level of current income
that is exempt from Massachusetts State and federal
income taxes, consistent with liquidity and the
preservation of capital
(GRAPHIC)
This report is not
authorized for distribution to prospective
investors unless preceded or accompanied by a
current prospectus.
(LOGO)
<PAGE>
Build on the Rock
Investment Goals and Style
Prudential Municipal Series Fund/Massachusetts
Money Market Series seeks to provide the highest
level of current income that is exempt from
Massachusetts State and federal income taxes,
consistent with liquidity and the preservation of
capital. The Series intends to invest in a
portfolio of short-term municipal debt securities
with maturities of 13 months or less from the state
of Massachusetts, its municipalities, local
governments, and other qualifying issuers (such as
Puerto Rico, Guam, and the U.S. Virgin Islands).
There can be no assurance that the Series will
achieve its investment objective.
Contents
1 Message From the Fund's President
2 Performance Review
3 Performance at a Glance
6 Financial Statements
<PAGE>
www.prudential.com (800) 225-1852
Message From the Fund's President As of April 17, 2000
(PHOTO)
Dear Shareholder
The Federal Reserve increased short-term interest
rates twice to slow U.S. economic growth and fend
off higher inflation during the six months that
ended on February 29, 2000. Prudential's Money
Markets Sector team worked hard to anticipate these
changes in U.S. monetary policy, and acted quickly
to take advantage of good investment opportunities
that emerged as Massachusetts money market yields
rose.
As a result, Prudential Municipal Series
Fund/Massachusetts Money Market Series maintained a
$1.00 net asset value per share, and provided a
competitive yield during its fiscal half year. On
February 29, 2000, the Series' seven-day current
yield was 3.07%, compared with 3.09% for the
average Massachusetts money market fund as tracked
by iMoneyNet, Inc. The
following report takes a closer look at
developments in the municipal money market sector
during the six-month review period, and explains
how the Series was positioned throughout.
New team member brings solid investment expertise
The newest member of Prudential's Money Markets
Sector team is Monica Wong. Prior to joining
Prudential, Monica was a portfolio manager at
Montgomery Asset Management, where she oversaw tax-
exempt assets totaling more than $500 million.
During Monica's 10 years of municipal finance
experience, she also worked as a research analyst,
financial advisor, trader, and underwriter.
Thank you for your continued confidence in
Prudential mutual funds.
Sincerely,
John R. Strangfeld
President
Prudential Municipal Series Fund
1
<PAGE>
Prudential Municipal Series Fund Massachusetts Money Market Series
Performance Review
(PHOTO) (PHOTO) Portfolio Managers Joseph Tully (Money Markets
Sector Team Leader) and Monica Wong
Fed tried to curb U.S. economic growth
Shortly before the Series' fiscal half year began
on September 1, 1999, the Federal Reserve increased
the federal funds rate (what U.S. banks charge each
other for overnight loans) by a quarter of a
percentage point to 5.25% from 5.00%. It also
raised the rate at which banks can borrow from the
Federal Reserve system (known as the discount rate)
to 4.75% from 4.50%.
The short-term rate hike rippled through the U.S.
economy, increasing
borrowing costs for consumers and businesses. In
this way, the Fed hoped to rein in the brisk pace
of U.S. economic growth and avert a buildup in
inflationary pressures. Mounting inflation is
particularly hard on people who live on fixed
incomes, because their buying power declines if
their incomes are not adjusted for the rise in
prices.
Reinvesting at higher yields helped the Series
Because we believed that the Fed would continue to
tighten monetary policy, we invested primarily in shorter-term
Massachusetts money market securities from
September 1999 through much of October 1999. As
these securities matured, we planned to reinvest
the money in higher-yielding Massachusetts money
market securities that would likely be available
after any subsequent Fed rate hike.
We did not have to wait long. The U.S. central bank
boosted the federal funds rate to 5.50% and its
discount rate to 5.00% on November 16, 1999. Yields
on Massachusetts money market securities also
climbed, creating attractive buying opportunities.
Among our purchases were bond anticipation notes of
Bedford, Massachusetts, that matured in one year,
and insured general obligation bonds of Ipswich,
Massachusetts, that also matured in one year.
2
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
<TABLE>
Fund Facts As of 2/29/00
<CAPTION>
7-Day Net Asset Taxable Equivalent Yield* Weighted Avg. Net Assets
Current Yld. Value (NAV) @31% @36% @39.6% Mat. (WAM) (Millions)
<S> <C> <C> <C>
MA Money
Market Series 3.07% $1.00 5.06% 5.45% 5.78% 38 Days $68
iMoneyNet, Inc.
Tax-Free State Specific
Avg. (SB & GP--MA)** 3.09% $1.00 5.09% 5.49% 5.81% 49 Days N/A
</TABLE>
Note: Yields will
fluctuate from time to time, and past performance
is not indicative of future results. An investment
in the Series is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Series seeks to
preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in
the Series.
*Some investors may be subject to the federal
alternative minimum tax and/or state and local
taxes. Taxable equivalent yields reflect federal
and applicable state tax rates.
**iMoneyNet, Inc. reports the 7-Day Current Yield,
NAV, and WAM on Mondays. This is the data of all
funds in the iMoneyNet, Inc. Tax-Free State
Specific Average (Stock Broker (SB) & General
Purpose (GP)--Massachusetts) category as of February
28, 2000.
Tracking Municipal Money Market Fund Yields
(GRAPH)
3
<PAGE>
Prudential Municipal Series Fund Massachusetts Money Market Series
Performance Review
The Ipswich general obligation bonds were a good
alternative to conventional tax-exempt money market
securities because they provided solid yields to
compensate for the fact that they were issued in
moderate-sized blocks. We, like most money
managers, often prefer to buy large blocks of bonds
because they could be easier to sell. However,
owning moderate-sized blocks of insured short-term
municipal bonds that offered higher yields also met
our fundamental buy-and-hold strategy.
Weathering the "January effect"
Our purchases lengthened the Series' weighted
average maturity (WAM), which positioned the Series
longer than the average of comparable funds as
measured by iMoneyNet, Inc. (WAM is a measurement
tool that determines a portfolio's sensitivity to
changes in the level of interest rates. It takes
into account the maturity level of each security
held in a portfolio.) However, the Series' WAM
shortened in early January 2000 amid an industry-
wide phenomenon that causes municipal money market
yields to decline.
Known as the "January effect," this period of lower
yields occurred as investors rushed to temporarily
reinvest money received from coupon payments and
maturing bonds in the municipal money market during
the first week of January. Their increased demand
drove yields on municipal money market securities
lower and their prices higher. Because we largely
avoided reinvesting in longer-term municipal money
market securities with yields at such unattractive
levels, the Series' WAM shortened in the new year.
Massachusetts bonds upgraded
Besides the "January effect," the change of year
brought good news for investors in Massachusetts
debt securities. Moody's Investors Service upgraded
the state's general obligation bonds to AA2 from
AA3 on January 13, 2000, even though Massachusetts
residents may vote to cut taxes later in the year.
Moody's noted that the economic strength of
Massachusetts would enable its government to
accommodate a lower tax rate. More than two years
ago, Standard & Poor's also upgraded its rating of
Massachusetts' general obligation bonds to AA-minus
from A-plus.
4
<PAGE>
www.prudential.com (800) 225-1852
While Massachusetts received praise for its
economic prowess, the Fed renewed its efforts to
check the powerful U.S. economy. On February 2,
2000, it hiked the federal funds rate to 5.75% and
its discount rate to 5.25%. In the statement
announcing this change in monetary policy, the Fed
warned that further rate hikes might be necessary
to keep the U.S. economy from overheating. February
marked the 107th consecutive month of the economic
expansion, making it the longest in U.S. history.
Looking Ahead
True to its word, the Fed again increased the
federal funds rate to 6.00% and the discount rate
to 5.50% on March 21, 2000. As the U.S. economy
continues to grow rapidly, we believe this will not
be the last time the Fed will take action this
year. With the approach of the tax season, we
intend to again increase the Series' exposure to
very short-term municipal money market securities
in order to accommodate seasonal cash outflows that
usually occur as shareholders pay their income
taxes. Adopting this strategy should position the
Series to lock in higher yields that become
available as the supply of municipal money market
securities balloons during the tax season.
Weighted Average Maturity Compared to the Average Municipal Money Fund
(GRAPH)
5
<PAGE>
Prudential Municipal Series Fund Massachusetts Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value (Note
Description (a) Rating Rate Date (000) 1)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Bedford, B.A.N. NR 4.25% 12/04/00 $ 2,000 $ 2,004,833
Hanover, B.A.N. MIG1 4.25 5/30/00 1,620 1,621,912
Holden, B.A.N. MIG1 4.00 3/15/00 2,500 2,500,259
Hopkinton, B.A.N. MIG1 4.00 8/25/00 1,000 1,001,451
Ipswich, Gen. Oblig., F.G.I.C. Aaa 5.00 11/15/00 1,169 1,178,241
Mass. Bay Trans. Auth., Gen.
Trans. Sys. Bonds, Ser. A Aaa 7.00 3/01/00 1,800(c) 1,800,000
Mass. St. Certificates, Series
240, F.R.W.D.S. VMIG1 3.91 3/02/00 6,000 6,000,000
Mass. St. Dev. Fin. Agcy. Rev.,
Elderhostel, Inc., Ser. 2000,
F.R.W.D. VMIG1 3.75 3/03/00 1,500 1,500,000
Notre Dame Hlth. Care Center,
Ser. 99, F.R.W.D. VMIG1 3.90 3/02/00 3,485 3,485,000
Semass Proj., Ser. A,
F.R.W.D., A.M.T. A-1(d) 4.10 3/01/00 4,800 4,800,000
Semass Proj., Ser. B,
F.R.W.D., A.M.T. A-1(d) 4.10 3/01/00 1,600 1,600,000
Waste Mgmt., Inc., Ser. 99,
F.R.W.D., A.M.T. VMIG1 4.05 3/01/00 2,500 2,500,000
Wentworth Inst. of Tech., Ser.
2000, F.R.W.D., A.M.B.A.C. VMIG1 3.85 3/01/00 2,500 2,500,000
Mass. St. Hlth. & Edl. Facs.
Auth. Rev.,
Boston Univ., Ser. 85H,
F.R.W.D. VMIG1 3.75 3/02/00 5,300 5,300,000
CIL Realty, Ser. 99, F.R.W.D. VMIG1 3.75 3/01/00 1,000 1,000,000
Daughters of Charity--Carney
Hosp., Ser. C Aaa 7.75 7/01/00 1,500(c) 1,547,149
Northeastern Univ., Ser. G,
M.B.I.A. Aaa 4.50 10/01/00 465 465,643
Williams College, Ser. SG65,
F.R.D.D.S. A1+(d) 3.90 3/01/00 4,000 4,000,000
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Massachusetts Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value (Note
Description (a) Rating Rate Date (000) 1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mass. St. Hsg. Fin. Agcy. Rev.,
Multi-Family Rev., Harbor
Port, Ser. 95A, F.R.W.D. A1+(d) 3.80% 3/01/00 $ 5,000 $ 5,000,000
Single Family Housing Notes,
Ser. A, A.M.T. MIG1 3.60 6/01/00 1,500 1,500,843
Mass. St. Ind. Fin. Agcy. Ind.
Rev.,
Constitution Corp., Ser. 98,
F.R.W.D., A.M.T. A-1(d) 4.00 3/02/00 1,500 1,500,000
Goddard House, Ser. 95,
F.R.W.D. A-1(d) 3.70 3/02/00 1,935 1,935,000
Governor Dummer Academy,
Ser. 96, F.R.W.D. A1+(d) 3.75 3/02/00 1,500 1,500,000
Hazen Paper Co., Ser. 95,
F.R.W.D, A.M.T. A-1(d) 4.00 3/02/00 1,400 1,400,000
New England College, Ser. 97,
F.R.W.D. A1+(d) 3.75 3/02/00 1,000 1,000,000
Riverdale Mills Corp., Ser.
95, F.R.W.D., A.M.T. A-1(d) 4.05 3/02/00 1,000 1,000,000
United Med. Corp., Ser. 92,
F.R.W.D., A.M.T. P-1 3.80 3/01/00 500 500,000
Mass. St. Wtr. Res. Auth.,
General Rev.,
Ser. 90A Aaa 7.50 4/01/00 815(c) 834,146
Ser. 90A Aaa 7.625 4/01/00 320(c) 327,327
Ser. 98A Aaa 7.375 4/01/00 425(c) 434,951
Melrose, Gen. Oblig., M.B.I.A. Aaa 5.00 8/15/00 720 724,474
Mohawk Trail Reg. School Dist.,
Gen. Oblig., Ser. 1999,
A.M.B.A.C. Aaa 5.00 4/15/00 365 365,799
Monson, Gen. Oblig. Sch. Proj.,
Ser. 90, M.B.I.A. Aaa 7.70 10/15/00 500(c) 520,661
Palmer, Gen. Oblig. Sch. Proj.,
Ser. B, A.M.B.A.C. Aaa 7.70 10/01/00 500(c) 520,006
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Municipal Series Fund Massachusetts Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value (Note
Description (a) Rating Rate Date (000) 1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Somerville, Gen. Oblig., Ser.
98, F.G.I.C Aaa 6.00% 4/01/00 $ 1,095 $ 1,097,619
Worcester, Gen. Oblig.,
M.B.I.A. Aaa 5.25 8/01/00 2,210 2,223,897
------------
Total Investments 99.4%
(amortized cost
$67,189,211(e)) 67,189,211
Other assets in excess of
liabilities 0.6% 425,858
------------
Net Assets 100% $ 67,615,069
------------
------------
</TABLE>
- ------------------------------
(a) The following abbreviations are used in portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation.
A.M.T.--Alternative Minimum Tax.
B.A.N.--Bond Anticipation Note.
F.G.I.C.--Financial Guaranty Insurance Company.
F.R.D.D.S.--Floating Rate (Daily) Demand Note Synthetic (b).
F.R.W.D.--Floating Rate (Weekly) Demand Note (b).
F.R.W.D.S.--Floating Rate (Weekly) Demand Note Synthetic (b).
M.B.I.A.--Municipal Bond Insurance Association.
(b) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be the later of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
(c) Prerefunded issues are secured by escrowed cash and/or direct U.S.
guaranteed obligations.
(d) Standard & Poor's Rating.
(e) The cost of securities for federal income tax purposes is substantially the
same as for financial reporting purposes.
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.
8 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Massachusetts Money Market Series
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
ASSETS
Investments, at amortized cost which approximates market value $ 67,189,211
Cash 70,722
Receivable for Series shares sold 493,342
Interest receivable 480,020
Other assets 1,067
-----------------
Total assets 68,234,362
-----------------
LIABILITIES
Payable for Series shares reacquired 527,081
Accrued expenses 44,650
Management fee payable 26,049
Dividends payable 11,790
Deferred trustee's fees 6,017
Distribution fee payable 3,706
-----------------
Total liabilities 619,293
-----------------
NET ASSETS $ 67,615,069
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at $.01 par value $ 676,151
Paid-in capital in excess of par 66,938,918
-----------------
Net assets, February 29, 2000 $ 67,615,069
-----------------
-----------------
Net asset value, offering price and redemption price per share
($67,615,069 / 67,615,069 shares of beneficial interest
issued
and outstanding; unlimited number of shares authorized) $1.00
-----------------
-----------------
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Municipal Series Fund Massachusetts Money Market Series
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest $ 1,051,325
-----------------
Expenses
Management fee 147,634
Distribution fee 36,908
Custodian's fees and expenses 30,000
Reports to shareholders 13,000
Registration fees 8,000
Transfer agent's fees and expenses 7,000
Trustee's fees and expenses 5,000
Audit fee and expenses 4,000
Legal fees and expenses 3,000
Miscellaneous 382
-----------------
Total expenses 254,924
Less: Custodian fee credit (Note 1) (362)
-----------------
Net expenses 254,562
-----------------
Net investment income 796,763
-----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 796,763
-----------------
-----------------
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Massachusetts Money Market Series
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
February 29, 2000 August 31, 1999
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 796,763 $ 1,364,638
----------------- ---------------
Dividends (Note 1) (796,763) (1,364,638)
----------------- ---------------
Series share transactions (at $1 per share)
Net proceeds from shares sold 98,911,471 174,293,713
Net asset value of shares issued to
shareholders in reinvestment of
dividends 792,716 1,330,047
Cost of shares reacquired (87,592,649) (182,580,621)
----------------- ---------------
Net increase (decrease) in net assets from
Series share transactions 12,111,538 (6,956,861)
----------------- ---------------
Total increase (decrease) 12,111,538 (6,956,861)
NET ASSETS
Beginning of period 55,503,531 62,460,392
----------------- ---------------
End of period $ 67,615,069 $ 55,503,531
----------------- ---------------
----------------- ---------------
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Municipal Series Fund Massachusetts Money Market Series
Notes to Financial Statements (Unaudited)
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
eleven series. The monies of each series are invested in separate, independently
managed portfolios. The Massachusetts Money Market Series (the 'Series')
commenced investment operations on August 5, 1991. The Series is nondiversified
and seeks to provide the highest level of income that is exempt from
Massachusetts State and federal income taxes with minimum risk by investing in
'investment grade' tax-exempt securities having a maturity of 13 months or less
and whose ratings are within the 2 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 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: Portfolio securities of the Series are valued at
amortized cost, which approximates market value. The amortized cost method of
valuation involves valuing a security at its cost on the date of purchase and
thereafter assuming a constant amortization to maturity of any discount or
premium.
All securities are valued as of 4:30 p.m., New York time.
Securities Transactions and Net Investment Income: Securities
transactions are recorded on the trade date. Realized gains and losses on sales
of investments 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.
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 continue 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: The Series declares all of its net investment income and net
realized short-term capital gains or losses, if any, as dividends daily to its
shareholders of record at the time of such declaration. Payment of dividends is
made monthly. Income distributions and capital gain distributions are determined
in accordance with
12
<PAGE>
Prudential Municipal Series Fund Massachusetts Money Market Series
Notes to Financial Statements (Unaudited) Cont'd.
income tax regulations which may differ from generally accepted accounting
principles.
Custody Fee Credits: The Fund has an arrangement with its custodian
bank, whereby uninvested monies earn credits which reduce the fees charged by
the custodian.
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM has entered into a subadvisory agreement with The Prudential
Investment Corporation ('PIC'); PIC furnishes investment advisory services in
connection with the management of the Fund. PIFM pays for the 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 Investment
Management Services LLC ('PIMS'), which acts as the distributor of the Fund. The
Fund compensates PIMS for distributing and servicing the Fund's shares pursuant
to the plans of distribution regardless of expenses actually incurred by PIMS.
The Series reimbursed PIMS for distributing and servicing the Fund's shares
pursuant to the plan of distribution at an annual rate of .125 of 1% of the
Series' average daily net assets. The distribution fees are accrued daily and
payable monthly.
PIMS, PIFM and PIC are indirect wholly owned subsidiaries of The
Prudential Insurance Company of America.
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 29,
2000, the Series incurred fees of approximately $6,800 for the services of PMFS.
As of February 29, 2000, approximately $1,200 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.
13
<PAGE>
Prudential Municipal Series Fund Massachusetts Money Market Series
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1.00
Net investment income and realized gains .01
Dividends and distributions to shareholders (.01)
--------
Net asset value, end of period $ 1.00
--------
--------
TOTAL RETURN(b): 1.36%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $67,615
Average net assets (000) $59,378
Ratios to average net assets:
Expenses, including distribution fees .86%(c)
Expenses, excluding distribution fees .74%(c)
Net investment income 2.70%(c)
</TABLE>
- ------------------------------
(a) Net of management fee waiver.
(b) Total return includes reinvestment of dividends and distributions. Total
returns for periods of less than a full year are not annualized.
(c) Annualized.
14 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Massachusetts Money Market Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
.02 .03 .03(a) .03(a) .03(a)
(.02) (.03) (.03) (.03) (.03)
-------- -------- -------- -------- --------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
2.35% 2.77% 3.08% 3.12% 3.10%
$ 55,504 $ 62,460 $ 53,441 $ 50,511 $ 56,822
$ 58,654 $ 55,540 $ 53,078 $ 54,689 $ 42,919
.88% .84% .54%(a) .55%(a) .63%(a)
.76% .71% .42%(a) .43%(a) .50%(a)
2.33% 2.73% 3.04%(a) 3.08%(a) 3.14%(a)
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Municipal Series Fund Massachusetts Money Market Series
Getting the Most From Your Prudential Mutual Fund
Some mutual fund shareholders won't ever read
this--they don't read annual and semiannual reports.
It's quite understandable. These annual and
semiannual reports are prepared to comply with
federal regulations, and are often written in
language that is difficult to understand. So when
most people run into those particularly daunting
sections of these reports, they don't read them.
We think that's a mistake
At Prudential Mutual Funds, we've made some changes
to our report to make it easier to understand and
more pleasant to read. We hope you'll find it
profitable to spend a few minutes familiarizing
yourself with your investment. Here's what you'll
find in the report:
Performance at a Glance
Since an investment's performance is often a
shareholder's primary concern, we present
performance information in two different formats.
You'll find it first on the "Performance at a
Glance" page where we compare the Fund and the
comparable average calculated by Lipper, Inc., a
nationally recognized mutual fund rating agency. We
report both the cumulative total returns and the
average annual total returns. The cumulative total
return is the total amount of income and
appreciation the Fund has achieved in various time
periods. The average annual total return is an
annualized representation of the Fund's
performance. It gives you an idea of how much the
Fund has earned in an average year for a given time
period. Under the performance box, you'll see
legends that explain the performance information,
whether fees and sales charges have been included
in returns, and the inception dates for the Fund's
share classes.
See the performance comparison charts at the back
of the report for more performance information.
Please keep in mind that past performance is not
indicative of future results.
<PAGE>
www.prudential.com (800) 225-1852
Performance review
The portfolio manager, who invests your money for
you, reports on
successful--and not-so-successful--strategies in this
section of your report. Look for recent purchases
and sales here, as well as information about the
sectors the portfolio manager favors, and any
changes that are on the
drawing board.
Portfolio of Investments
This is where the report begins to appear
technical, but it's really just a
listing of each security held at the end of the
reporting period, along with valuations and other
information. Please note that sometimes we discuss
a security in the Performance Review that doesn't
appear in this listing because it was sold before
the close of the reporting period.
Statement of Assets and Liabilities
The balance sheet shows the assets (the value of
the Fund's holdings),
liabilities (how much the Fund owes), and net
assets (the Fund's equity, or holdings after the
Fund pays its debts) as of the end of the reporting
period. It also shows how we calculate the net
asset value per share for each class of shares. The
net asset value is reduced by payment of your
dividend, capital gain, or other distribution, but remember
that the money or new shares are being paid or
issued to you. The net asset value fluctuates
daily, along with the value of every security in
the portfolio.
Statement of Operations
This is the income statement, which details income
(mostly interest and
dividends earned) and expenses (including what you
pay us to manage your money). You'll also see
capital gains here--both realized and unrealized.
<PAGE>
Prudential Municipal Series Fund Massachusetts Money Market Series
Getting the Most From Your Prudential Mutual Fund
Statement of Changes in Net Assets
This schedule shows how income and expenses
translate into changes
in net assets. The Fund is required to pay out the
bulk of its income to shareholders every year, and
this statement shows you how we do it (through
dividends and distributions) and how that affects
the net assets. This statement also shows how money
from investors flowed into and out of the Fund.
Notes to Financial Statements
This is the kind of technical material that can
intimidate readers, but it does contain useful
information. The Notes provide a brief history and
explanation of your Fund's objectives. In addition,
they outline how Prudential Mutual Funds prices
securities. The Notes also explain who manages and
distributes the Fund's shares and, more
importantly, how much they are paid for doing so.
Finally, the Notes explain how many shares are
outstanding and the number issued and redeemed over
the period.
Financial Highlights
This information contains many elements from prior
pages, but on a per-share basis. It is designed to
help you understand how the Fund performed, and to
compare this year's performance and expenses to
those of prior years.
Independent Auditor's Report
Once a year, an outside auditor looks over our
books and certifies that the information is fairly
presented and complies with generally accepted
accounting principles.
Tax Information
This is information that we report annually about
how much of your total return is taxable. Should
you have any questions, you may want to consult a
tax adviser.
<PAGE>
www.prudential.com (800) 225-1852
Performance Comparison
These charts are included in the annual report and
are required by the Securities Exchange Commission.
Performance is presented here as a hypothetical
$10,000 investment in the Fund since its inception
or for 10 years (whichever is shorter). To help you
put that return in context, we
are required to include the performance of an
unmanaged, broad-based securities index as well.
The index does not reflect the cost of buying the
securities it contains or the cost of managing a
mutual fund. Of course, the index holdings do not
mirror those of the Fund--the index is a broad-based
reference point commonly used by investors to
measure how well they are doing. A definition of
the selected index is also provided. Investors
cannot invest directly in an index.
<PAGE>
Prudential Municipal Series Fund Massachusetts Money Market Series
Getting the Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds,
you receive financial advice from a Prudential
Securities Financial Advisor or Pruco Securities
registered representative. Your advisor or
representative can provide you with the following
services:
There's No Reward Without Risk; but Is This Risk
Worth It?
Your financial advisor or registered representative
can help you match the reward you seek with the
risk you can tolerate. Risk can be difficult to
gauge--sometimes even the simplest investments bear
surprising risks. The educated investor knows that
markets seldom move in just one direction. There
are times when a market sector or asset class will
lose value or provide little in the way of total
return. Managing your own expectations is easier
with help from someone who understands the markets
and who knows you!
Keeping Up With the Joneses
A financial advisor or registered representative
can help you wade through the numerous available
mutual funds to find the ones that fit your
individual investment profile and risk tolerance.
While the newspapers and popular magazines are full
of advice about investing, they are aimed at
generic groups of people or representative
individuals--not at you personally. Your financial
advisor or registered representative will review
your investment objectives with you. This means you
can make financial decisions based on the assets
and liabilities in your current portfolio and your
risk tolerance--not just based on the current
investment fad.
Buy Low, Sell High
Buying at the top of a market cycle and selling at
the bottom are among the most common investor
mistakes. But sometimes it's difficult to hold on
to an investment when it's losing value every
month. Your financial advisor or registered
representative can answer questions when you're
confused or worried about your investment, and
should remind you that you're investing for the
long haul.
<PAGE>
www.prudential.com (800) 225-1852
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Trustees
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, Secretary
David F. Connor, Assistant Secretary
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
194 Wood Avenue South
Iselin, NJ 08830
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Cusip Number 74435M630
The views expressed in this report and information about the
Fund's portfolio holdings are for the period
covered by this report and
are subject to change thereafter.
The accompanying financial statements as
of February 29, 2000, were not audited and,
accordingly, no opinion is expressed on them.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
MF153E2 74435M630
(LOGO) Printed on Recycled Paper
<PAGE>
SEMIANNUAL REPORT FEBRUARY 29, 2000
Prudential
Municipal Series Fund/
New Jersey Series
Fund Type Municipal bond
Objective Maximize current income that is exempt from New
Jersey State and federal income taxes, consistent
with the preservation of capital
(GRAPHIC)
This report is not
authorized for distribution to prospective
investors unless preceded or accompanied by a
current prospectus.
(LOGO)
<PAGE>
Build on the Rock
Investment Goals and Style
Prudential Municipal Series Fund/New Jersey Series'
investment objective is to maximize current income
that is exempt from New Jersey State and federal
income taxes, consistent with the preservation of
capital. However, certain shareholders may be
subject to the federal alternative minimum tax
(AMT) because some of the Series' bonds are AMT
eligible. There can be no assurance the Series will
achieve its investment objective.
Contents
1 Message From the Fund's President
2 Performance Review
2 Portfolio Composition
3 Performance at a Glance
4 Credit Quality
5 Five Largest Issuers
7 Financial Statements
<PAGE>
www.prudential.com (800) 225-1852
Message From the Fund's President As of April 17, 2000
(PHOTO)
Dear Shareholder
The Class A shares of Prudential Municipal Series
Fund/New Jersey Series had a negative return of
0.93% during its fiscal half year that ended
February 29, 2000. For the same period, the Series'
benchmark Lipper Average was a negative 1.70%.
After the initial sales charge, the Class A shares'
return was a negative 3.90%. Prices of municipal
bonds declined primarily because investors required
higher yields in light of two short-term rate
increases implemented by the Federal Reserve during
our review period to slow the rapid pace of U.S.
economic growth.
Staying the course amid ups and downs of financial
markets
Many investors consider selling an asset class that
has performed poorly in favor of investments that
are currently gaining in value. That may not be the
best move. Changes in asset allocation should
reflect basic shifts in an investor's time horizon
and tolerance for risk--not recent fluctuations in
the performance of financial markets. One strategy
may be to own a diversified portfolio of mutual
funds that invests in stocks, bonds, and money
market instruments because this approach may help
to reduce risk.
Deciding on the correct level of diversification is
not easy. It requires
an understanding of an investor's risk tolerance
and overall investment strategy. In these volatile
times, we recommend consulting your financial
advisor to develop your asset allocation goals.
Thank you for your continued confidence in
Prudential mutual funds.
Sincerely,
John R. Strangfeld
President
Prudential Municipal Series Fund
1
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Performance Review
(PHOTO) (PHOTO) Portfolio Managers Evan Lamp (Municipal
Bonds Sector Team Leader) and Scott Diamond
Bear market in municipal bonds continued
During our six-month review period, increases in
short-term interest
rates by the Federal Reserve and sales of municipal
bonds by investors who wanted to realize tax losses
pressured the prices of tax-exempt debt securities.
Given this bearish trend, we positioned the Series
so that it would be less vulnerable to the decline
in bond prices.
The Fed raised its target for the federal funds
rate (what U.S. banks charge each other for
overnight loans) by a quarter of a percentage point
in November 1999 and February 2000 to curb U.S.
economic growth and reduce the economic imbalances
that can lead to higher inflation. These moves
pushed up the rate to 5.75% by February 2000. The
Fed also
engineered two quarter-point increases that raised
its discount rate on loans to banks from the
Federal Reserve system to 5.25% by February 2000.
As short-term rates rose, investors required higher
yields on both short- and long-term municipal
bonds, which caused their prices to fall.
More selling pressure emerged in late December
1999. As interest rates climbed, investors realized
capital losses by selling bonds or bond funds. Many
investors reinvest in new bonds or other bond funds
with a lower cost basis for tax purposes (due to
the higher level of yields). This is called "tax
loss swapping". In the municipal bond market, the
capital loss often reduces taxes, while the higher
yields on the new bonds or other funds are
generally tax exempt.
Portfolio Composition
Expressed as a percentage of total investments
as of 2/29/00
56.24% Revenue Bonds
26.41 General Obligations
14.19 Prerefunded Bonds
3.16 Miscellaneous
2
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
<TABLE>
Cumulative Total Returns1 As of 2/29/00
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A -0.93% -3.50% 26.42% (26.05) 85.58% (81.60) 86.61% (82.42)
Class B -0.96 -3.65 24.26 (23.90) 78.82 (74.99) 112.15 (104.51)
Class C -1.08 -3.89 22.73 (22.37) N/A 25.96 (25.35)
Class Z -0.77 -2.68 N/A N/A 13.01 (12.90)
Lipper NJ Muni
Debt Fund Avg.3 -1.70 -4.67 24.77 85.35 ***
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 3/31/00
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A -4.57% 4.42% (4.36) 6.25% (6.03) 6.20% (5.97)
Class B -6.87 4.51 (4.45) 6.16 (5.94) 6.59 (6.25)
Class C -4.09 4.21 (4.15) N/A 4.30 (4.21)
Class Z -0.89 N/A N/A 4.33 (4.30)
</TABLE>
<TABLE>
Distributions and Yields As of 2/29/00
<CAPTION>
Total Distributions 30-Day Taxable Equivalent Yield4 at tax rates of
Paid for Six Months SEC Yield 36% 39.6%
<S> <C> <C> <C>
Class A $0.31 4.88% 8.14% 8.63%
Class B $0.30 4.78 7.98 8.45
Class C $0.28 4.48 7.48 7.92
Class Z $0.32 5.28 8.81 9.34
</TABLE>
Past performance is not indicative of future
results. Principal and investment return will
fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their
original cost.
1 Source: Prudential Investments Fund Management
LLC and Lipper Inc. The cumulative total returns do
not take into account sales charges. The average
annual total returns do take into account
applicable sales charges. The Series charges a
maximum front-end sales charge of 3% for Class A
shares and a declining contingent deferred sales
charge (CDSC) of 5%, 4%, 3%, 2%, 1%, and 1% for six
years for Class B shares. Class B shares will
automatically convert to Class A shares, on a
quarterly basis, approximately seven years after
purchase. Class C shares are subject to a front-end
sales charge of 1% and a CDSC of 1% for 18 months.
Class Z shares are not subject to a sales charge or
distribution and service (12b-1) fees. 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 ( ).
2 Inception dates: Class A, 1/22/90; Class B,
3/4/88; Class C, 8/1/94; and Class Z, 12/6/96.
3 Lipper average returns are for all funds in each
share class for the six-month, one-, five-, and
ten-year periods in the New Jersey Municipal Debt Fund
category. Single-state Municipal Debt funds limit
their securities that are exempt from taxation in a
specified state (double tax exempt) or city (triple
tax exempt).
4 Taxable equivalent yields reflect federal and
applicable state tax rates.
***Lipper Since Inception returns are 87.84% for
Class A, 117.71% for Class B, 28.60% for Class C,
and 9.22% for Class Z, based on all funds in each
share class.
3
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Performance Review
Although the bear market detracted from the Series'
returns, we were able to increase the Series'
distribution yield in this rising-interest-rate
environment. An increased exposure to the
transportation sector, industrial development
bonds, and others benefited the Series' yield.
We pursued a short-duration strategy
When bond markets sell off, lowering a portfolio's
duration generally provides some degree of
protection by making the portfolio less sensitive
to the rise in bond yields. (Duration measures how
much a portfolio's bonds will fluctuate in price
for a given change in interest rates. It is
expressed in years.) The Series' share classes,
without sales charges factored in, performed better
than its benchmark Lipper Average, which does not
consider sales charges. This occurred largely
because we kept the Series' duration shorter than
average for most of its fiscal half year.
In January 2000, however, we began to lengthen the
Series' duration because we believe the Fed's
monetary policy moves will keep inflation in check,
which could allow municipal bond yields to decline
as the year progresses.
We lessened the impact of "market-discount
taxation"
Another strategy that benefited the Series was
selling some of its municipal bonds before they
became subject to ordinary income taxes for
investors who might want to buy them. Here's how it
works: When yields climb beyond a certain point for
every municipal bond, the market discount on that
bond may become subject to ordinary income taxes
for new buyers.
This lowers the value of the bond because new
buyers would want to purchase the bond cheaply
enough to compensate for the greater tax liability.
4
<PAGE>
www.prudential.com (800) 225-1852
Looking Ahead
Shortly after our six-month review period ended,
the Fed engineered another quarter-point rate hike
that raised its target for the federal funds rate
to 6.00% and its discount rate to 5.50%. We believe
the Fed's efforts to tighten monetary policy will
slow the U.S. economic expansion in 2000 from its
7.30% annual pace in the fourth quarter of 1999.
Moderating economic growth could help bolster the
performance of municipal bonds, but detract from
the performance of equities.
Meanwhile, the powerful U.S. economic expansion has
improved the credit quality of many state and local
governments and reduced their borrowing needs,
allowing them to issue fewer bonds. The supply of
new municipal bonds has also fallen because the
rising-interest-rate environment provided less
opportunity for issuers to save money by replacing
older higher coupon bonds with new lower-coupon
bonds. With the declining supply, if investor
demand remains strong, the tax-exempt bond market
should perform better than other U.S. fixed-income
markets in 2000.
Five Largest Issuers
Expressed as a percentage of net assets
as of 2/29/00
7.17% New Jersey State Transportation
Trust Fund Authority
4.07 New Jersey State
Highway Authority
3.61 New Jersey Economic Dev.
Authority Water Facility
3.10 Edison Township
3.09 Jackson Township
School District
* Prerefunded issues are secured by escrowed cash and/or direct U.S.
guaranteed obligations.
5
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Financial
Statements
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 97.6%
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bayshore Regl. Sewage Auth. Rev.,
M.B.I.A. Aaa 5.50% 4/01/12 $ 3,000 $ 3,009,540
Bergen Cnty., Utils. Auth., Wtr.
Poll. Ctrl. Rev., Ser. B, F.G.I.C. Aaa 5.75 12/15/05 1,000 1,038,770
Cape May Cnty. Ind. Poll. Ctrl.,
Fin. Auth. Rev., Atlantic Cnty.
Elec. Co., M.B.I.A. Aaa 6.80 3/01/21 2,615 2,932,932
East Orange Bd. of Ed. Cert.,
Cap. Apprec., F.S.A. Aaa Zero 8/01/18 1,420 470,233
Cap. Apprec., F.S.A. Aaa Zero 2/01/22 2,845 750,824
Cap. Apprec., F.S.A. Aaa Zero 2/01/24 1,845 429,184
Edison Twnshp., Gen. Oblig.,
A.M.B.A.C. Aaa 6.00 1/01/08 5,390 5,692,648
Evesham Mun. Utils. Auth. Rev.,
Ser. B, M.B.I.A. Aaa 7.00 7/01/10 2,000 2,018,200
Gloucester Cnty. Impvt. Auth.,
Solid Waste Sys. Rev. BBB(c) 6.85 12/01/29 3,000 3,014,370
Hudson Cnty. Impvt. Auth.,
Solid Waste Sys. Rev. NR 7.10 1/01/20 1,960(f) 2,089,791
Solid Waste Sys. Rev. A+(c) 6.10 7/01/20 1,500(e)(f) 1,591,965
Solid Waste Sys. Rev. BBB-(c) 6.125 1/01/29 1,000 910,150
Solid Waste Sys. Rev., A.M.T. BBB-(c) 6.125 1/01/29 1,250 1,137,688
Jackson Twnshp.,
Sch. Dist., F.G.I.C. Aaa 6.60 6/01/04 1,020 1,087,922
Sch. Dist., F.G.I.C. Aaa 6.60 6/01/05 940(e) 1,011,045
Sch. Dist., F.G.I.C. Aaa 6.60 6/01/10 1,600 1,769,440
Sch. Dist., F.G.I.C. Aaa 6.60 6/01/11 1,600(e) 1,777,344
Jersey City Mun. Utils. Auth. Sewer
Rev. Ref., F.S.A. Aaa 5.25 12/01/14 1,725 1,664,763
Jersey City, Gen. Oblig., Ser. A,
F.S.A. Aaa 9.25 5/15/04 4,310 4,998,178
Lenape Regl. High Sch. Dist., Gen.
Oblig., M.B.I.A. Aaa 7.625 1/01/12 400(b) 476,288
Middle Twnshp. Sch. Dist., F.G.I.C. Aaa 7.00 7/15/05 1,200 1,313,040
Middlesex Cnty.,
Certif. Part. Cap. Apprec.,
M.B.I.A. Aaa Zero 6/15/25 1,250 265,488
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Middlesex Cnty., cont'd.
Impvt. Auth., Utils. Sys. Rev.,
A.M.B.A.C. Aaa Zero 9/01/19 $ 5,000 $ 1,536,950
Millburn Twnshp.
Sch. Dist., Brd. of Ed. Aaa 5.35% 7/15/13 1,140 1,136,478
Sch. Dist., Brd. of Ed. Aaa 5.35 7/15/14 1,135 1,121,482
Sch. Dist., Brd. of Ed. Aaa 5.35 7/15/16 1,150 1,120,077
Sch. Dist., Brd. of Ed. Aaa 5.35 7/15/17 1,150 1,103,448
Monmouth Cnty. Impvt. Auth. Rev.,
Howell Twnshp. Brd. of Ed. AA+(c) 6.55 7/01/12 3,465(f) 3,666,524
Howell Twnshp. Brd. of Ed.,
A.M.B.A.C. AAA(c) 6.50 7/15/06 875 940,424
Howell Twnshp. Brd. of Ed.,
A.M.B.A.C. AAA(c) 6.50 7/15/07 930 1,005,600
New Jersey Econ. Dev. Auth. Rev.,
Ed. Testing Service, Ser. A,
M.B.I.A. Aaa 5.90 5/15/15 2,000(f) 2,110,540
First Mtg. - Keswick Pines NR 5.75 1/01/24 2,250 1,774,013
First Mtg. - The Evergreens NR 5.875 10/01/12 1,200 1,094,244
First Mtg. - The Evergreens NR 6.00 10/01/17 1,425 1,222,906
First Mtg. - The Evergreens NR 6.00 10/01/22 1,400 1,165,038
First Mtg. - Leisure Park Marriott NR 5.875 12/01/27 2,200 1,765,478
Kapkowski Rd. Landfill NR Zero 4/01/08 1,020 592,477
Kapkowski Rd. Landfill NR 6.375 4/01/31 2,000 1,873,380
Nat'l. Assoc. of Accountants NR 7.50 7/01/01 465 470,454
Nat'l. Assoc. of Accountants NR 7.65 7/01/09 950 976,135
Natural Gas Facs., NUI Corp.
Proj., M.B.I.A., A.M.T. Aaa 5.70 6/01/32 3,000 2,838,930
New Jersey Econ. Dev. Auth. Wtr.
Facs. Rev., New Jersey American
Wtr. Co., Ser. B, F.G.I.C., A.M.T. Aaa 5.375 5/01/32 2,000 1,784,460
New Jersey Econ. Dev. Auth. Wtr.
Facs., F.G.I.C., A.M.T. NR 7.848(d) 11/01/29 5,000 4,834,850
New Jersey Econ. Dev. Auth., Spec.
Fac. Rev.,
Continental Airlines Proj., A.M.T. Ba2 6.25 9/15/29 4,000 3,559,520
New Jersey Econ. Dist., Heating &
Cool., Trigen Trenton Proj. BBB-(c) 6.20 12/01/10 600 582,546
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New Jersey Ed. Facs. Auth. Rev.,
Fairleigh Dickinson Univ., Ser. G NR 5.70% 7/01/28 $ 2,750 $ 2,324,685
Felician College of Lodi, Ser. D NR 7.375 11/01/22 1,275 1,305,039
Princeton Theological, Ser. B Aaa 5.90 7/01/26 2,500 2,506,300
Seton Hall Univ. Proj., Ser. D Baa1 7.00 7/01/21 1,260 1,324,121
New Jersey Hlth. Care Facs. Fin.
Auth. Rev.,
Atlantic City Med. Ctr., Ser. C A3 6.80 7/01/11 2,500 2,622,100
Jersey Shore Med. Ctr., A.M.B.A.C. AAA(c) 6.00 7/01/09 835(f) 879,948
Jersey Shore Med. Ctr., A.M.B.A.C. Aaa 6.00 7/01/09 630 653,430
Jersey Shore Med. Ctr., A.M.B.A.C. AAA(c) 6.25 7/01/21 850(f) 903,949
Jersey Shore Med. Ctr., A.M.B.A.C. Aaa 6.25 7/01/21 650 664,235
Kensington Cmnty. Med. Ctr.,
M.B.I.A. Aaa 7.00 7/01/20 3,450 3,542,736
St. Joseph's Hosp. & Med. Ctr.,
Ser. A AAA(c) 5.70 7/01/11 4,375 4,453,006
New Jersey St. Hsg. & Mtge. Fin.
Agcy., Rental Housing,
Ser. B, A.M.T. AA-(c) 6.75 11/01/11 2,190 2,258,416
New Jersey St. Hwy. Auth., Garden
St. Pkwy.,
Gen. Rev. A1 6.20 1/01/10 3,035 3,244,476
Gen. Rev. A1 5.75 1/01/14 2,500 2,534,075
Gen. Rev. A1 5.625 1/01/30 1,750 1,670,865
New Jersey St. Tpke. Auth. Rev.,
Ser. C, M.B.I.A. Aaa 6.50 1/01/09 1,000 1,087,410
New Jersey St. Trans. Trust Fund
Auth. Trans. Sys.,
M.B.I.A. Aaa 5.75 6/15/14 3,500 3,528,665
Ser. A Aa2 5.75 6/15/20 4,150 4,144,646
Ser. B, M.B.I.A. Aaa 6.50 6/15/11 5,000(e) 5,486,700
North Brunswick Twnshp.,
Brd. of Ed., Gen. Oblig. A3 6.80 6/15/06 350 382,168
Brd. of Ed., Gen. Oblig. A3 6.80 6/15/07 350(e) 385,427
Gen. Oblig. A1 6.40 5/15/10 545(e) 572,441
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ocean Cnty. Utils. Auth.,
Wastewater Rev. Aa2 6.00% 1/01/07 $ 5,000 $ 5,247,850
Pohatcong Twnshp. Sch. Dist.,
F.S.A. AAA(c) 5.20 7/15/22 1,960 1,794,948
Port Auth. New York & New Jersey,
Ser. 94 A1 5.80 12/01/13 2,500 2,531,750
Ser. 96, F.G.I.C., A.M.T. Aaa 6.60 10/01/23 2,750 2,888,380
Puerto Rico Commonwealth.,
Gen. Oblig. Baa1 Zero 7/01/16 2,500 950,075
Gen. Oblig. Baa1 Zero 7/01/17 3,000 1,067,340
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 95X, M.B.I.A. Aaa 6.00 7/01/12 3,295 3,393,092
Puerto Rico Mun. Fin. Agcy., Ser.
A, F.S.A. Aaa 5.50 8/01/23 3,000 2,848,560
Puerto Rico Pub. Bldgs. Auth. Rev.,
Ser. B, F.S.A. AAA(c) 5.25 7/01/21 2,250 2,071,058
Puerto Rico Tel. Auth. Rev., Ser.
I, M.B.I.A., R.I.B.S. Aaa 6.764(d) 1/25/07 7,875(e)(f) 8,160,469
Rutgers St. Univ. Rev., Ser. A A1 6.40 5/01/13 2,000(e) 2,164,240
Salem Cnty. Indus. Poll. Ref.,
PSE&G Co., M.B.I.A. Aaa 6.20 8/01/30 5,000 5,080,000
South River
Sch. Dist., F.G.I.C. Aaa 5.00 12/01/13 1,300 1,237,743
Sch. Dist., F.G.I.C. Aaa 5.00 12/01/14 1,300 1,222,260
Sch. Dist., F.G.I.C. Aaa 5.00 12/01/15 1,230 1,142,362
Sparta Twnshp. Brd. of Ed.,
M.B.I.A. Aaa 5.75 9/01/14 1,000(e)(f) 1,036,720
Union City Sch. Impvt., F.S.A. Aaa 6.375 11/01/08 1,545 1,678,148
Union Cnty. Impvt. Auth. Rev.,
Plainfield Brd. of Ed., F.G.I.C. Aaa 6.25 8/01/14 1,175(f) 1,263,395
Plainfield Brd. of Ed., F.G.I.C. Aaa 6.25 8/01/15 1,250(f) 1,344,038
Plainfield Brd. of Ed., F.G.I.C. Aaa 6.25 8/01/16 1,330(f) 1,430,056
Plainfield Brd. of Ed., F.G.I.C. Aaa 6.25 8/01/17 1,415(f) 1,521,450
Virgin Islands Pub. Fin. Auth.
Rev., Ser. A BBB-(c) 6.50 10/01/24 750 741,780
Washington Twnshp. Mun. Utils.,
Cap. Apprec., Ser. A, F.G.I.C. Aaa Zero 12/15/22 1,055 257,198
Cap. Apprec., Ser. A, F.G.I.C. Aaa Zero 12/15/25 1,055 211,992
West Windsor,
Plainsboro Regl. Sch. Dist.,
F.G.I.C. Aaa 5.50 12/01/13 2,600 2,607,904
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
West Windsor, cont'd.
Plainsboro Regl. Sch. Dist.,
F.G.I.C. Aaa 5.50% 12/01/14 $ 2,700 $ 2,688,957
------------
Total long-term investments (cost
$181,705,158) 180,782,360
SHORT-TERM INVESTMENTS--1.3%
<CAPTION>
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New Jersey Econ. Dev. Auth. Rev.
Ref., F.R.D.D. NR 3.80% 3/01/00 $ 2,300 $ 2,300,000
Port Auth. New York & New Jersey,
Ser. 3, F.R.D.D. VMIG1 3.75 3/01/00 100 100,000
------------
Total short-term investments (cost
$2,400,000) 2,400,000
------------
Total Investments--98.9%
(cost $184,105,158; Note 4) 183,182,360
Other assets in excess of
liabilities--1.1% 2,118,662
------------
Net Assets--100% $185,301,022
------------
------------
</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.R.D.D.--Floating Rate (Daily) Demand Note(b).
F.S.A.--Financial Security Assurance.
M.B.I.A.--Municipal Bond Insurance Association.
R.I.B.S.--Residual Interest Bonds.
(b) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be the later of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
(c) Standard & Poor's Rating.
(d) Inverse floating rate bond. The coupon is inversely indexed to a floating
interest rate. The rate shown is the rate at February 29, 2000.
(e) All or partial amount segregated as collateral for when-issued security.
(f) 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 11
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $184,105,158) $ 183,182,360
Cash 91,880
Interest receivable 2,515,433
Receivable for Series shares sold 6,585
Prepaid expenses and other assets 5,140
-----------------
Total assets 185,801,398
-----------------
LIABILITIES
Payable for Series shares reacquired 217,036
Accrued expenses 100,469
Management fee payable 73,774
Dividends payable 52,594
Distribution fee payable 50,241
Deferred trustees' fees 6,262
-----------------
Total liabilities 500,376
-----------------
NET ASSETS $ 185,301,022
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 180,518
Paid-in capital in excess of par 186,395,346
-----------------
186,575,864
Accumulated net realized loss on investments (352,044)
Net unrealized depreciation on investments (922,798)
-----------------
Net assets, February 29, 2000 $ 185,301,022
-----------------
-----------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Statement of Assets and Liabilities (Unaudited) Cont'd.
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share
($120,079,711 / 11,698,977 shares of beneficial interest
issued and outstanding) $10.26
Maximum sales charge (3% of offering price) .32
-----------------
Maximum offering price to public $10.58
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per
share ($63,075,380 / 6,143,881 shares of beneficial
interest issued and outstanding) $10.27
-----------------
-----------------
Class C:
Net asset value and redemption price per share ($2,076,501
/ 202,262 shares of beneficial interest issued and
outstanding) $10.27
Sales charge (1% of offering price) .10
-----------------
Offering price to public $10.37
-----------------
-----------------
Class Z:
Net asset value, offering price and redemption price per
share ($69,430 / 6,715 shares of beneficial interest
issued and outstanding) $10.34
-----------------
-----------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest and discount earned $ 5,693,201
-----------------
Expenses
Management fee 485,872
Distribution fee--Class A 153,991
Distribution fee--Class B 172,766
Distribution fee--Class C 7,419
Custodian's fees and expenses 50,000
Transfer agent's fees and expenses 39,000
Reports to shareholders 25,000
Registration fees 20,000
Legal fees and expenses 9,000
Audit fees and expenses 5,000
Trustees' fees and expenses 2,500
Miscellaneous 9,306
-----------------
Total expenses 979,854
-----------------
Net investment income 4,713,347
-----------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investment transactions (337,705)
Net decrease in unrealized appreciation (depreciation) on
investments (6,431,946)
-----------------
Net loss on investments (6,769,651)
-----------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(2,056,304)
-----------------
-----------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year Ended
Ended August 31,
February 29, 2000 1999
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 4,713,347 $ 10,122,921
Net realized gain (loss) on investment
transactions (337,705) 1,234,336
Net decrease in unrealized appreciation
(depreciation) on investments (6,431,946) (12,090,901)
----------------- -------------
Net decrease in net assets resulting from
operations (2,056,304) (733,644)
----------------- -------------
Dividends and distributions (Note 1):
Dividends from net investment income
Class A (3,047,966) (5,851,852)
Class B (1,619,415) (4,200,420)
Class C (44,108) (66,932)
Class Z (1,858) (3,717)
----------------- -------------
(4,713,347) (10,122,921)
----------------- -------------
Distributions in excess of net investment
income
Class A -- (7,898)
Class B -- (6,230)
Class C -- (97)
Class Z -- (6)
----------------- -------------
-- (14,231)
----------------- -------------
Distributions from net realized gains
Class A (587,987) (958,970)
Class B (308,100) (756,555)
Class C (9,830) (11,815)
Class Z (314) (714)
----------------- -------------
(906,231) (1,728,054)
----------------- -------------
Series share transactions (net of share
conversions) (Note 5):
Net proceeds from shares sold 9,428,615 20,755,452
Net asset value of shares issued in
reinvestment of dividends and
distributions 3,385,684 7,062,891
Cost of shares reacquired (25,014,866) (42,677,795)
----------------- -------------
Net decrease in net assets from Series share
transactions (12,200,567) (14,859,452)
----------------- -------------
Total decrease (19,876,449) (27,458,302)
NET ASSETS
Beginning of period 205,177,471 232,635,773
----------------- -------------
End of period $ 185,301,022 $ 205,177,471
----------------- -------------
----------------- -------------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Notes to Financial Statements (Unaudited)
Prudential Municipal Series Fund (the 'Fund') is registered under the
Investment Company Act of 1940, as an open-end management investment company.
The Fund was organized as a Massachusetts business trust on May 18, 1984, and
consists of 11 series. The monies of each series are invested in separate,
independently managed portfolios. The New Jersey Series (the 'Series') commenced
investment operations in March 1988. 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 which approximates market value.
All securities are valued as of 4:15 p.m., New York time.
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 original issue
discount paid on purchases of 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.
16
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Notes to Financial Statements (Unaudited) Cont'd.
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 continue 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.
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 Investment
Management Services LLC ('PIMS') which acts as distributor of the Class A, Class
B, Class C and Class Z shares of the Fund. The Fund compensates PIMS for
distributing and servicing the Fund's Class A, Class B and Class C shares
pursuant to plans of distribution, (the 'Class A, B and C Plans'), regardless of
expenses actually incurred by them. The distribution fees are accrued daily and
payable monthly. No distribution or service fees are paid to PIMS as distributor
of the Class Z shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, .50% of 1%
and 1% of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Plans were .25 of 1%, .50 of 1% and .75 of
1% of the average
17
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Notes to Financial Statements (Unaudited) Cont'd.
daily net assets of the Class A, B and C shares, respectively, for the six
months ended February 29, 2000.
PIMS advised the Series that it has received approximately $6,000 and
$4,600 in front-end sales charges resulting from sales of Class A and Class C
shares, respectively, during the six months ended February 29, 2000. From these
fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn
paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Series that during the six months ended February 29,
2000, it received approximately $40,900 and $300 in contingent deferred sales
charges imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PIFM, PIMS and PIC are wholly owned subsidiaries of The Prudential
Insurance Company of America.
The Series, along with other affiliated registered investment companies
(the 'Funds'), entered into a syndicated credit agreement ('SCA') with an
unaffiliated lender. The maximum commitment under the SCA is $1 billion and
interest on any borrowings will be at market rates. For the period
3/11/99-3/9/00, the commitment fee on the unused portion of the credit facility
was .065 of 1%. Subsequent to March 9, 2000, the SCA was renewed with a maximum
commitment of $1 billion at a commitment fee of .080 of 1% of the unused portion
of the credit facility. The expiration date of the SCA is March 9, 2001. The
commitment fee is accrued and paid quarterly on a pro rata basis by the Funds.
Prior to March 11, 1999, the Funds had a credit agreement with a maximum
commitment of $200,000,000. The commitment fee was .055 of 1% on the unused
portion of the credit facility. The Fund did not borrow any amounts during the
six months ended February 29, 2000. The purpose of the credit agreements is to
serve as an alternative source of funding for capital share redemptions.
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the six months ended February 29,
2000, the Series incurred fees of approximately $33,400 for the services of
PMFS. As of February 29, 2000, approximately $5,400 of such fees were due to
PMFS. Transfer agent fees and expenses in the Statement of Operations include
certain out-of-pocket expenses paid to nonaffiliates.
18
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Notes to Financial Statements (Unaudited) Cont'd.
Note 4. Portfolio Securities
Purchases and sales of portfolio securities of the Series, excluding short-term
investments, for the six months ended February 29, 2000, were $18,225,694 and
$32,038,392, respectively.
The cost basis of investments for federal income tax purposes at February
29, 2000 was substantially the same as for financial reporting purposes and
accordingly, net unrealized depreciation of investments for federal income tax
purposes was $922,798 (gross unrealized appreciation--$4,333,217; gross
unrealized depreciation--$5,256,015).
Note 5. Capital
The Series offers Class A, Class B, Class C and Class Z shares. Class A shares
are sold with a front-end sales charge of up to 3%. Class B shares are sold with
a contingent deferred sales charge which declines from 5% to zero depending on
the period of time the shares are held. Class C shares are sold with a front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18 months. Class B shares will automatically convert to Class A shares on a
quarterly basis approximately seven years after purchase. A special exchange
privilege is also available for shareholders who qualify to purchase Class A
shares at net asset value. Class Z shares are not subject to any sales or
redemption charge and are offered exclusively for sale to a limited group of
investors.
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 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------------------------------------ ---------- ------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold 580,211 $ 6,055,489
Shares issued in reinvestment of dividends and distributions 208,782 2,163,071
Shares reacquired (1,322,462) (13,716,961)
---------- ------------
Net decrease in shares outstanding before conversion (533,469) (5,498,401)
Shares issued upon conversion from Class B 640,754 6,772,489
---------- ------------
Net increase in shares outstanding 107,285 1,274,088
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 985,448 $ 10,991,945
Shares issued in reinvestment of dividends and distributions 362,139 4,029,788
Shares reacquired (1,612,166) (17,882,857)
---------- ------------
Net decrease in shares outstanding before conversion (264,579) (2,861,124)
Shares issued upon conversion from Class B 1,766,984 19,823,070
---------- ------------
Net increase in shares outstanding 1,502,405 $ 16,961,946
---------- ------------
---------- ------------
</TABLE>
19
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B Shares Amount
- ------------------------------------------------------------ ---------- ------------
Six months ended February 29, 2000:
<S> <C> <C>
Shares sold 274,163 $ 2,862,708
Shares issued in reinvestment of dividends and distributions 113,154 1,173,490
Shares reacquired (1,060,358) (11,076,040)
---------- ------------
Net decrease in shares outstanding before conversion (673,041) (7,039,842)
Shares reacquired upon conversion into Class A (640,754) (6,772,489)
---------- ------------
Net decrease in shares outstanding (1,313,795) $(13,812,331)
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 801,429 $ 8,959,095
Shares issued in reinvestment of dividends and distributions 265,518 2,960,115
Shares reacquired (2,195,958) (24,462,541)
---------- ------------
Net decrease in shares outstanding before conversion (1,129,011) (12,543,331)
Shares reacquired upon conversion into Class A (1,766,556) (19,823,070)
---------- ------------
Net decrease in shares outstanding (2,895,567) $(32,366,401)
---------- ------------
---------- ------------
<CAPTION>
Class C
- ------------------------------------------------------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold 43,741 $ 458,370
Shares issued in reinvestment of dividends and distributions 4,594 47,573
Shares reacquired (17,050) (178,473)
---------- ------------
Net increase in shares outstanding 31,285 $ 327,470
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 67,242 $ 749,066
Shares issued in reinvestment of dividends and distributions 6,176 68,659
Shares reacquired (22,179) (245,690)
---------- ------------
Net increase in shares outstanding 51,239 $ 572,035
---------- ------------
---------- ------------
<CAPTION>
Class Z
- ------------------------------------------------------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold 4,897 $ 52,048
Shares issued in reinvestment of dividends and distributions 148 1,550
Shares reacquired (4,106) (43,392)
---------- ------------
Net increase in shares outstanding 939 $ 10,206
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 5,027 $ 55,346
Shares issued in reinvestment of dividends and distributions 386 4,329
Shares reacquired (7,771) (86,707)
---------- ------------
Net decrease in shares outstanding (2,358) $ (27,032)
---------- ------------
---------- ------------
</TABLE>
20
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Financial
Highlights
21
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Class A
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.67
-----------------
Income from investment operations
Net investment income .26
Net realized and unrealized loss on investment transactions (.36)
-----------------
Total from investment operations (.10)
-----------------
Less distributions
Dividends from net investment income (.26)
Distributions in excess of net investment income --
Distributions from net realized gains on investment
transactions (.05)
-----------------
Total distributions (.31)
-----------------
Net asset value, end of period $ 10.26
-----------------
-----------------
TOTAL RETURN(c): (.93)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 120,080
Average net assets (000) $ 123,870
Ratios to average net assets:(b)
Expenses, including distribution fees .91%(a)
Expenses, excluding distribution fees .66%(a)
Net investment income 4.95%(a)
For Class A, B, C and Z shares:
Portfolio turnover rate 10%
</TABLE>
- ------------------------------
(a) Annualized.
(b) Net of management fee waiver.
(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 one full year are not
annualized.
(d) Less than $.005 per share.
22 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class A
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11.31 $ 10.97 $ 10.87 $ 10.98 $ 10.81
- ---------------- ---------------- -------- -------- --------
.52 .53 .55(b) .57(b) .61(b)
(.55) .36 .29 (.07) .17
- ---------------- ---------------- -------- -------- --------
(.03) .89 .84 .50 .78
- ---------------- ---------------- -------- -------- --------
(.52) (.53) (.55) (.57) (.61)
--(d) -- --(d) -- --
(.09) (.02) (.19) (.04) --
- ---------------- ---------------- -------- -------- --------
(.61) (.55) (.74) (.61) (.61)
- ---------------- ---------------- -------- -------- --------
$ 10.67 $ 11.31 $ 10.97 $ 10.87 $ 10.98
- ---------------- ---------------- -------- -------- --------
- ---------------- ---------------- -------- -------- --------
(.40)% 8.40% 7.97% 4.63% 7.55%
$123,692 $114,090 $ 95,729 $ 74,492 $ 49,666
$125,547 $107,206 $ 89,280 $ 61,837 $ 30,290
.84% .71% .70%(b) .67%(b) .55%(b)
.64% .61% .60%(b) .57%(b) .45%(b)
4.66% 4.85% 5.03%(b) 5.19%(b) 5.65%(b)
15% 18% 25% 62% 37%
</TABLE>
See Notes to Financial Statements 23
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.67
--------
Income from investment operations
Net investment income .25
Net realized and unrealized loss on investment transactions (.35)
--------
Total from investment operations (.10)
--------
Less distributions
Dividends from net investment income (.25)
Distributions in excess of net investment income --
Distributions from net realized gains on investment
transactions (.05)
--------
Total distributions (.30)
--------
Net asset value, end of period $ 10.27
--------
--------
TOTAL RETURN(c): (.96)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $63,075
Average net assets (000) $69,486
Ratios to average net assets:
Expenses, including distribution fees 1.16%(a)
Expenses, excluding distribution fees .66%(a)
Net investment income 4.69%(a)
</TABLE>
- ------------------------------
(a) Annualized.
(b) Net of management fee waiver.
(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 one full year are not
annualized.
(d) Less than $.005 per share.
24 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11.31 $ 10.97 $ 10.87 $ 10.98 $ 10.81
-------- ---------------- ---------------- ---------------- ----------------
.49 .50 .50(b) .53(b) .57(b)
(.55) .36 .29 (.07) .17
-------- ---------------- ---------------- ---------------- ----------------
(.06) .86 .79 .46 .74
-------- ---------------- ---------------- ---------------- ----------------
(.49) (.50) (.50) (.53) (.57)
--(d) -- --(d) -- --
(.09) (.02) (.19) (.04) --
-------- ---------------- ---------------- ---------------- ----------------
(.58) (.52) (.69) (.57) (.57)
-------- ---------------- ---------------- ---------------- ----------------
$ 10.67 $ 11.31 $ 10.97 $ 10.87 $ 10.98
-------- ---------------- ---------------- ---------------- ----------------
-------- ---------------- ---------------- ---------------- ----------------
(.71)% 7.97% 7.54% 4.22% 7.12%
$ 79,598 $117,099 $144,992 $188,315 $246,202
$ 96,542 $128,382 $162,330 $222,235 $274,995
1.14% 1.11% 1.10%(b) 1.07%(b) .95%(b)
.64% .61% .60%(b) .57%(b) .45%(b)
4.35% 4.46% 4.63%(b) 4.80%(b) 5.30%(b)
</TABLE>
See Notes to Financial Statements 25
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
<S> <C> <C>
-----------------
<CAPTION>
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.67
--------
Income from investment operations
Net investment income .23
Net realized and unrealized loss on investment transactions (.35)
--------
Total from investment operations (.12)
--------
Less distributions
Dividends from net investment income (.23)
Distributions in excess of net investment income --
Distributions from net realized gains on investment
transactions (.05)
--------
Total distributions (.28)
--------
Net asset value, end of period $ 10.27
--------
--------
TOTAL RETURN(c): (1.08)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 2,077
Average net assets (000) $ 1,989
Ratios to average net assets:(b)
Expenses, including distribution fees 1.41%(a)
Expenses, excluding distribution fees .66%(a)
Net investment income 4.46%(a)
</TABLE>
- ------------------------------
(a) Annualized.
(b) Net of management fee waiver.
(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 one full year are not
annualized.
(d) Less than $.005 per share.
26 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
- ----------------------------------------------------------------------------------------------------------
Year Ended September 30,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$11.31 $10.97 $10.87 $10.98 $10.81
------- ------- ------- ------- -------
.46 .47 .48(b) .50(b) .54(b)
(.55) .36 .29 (.07) .17
------- ------- ------- ------- -------
(.09) .83 .77 .43 .71
------- ------- ------- ------- -------
(.46) (.47) (.48) (.50) (.54)
--(d) -- --(d) -- --
(.09) (.02) (.19) (.04) --
------- ------- ------- ------- -------
(.55) (.49) (.67) (.54) (.54)
------- ------- ------- ------- -------
$10.67 $11.31 $10.97 $10.87 $10.98
------- ------- ------- ------- -------
------- ------- ------- ------- -------
(.95)% 7.70% 7.27% 3.96% 6.86%
$1,825 $1,354 $1,637 $1,961 $1,502
$1,622 $1,274 $1,894 $1,735 $ 790
1.39% 1.36% 1.35%(b) 1.32%(b) 1.20%(b)
.64% .61% .60%(b) .57%(b) .45%(b)
4.13% 4.21% 4.38%(b) 4.54%(b) 4.99%(b)
</TABLE>
See Notes to Financial Statements 27
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
----------------
Six Months Ended
March 31, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $10.75
-------
Income from investment operations
Net investment income .27
Net realized and unrealized loss on investment transactions (.36)
-------
Total from investment operations (.09)
-------
Less distributions
Dividends from net investment income (.27)
Distributions in excess of net investment income --
Distributions from net realized gains on investment
transactions (.05)
-------
Total distributions (.32)
-------
Net asset value, end of period $10.34
-------
-------
TOTAL RETURN(c): (.77)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 69
Average net assets (000) $ 72
Ratios to average net assets:(b)
Expenses, including distribution fees .66%(a)
Expenses, excluding distribution fees .66%(a)
Net investment income 5.22%(a)
</TABLE>
- ------------------------------
(a) Annualized.
(b) Net of management fee waiver.
(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 one full year are not
annualized.
(d) Less than $.005 per share.
(e) Commencement of offering of Class Z shares.
28 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
- ---------------------------------------------------------------------------------------
Year Ended August 31, December 6, 1996(d)
- ------------------------------------------ Through August 31,
1999 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
$11.32 $10.98 $11.10
------- ------- -------
.54 .55 .41(b)
(.48) .36 .07
------- ------- -------
.06 .91 .48
------- ------- -------
(.54) (.55) (.41)
--(d) -- --(d)
(.09) (.02) (.19)
------- ------- -------
(.63) (.57) (.60)
------- ------- -------
$10.75 $11.32 $10.98
------- ------- -------
------- ------- -------
.45% 8.51% 4.49%
$ 62 $ 92 $ 15
$ 77 $ 30 $ 10
.64% .61% .60%(a)(b)
.64% .61% .60%(a)(b)
4.86% 4.96% 5.13%(a)(b)
</TABLE>
See Notes to Financial Statements 29
<PAGE>
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Prudential Mutual Fund Family
Prudential offers a broad range of mutual funds designed to
meet your individual needs. For information about
these funds, contact your financial adviser or call
us at (800) 225-1852. Read the prospectus carefully
before you invest or send money.
STOCK FUNDS
Prudential Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Index Series Fund
Prudential Small-Cap Index Fund
Prudential Stock Index Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Mid-Cap Value Fund
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund
Prudential 20/20 Focus Fund
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Target Funds
Large Capitalization Growth Fund
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Small Capitalization Growth Fund
Small Capitalization Value Fund
Asset Allocation/Balanced Funds
Prudential Balanced Fund
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The Prudential Investment Portfolios, Inc.
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GLOBAL FUNDS
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Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Index Series Fund
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Prudential Pacific Index Fund
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Prudential Global Growth Fund
Prudential International Value Fund
Prudential Jennison International Growth Fund
Global Utility Fund, Inc.
Target Funds
International Equity Fund
Global Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund,
Inc.www.prudential.com(800) 225-1852
BOND FUNDS
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 High Yield Total Return Fund, Inc.
Prudential Index Series Fund
Prudential Bond Market Index Fund
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Target Funds
Total Return Bond Fund
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
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Prudential Municipal Bond Fund
High Income Series
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New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
MONEY MARKET FUNDS
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Cash Accumulation Trust
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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
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Getting the Most From Your Prudential Mutual Fund
Some mutual fund shareholders won't ever read
this--they don't read annual and semiannual reports.
It's quite understandable. These annual and
semiannual reports are prepared to comply with
federal regulations, and are often written in
language that is difficult to understand. So when
most people run into those particularly daunting
sections of these reports, they don't read them.
We think that's a mistake
At Prudential Mutual Funds, we've made some changes
to our report to make it easier to understand and
more pleasant to read. We hope you'll find it
profitable to spend a few minutes familiarizing
yourself with your investment. Here's what you'll
find in the report:
Performance at a Glance
Since an investment's performance is often a
shareholder's primary concern, we present
performance information in two different formats.
You'll find it first on the "Performance at a
Glance" page where we compare the Fund and the
comparable average calculated by Lipper, Inc., a
nationally recognized mutual fund rating agency. We
report both the cumulative total returns and the
average annual total returns. The cumulative total
return is the total amount of income and
appreciation the Fund has achieved in various time
periods. The average annual total return is an
annualized representation of the Fund's
performance. It gives you an idea of how much the
Fund has earned in an average year for a given time
period. Under the performance box, you'll see
legends that explain the performance information,
whether fees and sales charges have been included
in returns, and the inception dates for the Fund's
share classes.
See the performance comparison charts at the back
of the report for more performance information.
Please keep in mind that past performance is not
indicative of future results.
<PAGE>
www.prudential.com (800) 225-1852
Performance review
The portfolio manager, who invests your money for
you, reports on
successful--and not-so-successful--strategies in this
section of your report. Look for recent purchases
and sales here, as well as information about the
sectors the portfolio manager favors, and any
changes that are on the drawing board.
Portfolio of Investments
This is where the report begins to appear
technical, but it's really just a
listing of each security held at the end of the
reporting period, along with valuations and other
information. Please note that sometimes we discuss
a security in the Performance Review that doesn't
appear in this listing because it was sold before
the close of the reporting period.
Statement of Assets and Liabilities
The balance sheet shows the assets (the value of
the Fund's holdings),
liabilities (how much the Fund owes), and net
assets (the Fund's
equity, or holdings after the Fund pays its debts)
as of the end of the reporting period. It also
shows how we calculate the net asset value per
share for each class of shares. The net asset value
is reduced by payment of your
dividend, capital gain, or other distribution, but
remember that the money or new shares are being
paid or issued to you. The net asset value
fluctuates daily, along with the value of every
security in the portfolio.
Statement of Operations
This is the income statement, which details income
(mostly interest and
dividends earned) and expenses (including what you
pay us to manage your money). You'll also see
capital gains here--both realized and unrealized.
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Getting the Most From Your Prudential Mutual Fund
Statement of Changes in Net Assets
This schedule shows how income and expenses
translate into changes
in net assets. The Fund is required to pay out the
bulk of its income to shareholders every year, and
this statement shows you how we do it (through
dividends and distributions) and how that affects
the net assets. This statement also shows how money
from investors flowed into and out of the Fund.
Notes to Financial Statements
This is the kind of technical material that can
intimidate readers, but it does contain useful
information. The Notes provide a brief history and
explanation of your Fund's objectives. In addition,
they outline how Prudential Mutual Funds prices
securities. The Notes also explain who manages and
distributes the Fund's shares and, more
importantly, how much they are paid for doing so.
Finally, the Notes explain how many shares are
outstanding and the number issued and redeemed over
the period.
Financial Highlights
This information contains many elements from prior
pages, but on a
per-share basis. It is designed to help you
understand how the Fund
performed, and to compare this year's performance
and expenses to those of prior years.
Independent Auditor's Report
Once a year, an outside auditor looks over our
books and certifies that the information is fairly
presented and complies with generally accepted
accounting principles.
Tax Information
This is information that we report annually about
how much of your total return is taxable. Should
you have any questions, you may want to consult a
tax adviser.
<PAGE>
www.prudential.com (800) 225-1852
Performance Comparis
on
These charts are included in the annual report and
are required by the Securities Exchange Commission.
Performance is presented here as a hypothetical
$10,000 investment in the Fund since its inception
or for 10 years (whichever is shorter). To help you
put that return in context, we
are required to include the performance of an
unmanaged, broad-based securities index as well.
The index does not reflect the cost of buying the
securities it contains or the cost of managing a
mutual fund. Of course, the index holdings do not
mirror those of the Fund--the index is a broad-based
reference point commonly used by investors to
measure how well they are doing. A definition of
the selected index is also provided. Investors
cannot invest directly in an index.
<PAGE>
Prudential Municipal Series Fund New Jersey Series
Getting the Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds,
you receive financial advice from a Prudential
Securities Financial Advisor or Pruco Securities
registered representative. Your advisor or
representative can provide you with the following
services:
There's No Reward Without Risk; but Is This Risk
Worth It?
Your financial advisor or registered representative
can help you match the reward you seek with the
risk you can tolerate. Risk can be difficult to
gauge--sometimes even the simplest investments bear
surprising risks. The educated investor knows that
markets seldom move in just one direction. There
are times when a market sector or asset class will
lose value or provide little in the way of total
return. Managing your own expectations is easier
with help from someone who understands the markets
and who knows you!
Keeping Up With the Joneses
A financial advisor or registered representative
can help you wade through the numerous available
mutual funds to find the ones that fit your
individual investment profile and risk tolerance.
While the newspapers and popular magazines are full
of advice about investing, they are aimed at
generic groups of people or representative
individuals--not at you personally. Your financial
advisor or registered representative will review
your investment objectives with you. This means you
can make financial decisions based on the assets
and liabilities in your current portfolio and your
risk tolerance--not just based on the current
investment fad.
Buy Low, Sell High
Buying at the top of a market cycle and selling at
the bottom are among the most common investor
mistakes. But sometimes it's difficult to hold on
to an investment when it's losing value every
month. Your financial advisor or registered
representative can answer questions when you're
confused or worried about your investment, and
should remind you that you're investing for the
long haul.
<PAGE>
www.prudential.com (800) 225-1852
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Trustees
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, Secretary
David F. Connor, Assistant Secretary
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
194 Wood Avenue South
Iselin, NJ 08830
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Fund Symbols NASDAQ CUSIP
Class A PRNJX 74435M788
Class B -- 74435M796
Class C -- 74435M531
Class Z -- 74435M432
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 29, 2000, were not audited and,
accordingly, no opinion is expressed on
them.
<PAGE>
SEMIANNUAL REPORT FEBRUARY 29, 2000
Prudential
Municipal Series Fund/
New Jersey Money Market Series
Fund Type Money market
Objective The highest level of current income
that is exempt from New Jersey State and federal
income taxes, consistent with liquidity and the
preservation of capital
(GRAPHIC)
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a
current prospectus.
(LOGO)
<PAGE>
Build on the Rock
Investment Goals and Style
Prudential Municipal Series Fund/New Jersey Money
Market Series seeks to provide the highest level of
current income that is exempt from New Jersey State
and federal income taxes, consistent with liquidity
and the preservation of capital. The Series intends
to invest in a portfolio of short-term municipal
debt securities with maturities of 13 months or
less from the state of New Jersey, its
municipalities, local governments, and other
qualifying issuers (such as Puerto Rico, Guam, and
the U.S. Virgin Islands). There can be no assurance
that the Series will achieve its investment
objective.
Contents
1 Message From the Fund's President
2 Performance Review
3 Performance at a Glance
6 Financial Statements
<PAGE>
www.prudential.com (800) 225-1852
Message From the Fund's President As of April 17, 2000
Dear Shareholder
The Federal Reserve increased short-term interest
rates twice to slow U.S. economic growth and fend
off higher inflation during the six months that
ended on February 29, 2000. Prudential's Money
Markets Sector team worked hard to anticipate these
changes in U.S. monetary policy, and acted quickly
to take advantage of good investment opportunities.
As a result, Prudential Municipal Series Fund/New
Jersey Money Market Series maintained a $1.00 net
asset value per share, and provided a competitive
yield. On February 29, 2000, the Series' seven-day
current yield was 3.08%, compared with 3.05% for
the average New Jersey money market fund as tracked
by iMoneyNet, Inc. The following report takes a
closer look at developments in the municipal money
market sector during the six-month review period,
and explains how the Series was positioned
throughout.
High-quality investments can help reduce risk
Having a conservative, high-quality investment
alternative, such as a money market fund, made good
sense for investors who were concerned about
volatile conditions in the financial markets.
Indeed, investors may do well to consider investing
in a money market fund as part of their overall
investment strategy. For any of life's unexpected
events, it is reassuring to have quick access to
your money and an investment vehicle that
emphasizes safety of principal and liquidity.
Thank you for your continued confidence in
Prudential mutual funds.
Sincerely,
John R. Strangfeld
President
Prudential Municipal Series Fund
1
<PAGE>
Prudential Municipal Series Fund New Jersey Money Market Series
Performance Review
(PHOTO) (PHOTO) Portfolio Managers Joseph Tully (Money Markets Sector
Team Leader) and Richard S. Lynes
Fed tried to curb U.S. economic growth
Shortly before the Series' fiscal half year began
on September 1, 1999, the Federal Reserve increased
the federal funds rate (what U.S. banks charge each
other for overnight loans) by a quarter of a
percentage point to 5.25% from 5.00%. It also
raised the rate at which banks can borrow from the
Federal Reserve system (known as the discount rate)
to 4.75% from 4.50%.
The short-term rate hike rippled through the U.S.
economy, increasing borrowing costs for consumers
and businesses. In this way, the Fed hoped to rein
in the brisk pace of U.S. economic growth and avert
a buildup in inflationary pressures. Mounting
inflation is particularly hard on people who live
on fixed incomes, because their buying power
declines if their incomes are not adjusted for the
rise in prices.
Series locked in solid yields
When the Fed tightens U.S. monetary policy, yields
in the municipal money market climb, but at a lag
to the rise in taxable money market yields.
However, the impact of the Fed-engineered rate hike
was muted by the strong investor demand for New
Jersey money market securities. Therefore, we
believe our decision to buy longer-term New Jersey
money market securities in September 1999 and early
October 1999, which was long before the Fed's
subsequent rate increase in November 1999, was
strategically sound.
Among our purchases were bond anticipation notes of
Morris Township. In addition, we bought one-year
bonds of Jersey City that were rated Aaa because
their interest and principal payments are insured
by a municipal bond insurance company. The Jersey
City bonds also provided an attractive
2
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
<TABLE>
Fund Facts As of 2/29/00
<CAPTION>
7-Day Net Asset Taxable Equivalent Yield* Weighted Avg. Net Assets
Current Yld. Value (NAV) @31% @36% @39.6% Mat. (WAM) (Millions)
<S> <C> <C> <C> <C> <C> <C> <C>
NJ Money
Market Series 3.08% $1.00 4.77% 5.14% 5.45% 47 Days $199
iMoneyNet, Inc.
Tax-Free State Specific
Avg. (SB & GP--NJ)** 3.05% $1.00 4.72% 5.09% 5.39% 48 Days N/A
</TABLE>
Note: Yields will fluctuate from time to time, and past performance
is not indicative of future results. An investment
in the Series is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Series seeks to
preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in
the Series.
*Some investors may be subject to the federal
alternative minimum tax and/or state and local
taxes. Taxable equivalent yields reflect federal
and applicable state tax rates.
**iMoneyNet, Inc. reports the 7-Day Current Yield,
NAV, and WAM on Mondays. This is the data of all
funds in the iMoneyNet, Inc. Tax-Free State
Specific Average (Stock Broker (SB) & General
Purpose (GP)--New Jersey) category as of February
28, 2000.
Tracking Municipal Money Market Fund Yields
(GRAPH)
3
<PAGE>
Prudential Municipal Series Fund New Jersey Money Market Series
Performance Review
yield to compensate for the fact that they were
issued in moderate-sized blocks. Owning these
insured municipal bonds offering higher yields met
our fundamental buy-and-hold strategy.
Our purchases in September and October extended the
Series' weighted average maturity (WAM), which
positioned the Series longer than the average of
comparable funds as measured by iMoneyNet, Inc.
(WAM is a measurement tool that determines a
portfolio's sensitivity to changes in the level of
interest rates. It takes into account the maturity
level of each security held in a portfolio.)
Lengthening the Series' WAM by purchasing
attractively priced securities enhanced its yield.
Fed repeatedly applied the brakes
The Fed's next move occurred on November 16, 1999.
It increased the federal funds rate to 5.50% and
its discount rate to 5.00%. The pace of U.S.
economic growth, however, accelerated in the final
three months of 1999. Not surprisingly, the Fed
renewed its efforts to cool off the economy in the
new year. It raised the federal funds rate to 5.75%
and its discount rate to 5.25% on February 2, 2000.
New year brought good buying opportunities
Following the February short-term rate increase,
many good buying opportunities emerged in New
Jersey money market securities. Among our purchases
were "prerefunded" bonds maturing in July 2000 that
are backed by direct obligations of the U.S.
government. We also purchased one-year bonds of the
New Jersey Sports and Exposition Authority that
were rated Aa3 by Moody's Investors Service and
were recently upgraded by Standard & Poor's to AA-
minus. These purchases again helped to extend the
Series' WAM and bolster its yield.
4
<PAGE>
www.prudential.com (800) 225-1852
Looking Ahead
On March 21, 2000, the Fed again increased the
federal funds rate to 6.00% and the discount rate
to 5.50%. As the economy continues to grow rapidly,
we believe this will not be the last time the Fed
will take action this year.
With the approach of the tax season, we intend to
again increase the Series' exposure to very short-
term municipal money market securities in order to
accommodate seasonal cash outflows that usually
occur as shareholders pay their income taxes.
Adopting this strategy should position the Series
to lock in higher yields that become available as
the supply of municipal money market securities
balloons during the tax season.
Weighted Average Maturity Compared to the Average Municipal Money Fund
(GRAPH)
5
<PAGE>
Prudential Municipal Series Fund New Jersey Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Atlantic City, Brd. of Ed., Cert.
of Part., M.B.I.A. Aaa 4.00% 05/01/00 $ 375 $ 375,240
Bernardsville Borough, G.O. Aa1 4.85 07/01/00 325 326,157
Bridgewater Twnshp., G.O. Aa1 4.60 07/15/00 765 767,673
Burlington Cnty. Cmnty. Coll., G.O. AA(c) 4.65 07/15/00 900 903,744
Delaware River Port Auth.,
Pennsylvania and New Jersey Rev.,
Merlots, Ser. K VMIG1 3.90 03/02/00 4,000 4,000,000
Dover Twnshp. Gen. Impvt. Ser.
Bonds, M.B.I.A. Aaa 4.90 07/15/00 500 502,350
Englewood Twnshp., B.A.N. NR 4.00 07/14/00 5,137 5,146,569
Evesham Twnshp., G.O., M.B.I.A. Aaa 4.00 08/15/00 350 350,385
Fairfield Twnshp., G.O., F.G.I.C. Aaa 5.375 01/15/01 330 333,424
Glen Rock Borough, B.A.N. NR 3.50 06/09/00 2,482 2,483,852
Hackensack Twnshp., B.A.N. NR 3.40 06/02/00 3,087 3,088,123
Hopatcong Borough, G.O., F.G.I.C. Aaa 4.80 06/01/00 200 200,710
Hudson Cnty. Impvt. Auth. Rev.,
Pooled Gov't. Loan Prog.,
Ser. 86, F.R.W.D. A-1(c) 3.90 03/02/00 2,945 2,945,000
Hudson Cnty., Cert. of Part., Fltr
Trs, Ser. A9, Reg. D Aaa 3.95 12/01/21 5,000 5,000,000
Jersey City,
G.O., B.A.N. (QUAL.) SP-1+(c) 4.75 01/12/01 7,000 7,033,163
Qual. Public Impvt., Ser. B,
M.B.I.A. Aaa 5.13 09/01/00 1,050 1,057,042
Qual. School, Ser. A, F.S.A. Aaa 5.25 09/01/00 550 554,028
Manalapan Twnshp., B.A.N.,
Ser. A NR 4.25 10/13/00 2,424 2,430,015
Middlesex Cnty.,
Cnty. Coll. Aaa 4.40 07/15/00 300 300,976
Gen. Impvt. Aaa 4.40 07/15/00 460 461,496
Monmouth Cnty., G.O. Aaa 5.00 07/01/00 1,000 1,005,687
Monroe Twnshp. Mun. Utilities
Auth., Rev., M.B.I.A. Aaa 4.40 08/01/00 380 380,325
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New Jersey Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Morris Twnshp., B.A.N. NR 4.25% 09/20/00 $ 4,801 $ 4,814,341
Municipal Secs. Trust Cert., Ser.
1999-84, Class A A-1(c) 3.82 03/02/00 8,000 8,000,000
New Jersey Building Auth. St.
Building Rev., Putters,
Ser. 126, M.B.I.A. VMIG1 3.91 03/02/00 6,900 6,900,000
New Jersey Health Care Fac. Fin.
Auth. Rev., Elizabeth Gen. Med.
Ctr., Ser. C NR 7.38 07/01/00 3,220(e) 3,317,521
New Jersey Hsg. & Mtg. Fin. Agy.,
Eagle Tax Exempt, Trust 92A, Ser.
3001, F.R.W.D.S. A-1+(c) 3.96 03/02/00 3,080 3,080,000
Home Buyer, Ser. 96S, F.R.W.D.S.,
A.M.T. A-1+(c) 3.86 03/02/00 4,560 4,560,000
New Jersey Sports and Expo. Auth.,
Ser. A Aa3 4.75 03/01/01 1,545 1,553,213
New Jersey St. Econ. Dev. Auth.,
865 Centennial Ave. Proj., Ser.
85, F.R.W.D., A.M.T. A-1+(c) 4.02 03/02/00 1,250 1,250,000
AFL Quality Inc. Proj., A.M.T. A-1(c) 3.90 03/01/00 4,000 4,000,000
AIRIS Newark, F.R.W.D., A.M.B.A.C. A-1+(c) 3.90 03/02/00 4,900 4,900,000
Alpha Assoc. & Avallone, Ser. 98,
F.R.W.D. A-1(c) 3.90 03/01/00 2,700 2,700,000
Bayshore Hlth. Care, Ser. 98A,
F.R.W.D. VMIG1 3.90 03/02/00 3,900 3,900,000
Catholic Cmnty. Svcs. Proj., Ser.
93, F.R.W.D. VMIG1 3.65 03/02/00 5,570 5,570,000
Catholic Cmnty. Svcs. Proj., Ser.
95, F.R.W.D. VMIG1 3.65 03/02/00 3,545 3,545,000
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Municipal Series Fund New Jersey Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Davidson Ave. Assoc. Ltd., Ser.
84, F.R.W.D., A.M.T. A-1+(c) 4.02% 03/02/00 $ 2,500 $ 2,500,000
Dow Chemical El Dorado
Terminals--A P-1 3.80 03/01/00 2,800 2,800,000
Fin. Assoc. L.P., Ser. 97,
F.R.W.D. A-1+(c) 3.97 03/02/00 3,952 3,952,000
GSA Bldg. Assoc. Ltd., Ser. 85,
F.R.W.D., A.M.T. A-1+(c) 4.02 03/02/00 4,200 4,200,000
Jewish Home At Rockliegh, F.R.W.D. VMIG1 3.80 03/03/00 10,000 10,000,000
Kent Place, Ser. 92L, F.R.W.D. VMIG1 3.80 03/02/00 1,690 1,690,000
Michael Shalit Proj., Ser. 93,
F.R.D.D. NR 3.75 03/01/00 1,045 1,045,000
National Refridgerants, Proj. A P-1 3.95 03/01/00 400 400,000
New Jersey Foreign Trade Zone
Venture, Ser. 98, F.R.D.D. A-1+(c) 3.75 03/01/00 600 600,000
New Jersey Natural Gas Co. Proj.,
Ser 98B, F.R.W.D., A.M.T. P-1 3.70 03/01/00 2,000 2,000,000
New Jersey Performing Arts Ctr.,
A.M.B.A.C. Aaa 8.00 06/15/00 1,455 1,474,685
North Plainfield Hldg., Ser. 92,
A.O.T. VMIG1 3.65 09/01/00 2,825 2,825,000
Office Court Assoc. Proj.,
F.R.W.D., A.M.T. A-1(c) 3.95 03/01/00 3,100 3,100,000
Owens Drive Bldg. Ltd., Ser. 84,
F.R.W.D., A.M.T. A-1+(c) 4.02 03/02/00 1,200 1,200,000
Owens Drive Bldg. Ltd., Ser. 90,
F.R.W.D., A.M.T. A-1+(c) 4.02 03/02/00 1,450 1,450,000
Peddie Sch. Proj., Ser. 94B,
F.R.W.D. A-1(c) 3.75 03/02/00 3,000 3,000,000
Raritan Bldg. Assoc. Ltd., Ser. 85
F.R.W.D. A-1+(c) 3.97 03/02/00 3,500 3,500,000
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New Jersey Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RJB Associates Ltd., F.R.W.D. NR 3.75% 03/02/00 $ 1,242 $ 1,242,000
Russ Berrie & Co., Ser. 83,
F.R.W.D. A-1+(c) 3.50 03/01/00 3,000 3,000,000
U.S. Golf Assn. Proj., F.R.W.D. NR 3.75 03/02/00 2,400 2,400,000
United Water Inc., Proj. A,
A.M.B.A.C. VMIG1 3.80 03/01/00 8,000 8,000,000
United Water Inc., Proj. B,
A.M.B.A.C. VMIG1 3.80 03/01/00 1,600 1,600,000
V.P.R. Commerce Ctr., F.R.W.D. A-1(c) 3.75 03/02/00 6,700 6,700,000
Volvo America Corp., Ser. 84,
F.R.W.D. Aa1 4.13 03/01/00 1,500 1,500,000
West Essex Assoc. Ltd., Ser. 84,
F.R.W.D. A-1+(c) 3.97 03/02/00 1,300 1,300,000
New Jersey St. Tpke. Auth. Rev.,
Ser. 91D, F.R.W.D., F.G.I.C. VMIG1 3.55 03/01/00 2,200 2,200,000
New Jersey St. Transport. Trust
Fund Auth., Ser. 95B, M.B.I.A. Aaa 4.50 06/15/00 1,000 1,002,954
Ocean County Utilities Auth.,
Wastewater Rev., G.O. Aa1 5.00 01/01/01 500 503,227
Ocean Twnshp. B.A.N. NR 3.30 05/26/00 4,025 4,026,005
Pleasantville Twnshp. Sch. Dist.,
Cert. of Part., M.B.I.A. Aaa 3.75 06/01/00 430 430,419
Port Auth. New York & New Jersey,
Ser. 2, F.R.D.D. VMIG1 3.75 03/01/00 1,800 1,800,000
Ser. 3, F.R.D.D. VMIG1 3.75 03/01/00 1,300 1,300,000
Ser. 93-2, F.R.W.D. NR 3.833 03/07/00 8,000 8,000,000
Princeton Twnshp., Mercer Co.,
B.A.N. NR 3.375 03/30/00 3,000 3,000,749
Ridgewood VIllage, G.O. Aaa 4.90 10/01/00 720 724,704
Sayreville Twnshp., Bd. of Ed.,
F.S.A. AAA(c) 4.80 07/15/00 230 230,999
South Plainfield Swr. Utility,
F.S.A. Aaa 4.80 06/15/00 225 225,824
Sterling Regional High Sch. Dist.,
F.S.A. AAA(c) 4.75 06/01/00 260 260,924
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Municipal Series Fund New Jersey Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Trenton Sch. Dist. QUAL. NR 3.25% 03/10/00 $ 2,675 $ 2,675,128
Watchung Borough, G.O. Aa1 4.00 05/01/00 400 400,553
West Milford Twnshp., G.O., F.S.A. Aaa 4.30 07/15/00 500 501,672
------------
Total Investments 98.6%
(Amortized cost $196,497,877;(d)) 196,497,877
Other assets in excess of
liabilities 1.4% 2,713,058
------------
Net Assets 100% $199,210,935
------------
------------
</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.
A.O.T.--Annual Optional Tender.
B.A.N.--Bond Anticipation Note.
F.G.I.C.--Financial Guaranty Insurance Company.
F.R.D.D.--Floating Rate (Daily) Demand Note (b).
F.R.W.D.--Floating Rate (Weekly) Demand Note (b).
F.R.W.D.S.--Floating Rate (Weekly) Demand Synthetic Note (b).
F.S.A.--Financial Security Assurance.
G.O.--General Obligation.
M.B.I.A.--Municipal Bond Insurance Corporation.
(b) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be the later of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
(c) Standard & Poor's Rating.
(d) The cost of securities for federal income tax purposes is substantially the
same as for financial statement purposes.
(e) Pre-refunded security.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information contains a description of
Moody's and Standard & Poor's ratings.
10 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New Jersey Money Market Series
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
ASSETS
Investments, at amortized cost which approximates market value $ 196,497,877
Cash 63,599
Receivable for Series shares sold 4,191,556
Interest receivable 1,699,506
Deferred expenses and other assets 6,144
-----------------
Total assets 202,458,682
-----------------
LIABILITIES
Payable for Series shares reacquired 3,113,458
Management fee payable 83,748
Dividends payable 34,961
Distribution fee payable 9,318
Deferred trustee's fee 6,262
-----------------
Total liabilities 3,247,747
-----------------
NET ASSETS $ 199,210,935
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at $.01 par value $ 1,992,109
Paid-in capital in excess of par 197,218,826
-----------------
Net assets, February 29, 2000 $ 199,210,935
-----------------
-----------------
Net asset value, offering price and redemption price per share
($199,210,935 / 199,210,935 shares of beneficial interest
issued and outstanding; unlimited number of shares
authorized) $1.00
-----------------
-----------------
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Municipal Series Fund New Jersey Money Market Series
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest and discount earned $ 3,609,309
-----------------
Expenses
Management fee 517,558
Distribution fee 129,390
Custodian's fees and expenses 35,000
Transfer agent's fees and expenses 30,000
Reports to shareholders 15,000
Registration fees 9,000
Legal fees and expenses 4,000
Audit fee and expenses 4,000
Trustees' fees and expenses 2,000
Miscellaneous 722
-----------------
Total expenses 746,670
Less: Custodian fee credit (Note 1) (16,187)
-----------------
Net expenses 730,483
-----------------
Net investment income 2,878,826
-----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,878,826
-----------------
-----------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New Jersey Money Market Series
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year Ended
Ended August 31,
February 29, 2000 1999
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 2,878,826 $ 5,209,801
----------------- --------------
Net increase in net assets resulting from
operations 2,878,826 5,209,801
----------------- --------------
Dividends and distributions to shareholders
(Note 1) (2,878,826) (5,209,801)
----------------- --------------
Series share transactions (at $1 per share)
Net proceeds from shares subscribed 480,748,960 772,444,020
Net asset value of shares issued in
reinvestment of dividends 2,794,080 5,083,846
Cost of shares reacquired (491,336,335) (771,438,504)
----------------- --------------
Net increase (decrease) in net assets from
Series share transactions (7,793,295) 6,089,362
----------------- --------------
Total increase (decrease) (7,793,295) 6,089,362
NET ASSETS
Beginning of period 207,004,230 200,914,868
----------------- --------------
End of period $ 199,210,935 $ 207,004,230
----------------- --------------
----------------- --------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Municipal Series Fund New Jersery Money Market Series
Notes to Financial Statements (Unaudited)
Prudential Municipal Series Fund (the 'Fund') is registered under the
Investment Company Act of 1940 as an open-end management 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 New Jersey Money Market Series (the
'Series') commenced investment operations on December 3, 1990. The Series is
nondiversified and seeks to achieve its investment objective of providing the
highest level of income that is exempt from New Jersey state and federal income
taxes with a minimum of risk by investing in 'investment grade' tax-exempt
securities maturing within 13 months or less and whose ratings are within the
two 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 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: Portfolio securities of the Series are valued at
amortized cost, which approximates market value. The amortized cost method of
valuation involves valuing a security at its cost on the date of purchase and
thereafter assuming a constant amortization to maturity of any discount or
premium.
All securities are valued as of 4:30 p.m., New York time.
Securities Transactions and Net Investment Income: Securities
transactions are recorded on the trade date. Realized gains and losses on sales
of investments are calculated on the identified cost basis. The Series amortizes
premiums and accretes original issue discount on portfolio securities as
adjustments to interest income. Interest income is recorded on the accrual
basis. Expenses are recorded on the accrual basis which may require the use of
certain estimates by management.
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 continue 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: The Series declares daily dividends from net investment
income. Payment of dividends is made monthly.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
14
<PAGE>
Prudential Municipal Series Fund New Jersey Money Market Series
Notes to Financial Statements (Unaudited) Cont'd.
Custody Fee Credits: The Fund has an arrangement with its custodian
bank, whereby uninvested monies earn credits which reduce the fees charged by
the custodian.
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM has entered into a subadvisory agreement with The Prudential
Investment Corporation ('PIC'); PIC furnishes investment advisory services in
connection with the management of the Fund. PIFM pays for the 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 to 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 Series has a distribution agreement with Prudential Investment
Management Services LLC ('PIMS') which acts as the distributor of the Series
shares. The Series compensates PIMS for distributing and servicing the Series'
shares pursuant to the plan of distribution at an annual rate of .125 of 1% of
the Series' average daily net assets. The distribution fee is accrued daily and
payable monthly.
PIFM, PIMS and PIC are wholly owned subsidiaries of The Prudential
Insurance Company of America ('Prudential').
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 29,
2000, the Series incurred fees of approximately $27,000 for the services of
PMFS. As of February 29, 2000, approximately $4,400 of such fees were due to
PMFS. Transfer agent fees and expenses in the Statement of Operations include
certain out-of-pocket expenses paid to nonaffiliates.
15
<PAGE>
Prudential Municipal Series Fund New Jersey Money Market Series
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1.00
Net investment income and net realized gains .01
Dividends and distributions (.01)
-----------------
Net asset value, end of period $ 1.00
-----------------
-----------------
TOTAL RETURN(a): 1.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 199,211
Average net assets (000) $ 208,161
Ratios to average net assets:
Expenses, including distribution fee .72%(b)
Expenses, excluding distribution fee .60%(b)
Net investment income 2.78%(b)
</TABLE>
- ------------------------------
(a) Total return includes reinvestment of dividends and distributions. Total
returns for periods of less than one year are not annualized.
(b) Annualized.
16 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New Jersey Money Market Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
.03 .03 .03 .03 .03
(.03) (.03) (.03) (.03) (.03)
- ---------------- ---------------- ---------------- ---------------- ----------------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------- ---------------- ---------------- ---------------- ----------------
- ---------------- ---------------- ---------------- ---------------- ----------------
2.52% 2.87% 2.82% 2.92% 3.15%
$207,004 $200,915 $199,472 $181,396 $182,453
$209,479 $198,647 $196,223 $192,617 $171,223
.72% .73% .73% .70% .64%
.59% .60% .60% .57% .51%
2.49% 2.82% 2.78% 2.89% 3.11%
</TABLE>
See Notes to Financial Statements 17
<PAGE>
<PAGE>
Prudential Municipal Series Fund New Jersey Money Market Series
Prudential Mutual Fund Family
Prudential offers a broad range of mutual
funds designed to meet your individual needs. For
information about these funds, contact your
financial adviser or call us at (800) 225-1852.
Read the prospectus carefully before you invest or
send money.
STOCK FUNDS
Prudential Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Index Series Fund
Prudential Small-Cap Index Fund
Prudential Stock Index Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Mid-Cap Value Fund
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund
Prudential 20/20 Focus Fund
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Target Funds
Large Capitalization Growth Fund
Large Capitalization Value Fund
Small Capitalization Growth Fund
Small Capitalization Value Fund
Asset Allocation/Balanced Funds
Prudential Balanced Fund
Prudential Diversified Funds
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund
GLOBAL FUNDS
Global Stock Funds
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Prudential Latin America Equity Fund
Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Index Series Fund
Prudential Europe Index Fund
Prudential Pacific Index Fund
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Prudential Global Growth Fund
Prudential International Value Fund
Prudential Jennison International Growth Fund
Global Utility Fund, Inc.
Target Funds
International Equity Fund
Global Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
www.prudential.com(800) 225-1852
BOND FUNDS
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 High Yield Total Return Fund, Inc.
Prudential Index Series Fund
Prudential Bond Market Index Fund
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Target Funds
Total Return Bond Fund
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Income Series
Insured Series
Prudential Municipal Series Fund
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
MONEY MARKET FUNDS
Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
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
<PAGE>
Prudential Municipal Series Fund New Jersey Money Market Series
Getting the Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds,
you receive financial advice from a Prudential
Securities Financial Advisor or Pruco Securities
registered representative. Your advisor or
representative can provide you with the following
services:
There's No Reward Without Risk; but Is This Risk
Worth It?
Your financial advisor or registered representative
can help you match the reward you seek with the
risk you can tolerate. Risk can be difficult to
gauge--sometimes even the simplest investments bear
surprising risks. The educated investor knows that
markets seldom move in just one direction. There
are times when a market sector or asset class will
lose value or provide little in the way of total
return. Managing your own expectations is easier
with help from someone who understands the markets
and who knows you!
Keeping Up With the Joneses
A financial advisor or registered representative
can help you wade through the numerous available
mutual funds to find the ones that fit your
individual investment profile and risk tolerance.
While the newspapers and popular magazines are full
of advice about investing, they are aimed at
generic groups of people or representative
individuals--not at you personally. Your financial
advisor or registered representative will review
your investment objectives with you. This means you
can make financial decisions based on the assets
and liabilities in your current portfolio and your
risk tolerance--not just based on the current
investment fad.
Buy Low, Sell High
Buying at the top of a market cycle and selling at
the bottom are among the most common investor
mistakes. But sometimes it's difficult to hold on
to an investment when it's losing value every
month. Your financial advisor or registered
representative can answer questions when you're
confused or worried about your investment, and
should remind you that you're investing for the
long haul.
<PAGE>
www.prudential.com (800) 225-1852
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Trustees
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, Secretary
David F. Connor, Assistant Secretary
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
194 Wood Avenue South
Iselin, NJ 08830
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Cusip Number 74435M762
The views expressed in this report and information
about the Fund's portfolio holdings are for the
period covered by this report and
are subject to change thereafter.
The accompanying financial statements as
of February 29, 2000, were not audited and,
accordingly, no opinion is expressed on them.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
MF147E2 74435M762
(LOGO) Printed on Recycled Paper
<PAGE>
SEMIANNUAL REPORT FEBRUARY 29, 2000
Prudential
Municipal Series Fund/
New York Series
Fund Type Municipal bond
Objective Maximize current income that is exempt from New
York State, New York City, and federal income
taxes, consistent with the preservation of
capital
(GRAPHIC)
This report is not authorized for
distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(LOGO)
<PAGE>
Build on the Rock
Investment Goals and Style
Prudential Municipal Series Fund/New York Series'
investment objective is to maximize current income
that is exempt from New York State, New York City,
and federal income taxes, consistent with the
preservation of
capital. However, certain shareholders may be
subject to the federal alternative minimum tax
(AMT) because some of the Series' bonds are AMT
eligible. There can be no assurance the Series will
achieve its investment objective.
Contents
1 Message From the Fund's President
2 Performance Review
2 Portfolio Composition
3 Performance at a Glance
4 Credit Quality
5 Five Largest Issuers
6 Financial Statements
<PAGE>
www.prudential.com (800) 225-1852
Message From the Fund's President As of April 17, 2000
(PHOTO)
Dear Shareholder
The Class A shares of Prudential Municipal Series
Fund/New York Series had a negative return of 0.57%
during its fiscal half year that ended February 29,
2000. For the same period, the return on the
Series' benchmark Lipper Average was a negative
1.27%. After the initial sales charge, the Class A
shares' return was a negative 3.55%. Prices of
municipal bonds declined primarily because
investors required higher yields in light of two
short-term rate increases implemented by the
Federal Reserve during our review period to slow
the rapid pace of U.S. economic growth.
Staying the course amid ups and downs of financial
markets
Many investors consider selling an asset class that
has performed poorly in favor of investments that
are currently gaining in value. That may not be the
best move. Changes in asset allocation should
reflect basic shifts in an investor's time horizon
and tolerance for risk--not recent fluctuations in
the performance of financial markets. One strategy
may be to own a diversified portfolio of mutual
funds that invests in stocks, bonds, and money
market instruments because this approach may help
to reduce risk.
Deciding on the correct level of diversification is
not easy. It requires
an understanding of an investor's risk tolerance
and overall investment strategy. In these volatile
times, we recommend consulting your financial
advisor to develop your asset allocation goals.
Thank you for your continued confidence in
Prudential mutual funds.
Sincerely,
John R. Strangfeld
President
Prudential Municipal Series Fund
1
<PAGE>
Prudential Municipal Series Fund New York Series
Performance Review
(PHOTO) (PHOTO) Portfolio Managers Evan Lamp (Municipal Bonds
Sector Team Leader) and Scott Diamond
Bear market in municipal bonds continued
During our six-month review period, increases in
short-term interest
rates by the Federal Reserve and sales of municipal
bonds by investors who wanted to realize tax losses
pressured the prices of tax-exempt debt securities.
Given this bearish trend, we positioned the Series
so that it would be less vulnerable to the decline
in bond prices.
The Fed raised its target for the federal funds
rate (what U.S. banks charge each other for
overnight loans) by a quarter of a percentage point
in November 1999 and February 2000 to curb U.S.
economic growth and reduce the economic imbalances
that can lead to higher inflation. These moves
pushed up the rate to 5.75% by February 2000. The
Fed also engineered two quarter-point increases
that raised its discount rate on loans
to banks from the Federal Reserve system to 5.25%
by February 2000. As
short-term rates rose, investors required higher
yields on both short- and long-term municipal
bonds, which caused their prices to fall.
More selling pressure emerged in late December
1999. As interest rates climbed, investors realized
capital losses by selling bonds or bond funds. Many
investors reinvested in new bonds or other bond
funds with a lower cost basis for tax purposes (due
to the higher level of yields). This is called "tax
loss swapping." In the municipal bond market, the
capital loss often reduces taxes, while the higher
yields on the new bonds or other funds are
generally tax exempt.
Portfolio Composition
Expressed as a percentage of
total investments as of 2/29/00
50.60% General Obligations
34.80 Revenue Bonds
13.60 Prerefunded Bonds
1.00 Miscellaneous
2
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
<TABLE>
Cumulative Total Returns1 As of 2/29/00
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A -0.57% -3.72% 27.71% (27.48) 87.43% (87.09) 88.02% (87.68)
Class B -0.61 -3.96 25.52 (25.29) 80.45 (80.13) 195.17 (194.64)
Class C -0.73 -4.20 23.96 (23.74) N/A 27.26 (27.03)
Class Z -0.44 -3.47 N/A N/A 12.78 (12.68)
Lipper NY Muni
Debt Fund Avg.3 -1.27 -4.72 25.37 83.25 ***
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 3/31/00
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A -4.36 4.67% (4.63) 6.43% (6.41) 6.30% (6.28)
Class B -6.73 4.76 (4.72) 6.34 (6.32) 7.35 (7.33)
Class C -3.95 4.45 (4.42) N/A 4.54 (4.50)
Class Z -1.23 N/A N/A 4.38 (4.35)
</TABLE>
<TABLE>
Distributions and Yields As of 2/29/00
<CAPTION>
Total Distributions 30-Day Taxable Equivalent Yield4 at tax rates of
Paid for Six Months SEC Yield 36% 39.6%
<S> <C> <C> <C>
Class A $0.29 4.78% 8.02% 8.50%
Class B $0.28 4.68 7.85 8.32
Class C $0.26 4.38 7.35 7.78
Class Z $0.31 5.18 8.69 9.21
</TABLE>
Past performance is not indicative of future
results. Principal and investment return will
fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their
original cost.
1 Source: Prudential Investments Fund Management
LLC and Lipper Inc. The cumulative total returns do
not take into account sales charges. The average
annual total returns do take into account
applicable sales charges. The Series charges a
maximum front-end sales charge of 3% for Class A
shares and a declining contingent deferred sales
charge (CDSC) of 5%, 4%, 3%, 2%, 1%, and 1% for six
years for Class B shares. Class B shares will
automatically convert to Class A shares, on a
quarterly basis, approximately seven years after
purchase. Class C shares are subject to a front-end
sales charge of 1% and a CDSC for 18 months. Class
Z shares are not subject to a sales charge or
distribution and service (12b-1) fees. 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 ( ).
2 Inception dates: Class A, 1/22/90; Class B,
9/13/84; Class C, 8/1/94; and Class Z, 12/6/96.
3 Lipper average returns are for all funds in each
share class for the six-month, one-, five-, and
ten-year periods in the New York Municipal Debt
Fund category. Single-state Municipal Debt funds
limit their securities that are exempt from
taxation in a specified state (double tax exempt)
or city (triple tax exempt).
4 Taxable equivalent yields reflect federal and
applicable state tax rates.
***Lipper Since Inception returns are 84.86% for
Class A, 215.02% for Class B, 28.70% for Class C,
and 9.74% for Class Z, based on all funds in each
share class.
3
<PAGE>
Prudential Municipal Series Fund New York Series
Performance Review
Although the bear market detracted from the Series'
returns, we were able to increase its distribution
yield in this rising interest-rate environment.
We pursued a short-duration strategy
When bond markets sell off, lowering a portfolio's
duration generally provides some degree of
protection by making the portfolio less sensitive
to the rise in bond yields. (Duration measures how
much a portfolio's bonds will fluctuate in price
for a given change in interest rates. It is
expressed in years.) The Series' share classes,
without sales charges factored in, performed better
than its benchmark Lipper Average, which does not
consider sales charges. This occurred largely
because we kept its duration shorter than average
for most of its fiscal half year.
In January 2000, however, we began to lengthen the
Series' duration because we believe the Fed's
monetary policy moves will keep inflation in check,
which could allow municipal bond yields to decline
as the year progresses.
We lessened the impact of "market-discount
taxation"
Another strategy that benefited the Series was
selling some of its municipal bonds before they
became subject to ordinary income taxes for
investors who might want to buy them. Here's how it
works: When yields climb beyond a certain point for
every municipal bond, the market discount on that
bond may become subject to ordinary income taxes
for new buyers.
This lowers the value of the bond because new
buyers would want to purchase the bond cheaply
enough to compensate for the greater tax
liability.
Credit Quality
Expressed as a percentage
of total investments as of 2/29/00
8.20% AAA
6.20 AA
25.90 A
18.90 BBB
2.60 BB
3.10 B
33.70 Insured
0.90 Not Rated
0.50 Cash Equivalents
4
<PAGE>
www.prudential.com (800) 225-1852
New York State bonds upgraded
Standard & Poor's (S&P) upgraded its ratings of New
York State's general obligation bonds to A-plus
from single-A and all other state appropriation
debt to A-minus from BBB-plus in November 1999. (In
March 2000, S&P upgraded its rating of state
appropriation debt to single-A from A-minus.)
Standard & Poor's praised the state's slow, but
steady economic growth; fundamental changes in its
fiscal discipline and management; and marginal
success in reducing pace of borrowing. As of
February 29, 2000, the Series held 8.45% of its
total investments in state appropriation debt.
Looking Ahead
Shortly after our six-month review period ended,
the Fed engineered another quarter-point rate hike
that raised its target for the federal funds rate
to 6.00% and its discount rate to 5.50%. We believe
the Fed's efforts to tighten monetary policy will
slow the U.S. economic expansion in 2000 from its
7.30% annual pace in the fourth quarter of 1999.
Moderating economic growth could help bolster the
performance of municipal bonds, but detract from
the performance of equities.
Meanwhile, the powerful U.S.
economic expansion has improved the credit quality
of many state and local governments and reduced
their borrowing needs, allowing them to issue fewer
bonds. The supply of new municipal bonds has also
decreased because the rising-interest-rate
environment provided less opportunity for issuers
to save money by replacing older higher-coupon
bonds with new lower-coupon bonds. With the
declining supply, if investor demand remains
strong, the tax-exempt bond market should perform
better than other U.S. fixed-income markets in
2000.
Five Largest Issuers
Expressed as a percentage of net assets
as of 2/29/00
19.10% New York State
Dorm. Auth. Revenue*
14.20 New York City
General Obligation*
10.90 Metro Transportation Authority
10.30 New York State Urban Dev.
Corp. Revenue
4.90 New York State Local Gov't
Assistance Corp.
* Prerefunded issues are secured by escrowed cash and/or direct U.S.
guaranteed obligations.
5
<PAGE>
Prudential Municipal Series Fund New York Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 98.4%
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Albany Mun. Wtr. Fin. Auth. Wtr. &
Swr. Sys. Rev.,
Cap. Apprec., Ser. A, F.G.I.C. Aaa Zero 12/01/20 $ 2,165 $ 620,792
Cap. Apprec., Ser. A, F.G.I.C. Aaa Zero 12/01/21 1,160 312,527
Cap. Apprec., Ser. A, F.G.I.C. Aaa Zero 12/01/22 560 141,423
City of Buffalo, School, Gen.
Oblig.,
Ser. E, F.S.A. Aaa 6.00% 12/01/14 975 1,003,080
Ser. E, F.S.A. Aaa 6.00 12/01/16 1,100 1,119,382
City of Elmira, Wtr. Impvt., Ser.
96 B, A.M.B.A.C. Aaa 5.95 03/01/16 5,395(c) 5,460,172
City of New Rochelle Ind. Dev.
Agcy.,
Coll. of New Rochelle Baa2 6.625 07/01/12 500(c)(d) 528,755
Coll. of New Rochelle Baa2 6.75 07/01/22 2,000(c)(d) 2,120,480
Islip Res. Rec., Ser. B,
A.M.B.A.C., A.M.T. Aaa 7.20 07/01/10 1,745 1,968,447
Jefferson Cnty. Ind. Dev. Agcy.,
Solid Waste Disp. Rev., A.M.T. Baa1 7.20 12/01/20 1,500 1,559,760
Met. Trans. Auth. Facs. Rev.,
Cap. Apprec., Ser. N, F.G.I.C. Aaa Zero 07/01/13 4,000 1,873,000
Commuter Facs., Ser. A, F.G.I.C. Aaa 5.60 07/01/09 500 509,965
Commuter Facs., Ser. A, F.G.I.C. Aaa 5.70 07/01/10 1,000 1,022,540
Trans. Facs. Rev., Ser. A, F.S.A. Aaa 5.60 07/01/09 2,900 2,957,797
Trans. Facs. Rev., Ser. A, F.S.A. Aaa 5.70 07/01/10 4,600 4,703,684
Trans. Facs. Rev., Ser. N,
F.G.I.C. Aaa Zero 07/01/12 5,575 2,796,643
Met. Trans. Auth., New York Svc.
Contract,
Cap. Apprec., Ser. 7, M.B.I.A. Aaa Zero 07/01/08 7,185 4,599,909
Commuter Facs., Ser. O Baa1 5.50 07/01/17 2,500 2,407,875
Trans. Facs. Rev., Ser. O Baa1 5.75 07/01/13 1,975 2,003,973
Met. Trans. Auth., New York Tax
Fund, Ser. A, F.G.I.C. Aaa 6.00 04/01/30 3,000 2,995,650
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New York Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Monroe Cnty. Ind. Dev. Agcy. Rev.,
Ser. A Baa3 5.375% 04/01/29 $ 1,200 $ 967,140
Mount Vernon Ind. Dev. Agcy.,
Wartburg Senior Hsg. Inc. NR 6.15 06/01/19 800 688,592
New York City Ind. Dev. Agcy.,
Civic Touro College Proj., Ser. A Ba2 6.35 06/01/29 3,700(c) 3,337,696
Laguardia Assoc., Ltd. Partnership
Proj. NR 6.00 11/01/28 2,000 1,702,860
New York City Ind. Dev. Agcy.,
Spec. Fac. Rev.,
Brooklyn Navy Yard Part., A.M.T. Baa3 5.75 10/01/36 4,000 3,476,160
U.S.T.A. National Tennis Center
Proj., F.S.A. Aaa 6.375 11/15/14 1,000 1,047,020
Y.M.C.A. of Greater N.Y. Proj. Aaa 8.00 08/01/16 1,350(d) 1,435,739
New York City, Gen. Oblig.,
Ser. B A3 7.50 02/01/01 4,000(c) 4,112,000
Ser. D Aaa 8.00 08/01/03 2,450(d) 2,602,169
Ser. D A3 8.00 08/01/03 50 52,849
Ser. D Aaa 7.70 02/01/09 2,995(d) 3,199,349
Ser. D A3 7.70 02/01/09 45 47,837
Ser. F Aaa 8.20 11/15/03 2,760(d) 2,962,832
Ser. F A3 8.20 11/15/03 240 256,217
Ser. G A3 5.75 10/15/12 7,085 7,141,751
Ser. G A3 5.875 10/15/14 2,500 2,515,325
Ser. H A3 6.00 08/01/17 2,400 2,406,696
Ser. I A3 6.25 04/15/27 3,475(d) 3,720,266
Ser. I A3 6.25 04/15/27 2,525 2,543,786
Ser. I A3 6.10 04/15/10 425(d) 451,240
Ser. I A3 6.10 04/15/10 1,575 1,632,834
New York City Transitional Fin.
Auth. Rev.,
Ser. C Aa3 5.00 05/01/29 5,000 4,200,700
Ser. B Aa3 6.00 11/15/29 1,000 995,770
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Municipal Series Fund New York Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New York St. Dorm. Auth. Rev.,
Albany Cnty. Airport Baa1 5.25% 04/01/17 $ 3,760 $ 3,390,242
Cap. Apprec., Court Facs.,
A.M.B.A.C. Aa1 Zero 08/01/23 4,500 1,084,140
City Univ. Refunding Bonds Baa1 6.00 07/01/14 6,500 6,689,085
City Univ. Sys. Cons., Ser. D Baa1 7.00 07/01/09 1,880 2,032,430
Coll. & Univ. Ed., M.B.I.A.,
A.M.T. Aaa Zero 07/01/04 2,255(c) 1,810,855
Episcopal Hlth. Svcs., G.N.M.A. AAA(b) 7.55 08/01/29 3,000 3,066,150
Ins. Marymount Manhattan Clg. AA(b) 6.375 07/01/15 1,875 1,955,569
Ins. Marymount Manhattan Clg. AA(b) 6.375 07/01/16 1,975 2,053,229
Ins. Marymount Manhattan Clg. AA(b) 6.375 07/01/17 2,080 2,155,421
Ins. New York Univ., Ser. A,
M.B.I.A. Aaa 5.75 07/01/27 5,000 4,915,000
Mental Hlth. Svcs. Facs. Impvt.,
Ser. B A3 6.50 08/15/11 3,000 3,207,690
Mental Hlth. Svcs. Facs. Impvt.,
Ser. B A3 5.625 02/15/21 2,000 1,866,040
Spec. Act. Sch. Districts,
F.G.I.C. Aaa 7.00 07/01/13 3,050(d) 3,140,219
St. Univ. Edl. Facs., Ser. A A3 5.25 05/15/15 8,600 8,108,854
New York St. Energy Resch. & Dev.
Auth. Rev.,
Brooklyn Union Gas Co., Ser. B,
M.B.I.A., A.M.T. Aaa 6.75 02/01/24 2,000(c) 2,093,340
Con. Edison Co., Ser.A, A.M.T. A1 7.50 01/01/26 4,775 4,833,398
New York St. Environ. Facs. Corp.,
Poll. Ctrl. Rev.,
Ser. E Aaa 6.50 06/15/14 965(d) 1,008,261
Ser. E Aaa 6.50 06/15/14 35 36,375
New York St. Hsg. Fin. Agcy. Rev.,
Ser. A,
Multifamily Hsg. Aa1 7.05 08/15/24 1,000 1,043,050
St. Univ. Constr., E.T.M. Aaa 8.00 05/01/11 3,600(c) 4,291,560
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New York Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New York St. Local Gov't. Assist.
Corp.,
Ser. C A3 Zero 04/01/14 $ 11,882 $ 5,244,477
Ser. E A3 6.00% 04/01/14 6,135(c) 6,395,922
New York St. Med. Care Facs. Fin.
Agcy. Rev.,
Mental Hlth. Svcs., Ser. A Aaa 7.50 08/15/07 505(d) 530,230
Mental Hlth. Svcs., Ser. A A3 7.50 08/15/07 310 323,953
New York Hosp., Ser. A,
A.M.B.A.C., F.H.A. Aaa 6.50 08/15/29 3,000(d) 3,235,560
New York St. Mun. Bond Bank Agcy.,
Spec. Proj. Rev., Ser. A AAA(b) 6.75 03/15/11 3,000(d) 3,157,260
New York St. Thrwy. Auth.,
Highway & Bridge Trust Fund, Ser.
B, F.G.I.C. Aaa 6.00 04/01/14 2,220(d) 2,340,724
Svc. Contract Rev., Local Highway
& Bridge Baa1 6.45 04/01/15 1,000(d) 1,073,860
New York St. Urban Dev. Corp. Rev.,
Correctional Cap. Facs.,
A.M.B.A.C. Aaa Zero 01/01/08 10,000 6,570,600
St. Facs. Baa1 5.75 04/01/11 5,450 5,503,083
St. Facs. Baa1 5.75 04/01/12 5,750 5,789,502
St. Facs. Baa1 5.60 04/01/15 2,000 1,956,100
Subordinated Lien Corp. A2 5.50 07/01/22 5,000 4,556,850
Orange Cnty. Ind. Dev. Agcy., The
Glen Arden Inc. Proj. NR 5.70 01/01/28 1,250 978,900
Otsego Cnty. Ind. Dev. Agcy., Civic
Facs. Rev. Baa1 5.50 07/01/19 2,520(c) 2,290,957
Port Auth. of New York & New
Jersey, Ser. 70, A.M.T. A1 7.25 08/01/25 1,000 1,019,730
Puerto Rico Commonwealth,
Gen. Oblig. Baa1 Zero 07/01/14 2,000 868,820
Gen. Oblig. Baa1 Zero 07/01/15 1,250 507,787
Gen. Oblig., A.M.B.A.C. Aaa 7.00 07/01/10 6,500 7,414,810
Pub. Impvt. Rfdg., M.B.I.A. Aaa 7.00 07/01/10 1,250(c) 1,425,925
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Municipal Series Fund New York Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Puerto Rico Ind. Tourist Edl. Med.
& Envr. Ctrl. Facs. Fin. Auth.,
Hosp. Rev., M.B.I.A. Aaa 5.50% 07/01/26 $ 2,500 $ 2,341,625
Puerto Rico Mun. Fin. Agcy., Ser.
A, F.S.A. Aaa 5.50 08/01/23 2,015 1,913,283
Puerto Rico Pub. Bldgs. Auth. Rev.,
Gtd. Gov't. Facs., Ser. A,
A.M.B.A.C. Aaa 6.25 07/01/15 2,050 2,207,727
Rockland Cnty. Solid Waste Mgmt.
Auth.,
Ser. B., A.M.B.A.C., A.M.T. Aaa 5.625 12/15/14 375(d) 392,416
Ser. B., A.M.B.A.C., A.M.T. Aaa 5.625 12/15/14 1,210 1,179,674
Scotia Hsg. Auth. Rev., Coburg
Village Inc. Proj., Ser. A NR 6.20 07/01/38 4,000 3,326,000
Suffolk Cnty. Ind. Dev. Agcy. Rev.,
A.M.T. NR 5.50 01/01/23 2,000 1,662,240
Suffolk Cnty. Ind. Dev. Agcy. Rev.,
Cont. Care Retirement Cmnty., Ser.
A NR 7.25 11/01/28 2,250 2,155,725
Triborough Bridge & Tunl. Auth.
Rev., Ser. A, M.B.I.A. Aaa 6.00 01/01/10 2,000 2,101,400
Virgin Islands Pub. Fin. Auth.
Rev., Ser. A BBB-(b) 6.50 10/01/24 1,000 989,040
Watervliet Hsg. Auth., Sen. Res.
Beltrone Lvng. Ctr. Proj., Ser. A NR 6.125 06/01/38 4,000 3,322,760
------------
Total long-term investments (cost
$231,699,630) 233,760,530
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New York Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS 1.1%
<CAPTION>
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New York City Mun. Wtr. Fin. Auth.,
Wtr. & Swr. Auth.,
Ser. 93C, F.R.D.D. VMIG1 3.80% 03/01/00 $ 400 $ 400,000
Port Auth. of New York & New
Jersey, Ser. 5, F.R.D.D. VMIG1 3.75 03/01/00 2,100 2,100,000
------------
Total short-term investments (cost
$2,500,000) 2,500,000
------------
Total Investments 99.5%
(cost $234,199,630; Note 4) 236,260,530
Other assets in excess of
liabilities 0.5% 1,294,699
Net Assets 100% $237,555,229
------------
------------
</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.
E.T.M.--Escrowed to Maturity.
F.G.I.C.--Financial Guaranty Insurance Company.
F.H.A.--Federal Housing Administration.
F.R.D.D.--Floating Rate (Daily) Demand Note (e).
F.S.A.--Financial Security Assurance.
G.N.M.A.--Government National Mortgage Association.
M.B.I.A.--Municipal Bond Insurance Association.
(b) Standard & Poor's Rating.
(c) Pledged as initial margin on financial futures contracts.
(d) Prerefunded issues are secured by escrowed cash and/or direct U.S.
guaranteed obligations.
(e) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be the later of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
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 11
<PAGE>
Prudential Municipal Series Fund New York Series
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $234,199,630) $ 236,260,530
Interest receivable 3,134,553
Receivable for Series shares sold 27,781
Prepaid expenses and other assets 5,943
-----------------
Total assets 239,428,807
-----------------
LIABILITIES
Payable for investments purchased 1,069,732
Payable for Series shares reacquired 418,866
Accrued expenses and other liabilities 154,364
Management fee payable 94,399
Dividends payable 70,097
Distribution fee payable 59,788
Deferred trustees' fees 6,332
-----------------
Total liabilities 1,873,578
-----------------
NET ASSETS $ 237,555,229
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 213,161
Paid-in capital in excess of par 236,136,856
-----------------
236,350,017
Accumulated net loss on investments (855,688)
Net unrealized appreciation on investments 2,060,900
-----------------
Net assets, February 29, 2000 $ 237,555,229
-----------------
-----------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New York Series
Statement of Assets and Liabilities (Unaudited) Cont'd.
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share
($175,491,397 / 15,748,428 shares of beneficial interest
issued and outstanding) $11.14
Maximum sales charge (3% of offering price) .34
-----------------
Maximum offering price to public $11.48
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per
share ($60,087,196 / 5,390,356 shares of beneficial
interest issued and outstanding) $11.15
-----------------
-----------------
Class C:
Net asset value and redemption price per share ($1,698,141
/ 152,345 shares of beneficial interest issued and
outstanding) $11.15
Sales charge (1% of offering price) .11
-----------------
Offering price to public $11.26
-----------------
-----------------
Class Z:
Net asset value, offering price and redemption price per
share ($278,495 / 24,966 shares of beneficial interest
issued and outstanding) $11.15
-----------------
-----------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Municipal Series Fund New York Series
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest $ 7,409,469
-----------------
Expenses
Management fee 615,372
Distribution fee--Class A 222,532
Distribution fee--Class B 164,919
Distribution fee--Class C 6,836
Transfer agent's fees and expenses 49,500
Custodian's fees and expenses 44,000
Reports to shareholders 28,000
Registration fees 18,500
Legal fees and expenses 11,500
Audit fees and expenses 5,000
Trustees' fees and expenses 2,250
Miscellaneous expense 5,154
-----------------
Total expenses 1,173,563
Custodian fee credit (1,180)
-----------------
Net expenses 1,172,383
-----------------
Net investment income 6,237,086
-----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Investment transactions (713,678)
Financial futures transactions 212,254
-----------------
(501,424)
-----------------
Net change in unrealized appreciation on:
Investments (7,227,453)
Financial futures contracts (68,250)
-----------------
(7,295,703)
-----------------
Net loss on investments (7,797,127)
-----------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(1,560,041)
-----------------
-----------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New York Series
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year Ended
Ended August 31,
February 29, 2000 1999
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
DECREASE IN NET ASSETS
Operations
Net investment income $ 6,237,086 $ 12,698,298
Net realized gain (loss) on investment
transactions (501,424) 39,076
Net change in unrealized appreciation of
investments (7,295,703) (15,675,222)
----------------- -------------
Net decrease in net assets resulting from
operations (1,560,041) (2,937,848)
----------------- -------------
Dividends and distributions (Note 1):
Dividends from net investment income
Class A (4,576,201) (8,660,657)
Class B (1,609,663) (3,946,857)
Class C (42,284) (66,182)
Class Z (8,938) (24,602)
----------------- -------------
(6,237,086) (12,698,298)
----------------- -------------
Distributions from net realized gains
Class A -- (1,374,194)
Class B -- (688,548)
Class C -- (10,565)
Class Z -- (4,126)
----------------- -------------
-- (2,077,433)
----------------- -------------
Distributions in excess of net realized
gains
Class A -- (234,342)
Class B -- (117,417)
Class C -- (1,803)
Class Z -- (702)
----------------- -------------
-- (354,264)
----------------- -------------
Series share transactions (net of share
conversions) (Note 5):
Net proceeds from shares sold 13,583,848 25,657,665
Net asset value of shares issued in
reinvestment of dividends and
distributions 3,939,687 9,398,834
Cost of shares reacquired (26,701,495) (40,612,658)
----------------- -------------
Net decrease in net assets from Series share
transactions (9,177,960) (5,556,159)
----------------- -------------
Total decrease (16,975,087) (23,624,002)
NET ASSETS
Beginning of period 254,530,316 278,154,318
----------------- -------------
End of period $ 237,555,229 $ 254,530,316
----------------- -------------
----------------- -------------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Municipal Series Fund New York Series
Notes to Financial Statements (Unaudited)
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 11
series. The monies of each series are invested in separate, independently
managed portfolios. The New York Series (the 'Series') commenced investment
operations in September 1984. The Series is diversified and its investment
objective is to maximize current income that is exempt from New York State, New
York City 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 Series seeks to achieve the objective by
investing primarily in New York State, municipal and local government
obligations and obligations of other qualifying issuers. The ability of the
issuers of the securities held by the Series to meet their obligations may be
affected by economic 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 Series 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
16
<PAGE>
Prudential Municipal Series Fund New York Series
Notes to Financial Statements (Unaudited) Cont'd.
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 paid on purchases of 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.
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 continue 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.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
Custody Fee Credits: The Fund has an arrangement with its custodian
bank, whereby uninvested monies earn credits which reduce the fees charged by
the custodian.
17
<PAGE>
Prudential Municipal Series Fund New York Series
Notes to Financial Statements (Unaudited) Cont'd.
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 Investment
Management Services ('PIMS'), which acts as the distributor of the Class A,
Class B, Class C and Class Z shares of the Fund. The Fund compensates PIMS for
distributing and servicing the Fund's Class A, Class B and Class C shares,
pursuant to a plan of distribution, (the 'Class A, B and C Plans'), regardless
of expenses actually incurred by them. The distribution fees are accrued daily
and payable monthly. No distribution or service fees are paid to PIMS as
distributor of the Class Z shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, .50 of 1%
and 1% of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Plans were .25 of 1%, .50 of 1% and .75 of
1% of the average daily net assets of the Class A, B and C shares, respectively,
for the six months ended February 29, 2000.
PIMS has advised the Series that it received approximately $3,500 and
$1,600 in front-end sales charges resulting from sales of Class A and Class C
shares, respectively during the six months ended February 29, 2000. From these
fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn
paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Series that for the six months ended February 29,
2000, it received approximately $46,400 and $300 in contingent deferred sales
charges imposed upon certain redemptions by Class B and C shareholders,
respectively.
PIFM, PIMS and PIC are wholly owned subsidiaries of The Prudential
Insurance Company of America.
The Fund, along with other affiliated registered investment companies (the
'Funds'), entered into a syndicated credit agreement ('SCA') with an
unaffiliated lender. The maximum commitment under the SCA is $1 billion and
interest on any
18
<PAGE>
Prudential Municipal Series Fund New York Series
Notes to Financial Statements (Unaudited) Cont'd.
borrowings will be at market rates. For the period 3/11/99-3/9/00, the
commitment fee on the unused portion of the credit facility was .065 of 1%.
Subsequent to March 9, 2000, the SCA was renewed with a maximum commitment of $1
billion at a commitment fee of .080 of 1% of the unused portion of the credit
facility. The expiration date of the SCA is March 9, 2001. The commitment fee is
accrued and paid quarterly on a pro rata basis by the Funds. Prior to March 11,
1999, the Funds had a credit agreement with a maximum commitment of
$200,000,000. The commitment fee was .055 of 1% on the unused portion of the
credit facility. The Fund did not borrow any amounts during the six months ended
February 29, 2000. The purpose of the credit agreements is to serve as an
alternative source of funding for capital share redemptions.
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the six months ended February 29,
2000, the Series incurred fees of approximately $45,200 for the services of
PMFS. As of February 29, 2000, approximately $7,400 of such fees were due to
PMFS. Transfer agent fees and expenses in the Statement of Operations include
certain out-of-pocket expenses paid to nonaffiliates.
Note 4. Portfolio Securities
Purchases and sales of portfolio securities of the Series, excluding short-term
investments, for the six months ended February 29, 2000 were $31,343,985 and
$42,858,788, respectively.
The cost basis of investments for federal income tax purposes at February
29, 2000 was substantially the same as for financial reporting purposes and
accordingly, net unrealized appreciation on investments for federal income tax
purposes was $2,060,900 (gross unrealized appreciation--$6,921,733, gross
unrealized depreciation--$4,860,833).
In addition for federal income tax purposes, the Series elected to treat
net realized capital losses of approximately $270,918 incurred in the ten month
period ended August 31, 1999 as having occurred in the current fiscal year.
Note 5. Capital
The Series offers Class A, Class B, Class C and Class Z shares. Class A shares
are sold with a front-end sales charge of up to 3%. Class B shares are sold with
a contingent deferred sales charge which declines from 5% to zero depending on
the period of time the shares are held. Class C shares are sold with a front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18
19
<PAGE>
Prudential Municipal Series Fund New York Series
Notes to Financial Statements (Unaudited) Cont'd.
months. Class B shares automatically convert to Class A shares on a quarterly
basis approximately seven years after purchase. A special exchange privilege is
also available for shareholders who qualify to purchase Class A shares at net
asset value. Class Z shares are not subject to any sales or redemption charge
and are offered exclusively for sale to a limited group of investors.
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 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------------------------------------ ---------- ------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold 951,744 $ 10,813,311
Shares issued in reinvestment of dividends and distributions 261,734 2,938,661
Shares reacquired (1,320,118) (14,835,286)
---------- ------------
Net decrease in shares outstanding before conversion (106,640) (1,083,314)
Shares issued upon conversion from Class B 605,051 6,910,078
---------- ------------
Net increase in shares outstanding 498,411 $ 5,826,764
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 1,261,310 $ 15,319,992
Shares issued in reinvestment of dividends and distributions 538,733 6,502,373
Shares reacquired (1,697,677) (20,438,469)
---------- ------------
Net increase in shares outstanding before conversion 102,366 1,383,896
Shares issued upon conversion from Class B 792,273 9,621,083
---------- ------------
Net increase in shares outstanding 894,639 $ 11,004,979
---------- ------------
---------- ------------
<CAPTION>
Class B
- ------------------------------------------------------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold 225,576 $ 2,541,628
Shares issued in reinvestment of dividends and distributions 85,314 959,178
Shares reacquired (1,005,518) (11,348,286)
---------- ------------
Net decrease in shares outstanding before conversion (694,628) (7,847,480)
Shares reacquired upon conversion into Class A (605,051) (6,910,078)
---------- ------------
Net decrease in shares outstanding (1,299,679) $(14,757,558)
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 756,576 $ 9,175,430
Shares issued in reinvestment of dividends and distributions 232,603 2,811,896
Shares reacquired (1,620,967) (19,593,950)
---------- ------------
Net decrease in shares outstanding before conversion (631,788) (7,606,624)
Shares reacquired upon conversion into Class A (792,127) (9,621,083)
---------- ------------
Net decrease in shares outstanding (1,423,915) $(17,227,707)
---------- ------------
---------- ------------
</TABLE>
20
<PAGE>
Prudential Municipal Series Fund New York Series
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C Shares Amount
- ------------------------------------------------------------ ---------- ------------
Six months ended February 29, 2000:
<S> <C> <C>
Shares sold 18,450 $ 207,837
Shares issued in reinvestment of dividends and distributions 2,980 33,479
Shares reacquired (28,221) (314,690)
---------- ------------
Net decrease in shares outstanding (6,791) $ (73,374)
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 75,388 $ 909,212
Shares issued in reinvestment of dividends and distributions 5,423 65,391
Shares reacquired (25,670) (306,468)
---------- ------------
Net increase in shares outstanding 55,141 $ 668,135
---------- ------------
---------- ------------
<CAPTION>
Class Z
- ------------------------------------------------------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold 1,863 $ 21,072
Shares issued in reinvestment of dividends and distributions 744 8,369
Shares reacquired (17,944) (203,233)
---------- ------------
Net decrease in shares outstanding (15,337) $ (173,792)
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 20,888 $ 253,031
Shares issued in reinvestment of dividends and distributions 1,592 19,174
Shares reacquired (22,527) (273,771)
---------- ------------
Net decrease in shares outstanding (47) $ (1,566)
---------- ------------
---------- ------------
</TABLE>
21
<PAGE>
Prudential Municipal Series Fund New York Series
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Class A
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.50
-----------------
Income from investment operations
Net investment income .29
Net realized and unrealized gain (loss) on investment
transactions (.36)
-----------------
Total from investment operations (.07)
-----------------
Less distributions
Dividends from net investment income (.29)
Distributions in excess of net investment income --
Distributions from net realized gains --
Distributions in excess of capital gains --
-----------------
Total distributions (.29)
-----------------
Net asset value, end of period $ 11.14
-----------------
-----------------
TOTAL RETURN(b): (.57)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 175,491
Average net assets (000) $ 179,004
Ratios to average net assets:
Expenses, including distribution fees .88%(d)
Expenses, excluding distribution fees .63%(d)
Net investment income 5.14%(d)
For Class A, B, C and Z shares:
Portfolio turnover rate 13%
</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 return for periods of less than one year are not
annualized.
(c) Less than $.005 per share.
(d) Annualized.
22 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New York Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class A
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 12.30 $ 11.94 $ 11.77 $ 11.91 $ 11.71
- ---------------- ---------------- ---------------- ---------------- ----------------
.57 .60 .61(a) .63(a) .66(a)
(.69) .42 .43 (.09) .20
- ---------------- ---------------- ---------------- ---------------- ----------------
(.12) 1.02 1.04 .54 .86
- ---------------- ---------------- ---------------- ---------------- ----------------
(.57) (.60) (.61) (.63) (.66)
-- (.01) --(c) -- --
(.09) (.05) (.26) (.05) --
(.02) -- -- -- --
- ---------------- ---------------- ---------------- ---------------- ----------------
(.68) (.66) (.87) (.68) (.66)
- ---------------- ---------------- ---------------- ---------------- ----------------
$ 11.50 $ 12.30 $ 11.94 $ 11.77 $ 11.91
- ---------------- ---------------- ---------------- ---------------- ----------------
- ---------------- ---------------- ---------------- ---------------- ----------------
(1.07)% 8.71% 9.19% 4.53% 7.70%
$175,307 $176,555 $172,471 $168,037 $163,025
$181,951 $174,485 $173,963 $168,291 $ 95,024
.84% .73% .68%(a) .68%(a) .69%(a)
.64% .63% .58%(a) .58%(a) .59%(a)
4.76% 4.93% 5.15%(a) 5.24%(a) 5.65%(a)
11% 33% 43% 92% 57%
</TABLE>
See Notes to Financial Statements 23
<PAGE>
Prudential Municipal Series Fund New York Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.50
--------
Income from investment operations
Net investment income .28
Net realized and unrealized gain (loss) on investment
transactions (.35)
--------
Total from investment operations (.07)
--------
Less distributions
Dividends from net investment income (.28)
Distributions in excess of net investment income --
Distributions from net realized gains --
Distributions in excess of capital gains --
--------
Total distributions (.28)
--------
Net asset value, end of period $ 11.15
--------
--------
TOTAL RETURN(b): (.61)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $60,087
Average net assets (000) $66,330
Ratios to average net assets:
Expenses, including distribution fees 1.13%(d)
Expenses, excluding distribution fees .63%(d)
Net investment income 4.88%(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 return for periods of less than one year are not
annualized.
(c) Less than $.005 per share.
(d) Annualized.
24 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New York Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 12.30 $ 11.94 $ 11.77 $ 11.91 $ 11.71
-------- ---------------- ---------------- ---------------- ----------------
.54 .55 .56(a) .58(a) .61(a)
(.69) .42 .43 (.09) .20
-------- ---------------- ---------------- ---------------- ----------------
(.15) .97 .99 .49 .81
-------- ---------------- ---------------- ---------------- ----------------
(.54) (.55) (.56) (.58) (.61)
-- (.01) --(c) -- --
(.09) (.05) (.26) (.05) --
(.02) -- -- -- --
-------- ---------------- ---------------- ---------------- ----------------
(.65) (.61) (.82) (.63) (.61)
-------- ---------------- ---------------- ---------------- ----------------
$ 11.50 $ 12.30 $ 11.94 $ 11.77 $ 11.91
-------- ---------------- ---------------- ---------------- ----------------
-------- ---------------- ---------------- ---------------- ----------------
(1.37)% 8.28% 8.76% 4.12% 7.27%
$ 76,929 $ 99,823 $112,658 $135,764 $163,013
$ 88,626 $104,653 $122,744 $152,656 $230,033
1.13% 1.13% 1.08%(a) 1.08%(a) 1.11%(a)
.63% .63% .58%(a) .58%(a) .61%(a)
4.45% 4.53% 4.75%(a) 4.84%(a) 5.30%(a)
</TABLE>
See Notes to Financial Statements 25
<PAGE>
Prudential Municipal Series Fund New York Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.50
-------
Income from investment operations
Net investment income .26
Net realized and unrealized gain (loss) on investment
transactions (.35)
-------
Total from investment operations (.09)
-------
Less distributions
Dividends from net investment income (.26)
Distributions in excess of net investment income --
Distributions from net realized gains --
Distributions in excess of capital gains --
-------
Total distributions (.26)
-------
Net asset value, end of period $ 11.15
-------
-------
TOTAL RETURN(b): (.73)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 1,698
Average net assets (000) $ 1,833
Ratios to average net assets:
Expenses, including distribution fees 1.38%(d)
Expenses, excluding distribution fees .63%(d)
Net investment income 4.64%(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 return for periods of less than one year are not
annualized.
(c) Less than $.005 per share.
(d)Annualized.
26 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New York Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
- ----------------------------------------------------------------------------------------------------------
Year Ended September 30,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$12.30 $11.94 $11.77 $11.91 $11.71
------- ------- ------- ------- -------
.51 .52 .53(a) .55(a) .58(a)
(.69) .42 .43 (.09) .20
------- ------- ------- ------- -------
(.18) .94 .96 .46 .78
------- ------- ------- ------- -------
(.51) (.52) (.53) (.55) (.58)
-- (.01) --(c) -- --
(.09) (.05) (.26) (.05) --
(.02) -- -- -- --
------- ------- ------- ------- -------
(.62) (.58) (.79) (.60) (.58)
------- ------- ------- ------- -------
$11.50 $12.30 $11.94 $11.77 $11.91
------- ------- ------- ------- -------
------- ------- ------- ------- -------
(1.62)% 8.01% 8.49% 3.86% 7.01%
$1,830 $1,279 $ 780 $ 876 $ 529
$1,566 $ 969 $ 798 $ 659 $ 325
1.39% 1.38% 1.33%(a) 1.33%(a) 1.36%(a)
.64% .63% .58%(a) .58%(a) .61%(a)
4.23% 4.28% 4.50%(a) 4.59%(a) 5.05%(a)
</TABLE>
See Notes to Financial Statements 27
<PAGE>
Prudential Municipal Series Fund New York Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.51
-------
Income from investment operations
Net investment income .31
Net realized and unrealized gain (loss) on investment
transactions (.36)
-------
Total from investment operations (.05)
-------
Less distributions
Dividends from net investment income (.31)
Distributions in excess of net investment income --
Distributions from net realized gains --
Distributions in excess of capital gains --
-------
Total distributions (.31)
-------
Net asset value, end of period $ 11.15
-------
-------
TOTAL RETURN(b): (.44)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 279
Average net assets (000) $ 334
Ratios to average net assets:
Expenses, including distribution fees .63%(e)
Expenses, excluding distribution fees .63%(e)
Net investment income 5.37%(e)
</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) Commencement of offering of Class Z shares.
(e) Annualized.
28 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New York Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
- ---------------------------------------------------------------------------------------
Year Ended August 31, September 18, 1996(d)
- ------------------------------------------ through August 31,
1999 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
$12.31 $11.95 $12.09
------- ------- -------
.60 .62 .46(a)
(.69) .42 .12
------- ------- -------
(.09) 1.04 .58
------- ------- -------
(.60) (.62) (.46)
-- (.01) --(c)
(.09) (.05) (.26)
(.02) -- --
------- ------- -------
(.71) (.68) (.72)
------- ------- -------
$11.51 $12.31 $11.95
------- ------- -------
------- ------- -------
(0.87)% 8.81% 5.02%
$ 464 $ 497 $ 28
$ 496 $ 116 $ 11
.63% .63% .58%(a)/(e)
.63% .63% .58%(a)/(e)
4.96% 5.03% 5.25%(a)/(e)
</TABLE>
See Notes to Financial Statements 29
<PAGE>
<PAGE>
Prudential Municipal Series Fund New York Series
Prudential Mutual Fund Family
Prudential offers a broad range of mutual funds designed to
meet your individual needs. For information about
these funds, contact your financial adviser or call
us at (800) 225-1852. Read the prospectus carefully
before you invest or send money.
STOCK FUNDS
Prudential Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Index Series Fund
Prudential Small-Cap Index Fund
Prudential Stock Index Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Mid-Cap Value Fund
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund
Prudential 20/20 Focus Fund
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Target Funds
Large Capitalization Growth Fund
Large Capitalization Value Fund
Small Capitalization Growth Fund
Small Capitalization Value Fund
Asset Allocation/Balanced Funds
Prudential Balanced Fund
Prudential Diversified Funds
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund
GLOBAL FUNDS
Global Stock Funds
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Prudential Latin America Equity Fund
Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Index Series Fund
Prudential Europe Index Fund
Prudential Pacific Index Fund
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Prudential Global Growth Fund
Prudential International Value Fund
Prudential Jennison International Growth Fund
Global Utility Fund, Inc.
Target Funds
International Equity Fund
Global Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
www.prudential.com(800) 225-1852
BOND FUNDS
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 High Yield Total Return Fund, Inc.
Prudential Index Series Fund
Prudential Bond Market Index Fund
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Target Funds
Total Return Bond Fund
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Income Series
Insured Series
Prudential Municipal Series Fund
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
MONEY MARKET FUNDS
Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
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
<PAGE>
Prudential Municipal Series Fund New York Series
Getting the Most From Your Prudential Mutual Fund
Some mutual fund shareholders won't ever read
this--they don't read annual and semiannual reports.
It's quite understandable. These annual and
semiannual reports are prepared to comply with
federal regulations, and are often written in
language that is difficult to understand. So when
most people run into those particularly daunting
sections of these reports, they don't read them.
We think that's a mistake
At Prudential Mutual Funds, we've made some changes
to our report to make it easier to understand and
more pleasant to read. We hope you'll find it
profitable to spend a few minutes familiarizing
yourself with your investment. Here's what you'll
find in the report:
Performance at a Glance
Since an investment's performance is often a
shareholder's primary concern, we present
performance information in two different formats.
You'll find it first on the "Performance at a
Glance" page where we compare the Fund and the
comparable average calculated by Lipper, Inc., a
nationally recognized mutual fund rating agency. We
report both the cumulative total returns and the
average annual total returns. The cumulative total
return is the total amount of income and
appreciation the Fund has achieved in various time
periods. The average annual total return is an
annualized representation of the Fund's
performance. It gives you an idea of how much the
Fund has earned in an average year for a given time
period. Under the performance box, you'll see
legends that explain the performance information,
whether fees and sales charges have been included
in returns, and the inception dates for the Fund's
share classes.
See the performance comparison charts at the back
of the report for more performance information.
Please keep in mind that past performance is not
indicative of future results.
<PAGE>
www.prudential.com (800) 225-1852
Performance review
The portfolio manager, who invests your money for
you, reports on
successful--and not-so-successful--strategies in this
section of your report. Look for recent purchases
and sales here, as well as information about the
sectors the portfolio manager favors, and any
changes that are on the drawing board.
Portfolio of Investments
This is where the report begins to appear
technical, but it's really just a
listing of each security held at the end of the
reporting period, along with valuations and other
information. Please note that sometimes we discuss
a security in the Performance Review that doesn't
appear in this listing because it was sold before
the close of the reporting period.
Statement of Assets and Liabilities
The balance sheet shows the assets (the value of
the Fund's holdings),
liabilities (how much the Fund owes), and net
assets (the Fund's
equity, or holdings after the Fund pays its debts)
as of the end of the reporting period. It also
shows how we calculate the net asset value per
share for each class of shares. The net asset value
is reduced by payment of your
dividend, capital gain, or other distribution, but
remember that the money or new shares are being
paid or issued to you. The net asset value
fluctuates daily, along with the value of every
security in the portfolio.
Statement of Operations
This is the income statement, which details income
(mostly interest and
dividends earned) and expenses (including what you
pay us to manage your money). You'll also see
capital gains here--both realized and unrealized.
<PAGE>
Prudential Municipal Series Fund New York Series
Getting the Most From Your Prudential Mutual Fund
Statement of Changes in Net Assets
This schedule shows how income and expenses
translate into changes
in net assets. The Fund is required to pay out the
bulk of its income to shareholders every year, and
this statement shows you how we do it (through
dividends and distributions) and how that affects
the net assets. This statement also shows how money
from investors flowed into and out of the Fund.
Notes to Financial Statements
This is the kind of technical material that can
intimidate readers, but it does contain useful
information. The Notes provide a brief history and
explanation of your Fund's objectives. In addition,
they outline how Prudential Mutual Funds prices
securities. The Notes also explain who manages and
distributes the Fund's shares and, more
importantly, how much they are paid for doing so.
Finally, the Notes explain how many shares are
outstanding and the number issued and redeemed over
the period.
Financial Highlights
This information contains many elements from prior
pages, but on a
per-share basis. It is designed to help you
understand how the Fund
performed, and to compare this year's performance
and expenses to those of prior years.
Independent Auditor's Report
Once a year, an outside auditor looks over our
books and certifies that the information is fairly
presented and complies with generally accepted
accounting principles.
Tax Information
This is information that we report annually about
how much of your total return is taxable. Should
you have any questions, you may want to consult a
tax adviser.
<PAGE>
www.prudential.com(800) 225-1852
Performance Comparison
These charts are included in the annual report and
are required by the Securities Exchange Commission.
Performance is presented here as a hypothetical
$10,000 investment in the Fund since its inception
or for 10 years (whichever is shorter). To help you
put that return in context, we
are required to include the performance of an
unmanaged, broad-based securities index as well.
The index does not reflect the cost of buying the
securities it contains or the cost of managing a
mutual fund. Of course, the index holdings do not
mirror those of the Fund--the index is a broad-based
reference point commonly used by investors to
measure how well they are doing. A definition of
the selected index is also provided. Investors
cannot invest directly in an index.
<PAGE>
Prudential Municipal Series Fund New York Series
Getting the Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds,
you receive financial advice from a Prudential
Securities Financial Advisor or Pruco Securities
registered representative. Your advisor or
representative can provide you with the following
services:
There's No Reward Without Risk; but Is This Risk
Worth It?
Your financial advisor or registered representative
can help you match the reward you seek with the
risk you can tolerate. Risk can be difficult to
gauge--sometimes even the simplest investments bear
surprising risks. The educated investor knows that
markets seldom move in just one direction. There
are times when a market sector or asset class will
lose value or provide little in the way of total
return. Managing your own expectations is easier
with help from someone who understands the markets
and who knows you!
Keeping Up With the Joneses
A financial advisor or registered representative
can help you wade through the numerous available
mutual funds to find the ones that fit your
individual investment profile and risk tolerance.
While the newspapers and popular magazines are full
of advice about investing, they are aimed at
generic groups of people or representative
individuals--not at you personally. Your financial
advisor or registered representative will review
your investment objectives with you. This means you
can make financial decisions based on the assets
and liabilities in your current portfolio and your
risk tolerance--not just based on the current
investment fad.
Buy Low, Sell High
Buying at the top of a market cycle and selling at
the bottom are among the most common investor
mistakes. But sometimes it's difficult to hold on
to an investment when it's losing value every
month. Your financial advisor or registered
representative can answer questions when you're
confused or worried about your investment, and
should remind you that you're investing for the
long haul.
<PAGE>
www.prudential.com (800) 225-1852
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Trustees
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, Secretary
David F. Connor, Assistant Secretary
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
194 Wood Avenue South
Iselin, NJ 08830
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Fund Symbols NASDAQ CUSIP
Class A PMNYX 74435M747
Class B -- 74435M754
Class C -- 74435M523
Class Z -- 74435M440
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 29, 2000, were not audited and,
accordingly, no opinion is expressed on them.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
MF122E2 74435M747 74435M754 74435M523 74435M440
(LOGO) Printed on Recycled Paper
<PAGE>
SEMIANNUAL REPORT FEBRUARY 29, 2000
Prudential
Municipal Series Fund/
New York Money Market Series
Fund Type Money market
Objective The highest level of current income
that is exempt from New York State, New York City,
and federal income taxes, consistent with liquidity
and the preservation of capital
(GRAPHIC)
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a
current prospectus.
(LOGO)
Build on the Rock
Investment Goals and Style
Prudential Municipal Series Fund/New York Money
Market Series seeks to provide the highest level of
current income that is exempt from New York State,
New York City, and federal income taxes, consistent
with liquidity and the preservation of capital. The
Series intends to invest in a portfolio of short-
term municipal debt securities with maturities of
13 months or less from the state of New York, its
municipalities, local governments, and other
qualifying issuers (such as Puerto Rico, Guam, and
the U.S. Virgin Islands). There can be no
assurance that the Series will achieve its
investment objective.
Contents
1 Message From the Fund's President
2 Performance Review
3 Performance at a Glance
6 Financial Statements
<PAGE>
www.prudential.com (800) 225-1852
Message From the Fund's President As of April 17, 2000
(PHOTO)
Dear Shareholder
The Federal Reserve increased short-term interest
rates twice to slow U.S. economic growth and fend
off higher inflation during the six months that
ended on February 29, 2000. Prudential's Money
Markets Sector team worked hard to anticipate these
changes in U.S. monetary policy, and acted quickly
to take advantage of good investment opportunities
that emerged as New York money market yields rose.
As a result, Prudential Municipal Series Fund/New
York Money Market Series maintained a $1.00 net
asset value per share, and provided a competitive
yield during its fiscal half year. On February 29,
2000, the Series' seven-day current yield was
3.17%, compared with 3.11% for the average New York
money market fund as tracked by iMoneyNet, Inc. The
following report takes a closer look at
developments in the municipal money market sector
during the six-month review period, and explains
how the Series was positioned throughout.
New team member brings solid investment expertise
The newest member of Prudential's Money Markets
Sector team is Monica Wong. Prior to joining
Prudential, Monica was a portfolio manager at
Montgomery Asset Management, where she oversaw tax-
exempt assets totaling more than $500 million.
During Monica's 10 years of municipal finance
experience, she also worked as a research analyst,
financial advisor, trader, and underwriter.
Thank you for your continued confidence in
Prudential mutual funds.
Sincerely,
John R. Strangfeld
President
Prudential Municipal Series Fund
1
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Performance Review
(PHOTO) (PHOTO) Portfolio Managers Joseph Tully (Money Markets Sector
Team Leader) and Monica Wong
Fed tried to curb U.S. economic growth
Shortly before the Series' fiscal half year began
on September 1, 1999, the Federal Reserve increased
the federal funds rate (what U.S. banks charge each
other for overnight loans) by a quarter of a
percentage point to 5.25% from 5.00%. It also
raised the rate at which banks can borrow from the
Federal Reserve system (known as the discount rate)
to 4.75% from 4.50%.
The short-term rate hike rippled through the U.S.
economy, increasing borrowing costs for consumers
and businesses. In this way, the Fed hoped to rein
in the brisk pace of U.S. economic growth and avert
a buildup in inflationary pressures. Mounting
inflation is particularly hard on people who live
on fixed incomes, because their buying power
declines if their incomes are not adjusted for the
rise in prices.
Reinvesting at higher yields helped the Series
Because we believed that the Fed would continue to
tighten monetary policy, we invested primarily in
shorter-term New York money market securities from
September 1999 through much of November 1999. As
these securities matured, we planned to reinvest
this money at the higher tax-exempt money market
yields that would likely be available after any
subsequent Fed rate hike.
We did not have to wait long. The U.S. central bank
boosted the federal funds rate to 5.50% and its
discount rate to 5.00% on November 16, 1999. Yields
on New York money market securities also climbed,
creating many attractive buying opportunities.
2
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
<TABLE>
Fund Facts As of 2/29/00
<CAPTION>
7-Day Net Asset Taxable Equivalent Yield* Weighted Avg. Net Assets
Current Yld. Value (NAV) @31% @36% @39.6% Mat. (WAM) (Millions)
<S> <C> <C> <C> <C> <C> <C> <C>
NY Money
Market Series 3.17% $1.00 4.93% 5.32% 5.63% 39 Days $386
iMoneyNet, Inc.
Tax-Free State Specific
Avg. (SB & GP--NY)** 3.11% $1.00 4.84% 5.22% 5.53% 37 Days N/A
</TABLE>
Note: Yields will fluctuate from time to time, and past performance
is not indicative of future results. An investment
in the Series is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Series seeks to
preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in
the Series.
*Some investors may be subject to the federal
alternative minimum tax and/or state and local
taxes. Taxable equivalent yields reflect federal
and applicable state tax rates.
**iMoneyNet, Inc. reports the 7-Day Current Yield,
NAV, and WAM on Mondays. This is the data of all
funds in the iMoneyNet, Inc. Tax-Free State
Specific Average (Stock Broker (SB) & General
Purpose (GP)--New York) category as of February 28,
2000.
Tracking Municipal Money Market Fund Yields
(GRAPH)
3
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Performance Review
Among our purchases were one-year tax anticipation
notes. Buying these securities in December 1999
lengthened the Series' weighted average maturity
(WAM), which positioned the Series longer than the
average of comparable funds as measured by
iMoneyNet, Inc. (WAM is a measurement tool that
determines a portfolio's sensitivity to changes in
the level of interest rates. It takes into account
the maturity level of each security held in a
portfolio.) Extending the Series' WAM by purchasing
these attractively priced securities enhanced the
Series' yield.
New year brought good buying opportunities
We again lengthened the Series' WAM in January 2000
by purchasing two kinds of bonds, both of which
provided attractive yields and were good
alternatives to tax-exempt notes and other
conventional municipal money market securities. We
bought one-year "prerefunded" bonds that are backed
by direct obligations of the U.S. government. We
also purchased one-year bonds that were rated AAA
because their interest and principal payments are
insured by a major bond insurance company. These
insured short-term bonds provided solid yields to
compensate for the fact that they were issued in
moderate-sized blocks. We, like most money
managers, often prefer to buy large blocks of bonds
because they could be easier to sell. However,
owning moderate-sized blocks of insured short-term
municipal bonds that offered higher yields met our
fundamental buy-and-hold strategy.
New York State bonds upgraded
On February 2, 2000, the Fed renewed its efforts to
check the powerful U.S. economy by raising the
federal funds rate to 5.75% and its discount rate
to 5.25%. February marked the 107th consecutive
month of the economic expansion, making it the
longest in U.S. history.
At the state level, slow but steady economic growth
in New York was one of the reasons cited by
Standard & Poor's (S&P) when it upgraded
the state's general obligation bond rating to A-
plus from single-A on November 9, 1999. S&P also
noted the fundamental changes in New York's
4
<PAGE>
www.prudential.com (800) 225-1852
fiscal discipline and management, as well as
marginal success in reducing the state's pace of
borrowing.
Looking Ahead
On March 21, 2000, the Fed increased the federal
funds rate to 6.00% and the discount rate to 5.50%.
As the U.S. economy continues to grow rapidly, we
believe this will not be the last time the Fed will
take action this year.
With the approach of the tax season, we intend to
again increase the Series' exposure to very short-
term municipal money market securities in order to
accommodate seasonal cash outflows that usually
occur as shareholders pay their income taxes.
Adopting this strategy should position the Series
to lock in higher yields that become available as
the supply of municipal money market securities
balloons during the tax season.
Weighted Average Maturity Compared to the Average Municipal Money Fund
(GRAPH)
5
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Clinton Cnty. Ind. Dev. Agcy.,
Champlain Plastics Proj., Ser.
98A, F.R.W.D., A.M.T. NR 4.10% 03/01/00 $ 4,680 $ 4,680,000
Copiague Union Free Sch. Dist.,
Ser. 99-00, T.A.N. NR 4.00 06/26/00 8,000 8,013,124
Dutchess Cnty. Ind. Dev. Agcy.,
Marist College Civic Facility,
Ser. 99A, F.R.W.D. A-1+(d) 3.70 03/02/00 7,500 7,500,000
Erie Cnty. Ind. Dev. Agcy. Life
Care Community Rev., Ser. 98B,
F.R.W.D. VMIG1 3.85 03/01/00 2,025 2,025,000
Hempstead Ind. Dev. Agcy. Rev.,
American Refuel, Ser. 99, F.R.W.D. A-1(d) 3.95 03/01/00 6,355 6,355,000
Letchworth Central Sch. Dist.,
Ser. 00 NR 4.75 06/15/00 4,150 4,160,301
Letchworth Central Sch. Dist.,
Ser. 99 NR 4.00 06/15/00 2,500 2,502,090
Long Island Power Auth.,
Elec. Sys. Rev., Ser. 4 VMIG1 3.85 04/04/00 1,500 1,500,000
Elec. Sys. Rev., Ser. 4 VMIG1 3.80 04/11/00 1,100 1,100,000
Mamaroneck Union Free Sch. Dist.,
Ser. 99, B.A.N. NR 4.25 07/07/00 590 591,494
Metropolitan Trans. Auth.,
Commuter Fac. Rev., Ser. SGA82 A-1+(d) 3.95 03/01/00 5,000 5,000,000
Trans. Fac., Ser. A P-1 3.75 04/05/00 5,000 5,000,000
Trans. Fac., Ser. A P-1 3.75 04/06/00 5,000 5,000,000
Trans. Fac., Ser. F, F.R.W.D.S. VMIG1 3.95 03/02/00 6,000 6,000,000
Monroe Cnty. Ind. Dev. Agcy. Rev.,
Genesee Valley, Ser. 97, F.R.W.D.,
A.M.T. VMIG1 4.20 03/02/00 2,800 2,800,000
Nassau Cnty. Gen. Improv., Ser.
99C, T.A.N. MIG1 4.75 12/21/00 7,500 7,540,613
Nassau Cnty. Ind. Dev. Agcy. Rev.,
J.C. Solution Inc. Proj., Ser. 97,
F.R.W.D., A.M.T. NR 4.10 03/01/00 3,020 3,020,000
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New York City Hsg. Dev. Corp.,
One Columbus Pl., Ser. 98A,
F.R.W.D., A.M.T. A-1+(d) 3.80% 03/01/00 $ 30,000 $ 30,000,000
Macombs Pl., Ser. 98A, F.R.W.D.,
A.M.T. A-1+(d) 3.80 03/01/00 3,300 3,300,000
Multifamily Mtg., Related Bwy.,
F.R.W.D., A.M.T. A-1(d) 3.80 03/01/00 2,500 2,500,000
Multifamily Mtg., River Ct. Proj.,
Ser. 97A, F.R.W.D., A.M.T. A-1(d) 3.80 03/01/00 8,100 8,100,000
New York City Ind. Dev. Agcy.,
Civic Fac. Rev., Ser. 206,
F.R.W.D.S. VMIG1 3.94 03/02/00 5,745 5,745,000
Special Fac. Rev., Korean
Airlines, Ser. 97A, F.R.D.D.,
A.M.T. VMIG1 3.95 03/01/00 7,500 7,500,000
New York City Mun. Water Fin.
Auth., Ser. 1, T.E.C.P. P-1 3.70 04/07/00 5,000 5,000,000
Water & Sewer Sys. Rev., Ser. 95A,
F.R.D.D. VMIG1 3.90 03/01/00 5,200 5,200,000
Water & Sewer Sys. Rev., Ser. C,
F.R.D.D. VMIG1 3.80 03/01/00 1,000 1,000,000
New York City Transitional Fin.
Auth., Future Tax Sec'd. Bonds,
Ser. SG74, F.R.D.D.S. A-1+(d) 3.90 03/01/00 2,400 2,400,000
New York City, Gen. Oblig.,
Ser. 91A NR 7.25 03/15/00 2,950(e) 2,998,958
Ser. 94A-1, F.R.D.D. VMIG1 3.90 03/01/00 500 500,000
Ser. 94A-10, F.R.D.D. VMIG1 3.90 03/01/00 800 800,000
Ser. 94A-9, F.R.W.D. VMIG1 3.70 03/02/00 6,180 6,180,000
Ser. 94B-2, F.R.D.D. VMIG1 3.90 03/01/00 1,400 1,400,000
Ser. 94B-2, F.R.D.D. VMIG1 3.90 03/01/00 550 550,000
Ser. 94C, F.R.D.D. VMIG1 3.90 03/01/00 900 900,000
Ser. 94H-3, T.E.C.P. VMIG1 3.70 04/06/00 1,300 1,300,000
Ser. 94H-5, T.E.C.P. VMIG1 3.70 04/07/00 2,500 2,500,000
Ser. 95B-4, F.R.D.D. VMIG1 3.80 03/01/00 200 200,000
Ser. 96J-2, F.R.W.D. VMIG1 3.80 03/01/00 10,400 10,400,000
Ser. 97M NR 6.00 06/01/00 1,665 1,675,185
Ser. 99A NR 4.00 08/01/00 850 849,975
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New York St. Dorm. Auth. Rev.,
City Univ. Sys., Ser. 90B NR 9.00% 07/01/00 $ 2,000 $ 2,036,915
Insured New York Public Library,
Ser. 1999A, F.R.W.D. VMIG1 3.75 03/01/00 2,500 2,500,000
State Univ. Edu. Facs., Ser. 00G,
F.R.W.D.S. VMIG1 3.95 03/01/00 10,000 10,000,000
State Univ. Edu. Facs., Ser. 90A NR 7.63 05/15/00 1,300(e) 1,337,472
State Univ. Edu. Facs., Ser. 90A NR 7.70 05/15/00 1,745(e) 1,795,561
State Univ. Ed. Fac., Ser 90C NR 7.00 05/15/00 1,805(e) 1,852,417
State Univ. Edu. Facs., Ser. 107,
F.R.W.D.S. VMIG1 3.92 03/02/00 3,000 3,000,000
State Univ. Educ. Facs., Ser. 1989 NR 7.25 05/15/00 2,100(e) 2,158,791
Rockefeller Univ., Ser. 97-C3201,
F.R.W.D.S. A-1+(d) 3.93 03/02/00 8,850 8,850,000
New York St. Energy Res. & Dev.
Auth.,
Con Edison Proj., Ser. 99A-2,
F.R.W.D., A.M.T. A-1(d) 3.90 03/01/00 10,000 10,000,000
Con Edison Proj., Ser. 99A-3,
F.R.W.D., A.M.T. A-1(d) 3.80 03/01/00 5,400 5,400,000
New York St. Elec. & Gas, Ser.
85A, A.N.N.O.T. VMIG1 3.00 03/15/00 1,500 1,500,000
New York St. Elec. & Gas, Ser.
85B, A.N.N.O.T. NR 3.70 10/15/00 4,500 4,500,000
New York St. Elec. & Gas, Ser.
94B, F.R.D.D. VMIG1 3.80 03/01/00 1,900 1,900,000
Niagara Mohawk Pwr. Corp., Ser.
86A, F.R.D.D., A.M.T. P-1 3.80 03/01/00 1,800 1,800,000
Niagara Mohawk Pwr. Corp., Ser.
87B, F.R.D.D., A.M.T. A-1+(d) 3.95 03/01/00 2,400 2,400,000
Niagara Mohawk Pwr. Corp., Ser.
88A, F.R.D.D., A.M.T. A-1+(d) 3.95 03/01/00 1,590 1,590,000
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New York St. Hsg. Fin. Agcy. Rev.,
240 East 39th St., Ser. 97A,
F.R.W.D., A.M.T. VMIG1 3.80% 03/01/00 $ 8,000 $ 8,000,000
Talleyrand Crescent Hsg., Ser.
99A, F.R.W.D., A.M.T. VMIG1 3.85 03/01/00 2,000 2,000,000
New York St. Local Govt. Assist.
Corp.,
Ser. 93A, F.R.W.D. VMIG1 3.70 03/06/00 3,700 3,700,000
Ser. SGA 59, F.R.D.D. A-1+(d) 3.90 03/01/00 19,700 19,700,000
New York St. Med. Care Fac. Fin.
Agcy. Rev., Mental Health Fac.,
Ser. 1990B NR 7.88 08/15/00 8,460(e) 8,779,726
New York St. Mtg. Agcy. Rev., Ser.
00B, F.R.W.D.S., A.M.T. VMIG1 4.00 03/01/00 5,515 5,515,000
New York St. Power Auth. Rev. &
Gen. Purp.,
Ser. W NR 6.50 01/01/01 1,000(e) 1,019,798
Ser. Y NR 6.75 01/01/01 9,990(e) 10,399,491
New York St. Thruway Auth.,
Highway & Bridge Trust Fund, Ser.
1998A NR 4.50 04/01/00 5,680 5,686,554
Local Highway & Bridge Service
Contract Rev., Ser. 94 MIG1 5.20 04/01/00 5,425 5,433,282
Muni Trust, Ser. SGA 66,
F.R.W.D.S. A-1+(d) 3.90 03/01/00 5,055 5,055,000
Niagara Cnty. Ind. Dev. Agcy. Rev.,
F.R.W.D., A.M.T., Solid Waste
Disp. Rev., American Refuel Co.,
Ser. 94C P-1 3.80 03/01/00 5,000 5,000,000
Onondaga Cnty. Ind. Dev. Agcy.
Rev., Syracuse Research Corp.,
Ser. 97A, F.R.W.D. A-1(d) 3.85 03/02/00 6,110 6,110,000
Oswego Cnty. Ind. Dev. Agcy. Rev.,
Phillip Morris Co., Ser. 92,
F.R.W.D. P-1 4.00 03/01/00 10,000 10,000,000
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Port Auth. New York & New Jersey,
Ser. 3, F.R.D.D. VMIG1 3.75% 03/01/00 $ 1,500 $ 1,500,000
Ser. 5, F.R.D.D. VMIG1 3.75 03/01/00 1,600 1,600,000
Ser. 6, F.R.D.D., A.M.T. VMIG1 3.85 03/01/00 1,150 1,150,000
Ser. 93-1, F.R.W.D. NR 3.83 03/07/00 12,000 12,000,000
Ramapo Hsg. Auth. Rev.,
Fountainview Proj., Ser. 98,
F.R.W.D., A.M.T. VMIG1 4.04 03/02/00 11,485 11,485,000
Rockland Cnty. Ind. Dev. Agcy.,
Asstd. Living, Northern River,
Ser. 99, F.R.W.D. VMIG1 4.04 03/02/00 5,500 5,500,000
Smithtown Central Sch. Dist., Ser.
1999, T.A.N. MIG1 3.80 06/26/00 5,000 5,006,984
Suffolk Cnty. Public Improvement,
Ser. 1997A NR 5.00 06/15/00 2,355 2,362,793
Syracuse, Hancock Arpt., Ser. 207,
F.R.W.D.S., A.M.T. VMIG1 4.01 03/02/00 1,420 1,420,000
Tribeca Landing Hsg., Ser. A,
F.R.W.D., A.M.T. VMIG1 3.80 03/01/00 6,000 6,000,000
Triboro. Bridge & Tunnel Auth.
Rev., Ser. T NR 7.00 01/01/01 600(e) 625,160
Wayne Central Sch. Dist., Ser. 1999 NR 3.75 06/15/00 2,100 2,102,664
------------
Total Investments 100.0%
(cost $383,559,348(b)) 383,559,348
Other assets in excess of
liabilities 0.6% 2,292,866
------------
Net Assets 100% $385,852,214
------------
------------
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
- ------------------------------
(a) The following abbreviations are used in portfolio descriptions:
A.M.T.--Alternative Minimum Tax.
A.N.N.O.T.--Annual Optional Tender.
B.A.N.--Bond Anticipation Note.
F.R.D.D.--Floating Rate (Daily) Demand Note (c).
F.R.D.D.S.--Floating Rate (Daily) Demand Note Synthetic (c).
F.R.W.D.--Floating Rate (Weekly) Demand Note (c).
F.R.W.D.S.--Floating Rate (Weekly) Demand Note Synthetic (c).
T.A.N.--Tax Anticipation Note.
T.E.C.P.--Tax-Exempt Commercial Paper.
(b) The cost of securities for federal income tax purposes is substantially the
same as for financial reporting purposes.
(c) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be the later of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
(d) Standard & Poor's Rating.
(e) Prerefunded issues are secured by escrowed cash and 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 11
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
ASSETS
Investments, at amortized cost which approximates market value $ 383,559,348
Cash 48,534
Receivable for Series shares sold 5,651,083
Interest receivable 2,559,799
Other assets 6,710
-----------------
Total assets 391,825,474
-----------------
LIABILITIES
Payable for Series shares reacquired 5,644,304
Management fee payable 146,249
Accrued expenses 86,819
Dividends payable 70,356
Distribution fee payable 19,026
Deferred trustee's fee 6,506
-----------------
Total liabilities 5,973,260
-----------------
NET ASSETS $ 385,852,214
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at $.01 par value $ 3,858,522
Paid-in capital in excess of par 381,993,692
-----------------
Net assets, February 29, 2000 $ 385,852,214
-----------------
-----------------
Net asset value, offering price and redemption price per share
($385,852,214 / 385,852,214 shares of beneficial interest
issued and outstanding; unlimited number of shares
authorized) $1.00
-----------------
-----------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest $ 6,144,497
-----------------
Expenses
Management fee 871,942
Distribution fee 217,985
Transfer agent's fees and expenses 50,000
Custodian's fees and expenses 32,000
Reports to shareholders 23,000
Registration fees 11,000
Legal fees and expenses 5,000
Audit fee and expenses 4,000
Trustees' fees and expenses 2,100
Miscellaneous 5,413
-----------------
Total expenses 1,222,440
Less: Custodian fee credit (6,668)
-----------------
Net expenses 1,215,772
-----------------
Net investment income 4,928,725
-----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,928,725
-----------------
-----------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year Ended
Ended August 31,
February 29, 2000 1999
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 4,928,725 $ 9,234,844
----------------- --------------
Net increase in net assets resulting from
operations 4,928,725 9,234,844
----------------- --------------
Dividends and distributions to shareholders (4,928,725) (9,234,844)
----------------- --------------
Series share transactions (at $1 per share)
Net proceeds from shares sold 608,133,980 1,191,546,021
Net asset value of shares issued in
reinvestment of dividends and
distributions 4,892,540 9,050,815
Cost of shares reacquired (585,730,274) (1,254,393,321)
----------------- --------------
Net increase (decrease) in net assets from
Series share transactions 27,296,246 (53,796,485)
----------------- --------------
Total increase (decrease) 27,296,246 (53,796,485)
NET ASSETS
Beginning of period 358,555,968 412,352,453
----------------- --------------
End of period $ 385,852,214 $ 358,555,968
----------------- --------------
----------------- --------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Notes to Financial Statements (Unaudited)
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
eleven series. The monies of each series are invested in separate, independently
managed portfolios. The New York Money Market Series (the 'Series') commenced
investment operations in April, 1985. The Series is diversified and seeks to
achieve its investment objective of providing the highest level of income that
is exempt from New York State, New York City and federal income taxes with a
minimum of risk by investing in 'investment grade' tax-exempt securities having
a maturity of 13 months or less whose ratings are within the two highest ratings
categories by two nationally recognized statistical rating organizations, 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 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: Portfolio securities of the Series are valued at
amortized cost, which approximates market value. The amortized cost method of
valuation involves valuing a security at its cost on the date of purchase and
thereafter assuming a constant amortization to maturity of any discount or
premium.
All securities are valued as of 4:30 p.m., New York time.
Securities Transactions and Net Investment Income: Securities
transactions are recorded on the trade date. Realized gains and losses on sales
of investments are calculated on the identified cost basis. Interest income is
recorded on the accrual basis. Expenses are recorded on the accrual basis which
may require the use of certain estimates by management.
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 continue 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: The Series declares daily dividends from net investment
income. Payment of dividends is made monthly. Income distributions and capital
gain distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
15
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Notes to Financial Statements (Unaudited) Cont'd.
Custody Fee Credits: The Fund has an arrangement with its custodian
bank, whereby uninvested monies earn credits which reduce the fees charged by
the custodian.
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC. ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM has entered into a subadvisory agreement with The Prudential
Investment Corporation ('PIC'); PIC furnishes investment advisory services in
connection with the management of the Fund. PIFM pays for the 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 to 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 Investment
Management Services LLC ('PIMS') which acts as the distributor of the Fund. The
Fund compensated PIMS for distributing and servicing the Fund's shares pursuant
to the plans of distribution regardless of expenses actually incurred by them.
The Series reimburses PIMS for distributing and servicing the Series' shares
pursuant to the plan of distribution at an annual rate of .125 of 1% of the
Series' average daily net assets. The distribution fees are accrued daily and
payable monthly.
PIFM, PIMS and PIC are wholly owned subsidiaries of The Prudential
Insurance Company of America ('Prudential').
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 29,
2000, the Series incurred fees of approximately $45,000 for the services of
PMFS. As of February 29, 2000, approximately $7,500 of such fees were due to
PMFS. Transfer agent fees and expenses in the Statement of Operations include
certain out-of-pocket expenses paid to nonaffiliates.
16
<PAGE>
This page intentionally left blank
17
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1.00
Net investment income and net realized gains .01
Dividends and distributions to shareholders (.01)
-----------------
Net asset value, end of period $ 1.00
-----------------
-----------------
TOTAL RETURN(a): 1.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 385,852
Average net assets (000) $ 350,693
Ratios to average net assets:
Expenses, including distribution fee .71%(b)
Expenses, excluding distribution fee .58%(b)
Net investment income 2.83%(b)
</TABLE>
- ------------------------------
(a) Total return includes reinvestment of dividends and distributions. Total
returns for periods of less than a full year are not annualized.
(b) Annualized.
18 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
.02 .03 .03 .03 .03
(.02) (.03) (.03) (.03) (.03)
- ---------------- ---------------- ---------------- ---------------- ----------------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------- ---------------- ---------------- ---------------- ----------------
- ---------------- ---------------- ---------------- ---------------- ----------------
2.49% 2.94% 2.91% 2.97% 3.06%
$358,556 $412,352 $358,291 $349,470 $324,698
$375,650 $373,494 $326,092 $336,427 $292,763
.70% .69% .71% .72% .73%
.57% .57% .58% .60% .61%
2.46% 2.90% 2.87% 2.91% 3.02%
</TABLE>
See Notes to Financial Statements 19
<PAGE>
<PAGE>
Prudential Municipal Series Fund New York Money Market Series
Getting the Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds,
you receive financial advice from a Prudential
Securities Financial Advisor or Pruco Securities
registered representative. Your advisor or
representative can provide you with the following
services:
There's No Reward Without Risk; but Is This Risk
Worth It?
Your financial advisor or registered representative
can help you match the reward you seek with the
risk you can tolerate. Risk can be difficult to
gauge--sometimes even the simplest investments bear
surprising risks. The educated investor knows that
markets seldom move in just one direction. There
are times when a market sector or asset class will
lose value or provide little in the way of total
return. Managing your own expectations is easier
with help from someone who understands the markets
and who knows you!
Keeping Up With the Joneses
A financial advisor or registered representative
can help you wade through the numerous available
mutual funds to find the ones that fit your
individual investment profile and risk tolerance.
While the newspapers and popular magazines are full
of advice about investing, they are aimed at
generic groups of people or representative
individuals--not at you personally. Your financial
advisor or registered representative will review
your investment objectives with you. This means you
can make financial decisions based on the assets
and liabilities in your current portfolio and your
risk tolerance--not just based on the current
investment fad.
Buy Low, Sell High
Buying at the top of a market cycle and selling at
the bottom are among the most common investor
mistakes. But sometimes it's difficult to hold on
to an investment when it's losing value every
month. Your financial advisor or registered
representative can answer questions when you're
confused or worried about your investment, and
should remind you that you're investing for the
long haul.
www.prudential.com (800) 225-1852
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Trustees
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, Secretary
David F. Connor, Assistant Secretary
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
194 Wood Avenue South
Iselin, NJ 08830
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Cusip NUmber 74435M721
The views expressed in this report and information about the
Fund's portfolio holdings are for the period
covered by this report and
are subject to change thereafter.
The accompanying financial statements as
of February 29, 2000, were not audited and,
accordingly, no opinion is expressed on them.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
MF127E2 74435M721
(LOGO) Printed on Recycled Paper
<PAGE>
SEMIANNUAL REPORT FEBRUARY 29, 2000
Prudential
Municipal Series Fund/
North Carolina Series
Fund Type Municipal bond
Objective Maximize current income that is
exempt from North Carolina State and federal income
taxes, consistent with the preservation of
capital
(GRAPHIC)
This report is not authorized for
distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(LOGO)
<PAGE>
Build on the Rock
Investment Goals and Style
Prudential Municipal Series Fund/North Carolina
Series' investment objective is to maximize current
income that is exempt from North Carolina State and
federal income taxes, consistent with the
preservation of capital. However, certain
shareholders may be subject to the federal
alternative minimum tax (AMT) because some of the
Series' bonds are AMT eligible. There can be no
assurance the Series will achieve its investment
objective.
Contents
1 Message From the Fund's President
2 Performance Review
2 Portfolio Composition
3 Performance at a Glance
4 Credit Quality
5 Five Largest Issuers
6 Financial Statements
<PAGE>
www.prudential.com (800) 225-1852
Message From the Fund's President As of April 17, 2000
(PHOTO)
Dear Shareholder,
The Class A shares of Prudential Municipal Series
Fund/North Carolina Series had a negative return of
0.86% during its fiscal half year that ended
February 29, 2000. For the same period, the Series'
benchmark Lipper Average was a negative 1.16%.
After the initial sales charge, the Class A shares'
return was a negative 3.84%. Prices of municipal
bonds declined primarily because investors required
higher yields in light of two short-term rate
increases implemented by the Federal Reserve during
our review period to slow the rapid pace of U.S.
economic growth.
Staying the course amid ups and downs of financial
markets
Many investors consider selling an asset class that
has performed poorly in favor of investments that
are currently gaining in value. That may not be the
best move. Changes in asset allocation should
reflect basic shifts in an investor's time horizon
and tolerance for risk--not recent fluctuations in
the performance of financial markets. One strategy
may be to own a diversified portfolio of mutual
funds that invests in stocks, bonds, and money
market instruments because this approach may help
to reduce risk.
Deciding on the correct level of diversification is
not easy. It requires
an understanding of an investor's risk tolerance
and overall investment strategy. In these volatile
times, we recommend consulting your financial
advisor to develop your asset allocation goals.
Thank you for your continued confidence in
Prudential mutual funds.
Sincerely,
John R. Strangfeld
President
Prudential Municipal Series Fund
1
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Performance Review
(PHOTO) (PHOTO) Portfolio Managers Evan Lamp (Municipal
Bonds Sector Team Leader) and Lorely Machin
Bear market in municipal bonds continued
During our six-month review period, increases in
short-term interest
rates by the Federal Reserve and sales of municipal
bonds by investors who wanted to realize tax losses
pressured the prices of tax-exempt debt securities.
Given this bearish trend, we positioned the Series
so that it would be less vulnerable to the decline
in bond prices.
The Fed raised its target for the federal funds
rate (what U.S. banks charge each other for
overnight loans) by a quarter of a percentage point
in November 1999 and February 2000 to curb U.S.
economic growth and reduce the economic imbalances
that can lead to higher inflation. These moves
pushed up the rate to 5.75% by February 2000. The
Fed also engineered two quarter-point increases that raised
its discount rate on loans to banks from the
Federal Reserve system to 5.25% by February 2000.
As short-term rates rose, investors required higher
yields on both short- and long-term municipal
bonds, which caused their prices to fall.
More selling pressure emerged in late December
1999. As interest rates climbed, investors realized
capital losses by selling bonds or bond funds. Many
investors reinvest in new bonds or other bond funds
with a lower cost basis for tax purposes (due to
the higher level of yields). This is called "tax
loss swapping." In the municipal bond market, the
capital loss often reduces taxes, while the higher
yields on the new bonds or other funds are
generally tax exempt.
Portfolio Composition
Expressed as a percentage of
total investments as of 2/29/00
61.20% Revenue Bonds
23.48 Prerefunded Bonds
14.74 General Obligations
0.58 Cash Equivalents
2
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
<TABLE>
Cumulative Total Returns1 As of 2/29/00
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A -0.86% -4.29% 24.86% (24.62) 77.32% (76.98) 78.40% (78.06)
Class B -0.98 -4.44 22.72 (22.49) 70.82 (70.50) 157.17 150.12)
Class C -1.11 -4.68 21.21 (20.98) N/A 24.55 (24.31)
Lipper NC Muni
Debt Fund Avg.3 -1.16 -4.32 25.09 75.59 ***
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 3/31/00
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A -5.32% 4.17% (4.13) 5.79% (5.77) 5.72% (5.71)
Class B -7.54 4.26 (4.22) 5.72 (5.70) 6.57 (6.35)
Class C -4.76 3.96 (3.92) N/A 4.10 (4.07)
</TABLE>
<TABLE>
Distributions and Yields As of 2/29/00
<CAPTION>
Total Distributions 30-Day Taxable Equivalent Yield4 At Tax Rates of
Paid for Six Months SEC Yield 36% 39.6%
<S> <C> <C> <C> <C>
Class A $0.27 4.77% 8.08% 8.56%
Class B $0.25 4.67 7.91 8.38
Class C $0.24 4.38 7.42 7.86
</TABLE>
Past performance is not indicative of future
results. Principal and investment return will
fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their
original cost.
1 Source: Prudential Investments Fund Management
LLC and Lipper Inc. The cumulative total returns do
not take into account sales charges. The average
annual total returns do take into account
applicable sales charges. The Series charges a
maximum front-end sales charge of 3% for Class A
shares and a declining contingent deferred sales
charge (CDSC) of 5%, 4%, 3%, 2%, 1%, and 1% for six
years for Class B shares. Class B shares will
automatically convert to Class A shares, on a
quarterly basis, approximately seven years after
purchase. Class C shares are subject to a front-end
sales charge of 1% and a CDSC of 1% for 18 months.
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 ( ).
2 Inception dates: Class A, 1/22/90; Class B,
2/13/85; and Class C, 8/1/94.
3 Lipper average returns are for all funds in each
share class for the six-month, one-, five-, and
ten-year periods in the North Carolina Municipal Debt Fund
category. Single-state Municipal Debt funds limit
their securities that are exempt from taxation in a
specified state (double tax exempt) or city (triple
tax exempt).
4 Taxable equivalent yields reflect federal and
applicable state tax rates.
***Lipper Since Inception returns are 77.55% for
Class A, 182.49% for Class B, and 29.21% for
Class C, based on all funds in each share class.
3
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Performance Review
Although the bear market detracted from the Series'
returns, we were able to increase the Series'
distribution yield in this rising-interest-rate
environment. An increased exposure to the
transportation sector, retirement community bonds,
and others benefited the Series' yield.
We pursued a short-duration strategy
When bond markets sell off, lowering a portfolio's
duration generally
provides some degree of protection by making the
portfolio less sensitive to the rise in bond
yields. (Duration measures how much a portfolio's
bonds will fluctuate in price for a given change in
interest rates. It is expressed
in years.) We kept the Series' duration shorter
than average for most of its
fiscal half year. This approach helped the Series'
share classes, without sales charges factored in,
to perform better than its benchmark Lipper
Average, which does not consider sales charges.
In January 2000, however, we began to lengthen the
Series' duration because we believe the Fed's
monetary policy moves will keep inflation in check,
which could allow municipal bond yields to decline
as the year progresses.
We also maintained a considerable exposure to
prerefunded bonds, which made up 23.5% of the
Series' total investments as of February 29, 2000.
Prices of prerefunded bonds held up better due to
their high coupon rates and shorter-term
maturities.
We lessened the impact of "market-discount
taxation"
Another strategy that benefited the Series was
selling some of its municipal bonds before they
became subject to ordinary income taxes for investors
Credit Quality
Expressed as a percentage
of total investments as of 2/29/00
22.35% AAA
7.87 AA
11.38 A
17.15 BBB
1.12 B
40.13 Insured
4
<PAGE>
www.prudential.com (800) 225-1852
who might want to buy them. Here's how it works:
When yields climb beyond a certain point for every
municipal bond, the market discount on that bond
may become subject to ordinary income taxes for new
buyers.
This lowers the value of the bond because new
buyers would want to purchase the bond cheaply
enough to compensate for the greater tax liability.
Looking Ahead
Shortly after our six-month review period ended,
the Fed engineered another quarter-point rate hike
that raised its target for the federal funds rate
to 6.00% and its discount rate to 5.50%. We believe
the Fed's efforts to tighten monetary policy will
slow the U.S. economic expansion in 2000 from its
7.30% annual pace in the fourth quarter of 1999.
Moderating economic growth could help bolster the
performance of municipal bonds, but detract from
the performance of equities.
Meanwhile, the powerful U.S. economic expansion has
improved the credit quality of many state and local
governments and reduced their borrowing needs,
allowing them to issue fewer bonds. The supply of
new municipal bonds has also decreased because the
rising-interest-rate environment has provided less
opportunity for issuers to save money by replacing
older higher-coupon bonds with new lower-coupon
bonds. With the declining supply, if investor
demand remains strong, the tax-exempt bond market
should perform better than other U.S. fixed-income
markets in 2000.
Five Largest Issuers
Expressed as a percentage of net assets
as of 2/29/00
14.85% North Carolina Eastern
Muni Power Agency*
8.17 No. Carolina Mun. Pwr. Agcy.
6.60 Charlotte Wtr. and Swr.*
4.95 Pitt Cnty. Pub. Fac.
4.66 No. Carolina Med.Care Comm.
Rev., Rex Hosp. Proj.*
5
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 98.3%
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Asheville Hsg. Auth., Multi. Fam.
Rev., Woodridge Apts., G.N.M.A.,
A.M.T. AAA(c) 5.70% 11/20/19 $ 250 $ 237,220
Charlotte Mecklenberg Hosp. Auth.,
Hlth. Care Sys. Rev. AA(c) 6.25 1/01/20 430(e) 449,320
Hlth. Care Sys. Rev. Aa3 6.25 1/01/20 320 321,696
Hlth. Care Sys. Rev. Aa3 5.875 1/15/26 500(g) 483,520
Charlotte No. Carolina Arpt. Rev.,
Ser. B, M.B.I.A., A.M.T. Aaa 6.00 7/01/24 1,000 984,810
Ser. B, M.B.I.A., A.M.T. Aaa 6.00 7/01/28 500 490,800
Charlotte Wtr. & Swr., Gen. Oblig. Aaa 6.20 6/01/17 1,500(e)(g) 1,574,940
Charlotte Wtr. & Swr., Gen. Oblig. Aaa 5.90 2/01/19 1,000(e) 1,051,050
Columbus Cnty. Ind. Fac. & Poll.
Cntrl. Fin. Auth. Rev., Intl.
Paper Co. Proj., A.M.T. A3 6.15 4/01/21 1,000 928,200
Concord Util. Sys. Rev., M.B.I.A. Aaa 5.50 12/01/14 1,000 988,960
Cumberland Cnty. No. Carolina Hosp.
Fac. Rev., Cumberland Cnty. Hosp.
Sys. Inc. A3 5.25 10/01/29 500 395,425
Guam Arpt. Auth. Rev., Ser. B,
A.M.T. BBB(c) 6.60 10/01/10 1,000(g) 1,031,700
Guam Pwr. Auth. Rev.,
Ser. A BBB(c) 6.625 10/01/14 250(e) 272,817
Ser. A BBB(c) 6.75 10/01/24 525(e) 575,589
Halifax Cnty. Ind. Fac. & Poll.
Ctrl. Fin. Auth. Rev., Champion
Intl. Corp. Proj., Ser. A, A.M.T. Baa1 5.45 11/01/33 1,000 816,120
Lincoln Cnty., Gen. Oblig.,
F.G.I.C. Aaa 5.10 6/01/09 1,170(g) 1,162,243
No. Carolina Eastn. Mun. Pwr.
Agcy.,
Pwr. Sys. Rev., Ser. A Baa3 6.40 1/01/21 1,000 976,090
Pwr. Sys. Rev., Ser. A Aaa 6.00 1/01/26 650(e) 661,875
Pwr. Sys. Rev., Ser. A, E.T.M. Aaa 6.50 1/01/18 1,995(g) 2,165,034
Pwr. Sys. Rev., Ser. A, M.B.I.A. Aaa 6.50 1/01/18 1,005 1,081,290
Pwr. Sys. Rev., A.M.B.A.C. Aaa 6.00 1/01/18 1,000 1,020,840
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
No. Carolina Hsg. Fin. Agcy., Home
Ownership, Ser. 6-A, A.M.T. Aa2 6.20% 1/01/29 $ 1,000 $ 994,050
No. Carolina Med. Care Comm., 1st.
Mtg., SalemTowne Proj. NR 6.30 10/01/29 500 440,220
No. Carolina Med. Care Comm.,
N. Carolina Hsg. Found. Inc. A(c) 6.625 8/15/30 750(f) 749,483
No. Carolina Med. Care Comm., Hosp.
Rev.,
Annie Pen Mem. Hosp. Proj. Baa3 7.50 8/15/21 1,000(e)(g) 1,066,800
Rex Hosp. Proj. Aaa 6.25 6/01/17 1,750(e)(g) 1,852,585
No. Carolina Mun. Pwr. Agcy.,
No. 1 Catawba Elec. Rev., M.B.I.A. Aaa 6.00 1/01/10 1,250(g) 1,300,750
No. 1 Catawba Elec. Rev., M.B.I.A. Aaa 6.97(d) 1/01/12 2,000(g) 1,947,500
Northern Hosp. Dist., Surry Cnty.
Hlth. Care Fac. Rev. Ba1 7.875 10/01/21 1,500(g) 1,504,680
Piedmont Triad Arpt. Auth., Arpt.
Rev., Ser. B, F.S.A., A.M.T. Aaa 6.00 7/01/21 1,000 986,880
Pitt Cnty. Pub. Fac., Cert. of
Part.,
Ser. A, M.B.I.A. Aaa 5.55 4/01/12 1,250 1,259,687
Ser. B, M.B.I.A. Aaa 5.40 4/01/08 700 709,114
Pitt Cnty. Rev., Pitt Cnty. Mem.
Hosp., E.T.M. Aaa 5.25 12/01/21 1,000(g) 924,280
Puerto Rico Commonwlth.,
Gen. Oblig., Ser. A, M.B.I.A. Aaa 6.25 7/01/10 1,240 1,291,956
Pub. Impt., Gen. Oblig. Baa1 Zero 7/01/15 2,150 873,394
Puerto Rico Tel. Auth. Rev.,
M.B.I.A. Aaa 6.971 1/25/07 1,000(e) 1,036,250
Raleigh Hsg. Auth., Multi. Fam.
Mtge. Rev., Ceder Pt. Apts. Proj.,
Ser. A A(c) 5.875 11/01/24 1,000 916,710
Union Cnty., Gen. Oblig. A1 6.50 4/01/07 350(e)(g) 365,078
University of No. Carolina, Util.
Sys. Rev. Aa2 Zero 8/01/19 2,715(g) 843,551
Virgin Islands Pub. Fin. Auth.
Rev., Gross Rcpts. Taxes Loan Note
Ser. A BBB-(c) 6.50 10/01/24 500 494,520
Virgin Islands Terr., Spl. Tax,
Ser. 91 NR 7.75 10/01/06 305(e) 320,003
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Wake Cnty. Hosp. Rev., E.T.M.,
M.B.I.A. Aaa 5.125% 10/01/26 $ 1,000(g) $ 909,940
Wilmington Wtr. & Swr. Sys. Rev.,
F.S.A. Aaa 5.50 6/01/17 375 363,195
Winston Salem, Sngl. Fam. Mtge.
Rev., A.M.T. A1 8.00 9/01/07 235 239,331
------------
Total long-term investments
(cost $38,866,812) $ 39,059,496
------------
SHORT-TERM INVESTMENTS 2.5%
- ----------------------------------------------------------------------------------------
Halifax Cnty. Ind. Facs. & Poll.
Ctrl., Westmoreland-Hadson
Roanoke, Ser. 91, F.R.D.D., A.M.T. CPS1 3.95 3/01/00 100 100,000
Raleigh Durham Arpt. Auth., Spec.
Facs. Rev., American Airlines,
Ser. A, F.R.D.D. A-1+(c) 3.80 3/01/00 900 900,000
------------
Total short-term investments
(cost $1,000,000) 1,000,000
------------
Total Investments 100.8%
(cost $39,866,812; Note 4) 40,059,496
Liabilities in excess of other
assets--(0.8)% (298,367)
------------
Net Assets 100% $ 39,761,129
------------
------------
</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.
E.T.M.--Escrowed To Maturity.
F.G.I.C.--Financial Guaranty Insurance Company.
F.R.D.D.--Floating Rate (Daily) Demand Note(b).
F.S.A.--Financial Security Assurance.
G.N.M.A.--Government National Mortgage Association.
M.B.I.A.--Municipal Bond Insurance Association.
(b) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be the later of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
8 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
(c) Standard & Poor's Rating.
(d) Inverse floating rate bond. The coupon is inversely indexed to a floating
interest rate. The rate shown is the rate at February 29, 2000.
(e) Prerefunded issues are secured by escrowed cash and/or direct U.S.
guaranteed obligations.
(f) Represents a when-issued security.
(g) All or partial principal amount segregated as collateral for when-issued
security.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information contains a description of
Moody's and Standard & Poor's ratings.
See Notes to Financial Statements 9
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $39,866,812) $40,059,496
Cash 28,934
Interest receivable 606,594
Receivable for investments sold 51,610
Receivable for Series shares sold 5,000
Other assets 1,173
-----------------
Total assets 40,752,807
-----------------
LIABILITIES
Payable for investments purchased 746,836
Payable for Series shares reaquired 109,582
Accrued expenses 89,647
Management fee payable 15,881
Dividends payable 13,238
Distribution fee payable 10,511
Deferred trustee's fee 5,983
-----------------
Total liabilities 991,678
-----------------
NET ASSETS $39,761,129
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 37,638
Paid-in capital in excess of par 40,038,707
-----------------
40,076,345
Accumulated net realized loss on investments (507,900)
Net unrealized appreciation on investments 192,684
-----------------
Net assets, February 29, 2000 $39,761,129
-----------------
-----------------
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Statement of Assets and Liabilities (Unaudited) Cont'd.
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share ($26,820,915
/ 2,539,226 shares of beneficial interest issued and
outstanding) $10.56
Maximum sales charge (3% of offering price) .33
-----------------
Maximum offering price to public $10.89
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per
share ($12,911,593 / 1,221,867 shares of beneficial
interest issued and outstanding) $10.57
-----------------
-----------------
Class C:
Net asset value and redemption price per share ($28,621 /
2,708 shares of beneficial interest issued and
outstanding) $10.57
Sales charge (1% of offering price) .10
-----------------
Offering price to public $10.67
-----------------
-----------------
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest $ 1,276,179
-----------------
Expenses
Management fee 106,459
Distribution fee--Class A 35,540
Distribution fee--Class B 35,308
Distribution fee--Class C 106
Custodian's fees and expenses 39,000
Reports to shareholders 19,000
Registration fees 12,000
Transfer agent's fees and expenses 9,000
Legal fees and expenses 6,000
Audit fee and expenses 5,000
Trustee's fees and expenses 4,100
Miscellaneous 3,819
-----------------
Total expenses 275,332
Less: Custodian fee credit (143)
-----------------
Net expenses 275,189
-----------------
Net investment income 1,000,990
-----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Investment transactions (506,674)
Financial futures transactions 211
-----------------
(506,463)
Net change in unrealized appreciation on
Investments (953,158)
-----------------
Net loss on investments (1,459,621)
-----------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (458,631)
-----------------
-----------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
February 29, 2000 August 31, 1999
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 1,000,990 $ 2,241,676
Net realized gain (loss) on investment
transactions (506,463) 58,888
Net change in unrealized appreciation of
investments (953,158) (3,120,844)
----------------- ---------------
Net decrease in net assets resulting from
operations (458,631) (820,280)
----------------- ---------------
Dividends and distributions (Note 1):
Dividends from net investment income
Class A (680,670) (1,400,647)
Class B (319,710) (839,833)
Class C (610) (1,196)
----------------- ---------------
(1,000,990) (2,241,676)
----------------- ---------------
Distributions from net realized gains
Class A (13,336) (152,983)
Class B (6,298) (100,812)
Class C (13) (148)
----------------- ---------------
(19,647) (253,943)
----------------- ---------------
Series share transactions (net of share
conversions) (Note 5):
Net proceeds from shares sold 935,316 3,818,192
Net asset value of shares issued in
reinvestment of dividends and
distributions 531,664 1,320,522
Cost of shares reacquired (6,214,900) (7,739,135)
----------------- ---------------
Net decrease in net assets from Series
share transactions (4,747,920) (2,600,421)
----------------- ---------------
Total decrease (6,227,188) (5,916,320)
NET ASSETS
Beginning of period 45,988,317 51,904,637
----------------- ---------------
End of period $39,761,129 $45,988,317
----------------- ---------------
----------------- ---------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Notes to Financial Statements (Unaudited)
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 11
series. The monies of each series are invested in separate, independently
managed portfolios. The North Carolina Series (the 'Series') commenced
investment operations in February 1985. The Series is diversified and its
investment objective is to maximize current income that is exempt from North
Carolina 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 Series seeks to achieve this objective
by investing primarily in North Carolina State, municipal and local government
obligations and obligations of other qualifying issuers. 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 Series 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 which approximates market value.
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 fluctuation 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
14
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Notes to Financial Statements (Unaudited) Cont'd.
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.
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 continue 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.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
Custodian Fee Credits: The Series has an arrangement with its custodian
bank, whereby uninvested monies earn credits which reduce the fees charged by
the custodian.
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM has entered into a subadvisory agreement with The Prudential
Investment
15
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Notes to Financial Statements (Unaudited) Cont'd.
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 Investment
Management Services LLC ('PIMS') which acts as the distributor of the Class A,
Class B and Class C shares of the Fund. The Fund compensated PIMS for
distributing and servicing the Fund's Class A, Class B and Class C shares,
pursuant to plans of distribution (the 'Class A, B and C Plans'), regardless of
expenses actually incurred by them. The distribution fees are accrued daily and
payable monthly.
Pursuant to the Class A, Class B and Class C Plans, the Fund compensates
PIMS 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, Class B and
Class C shares, respectively. Such expenses under the Plans were .25 of 1%, .50
of 1% and .75 of 1% of the average daily net assets of the Class A, Class B and
Class C shares, respectively, for the six months ended February 29, 2000.
PIMS has advised the Series that it received approximately $700 in
front-end sales charges resulting from sales of Class A and Class C shares
during the six months ended February 29, 2000. From these fees, PIMS paid such
sales charges to affiliated broker-dealers, which in turn paid commissions to
salespersons and incurred other distribution costs.
PIMS has advised the Series that during the six months ended February 29,
2000, it received approximately $13,700 in contingent deferred sales charges
imposed upon certain redemptions by Class B shareholders.
PIFM, PIC and PIMS are wholly owned subsidiaries of The Prudential
Insurance Company of America.
The Series, along with other affiliated registered investment companies
(the 'Funds'), entered into a syndicated credit agreement ('SCA') with an
unaffiliated lender. The maximum commitment under the SCA is $1 billion and
interest on any borrowings will be at market rates. For the period
3/11/99-3/9/00, the commitment fee on the unused portion of the credit facility
was .065 of 1%. Subsequent to March 9, 2000, the SCA was renewed with a maximum
commitment of $1 billion at a commitment fee of .080 of 1% of the unused portion
of the credit facility. The expiration date of the SCA is March 9, 2001. The
commitment fee is accrued and paid quarterly on a pro rata basis by the Funds.
Prior to March 11, 1999, the Funds had a
16
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Notes to Financial Statements (Unaudited) Cont'd.
credit agreement with a maximum commitment of $200,000,000. The commitment fee
was .055 of 1% on the unused portion of the credit facility. The Fund did not
borrow any amounts during the six months ended February 29, 2000. The purpose of
the credit agreements is to serve as an alternative source of funding for
capital share redemptions.
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the six months ended February 29,
2000, the Series incurred fees of approximately $7,300 for the services of PMFS.
As of February 29, 2000, approximately $1,200 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 29, 2000 were $5,807,679 and
$10,689,165, respectively.
The cost basis of investments for federal income tax purposes at February
29, 2000, was substantially the same as for financial reporting purposes and
accordingly, net unrealized appreciation of investments for federal income tax
purposes was $192,684 (gross unrealized appreciation-$1,041,691; gross
unrealized depreciation-$849,007).
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 a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Class C shares are sold with a front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18 months. Class B shares will automatically convert to Class A shares on a
quarterly basis approximately seven
17
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Notes to Financial Statements (Unaudited) Cont'd.
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 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- --------------------------------------------------------------- -------- -----------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold 60,596 $ 650,462
Shares issued in reinvestment of dividends and distributions 32,738 347,891
Shares reacquired (374,214) (3,984,374)
-------- -----------
Net decrease in shares outstanding before conversion (280,880) (2,986,021)
Shares issued upon conversion from Class B 129,050 1,395,637
-------- -----------
Net decrease in shares outstanding (151,830) $(1,590,384)
-------- -----------
-------- -----------
Year ended August 31, 1999:
Shares sold 160,409 $ 1,841,063
Shares issued in reinvestment of dividends and distributions 70,495 808,498
Shares reacquired (371,069) (4,230,540)
-------- -----------
Net decrease in shares outstanding before conversion (140,165) (1,580,979)
Shares issued upon conversion from Class B 251,666 2,895,820
-------- -----------
Net increase in shares outstanding 111,501 $ 1,314,841
-------- -----------
-------- -----------
<CAPTION>
Class B
- ---------------------------------------------------------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold 26,740 $ 284,557
Shares issued in reinvestment of dividends and distributions 17,242 183,432
Shares reacquired (208,274) (2,230,526)
-------- -----------
Net decrease in shares outstanding before conversion (164,292) (1,762,537)
Shares reacquired upon conversion into Class A (128,931) (1,395,637)
-------- -----------
Net decrease in shares outstanding (293,223) $(3,158,174)
-------- -----------
-------- -----------
Year ended August 31, 1999:
Shares sold 170,364 $ 1,976,534
Shares issued in reinvestment of dividends and distributions 44,516 511,315
Shares reacquired (306,345) (3,508,595)
-------- -----------
Net decrease in shares outstanding before conversion (91,465) (1,020,746)
Shares reacquired upon conversion into Class A (251,607) (2,895,820)
-------- -----------
Net decrease in shares outstanding (343,072) $(3,916,566)
-------- -----------
-------- -----------
</TABLE>
18
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
- ---------------------------------------------------------------
Six months ended February 29, 2000:
<S> <C> <C>
Shares sold 28 $ 297
Shares issued in reinvestment of dividends and distributions 32 341
-------- -----------
Net increase in shares outstanding 60 $ 638
-------- -----------
-------- -----------
Year ended August 31, 1999:
Shares sold 52 $ 595
Shares issued in reinvestment of dividends and distributions 61 709
-------- -----------
Net increase in shares outstanding 113 $ 1,304
-------- -----------
-------- -----------
</TABLE>
19
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Class A
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.92
--------
Income from investment operations
Net investment income .26
Net realized and unrealized gain (loss) on investment
transactions (.35)
--------
Total from investment operations (.09)
--------
Less distributions
Dividends from net investment income (.26)
Distributions in excess of net investment income --
Distributions from net realized gains (.01)
--------
Total distributions (.27)
--------
Net asset value, end of period $ 10.56
--------
--------
TOTAL RETURN(b): (.86)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $26,821
Average net assets (000) $28,588
Ratios to average net assets:
Expenses, including distribution fees 1.21%(d)
Expenses, excluding distribution fees .96%(d)
Net investment income 4.79%(d)
For Class A, B and C shares:
Portfolio turnover rate 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 year reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than one full year are not
annualized.
(c) Less than $.005 per share.
(d) Annualized.
20 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class A
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11.69 $ 11.28 $ 11.06 $ 11.19 $ 11.06
-------- -------- -------- -------- --------
.53 .55 .54(a) .53(a) .60(a)
(.71) .41 .38 (.01) .13
-------- -------- -------- -------- --------
(.18) .96 .92 .52 .73
-------- -------- -------- -------- --------
(.53) (.55) (.54) (.53) (.60)
-- --(c) -- -- --
(.06) -- (.16) (.12) --
-------- -------- -------- -------- --------
(.59) (.55) (.70) (.65) (.60)
-------- -------- -------- -------- --------
$ 10.92 $ 11.69 $ 11.28 $ 11.06 $ 11.19
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
(1.72)% 8.72% 8.58% 4.70% 6.86%
$ 29,400 $ 30,149 $ 29,350 $ 28,089 $ 26,519
$ 30,621 $ 29,617 $ 29,055 $ 27,628 $ 15,244
1.03% .84% .93%(a) 1.03%(a) .98%(a)
.83% .74% .83%(a) .93%(a) .88%(a)
4.57% 4.79% 4.87%(a) 4.78%(a) 5.25%(a)
15% 27% 35% 23% 28%
</TABLE>
See Notes to Financial Statements 21
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 10.93
--------
Income from investment operations
Net investment income .24
Net realized and unrealized gain (loss) on investment
transactions (.35)
--------
Total from investment operations (.11)
--------
Less distributions
Dividends from net investment income (.24)
Distributions in excess of net investment income --
Distributions from net realized gains (.01)
--------
Total distributions (.25)
--------
Net asset value, end of year $ 10.57
--------
--------
TOTAL RETURN(b): (.98)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $12,912
Average net assets (000) $14,201
Ratios to average net assets:
Expenses, including distribution fees 1.46%(d)
Expenses, excluding distribution fees .96%(d)
Net investment income 4.53%(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 year reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than one full year are not
annualized.
(c) Less than $.005 per share.
(d) Annualized.
22 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11.69 $ 11.29 $ 11.06 $ 11.19 $ 11.06
-------- -------- -------- -------- --------
.49 .51 .50(a) .49(a) .55(a)
(.70) .40 .39 (.01) .13
-------- -------- -------- -------- --------
(.21) .91 .89 .48 .68
-------- -------- -------- -------- --------
(.49) (.51) (.50) (.49) (.55)
-- --(c) -- -- --
(.06) -- (.16) (.12) --
-------- -------- -------- -------- --------
(.55) (.51) (.66) (.61) (.55)
-------- -------- -------- -------- --------
$ 10.93 $ 11.69 $ 11.29 $ 11.06 $ 11.19
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
(1.93)% 8.19% 8.25% 4.28% 6.44%
$ 16,560 $ 21,726 $524,952 $ 31,029 $ 40,119
$ 19,695 $ 23,460 $ 27,703 $ 35,605 $ 51,963
1.33% 1.24% 1.33%(a) 1.43%(a) 1.34%(a)
.83% .74% .83%(a) .93%(a) .84%(a)
4.26% 4.39% 4.47%(a) 4.37%(a) 5.10%(a)
</TABLE>
See Notes to Financial Statements 23
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.93
--------
Income from investment operations
Net investment income .23
Net realized and unrealized gain (loss) on investment
transactions (.35)
--------
Total from investment operations (.12)
--------
Less distributions
Dividends from net investment income (.23)
Distributions in excess of net investment income --
Distributions from net realized gains (.01)
--------
Total distributions (.24)
--------
Net asset value, end of year $ 10.57
--------
--------
TOTAL RETURN(b): (1.11)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 29
Average net assets (000) $ 29
Ratios to average net assets:
Expenses, including distribution fees 1.71%(d)
Expenses, excluding distribution fees .96%(d)
Net investment income 4.30%(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 year reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than one full year are not
annualized.
(c) Less than $.005 per share.
(d) Annualized.
24 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
- ----------------------------------------------------------------------------------------------------------
Year Ended September 30,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$11.69 $11.29 $11.06 $11.19 $11.06
------- ------- ------- ------- -------
.46 .48 .47(a) .46(a) .52(a)
(.70) .40 .39 (.01) .13
------- ------- ------- ------- -------
(.24) .88 .86 .45 .65
------- ------- ------- ------- -------
(.46) (.48) (.47) (.46) (.52)
-- --(c) -- -- --
(.06) -- (.16) (.12) --
------- ------- ------- ------- -------
(.52) (.48) (.63) (.58) (.52)
------- ------- ------- ------- -------
$10.93 $11.69 $11.29 $11.06 $11.19
------- ------- ------- ------- -------
------- ------- ------- ------- -------
(2.18)% 7.92% 7.98% 4.03% 6.17%
$ 29 $ 30 $ 62 $ 72 $ 53
$ 30 $ 31 $ 68 $ 69 $ 32
1.58% 1.49% 1.58%(a) 1.68%(a) 1.63%(a)
.83% .74% .83%(a) .93%(a) .88%(a)
4.02% 4.14% 4.22%(a) 4.14%(a) 4.59%(a)
</TABLE>
See Notes to Financial Statements 25
<PAGE>
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Prudential Mutual Fund Family
Prudential offers a broad range of mutual funds
designed to meet your individual needs. For
information about these funds, contact your
financial adviser or call us at (800) 225-1852.
Read the prospectus carefully before you invest or
send money.
STOCK FUNDS
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Prudential Small-Cap Quantum Fund, Inc.
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Target Funds
International Equity Fund
Global Bond Funds
Prudential Global Total Return Fund, Inc.
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www.prudential.com(800) 225-1852
BOND FUNDS
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.
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Prudential Index Series Fund
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Prudential Structured Maturity Fund, Inc.
Income Portfolio
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Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
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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
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Command Funds
Command Money Fund
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Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
<PAGE>
Prudential Municipal Series Fund North Carolina Series
Getting the Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds,
you receive financial advice from a Prudential
Securities Financial Advisor or Pruco Securities
registered representative. Your advisor or
representative can provide you with the following
services:
There's No Reward Without Risk; but Is This Risk
Worth It?
Your financial advisor or registered representative
can help you match the reward you seek with the
risk you can tolerate. Risk can be difficult to
gauge--sometimes even the simplest investments bear
surprising risks. The educated investor knows that
markets seldom move in just one direction. There
are times when a market sector or asset class will
lose value or provide little in the way of total
return. Managing your own expectations is easier
with help from someone who understands the markets
and who knows you!
Keeping Up With the Joneses
A financial advisor or registered representative
can help you wade through the numerous available
mutual funds to find the ones that fit your
individual investment profile and risk tolerance.
While the newspapers and popular magazines are full
of advice about investing, they are aimed at
generic groups of people or representative
individuals--not at you personally. Your financial
advisor or registered representative will review
your investment objectives with you. This means you
can make financial decisions based on the assets
and liabilities in your current portfolio and your
risk tolerance--not just based on the current
investment fad.
Buy Low, Sell High
Buying at the top of a market cycle and selling at
the bottom are among the most common investor
mistakes. But sometimes it's difficult to hold on
to an investment when it's losing value every
month. Your financial advisor or registered
representative can answer questions when you're
confused or worried about your investment, and
should remind you that you're investing for the
long haul.
<PAGE>
www.prudential.com (800) 225-1852
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Trustees
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, Secretary
David F. Connor, Assistant Secretary
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
194 Wood Avenue South
Iselin, NJ 08830
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Fund Symbols NASDAQ CUSIP
Class A PRNAX 74435M812
Class B -- 74435M820
Class C -- 74435M515
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 29, 2000, were not audited and,
accordingly, no opinion is expressed on them.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
MF126E2 74435M812 74435M820 74435M515
(LOGO) Printed on Recycled Paper
<PAGE>
SEMIANNUAL REPORT FEBRUARY 29, 2000
Prudential
Municipal Series Fund/
Ohio Series
Fund Type Municipal bond
Objective Maximize current income that is exempt from Ohio
State and federal income taxes, consistent with the
preservation of capital
(GRAPHIC)
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a
current prospectus.
(LOGO)
<PAGE>
Build on the Rock
Investment Goals and Style
Prudential Municipal Series Fund/Ohio Series'
investment objective is to maximize current income
that is exempt from Ohio State and federal income
taxes, consistent with the preservation of capital.
However, certain shareholders may be subject to the
federal alternative minimum tax (AMT) because some
of the Series' bonds are AMT eligible. There can be
no assurance the Series will achieve its investment
objective.
Contents
1 Message From the Fund's President
2 Performance Review
2 Portfolio Composition
3 Performance at a Glance
4 Credit Quality
5 Five Largest Issuers
6 Financial Statements
<PAGE>
www.prudential.com (800) 225-1852
Message From the Fund's President As of April 17, 2000
(PHOTO)
Dear Shareholder
The Class A shares of Prudential Municipal Series
Fund/Ohio Series had a negative return of 0.59%
during its fiscal half year that ended February 29,
2000. For the same period, the return on the
Series' benchmark Lipper Average was a negative
1.14%. After the initial sales charge, the Class A
shares' return was a negative 3.57%. Prices of
municipal bonds declined primarily because
investors required higher yields in light of two
short-term rate increases implemented by the
Federal Reserve during our review period to slow
the rapid pace of U.S. economic growth.
Staying the course amid ups and downs of financial
markets
Many investors consider selling an asset class that
has performed poorly in favor of investments that
are currently gaining in value. That may not be the
best move. Changes in asset allocation should
reflect basic shifts in an investor's time horizon
and tolerance for risk--not recent fluctuations in
the performance of financial markets. One strategy
may be to own a diversified portfolio of mutual
funds that invests in stocks, bonds, and money
market instruments because this approach may help
to reduce risk.
Deciding on the correct level of diversification is
not easy. It requires
an understanding of an investor's risk tolerance
and overall investment strategy. In these volatile
times, we recommend consulting your financial
advisor to develop your asset allocation goals.
Thank you for your continued confidence in Prudential mutual funds.
Sincerely,
John R. Strangfeld
President
Prudential Municipal Series Fund
1
<PAGE>
Prudential Municipal Series Fund Ohio Series
Performance Review
(PHOTO) (PHOTO) Portfolio Managers Evan
Lamp (Municipal Bonds Sector Team Leader) and Scott Diamond
Bear market in municipal bonds continued
During our six-month review period, increases in
short-term interest
rates by the Federal Reserve and sales of municipal
bonds by investors who wanted to realize tax losses
pressured the prices of tax-exempt debt securities.
Given this bearish trend, we positioned the Series
so that it would be less vulnerable to the decline
in bond prices.
The Fed raised its target for the federal funds
rate (what U.S. banks charge each other for
overnight loans) by a quarter of a percentage point
in November 1999 and February 2000 to curb U.S.
economic growth and reduce the economic imbalances
that can lead to higher inflation. These moves
pushed up the rate to 5.75% by February 2000. The
Fed also engineered two quarter-point increases that raised
its discount rate on loans to banks from the
Federal Reserve system to 5.25% by February 2000.
As short-term rates rose, investors required higher
yields on both short- and long-term municipal
bonds, which caused their prices to fall.
More selling pressure emerged in late December
1999. As interest rates climbed, investors realized
capital losses by selling bonds or bond funds. Many
investors reinvest in new bonds or other bond funds
with a lower cost basis for tax purposes (due to
the higher level of yields). This is called "tax
loss swapping." In the municipal bond market, the
capital loss often reduces taxes, while the higher
yields on the new bonds or other funds are
generally tax exempt.
Portfolio Composition
Expressed as a percentage of
total investments as of 2/29/00
48.00% Revenue Bonds
29.22 General Obligations
21.50 Prerefunded Bonds
1.28 Miscellaneous
2
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
<TABLE>
Cumulative Total Returns1 As of 2/29/00
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A -0.59% -3.93% 25.31% (21.55) 81.63% (76.18) 82.78% (77.30)
Class B -0.71 -4.08 23.05 (22.05) 75.00 181.83
Class C -0.84 -4.33 21.55 (20.33) N/A 24.58 (23.33)
Lipper OH Muni
Debt Fund Avg.3 -1.14 -3.99 25.45 83.18 ***
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 3/31/00
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A -4.62% 4.22% (4.18) 6.03% (6.01) 5.98% (5.96)
Class B -6.91 4.31 (4.27) 5.96 (5.94) 7.03 (6.96)
Class C -4.14 4.01 (3.97) N/A 4.11 (4.08)
</TABLE>
<TABLE>
Distributions and Yields As of 2/29/00
<CAPTION>
Total Distributions 30-Day Taxable Equivalent Yield4 at tax rates of
Paid for Six Months SEC Yield 36% 39.6%
<S> <C> <C> <C>
Class A $0.34 4.57% 7.69% 8.15%
Class B $0.33 4.46 7.51 7.96
Class C $0.31 4.17 7.02 7.44
</TABLE>
Past performance is not indicative of future
results. Principal and investment return will
fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their
original cost.
1 Source: Prudential Investments Fund Management
LLC and Lipper Inc. The cumulative total returns do
not take into account sales charges. The average
annual total returns do take into account
applicable sales charges. The Series charges a
maximum front-end sales charge of 3% for Class A
shares and a declining contingent deferred sales
charge (CDSC) of 5%, 4%, 3%, 2%, 1%, and 1% for six
years for Class B shares. Class B shares will
automatically convert to Class A shares, on a
quarterly basis, approximately seven years after
purchase. Class C shares are subject to a front-end
sales charge of 1% and a CDSC for 18 months.
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 ( ).
2 Inception dates: Class A, 1/22/90; Class B,
9/20/84; and Class C, 8/1/94.
3 Lipper average returns are for all funds in each
share class for the six-month, one-, five-, and
ten-year periods in the Ohio Municipal Debt Fund
category. Single-state Municipal Debt funds limit
their securities that are exempt from taxation in a
specified state (double tax exempt) or city (triple
tax exempt).
4 Taxable equivalent yields reflect federal and
applicable state tax rates.
***Lipper Since Inception returns are 85.15% for
Class A, 204.57% for Class B, and 29.42% for
Class C, based on all funds in each share class.
3
<PAGE>
Prudential Municipal Series Fund Ohio Series
Performance Review
Although the bear market detracted from the Series'
returns, we were able to increase its distribution
yield in this rising-interest-rate environment.
We pursued a short-duration strategy
When bond markets sell off, lowering a portfolio's
duration generally
provides some degree of protection by making the
portfolio less sensitive to the rise in bond
yields. (Duration measures how much a portfolio's
bonds will fluctuate in price for a given change in
interest rates. It is expressed in years.) Keeping
the Series' duration shorter than average for most
of our fiscal half year helped its share classes, without
sales charges factored in, to perform better than
its benchmark Lipper Average, which does not
consider sales charges.
In January 2000, however, we began to lengthen the
Series' duration because we believe the Fed's
monetary policy moves will keep inflation in check,
which could allow municipal bond yields to decline
as the year progresses.
The Series' relative performance also benefited
because it holds bonds of the Franciscan Medical
Center that rallied. The Medical Center, located in
Dayton, Ohio, merged with another hospital, Bon
Secours, and is cutting its borrowing costs by
retiring its bonds on their first call date. These
bonds rated BBB gained in value because they now
have a shorter maturity and are backed by an escrow
consisting of direct obligations of the U.S.
government that are rated AAA.
Credit Quality
Expressed as a percentage of total
investments as of 2/29/00
10.30% AAA
11.44 AA
3.35 A
20.93 BBB
4.15 BB
0.73 B
49.10 Insured
4
<PAGE>
www.prudential.com (800) 225-1852
We lessened the impact of "market-discount
taxation"
Another strategy that benefited the Series was
selling some of its municipal bonds before they
became subject to ordinary income taxes for
investors who might want to buy them. Here's how
it works: When yields climb beyond a certain point
for every municipal bond, the market discount on
that bond may become subject to ordinary income
taxes for new buyers. This lowers the value of the
bond because new buyers would want to purchase the
bond cheaply enough to compensate for the greater
tax liability.
Looking Ahead
Shortly after our six-month review period ended,
the Fed engineered another quarter-point rate hike
that raised its target for the federal funds rate
to 6.00% and its discount rate to 5.50%. We believe
the Fed's efforts to tighten monetary policy will
slow the U.S. economic expansion in 2000 from its
7.30% annual pace in the fourth quarter of 1999.
Moderating economic growth could help bolster the
performance of municipal bonds, but detract from
the performance of equities.
Meanwhile, the powerful U.S. economic expansion has
improved the credit quality of many state and local
governments and reduced their borrowing needs,
allowing them to issue fewer bonds. The supply of
new municipal bonds has also decreased because the
rising-interest-rate environment
provided less opportunity for issuers to save money
by replacing older
higher-coupon bonds with new lower-coupon bonds.
With the declining supply, if investor demand
remains strong, the tax-exempt bond market should
perform better than other U.S. fixed-income markets
in 2000.
Five Largest Issuers
Expressed as a percentage of net assets
as of 2/29/00
7.52% Ohio State Air Quality
Development Authority Revenue
7.29 Ohio State Turnpike
Commission Revenue
5.26 Guam Power Authority Revenue*
5.13 Franklin County Hospital*
4.76 Lucas County Hospital
*Prerefunded issues are secured by escrowed cash and/or direct U.S.
guaranteed obligations.
5
<PAGE>
Prudential Municipal Series Fund Ohio Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 99.6%
<CAPTION>
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Akron, Gen. Oblig. A1 6.50% 11/01/13 $ 870 $ 944,020
Akron, Gen. Oblig. A1 10.50 12/01/04 200 245,732
Brecksville Broadview Heights City
Sch. Dist., F.G.I.C. Aaa 6.50 12/01/16 1,000 1,060,940
Canton Water Works Sys., Gen.
Oblig., A.M.B.A.C. Aaa 5.85 12/01/15 700 708,624
Clear Fork Valley Loc. Sch. Dist.,
Richland Cnty. AA-(b) Zero 12/01/24 845 178,160
Cleveland Arpt. Spl. Rev. Ref.,
Continental Airlines, Inc., A.M.T. Ba2 5.70 12/01/19 650 554,047
Cleveland City Sch. Dist., Gen.
Oblig.,
Sch. Impvt., Ser. B, F.G.I.C. Aaa Zero 06/01/07 315 213,545
Sch. Impvt., Ser. B, F.G.I.C. Aaa Zero 12/01/08 550 342,600
Cleveland Cuyahoga Cnty. Port Auth.
Rev. NR 5.375 05/15/19 980 825,346
Columbus Citation Hsg. Dev. Corp.,
Mtge. Rev., F.H.A. AA(b) 7.625 12/31/11 1,850(d) 2,161,910
Columbus, Gen. Oblig., Mun. Arpt.
No. 32, A.M.T. Aaa 7.15 07/15/06 435 448,520
Cuyahoga Cnty. Hosp. Rev., Meridia
Health Sys. A1 6.25 08/15/05 1,500(d) 1,607,040
Dayton, Gen. Oblig., M.B.I.A. Aaa 7.00 12/01/07 480 536,462
Dover Mun. Elec. Sys. Rev.,
F.G.I.C. Aaa 5.95 12/01/14 1,000 1,021,160
Franklin Cnty. Hosp. Rev.,
Holy Cross Hlth. Sys., Ser. B,
A.M.B.A.C. Aaa 7.65 06/01/10 2,500(d) 2,571,750
Senior Doctors Hlth. Corp., Ser. A Baa3 5.60 12/01/28 1,000 758,200
Franklin Cnty. Pub. Impvt., Ser. 93 Aaa 5.375 12/01/20 2,400 2,258,280
Greene Cnty. Cap. Apprec., Wtr.
Sys. Rev., Ser. A, F.G.I.C. Aaa 6.125 12/01/21 1,000 1,009,750
Guam Pwr. Auth. Rev., Ser. A BBB(b) 6.75 10/01/04 3,110(d) 3,409,680
Hilliard City Sch. Dist., Cap.
Apprec. Impvt., Ser. A, F.G.I.C. Aaa Zero 12/01/09 2,855 1,676,856
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Ohio Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Huber Heights Water Sys. Rev., Cap.
Apprec., M.B.I.A. Aaa Zero 12/01/23 $ 1,000 $ 233,920
Lorain Cnty. Hosp. Rev., Ref.
Mtge., Elyria United Methodist
Village NR 6.875% 06/01/22 2,000 1,938,880
Lucas Cnty. Hlth. Fac. Rev., Ref.,
Ohio Presbyterian Retirement Svcs. NR 6.625 07/01/14 1,750 1,659,210
Lucas Cnty. Hosp. Rev., Promedica
Healthcare Oblig., Ser. 96,
M.B.I.A. Aaa 5.75 11/15/09 3,000 3,088,740
Marysville Village Sch. Dist., Gen.
Oblig., Sch. Impvt., M.B.I.A. Aaa Zero 12/01/15 865 346,588
Miami Cnty. Hosp. Fac. Rev., Ref. &
Impvt., Upper Valley Med. Ctr. Baa2 6.375 05/15/26 1,000 871,630
Montgomery Cnty. Hlth. Sys. Rev.,
Ref., Franciscan Med. Ctr., Dayton Baa1 5.50 01/01/08 1,750(d) 1,779,470
Montgomery Cnty. Swr. Sys. Rev.,
Greater Moraine, Beaver Creek,
F.G.I.C. Aaa Zero 09/01/05 1,000 750,970
Greater Moraine, Beaver Creek,
F.G.I.C. Aaa Zero 09/01/07 500 334,450
Mount Vernon City Sch. Dist., Gen.
Oblig., F.G.I.C. Aaa 7.50 12/01/14 500 552,275
Newark, Ltd. Tax Gen. Oblig., Wtr.
Impvt., Cap. Apprec., A.M.B.A.C. Aaa Zero 12/01/06 805 562,759
Newark, Ltd. Tax Gen. Oblig., Wtr.
Impvt., Cap. Apprec., Ref.,
F.G.I.C. Aaa Zero 12/01/18 1,495 486,159
Ohio Hsg. Fin. Agy., Mtg. Rev.,
Ser. A, G.N.M.A., A.M.T. Aaa 6.35 09/01/31 1,000 1,003,250
Ohio St. Air Quality Dev. Auth.
Rev., Poll. Ctrl.,
Cleveland Elec. Co. Proj., Ref.,
A.M.T. Ba1 6.10 08/01/20 1,000 888,540
Cleveland Elec. Co. Proj., Ref.,
F.G.I.C. Aaa 8.00 12/01/13 2,500 2,717,375
Edison Proj., Ser. A, F.G.I.C. Aaa 7.45 03/01/16 1,250 1,275,225
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Municipal Series Fund Ohio Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ohio St. Bldg. Auth., Das Data Ctr.
Proj., Aa2 6.00% 10/01/08 $ 615 $ 647,398
Ohio St. Environ. Impvt. Rev.,
Ref., USX Corp. Proj. Baa2 5.625 05/01/29 1,000 841,630
Ohio St. Higher Edl. Fac. Comn.
Rev., Case Western Resv. Univ.,
Ser. B Aa3 6.50 10/01/20 750 811,140
Ohio St. Solid Waste Disposal Rev.,
USG Corp. Proj. A.M.T. Baa2 6.05 08/01/34 1,000 901,890
Ohio St. Solid Waste Rev., A.M.T. NR 8.50 08/01/22 500 472,815
Ohio St. Tpk. Comm., Tpk. Rev.,
Ref., Series A, F.G.I.C. Aaa 5.50 02/15/24 5,000 4,732,800
Ohio St. Univ., Gen. Rcpts., Ser. A Aa2 6.00 12/01/16 1,000 1,027,070
Ohio St. Water Dev. Auth.,
Pollution Control Fac. Rev. Ba3 5.25 09/01/33 1,250 1,229,338
Pickerington Local Sch. Dist.,
Gen. Oblig., A.M.B.A.C. Aaa Zero 12/01/08 890 554,390
Gen. Oblig., A.M.B.A.C. Aaa Zero 12/01/13 525 238,471
Puerto Rico Comm., M.B.I.A. Aaa 5.75 07/01/12 2,000 2,076,920
Puerto Rico Pub. Bldgs. Auth. Rev.,
Gtd. Pub. Ed. & Hlth. Facs., Ser.
J Baa1 Zero 07/01/06 3,000 2,158,680
Sycamore Cmnty. Sch. Dist. AA+(b) 5.375 12/01/14 1,375 1,352,890
Trumbull Cnty. Correctional Fac.,
Cap. Apprec., A.M.B.A.C. Aaa Zero 12/01/09 1,250 734,175
Univ. Akron Ohio Gen. Rcpts.,
F.G.I.C. Aaa 5.75 01/01/14 1,000 1,010,360
Univ. of Puerto Rico Rev., Cap.
Apprec. Ref., Ser. N, M.B.I.A. Aaa Zero 06/01/13 4,245 2,038,746
Virgin Islands Pub. Fin. Auth.
Rev.,
Gross Rcpts. Taxes, Loan Notes,
Ser. A BBB-(b) 6.50 10/01/24 500 494,520
Ref., Matching Loan Notes, Ser. A NR 7.25 10/01/02 1,000(d) 1,084,140
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Ohio Series
Portfolio of Investments as of February 29, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Virgin Islands Terr., Hugo Ins.
Claims Fund Proj., Ser. 91 NR 7.75% 10/01/01 $ 305(d) $ 320,003
Virgin Islands Wtr. & Pwr. Auth.,
Elec. Sys. Rev., Ser. A NR 7.40 07/01/01 875(d) 915,775
------------
Total long-term investments
(cost $64,029,574) 64,665,214
------------
SHORT-TERM INVESTMENTS 1.1%
- ----------------------------------------------------------------------------------------
Ohio St. Solid Waste Rev., F.R.D.D
(cost $700,000) A1+(b) 3.90 03/01/00 700 700,000
------------
Total Investments 100.7%
(cost $64,729,574; Note 4) 65,365,214
Liabilities in excess of other
assets (0.7)% (482,708)
------------
Net Assets 100% $ 64,882,506
------------
------------
</TABLE>
- ------------------------------
(a) The following abbreviations are used in portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation.
A.M.T.--Alternative Minimum Tax.
F.G.I.C.--Financial Guaranty Insurance Company.
F.H.A.--Federal Housing Administration.
F.R.D.D.--Floating Rate (Daily) Demand Note(c).
G.N.M.A.--Government National Mortgage Association.
M.B.I.A.--Municipal Bond Insurance Association.
(b) Standard & Poor's Rating.
(c) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be the later of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
(d) 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 9
<PAGE>
Prudential Municipal Series Fund Ohio Series
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $64,729,574) $ 65,365,214
Cash 872
Interest receivable 816,797
Receivable for Series shares sold 30,448
Other assets 1,890
-----------------
Total assets 66,215,221
-----------------
LIABILITIES
Payable for investments purchased 1,005,292
Payable for Series shares reacquired 184,016
Accrued expenses 76,247
Management fee payable 25,889
Dividends payable 18,180
Distribution fee payable 17,073
Deferred trustee's fees 6,018
-----------------
Total liabilities 1,332,715
-----------------
NET ASSETS $ 64,882,506
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 59,390
Paid-in capital in excess of par 64,362,003
-----------------
64,421,393
Accumulated net realized loss on investments (174,527)
Net unrealized appreciation on investments 635,640
-----------------
Net assets, February 29, 2000 $ 64,882,506
-----------------
-----------------
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Ohio Series
Statement of Assets and Liabilities (Unaudited) Cont'd.
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share
($44,324,249 / 4,058,164 shares of beneficial interest
issued and outstanding) $10.92
Maximum sales charge (3% of offering price) .34
-----------------
Maximum offering price to public $11.26
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per
share
($20,367,885 / 1,863,457 shares of beneficial interest
issued and outstanding) $10.93
-----------------
-----------------
Class C:
Net asset value and redemption price per share
($190,372 / 17,417 shares of beneficial interest issued
and outstanding) $10.93
Sales charge (1% of offering price) .11
-----------------
Offering price to public $11.04
-----------------
-----------------
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Municipal Series Fund Ohio Series
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest $ 2,073,841
-----------------
Expenses
Management fee 171,931
Distribution fee--Class A 57,689
Distribution fee--Class B 56,007
Distribution fee--Class C 819
Custodian's fees and expenses 40,000
Reports to shareholders 25,000
Transfer agent's fees and expenses 25,000
Registration fees 17,000
Legal fees and expenses 8,000
Audit fees and expenses 5,000
Trustees' fees and expenses 2,500
Miscellaneous 1,221
-----------------
Total expenses 410,167
Custodian fee credit (114)
-----------------
Net expenses 410,053
-----------------
Net investment income 1,663,788
-----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Investment transactions (262,517)
Financial futures transactions 196,469
-----------------
(66,048)
-----------------
Net change in unrealized appreciation on:
Investments (2,040,644)
Financial futures contracts (65,563)
-----------------
(2,106,207)
-----------------
Net loss on investments (2,172,255)
-----------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (508,467)
-----------------
-----------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Ohio Series
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year Ended
Ended August 31,
February 29, 2000 1999
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 1,663,788 $ 3,603,673
Net realized gain (loss) on investment
transactions (66,048) 769,806
Net change in unrealized appreciation on
investments (2,106,207) (5,472,852)
----------------- --------------
Net decrease in net assets resulting from
operations (508,467) (1,099,373)
----------------- --------------
Dividends and distributions (Note 1):
Dividends to shareholders from net
investment income
Class A (1,136,426) (2,304,508)
Class B (522,581) (1,287,519)
Class C (4,781) (11,646)
----------------- --------------
(1,663,788) (3,603,673)
----------------- --------------
Distributions in excess of net investment
income
Class A (21,138) (38,470)
Class B (9,767) (23,367)
Class C (95) (164)
----------------- --------------
(31,000) (62,001)
----------------- --------------
Distributions from net realized gains
Class A (257,882) (1,111,350)
Class B (119,154) (675,050)
Class C (1,168) (4,744)
----------------- --------------
(378,204) (1,791,144)
----------------- --------------
Series share transactions (net of share
conversions) (Note 5):
Net proceeds from shares sold 3,048,643 6,020,350
Net asset value of shares issued in
reinvestment of dividends and
distributions 1,265,869 3,287,977
Cost of shares reacquired (9,735,091) (16,660,880)
----------------- --------------
Net decrease in net assets from Series
share transactions (5,420,579) (7,352,553)
----------------- --------------
Total decrease (8,002,038) (13,908,744)
NET ASSETS
Beginning of period 72,884,544 86,793,288
-----------------
- --------------
End of period $ 64,882,506 $ 72,884,544
----------------- --------------
----------------- --------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Municipal Series Fund Ohio Series
Notes to Financial Statements (Unaudited)
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
eleven series. The monies of each series are invested in separate, independently
managed portfolios. The Ohio Series (the 'Series') commenced investment
operations in September, 1984. The Series is diversified and its investment
objective is to maximize current income that is exempt from Ohio 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 gains. The Series seeks to achieve this objective by
investing primarily in Ohio state, municipal and local government obligations
and obligations of other qualifying issuers. The ability of the issuers of the
securities held by the Series to meet their obligations may be affected by
economic 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 preparation of its financial statements.
Securities Valuation: The Series 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 services, 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
14
<PAGE>
Prudential Municipal Series Fund Ohio Series
Notes to Financial Statements (Unaudited) Cont'd.
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 paid on purchases of 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.
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 continue 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 are made monthly. Distributions of
net capital gains, if any, are made annually.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
Custody Fee Credits: The Fund has an arrangement with its custodian
bank, whereby uninvested monies earn credits which reduce the fees charged by
the custodian.
Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2: Determination,
Disclosure, and
15
<PAGE>
Prudential Municipal Series Fund Ohio Series
Notes to Financial Statements (Unaudited) Cont'd.
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. The effect of applying this statement was
to increase undistributed net investment income and increase accumulated net
realized loss on investments by $31,000, due to the sale of securities purchased
with market discount during the six months ended February 29, 2000. Net
investment income, net realized gains and net assets were not affected by this
change.
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 Investment
Management Services LLC ('PIMS'), which acts as the distributor of the Class A,
Class B and Class C shares of the Fund. The Fund compensated PIMS for
distributing and servicing the Fund's Class A, Class B and Class C shares
pursuant to plans of distribution, (the 'Class A, B and C Plans'), regardless of
expenses actually incurred by them. The distribution fees are accrued daily and
payable monthly.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, .50 of 1%
and 1% of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Plans were .25 of 1%, .50 of 1% and .75 of
1% of the average daily net assets of the Class A, B and C shares, respectively,
for the six months ended February 29, 2000.
PIMS has advised the Series that they received approximately $3,200 in
front-end sales charges resulting from sales of Class A shares during the six
months
16
<PAGE>
Prudential Municipal Series Fund Ohio Series
Notes to Financial Statements (Unaudited) Cont'd.
ended February 29, 2000. From these fees, PIMS paid such sales charges to
affiliated broker-dealers, which in turn paid commissions to salespersons and
incurred other distribution costs.
PIMS has advised the Series that for the six months ended February 29,
2000, they received approximately $14,100 and $300 in contingent deferred sales
charges imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PIFM, PIC and PIMS are wholly owned subsidiaries of The Prudential
Insurance Company of America ('Prudential').
The Fund, along with other affiliated registered investment companies (the
'Funds'), entered into a syndicated credit agreement ('SCA') with an
unaffiliated lender. The maximum commitment under the SCA is $1 billion and
interest on any borrowings will be at market rates. For the period
3/11/99-3/9/00, the commitment fee on the unused portion of the credit facility
was .065 of 1%. Subsequent to March 9, 2000, the SCA was renewed with a maximum
commitment of $1 billion at a commitment fee of .080 of 1% of the unused portion
of the credit facility. The expiration date of the SCA is March 9, 2001. The
commitment fee is accrued and paid quarterly on a pro rata basis by the Funds.
Prior to March 11, 1999, the Funds had a credit agreement with a maximum
commitment of $200,000,000. The commitment fee was .055 of 1% on the unused
portion of the credit facility. The Fund did not borrow any amounts during the
six months ended February 29, 2000. The purpose of the credit agreements is to
serve as an alternative source of funding for capital share redemptions.
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the six months ended February 29,
2000, the Series incurred fees of approximately $16,100 for the services of
PMFS. As of February 29, 2000, 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 29, 2000 were $5,533,665 and
$10,889,824, respectively.
The cost basis of investments for federal income tax purposes at February
29, 2000 was substantially the same as for financial reporting purposes and
accordingly, net unrealized appreciation of investments for federal income tax
purposes was
17
<PAGE>
Prudential Municipal Series Fund Ohio Series
Notes to Financial Statements (Unaudited) Cont'd.
$635,640 (gross unrealized appreciation--$2,383,063; gross unrealized
depreciation--$1,747,423).
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 a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Class C shares are sold with a front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18 months. Class B shares 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 29, 2000 and the fiscal year ended August 31, 1999 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- --------------------------------------------------------------- -------- -----------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold.................................................... 201,743 $ 2,266,591
Shares issued in reinvestment of dividends and distributions... 80,667 888,771
Shares reacquired.............................................. (439,974) (4,857,741)
-------- -----------
Net decrease in shares outstanding before conversion........... (157,564) (1,702,379)
Shares issued upon conversion from Class B..................... 88,017 989,561
-------- -----------
Net decrease in shares outstanding............................. (69,547) $ (712,818)
-------- -----------
-------- -----------
Year ended August 31, 1999:
Shares sold.................................................... 275,877 $ 3,318,064
Shares issued in reinvestment of dividends and distributions... 177,578 2,124,198
Shares reacquired.............................................. (695,495) (8,255,801)
-------- -----------
Net decrease in shares outstanding before conversion........... (242,040) (2,813,539)
Shares issued upon conversion from Class B..................... 181,742 2,187,166
-------- -----------
Net decrease in shares outstanding............................. (60,298) $ (626,373)
-------- -----------
-------- -----------
<CAPTION>
Class B
- ---------------------------------------------------------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold.................................................... 70,490 $ 782,052
Shares issued in reinvestment of dividends and distributions... 33,732 372,164
Shares reacquired.............................................. (425,494) (4,733,970)
-------- -----------
Net decrease in shares outstanding before conversion........... (321,272) (3,579,754)
Shares reacquired upon conversion into Class A................. (87,982) (989,561)
-------- -----------
Net decrease in shares outstanding............................. (409,254) $(4,569,315)
-------- -----------
-------- -----------
</TABLE>
18
<PAGE>
Prudential Municipal Series Fund Ohio Series
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B Shares Amount
- --------------------------------------------------------------- -------- -----------
Year ended August 31, 1999:
<S> <C> <C>
Shares sold.................................................... 209,044 $ 2,517,815
Shares issued in reinvestment of dividends and distributions... 96,304 1,154,072
Shares reacquired.............................................. (698,008) (8,392,171)
-------- -----------
Net decrease in shares outstanding before conversion........... (392,660) (4,720,284)
Shares reacquired upon conversion into Class A................. (181,591) (2,187,166)
-------- -----------
Net decrease in shares outstanding............................. (574,251) $(6,907,450)
-------- -----------
-------- -----------
<CAPTION>
Class C
- ---------------------------------------------------------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares issued in reinvestment of dividends and distributions... 447 $ 4,934
Shares reacquired.............................................. (12,746) (143,380)
-------- -----------
Net decrease in shares outstanding............................. (12,299) $ (138,446)
-------- -----------
-------- -----------
Year ended August 31, 1999:
Shares sold.................................................... 15,141 $ 184,471
Shares issued in reinvestment of dividends and distributions... 816 9,707
Shares reacquired.............................................. (1,115) (12,908)
-------- -----------
Net increase in shares outstanding............................. 14,842 $ 181,270
-------- -----------
-------- -----------
</TABLE>
19
<PAGE>
Prudential Municipal Series Fund Ohio Series
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Class A
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.33
--------
Income from investment operations
Net investment income .27
Net realized and unrealized gain (loss) on investment
transactions (.34)
--------
Total from investment operations (.07)
--------
Less distributions
Dividends from net investment income (.27)
Distributions in excess of net investment income (.01)
Distributions from net realized gains (.06)
--------
Total distributions (.34)
--------
Net asset value, end of period $ 10.92
--------
--------
TOTAL RETURN(b): (.59)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $44,324
Average net assets (000) $46,405
Ratios to average net assets:
Expenses, including distribution fees 1.11%(d)
Expenses, excluding distribution fees .86%(d)
Net investment income 4.92%(d)
For Class A, B and C shares:
Portfolio turnover rate 8%
</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 year 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.
20 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Ohio Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class A
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 12.31 $ 11.95 $ 11.70 $ 11.92 $ 11.72
-------- -------- -------- -------- --------
.54 .60 .63(a) .63(a) .65(a)
(.71) .42 .27 (.15) .20
-------- -------- -------- -------- --------
(.17) 1.02 .90 .48 .85
-------- -------- -------- -------- --------
(.54) (.60) (.63) (.63) (.65)
(.01) --(c) --(c) -- --
(.26) (.06) (.02) (.07) --
-------- -------- -------- -------- --------
(.81) (.66) (.65) (.70) (.65)
-------- -------- -------- -------- --------
$ 11.33 $ 12.31 $ 11.95 $ 11.70 $ 11.92
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
(1.53)% 8.80% 7.92% 4.02% 7.59%
$ 46,775 $ 51,546 $ 50,977 $ 49,851 $ 51,132
$ 50,833 $ 51,082 $ 51,641 $ 51,205 $ 29,904
.97% .83% .80%(a) .80%(a) .83%(a)
.77% .73% .70%(a) .70%(a) .73%(a)
4.53% 4.93% 5.37%(a) 5.27%(a) 5.50%(a)
45% 30% 22% 35% 38%
</TABLE>
See Notes to Financial Statements 21
<PAGE>
Prudential Municipal Series Fund Ohio Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.34
--------
Income from investment operations
Net investment income .26
Net realized and unrealized gain (loss) on investment
transactions (.34)
--------
Total from investment operations (.08)
--------
Less distributions
Dividends from net investment income (.26)
Distributions in excess of net investment income (.01)
Distributions from net realized gains (.06)
--------
Total distributions (.33)
--------
Net asset value, end of period $ 10.93
--------
--------
TOTAL RETURN(b): (.71)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $20,368
Average net assets (000) $22,526
Ratios to average net assets:
Expenses, including distribution fees 1.36%(d)
Expenses, excluding distribution fees .86%(d)
Net investment income 4.67%(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 year 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.
22 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Ohio Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 12.32 $ 11.96 $ 11.71 $ 11.93 $ 11.73
-------- -------- -------- -------- --------
.51 .55 .59(a) .58(a) .60(a)
(.71) .42 .27 (.15) .20
-------- -------- -------- -------- --------
(.20) .97 .86 .43 .80
-------- -------- -------- -------- --------
(.51) (.55) (.59) (.58) (.60)
(.01) --(c) --(c) -- --
(.26) (.06) (.02) (.07) --
-------- -------- -------- -------- --------
(.78) (.61) (.61) (.65) (.60)
-------- -------- -------- -------- --------
$ 11.34 $ 12.32 $ 11.96 $ 11.71 $ 11.93
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
(1.82)% 8.36% 7.49% 3.61% 7.16%
$ 25,773 $ 35,064 $ 40,770 $ 50,998 $ 62,805
$ 30,456 $ 37,848 $ 45,503 $ 57,909 $ 85,410
1.27% 1.23% 1.20%(a) 1.20%(a) 1.22%(a)
.77% .73% .70%(a) .70%(a) .72%(a)
4.23% 4.54% 4.97%(a) 4.87%(a) 5.27%(a)
</TABLE>
See Notes to Financial Statements 23
<PAGE>
Prudential Municipal Series Fund Ohio Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.34
--------
Income from investment operations
Net investment income .24
Net realized and unrealized gain (loss) on investment
transactions (.34)
--------
Total from investment operations (.10)
--------
Less distributions
Dividends from net investment income (.24)
Distributions in excess of net investment income (.01)
Distributions from net realized gains (.06)
--------
Total distributions (.31)
--------
Net asset value, end of period $ 10.93
--------
--------
TOTAL RETURN(b): (.84)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 190
Average net assets (000) $ 220
Ratios to average net assets:
Expenses, including distribution fees 1.61%(d)
Expenses, excluding distribution fees .86%(d)
Net investment income 4.38%(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 year 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.
24 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Ohio Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$12.32 $11.96 $11.71 $11.93 $11.73
------- ------- ------- ------- -------
.48 .52 .56(a) .55(a) .57(a)
(.71) .42 .27 (.15) .20
------- ------- ------- ------- -------
(.23) .94 .83 .40 .77
------- ------- ------- ------- -------
(.48) (.52) (.56) (.55) (.57)
(.01) --(c) --(c) -- --
(.26) (.06) (.02) (.07) --
------- ------- ------- ------- -------
(.75) (.58) (.58) (.62) (.57)
------- ------- ------- ------- -------
$11.34 $12.32 $11.96 $11.71 $11.93
------- ------- ------- ------- -------
------- ------- ------- ------- -------
(2.06)% 8.09% 7.22% 3.36% 6.89%
$ 337 $ 183 $ 71 $ 44 $ 126
$ 289 $ 149 $ 57 $ 97 $ 61
1.52% 1.48% 1.45%(a) 1.45%(a) 1.49%(a)
.77% .73% .70%(a) .70%(a) .74%(a)
4.03% 4.26% 4.72%(a) 4.62%(a) 4.76%(a)
</TABLE>
See Notes to Financial Statements 25
<PAGE>
<PAGE>
Prudential Municipal Series Fund Ohio Series
Prudential Mutual Fund Family
Prudential offers a broad range of mutual funds designed to
meet your individual needs. For information about
these funds, contact your financial adviser or call
us at (800) 225-1852. Read the prospectus carefully
before you invest or send money.
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www.prudential.com(800) 225-1852
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<PAGE>
Prudential Municipal Series Fund Ohio Series
Getting the Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds,
you receive financial advice from a Prudential
Securities Financial Advisor or Pruco Securities
registered representative. Your advisor or
representative can provide you with the following
services:
There's No Reward Without Risk; but Is This Risk
Worth It?
Your financial advisor or registered representative
can help you match the reward you seek with the
risk you can tolerate. Risk can be difficult to
gauge--sometimes even the simplest investments bear
surprising risks. The educated investor knows that
markets seldom move in just one direction. There
are times when a market sector or asset class will
lose value or provide little in the way of total
return. Managing your own expectations is easier
with help from someone who understands the markets
and who knows you!
Keeping Up With the Joneses
A financial advisor or registered representative
can help you wade through the numerous available
mutual funds to find the ones that fit your
individual investment profile and risk tolerance.
While the newspapers and popular magazines are full
of advice about investing, they are aimed at
generic groups of people or representative
individuals--not at you personally. Your financial
advisor or registered representative will review
your investment objectives with you. This means you
can make financial decisions based on the assets
and liabilities in your current portfolio and your
risk tolerance--not just based on the current
investment fad.
Buy Low, Sell High
Buying at the top of a market cycle and selling at
the bottom are among the most common investor
mistakes. But sometimes it's difficult to hold on
to an investment when it's losing value every
month. Your financial advisor or registered
representative can answer questions when you're
confused or worried about your investment, and
should remind you that you're investing for the
long haul.
<PAGE>
www.prudential.com (800) 225-1852
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Trustees
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, Secretary
David F. Connor, Assistant Secretary
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
194 Wood Avenue South
Iselin, NJ 08830
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Fund Symbols NASDAQ CUSIP
Class A PROHX 74435M838
Class B -- 74435M846
Class C -- 74435M499
The views expressed in
this report and information about the Fund's
portfolio holdings are for the period covered by
this report and are subject to change thereafter.
The accompanying financial statements as
of February 29, 2000, were not audited and,
accordingly, no opinion is expressed on them.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
MF123E2 74435M838 74435M846 74435M499
(LOGO) Printed on Recycled Paper
<PAGE>
SEMIANNUAL REPORT FEBRUARY 29, 2000
Prudential
Municipal Series Fund/
Pennsylvania Series
Fund Type Municipal bond
Objective Maximize current income that is exempt
from Commonwealth of Pennsylvania personal income
and federal income taxes, consistent with the
preservation of capital
(GRAPHIC)
This report is not authorized for distribution to
prospective investors unless preceded or
accompanied by a current prospectus.
(LOGO)
<PAGE>
Build on the Rock
Investment Goals and Style
Prudential Municipal Series Fund/Pennsylvania
Series' investment objective is to maximize current
income that is exempt from Commonwealth of
Pennsylvania personal income and federal income
taxes, consistent with the preservation of capital.
However, certain shareholders may be subject to the
federal alternative minimum tax (AMT) because some
of the Series' bonds are AMT eligible. There can be
no assurance the Series will achieve its investment
objective.
Contents
1 Message From the Fund's President
2 Performance Review
2 Portfolio Composition
3 Performance at a Glance
4 Credit Quality
5 Five Largest Issuers
6 Financial Statements
<PAGE>
www.prudential.com (800) 225-1852
Message From the Fund's President As of April 17, 2000
(PHOTO)
Dear Shareholder
The Class A shares of Prudential Municipal Series
Fund/Pennsylvania Series had a negative return of
1.10%
during its fiscal half year that ended February 29,
2000. For the same period, the return on the
Series' benchmark Lipper Average was a negative
1.77%. After the initial sales charge, the Class A
shares' return was a negative 4.06%. Prices of
municipal bonds declined primarily because
investors required higher yields in light of two
short-term rate increases implemented by the
Federal Reserve during our review period to slow
the rapid pace of U.S. economic growth.
Staying the course amid ups and downs of financial
markets
Many investors consider selling an asset class that
has performed poorly in favor of investments that
are currently gaining in value. That may not be the
best move. Changes in asset allocation should
reflect basic shifts in an investor's time horizon
and tolerance for risk--not recent fluctuations in
the performance of financial markets. One strategy
may be to own a diversified portfolio of mutual
funds that invests in stocks, bonds, and money
market instruments because this approach may help
to reduce risk.
Deciding on the correct level of diversification is
not easy. It requires
an understanding of an investor's risk tolerance
and overall investment strategy. In these volatile
times, we recommend consulting your financial
advisor to develop your asset allocation goals.
Thank you for your continued confidence in
Prudential mutual funds.
Sincerely,
John R. Strangfeld
President
Prudential Municipal Series Fund
1
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Performance Review
(PHOT) (PHOTO) Portfolio Managers Evan Lamp (Municipal Bonds
Sector Team Leader) and James M. Murphy
Bear market in municipal bonds continued
During our six-month review period, increases in
short-term interest rates by the Federal Reserve
and sales of municipal bonds by investors who
wanted to realize tax losses pressured the prices
of tax-exempt debt securities. Given this bearish
trend, we positioned the Series so that it would be
less vulnerable to the decline in bond prices.
The Fed raised its target for the federal funds
rate (what U.S. banks charge each other for
overnight loans) by a quarter of a percentage point
in November 1999 and February 2000 to curb U.S.
economic growth and reduce the economic imbalances
that can lead to higher inflation. These moves
pushed up the rate to 5.75% by February 2000. The
Fed also engineered two quarter-point increases
that raised its discount rate on loans
to banks from the Federal Reserve system to 5.25%
by February 2000. As short-term rates rose,
investors required higher yields on both short- and
long-term municipal bonds, which caused their
prices to fall.
More selling pressure emerged in late December
1999. As interest rates climbed, investors realized
capital losses by selling bonds or bond funds. Many
investors reinvest in new bonds or other bond funds
with a lower cost basis for tax purposes (due to
the higher level of yields). This is called "tax
loss swapping." In the municipal bond market, the
capital loss often reduces taxes, while the higher
yields on the new bonds or other funds are
generally tax exempt.
Portfolio Composition
Expressed as a percentage of total investments
as of 2/29/00
57.86% Revenue Bonds
20.27 Prerefunded Bonds
17.83 General Obligations
4.04 Miscellaneous
2
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
<TABLE>
Cumulative Total Returns1 As of 2/29/00
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A -1.10% -3.84% 26.01% (25.75) 81.73% (81.17) 82.58% (82.01)
Class B -1.22 -4.09 23.73 (23.48) 74.93 (74.39) 109.03 (105.81)
Class C -1.35 -4.34 22.19 (21.94) N/A 24.90 (24.64)
Lipper PA Muni
Debt Fund Avg.3 -1.77 -4.81 25.26 83.05 ***
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 3/31/00
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A -4.91% 4.35% (4.30) 6.03% (6.00) 5.96% (5.93)
Class B -7.13 4.44 (4.39) 5.95 (5.92) 5.99 (5.85)
Class C -4.36 4.13 (4.09) N/A 4.15 (4.11)
</TABLE>
<TABLE>
Distributions and Yields As of 2/29/00
<CAPTION>
Total Distributions 30-Day Taxable Equivalent Yield4 at tax rates of
Paid for Six Months SEC Yield 36% 39.6%
<S> <C> <C> <C>
Class A $0.27 4.91% 7.89% 8.36%
Class B $0.25 4.82 7.75 8.21
Class C $0.24 4.52 7.27 7.70
</TABLE>
Past performance is not indicative of future
results. Principal and investment return will
fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their
original cost.
1 Source: Prudential Investments Fund Management
LLC and Lipper Inc. The cumulative total returns do
not take into account sales charges. The average
annual total returns do take into account
applicable sales charges. The Series charges a
maximum front-end sales charge of 3% for Class A
shares and a declining contingent deferred sales
charge (CDSC) of 5%, 4%, 3%, 2%, 1%, and 1% for six
years for Class B shares. Class B shares will
automatically convert to Class A shares, on a
quarterly basis, approximately seven years after
purchase. Class C shares are subject to a front-end
sales charge of 1% and a CDSC for 18 months.
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 ( ).
2 Inception dates: Class A, 1/22/90; Class B,
4/3/87; and Class C, 8/1/94.
3 Lipper average returns are for all funds in each
share class for the six-month, one-, five-, and
ten-year periods in the Pennsylvania Municipal Debt
Fund category. Single-state Municipal Debt funds
limit their securities that are exempt from
taxation in a specified state (double tax exempt)
or city (triple tax exempt).
4 Taxable equivalent yields reflect federal and
applicable state tax rates.
***Lipper Since Inception returns are 84.93% for
Class A, 116.12% for Class B, and 28.54% for
Class C, based on all funds in each share class.
3
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Performance Review
Although the bear market detracted from the Series'
returns, we were able to increase its distribution
yield in this rising-interest-rate environment.
We pursued a short-duration strategy
When bond markets sell off, lowering a portfolio's
duration generally provides some degree of
protection by making the portfolio less sensitive
to the rise in bond yields. (Duration measures how
much a portfolio's bonds will fluctuate in price
for a given change in interest rates. It is
expressed in years.) Keeping the Series' duration
shorter than average for most of our
fiscal half year helped its share classes, without
sales charges factored in, to perform better than
its Lipper Average, which does not consider sales
charges.
In January 2000, however, we began to lengthen the
Series' duration because we believe the Fed's
monetary policy moves will keep inflation in check,
which could allow municipal bond yields to decline
as the year progresses.
The Series was also helped by its considerable
exposure to prerefunded bonds, which stood at 20%
of its total investments as of February 29, 2000.
Prices of prerefunded bonds held up better due to
their high coupon rates and shorter-term
maturities.
We lessened the impact of "market-discount
taxation"
Another strategy that benefited the Series was
selling some of its municipal bonds before they
became subject to ordinary income taxes for
investors who might want to buy them. Here's how it
works: When yields climb beyond a certain point for
every municipal bond, the market discount on that
bond may become subject to ordinary income taxes
for new buyers.
Credit Quality
Expressed as a percentage of total investments
as of 2/29/00
12.05% AAA
3.77 AA
19.88 A
15.55 BBB
6.68 BB
41.88 Insured
0.19 Other
4
<PAGE>
www.prudential.com (800) 225-1852
This lowers the value of the bond because new
buyers would want to purchase the bond cheaply
enough to compensate for the greater tax liability.
Looking Ahead
Shortly after our six-month review period ended,
the Fed engineered
another quarter-point rate hike that raised its
target for the federal funds rate to 6.00% and its
discount rate to 5.50%. We believe the Fed's
efforts to
tighten monetary policy will slow the U.S. economic
expansion in 2000 from its 7.30% annual pace in the
fourth quarter of 1999. Moderating economic growth
could help bolster the performance of municipal
bonds, but detract from the performance of
equities.
Meanwhile, the powerful U.S. economic expansion has
improved the credit quality of many state and local
governments and reduced their borrowing needs,
allowing them to issue fewer bonds. The supply of
new municipal bonds has also decreased because the
rising-interest-rate environment provided less
opportunity for issuers to save money by replacing
older higher-coupon bonds with new lower-coupon
bonds. With the declining supply, if investor
demand remains strong, then the tax-exempt bond
market should perform better than other U.S. fixed-
income markets in 2000.
Five Largest Issuers
Expressed as a percentage of net assets
as of 2/29/00
7.67% Philadelphia Industrial
Development*
5.56 Puerto Rico Commonwealth*
4.16 Allegheny County Hospital
Development Authority
3.93 Pittsburgh Water & Sewer
Authority
3.64 Pennsylvania State Higher
Education Facs. Auth.
* Prerefunded issues are secured by escrowed cash
and/or direct U.S. guaranteed obligations.
5
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 99.4%
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allegheny Cnty. Arpt. Rev.,
Greater Pittsburgh Int'l. Arpt.,
Ser. A, A.M.T., F.S.A. Aaa 6.60% 1/01/04 $ 1,000 $ 1,043,080
Pittsburgh Int'l. Arpt., A.M.T.,
M.B.I.A. Aaa 5.75 1/01/14 2,435 2,437,094
Allegheny Cnty. Hosp. Dev. Auth.
Rev.,
Allegheny Gen. Hosp. Proj., Ser.
A, M.B.I.A. Aaa 6.25 9/01/20 1,750 1,699,845
Magee-Womens Hosp., F.G.I.C. Aaa Zero 10/01/14 2,000 847,840
Magee-Womens Hosp., F.G.I.C. Aaa Zero 10/01/16 2,000 739,300
Magee-Womens Hosp., F.G.I.C. Aaa Zero 10/01/18 2,000 644,000
Magee-Womens Hosp., F.G.I.C. Aaa Zero 10/01/19 4,000 1,200,360
West Penn. Hosp. Hlth. Ctr. NR 8.50 1/01/20 2,000 2,070,160
Allegheny Cnty. Ind. Dev. Auth.
Rev., USX Proj., Ser. A Baa2 6.70 12/01/20 4,500 4,459,095
Allegheny Cnty. Residential Fin.
Auth., Mtge. Rev., G.N.M.A.,
Ser. Q, A.M.T. Aaa 7.40 12/01/22 640 656,186
Beaver Cnty. Indl. Dev. Auth.,
Pollution Ctl. Rev.,
Toledo Edison Co. Proj. A Baa3 4.85 6/01/30 1,500 1,421,910
Ohio Edison Co. Proj. A Baa3 4.65 6/01/33 1,000 943,060
Berks Cnty. Gen. Oblig., Cap.
Appreciation, F.G.I.C. Aaa Zero 5/15/16 2,900 1,096,577
Berks Cnty. Ind. Rev., Lutheran
Home Proj., A.M.B.A.C. Aaa 6.875 1/01/23 1,500 1,554,780
Berks Cnty. Mun. Auth. Hosp. Rev.,
Reading Hosp. Med. Ctr. Proj.,
M.B.I.A. Aaa 5.70 10/01/14 1,250 1,249,925
Bethlehem Auth. Wtr. Rev., Cap.
Appreciation, F.S.A. Aaa Zero 11/15/22 3,080 746,315
Bucks Cnty. Wtr. & Swr. Auth. Rev.,
Neshaminy Interceptor Swr. Syst.,
Ser. A, F.G.I.C. Aaa Zero 12/01/15 2,175 851,708
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Butler Cnty. Hosp. Auth. Rev.,
North Hills Passavant Hosp.,
Ser. A, F.S.A. Aaa 7.00% 6/01/22 $ 1,000(d) $ 1,050,340
Chartiers Valley Ind. Rev.,
Friendship Vlg./South Hills NR 6.75 8/15/18 2,225 2,104,027
Chester Upland Sch. Auth., Sch.
Rev., A(b) 6.375 9/01/21 1,000(d) 1,035,640
Clarion Cnty. Hosp. Auth. Rev.,
Clarion Hosp. Proj. BBB-(b) 5.625 7/01/21 1,000 792,920
Delaware Cnty. Ind. Dev. Auth.
Rev.,
Res. Rec. Facs., Ser. A B2 6.00 1/01/09 500 461,205
Res. Rec. Facs., Ser. A B2 6.10 7/01/13 2,500 2,246,675
Delaware Cnty. Hosp. Auth. Rev.,
Crozer-Chester Med. Ctr., M.B.I.A. Aaa 7.15 12/15/05 2,550(d) 2,659,522
Doylestown Hosp. Auth. Rev., Pine
Run Retirement, Ser. A NR 7.20 7/01/23 3,180(d) 3,437,326
Greencastle Antrim Sch. Dist. Rev.,
M.B.I.A.,
Cap. Appreciation, Ser. B Aaa Zero 1/01/12 1,000 505,860
Cap. Appreciation, Ser. B Aaa Zero 1/01/13 1,000 476,970
Harrisburg Auth. Rev., Pooled Bond
Prog., Ser. I, M.B.I.A. Aaa 5.625 4/01/15 300 296,829
Harrisburg, Gen. Oblig., A.M.B.A.C
Cap. Appreciation, Ser. D Aaa Zero 3/15/15 2,380 968,017
Cap. Appreciation, Ser. F Aaa Zero 9/15/21 2,000 526,700
Cap. Appreciation, Ser. F Aaa Zero 9/15/22 2,000 492,920
Hopewell Area School District, Gen.
Oblig., F.S.A.,
Cap. Appreciation Aaa Zero 9/01/23 2,000 463,280
Cap. Appreciation Aaa Zero 9/01/24 2,025 439,729
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lower Pottsgrove Twnshp. Auth. Swr.
Rev., Montgomery Cnty.,
A.M.B.A.C.,
Ser. A Aaa Zero 11/01/13 $ 1,155 $ 521,575
Ser. A Aaa Zero 11/01/15 1,185 466,333
Luzerne Cnty. Ind. Dev. Auth.,
Rev., Gas & Water, Ser. B, A.M.T. A3 7.125% 12/01/22 6,000 6,294,000
McKeesport Area School District,
M.B.I.A.
Cap. Appreciation Aaa Zero 10/01/20 3,555 997,248
Cap. Appreciation Aaa Zero 10/01/21 2,555 671,020
Montgomery Cnty. Higher Ed. & Hlth.
Auth. Hosp. Rev.,
Jeanes Hlth. Sys. Proj. NR 8.625 7/01/07 3,695(d) 3,818,893
Montgomery Cnty. Redev. Auth. Rev.,
Multifamily Hsg., Ser. A NR 6.50 7/01/25 1,400 1,351,056
Montgomery Cnty. Indl. Dev. Auth.
Rev., Retirement Comm. A-(b) 5.25 11/15/28 1,500 1,125,345
Northampton Cnty. Higher Ed. Auth.
Rev.,
Moravian Coll. AAA(b) 8.20 6/01/11 2,095(d) 2,230,442
Moravian Coll., A.M.B.A.C. Aaa 6.25 7/01/11 2,195 2,357,276
Northeastern Hosp. & Ed. Auth.
Coll. Rev., Kings Coll. Proj.,
Ser. B BBB(b) 6.00 7/15/18 3,235 3,085,996
Northumberland Cnty. Ind. Dev.
Auth. Rev.,
Roaring Creek Wtr., A.M.T. NR 6.375 10/15/23 1,000 935,270
Penn Hills Twnshp., Gen. Oblig.,
Ser A, A.M.B.A.C. Aaa Zero 6/01/10 1,535 866,861
Penn Hills, Gen. Oblig., Ser. B,
A.M.B.A.C. Aaa Zero 12/01/18 1,360 433,486
Pennsylvania Convention Ctr. Auth.
Rev., Ser. A, F.G.I.C. Aaa 6.00 9/01/19 5,445 5,558,365
Pennsylvania Econ. Dev. Auth., Wst.
Wtr. Treatment Rev., Sun Co.,
R & M Proj., Ser. A, A.M.T. Baa3 7.60 12/01/24 4,500 4,761,495
Pennsylvania Econ. Dev. Fin. Wst.
Disp. Rev., Usg. Corp., A.M.T. Baa2 6.00 6/01/31 3,000 2,693,880
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pennsylvania Hsg. Fin. Agcy.,
Sngl. Fam. Mtge., A.M.T. Aa2 7.502%(c) 4/01/25 $ 2,100 $ 2,065,875
Sngl. Fam. Mtge., A.M.T.,
R.I.B.S., S.F.M.R. Aa2 4.75 4/01/11 1,895 1,772,109
Pennsylvania Intergovt. Coop.
Auth., Spl. Tax Rev., F.G.I.C. Aaa 5.25 6/15/14 4,295 4,103,357
Pennsylvania St. Cert. of Part.,
Ser. A, F.S.A. Aaa 6.25 11/01/06 1,900 1,977,026
Pennsylvania St. Higher Ed. Facs.
Auth. Rev.,
Allegheny Coll., Ser. B AAA(b) 6.00 11/01/22 2,000(d) 2,110,600
Ursinus College Ser. A BBB+(b) 5.90 1/01/27 1,925 1,773,560
Drexel University A-(b) 6.00 5/01/29 2,500 2,416,350
Philadelphia Gas Wks. Rev.,
13th Ser. Baa1 7.70 6/15/11 215(d) 227,494
13th Ser. Aaa 7.70 6/15/21 3,430(d) 3,634,256
Philadelphia Hosps. & Higher Ed.
Facs. Auth. Rev.,
Childrens' Seashore House, Ser. B A+(b) 7.00 8/15/12 500 523,305
Childrens' Seashore House, Ser. A A+(b) 7.00 8/15/12 1,000 1,046,840
Childrens' Seashore House, Ser. A A+(b) 7.00 8/15/17 1,000 1,038,880
Grad. Hlth. Sys. Ca 7.25 7/01/18 2,730(e) 986,212
Philadelphia Ind. Dev. Auth. Rev.,
Baptist Home of Phil., Ser. A NR 5.60 11/15/28 2,750 2,100,670
Inst. for Cancer Res. Proj., Ser.
B A+(b) 7.25 7/01/10 5,770 5,913,442
Nat'l. Brd. of Med. Examiners
Proj. A+(b) 6.75 5/01/12 5,000(d) 5,274,500
Philadelphia Auth. Ind. Dev. Rev.,
A.M.T. NR 5.50 1/01/24 2,500 2,065,425
Philadelphia Wtr. & Waste Rev.,
Ser. A, A.M.B.A.C. Aaa 5.125 8/01/27 3,000 2,579,280
Pittsburgh and Allegheny Auditorium
Asset Dist. Sales Tax Rev.,
A.M.B.A.C. Aaa 5.00 2/01/29 3,000 2,514,990
Pittsburgh Public Parking Auth.
Parking Rev. Aaa 6.00 12/01/24 1,725 1,709,441
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pittsburgh Urban Redev. Auth.,
Mtge. Rev.,
Ser. A, A.M.T. Aa2 6.25% 10/01/28 $ 950 $ 948,680
Ser. C, A.M.T. Aa2 6.55 4/01/28 1,590 1,601,766
Pittsburgh Wtr. & Swr. Auth.,
F.G.I.C.
First Lien, Ser. B Aaa Zero 9/01/19 2,300 689,839
First Lien, Ser. B Aaa Zero 9/01/20 2,300 644,667
Wtr. & Swr. Sys. Rev. Aaa 6.50 9/01/13 5,000 5,467,200
Puerto Rico Comnwlth.,
Gen. Oblig., M.B.I.A. Aaa 5.75 7/01/10 3,000 3,137,760
Gen. Oblig., A.M.B.A.C. Aaa 7.00 7/01/10 4,030 4,597,182
Hwy. & Trans. Auth. Rev., Ser. Y Baa1 6.25 7/01/14 1,000 1,063,400
Pub. Impvt. Rfdg., M.B.I.A. Aaa 7.00 7/01/10 720 821,333
Puerto Rico Port Auth. Rev., Spl.
Facs. Amer. Airlines,
Ser. A, A.M.T. Baa3 6.25 6/01/26 1,475 1,416,133
Schuylkill Cnty. Ind. Dev. Auth.
Rev.,
Pine Grove Landfill Inc., A.M.T. BBB(b) 5.10 10/01/19 1,500 1,274,010
Schuylkill Engy., A.M.T. NR 6.50 1/01/10 3,230 3,159,780
Scranton-Lackawanna Hlth. & Welfare
Auth. Rev.,
Univ. of Scranton Proj., Ser. C NR 7.50 6/15/06 1,000(d) 1,029,360
Univ. of Scranton Proj., Ser. C NR 6.50 3/01/15 2,250(d) 2,364,547
Unity Twnshp. Mun. Auth., Gtd. Swr.
Rev., A.M.B.A.C.,
Cap. Appreciation Aaa Zero 11/01/11 1,035 531,617
Cap. Appreciation Aaa Zero 11/01/12 1,035 499,046
Cap. Appreciation Aaa Zero 11/01/13 1,035 470,501
Upper St. Clair Twp., PA Sch. Dist.
Rev. Aa3 5.20 7/15/27 3,000 2,629,980
Virgin Islands Pub. Fin. Auth.
Rev., Ref. Matching Loan Notes,
Ser. A AAA(b) 7.25 10/01/18 1,950(d) 2,114,073
Virgin Islands Terr., Hugo Ins.
Claims Fund Proj., Ser. 91 NR 7.75 10/01/06 730(d) 765,909
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Portfolio of Investments as of February 29, 2000 (Unaudited)
Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Washington Cnty. Auth. Lease Rev.,
Mun. Fac., Shadyside Hosp.,
Ser. C-1D, A.M.B.A.C. Aaa 7.45% 12/15/18 $ 2,900(d) $ 3,014,115
Washington Cnty. Hosp. Auth. Rev.,
Monongahela Valley Hosp. A2 6.75 12/01/08 2,750 2,891,268
West Mifflin San. Swr. Mun. Auth.
Rev., F.G.I.C. Aaa 6.25 8/01/10 1,555 1,672,060
Westmoreland Cnty. Rev., Cap.
Appreciation, F.G.I.C. AAA(b) Zero 12/01/19 5,750 1,707,923
Westmoreland Cnty. Ind. Rev.,
GTD-Valley Landfill Proj., A.M.T. BBB(b) 5.10 5/01/18 1,000 849,880
Westmoreland Cnty. Mun. Auth. Rev.,
Cap. Appreciation, Ser. A Aaa Zero 8/15/23 5,000 1,153,500
------------
Total Investments--99.4%
(cost $173,906,203; Note 4) 172,136,877
Other assets in excess of liabilities--0.6% 1,017,380
------------
Net Assets--100% $173,154,257
------------
------------
</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.
G.N.M.A.--Government National Mortgage Association.
M.B.I.A.--Municipal Bond Insurance Association.
R.I.B.S.--Residual Interest Bonds.
S.F.M.R.--Single Family Mortgage Revenue.
(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 year end.
(d) Prerefunded issues are secured by escrowed cash and/or direct U.S.
guaranteed obligations.
(e) Represents issuer in default of interest payment. Non-income producing
security.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information contains a description of
Moody's and Standard & Poor's ratings.
See Notes to Financial Statements 11
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $173,906,203) $ 172,136,877
Interest receivable 2,455,154
Receivable for Series shares sold 7,814
Deferred expenses and other assets 4,554
-----------------
Total assets 174,604,399
-----------------
LIABILITIES
Bank overdraft 402,136
Payable for investments purchased 466,308
Payable for Series shares reacquired 282,284
Accrued expenses 126,568
Management fee payable 69,076
Dividends payable 48,913
Distribution fee payable 48,630
Deferred trustee's fees 6,227
-----------------
Total liabilities 1,450,142
-----------------
NET ASSETS $ 173,154,257
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 178,183
Paid-in capital in excess of par 175,550,423
-----------------
175,728,606
Accumulated net realized loss on investments (805,023)
Net unrealized depreciation on investments (1,769,326)
-----------------
Net assets, February 29, 2000 $ 173,154,257
-----------------
-----------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Statement of Assets and Liabilities (Unaudited) Cont'd.
<TABLE>
<CAPTION>
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share
($103,132,391 / 10,611,608 shares of beneficial interest
issued and outstanding) $ 9.72
Maximum sales charge (3% of offering price) .30
-----------------
Maximum offering price to public $10.02
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per
share ($69,428,436 / 7,145,566 shares of beneficial
interest issued and outstanding) $9.72
Class C:
Net asset value, offering price and redemption price per
share ($593,430 / 61,079 shares of beneficial interest
issued and outstanding) $ 9.72
Sales charge (1% of offering price) .10
-----------------
Offering price to public $ 9.82
-----------------
-----------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February 29, 2000
<S> <C> <C>
- ----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest $ 5,667,694
-----------------
Expenses
Management fee 456,125
Distribution fee--Class A 131,372
Distribution fee--Class B 191,347
Distribution fee--Class C 3,051
Transfer agent's fees and expenses 50,000
Custodians's fees and expenses 32,000
Reports to shareholders 22,000
Registration fees 11,000
Legal fees and expenses 6,000
Audit fees and expenses 4,000
Trustees' fees and expenses 2,000
Miscellaneous 4,340
-----------------
Total expenses 913,235
Less: Custodian fee credit (2,593)
-----------------
Net expenses 910,642
-----------------
Net investment income 4,757,052
-----------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investment transactions (755,822)
Net change in unrealized depreciation on investments (6,463,142)
-----------------
Net loss on investments (7,218,964)
-----------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(2,461,912)
-----------------
-----------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year Ended
Ended August 31,
February 29, 2000 1999
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 4,757,052 $ 10,198,665
Net realized gain (loss) on investment
transactions (755,822) 2,064,650
Net change in unrealized depreciation of
investments (6,463,142) (15,124,349)
----------------- --------------
Net decrease in net assets resulting from
operations (2,461,912) (2,861,034)
----------------- --------------
Dividends and distributions (Note 1):
Dividends to shareholders from net
investment income
Class A (2,799,828) (5,224,812)
Class B (1,937,721) (4,925,961)
Class C (19,503) (47,892)
----------------- --------------
(4,757,052) (10,198,665)
----------------- --------------
Distributions from net realized gains
Class A (350,166) (1,164,135)
Class B (234,220) (1,223,297)
Class C (2,550) (13,254)
----------------- --------------
(586,936) (2,400,686)
----------------- --------------
Series share transactions (net of share
conversions) (Note 5):
Net proceeds from shares sold 10,877,195 26,494,078
Net asset value of shares issued in
reinvestment of dividends and
distributions 3,054,004 7,127,006
Cost of shares reacquired (26,581,852) (41,134,998)
----------------- --------------
Net decrease in net assets from Series
share transactions (12,650,653) (7,513,914)
----------------- --------------
Total decrease (20,456,553) (22,974,299)
NET ASSETS
Beginning of period 193,610,810 216,585,109
----------------- --------------
End of period $ 173,154,257 $ 193,610,810
----------------- --------------
----------------- --------------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Notes to Financial Statements (Unaudited)
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 11
series. The monies of each series are invested in separate, independently
managed portfolios. The Pennsylvania Series (the 'Series') commenced investment
operations on April 3, 1987. 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 a 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 Series 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.
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 original issue
discount paid on purchases of 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.
16
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Notes to Financial Statements (Unaudited) Cont'd.
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 continue 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 are made monthly. Distributions of
net capital gains, if any, are made annually. Income distributions and capital
gain distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
Custody Fee Credits: The Series has an arrangement with its custodian
bank, whereby uninvested monies earn credits which reduce the fees charged by
the custodian.
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM has entered into a subadvisory agreement with The Prudential
Investment Corporation ('PIC'); PIC furnishes investment advisory services in
connection with the management of the Fund. PIFM pays for the services of PIC,
the compensation of officers of the Fund, occupancy and certain clerical and
bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid PIFM is computed daily and payable monthly, at an
annual rate of .50 of 1% of the average daily net assets of the Series.
The Fund had a distribution agreement with Prudential Investment
Management Services LLC ('PIMS'), which acts as the distributor of the Class A,
Class B and Class C shares of the Fund. The Fund compensated PIMS for
distributing and servicing the Fund's Class A, Class B and Class C shares,
pursuant to plans of distribution, (the 'Class A, B and C Plans'), regardless of
expenses actually incurred by them. The distribution fees are accrued daily and
payable monthly.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS 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 Plan were .25 of 1%, .50 of 1% and .75 of
1% of the average daily net assets of the Class A, B and C shares, respectively.
PIMS has advised the Series that they have received approximately $4,400
and $600 in front-end sales charges resulting from sales of Class A and Class C
shares,
17
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Notes to Financial Statements (Unaudited) Cont'd.
respectively during the six months ended February 29, 2000. From these fees,
PIMS paid such sales charges to affiliated broker-dealers, which in turn paid
commissions to salespersons and incurred other distribution costs.
PIMS has advised the Series that for the six months ended February 29,
2000, they received approximately $53,700 and $1,900 in contingent deferred
sales charges imposed upon certain redemptions by Class B and Class C
shareholders, respectively.
PIFM, PIC and PIMS are wholly owned subsidiaries of The Prudential
Insurance Company of America.
As of March 11, 1999, the Series, along with other affiliated registered
investment companies (the 'Funds'), entered into a syndicated credit agreement
('SCA') with an unaffiliated lender. The maximum commitment under the SCA is $1
billion. Interest on any borrowings will be at market rates. For the period
3/11/99 - 3/9/00, the commitment fee on the unused portion of the credit
facility was .065 of 1%. Subsequent to March 9, 2000, the SCA was renewed with a
maximum commitment of $1 billion at a commitment fee of .080 of 1% of the unused
portion of the facility. The expiration date of the SCA is March 9, 2001. The
Fund did not borrow any amounts pursuant to either agreement during the six
months ended February 29, 2000. The purpose of the credit agreements is to serve
as an alternative source of funding for capital share redemptions.
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the six months ended February 29,
2000, the Series incurred fees of approximately $44,600 for the services of
PMFS. As of February 29, 2000, approximately $7,300 of such fees were due to
PMFS. Transfer agent fees and expenses in the Statement of Operations includes
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 29, 2000 were $13,407,200 and
$23,875,522, respectively.
The cost basis of investments for federal income tax purposes at February
29, 2000 was substantially the same as for financial reporting purposes and
accordingly, net unrealized depreciation of investments for federal income tax
purposes was $1,769,326 (gross unrealized appreciation--$5,436,656; gross
unrealized depreciation--$7,205,982).
18
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Notes to Financial Statements (Unaudited) Cont'd.
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 a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Class C shares are sold with a front-end
sales charge of 1% during the first 18 months. Class B shares will automatically
convert to Class A shares on a quarterly basis approximately seven years after
purchase. A special exchange privilege is also available for shareholders who
qualify to purchase Class A shares at net asset value. 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 29, 2000 and the fiscal year ended August 31, 1999 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------------------------------------ ---------- ------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold 820,337 $ 8,211,305
Shares issued in reinvestment of
dividends and distributions 185,942 1,824,749
Shares reacquired (995,696) (9,787,443)
---------- ------------
Net increase in shares outstanding before conversion 10,583 248,611
Shares issued upon conversion from
Class B 318,224 3,184,951
---------- ------------
Net increase in shares outstanding 328,807 $ 3,433,562
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 1,560,443 $ 16,614,598
Shares issued in reinvestment of
dividends and distributions 345,509 3,672,564
Shares reacquired (1,240,715) (13,105,874)
---------- ------------
Net increase in shares outstanding before conversion 665,237 7,181,288
Shares issued upon conversion from
Class B 663,116 7,103,569
---------- ------------
Net increase in shares outstanding 1,328,353 $ 14,284,857
---------- ------------
---------- ------------
</TABLE>
19
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B Shares Amount
- ------------------------------------------------------------ ---------- ------------
Six months ended February 29, 2000:
<S> <C> <C>
Shares sold 259,027 $ 2,557,275
Shares issued in reinvestment of
dividends and distributions 123,419 1,211,790
Shares reacquired (1,655,140) (16,417,699)
---------- ------------
Net decrease in shares outstanding before conversion (1,272,694) (12,648,634)
Shares reacquired upon conversion from Class B (318,224) (3,184,951)
---------- ------------
Net decrease in shares outstanding (1,590,918) $(15,833,585)
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 889,808 $ 9,514,214
Shares issued in reinvestment of
dividends and distributions 320,265 3,411,048
Shares reacquired (2,587,525) (27,465,851)
---------- ------------
Net decrease in shares outstanding before conversion (1,377,452) (14,540,589)
Shares reacquired upon conversion from Class B (663,288) (7,103,569)
---------- ------------
Net decrease in shares outstanding (2,040,740) $(21,644,158)
---------- ------------
---------- ------------
<CAPTION>
Class C
- ------------------------------------------------------------
<S> <C> <C>
Six months ended February 29, 2000:
Shares sold 11,011 $ 108,615
Shares issued in reinvestment of
dividends and distributions 1,779 17,465
Shares reacquired (38,735) (376,710)
---------- ------------
Net decrease in shares outstanding (25,945) $ (250,630)
---------- ------------
---------- ------------
Year ended August 31, 1999:
Shares sold 34,335 $ 365,266
Shares issued in reinvestment of
dividends and distributions 4,074 43,394
Shares reacquired (53,304) (563,273)
---------- ------------
Net decrease in shares outstanding (14,895) $ (154,613)
---------- ------------
---------- ------------
</TABLE>
20
<PAGE>
This page intentionally left blank
21
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Class A
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.13
-----------------
Income from investment operations
Net investment income .27
Net realized and unrealized gain (loss) on investment
transactions (.38)
-----------------
Total from investment operations .(.11)
-----------------
Less distributions
Dividends from net investment income (.27)
Distributions in excess of net investment income --
Distributions from net realized gains (.03)
-----------------
Total distributions (.30)
-----------------
Net asset value, end of period $ 9.72
-----------------
-----------------
TOTAL RETURN(b): (1.10)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 103,132
Average net assets (000) $ 105,675
Ratios to average net assets:
Expenses, including distribution fees .89%(d)
Expenses, excluding distribution fees .64%(d)
Net investment income 5.33%(d)
For Class A, B and C shares:
Portfolio turnover rate 7%
</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.
22 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class A
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 10.92 $ 10.73 $ 10.49 $ 10.55 $ 10.42
- ---------------- -------- -------- -------- --------
.53 .57 .59(a) .59(a) .60(a)
(.67) .21 .33 (.06) .13
- ---------------- -------- -------- -------- --------
(.14) .78 .92 .53 .73
- ---------------- -------- -------- -------- --------
(.53) (.57) (.59) (.59) (.60)
-- --(c) --(c) -- --
(.12) (.02) (.09) -- --
- ---------------- -------- -------- -------- --------
(.65) (.59) (.68) (.59) (.60)
- ---------------- -------- -------- -------- --------
$ 10.13 $ 10.92 $ 10.73 $ 10.49 $ 10.55
- ---------------- -------- -------- -------- --------
- ---------------- -------- -------- -------- --------
(1.35)% 7.55% 9.01% 5.08% 7.35%
$104,210 $ 97,794 $ 89,604 $ 69,659 $ 50,696
$104,460 $ 96,053 $ 83,552 $ 59,995 $ 30,092
.84% .77% .72%(a) .75%(a) .80%(a)
.64% .67% .62%(a) .65%(a) .70%(a)
5.00% 5.26% 5.60%(a) 5.56%(a) 5.76%(a)
23% 13% 21% 26% 19%
</TABLE>
See Notes to Financial Statements 23
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.13
--------
Income from investment operations
Net investment income .25
Net realized and unrealized gain (loss) on investment
transactions (.38)
--------
Total from investment operations (.13)
--------
Less distributions
Dividends from net investment income (.25)
Distributions in excess of net investment income --
Distributions from net realized gains (.03)
--------
Total distributions (.28)
--------
Net asset value, end of period $ 9.72
--------
--------
TOTAL RETURN(b): (1.22)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $69,428
Average net assets (000) $76,959
Ratios to average net assets:
Expenses, including distribution fees 1.14%(d)
Expenses, excluding distribution fees .64%(d)
Net investment income 5.06%(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.
24 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
- ----------------------------------------------------------------------------------------------------------
Year Ended August 31,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 10.92 $ 10.72 $ 10.49 $ 10.55 $ 10.42
- ---------------- ---------------- ---------------- ---------------- ----------------
.50 .53 .55(a) .55(a) .56(a)
(.67) .22 .32 (.06) .13
- ---------------- ---------------- ---------------- ---------------- ----------------
(.17) .75 .87 .49 .69
- ---------------- ---------------- ---------------- ---------------- ----------------
(.50) (.53) (.55) (.55) (.56)
-- --(c) --(c) -- --
(.12) (.02) (.09) -- --
- ---------------- ---------------- ---------------- ---------------- ----------------
(.62) (.55) (.64) (.55) (.56)
- ---------------- ---------------- ---------------- ---------------- ----------------
$ 10.13 $ 10.92 $ 10.72 $ 10.49 $ 10.55
- ---------------- ---------------- ---------------- ---------------- ----------------
- ---------------- ---------------- ---------------- ---------------- ----------------
(1.65)% 7.13% 8.58% 4.66% 6.92%
$ 88,519 $117,678 $135,275 $167,809 $202,633
$104,860 $125,306 $148,394 $189,902 $223,082
1.14% 1.17% 1.12%(a) 1.15%(a) 1.17%(a)
.64% .67% .62%(a) .65%(a) .67%(a)
4.70% 4.87% 5.20%(a) 5.16%(a) 5.44%(a)
</TABLE>
See Notes to Financial Statements 25
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
-----------------
Six Months Ended
February 29, 2000
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.13
--------
Income from investment operations
Net investment income .24
Net realized and unrealized gain (loss) on investment
transactions (.38)
--------
Total from investment operations (.14)
--------
Less distributions
Dividends from net investment income (.24)
Distributions in excess of net investment income --
Distributions from net realized gains (.03)
--------
Total distributions (.27)
--------
Net asset value, end of period $ 9.72
--------
--------
TOTAL RETURN(b): (1.35)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 593
Average net assets (000) $ 818
Ratios to average net assets:
Expenses, including distribution fees 1.39%(d)
Expenses, excluding distribution fees .64%(d)
Net investment income 4.79%(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.
26 See Notes to Financial Statements
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
- ----------------------------------------------------------------------------------------------------------
Year Ended September 30,
- ----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$10.92 $10.72 $10.49 $10.55 $10.42
------- ------- ------- ------- -------
.47 .50 .52(a) .52(a) .53(a)
(.67) .22 .32 (.06) .13
------- ------- ------- ------- -------
(.20) .72 .84 .46 .66
------- ------- ------- ------- -------
(.47) (.50) (.52) (.52) (.53)
-- --(c) --(c) -- --
(.12) (.02) (.09) -- --
------- ------- ------- ------- -------
(.59) (.52) (.61) (.52) (.53)
------- ------- ------- ------- -------
$10.13 $10.92 $10.72 $10.49 $10.55
------- ------- ------- ------- -------
------- ------- ------- ------- -------
(1.91)% 6.86% 8.31% 4.41% 6.65%
$ 882 $1,113 $ 471 $ 829 $ 336
$1,075 $ 661 $ 678 $ 704 $ 223
1.39% 1.42% 1.37%(a) 1.40%(a) 1.44%(a)
.64% .67% .62%(a) .65%(a) .69%(a)
4.46% 4.60% 4.95%(a) 4.91%(a) 5.14%(a)
</TABLE>
See Notes to Financial Statements 27
<PAGE>
Prudential Municipal Series Fund Pennsylvania Series
Getting the Most From Your Prudential Mutual Fund
How many times have you read these reports--or other
financial materials--and stumbled across a word that
you don't understand?
Many shareholders have run into the same problem.
We'd like to help. So we'll use this space from
time to time to explain some of the words you might
have read, but not understood. And if you have a
favorite word that no one can explain to your
satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half
of one percent is 50 basis points.
Collateralized Mortgage Obligations (CMOs):
Mortgage-backed bonds that separate mortgage pools
into different maturity classes called tranches.
These instruments are sensitive to changes in
interest rates and homeowner refinancing activity.
They are subject to prepayment and maturity
extension risk.
Derivatives: Securities that derive their value
from other securities. The rate of return of these
financial instruments rises and falls--sometimes
very suddenly--in response to changes in some
specific interest rate, currency, stock, or other
variable.
Discount Rate: The interest rate charged by the
Federal Reserve on loans to member banks.
Federal Funds Rate: The interest rate charged by
one bank to
another on overnight loans.
Futures Contract: An agreement to purchase or sell
a specific amount of
a commodity or financial instrument at a set price
at a specified date in
the future.
<PAGE>
www.prudential.com (800) 225-1852
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Trustees
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, Secretary
David F. Connor, Assistant Secretary
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
194 Wood Avenue South
Iselin, NJ 08830
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Fund Symbols NASDAQ CUSIP
Class A PMPAX 74435M879
Class B -- 74435M887
Class C -- 74435M481
The views expressed in this report and information
about the Fund's portfolio holdings are for the
period covered by this report and
are subject to change thereafter.
The accompanying financial statements as
of February 29, 2000, were not audited and,
accordingly, no opinion is expressed on them.
<PAGE>
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Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
MF132E2 74435M879 74435M887 74435M481
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