SEMI-ANNUAL REPORT February 28, 1994
Prudential
California
Municipal Fund
California Series
- --------------------------------------------------
Prudential Mutual Funds
BUILDING YOUR FUTURE
(LOGO)
ON OUR STRENGTH
<PAGE>
LETTER TO
SHAREHOLDERS
April 4, 1994
Dear Shareholder:
In 1993, falling interest rates caused many investors to turn to municipal
bonds. Increased demand helped raise municipal bond prices, causing their
yields to decline -- in some cases to the lowest levels seen in 15 years.
As bond prices rose, so did the net asset value of your Prudential
California Municipal Fund -- California Series shares.
When we last reported to you six months ago, municipal bond funds
in general were performing well. Early this year, however, interest
rates began to rise. This means municipal bond yields may be higher
than last year, but price losses in 1994 may erode some gains.
Nevertheless, we expect that these issues should still remain
relatively attractive to investors, especially those in the higher
tax brackets.
California Series
The Series seeks maximum current income exempt from California state
and federal income taxes*, consistent with preservation of capital.
The portfolio is comprised of investment grade municipal obligations,
with an average credit quality of Aa/AA, as determined by Moody's
Investors Service or Standard & Poor's Ratings Group.
<TABLE>
SERIES PERFORMANCE
As of February 28, 1994
<CAPTION>
30-day Taxable Equivalent Yields
NAV SEC Yield @31% @36% @39.6%
<S> <C> <C> <C> <C> <C>
Class A $11.84 4.2% 6.8% 7.4% 7.8%
Class B $11.83 4.0% 6.5% 7.0% 7.4%
</TABLE>
Investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than
their original cost.
*Interest on certain municipal obligations may be subject to the
federal alternative minimum tax. See your Series' prospectus for
more details.
-1-
<PAGE>
<TABLE>
TOTAL RETURNS
<CAPTION>
Historical (As of 2/28/94)1 Average Annual (As of 3/31/94)2
1-Yr. 5-Yr. Since Incep.* 1-Yr. 5-Yr. Since Incep.*
<S> <C> <C> <C> <C> <C> <C>
Class A 5.2% N/A 43.0% -2.6% N/A 6.5%
Class B 4.9% 49.3% 121.9% -3.4% 7.3% 8.4%
Lipper CA
Muni Debt Avg.** 5.4% 54.7% 148.6% N/A N/A N/A
</TABLE>
1Source: Lipper Analytical Services. Past performance is no
guarantee of future results and an investor's shares, when
redeemed, may be worth more or less than their original value. These
figures do not take into account sales charges. The
Fund charges a maximum sales load of 4.50% for Class A shares.
Class B shares are subject to a declining contingent deferred sales
charge of 5%, 4%, 3%, 2%, 1% and 1%, respectively, for the first six
years.
2Source: Prudential Mutual Fund Management, Inc. These averages take
into account applicable sales charges.
*Inception on: 1/22/90 for Class A; 9/19/84 for Class B.
**These are the average returns of 66 California municipal
debt funds for 1-Yr., 36 funds for 5-Yr. and 13 funds since
inception, as determined by Lipper Analytical Services, Inc.
Note: Without expense subsidies and management fee waivers,
the Series' since inception historical and average annual total
returns would have been slightly lower.
A Choppy Market
In response to mixed news about the U.S. economy, municipal bond
prices fluctuated over the past six months. In August, after the
tax-raising Omnibus Budget Reconciliation Act was passed, municipal
bond prices rose and continued to climb through late December 1993,
when news of an accelerating U.S. economy halted the advance. (Many
bond investors fear rapid economic growth because it may portend rising
inflation, which erodes the purchasing power of a bond's fixed interest
payments.) Thanks to stronger economic news in the first two months of
1994, prices continued to soften in March.
Record High Issuance Absorbed
While the economy and interest rate movements affect municipal bond
prices, changes in the supply and demand also play a role. For instance,
nationwide, municipal bond supply was extremely heavy over the past six
months. Such a sizable increase in new issues would normally drive prices
down (and yields up) in order to attract buyers. Instead demand for
tax-exempt investments last year managed to absorb this supply.
California Investment Environment and Activity
California's long-term prospects appear strong to us and to the credit
rating agencies. However, in the wake of economic struggles, fires and
earthquakes, Moody's and S&P downgraded its prized Aaa/AAA rating to Aa/A+.
-2-
<PAGE>
The state's budget is now flooded with nearly $5 billion in red ink
for 1994, and the situation may deteriorate depending on how much it
will cost to rebuild Los Angeles following the earthquake.
Unfortunately, the state's deficit -- and the likelihood that it might
result in another credit rating downgrade -- has caused us to avoid the
state's general obligation bonds. California is currently using revenue
anticipation warrants ($3.2 billion in February 1994 alone) to
finance the deficit.
During the six months ended February 28, 1994, we continued to balance
the portfolio between older, high-coupon bonds and discounted bonds. The
high coupon bonds help to maintain the fund's dividend level while
cushioning against rising interest rates. On the other hand, the
discounted bonds should appreciate more rapidly if long-term interest
rates decline later this year as anticipated. The Fund is also concentrated
in bonds rated Aaa/AAA by Moody's or S&P (which were 47% of net assets
at the end of February) because we believe their prices should be resilient
if the state's credit rating is lowered. In line with this strategy,
we purchased J. Paul Getty Museum bonds (issued by the California Statewide
Community) during the period. This issue was 4.1% of net assets at the
end of February.
Demand May Weaken Slightly
While it is unlikely that investor demand will continue at last year's
feverish pitch, we do expect relatively strong demand for municipal bonds
throughout the rest of 1994.
Currently, 75% of the U.S. municipal bonds outstanding in the market are
owned by or controlled by individuals, usually through mutual funds or trusts.
As these investors begin feeling the bite of new federal income taxes on their
disposable income -- and if the market appears more stable -- they may look to
municipal bonds once again for tax-exempt income.
Supply Could Decline Dramatically
Most bond issuers that needed to sell new bonds did so when interest
rates were at their 1993 lows. As a result, we expect the municipal
bond supply to taper off in this year.
We also do not expect many more municipal bonds to be "refunded" in
1994, particularly as the year progresses. Refundings occur when market
interest rates decline and issuers decide to trim long-term financing costs
by replacing outstanding high coupon bonds with a similar amount of
lower coupon bonds. In 1993, municipal bonds issued solely for refunding
purposes accounted for 44% of issuance, according to The Bond Buyer.
-3-
<PAGE>
An Improving Economy Should Help
We expect a relatively strong economy in 1994. Such an environment could
be favorable for municipal bonds, although much depends on the path of
interest rates. Most state and local government issuers as well as private
purpose borrowers (e.g.,bridge and highway authorities) should see their
revenues begin to rise in 1994 after several years of recession. In turn,
rising revenues should improve the credit quality of the issuers' outstanding
bonds and support their prices.
Municipal Market Outlook Still Positive
Investors should be prepared for some volatility, but we think 1994 will
be a fair year for municipal bonds. The continued strong demand for
municipal bonds, along with a possibility of decreasing supply, should
help stabilize prices. An improving economy should further help municipal
issuer credit quality.
As always, we are pleased to have you as a shareholder of the Prudential
California Municipal Fund -- California Series and to take the opportunity
to report our activities to you.
Sincerely,
Lawrence C. McQuade
President
Christian Smith
Portfolio Manager
-4- <PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND Portfolio of Investments
CALIFORNIA SERIES February 28, 1994 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
LONG-TERM INVESTMENTS--97.5%
Alameda Impvt. Bond Act
of 1915, Marina Vlg.
Assmt. Dist. 89-1,
NR $ 1,700 7.55%, 9/2/06........... $ 1,752,411
NR 1,120 7.65%, 9/2/09........... 1,154,306
Arcadia Unified Sch.
Dist., Ser. A, M.B.I.A.,
Aaa 1,765 Zero coupon, 9/1/10..... 685,685
Aaa 1,370 Zero coupon, 9/1/14..... 407,548
Aaa 2,555 Zero coupon, 9/1/15..... 717,929
Aaa 1,225 Zero coupon, 9/1/16..... 324,478
Aaa 1,790 Zero coupon, 9/1/17..... 446,963
Azusa Pub. Fin. Auth.
Rev.,
Aaa 3,800 5.00%, 7/1/23, Ser. A,
F.G.I.C............... 3,427,714
Bakersfield Pub. Fac.
Corp., Cert. of Part.,
Wst. Wtr. Treat.
Plant, No. 3,
A1 2,750 8.00%, 1/1/10........... 3,081,072
Benicia Unified Sch.
Dist., Gen. Oblig.,
Aaa 1,000 6.85%, 8/1/16, Ser. A... 1,115,480
Berkeley Hosp. Rev.,
Alta Bates Hosp.
Corp.,
Baa1 1,785(D) 7.65%, 12/1/15.......... 2,073,849
Brea Pub. Fin. Auth.
Rev.,
Tax Alloc. Redev. Proj.,
NR 5,000 8.10%, 3/1/21, Ser. C... 5,684,300
Buena Park Cmnty. Redev.
Agcy., Central Bus.
Dist. Proj.,
BBB+* 2,500 7.10%, 9/1/14........... 2,648,025
California St. Brd. of
Pub. Wks., Lease Rev.,
Dept. of Corrections,
Aaa 775 5.25%, 12/1/08, Ser. A,
A.M.B.A.C............. 772,566
Univ. of California at
San Diego, High
Technology Facs.,
A1 1,570 7.375%, 4/1/06, Ser. A.. 1,747,881
Univ. of California at
Santa Barbara, High
Technology Facs.,
A1 2,500(D) 8.125%, 2/1/08, Ser. A.. 2,889,075
California St. Hlth.
Facs. Fin. Auth. Rev.,
Brookside Hosp.,
A+* $ 1,500 8.10%, 11/1/17, Ser. A.. $ 1,674,900
Catholic Hlth. Facs.,
Aaa 2,000 5.00%, 7/1/14,
A.M.B.A.C............. 1,841,560
Aaa 6,630 5.00%, 7/1/21,
A.M.B.A.C............. 5,998,890
Episcopal Homes
Foundation,
A+* 2,500 7.70%, 7/1/18, Ser. A... 2,748,075
Eskaton Properties,
A+* 4,500(D)/@ 7.50%, 5/1/20........... 5,259,465
Scripps Memorial Hosp.,
Aaa 1,705 4.50%, 10/1/18, Ser. A,
M.B.I.A............... 1,442,021
Sisters of Providence
Hosp.,
A1 1,500 7.50%, 10/1/10.......... 1,701,825
Sutter Hlth. Sys.,
A1 1,500 9.125%, 1/1/06.......... 1,592,760
NR 750(D) 8.00%, 1/1/16, Ser. B... 842,513
California St. Hsg. Fin.
Agcy. Rev.,
Sngl. Fam. Mtge.,
Aa 14,100 Zero coupon, 2/1/15,
Ser. A................ 1,877,979
California St. Poll.
Ctrl. Fin. Auth. Rev.,
Pacific Gas & Elec. Co.,
A* 1,650 6.625%, 6/1/09, Ser. A.. 1,765,797
A1 3,250 8.20%, 12/1/18, Ser. A.. 3,641,202
California Statewide
Cmnty. Dev. Corp.,
J. Paul Getty Museum,
Aaa 2,330 5.00%, 10/1/11.......... 2,199,613
Aaa 1,255 5.00%, 10/1/14.......... 1,187,042
Aaa 1,500 5.00%, 10/1/15.......... 1,414,830
Cert. of Part.,
Aaa 4,500 5.00%, 10/1/23.......... 4,142,070
Clearlake Redev. Agcy.,
Highlands Park Cmnty.
Dev. Proj., Tax Alloc.
Rev.,
BBB* 2,000 6.20%, 10/1/22.......... 1,999,840
Contra Costa Cnty.,
Spec. Tax,
Cmnty. Facs. Pleasant
Hill,
NR 1,300 8.125%, 8/1/16.......... 1,418,768
Contra Costa Wtr. Dist.
Rev.,
A 2,000(D)/@ 7.25%, 10/1/10, Ser. A. 2,330,440
</TABLE>
-5- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
Culver City Redev. Fin.
Auth.,
Tax Alloc. Rev.,
Aaa $ 4,500 4.60%, 11/1/20,
A.M.B.A.C............. $ 3,841,515
Desert Hosp. Dist.,
Cert. of Part.,
AAA* 5,000(D) 8.10%, 7/1/20........... 6,027,600
East Palo Alto San. Dist.,
Cert. of Part.,
Aux. Facs. Sch. Bldg.
Corp.,
NR 1,295 8.25%, 10/1/15.......... 1,394,197
Fairfield Pub. Fin.
Auth. Rev.,
Fairfield Redev.
Projs.,
NR 4,200(D) 7.90%, 8/1/21, Ser. A... 5,072,844
Fontana Cmnty. Facs.,
Dist. No. 2, Spec. Tax
Rev.,
NR 3,000 8.50%, 9/1/17, Ser. B... 3,349,680
Fresno Swr. Rev.,
A.M.B.A.C.,
Aaa 1,000 6.25%, 9/1/14........... 1,091,520
Aaa 1,500 5.25%, 9/1/19........... 1,421,355
Aaa 795 4.50%, 9/1/23........... 664,429
Industry City, Gen.
Oblig.,
Helene Curtis Proj.,
Aaa 1,660(D) 8.00%, 7/1/11,
F.G.I.C............... 1,966,453
Aaa 1,795(D) 8.00%, 7/1/12,
F.G.I.C............... 2,123,144
Urban Dev. Agcy.,
NR 970 10.40%, 5/1/15.......... 1,068,697
Long Beach Redev. Agcy.,
Dist. 3, Spec. Tax
Rev.,
NR 3,000 6.375%, 9/1/23.......... 2,875,230
Los Angeles Cmnty. Redev. Agcy.,
Bunker Hill Proj., Sub. Tax. Alloc.,
Aaa 750(D) 6.00%, 12/1/09, Ser. C,
M.B.I.A............... 822,653
Los Angeles Cnty., Cert. of Part.,
Civic Ctr. Heating &
Refrigeration Plant,
A1 2,000(D)/(D)(D) 8.00%, 6/1/10..... 2,318,980
Correctional Facs.
Proj.,
Aaa 3,770 Zero coupon, 9/1/10,
M.B.I.A............... 1,429,810
Solheim Lutheran Nursing
Home Proj.,
A+* 2,000 8.125%, 11/1/17......... 2,237,720
Los Angeles Cnty., Hsg.
Auth.,
Multifam. Mtge. Rev.,
Mayflower Gardens
Proj.,
NR $ 2,100(D) 8.875%, 12/20/10, Ser.
K, G.N.M.A............ $ 2,673,678
Los Angeles Cnty., Pub.
Wks. Fin. Auth., Lease
Rev.,
Mult. Cap. Fac. Proj.,
Aaa 6,000 4.75%, 12/1/13,
M.B.I.A............... 5,407,800
Los Angeles Conv. &
Exhib.
Ctr. Auth., Cert. of
Part.,
Aaa 1,250(D) 9.00%, 12/1/10.......... 1,683,925
Met. Wtr. Dist. of
Southern
California, Waterworks
Rev.,
Aa 4,000 5.75%, 7/1/21, Ser. A... 4,145,960
Mt. Diablo Hosp. Dist.
Rev.,
Aaa 1,250(D) 8.00%, 12/1/11, Ser. A,
A.M.B.A.C............. 1,514,350
Petaluma, Cert. of
Part.,
Petaluma Cmnty. Ctr.
Proj.,
A 1,380(D) 8.10%, 6/15/12.......... 1,487,557
Pleasanton Impvt. Bond Act of 1915,
Assmt. Dist. No. 86-9,
NR 1,495 7.80%, 9/2/13, Ser. B... 1,540,508
Port of Oakland Rev.,
M.B.I.A.,
Aaa 1,000 6.50%, 11/1/16, Ser.
E,.................... 1,082,350
Aaa 2,500 6.40%, 11/1/22, Ser.
A,.................... 2,662,950
Puerto Rico Hwy. &
Trans.
Auth. Rev.,
Baa1 5,000 6.625%, 7/1/12, Ser.
V..................... 5,511,350
Baa1 1,250 6.625%, 7/1/18, Ser.
T..................... 1,378,725
Rancho Wtr. Dist. Fin.
Auth., Rfdg. Rev.,
Aaa 2,250 4.75%, 8/15/21,
A.M.B.A.C............. 1,963,485
Riverside Wtr. Rev.,
Tyler Mall Cmnty.
Facs.,
Aa 1,660 Zero coupon, 10/1/07.... 787,753
Aa 2,920 6.00%, 10/1/15.......... 2,994,840
Roseville Cert. of
Part.,
Pub. Facs. Proj.,
Aaa 1,325 4.75%, 8/1/20,
M.B.I.A............... 1,159,017
Roseville City Sch.
Dist.,
Aaa 1,230 Zero coupon, 8/1/10,
Ser. A, F.G.I.C....... 480,131
</TABLE>
-6- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
Sacramento Cnty. San.
Dist.
Fin. Auth. Rev.,
Aa $ 2,500 4.75%, 12/1/23.......... $ 2,174,200
Sacramento Mun. Util.
Dist. Elec. Rev.,
Aaa 3,650 5.75%, 11/15/09, Ser. C,
M.B.I.A............... 3,749,535
Aaa 2,750 4.75%, 9/1/21,
M.B.I.A............... 2,399,623
San Buenaventura, Wtr. Rev. Rfdg.,
Aaa 5,000 4.75%, 10/1/20,
A.M.B.A.C............. 4,371,800
San Diego Cnty. Regl.
Trans.
Cmnty., Sales Tax
Rev.,
Aaa 2,000 5.25%, 4/1/08, Ser. A,
F.G.I.C............... 1,993,980
A1 1,750 6.00%, 4/1/08, Ser. A... 1,827,105
San Francisco City &
Cnty.,
Airports Comn., Issue
No. 3,
Aaa 4,500 6.20%, 5/1/20,
M.B.I.A............... 4,631,130
Pub. Utils. Comn. Wtr.
Rev.,
Aa 2,000 8.00%, 11/1/11.......... 2,283,600
Redev. Agcy., Lease
Rev.,
A 2,000 Zero coupon, 7/1/09..... 793,180
San Francisco Port Comm. Rev.,
A1 1,000 9.80%, 7/1/99, Ser. C... 1,047,680
San Jose Redev. Proj.,
Aaa 2,100 6.00%, 8/1/15,
M.B.I.A............... 2,231,082
San Mateo Cnty. Jt.
Pwrs.
Fin. Auth., Lease
Rev.,
Aaa 3,475@ 6.50%, 7/1/16,
M.B.I.A............... 3,937,870
Aaa 1,700 5.125%, 7/1/18,
M.B.I.A............... 1,593,240
Santa Cruz Cnty. Pub.
Fin. Auth. Rev.,
Tax Alloc. Sub. Ln.,
AAA* 2,350(D) 7.625%, 9/1/21, Ser.
B..................... 2,746,938
Sonoma Cnty., Cert. of
Part.,
Correctional Facs.
Proj.,
NR 4,000(D) 8.125%, 6/1/12.......... 4,592,640
Southern California Pub.
Pwr.
Auth. Rev., Pwr.
Proj.,
A 2,000 6.75%, 7/1/12........... 2,276,260
Southern California Pub.
Pwr.
Auth. Rev., Pwr.
Proj.,
Transmission Proj.,
Aaa $ 7,080 Zero coupon, 7/1/12,
F.G.I.C............... $ 2,467,592
Southern California Rapid
Transit Dist., Cert. of Part.,
Worker's Compensation Fund,
Aaa 2,095 6.00%, 7/1/10,
M.B.I.A............... 2,196,230
Sulphur Springs Union Sch. Dist.,
Aaa 2,000 Zero coupon, 9/1/09,
Ser. A, M.B.I.A....... 836,540
Torrance Redev. Agcy.,
Tax. Alloc., Downtown Redev.,
Baa 1,580 7.125%, 9/1/21.......... 1,688,467
Univ. of California
Rev.,
Mult. Purpose Proj.,
M.B.I.A.,
Aaa 9,840 4.75%, 9/1/21........... 8,586,286
Pkg. Sys.,
A 2,000(D) 7.75%, 11/1/14, Ser.
C..................... 2,235,680
Virgin Islands Pub. Fin. Auth. Rev.,
NR 600 7.25%, 10/1/18, Ser.
A..................... 674,652
Virgin Islands Terr.,
Hugo Ins. Claims Fund Prog.,
NR 925 7.75%, 10/1/06, Ser.
91.................... 1,065,554
Virgin Islands Wtr. & Pwr. Auth.,
Elec. Sys. Rev.,
NR 500 7.40%, 7/1/11, Ser. A... 569,605
Wtr. Sys. Rev.,
NR 250 7.20%, 1/1/02, Ser. B... 273,255
NR 830 7.60%, 1/1/12, Ser. B... 927,351
Whittier Pub. Fin. Auth.
Rev.,
Whittier Blvd. Redev.
Proj.,
NR 825 7.50%, 9/1/14, Ser. A... 888,640
------------
Total long-term
investments
(cost $200,754,141)... 213,248,793
------------
SHORT-TERM INVESTMENTS--1.3%
California St. Poll. Ctrl. Fin. Auth.
Rev.,
Burney Forest Proj.,
F.R.D.D.,
P1 1,400 2.20%, 3/1/94, Ser.
88A................... 1,400,000
</TABLE>
-7- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
Delano Proj., F.R.D.D.,
P1 $ 1,500 2.30%, 3/1/94, Ser.
91.................... $ 1,500,000
------------
Total short-term
investments
(cost $2,900,000)..... 2,900,000
------------
Total Investments--98.8%
(cost $203,654,141;
Note 4).............. 216,148,793
Other assets in excess
of
liabilities--1.2%..... 2,656,434
------------
Net Assets--100%........ $218,805,227
------------
------------
</TABLE>
- ------------------
(a) The following abbreviations are used in portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation.
F.G.I.C.--Financial Guaranty Insurance Company.
F.R.D.D.--Floating Rate Daily Demand#.
G.N.M.A.--Government National Mortgage Association.
M.B.I.A.--Municipal Bond Insurance Association.
# For purposes of amortized cost valuation, the maturity date of these
instruments 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.
* Ratings of Standard & Poor's Corporation.
(D) Prerefunded issues are secured by escrowed cash and/or direct U.S.
guaranteed obligations.
(D)(D) $1,250,000 of principal amount pledged as initial margin on financial
futures contracts.
@ Entire principal amount pledged as initial margin on financial futures
contracts.
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>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
February 28,
Assets 1994
------------
<S> <C>
Investments, at value (cost $203,654,141)................................................. $216,148,793
Cash...................................................................................... 12,968
Interest receivable....................................................................... 3,582,959
Receivable for Fund shares sold........................................................... 399,237
Deferred expenses and other assets........................................................ 3,999
------------
Total assets.......................................................................... 220,147,956
------------
Liabilities
Payable for Fund shares reacquired........................................................ 940,105
Accrued expenses.......................................................................... 119,949
Management fee payable.................................................................... 85,301
Distribution fee payable.................................................................. 81,620
Due to broker-variation margin payable.................................................... 74,954
Dividends payable......................................................................... 39,108
Deferred trustees' fees................................................................... 1,692
------------
Total liabilities..................................................................... 1,342,729
------------
Net Assets................................................................................ $218,805,227
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at par................................................... $ 185,008
Paid-in capital in excess of par........................................................ 204,490,963
------------
204,675,971
Accumulated net realized gains on investments........................................... 1,106,104
Net unrealized appreciation on investments.............................................. 13,023,152
------------
Net assets, February 28, 1994........................................................... $218,805,227
------------
------------
Class A:
Net asset value and redemption price per share
($11,808,573 / 997,448 shares of beneficial interest issued and outstanding).......... $11.84
Maximum sales charge (4.5% of offering price)........................................... .56
------------
Maximum offering price to public........................................................ $12.40
------------
------------
Class B:
Net asset value, offering price and redemption price per share
($206,996,654 / 17,503,392 shares of beneficial interest issued and outstanding)...... $11.83
------------
------------
</TABLE>
See Notes to Financial Statements.
-9-
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February
28,
Net Investment Income 1994
-----------
<S> <C>
Income
Interest............................ $ 6,845,480
-----------
Expenses
Management fee...................... 551,571
Distribution fee--Class A........... 5,856
Distribution fee--Class B........... 522,289
Custodian's fees and expenses....... 55,000
Transfer agent's fees and
expenses............................ 49,000
Registration fees................... 12,500
Audit fee........................... 7,500
Legal fee........................... 7,000
Reports to shareholders............. 5,000
Trustees' fees...................... 4,000
Miscellaneous....................... 657
-----------
Total expenses.................... 1,220,373
-----------
Net investment income................. 5,625,107
-----------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions............. 4,517,412
Financial futures contract
transactions...................... (136,720)
-----------
4,380,692
-----------
Net change in unrealized appreciation/
depreciation on:
Investments......................... (8,815,718)
Financial futures contracts......... 579,313
-----------
(8,236,405)
-----------
Net loss on investments............... (3,855,713)
-----------
Net Increase in Net Assets
Resulting from Operations............. $ 1,769,394
-----------
-----------
</TABLE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) February 28, August 31,
in Net Assets 1994 1993
------------ ------------
<S> <C> <C>
Operations
Net investment
income............... $ 5,625,107 $ 10,834,798
Net realized gain on
investment
transactions......... 4,380,692 1,873,737
Net change in
unrealized
appreciation/
depreciation
on investments....... (8,236,405) 9,704,370
------------ ------------
Net increase in net
assets resulting from
operations........... 1,769,394 22,412,905
------------ ------------
Dividends and distributions (Note 1)
Dividends to
shareholders from net
investment income
Class A.............. (320,950) (449,523)
Class B.............. (5,304,157) (10,385,275)
------------ ------------
(5,625,107) (10,834,798)
------------ ------------
Distributions to
shareholders from net
realized gains
Class A.............. (111,145) --
Class B.............. (1,998,700) --
------------ ------------
(2,109,845) --
------------ ------------
Fund share transactions
(Note 5)
Net proceeds from
shares subscribed.... 18,027,824 49,271,241
Net asset value of
shares issued in
reinvestment of
dividends and
distributions........ 4,522,738 5,878,940
Cost of shares
reacquired........... (16,529,446) (31,227,312)
------------ ------------
Net increase in net
assets from Fund
share transactions... 6,021,116 23,922,869
------------ ------------
Total increase........... 55,558 35,500,976
Net Assets
Beginning of period...... 218,749,669 183,248,693
------------ ------------
End of period............ $218,805,227 $218,749,669
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-10-
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
Notes to Financial Statements
(Unaudited)
Prudential California Municipal 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
three series. The monies of each series are invested in separate, independently
managed portfolios. The California Series (the ``Series'') commenced investment
operations on September 19, 1984. The Series is diversified and seeks to achieve
its investment objective of obtaining the maximum amount of income exempt from
federal and California 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 developments in a specific state, industry or region.
Note 1. Accounting The following is a summary
Policies of significant accounting poli-
cies followed by the Fund, and the Series, in
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 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 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 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.
Net investment income (other than distribution fees) and realized and
unrealized 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 and because substantially all of the Series' gross
income consists of tax-exempt interest, 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.
-11-
<PAGE>
<PAGE>
Note 2. Agreements The Fund has a management
agreement with Prudential Mutual Fund Management,
Inc. (``PMF''). Pursuant to this agreement, PMF has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PMF 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. PMF pays for the cost of the
subadviser's services, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.
The management fee paid PMF 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 distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as the distributor of the Class A
shares of the Fund and with Prudential Securities Incorporated (``PSI''), which
acts as distributor of the Class B shares of the Fund (collectively the
``Distributors''). To reimburse the Distributors for their expenses incurred in
distributing and servicing the Fund's Class A and B shares, the Fund, pursuant
to plans of distribution, pays the Distributors a reimbursement, accrued daily
and payable monthly.
Pursuant to the Class A Plan, the Fund reimburses PMFD for its distribution
and service related expenses with respect to Class A shares at an annual rate of
up to .30 of 1% of the average daily net assets of the Class A shares. Such
expenses under the Class A Plan were .10 of 1% of the average daily net assets
of the Class A shares for the six months ended February 28, 1994. PMFD pays
various broker-dealers, including PSI and Pruco Securities Corporation
(``Prusec''), affiliated broker-dealers, for account servicing fees and other
expenses incurred by such broker-dealers.
Pursuant to the Class B Plan, the Series reimburses PSI for its distribution
and service related expenses with respect to Class B shares at an annual rate of
up to .50 of 1% of the average daily net assets of the Class B shares.
The Class B distribution and service related expenses include commission
credits for payment of commissions and account servicing fees to financial
advisers and an allocation for overhead and other branch office
distribution-related expenses, interest and/or carrying charges, the cost of
printing and mailing prospectuses to potential investors and of advertising
incurred in connection with the distribution of shares.
The Distributors recover the distribution expenses and service fees incurred
through the receipt of reimbursement payments from the Series under the plans
and the receipt of initial sales charges (Class A only) and contingent deferred
sales charges (Class B only) from shareholders.
PMFD has advised the Series that it has received approximately $66,500 in
front-end sales charges resulting from sales of Class A shares during the six
months ended February 28, 1994. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salespersons and
incurred other distribution costs.
With respect to the Class B Plan, at any given time the amount of expenses
incurred by PSI in distributing the Series' shares and not recovered through the
imposition of contingent deferred sales charges in connection with certain
redemptions of shares may exceed the total payments made by the Series pursuant
to the Plan. PSI has advised the Series that for the six months ended February
28, 1994, it received approximately $158,600 in contingent deferred sales
charges imposed upon certain redemptions by investors. PSI, as distributor, has
also advised the Series that as of February 28, 1994, the amount of distribution
expenses incurred by PSI and not yet reimbursed by the Series or recovered
through contingent deferred sales charges approximated $5,556,300. This amount
may be recovered through future payments under the Class B Plan or contingent
deferred sales charges.
In the event of termination or noncontinuation of the Class B Plan, the
Series would not be contractually obligated to pay PSI as distributor, for any
expenses not previously reimbursed or recovered through contingent deferred
sales charges.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are (indirect)
wholly-owned subsidiaries of The Prudential Insurance Company of America.
Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS''), a
with Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During
the six months ended February 28, 1994, the Series incurred fees of
approximately $35,800 for the services of PMFS. As of February 28, 1994,
approximately $6,000 of such fees were due to PMFS. Transfer agent fees and
expenses in the Statement of Operations include certain out-of-pocket expenses
paid to non-affiliates.
Note 4. Portfolio Purchases and sales of port-
Securities folio securities of the Series,
excluding short-term investments, for the six
months ended February 28, 1994 were $77,908,382 and $73,009,944, respectively.
-12-
<PAGE>
<PAGE>
The cost basis of investments for federal income tax purposes was
substantially the same as for financial reporting purposes and, accordingly, at
February 28, 1994 net unrealized appreciation of investments for federal income
tax purposes was $12,494,652 (gross unrealized appreciation-- $15,532,668; gross
unrealized depreciation--$3,038,016).
At February 28, 1994, the Series sold 132 financial futures contracts on the
Municipal Bond Index and sold 33 financial futures contracts on U.S. Treasury
Bonds both of which expire in March 1994. The value at sale of such contracts
was $17,376,031. The value of such contracts on February 28, 1994 was
$16,847,531, thereby resulting in an unrealized gain of $528,500. The Series has
pledged $1,250,000 principal amount of Los Angeles Cnty., Cert. of Part., Civic
Ctr. Heating & Refrigeration Plant, $4,500,000 principal amount of California
Hlth. Facs. Fin Auth. Rev., Eskaton Properties, $2,000,000 principal amount of
Contra Costa Wtr. Dist. Rev. and $3,475,000 principal amount of San Mateo Cnty.
Jt. Pwrs. Fin. Auth., Lease Rev. as initial margin on such contracts.
For federal income tax purposes, the Series has a capital loss carryforward
as of August 31, 1993 of approximately $1,216,000 which expires in 1999.
Note 5. Capital The Series offers both Class A and
Class B shares. Class A shares are sold with a
front-end sales charge of up to 4.5%. 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. Both classes of shares have equal rights as to
earnings, assets and voting privileges except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan.
The Fund has authorized an unlimited number of shares of beneficial interest
for each class at $.01 par value per share.
Transactions in shares of beneficial interest for the six months ended
February 28, 1994 and fiscal year ended August 31, 1993 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------ ---------- ------------
<S> <C> <C>
Six months ended February 28, 1994:
Shares sold................... 203,909 $ 2,478,568
Shares issued in reinvestment
of dividends and
distributions............... 20,784 249,912
Shares reacquired............. (141,268) (1,707,967)
---------- ------------
Net increase in shares
outstanding................. 83,425 $ 1,020,513
---------- ------------
---------- ------------
Year ended August 31, 1993:
Shares sold................... 551,246 $ 6,493,924
Shares issued in reinvestment
of dividends................ 20,712 244,188
Shares reacquired............. (127,066) (1,500,007)
---------- ------------
Net increase in shares
outstanding................. 444,892 $ 5,238,105
---------- ------------
---------- ------------
<CAPTION>
Class B
- ------------------------------
<S> <C> <C>
Six months ended February 28, 1994:
Shares sold................... 1,283,035 $ 15,549,256
Shares issued in reinvestment
of dividends and
distributions............... 355,683 4,272,826
Shares reacquired............. (1,227,067) (14,821,479)
---------- ------------
Net increase in shares
outstanding................. 411,651 $ 5,000,603
---------- ------------
---------- ------------
Year ended August 31, 1993:
Shares sold................... 3,646,925 $ 42,777,317
Shares issued in reinvestment
of dividends. .............. 480,211 5,634,752
Shares reacquired............. (2,532,383) (29,727,305)
---------- ------------
Net increase in shares
outstanding................. 1,594,753 $ 18,684,764
---------- ------------
---------- ------------
</TABLE>
-13-
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A Class B
--------------------------------------------------------------- ----------------------------------
January 22,
Six Months 1990* Six Months Year Ended August
Ended Year Ended August 31, Through Ended 31,
February 28, --------------------------------- August 31, February 28, -------------------
1994 1993 1992 1991 1990 1994 1993 1992
------------ ------- ------- ------ ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of
period............... $12.16 $ 11.48 $11.01 $10.57 $10.77 $ 12.15 $ 11.48 $ 11.01
------------ ------- ------- ------ ------------ ------------ -------- --------
Income from investment
operations
Net investment
income............... .33 .69 .70 .69 .41 .30 .64 .66
Net realized and
unrealized gain
(loss) on investment
transactions......... (.20) .68 .47 .44 (.20) (.20) .67 .47
------------ ------- ------- ------ ------------ ------------ -------- --------
Total from investment
operations......... .13 1.37 1.17 1.13 .21 .10 1.31 1.13
------------ ------- ------- ------ ------------ ------------ -------- --------
Less distributions
Dividends from net
investment income.... (.33) (.69) (.70) (.69) (.41) (.30) (.64) (.66)
Distributions from net
realized gains....... (.12) -- -- -- -- (.12) -- --
------------ ------- ------- ------ ------------ ------------ -------- --------
Total distributions.... (.45) (.69) (.70) (.69) (.41) (.42) (.64) (.66)
------------ ------- ------- ------ ------------ ------------ -------- --------
Net asset value, end of
period............... $11.84 $ 12.16 $11.48 $11.01 $10.57 $ 11.83 $ 12.15 $ 11.48
------------ ------- ------- ------ ------------ ------------ -------- --------
------------ ------- ------- ------ ------------ ------------ -------- --------
TOTAL RETURN#:......... 1.09% 12.30% 10.95% 10.98% 1.85% .88% 11.74% 10.52%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000)......... $11,809 $11,116 $5,388 $4,188 $1,774 $206,997 $207,634 $177,861
Average net assets
(000)................ $11,810 $7,728 $4,322 $2,748 $1,214 $210,647 $190,944 $172,495
Ratios to average net
assets:
Expenses, including
distribution
fees............... .73%** .77% .82% .88% .90%** 1.13%** 1.17% 1.22%
Expenses, excluding
distribution
fees............... .63%** .67% .72% .78% .80%** .63%** .67% .72%
Net investment
income............... 5.48%** 5.82% 6.25% 6.37% 6.28%** 5.08%** 5.44% 5.85%
Portfolio turnover..... 33% 43% 53% 53% 119% 33% 43% 53%
<CAPTION>
1991 1990 1989
-------- -------- --------
<S> <C> <C> <C>
PER SHARE OPERATING PER
Net asset value,
beginning of
period............... $ 10.57 $ 10.76 $ 10.52
-------- -------- --------
Income from investment
operations
Net investment
income............... .64 .64 .66
Net realized and
unrealized gain
(loss) on investment
transactions......... .44 (.19) .24
-------- -------- --------
Total from investment
operations......... 1.08 .45 .90
-------- -------- --------
Less distributions
Dividends from net
investment income.... (.64) (.64) (.66)
Distributions from net
realized gains....... -- -- --
-------- -------- --------
Total distributions.... (.64) (.64) (.66)
-------- -------- --------
Net asset value, end of
period............... $ 11.01 $ 10.57 $ 10.76
-------- -------- --------
-------- -------- --------
TOTAL RETURN#:......... 10.54% 4.21% 8.79%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000)......... $169,190 $174,005 $178,287
Average net assets
(000)................ $169,220 $175,990 $166,305
Ratios to average net
assets:
Expenses, including
distribution
fees............... 1.28% 1.24% 1.23%
Expenses, excluding
distribution
fees............... .78% .76% .75%
Net investment
income............. 5.98% 5.95% 6.12%
Portfolio turnover..... 53% 119% 145%
</TABLE>
- ---------------
* Commencement of offering of Class A shares.
** Annualized.
# 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.
See Notes to Financial Statements.
-14-
<PAGE>
Trustees
Edward D. Beach
Eugene C. Dorsey
Delayne Dedrick Gold
Harry A. Jacobs, Jr.
Lawrence C. McQuade
Thomas T. Mooney
Thomas H. O'Brien
Richard A. Redeker
Nancy Hays Teeters
Officers
Lawrence C. McQuade, President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
S. Jane Rose, Secretary
Deborah Docs, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Deloitte & Touche
1633 Broadway
New York, NY 10019
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
One Seaport Plaza
New York, NY 10292
Toll free (800) 225-1852
Collect (908) 417-7555
This report is not authorized for distribution
to prospective investors unless preceded or
accompanied by a current prospectus.
The accompanying financial statements as of
February 28, 1994 were not audited and, accordingly, no opinion is expressed
on them.
744313107 MF 116E-2
744313206 Cat. #642111F
SEMI ANNUAL REPORT February 28, 1994
Prudential
California
Municipal Fund
_____________________________
(ARTWORK)
California
Income Series
(LOGO)
<PAGE>
LETTER TO SHAREHOLDERS
April 4, 1994
Dear Shareholder:
In 1993, falling interest rates caused many investors to turn to
municipal bonds. Increased demand helped raise municipal bond
prices, causing their yields to decline -- in some cases to the
lowest levels seen in 15 years. As bond prices rose, so
did the net asset value of your Prudential California Municipal
Series Fund -- California Income Series shares.
When we last reported to you six months ago, municipal bond funds
in general were performing well. Early this year, however, interest
rates began to rise. This means municipal bond yields may be higher
than last year, but price losses in 1994 may erode some gains.
Nevertheless, we expect that these issues should still remain
relatively attractive to investors, especially those
in the higher tax brackets.
California Income Series
The California Income Series seeks to maximize state and
federally tax-free income and to preserve principal investment
value. The Series invests in investment grade and speculative quality
municipal bonds that produce tax-exempt income for California
residents.*
<TABLE>
SERIES PERFORMANCE
As of February 28, 1994
<CAPTION>
30-day Taxable Equivalent Yields
NAV SEC Yield @31% @36% @39.6%
<S> <C> <C> <C> <C> <C>
Class A $10.50 5.4% 8.7% 9.4% 10.0%
Class B $10.50 5.2% 8.5% 9.1% 9.7%
</TABLE>
Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than
their original cost.
*Interest on certain municipal obligations may be subject to the
federal alternative minimum tax. See your Series' prospectus for
more details.
-1-
<PAGE>
<TABLE>
TOTAL RETURNS
<CAPTIONS>
Historical (As of 2/28/94)1 Average Annual (As of 3/31/94)2
1-Yr. Since Incep.* 1-Yr. Since Incep.*
<S> <C> <C> <C> <C>
Class A 8.0% 38.4% 0.5% 7.7%
Class B N/A -3.8% N/A -8.8%
Lipper CA
Muni Debt Avg.** 5.4% N/A N/A N/A
</TABLE>
1Source: Lipper Analytical Services. Past performance is no guarantee
of future results and an investor's shares, when redeemed, may be worth
more or less than their original value. These figures do not take
into account sales charges. The Fund charges a maximum sales load
of 4.50% for Class A shares. Class B shares are subject to a declining
contingent deferred sales charge of 5%, 4%, 3%, 2%, 1% and 1%,
respectively, for the first six years.
2Source: Prudential Mutual Fund Management, Inc. These averages take
into account applicable sales charges.
*Inception on: 12/3/90 for Class A. 12/7/93 for Class B.
**This is the average return of 66
California municipal debt funds for 1-Yr. as determined by Lipper
Analytical Services, Inc.
Note: Without expense subsidies and management fee waivers, the
Series' since inception Class A historical and average annual total
returns would have been lower. Average annual total returns without
subsidies and fee waivers for Class A would have been 7.3% since
inception.
A Choppy Market
In response to mixed news about the U.S. economy, municipal bond
prices fluctuated over the past six months. In August, after the
tax-raising Omnibus Budget Reconciliation Act was passed, municipal
bond prices rose and continued to climb through late December 1993,
when news of an accelerating U.S. economy halted the advance. (Many
bond investors fear rapid economic growth because it may portend rising
inflation, which erodes the purchasing power of a bond's fixed interest
payments.) Thanks to stronger economic news in the first two months of
1994, prices continued to soften in March.
Record High Issuance Absorbed
While the economy and interest rate movements affect municipal bond
prices, changes in the supply and demand also play a role. For instance,
nationwide, municipal bond supply was extremely heavy over the past
six months. Such a sizable increase in new issues would normally drive
prices down (and yields up) in order to attract buyers. Instead demand
for tax-exempt investments last year managed to absorb this supply.
-2-
<PAGE>
California Investment Environment and Activity
California's long-term prospects appear strong to us and to the credit
rating agencies. However, in the wake of economic struggles, fires and
earthquakes, Moody's and Standard & Poor's downgraded the state's prized
Aaa/AAA rating to Aa/A+. The state's budget has is now flooded with
nearly $5 billion in red ink for 1994, and the situation may deteriorate
depending on how much it will cost to rebuild Los Angeles following the
earthquake.
Unfortunately, the state's deficit -- and the likelihood that
it might result in another credit rating
downgrade -- has caused us to avoid the state's general obligation
bonds. California is currently using revenue anticipation warrants
($3.2 billion in February 1994 alone) to finance
the deficit.
We have split the Series' portfolio between investment grade and non
investment grade credits. The higher rated credits should keep the
portfolio's overall credit risk manageable, while the unrated junk
bonds can raise the Series' yield. One recent purchase was J.
Paul Getty Museum bonds (issued by California Statewide Community),
which is rated Aaa by Moody's. This issue was 0.7% of the portfolio
at the end of February.
Demand May Weaken Slightly
While it is unlikely that investor demand will continue at last
year's feverish pitch, we do expect relatively strong demand for
municipal bonds throughout the rest of 1994.
Currently, 75% of the U.S. municipal bonds outstanding in the market
are owned by or controlled by individuals, usually through mutual
funds or trusts. As these investors begin feeling the bite of new
federal income taxes on their disposable income -- and if the market
appears more stable -- they may look to municipal bonds once
again for tax-exempt income.
Supply Could Decline Dramatically
Most bond issuers that needed to sell new bonds did so when
interest rates were at their 1993 lows. As a result, we expect
the municipal bond supply to taper off in this year.
We also do not expect many more municipal bonds to be "refunded" in
1994, particularly as the year progresses. Refundings occur when
market interest rates decline and issuers decide to trim long-term
financing costs by replacing outstanding high coupon bonds with a
similar amount of lower coupon bonds. In 1993, municipal bonds
issued solely for refunding purposes accounted for 44% of issuance,
according to The Bond Buyer.
-3-
<PAGE>
An Improving Economy Should Help
We expect a relatively strong economy in 1994. Such an environment
could be favorable for municipal bonds, although much depends on the
path of interest rates. Most state and local government issuers as
well as private purpose borrowers (e.g.,bridge and highway authorities)
should see their revenues begin to rise in 1994 after several years
of recession. In turn, rising revenues should improve the credit
quality of the issuers' outstanding bonds and support their prices.
Municipal Market Outlook Still Positive
Investors should be prepared for some volatility, but we think 1994
will be a fair year for municipal bonds. The continued strong demand
for municipal bonds, along with a possibility of decreasing supply,
should help stabilize prices. An improving economy should further
help municipal issuer credit quality.
As always, we are pleased to have you as a shareholder of the
Prudential California Municipal Fund -- California Income Series
and to take the opportunity to report our activities to you.
Sincerely,
Lawrence C. McQuade
President
Christian Smith
Portfolio Manager
-4-
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND Portfolio of Investments
CALIFORNIA INCOME SERIES February 28, 1994 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
LONG-TERM INVESTMENTS--98.5%
Alameda Cmnty. Facs.
Dist.,
Spec. Tax Rev. No. 1,
NR $ 3,000 7.75%, 9/1/19........... $ 3,127,830
Alameda Impvt. Bond Act of 1915,
Marina Vlg. Assmt. Dist.
89-1,
NR 1,000 7.65%, 9/2/10........... 1,030,570
NR 2,000 7.65%, 9/2/11........... 2,061,040
Arcadia Unified Sch.
Dist., Gen. Oblig.,
M.B.I.A., Ser. A,
Aaa 1,200 Zero Coupon, 9/1/09..... 496,656
Aaa 1,875 Zero Coupon, 9/1/11..... 682,050
Aaa 2,045 Zero Coupon, 9/1/12..... 697,120
Aaa 1,205 Zero Coupon, 9/1/13..... 383,913
Aaa 1,940 Zero Coupon, 9/1/18..... 456,657
Assoc. of Bay Area
Govt's. Fin.
Auth., Cert. of Part.,
Channing House,
A+* 1,500@ 7.125%, 1/1/21, Ser.
A..................... 1,617,780
Brea Pub. Fin. Auth.
Rev.,
Tax Alloc. Redev. Proj.,
NR 3,000 8.10%, 3/1/21, Ser. C... 3,410,580
Buena Park Cmnty. Redev.
Agcy.,
Cent. Bus. Dist. Proj.,
NR 3,325 7.80%, 9/1/14........... 3,665,613
California Hlth. Facs
Fin.,
Catholic Hlth. Fac.,
Aaa 1,370 5.00%, 7/1/21,
A.M.B.A.C............. 1,239,590
A1 4,525 5.00%, 6/1/23, Ser. A... 3,954,533
California St. Brd. of
Pub.
Wks. Lease Rev.,
Dept. of Corrections,
Aaa 225 5.25%, 12/1/08, Ser. A,
A.M.B.A.C............. 224,294
California St. Edl.
Facs. Auth. Rev.,
Chapman Coll.,
Baa 600 7.50%, 1/1/18........... 662,100
California St. Hsg. Fin.
Agcy.,
Mtge. Rev., M.B.I.A.,
Aaa $ 1,000 7.20%, 2/1/26, Ser.
91A................... $ 1,060,000
California St. Poll.
Ctrl. Fin. Auth.,
Res. Recovery Rev.,
Waste Mgmt., Inc.,
A1 2,000 7.15%, 2/1/11, Ser. A... 2,221,640
California Statewide
Cmnty. Dev. Corp.,
Cert. of Part.,
J. Paul Getty Museum,
Aaa 1,500 5.00%, 10/1/23.......... 1,380,690
Sutter Hlth. Obligated
Group,
Aaa 2,850 6.125%, 8/15/22,
A.M.B.A.C............. 2,942,083
Villaview Cmnty. Hosp.,
A+* 1,000 7.00%, 9/1/09........... 1,076,900
California Transit
Finance Corp.,
Los Angeles Cnty. Trans. Comn.,
A1 2,500 6.25%, 7/1/04, Ser. B... 2,699,375
Carson City Ltd. Oblig.
Impvt.
Rev., Assmt. Dist.,
NR 2,500 7.375%, 9/2/22.......... 2,610,100
Clearlake Redev. Agcy.,
Highlands Park Cmnty.,
BBB* 1,225 6.20%, 10/1/22.......... 1,224,902
BBB* 500 6.40%, 10/1/23.......... 502,630
Contra Costa Cnty.,
Spec. Tax,
Cmnty. Facs. Pleasant
Hill,
NR 1,520 8.125%, 8/1/16.......... 1,658,867
Contra Costa Trans.
Auth.,
Sales Tax Rev.,
A1 1,000(D) 6.875%, 3/1/07, Ser.
A..................... 1,129,600
Culver City Redev. Fin.
Auth. Rev.,
Aaa 4,500@ 4.60%, 11/1/20,
A.M.B.A.C............. 3,841,515
Danville Impvt. Bd.,
Tassajara Ranch No.
93-1,
NR 1,000 6.75%, 9/2/11........... 1,008,990
NR 1,000 6.80%, 9/2/12........... 1,008,970
Delano, Cert. of Part.,
Regional Medical Center,
NR 2,970 9.25%, 1/1/22, Ser.
92A................... 3,363,525
</TABLE>
-5- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
Desert Hosp. Dist.,
Cert. of Part.,
AAA* $ 2,000(D) 8.10%, 7/1/20........... $ 2,411,040
Dry Creek Jt. Sch.
Dist.,
Spec. Tax Rev.,
Cmnty. Facs. Dist. No.
1,
BBB* 1,355 7.25%, 9/1/11........... 1,465,107
East Bay Mun. Util.
Dist.,
Wtr. Sys. Rev.,
A1 1,620 6.00%, 6/1/12........... 1,690,438
East Palo Alto San.
Dist.,
Cert. of Part., Aux.
Facs.
Sch. Bldg. Corp.,
NR 500 8.25%, 10/1/15.......... 538,300
Fairfield Impvt. Bond
Act of 1915,
No. Cordella Impvt.
Dist.,
NR 830 7.20%, 9/2/09........... 854,261
NR 920 7.20%, 9/2/10........... 948,125
NR 800 8.00%, 9/2/11........... 824,416
NR 995 7.375%, 9/2/18.......... 1,025,178
Fairfield Pub. Fin.
Auth. Rev.,
Fairfield Redev. Projs.,
NR 2,500(D) 7.90%, 8/1/21, Ser. A... 3,019,550
Folsom Spec. Tax Dist.
No. 2,
NR 3,130 7.70%, 12/1/19.......... 3,253,259
Fontana Redev. Agcy.,
Downtown Redev. Proj.,
BBB* 2,000 7.00%, 9/1/21........... 2,135,840
No. Fontana Redev.
Proj.,
BBB* 1,575(D) 7.65%, 12/1/09.......... 1,885,669
Fontana Spec. Tax Cmnty.
Facs.,
Dist. No. 2,
NR 3,595 8.50%, 9/1/17, Ser. B... 4,014,033
Foster City Pub. Fin.
Auth.
Rev., Cmnty. Dev. Proj.,
A-* 2,100 6.00%, 9/1/13, Ser. A... 2,119,509
Fresno Swr. Rev., Ser.
A-1, A.M.B.A.C.,
Aaa 1,500 5.25%, 9/1/19........... 1,421,355
Aaa 790 4.50%, 9/1/23........... 660,250
Hemet Pub. Fin. Auth.,
Wtr. Rev.,
NR $ 1,720 6.50%, 2/1/12, Ser. A... $ 1,738,662
Industry Impvt. Bond Act of 1915,
Assmt. Dist. No. 91-1,
NR 1,200 7.65%, 9/2/21........... 1,235,028
Long Beach Redev. Agcy.,
Pacific Court Apts.,
NR 1,000 6.80%, 9/1/13........... 984,090
NR 1,500 6.95%, 9/1/23........... 1,490,670
Los Angeles Cnty. Pub.
Wks. Fin.
Auth., Lease Rev.,
Mult. Cap. Fac. Proj.,
Aaa 3,000 4.75%, 12/1/13,
M.B.I.A............... 2,703,900
Los Angeles Cnty. Trans.
Comn.,
Sales Tax Rev.,
A1 2,000 7.40%, 7/1/15, Ser. A... 2,255,100
Los Angeles Dept. of
Wtr. & Pwr.,
Waterworks Rev.,
Aa 1,945 6.875%, 4/1/14.......... 2,205,572
Met. Wtr. Dist. of
Southern
California, Waterworks
Rev.,
Aa 2,000@ 5.75%, 7/1/21, Ser. A... 2,072,980
Nevada Cnty., Cert. of
Part.,
Baa1 1,000 7.50%, 6/1/21........... 1,111,990
Ontario Impvt. Bond Act
of 1915,
Assmt. Dist. 100,
NR 1,410 8.00%, 9/2/11........... 1,453,033
Orange Cnty., Cert. of
Part.,
Pub. Facs. Corp.,
Solid Wst. Mgmt.,
A 3,000 7.875%, 12/1/13......... 3,408,300
Orange Cnty. Cmnty.
Facs. Dist.,
Special Tax Rev.,
No. 87-4, Foothill
Ranch,
NR 3,500 7.375%, 8/15/18, Ser.
A..................... 3,646,125
No. 87-5B, Rancho Santa
Margarita,
NR 1,750 7.50%, 8/15/17.......... 1,895,967
No. 88-1, Aliso Viejo,
NR 805 7.15%, 8/15/06, Ser.
A..................... 860,642
NR 3,500 7.35%, 8/15/18, Ser.
92.................... 3,764,425
</TABLE>
-6- See Notes to Financial Statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
Perris Sch. Dist., Cert.
of Part.,
Cap. Projs.,
NR $ 1,500 7.75%, 3/1/21........... $ 1,613,670
Pleasanton Impvt. Bond
Act of 1915,
Assmt. Dist. No. 86-9,
NR 500 7.60%, 9/2/10, Ser. C... 515,285
Puerto Rico Hwy. &
Trans.
Auth. Rev.,
AAA* 2,100(D)/@ 7.75%, 7/1/10, Ser. Q... 2,498,517
Baa1 5,000 6.625%, 7/1/12, Ser.
V..................... 5,511,350
Baa1 2,175 6.625%, 7/1/18, Ser.
T..................... 2,398,981
Puerto Rico Pub. Bldgs.
Auth.,
Gtd. Pub. Ed. & Hlth.
Facs.,
Baa1 1,605 Zero Coupon, 7/1/06,
Ser. J................ 818,630
A* 2,625(D)/@ 6.875%, 7/1/21, Ser.
L..................... 3,032,295
Rancho Wtr. Dist. Fin.
Auth. Rfdg. Rev.,
Aaa 1,250 4.75%, 8/15/21,
A.M.B.A.C............. 1,090,825
Richmond Redev. Agcy.
Rev.,
NR 2,500 7.50%, 9/1/23........... 2,397,150
Riverside Cnty. Cert. of
Part.,
Air Force Vlg. West,
NR 3,000 8.125%, 6/15/20......... 3,180,930
Riverside Redev. Agcy.,
Multifam. Hsg. Rev.,
First & Mkt. Proj.,
Baa 3,500 7.75%, 9/1/21, Ser. A... 3,594,535
Riverside Sch. Dist.
Special Tax,
Cmnty. Facs. Dist. No.
2,
NR 1,000 7.25%, 9/1/18, Ser. A... 999,980
Rocklin Stanford Ranch
Cmnty.
Facs., Dist. Spec. Tax,
NR 1,000 8.10%, 11/1/15.......... 1,098,430
Sacramento Cnty.
Sanitation Dist.
Fin. Auth. Rev.,
Aa 2,500 4.75%, 12/1/23.......... 2,174,200
Sacramento Cnty. Spec.
Tax Rev.,
Dist. No. 1, Elliot
Ranch,
NR 2,000 8.20%, 8/1/21........... 2,100,580
Dist. No. 1, Laguna Creek Ranch,
NR 1,000 8.25%, 12/1/20.......... 1,100,950
Sacramento Mun. Util.
Dist. Elec. Rev.,
Aaa $ 2,750 4.75%, 9/1/21,
M.B.I.A............... $ 2,399,623
Sacramento Spec. Purpose
Fac.,
NR 2,200 7.25%, 12/1/18.......... 2,155,054
San Bernardino Cnty.,
Cert. of Part.,
Cap. Facs. Proj.,
A 3,500 6.25%, 8/1/19, Ser. B... 3,825,115
Medical Cent. Fin.
Proj.,
Baa1 2,750 5.50%, 8/1/24........... 2,467,135
San Diego Cnty. Regl.
Trans.
Cmnty., Sales Tax Rev.,
Aaa 500 5.25%, 4/1/08, Ser. A,
F.G.I.C............... 498,495
San Diego Cnty. Wtr.
Auth. Rev.,
Aaa 1,000 8.834%, 4/23/08,
F.G.I.C............... 1,063,750
San Francisco City &
Cnty.,
Airports Comn., Issue
No. 3,
Aaa 1,500 6.20%, 5/1/20,
M.B.I.A............... 1,543,710
Redev. Agcy., Lease
Rev.,
A 1,500 Zero Coupon, 7/1/06..... 739,800
A 2,250 Zero Coupon, 7/1/07..... 1,034,438
San Joaquin Hills Trans.
Corridor Agcy.,
Toll Road Rev.,
NR 2,000 Zero Coupon, 1/1/11..... 512,060
NR 4,000 7.00%, 1/1/30........... 4,090,880
NR 1,000 5.00%, 1/1/33........... 781,470
San Jose Redev. Proj.,
Aaa 900 6.00%, 8/1/15,
M.B.I.A............... 956,178
San Mateo Cnty. Jt.
Pwrs. Fin. Auth. Lease
Rev., M.B.I.A.,
Aaa 3,000 6.50%, 7/1/15........... 3,373,800
Santa Cruz Cnty. Pub. Fin. Auth. Rev.,
Tax Alloc. Sub. Lien.,
AAA* 2,500(D) 7.625%, 9/1/21, Ser.
B..................... 2,922,275
South San Francisco
Redev.
Agcy., Tax Alloc.,
Gateway Redev. Proj.,
NR 2,375 7.60%, 9/1/18........... 2,567,874
</TABLE>
-7- See Notes to Financial Statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
Southern California Pub.
Pwr.
Auth., Proj. Rev.,
A $ 2,000 6.75%, 7/1/12........... $ 2,276,260
A 3,000 6.75%, 7/1/13........... 3,415,620
Std. Elem. Sch. Dist.,
Cert. of Part.,
BBB+* 1,000 7.375%, 6/1/11.......... 1,066,490
Temecula Valley Unified
Sch. Cmnty. Facs.,
Spec. Tax Dist. No.
89-1,
NR 1,500** 8.60%, 9/1/17........... 1,200,000
Torrance Redev. Agcy.,
Tax Alloc. Downtown
Redev.,
Baa 3,925 7.125%, 9/1/22.......... 4,185,738
Tax Alloc. Ind. Redev.
Proj.,
NR 2,500 7.75%, 9/1/13........... 2,695,975
Univ. of California
Rev.,
Mult. Purpose Proj.,
M.B.I.A.,
Aaa 2,500 4.75%, 9/1/21........... 2,181,475
Virgin Islands Pub. Fin.
Auth.
Rev., Hwy. Trans. Trust
Fund,
BBB* 1,000 7.70%, 10/1/04.......... 1,115,260
NR 1,200 7.25%, 10/1/18, Ser.
A..................... 1,349,304
Virgin Islands
Territory,
Hugo Ins. Claims Fund
Proj.,
NR 1,200 7.75%, 10/1/06, Ser.
91.................... 1,382,340
Virgin Islands Wtr. &
Pwr. Auth.,
Elec. Sys. Rev.,
NR 1,000 7.40%, 7/1/11, Ser. A... 1,139,210
Wtr. Sys. Rev.,
NR 1,015 7.20%, 1/1/02, Ser. B... 1,109,415
West Sacramento Impvt.
Bond Act of 1915,
Lighthouse Marina Assmt.
Dist. 90-1,
NR 2,500 8.50%, 9/2/17........... 2,575,825
Westminster Redev.
Agcy.,
Tax Allocation Rev.,
Orange County, Proj.
No. 1,
Baa1 2,000 7.30%, 8/1/21, Ser. A... 2,212,600
------------
Total long-term
investments
(cost $192,396,935)..... 203,496,404
------------
SHORT-TERM INVESTMENTS--1.0%
California Poll. Ctrl.
Fin. Auth. Rev.,
Burney Forest Proj.,
F.R.D.D.,
P1 $ 300 2.30%, 3/1/94, Ser.
89A................... $ 300,000
Delano Proj., F.R.D.D.,
P1 500 2.30%, 3/1/94, Ser.
90.................... 500,000
P1 300 2.30%, 3/1/94, Ser.
91.................... 300,000
Orange Cnty. Var. Sanit.
Dist. Cert of Part.,
F.R.D.D.,
VMIG1 1,000 2.20%, 3/1/94........... 1,000,000
------------
Total short-term
investments
(cost $2,100,000)..... 2,100,000
------------
Total Investments--99.5%
(cost $194,496,935; Note
4).................... 205,596,404
Other assets in excess
of
liabilities--0.5%..... 1,079,850
------------
Net Assets--100%........ $206,676,254
------------
------------
</TABLE>
- ------------------
(a) The following abbreviations are used in portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation.
F.G.I.C.--Financial Guaranty Insurance Company.
F.R.D.D.--Floating Rate (Daily) Demand Note #.
M.B.I.A.--Municipal Bond Insurance Association.
# 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.
* Standard & Poor's rating.
** Represents issuer in default on interest payment.
(D) Prerefunded issues are secured by escrowed cash and/or direct U.S.
guaranteed obligations.
@ Pledged as initial margin on financial futures contracts.
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>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets February 28, 1994
-----------------
<S> <C>
Investments, at value (cost $194,496,935).............................................. $ 205,596,404
Interest receivable.................................................................... 3,865,135
Receivable for Fund shares sold........................................................ 1,212,697
Receivable for investments sold........................................................ 123,600
Deferred expenses and other assets..................................................... 15,139
-----------------
Total assets....................................................................... 210,812,975
-----------------
Liabilities
Payable for investments purchased...................................................... 2,578,884
Payable for Fund shares reacquired..................................................... 1,346,222
Accrued expenses and other liabilities................................................. 101,654
Dividends payable...................................................................... 37,584
Due to broker - variation margin....................................................... 33,031
Management fee payable................................................................. 20,015
Distribution fee payable............................................................... 17,639
Deferred trustees' fees................................................................ 1,692
-----------------
Total liabilities.................................................................. 4,136,721
-----------------
Net Assets............................................................................. $ 206,676,254
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at par................................................ $ 196,904
Paid-in capital in excess of par..................................................... 195,224,217
-----------------
195,421,121
Accumulated net realized gain on investments......................................... 21,195
Net unrealized appreciation on investments........................................... 11,233,938
-----------------
Net assets, February 28,1994......................................................... $ 206,676,254
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($200,014,625 / 19,055,732 shares of beneficial interest issued and outstanding)... $10.50
Maximum sales charge (4.5% of offering price)........................................ .49
-----------------
Maximum offering price to public..................................................... $10.99
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per share
($6,661,629 / 634,654 shares of beneficial interest issued and outstanding)........ $10.50
-----------------
-----------------
</TABLE>
See Notes to Financial Statements.
-9-
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February
28,
Net Investment Income 1994
-----------
<S> <C>
Income
Interest............................ $ 6,595,665
-----------
Expenses
Management fee, net of waiver of
$445,374.......................... 63,747
Distribution fee--Class A........... 101,110
Distribution fee--Class B........... 3,573
Custodian's fees and expenses....... 57,000
Transfer agent's fees and
expenses.......................... 28,000
Registration fees................... 12,000
Reports to shareholders............. 10,000
Audit fee........................... 7,500
Legal fees.......................... 7,000
Trustees' fees...................... 4,000
Amortization of organizational
expenses.......................... 3,680
Miscellaneous....................... 3,115
-----------
Total expenses.................... 300,725
-----------
Net investment income................. 6,294,940
-----------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions............. 1,760,268
Financial futures transactions...... (239,129)
-----------
1,521,139
-----------
Net change in unrealized appreciation
on:
Investments......................... (3,486,763)
Financial futures................... 302,344
-----------
(3,184,419)
-----------
Net loss on investments............... (1,663,280)
-----------
Net Increase in Net Assets
Resulting from Operations............. $ 4,631,660
-----------
-----------
</TABLE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) February 28, August 31,
in Net Assets 1994 1993
------------- -------------
<S> <C> <C>
Operations
Net investment
income................. $ 6,294,940 $ 10,812,389
Net realized gain on
investment
transactions......... 1,521,139 704,119
Net change in
unrealized
appreciation on
investments.......... (3,184,419) 10,324,900
------------- -------------
Net increase in net
assets
resulting from
operations........... 4,631,660 21,841,408
------------- -------------
Dividends and distributions (Note 1)
Dividends to
shareholders
from net investment
income
Class A................ (6,251,565) (10,812,389)
Class B................ (43,375) --
------------- -------------
(6,294,940) (10,812,389)
------------- -------------
Distributions to
shareholders
from net realized
gains
Class A................ (1,957,806) (738,313)
Class B................ -- --
------------- -------------
(1,957,806) (738,313)
------------- -------------
Fund share transactions (Note 5)
Net proceeds from
shares
subscribed........... 26,439,461 79,117,892
Net asset value of
shares
issued in
reinvestment of
dividends and
distributions........ 3,811,177 4,887,486
Cost of shares
reacquired............. (20,852,091) (34,498,281)
------------- -------------
Net increase in net
assets from Fund
share
transactions......... 9,398,547 49,507,097
------------- -------------
Total increase........... 5,777,461 59,797,803
Net Assets
Beginning of period...... 200,898,793 141,100,990
------------- -------------
End of period............ $ 206,676,254 $ 200,898,793
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-10-
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
Notes to Financial Statements
(Unaudited)
Prudential California Municipal 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
three series. The monies of each series are invested in separate, independently
managed portfolios. The California Income Series (the ``Series'') commenced
investment operations on December 3, 1990. The Series is non-diversified and
seeks to achieve its investment objective of obtaining the maximum amount of
income exempt from federal and California state income taxes with the minimum of
risk by investing primarily 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 but may also invest in lower-quality tax-exempt securities. 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 The following is a summary
Policies of significant accounting poli-
cies followed by the Fund, and the Series, in
preparation of its financial statements.
Security Valuations: The Fund values municipal securities (including commitments
to purchase such securities on a ``when-issued'' basis) on the basis of prices
provided by a pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining values. If market quotations are not readily available from such
pricing service, a security is valued at its fair value as determined under
procedures established by the Trustees.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
All securities are valued as of 4:15 P.M., New York time.
Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed upon 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 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 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.
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 and because substantially all of the Series' gross
income consists of tax-exempt interest, 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.
Deferred Organization Expenses: The Series incurred $35,818 in organization and
initial registration expenses.
-11-
<PAGE>
<PAGE>
Such amount has been deferred and is being amortized over a period of 60 months
ending December 1995.
Note 2. Agreements The Fund has a management
agreement with Prudential Mutual Fund Management,
Inc. (``PMF''). Pursuant to this agreement, PMF has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PMF 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. PMF pays for the cost of the
subadviser's services, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.
The management fee paid PMF is computed daily and payable monthly, at an
annual rate of .50 of 1% of the average daily net assets of the Series. PMF
voluntarily waived 100% of its management fee during the three months ended
November 30, 1993. Effective December 1, 1993, PMF reduced its voluntary waiver
to 75% of its management fee. The amount of such fees waived for the six months
ended February 28, 1994 amounted to $445,374 ($0.023 per share; .44% of average
net assets).
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as the distributor of the Class A
shares of the Fund, and Prudential Securities Incorporated (``PSI''), which acts
as distributor of the Class B shares of the Fund (collectively the
``Distributors''). To reimburse the Distributors for their expenses incurred in
distributing and servicing the Fund's Class A and Class B shares, the Fund,
pursuant to plans of distribution, pays the Distributors a reimbursement,
accrued daily and payable monthly.
Pursuant to the Class A Plan, the Fund reimburses PMFD for its distribution
and service related expenses with respect to Class A shares at an annual rate of
up to .30 of 1% of the average daily net assets of the Class A shares. Such
expenses under the Class A Plan were .10 of 1% of the average daily net assets
of the Class A shares for the six months ended February 28, 1994. PMFD pays
various broker-dealers, including PSI and Pruco Securities Corporation
(``Prusec''), affiliated broker-dealers, for account servicing fees and other
expenses incurred by such broker-dealers.
Pursuant to the Class B Plan, the Fund reimburses PSI for its distribution
and service related expenses with respect to Class B shares at an annual rate of
up to .50 of 1% of the average daily net assets of the Class B shares.
The Class B distribution and service related expenses include commission
credits for payment of commissions and account servicing fees to financial
advisers and an allocation for overhead and other branch office
distribution-related expenses, interest and/or carrying charges, the cost of
printing and mailing prospectuses to potential investors and of advertising
incurred in connection with the distribution of shares.
The Distributors recover the distribution expenses and service fees incurred
through the receipt of reimbursement payments from the Series under the plans
and the receipt of initial sales charges (Class A only) and contingent deferred
sales charges (Class B only) from shareholders.
PMFD has advised the Series that it has received approximately $724,700 in
front-end sales charges resulting from sales of Class A shares during the period
ended February 28, 1994. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salespersons and
incurred other distribution costs.
With respect to the Class B Plan, at any given time the amount of expenses
incurred by PSI in distributing the Series' shares and not recovered through the
imposition of contingent deferred sales charges in connection with certain
redemptions of shares may exceed the total payments made by the Series pursuant
to the Plan. PSI, as distributor, has advised the Series that as of February 28,
1994, the amount of distribution expenses incurred by PSI and not yet reimbursed
by the Series or recovered through contingent deferred sales charges
approximated $253,700. This amount may be recovered through future payments
under the Class B Plan or contingent deferred sales charges.
In the event of termination or noncontinuation of the Class B Plan, the
Series would not be contractually obligated to pay PSI, as distributor, for any
expenses not previously reimbursed or recovered through contingent deferred
sales charges.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are (indirect)
wholly-owned subsidiaries of The Prudential Insurance Company of America.
Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS''), a
with Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During
the six months ended February 28, 1994, the Series incurred fees of
approximately $24,600 for the services of PMFS. As of February 28, 1994,
approximately $4,200 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 non-affiliates.
-12-
<PAGE>
<PAGE>
Note 4. Portfolio Purchases and sales of port-
Securities folio securities of the Series,
excluding short-term investments, for the six
months ended February 28, 1994 were $51,973,065 and $40,553,596, respectively.
The cost basis of investments for federal income tax purposes was
substantially the same as for financial reporting purposes and accordingly, as
of February 28, 1994 net unrealized appreciation of investments for federal
income tax purposes was $11,099,469 (gross unrealized appreciation--
$13,034,434; gross unrealized depreciation--$1,934,965).
At February 28, 1994, the Series sold 26 financial futures contracts on the
Municipal Bond Index which expire in March 1994 and sold 33 financial futures
contracts on U.S. Treasury Bonds which expire in March 1994. The aggregate value
at sale of such contracts was $6,431,688. The aggregate value of such contracts
on February 28, 1994 was $6,297,219, thereby resulting in an unrealized gain of
$134,469. The Series has pledged $1,500,000 principal amount of Assoc. of Bay
Area Govt's. Fin. Auth., Cert. of Part., Channing House, $4,500,000 principal
amount of Culver City Redev. Fin. Auth. Rev., $2,000,000 principal amount of
Met. Wtr. Dist. of Southern California, Waterworks Rev., $2,100,000 principal
amount of Puerto Rico Hwy. & Trans. Auth. Rev., and $2,625,000 principal amount
of Puerto Rico Pub. Bldgs. Auth., Gtd. Pub. Ed. & Hlth. Facs., as initial margin
on such contracts.
Note 5. Capital The Series offers both Class
A and Class B shares. Class A shares are sold with
a front-end sales charge of up to 4.5%. 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. Both classes of shares have equal rights as
to earnings, assets and voting privileges except that each class bears
different distribution expenses and has exclusive voting rights with respect to
its distribution plan.
The Fund has authorized an unlimited number of shares of beneficial interest
for each class at $.01 par value per share.
Transactions in shares of beneficial interest for the six months ended
February 28, 1994 and the fiscal year ended August 31, 1993 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------ ---------- ------------
<S> <C> <C>
Six months ended February 28,
1994:
Shares sold................... 1,827,115 $ 19,577,919
Shares issued in reinvestment
of
dividends and
distributions............... 357,375 3,793,034
Shares reacquired............. (1,936,981) (20,737,507)
---------- ------------
Net increase in shares
outstanding................. 247,509 $ 2,633,446
---------- ------------
---------- ------------
Year ended August 31, 1993:
Shares sold................... 7,698,093 $ 79,117,890
Shares issued in reinvestment
of
dividends and
distributions............... 476,213 4,887,486
Shares reacquired............. (3,368,427) (34,498,280)
---------- ------------
Net increase in shares
outstanding................. 4,805,879 $ 49,507,096
---------- ------------
---------- ------------
<CAPTION>
Class B
- ------------------------------
<S> <C> <C>
December 7, 1993* through
February 28, 1994:
Shares sold................... 643,684 $ 6,861,542
Shares issued in reinvestment
of
dividends................... 1,720 18,143
Shares reacquired............. (10,750) (114,584)
---------- ------------
Net increase in shares
outstanding................. 634,654 $ 6,765,101
---------- ------------
---------- ------------
- ---------------
*Commencement of Class B operations.
</TABLE>
-13-
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C>
December 3, December 7,
Six Months 1990* 1993(D)(D)
Ended Year Ended August 31, Through Through
February 28, --------------------------- August 31, February 28,
1994 1993 1992 1991 1994
<CAPTION>
------------ -------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period............ $ 10.68 $ 10.08 $ 9.76 $ 9.55 $ 10.61
------------ -------- -------------- ------------ ------------
Income from investment operations
Net investment income(D)........................ .33 .67 .69 .51 .15
Net realized and unrealized gain (loss) on
investment transactions....................... (.08) .65 .35 .21 (.11)
------------ -------- -------------- ------------ ------------
Total from investment operations.............. .25 1.32 1.04 .72 .04
------------ -------- -------------- ------------ ------------
Less distributions
Dividends from net investment income............ (.33) (.67) (.69) (.51) (.15)
Distributions from net realized gains........... (.10) (.05) (.03) -- --
------------ -------- -------------- ------------ ------------
Total distributions........................... (.43) (.72) (.72) (.51) (.15)
------------ -------- -------------- ------------ ------------
Net asset value, end of period.................. $ 10.50 $ 10.68 $ 10.08 $ 9.76 $ 10.50
------------ -------- -------------- ------------ ------------
------------ -------- -------------- ------------ ------------
TOTAL RETURN#................................... 2.45% 13.67% 11.08% 7.97% .82%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)................. $200,015 $200,899 $141,101 $72,241 $6,662
Average net assets (000)........................ $203,895 $165,895 $102,227 $47,540 $3,105
Ratios to average net assets(D)/@:
Expenses, including distribution fees......... .29%** .20% .10% .0%** .76%**
Expenses, excluding distribution fees......... .19%** .10% .04% .0%** .26%**
Net investment income......................... 6.19%** 6.52% 6.91% 7.04%** 6.07%**
Portfolio turnover.............................. 20% 34% 69% 35% 20%
</TABLE>
- ---------------
* Commencement of investment operations.
** Annualized.
(D) Net of expense subsidy and/or fee waiver.
(D)(D) Commencement of offering of Class B shares.
# 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.
@ Because of the events referred to in (D)(D) and the timing of
such, the ratios for the Class A shares are not necessarily
comparable to that of Class B shares and are not necessarily
indicative of future ratios.
See Notes to Financial Statements.
-14-
<PAGE>
Trustees
Edward D. Beach
Eugene C. Dorsey
Delayne Dedrick Gold
Harry A. Jacobs, Jr.
Lawrence C. McQuade
Thomas T. Mooney
Thomas H. O'Brien
Richard A. Redeker
Nancy Hays Teeters
Officers
Lawrence C. McQuade, President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
S. Jane Rose, Secretary
Deborah Docs, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Deloitte & Touche
1633 Broadway
New York, NY 10019
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
One Seaport Plaza
New York, NY 10292
Toll free (800) 225-1852
Collect (908) 417-7555
The accompanying financial statements as of February 28, 1994
were not audited and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a current prospectus.
744313305 MF 146E2
744313404 Cat. #4443517
<PAGE>
SEMI ANNUAL REPORT February 28, 1994
Prudential
California
Municipal Fund
California Money Market Series
- ---------------------------------------------------
Prudential Mutual Funds
BUILDING YOUR FUTURE
(LOGO)
ON OUR STRENGTH
<PAGE>
LETTER TO
SHAREHOLDERS
April 4, 1994
Dear Shareholder:
In the last six months, rising federal income tax rates have contributed
to the increased demand for municipal securities. At the same time,
municipal money market investors enjoyed an increase in yields as the
Federal Reserve moved to increase short-term interest rates. In this
environment, the Prudential California Municipal Fund - California Money
Market Series continued to earn solid current-income returns.
<TABLE>
SERIES PERFORMANCE
As of February 28, 1994
<CAPTION>
Net Asset Weighted 7-Day Taxable Equivalent Yield Net
Value1 Avg. Mat. Current Yield2 @31% @36% @39.6% Assets (Mil.)
<S> <C> <C> <C> <C> <C> <C>
$1.00 47 days 1.8% 3.0% 3.2% 3.4% $332.4
</TABLE>
1 An investment in the fund is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Series will be able to
maintain a stable net asset value of $1.00 per share.
2 Yields will fluctuate from time to time. Past performance is not
indicative of future results.
The California Money Market Series seeks to provide the highest level
of California state and federally tax-exempt current income consistent
with liquidity and the preservation of capital.
The Series invests primarily in high-quality, short-term, tax-exempt
state, municipal and local debt obligations.
The Fed Raises Short-term Rates
After falling for much of the first half of 1993, interest rates
stabilized near the end of last summer and began to rise in late fall.
Economic growth, which had risen to 7.5% in the final months of 1993,
precipitated the change. As a result, many fixed-income investors
became increasingly worried about inflation and demanded higher yields
on fixed-income securities. Thus, when the Federal Reserve moved to
raise short-term rates 25 basis points in early February--the first
increase in nearly five years--and another 25 points in March,
rates climbed across the board.
Adjusting Weighted Average Maturity
Although higher U.S. Treasury security rates usually lead to greater
municipal yields, movements in the tax-exempt markets are dominated
more by seasonal changes in supply and demand. In order for us to
take advantage of these annual cycles, as well as any anticipated
Fed action, we adjusted your Fund's weighted average maturity.
-1-
<PAGE>
In October, for instance, tax-free yields dropped significantly as
Treasury yields reached historic lows, but they soon reversed and
drifted upward as their typical year-end cycle began to take hold. This
cycle, which is caused by a spike in investor redemptions to meet
holiday bills and increases in institutional cash positions, gave
us an opportunity to reduce the Series' weighted average maturity.
By reducing the portfolio's weighted average maturity, we were
able to purchase higher yielding securities more quickly as rates rose.
Earlier this year, we again shortened our weighted average maturity in
anticipation of a Fed rate increase. When rates increased, our shorter
weighted average maturity benefited the Series.
Environment & Activity
The long-term prospects for California's economy appear strong, but the
state's prized triple-A rating has deteriorated to AA/A+ in the wake of
its recent economic struggles and natural disasters. With nearly a
$5 billion state budget deficit for 1994, California has felt the
aftershocks of these emergencies. In addition, the situation may
deteriorate more if the Los Angeles earthquake rebuilding costs increase
further.
Unfortunately, the state's budget shortfall and the likelihood of another
credit rating downgrade forces us to actively monitor the credit worthiness
of the state's general obligation bonds. The state is currently using revenue
anticipation warrants--totalling $3.2 billion. These warrants are essentially
secured by unguaranteed revenues the state hopes to collect through future
tax law changes and most will instead be repaid by additional refunding
warrants for the foreseeable term.
In this environment, we continued to monitor the credit quality of the
state and its localities to add benefit and reduce risk.
Looking Ahead to 1994
Although the economy is growing, inflation appears to be under control.
Price pressures, which usually mount in the wake of sustained economic
growth, should motivate the Fed to hike short--term rates further by midyear.
The municipal market tends to lag the taxable markets in reacting to Fed moves,
however, because it is also influenced by its own unique cyclical factors.
However, we expect yields to drift higher during the year and we anticipate
strong, but temporary, upward pressure on rates in the short run as many
investors pay for their income tax liabilities from tax-exempt money market
funds.
As always, it is a pleasure to have you as a shareholder of the Prudential
California Municipal Fund - California Money Market Series, and to take this
opportunity to report our activities to you.
Sincerely,
Lawrence C. McQuade
President
J. Christopher Nicholl
Portfolio Manager
-2-
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND Portfolio of Investments
CALIFORNIA MONEY MARKET SERIES February 28, 1994 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
Alameda Rev.,
KQED, Inc. Proj.,
F.R.W.D.,
VMIG2 $ 6,300 3.10%, 3/2/94, Ser.
90.................... $ 6,300,000
California Hsg. Fin.
Agy. Rev., A.N.N.M.T.,
Home Mtge. Rev.,
VMIG1 15,000 2.40%, 9/15/94, Ser.
93F................... 14,987,785
California Poll. Ctrl.
Fin. Auth.
Rev., T.E.C.P.,
A1+* 8,000 2.40%, 4/25/94, Ser.
88B................... 8,000,000
Honey Lake Power Proj.,
F.R.D.D.,
Aa1 100 2.25%, 3/1/94, Ser.
88.................... 100,000
Ultrapower Malaga Fresno
Proj., F.R.D.D.,
P1 5,000 2.35%, 3/1/94, Ser.
88A................... 5,000,000
P1 3,000 2.35%, 3/1/94, Ser.
88B................... 3,000,000
Ultrapower Rocklin
Proj., F.R.D.D.,
P1 2,300 2.35%, 3/1/94, Ser.
88A................... 2,300,000
P1 1,600 2.35%, 3/1/94, Ser.
88B................... 1,600,000
California Rural Home
Mtge. Fin. Auth. Rev.,
F.R.M.D.,
VMIG1 11,345 2.81%, 3/1/94, Ser.
93.................... 11,345,000
California St., R.A.N.,
MIG1 18,300 2.55%, 3/3/94, Ser.
93-94................. 18,300,000
Chula Vista Ind. Dev.
Auth. Rev.,
San Diego Gas & Elec.
Co., T.E.C.P.,
P1 5,000 2.30%, 3/11/94, Ser.
92C................... 5,000,000
VMIG1 10,000 2.40%, 4/22/94, Ser.
92E................... 10,000,000
Delaware Mar Race Track
Auth., T.E.C.P.,
P1 3,000 2.60%, 4/8/94, Ser.
94.................... 3,000,000
Irvine Impvt. Bd., Dist.
85-7,
T.E.C.P.,
VMIG1 8,000 2.55%, 3/1/94, Ser.
86.................... 8,000,000
VMIG1 6,900 2.45%, 3/8/94, Ser.
86.................... 6,900,000
Irvine Ranch Wtr. Dist., F.R.D.D.,
VMIG1 $ 600 2.25%, 3/1/94, Ser.
93A................... $ 600,000
Kings Cnty. Multi-family
Rev.
Hsg. Auth., Edgewatger
Isle
Proj., F.R.W.D.,
VMIG1 15,170 2.55%, 3/2/94, Ser.
85A................... 15,170,000
Long Beach, T.R.A.N.,
MIG1 12,000 3.25%, 9/21/94, Ser.
93-94................. 12,026,693
Los Angeles Cnty.,
T.E.C.P.,
VMIG1 7,200 2.30%, 4/21/94, Ser.
93-94................. 7,200,000
Los Angeles Dept. Wtr. &
Pwr., T.E.C.P.,
P1 6,000 2.35%, 3/28/94, Ser.
90.................... 6,000,000
Los Angeles Hsg. Auth.,
Multi-family Rev.,
Lanewood Apts. Proj.,
F.R.W.D.,
VMIG1 7,000 2.55%, 3/2/94, Ser.
85.................... 7,000,000
Los Angeles Unified Sch.
Dist.,
T.R.A.N.,
MIG1 15,000 3.25%, 7/15/94, Ser.
93-94................. 15,027,182
Moorpark Ind. Dev. Auth.
Rev.,
Kavli & Kavlico Corp., F.R.W.D.,
VMIG1 6,795 2.60%, 3/3/94, Ser.
85.................... 6,795,000
Oakland Multi-family
Hsg. Rev.,
Skyline Hills Assoc.,
F.R.W.D.,
MIG1 6,700 2.55%, 3/3/94, Ser.
85A................... 6,700,000
Ontario Multi-family
Hsg. Rev.,
Park Ctr. Proj.,
F.R.W.D.,
VMIG1 8,400 2.45%, 3/3/94, Ser.
85A................... 8,400,000
Orange Cnty. Apt. Dev.
Rev.,
Bear Brand Apts. Proj.,
F.R.W.D.,
VMIG1 4,000 2.35%, 3/3/94, Ser.
85Z................... 4,000,000
Irvine Co. Proj.,
T.E.C.P.,
VMIG1 9,800 2.50%, 3/23/94, Ser.
85V................... 9,800,000
Lakes Proj., F.R.W.D.,
A1* 4,600 2.35%, 3/3/94, Ser.
91A................... 4,600,000
Lantern Pines Proj.,
F.R.W.D.,
VMIG1 3,475 2.40%, 3/2/94, Ser.
85C................... 3,475,000
</TABLE>
-3- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA MONEY MARKET SERIES
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<S> <C> <C> <C>
Orange Cnty. Apt. Dev. Rev. (cont'd.)
Robinson Ranch Apts.,
F.R.W.D.,
VMIG1 $ 8,400 2.55%, 3/3/94, Ser.
85Y................... $ 8,400,000
Vintage Woods Apts.,
F.R.W.D.,
VMIG1 8,300 2.45%, 3/3/94, Ser.
84E................... 8,300,000
Orange Cnty. Local
Trans. Sales Tax Rev.,
T.E.C.P.,
P1 13,000 2.50%, 3/9/94........... 13,000,000
Orange Cnty. Sanitation,
F.R.D.D.,
VMIG1 4,000 2.20%, 3/1/94, Ser.
90-92C................ 4,000,000
Palmdale Cmnty. Redev.
Agy.,
Manzanita Villas Apt.
Proj., F.R.W.D.,
VMIG1 4,800 2.65%, 3/3/94, Ser.
93A................... 4,800,000
San Diego Cnty.,
T.R.A.N.,
MIG1 10,000 3.25%, 7/29/94.......... 10,017,373
San Diego Cnty., Regl.
Trans. Cmnty., Sales
Tax Rev., T.E.C.P.,
P1 3,800 2.45%, 3/24/94, Ser.
A..................... 3,800,000
VMIG1 4,000 2.60%, 4/1/94, Ser. A... 4,000,000
San Francisco Bay Area,
Rapid Trans. Dist.,
T.E.C.P.,
P1 3,000 2.40%, 3/25/94, Ser.
A..................... 3,000,000
San Joaquin Cnty.Trans.
Auth.,
Sales Tax Rev.,
F.R.W.D.,
P1 8,000 2.35%, 3/2/94, Ser.
93.................... 8,000,000
San Marcos Ind. Dev.
Auth. Rev.,
Village Square Proj.,
F.R.W.D.,
Aa2 4,000 2.50%, 3/3/94, Ser.
92.................... 4,000,000
Santa Maria, Cert. of
Part.,
Town Ctr. & Westside Pkg. Facs.,
AAA* 9,695 10.75%, 6/1/94.......... 10,175,060
Southern Pub. Pwr.
Auth.,
Transmission Proj. Rev.,
F.R.W.D.,
P1 14,000 2.25%, 3/2/94, Ser.
91.................... 14,000,000
Tulare Cnty., T.R.A.N.,
SP1+* $15,000 3.25%, 7/14/94, Ser.
93.................... $ 15,028,022
Visalia, Cert. of Part.,
Convention Ctr.,
A1+* 8,980 2.30%, 3/2/94,
F.R.W.D............... 8,980,000
------------
Total Investments--99.3%
(amortized cost--
$330,127,115**)....... 330,127,115
Other assets in excess
of
liabilities--0.7%..... 2,284,273
------------
Net Assets--100%........ $332,411,388
------------
------------
</TABLE>
- ------------------
(a) The following abbreviations are used in portfolio descriptions:
A.N.N.M.T.--Annual Mandatory Tender.
F.R.D.D.--Floating Rate (Daily) Demand Note #.
F.R.M.D.--Floating Rate (Monthly) Demand Note #.
F.R.W.D.--Floating Rate (Weekly) Demand Note #.
R.A.N.--Revenue Anticipation Note.
T.E.C.P.--Tax-Exempt Commercial Paper.
T.R.A.N.--Tax & Revenue Anticipation Note.
# 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.
* Standard & Poor's rating.
** The cost of securities for federal income tax purposes is substantially the
same as for financial reporting purposes.
The Fund's current Statement of Additional Information contains
a description of Moody's and Standard & Poor's ratings.
-4- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA MONEY MARKET SERIES
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
February 28,
Assets 1994
------------
<S> <C>
Investments, at amortized cost which approximates market value............................ $330,127,115
Cash...................................................................................... 3,655
Receivable for Fund shares sold........................................................... 4,147,516
Accrued interest receivable............................................................... 2,303,727
Deferred expenses and other assets........................................................ 4,120
------------
Total assets.......................................................................... 336,586,133
------------
Liabilities
Payable for Fund shares reacquired........................................................ 3,738,008
Accrued expenses and other liabilities.................................................... 233,038
Due to Manager............................................................................ 131,227
Due to Distributor........................................................................ 50,877
Dividends payable......................................................................... 20,164
Deferred trustee's fees................................................................... 1,431
------------
Total liabilities..................................................................... 4,174,745
------------
Net Assets................................................................................ $332,411,388
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at $.01 par value......................................... $ 3,324,114
Paid-in capital in excess of par........................................................ 329,087,274
------------
Net assets, February 28, 1994........................................................... $332,411,388
------------
------------
Net asset value, offering price and redemption price per share ($332,411,388 / 332,411,388
shares of
beneficial interest issued and outstanding; unlimited number of shares authorized)...... $1.00
------------
------------
</TABLE>
See Notes to Financial Statements.
-5-
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA MONEY MARKET SERIES
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February
Net Investment Income 28, 1994
----------
<S> <C>
Income
Interest........................... $4,346,279
----------
Expenses
Management fee..................... 840,382
Distribution fee................... 210,096
Custodian's fees and expenses...... 89,000
Transfer agent's fees and
expenses........................... 68,000
Reports to shareholders............ 11,000
Registration fees.................. 10,000
Audit fee.......................... 7,500
Legal fees......................... 7,000
Amortization of organization
expenses........................... 4,600
Insurance expense.................. 4,000
Trustees' fees..................... 4,000
Miscellaneous...................... 1,965
----------
Total expenses................... 1,257,543
----------
Net investment income................ 3,088,736
Realized Gain on Investments
Net realized gain on investment
transactions....................... 17,614
----------
Net Increase in Net Assets
Resulting from Operations............ $3,106,350
----------
----------
</TABLE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA MONEY MARKET SERIES
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) February 28, August 31,
in Net Assets 1994 1993
------------- ---------------
<S> <C> <C>
Operations
Net investment
income............... $ 3,088,736 $ 5,852,209
Net realized gain on
investment
transactions....... 17,614 10,297
------------- ---------------
Net increase in net
assets resulting
from operations.... 3,106,350 5,862,506
------------- ---------------
Dividends and
distributions
to shareholders (Note
1)................... (3,106,350) (5,862,506)
------------- ---------------
Fund share transactions
(at $1 per share)
Net proceeds from
shares
subscribed......... 702,527,806 1,219,363,584
Net asset value of
shares issued in
reinvestment of
dividends and
distributions...... 3,074,956 5,672,116
Cost of shares
reacquired......... (688,116,704) (1,226,000,814)
------------- ---------------
Net increase
(decrease) in net
assets from Fund
share
transactions....... 17,486,058 (965,114)
------------- ---------------
Total increase
(decrease)........... 17,486,058 (965,114)
Net Assets
Beginning of period.... 314,925,330 315,890,444
------------- ---------------
End of period.......... $ 332,411,388 $ 314,925,330
------------- ---------------
------------- ---------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-6-
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA MONEY MARKET SERIES
Notes to Financial Statements
(Unaudited)
Prudential California Municipal 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
three series. The monies of each series are invested in separate, independently
managed portfolios. The California Money Market Series (the ``Series'')
commenced investment operations on March 3, 1989. The Series is diversified and
seeks to achieve its investment objective of obtaining the maximum amount of
income exempt from California state and federal income taxes with the minimum
risk by investing in ``investment grade'' tax-exempt securities having a
maturity of thirteen months or less 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 The following is a summary
Policies of significant accounting poli-
cies 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 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.
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 continue to distribute all of its net
income to shareholders. For this reason and because substantially all of the
Series' gross income consists of tax-exempt interest, no federal income tax
provision is required.
Dividends: The Series declares daily dividends from net investment income.
Payment of dividends is made monthly.
Deferred Organization Expenses: The Series incurred $46,000 in organization and
initial registration expenses. Such amount has been deferred and is being
amortized over a period of 60 months ending March 1994.
Note 2. Agreements The Fund has a management
agreement with Prudential Mutual Fund Management,
Inc. (``PMF''). Pursuant to this agreement PMF has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PMF 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. PMF pays for the cost of the
subadviser's services, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.
The management fee paid PMF is computed daily and payable monthly, at the
annual rate of .50 of 1% of the average daily net assets of the Series.
The Fund has a distribution agreement with Prudential Mutual Fund
Distributors, Inc. (``PMFD''). To reimburse PMFD for its expenses incurred
pursuant to a plan of distribution, the Fund pays PMFD a reimbursement, accrued
daily and payable monthly, at an annual rate of .125 of 1% of the Series'
average daily net assets. PMFD pays various broker-dealers, including Prudential
Securities Incorporated (``PSI'') and Pruco Securities Corporation, affiliated
broker-dealers, for account servicing fees and other expenses incurred by such
broker-dealers.
PMFD is a wholly-owned subsidiary of PMF; PSI, PIC, and PMF are (indirect)
wholly-owned subsidiaries of The Prudential Insurance Company of America.
Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS''), a
with Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During
the six months ended February 28, 1994, the Series incurred fees of
approximately $60,700 for the services of PMFS. As of February 28, 1994,
approximately $10,300 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 non-affiliates.
-7-
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA MONEY MARKET SERIES
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
March 3,
1989*
Six Months through
Ended Year Ended August 31, August
February 28, -------------------------------------------- 31,
PER SHARE OPERATING PERFORMANCE: 1994 1993 1992 1991 1990 1989
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income and net realized gains...... .01 .02 .03 .04(D) .05(D) .03(D)
Dividends and distributions....................... (.01) (.02) (.03) (.04) (.05) (.03)
------------ -------- -------- -------- -------- --------
Net asset value, end of period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ -------- -------- -------- -------- --------
------------ -------- -------- -------- -------- --------
TOTAL RETURN#:.................................... .94% 1.86% 2.91% 4.48% 5.59% 3.21%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)................... $ 332,411 $314,925 $315,890 $341,625 $388,739 $244,180
Average net assets (000).......................... $ 338,939 $319,464 $339,941 $375,655 $330,581 $174,500
Ratios to average net assets:
Expenses, including distribution fee............ .75%** .76% .76% .63%(D) .38%(D) .19%**(D)
Expenses, excluding distribution fee............ .62%** .63% .63% .51%(D) .25%(D) .08%**(D)
Net investment income........................... 1.84%** 1.83% 2.89% 4.37%(D) 5.40%(D) 5.57%**(D)
- ---------------
* Commencement of investment operations.
** Annualized.
(D) Net of management fee waiver and/or expense subsidy.
# Total return includes reinvestment of dividends and distributions. Total returns for periods of less than a
full year are not annualized.
</TABLE>
See Notes to Financial Statements.
-8-
<PAGE>
<PAGE>
Trustees
Edward D. Beach
Eugene C. Dorsey
Delayne Dedrick Gold
Harry A. Jacobs, Jr.
Lawrence C. McQuade
Thomas T. Mooney
Thomas H. O'Brien
Richard A. Redeker
Nancy Hays Teeters
Officers
Lawrence C. McQuade, President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
S. Jane Rose, Secretary
Deborah A. Docs, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributor
Prudential Mutual Fund Distributors, Inc.
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Deloitte & Touche
1633 Broadway
New York, NY 10019
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
One Seaport Plaza
New York, NY 10292
Toll free (800) 225-1852
Collect (908) 417-7555
This report is not authorized for distribution
to prospective investors unless preceded or
accompanied by a current prospectus.
The accompanying financial statements as of February 28, 1994 were not
audited and, accordingly, no opinion is expressed on them.
744313503 MF139E-2
Cat. #642861W
