SEMI ANNUAL REPORT February 28, 1995
Prudential
California
Municipal Fund
- ------------------------------
(PICTURE)
California Series
(LOGO)
<PAGE>
Letter to Shareholders
April 3, 1995
Dear Shareholder:
A powerful rally swept through the tax-exempt municipal bond market this
winter, lifting the value of your shares as yields of long-term municipal
bonds fell and newly-issued tax-exempt bonds became scarce. We are pleased
to report that your Prudential California Municipal Fund -- California
Series earned a positive total return, performing better than the average
California municipal bond fund, as measured by Lipper Analytical Services,
Inc.
<TABLE>
CUMULATIVE TOTAL RETURNS1
As of February 28, 1995
<CAPTION>
Six Months 1 Year 5 Years 10 Years Since Inception2
<S> <C> <C> <C> <C> <C>
Class A 2.8% 0.9% 42.8% N/A 43.7%
Class B 2.7% 0.6 40.0% 112.1% 127.1%
Class C 2.6% N/A N/A N/A 2.6%
Lipper CA
Muni. Avg3 2.4% 0.2% 42.0% 132.7% 150.8%
</TABLE>
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS1
As of March 31, 1995
<CAPTION>
1 Year 5 Years 10 Years Since Inception2
<S> <C> <C> <C> <C>
Class A 3.4% 6.9% N/A 6.8%
Class B 1.3% 7.0% 7.9% 8.2%
Class C N/A N/A N/A 2.6%
</TABLE>
(GRAPH)
Less Means More...
For You!
Prudential mutual fund shareholders will be
seeing total returns increase in the months
to come, thanks to a reduction in Fund management
expenses. Prudential Mutual Funds lowered
the rate on January 1, 1995, to 0.45% from 0.50%.
It is our way of showing you that we appreciate
your business and that we remain committed to
managing the Fund for your benefit.
Past performance is not indicative of future results. Principal and
investment return will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
1 Source: Prudential Mutual Fund Management Inc. and Lipper Analytical
Services, Inc. The cumulative total returns do not take into account
sales charges. The average annual returns do take into account applicable
sales charges. The Series charges a maximum front-end sales load of 3%
for Class A shares. Class B shares are subject to a contingent deferred
sales charge of 5%, 4%, 3%, 2%, 1% and 1% for six years. Class C shares
have a 1% CDSC for one year. Class B shares will automatically convert
to Class A shares on a quarterly basis, after approximately seven years.
2Inception dates: 1/22/90 Class A; 9/19/84 Class B; 8/1/94 Class C.
3Lipper average returns are for 26 funds for six months, 22 funds for
one year, 6 funds for five years, one fund for 10 years, and one fund
since inception of Class B shares on 9/19/84.
-1-
<PAGE>
Our Objective.
The Series seeks maximum income exempt from California state and federal
income taxes consistent with preservation of capital. Certain shareholders
may be subject to the federal alternative minimum tax. The Series will i
nvest primarily in California state, municipal and local government
obligations and obligations of U.S. territories (such as Puerto Rico, the
U.S. Virgin Islands and Guam), the income from which is also exempt from
federal and California state income taxes.
(GRAPH)
On the Hill:
In 1995, Congress will most likely consider an
initiative that would restore full income tax
deductibility for individual retirement account
(IRA) contributions for middle-income wage earners.
In addition, Congress may also consider the creation
of a new tax-deferred savings account called the
"American Dream Savings Account." Prudential Mutual
Funds supports both of these proposals, and we urge
you to share your opinion with your Congressional
representatives. We will keep you updated on these
initiatives as they make their way through the
legislative process.
New Year Opens With Bond Rally.
What a difference six months can make! When we last reported to you,
the tax-exempt bond market was in turmoil because interest rates were
rising sharply, and prices (which move in the opposite direction of
interest rates) were falling sharply.
Volatility escalated last year when the Federal Reserve started to
increase short-term interest rates in a pre-emptive strike against
inflation. By November, after the Federal Reserve's sixth increase
in the federal funds rate (the interbank overnight lending rate),
investors began to believe that the economy was showing signs of
slowing. As a result, long-term interest rates in the tax-exempt
bond market started to fall.
Long-term rates fell dramatically, and have continued to do so even
though the Federal Reserve raised short-term rates again on February
1, 1995. In fact, on March 2, the Bond Buyer's Revenue Bond Index sank
to 6.3% -- its lowest since last June. That's more than a full percentage
point below its 1994 high -- 7.4% recorded on November 17, 1994.
What We Did As Interest Rates Moved.
During this period of fluctuation, the Series sought to stabilize asset
values by maintaining a balance between bonds with higher coupons and
those with lower coupons, sometimes called premium and discount bonds.
The higher yielding premium bonds help cushion the impact of rising
interest rates while the lower coupon or discount bonds offer price
appreciation potential when interest rates decline.
-2-
<PAGE>
A Tax Reminder...
As a result of the Revenue Reconciliation Act
of 1993, it is possible that this year you may
have some taxable income from your normally
tax-exempt municipal bond fund. The law
stipulates that the portion of any gain
realized on the sale or retirement of a
tax-exempt bond purchased at a market
discount to its face value may be taxed
as ordinary income. The law affects bonds
purchased after April 30, 1993.
Smaller Supply Supports Market, Too.
The tax-exempt municipal bond market has also been helped recently by a
scarcity of new supply. Last year's higher interest rates made many issuers
reluctant to borrow money. In fact, the Revenue Bond Index rose dramatically
to 6.9% from 5.5% -- nearly one and a half percentage points. As a result,
the level of new bonds issued nationwide fell by 44% and in California
by 33%.
The Bankruptcy of Orange County.
The bankruptcy filing of Orange County in December 1994 weighed heavily on
the tax-exempt municipal bond market, dragging prices of all California bonds
down below national averages. We are pleased to report that the Prudential
California Municipal Fund -- California Series did not own any direct
obligations of Orange County. The Series continues to hold 10% of assets
in bonds of participants in the county's investment pool, of which 8% are
insured. We believe the long-term prospects for these issues should remain
positive.
California: The Recession Is Officially Over.
California's longest and deepest economic downturn since the Great Depression
is over. Unemployment has declined from 8.3% last June to 7.4% in December
1994. This dramatic improvement has lifted retail sales, personal income and
tax revenues. In addition, business loans have expanded and housing prices
appear to have stabilized. In short, the state is weaning itself from the
aerospace and defense manufacturing industries into the more diversified
service industries.
Although California's economy has strengthened, its recovery has lagged
the nation. For example, while unemployment has fallen substantially, it
is the highest of the nation's industrial states. In addition, the two-year
plan adopted by the Legislature in July to eliminate the state's deficit has
fallen out of balance by $2 billion, the state Legislative Analyst's Office
has reported. So California will continue to face program cutbacks and
structural budget problems.
Our California Strategy.
As a result of the state's budget uncertainty, we have refrained in recent
years from purchasing California's general obligation bonds. As the state's
fiscal situation improves, we will continue to review its debt in hopes of
returning to the market.
-3-
<PAGE>
The Outlook.
Tax-exempt municipal bonds have rallied substantially this winter. In fact,
the Lehman Brothers Municipal Bond Index has increased 2.8% over the last six
months. That is a substantial relief to investors who weathered sharply
rising interest rates and falling bond prices in 1994.
We expect long-term interest rates to stabilize in the year ahead, as
investors continue to gain confidence that the Federal Reserve is satisfied
that it has inflation under control. In addition, we expect the supply of
tax-exempt municipals to continue to contract, which should also provide
an additional reward to investors by supporting prices.
Fund Update
Starting in February 1995, Class B shareholders
may have begun to notice a change in their Fund
holdings. That's when Class B shares began to
automatically convert to Class A shares, on a
quarterly basis, approximately seven years after
purchase. As you may know, Class A shares generally
carry lower annual distribution expenses than Class
B shares. Accordingly, after conversion you will
earn higher total returns on your investment than
you would have as a Class B shareholder.
Following the May cycle, conversions of eligible
Class B shares and special exchanges of Class B
and C shares will take place each calendar quarter
(March, June, September and December) starting
in September 1995.
As always, it is a pleasure to work for you. We thank you for remaining
with the Prudential California Municipal Fund -- California Series
through a most difficult 1994. We appreciate the confidence you have
shown in us.
Sincerely,
Lawrence C. McQuade
President
Christian Smith
Portfolio Manager
-4-
<PAGE>
PORTFOLIO Q&A
(PICTURE)
Dennis Bushe
Many investors avoided bond funds in the past year, fearing that rising
interest rates would erode their returns and add volatility to their
investment portfolio. If you are contemplating putting cash into the
bond market -- in taxable or tax-exempt securities -- you might want to
consider some of the following points. We talked with Prudential Mutual
Funds chief fixed income strategist Dennis Bushe about why bonds and
bond mutual funds may make sense in today's investment environment.
Q. Why are bonds an attractive buy right now?
A. First, bond prices corrected in 1994, which put interest rates at
very attractive levels in 1995. Second, real rates of return (the
interest rate minus the inflation rate) are still very high historically.
According to Ibbotson Associates, a nationally recognized investment analysis
firm, the annual inflation-adjusted return on bonds from 1926 to 1994 was
between 2.5% and 3.0%. Today's investors receive over 4.5% in total
inflation-adjusted, annualized total return. Of course, these numbers
are just for illustration, but they show how much higher interest rates
improve bond total returns when inflation is only 2.7%, as measured by
the Consumer Price Index. And beating inflation is one primary goal of
long-term investing.
Q. Why buy a bond fund instead of an individual bond?
A. One of the biggest risks to bond investing is credit quality. Of course
you can avoid virtually all credit risk in a government bond fund, but some
investors need higher income than Uncle Sam provides. Bond funds help manage
both this risk, and that may be especially important in 1995. First of all,
if the U.S. economy is beginning to slow down, as many economists believe,
then credit quality is a concern. A credit team becomes very valuable,
carefully selecting bonds in different sectors and industries for bond
portfolios. In addition, few individual investors have the resources or
clout to continually monitor companies, unearth possible credit problems
before they surface, and negotiate favorable terms with troubled issuers -- a
bond fund does. Finally, the diversification of a bond fund may help
investors avoid wide price swings if one holding does experience financial
difficulties.
-5-
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND Portfolio of Investments
CALIFORNIA SERIES February 28, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description(a) (Note 1)
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--96.3%
Alameda Impvt.
Bond Act of 1915,
Marina Vlg. Assmt.
Dist. 89-1,
NR $ 1,700 7.55%, 9/2/06......... $ 1,754,162
NR 1,120 7.65%, 9/2/09......... 1,155,291
Arcadia Unified Sch.
Dist., Ser. A,
M.B.I.A.,
Aaa 1,765 Zero Coupon, 9/1/10... 689,868
Aaa 1,370 Zero Coupon, 9/1/14... 413,946
Aaa 2,555 Zero Coupon, 9/1/15... 723,167
Aaa 1,225 Zero Coupon, 9/1/16... 325,348
Aaa 1,790 Zero Coupon, 9/1/17... 446,014
Azusa Pub. Fin. Auth.
Rev.,
5.00%, 7/1/23, Ser. A,
F.G.I.C............. 2,131,915
Aaa 2,515
Bakersfield Pub. Fac.
Corp., Cert. of
Part.,
Wst. Wtr. Treat.
Plant, No. 3,
A1 2,750D 8.00%, 1/1/10......... 3,003,385
Baldwin Park
California Pub. Fin.
Auth. Rev.,
BBB* 1,020 7.05%, 9/1/14......... 1,032,005
Berkeley Hosp. Rev.,
Alta Bates Hosp.
Corp.,
Aaa 1,715D 7.65%, 12/1/15........ 1,950,452
Brea Pub. Fin. Auth.
Rev.,
Tax Alloc. Redev.
Proj.,
NR 5,000 8.10%, 3/1/21, Ser.
C................... 5,156,900
Buena Park Cmnty.
Redev.
Agcy., Central Bus.
Dist. Proj.,
NR 2,500 7.10%, 9/1/14......... 2,279,475
California St. Brd. of
Pub. Wks.,
Lease Rev., Univ. of
California at San
Diego,
High Technology
Facs.,
A1 1,570 7.375%, 4/1/06, Ser.
A................... 1,732,150
California St. Brd. of
Pub. Wks.,
Lease Rev.,
Univ. of California
at Santa Barbara,
High Technology
Facs.,
Aaa $ 2,500D 8.125%, 2/1/08, Ser.
A................... $ 2,767,700
Various Univ. of
California Projs.,
A 500 6.625%, 10/1/10....... 510,800
California St. Hlth.
Facs. Fin. Auth.
Rev.,
Episcopal Homes
Foundation,
A* 2,500 7.70%, 7/1/18, Ser.
A................... 2,635,800
Eskaton Properties,
NR 4,500D@ 7.50%, 5/1/20......... 5,065,830
Sisters of Providence
Hosp.,
A1 1,500 7.50%, 10/1/10........ 1,597,500
Sutter Hlth. Sys.,
NR 750D 8.00%, 1/1/16, Ser.
B................... 807,840
California St. Hsg.
Fin. Agcy. Rev.,
Sngl. Fam. Mtge.,
Aa 8,420 Zero Coupon, 2/1/15,
Ser. A.............. 1,204,734
California St. Poll.
Ctrl. Fin. Auth.
Rev., Pacific Gas &
Elec. Co.,
A2 3,250 8.20%, 12/1/18, Ser.
A................... 3,470,935
California Statewide
Cmnty.
Dev. Corp.,
Children's Hosp.,
Aaa 1,700 4.75%, 6/1/21,
M.B.I.A............. 1,384,123
Chula Vista Redev.
Agcy.,
Refunding Tax
Alloc.,
BBB+* 4,500 7.625%, 9/1/24........ 4,712,625
Contra Costa Cnty.,
Spec. Tax,
Cmnty. Facs.
Pleasant Hill,
NR 1,300 8.125%, 8/1/16........ 1,371,929
</TABLE>
-6- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description(a) (Note 1)
<C> <C> <S> <C>
Desert Hosp. Dist.,
Cert. of Part.,
AAA* $ 5,000D 8.10%, 7/1/20......... $ 5,782,550
East Palo Alto San.
Dist.,
Cert. of Part.,
NR 1,295 8.25%, 10/1/15........ 1,370,227
Fairfield Pub. Fin.
Auth. Rev.,
Fairfield Redev.
Projs.,
NR 4,200D 7.90%, 8/1/21, Ser.
A................... 4,875,276
Fontana Cmnty. Facs.,
Dist. No. 2, Spec.
Tax Rev.,
NR 3,000 8.50%, 9/1/17, Ser.
B................... 3,168,630
Industry City, Gen.
Oblig.,
Urban Dev. Agcy.,
NR 970 10.40%, 5/1/15........ 1,010,061
Kings Cnty. Wst. Mgmt.
Auth.,
Solid Wst. Rev.,
BBB+* 1,225 7.20%, 10/1/14........ 1,241,195
Kings River Consv.
Dist., Pine Flat
Pwr. Rev.,
Aa 1,350 5.50%, 1/1/20......... 1,232,469
Long Beach Redev.
Agcy.,
Dist. 3, Spec. Tax
Rev.,
NR 3,000 6.375%, 9/1/23........ 2,766,300
Los Angeles Cnty.,
Cert. of Part.,
Civic Ctr. Heating &
Refrigeration Plant,
A1 2,000D 8.00%, 6/1/10......... 2,221,760
Correctional Facs.
Proj.,
Aaa 3,770 Zero Coupon, 9/1/10,
M.B.I.A............. 1,473,542
Solheim Lutheran
Nursing Home Proj.,
A* 2,000D 8.125%, 11/1/17....... 2,196,900
Los Angeles Cnty.,
Hsg. Auth.,
Multifamily Mtge.
Rev.,
Mayflower Gardens
Proj.,
AAA** 2,100D 8.875%, 12/20/10, Ser.
K,
G.N.M.A............. 2,547,216
Los Angeles Conv. &
Exhib.
Ctr. Auth., Cert. of
Part.,
Aaa 1,250D@ 9.00%, 12/1/10........ 1,625,363
Los Angeles Dept. of
Wtr. &
Pwr., Elec. Plant
Rev.,
Aa $ 4,670 4.75%, 11/15/19....... $ 3,763,693
Aaa 4,035 5.375%, 9/1/23........ 3,621,856
Met. Wtr. Dist. of
Southern
California,
Waterworks Rev.,
Aa 1,000 5.748%, 8/10/18....... 942,380
Aa 4,000 5.75%, 7/1/21, Ser.
A................... 3,817,200
Mojave Desert & Solid
Wst.
Joint Pwrs., Proj.
Auth. Rev.,
Baa1 1,175 7.875%, 6/1/20........ 1,230,636
Orange Cnty. Cmnty.
Loc. Trans. Tax,
Reg. Linked
S.A.V.R.S. &
R.I.B.S.,
Aa 1,500 6.20%, 2/14/11........ 1,464,345
Port of Oakland Rev.,
Aaa 1,000 6.50%, 11/1/16, Ser.
E, M.B.I.A.......... 1,014,210
Redding Cmnty. Elec.
Sys.
Rev., Cert. of
Part., Reg.
Linked S.A.V.R.S. &
R.I.B.S.,
Aaa 3,550 6.368%, 7/1/22........ 3,689,409
Riverside Wtr. Rev.,
Aa 1,660 Zero Coupon,
10/1/07............. 800,186
Roseville City Sch.
Dist.,
Zero Coupon, 8/1/10,
Aaa 1,230 Ser. A, F.G.I.C..... 483,193
San Bernardino Cnty.,
Cert.
of Part., Med. Ctr.
Fin. Proj.,
Baa1 6,500 5.50%, 8/1/19......... 5,294,770
Baa1 4,400 5.50%, 8/1/22......... 3,532,144
San Diego Cnty. Regl.
Trans.
Cmnty., Sales Tax
Rev.,
Aaa 1,750 6.00%, 4/1/08, Ser.
A................... 1,806,018
</TABLE>
-7- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description(a) (Note 1)
<C> <C> <S> <C>
San Francisco City &
Cnty.,
Intl. Arpt. Comn.
Rev.,
Aaa $ 3,505 6.25%, 5/1/14......... $ 3,512,956
Pub. Utils. Comn. Wtr.
Rev.,
Aa 2,000 8.00%, 11/1/11........ 2,181,340
Redev. Agcy., Lease
Rev.,
A 2,000 Zero Coupon, 7/1/09... 820,500
Sewer Refunding Rev.,
Aaa 2,000 5.50%, 10/1/15........ 1,889,280
San Jose Arpt. Rev.,
Aaa 2,750 5.75%, 3/1/16......... 2,639,945
Santa Ana Tax Alloc.,
South Main St.
Redev.,
Aaa 3,000 5.00%, 9/1/19,
M.B.I.A............. 2,574,510
Santa Clara Elec.
Rev.,
Aaa 1,750 5.50%, 7/1/10, Ser.
B................... 1,683,220
Santa Cruz Cnty. Pub.
Fin.
Auth. Rev., Tax
Alloc.
Sub. Ln.,
AAA* 2,350D 7.625%, 9/1/21, Ser.
B................... 2,643,257
Santa Margarita, Dana
Point
Auth., Impvt. Dist.,
Ser. B,
Aaa 2,500 7.25%, 8/1/08......... 2,870,125
Aaa 1,400 7.25%, 8/1/09......... 1,608,376
Aaa 1,000 7.25%, 8/1/09,
M.B.I.A............. 1,148,840
Aaa 1,000 7.25%, 8/1/14......... 1,161,170
So. Orange Cnty. Pub.
Fin.
Auth., Foothill Area
Proj.,
Aaa 750 8.00%, 8/15/08,
F.G.I.C............. 905,843
Aaa 750 6.50%, 8/15/10,
F.G.I.C............. 792,855
Spec. Tax Rev.,
Aaa 3,500 7.00%, 9/1/11,
M.B.I.A............. 3,890,810
Sonoma Cnty., Cert. of
Part.,
Correctional Facs.
Proj.,
NR 4,000D 8.125%, 6/1/12........ 4,397,880
Southern California
Pub.
Pwr. Auth., Proj.
Rev.,
A 2,250 6.75%, 7/1/10......... 2,375,662
Southern California
Pub.
Pwr. Auth., Proj.
Rev.,
A $ 2,000 6.75%, 7/1/12......... $ 2,109,100
A 4,000 6.75%, 7/1/13......... 4,216,040
Aaa 7,925 Zero Coupon, 7/1/16,
A.M.B.A.C........... 2,105,039
Aaa 1,500 4.75%, 7/1/16,
A.M.B.A.C........... 1,256,040
Transmission Proj.,
Aaa 7,080 Zero Coupon, 7/1/12,
Ser. A, F.G.I.C..... 2,459,804
Southern California
Rapid
Transit Dist., Cert.
of Part.,
Aaa 1,365 5.50%, 9/1/09......... 1,333,004
Worker's Compensation
Fund,
Aaa 2,095 6.00%, 7/1/10,
M.B.I.A............. 2,129,861
Sulphur Springs Union
Sch. Dist.,
Aaa 2,000 Zero Coupon, 9/1/09,
Ser. A, M.B.I.A..... 841,120
Torrance Redev. Agcy.,
Tax. Alloc.,
Downtown Redev.,
Baa 1,580 7.125%, 9/1/21........ 1,592,466
Univ. of California
Rev.,
Pkg. Sys.,
A 2,000D 7.75%, 11/1/14, Ser.
C................... 2,139,660
Vacaville Cmnty.
Redev. Agcy.,
Multifamily Rev.,
A-* 1,110 7.375%, 11/1/14....... 1,158,884
Virgin Islands
Territory,
Hugo Ins. Claims
Fund Prog.,
NR 880 7.75%, 10/1/06, Ser.
91.................. 942,823
Walnut Valley Unified
School Dist.,
Aaa 1,870 6.00%, 8/1/15, Ser.
A,.................. 1,883,034
Whittier Pub. Fin.
Auth. Rev.,
Whittier Blvd.
Redev. Proj.,
NR 825 7.50%, 9/1/14, Ser.
A................... 838,959
------------
Total long-term
investments
(cost $163,223,664)... 173,397,826
------------
</TABLE>
-8- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
<TABLE>
<CAPTION>
Value
Description(a) (Note 1)
<C> <C> <S> <C>
Total Investments--96.3%
(cost $163,223,664;
Note 4)............. $173,397,826
Other assets in excess
of
liabilities--3.7%... 6,623,218
------------
Net Assets--100%...... $180,021,044
------------
------------
</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.
G.N.M.A.--Government National Mortgage Association.
M.B.I.A.--Municipal Bond Insurance Association.
R.I.B.S.--Residual Interest Bonds
S.A.V.R.S.--Select Auction Variable Rate Securities
* Standard & Poor's rating.
D Prerefunded issues are secured by escrowed cash
and/or direct U.S. guaranteed obligations.
@ 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.
-9- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets
February 28, 1995
-----------------
<S>
<C>
Investments, at value (cost
$163,223,664)............................................. $ 173,397,826
Receivable for investments
sold....................................................... 5,104,311
Interest
receivable...................................................................
3,028,957
Receivable for Series shares
sold..................................................... 321,702
Other
assets..........................................................................
3,905
-----------------
Total
assets........................................................................
181,856,701
-----------------
Liabilities
Bank
overdraft....................................................................
.... 1,302,613
Payable for Series shares
reacquired.................................................. 240,033
Accrued expenses and other
liabilities................................................ 74,629
Management fee
payable................................................................
61,319
Dividends
payable.....................................................................
60,426
Distribution fee
payable..............................................................
51,120
Due to broker-variation
margin........................................................ 42,391
Deferred trustee's
fees...............................................................
3,126
-----------------
Total
liabilities...................................................................
1,835,657
-----------------
Net
Assets.......................................................................
..... $ 180,021,044
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at
par............................................... $ 159,780
Paid-in capital in excess of
par.................................................... 176,842,433
-----------------
177,002,213
Accumulated net realized loss on
investments........................................ (6,936,768)
Net unrealized appreciation on
investments.......................................... 9,955,599
-----------------
Net assets, February 28,
1995....................................................... $ 180,021,044
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($68,069,684 / 6,040,693 shares of beneficial interest issued and
outstanding).... $11.27
Maximum sales charge (3.0% of offering
price)....................................... .35
-----------------
Maximum offering price to
public.................................................... $11.62
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per share
($111,874,563 / 9,930,473 shares of beneficial interest issued and
outstanding)... $11.27
-----------------
-----------------
Class C:
Net asset value, offering price and redemption price per share
($76,797 / 6,817 shares of beneficial interest issued and
outstanding)............ $11.27
-----------------
-----------------
</TABLE>
See Notes to Financial Statements.
-10-
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February
28,
Net Investment Income 1995
-----------
<S> <C>
Income
Interest............................ $ 6,138,954
-----------
Expenses
Management fee, net of waiver of
$14,179........................... 435,520
Distribution fee--Class A........... 8,618
Distribution fee--Class B........... 406,501
Distribution fee--Class C........... 160
Transfer agent's fees and
expenses.......................... 49,000
Custodian's fees and expenses....... 36,000
Registration fees................... 25,000
Reports to shareholders............. 24,000
Audit fee........................... 7,500
Legal fee........................... 7,000
Trustees' fees...................... 4,000
Miscellaneous....................... 5,343
-----------
Total expenses.................... 1,008,642
-----------
Net investment income................. 5,130,312
-----------
Realized and Unrealized
Gain (Loss) on Investments
Net realized loss on:
Investment transactions............. (1,471,034)
Financial futures transactions...... (909,708)
-----------
(2,380,742)
-----------
Net change in unrealized
appreciation on:
Investments......................... 1,308,728
Financial futures contracts......... (145,281)
-----------
1,163,447
-----------
Net loss on investments............... (1,217,295)
-----------
Net Increase in Net Assets
Resulting from Operations............. $ 3,913,017
-----------
-----------
</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 1995 1994
------------ ------------
<S> <C> <C>
Operations
Net investment
income............... $ 5,130,312 $ 11,071,242
Net realized loss on
investment
transactions......... (2,380,742) (1,281,438)
Net change in
unrealized
appreciation/depreciation
of investments....... 1,163,447 (12,467,405)
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations........... 3,913,017 (2,677,601)
------------ ------------
Dividends and
distributions
(Note 1)
Dividends to
shareholders from net
investment income
Class A.............. (547,917) (658,209)
Class B.............. (4,581,199) (10,413,033)
Class C.............. (1,196) --
------------ ------------
(5,130,312) (11,071,242)
------------ ------------
Distributions to
shareholders from net
realized gains
Class A.............. -- (111,145)
Class B.............. -- (1,998,700)
------------ ------------
-- (2,109,845)
------------ ------------
Series share transactions
(net of share
conversions) (Note 5)
Net proceeds from
shares sold.......... 8,229,008 27,913,990
Net asset value of
shares issued in
reinvestment of
dividends and
distributions........ 2,815,225 7,430,369
Cost of shares
reacquired........... (26,873,083) (41,168,151)
------------ ------------
Net decrease in net
assets from Series
share transactions... (15,828,850) (5,823,792)
------------ ------------
Total decrease........... (17,046,145) (21,682,480)
Net Assets
Beginning of period...... 197,067,189 218,749,669
------------ ------------
End of period............ $180,021,044 $197,067,189
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-11-
<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 the
preparation of its financial statements.
Securities Valuations: The Series values municipal securities (including
commitments to purchase such securities on a ``when-issued'' basis) on the basis
of prices provided by a pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining values. If market quotations are not readily available from such
pricing service, a security is valued at its fair value as determined under
procedures established by the Trustees.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
All securities are valued as of 4:15 P.M., New York time.
Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities at a set price
for delivery on a future date. Upon entering into a financial futures contract,
the Series is required to pledge to the broker an amount of cash and/or other
assets equal to a certain percentage of the contract amount. This amount is
known as the ``initial margin''. Subsequent payments, known as ``variation
margin'', are made or received by the Series each day, depending on the daily
fluctuations in the value of the underlying security. Such variation margin is
recorded for financial statement purposes on a daily basis as unrealized gain
or
loss. When the contract expires or is closed, the gain or loss is realized and
is presented in the statement of operations as net realized gain(loss) on
financial futures contracts. The Series invests in financial futures contracts
in order to hedge its existing portfolio securities or securities the Series
intends to purchase, against fluctuations in value caused by changes in
prevailing interest rates. Should interest rates move unexpectedly, the Series
may not achieve the anticipated benefits of the financial futures contracts and
may realize a loss. The use of futures transactions involves the risk of
imperfect correlation in movements in the price of futures contracts, interest
rates and the underlying hedged assets.
Securities Transactions and 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.
-12-
<PAGE>
<PAGE>
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
Note 2. Agreements The Fund has a management
agreement with Prudential 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.
Effective January 1, 1995, PMF has agreed to waive a portion (.05 of 1% of the
Series' average daily net assets) of its management fee, which amounted to
$14,179. The Series is not required to reimburse PMF for such waiver.
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 and Class C shares of the Fund (collectively
the ``Distributors''). The Fund compensates the Distributors for distributing
and servicing the Fund's Class A, Class B and Class C shares, pursuant to plans
of distribution, (the ``Class A, B and C Plans'') (regardless of expenses
actually incurred by them). The distribution fees are accrued daily and payable
monthly.
Pursuant to the Class A, B and C Plans, the Fund compensates the Distributors
for distribution-related activities at an annual rate of up to .30 of 1%, .50
of
1% and 1%, of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Plans were .10 of 1%, .50 of 1% and .75
of
1% of the average daily net assets of the Class A, B and C shares, respectively,
for the six months ended February 28, 1995.
PMFD has advised the Series that it has received approximately $12,500 in
front-end sales charges resulting from sales of Class A shares during the six
months ended February 28, 1995. From these fees, PMFD paid such sales charges
to
PSI and Pruco Securities Corporation, affiliated broker-dealers, which in turn
paid commissions to salespersons and incurred other distribution costs.
PSI has advised the Series that for the six months ended February 28, 1995,
it received approximately $209,000 in contingent deferred sales charges imposed
upon certain redemptions by Class B shareholders.
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, 1995, the Series incurred fees of
approximately $33,000 for the services of PMFS. As of February 28, 1995,
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, 1995 were $44,592,358 and $52,149,737, respectively.
At February 28, 1995, the Series sold 113 financial futures contracts on U.S.
Treasury Bonds which expire in March 1995. The value at disposition of such
contracts was $11,529,906. The value of such contracts on February 28, 1995 was
$11,748,469, thereby resulting in an unrealized loss of $218,563.
The cost basis of investments for federal income tax purposes was
substantially the same as for financial reporting purposes and, accordingly, at
February 28, 1995 net unrealized appreciation of investments for federal income
tax purposes was $10,174,162 (gross unrealized appreciation--$11,647,379; gross
unrealized depreciation--$1,473,217).
Note 5. Capital The Series currently offers
Class A, Class B and Class C shares. Class A
shares are sold with a front-end sales charge of up to 3%. Class B shares are
sold with a contingent deferred sales charge which declines from 5% to zero
depending on the period of time the shares are held. Class C shares are sold
with a contingent deferred sales charge of 1% during the first year. Commencing
in February 1995, Class B shares will automatically convert to Class A shares
on
a quarterly basis approximately seven years after purchase.
The Fund has authorized an unlimited number of shares of beneficial interest
for each class at $.01 par value per share.
-13-
<PAGE>
<PAGE>
Transactions in shares of beneficial interest for the six months ended
February 28, 1995 and fiscal year ended August 31, 1994 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------- ----------- -------------
<S> <C> <C>
Six months ended
February 28, 1995:
Shares sold................. 205,145 $ 2,211,223
Shares issued in
reinvestment of
dividends................. 26,306 290,146
Shares reacquired........... (436,494) (4,754,084)
----------- -------------
Net decrease in shares
outstanding before
conversion................ (205,043) (2,252,715)
Shares issued upon
conversion from Class B... 5,176,912 57,409,738
----------- -------------
Net increase in shares
outstanding 4,971,869 $ 55,157,023
----------- -------------
----------- -------------
Year ended August 31, 1994:
Shares sold................. 418,290 $ 4,907,256
Shares issued in
reinvestment
of dividends and
distributions............. 37,214 435,710
Shares reacquired........... (300,703) (3,517,825)
----------- -------------
Net increase in shares
outstanding............... 154,801 $ 1,825,141
----------- -------------
----------- -------------
<CAPTION>
Class B Shares Amount
- ---------------------------- ----------- -------------
<S> <C> <C>
Six months ended
February 28, 1995:
Shares sold................. 543,676 $ 5,943,618
Shares issued in
reinvestment
of dividends.............. 232,248 2,524,547
Shares reacquired........... (2,050,017) (22,117,999)
----------- -------------
Net decrease in shares
outstanding before
conversion................ (1,274,093) (13,649,834)
Shares reacquired upon
conversion into Class A... (5,176,912) (57,409,738)
----------- -------------
Net decrease in shares
outstanding............... (6,451,005) $ (71,059,572)
----------- -------------
----------- -------------
Year ended August 31, 1994:
Shares sold................. 1,940,266 $ 23,006,534
Shares issued in
reinvestment
of dividends and
distributions............. 596,575 6,994,659
Shares reacquired........... (3,247,104) (37,650,326)
----------- -------------
Net decrease in shares
outstanding............... (710,263) $ (7,649,133)
----------- -------------
----------- -------------
<CAPTION>
Class C
- ----------------------------
<S> <C> <C>
Six months ended
February 28, 1995:
Shares sold................. 6,840 $ 74,167
Shares issued in
reinvestment
of dividends.............. 49 532
Shares reacquired........... (90) (1,000)
----------- -------------
Net increase in shares
outstanding............... 6,799 $ 73,699
----------- -------------
----------- -------------
August 1, 1994* through
August 31, 1994:
Shares sold................. 18 $ 200
----------- -------------
----------- -------------
</TABLE>
- ---------------
* Commencement of offering of Class C shares.
-14-
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A
- -------------------------------------------------------------------------------
January 22,
Six Months
1990D
Ended Year Ended
August 31, through
February 28,
- ---------------------------------------------- August 31,
1995 1994 1993
1992 1991 1990
<S> <C> <C> <C>
<C> <C> <C>
------------ ------------
- ------- ------ ------ -----------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................ $ 11.30 $ 12.16 $
11.48 $11.01 $10.57 $ 10.77
------------ ------------
- ------- ------ ------ -----------
Income from investment operations
Net investment incomeDD............. .33DD .65
.69 .70 .69 .41
Net realized and unrealized gain
(loss) on investment
transactions...................... (.03) (.74)
.68 .47 .44 (.20)
------------ ------------
- ------- ------ ------ -----------
Total from investment
operations...................... .30 (.09)
1.37 1.17 1.13 .21
------------ ------------
- ------- ------ ------ -----------
Less distributions
Dividends from net investment
income............................ (.33) (.65)
(.69) (.70) (.69) (.41)
Distributions from net realized
gains............................. -- (.12) --
-- -- --
------------ ------------
- ------- ------ ------ -----------
Total distributions................. (.33) (.77)
(.69) (.70) (.69) (.41)
------------ ------------
- ------- ------ ------ -----------
Net asset value, end of period...... $ 11.27 $ 11.30 $
12.16 $11.48 $11.01 $ 10.57
------------ ------------
- ------- ------ ------ -----------
------------ ------------
- ------- ------ ------ -----------
TOTAL RETURN#:...................... 2.84% (0.80)%
12.30% 10.95% 10.98% 1.85%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..... $68,070 $12,082
$11,116 $5,388 $4,188 $1,774
Average net assets (000)............ $17,380 $11,812
$7,728 $4,322 $2,748 $1,214
Ratios to average net assets: DD
Expenses, including distribution
fees............................ .76%*/DD .73%
.77% .82% .88% .90%*
Expenses, excluding distribution
fees............................ .66%*/DD .63%
.67% .72% .78% .80%*
Net investment income............. 6.07%*/DD 5.57%
5.82% 6.25% 6.37% 6.28%*
Portfolio turnover.................. 26% 69%
43% 53% 53% 119%
</TABLE>
- ---------------
D Commencement of offering of Class A shares.
DD Net of fee waiver.
* 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.
-15-
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class C
--------
Class B
Six
- ----------------------------------------------------------------------------
Months
Six Months
Ended
Ended Year Ended
August 31, February
February 28,
- ------------------------------------------------------------ 28,
1995 1994 1993 1992
1991 1990 1995
<S> <C> <C> <C> <C>
<C> <C> <C>
------------ -------- --------
- -------- -------- -------- --------
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period................. $ 11.29 $ 12.15 $ 11.48 $
11.01 $ 10.57 $ 10.76 $11.29
------------ -------- --------
- -------- -------- -------- --------
Income from investment
operations
Net investment incomeDD..... .31DD .60 .64
.66 .64 .64 .29DD
Net realized and unrealized
gain (loss) on investment
transactions.............. (.02) (.74) .67
.47 .44 (.19) (.02)
------------ -------- --------
- -------- -------- -------- --------
Total from investment
operations.............. .29 (.14) 1.31
1.13 1.08 .45 .31
------------ -------- --------
- -------- -------- -------- --------
Less distributions
Dividends from net
investment income......... (.31) (.60) (.64)
(.66) (.64) (.64) (.29)
Distributions from net
realized gains............ -- (.12) -- --
-- -- --
------------ -------- --------
- -------- -------- -------- --------
Total distributions......... (.31) (.72) (.64)
(.66) (.64) (.64) (.29)
------------ -------- --------
- -------- -------- -------- --------
Net asset value, end of
period.................... $ 11.27 $ 11.29 $ 12.15 $
11.48 $ 11.01 $ 10.57 $11.27
------------ -------- --------
- -------- -------- -------- --------
------------ -------- --------
- -------- -------- -------- --------
TOTAL RETURN#:.............. 2.73% (1.20)% 11.74%
10.52% 10.54% 4.21% 2.59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $111,875 $184,985 $207,634
$177,861 $169,190 $174,005 $77
Average net assets (000).... $163,948 $201,558 $190,944
$172,495 $169,220 $175,990 $43
Ratios to average net
assets: DD
Expenses, including
distribution fees....... 1.16%*/DD 1.13% 1.17%
1.22% 1.28% 1.24% 1.41%*/DD
Expenses, excluding
distribution fees....... .66%*/DD .63% .67%
.72% .78% .76% .66%*/DD
Net investment income..... 5.67%*/DD 5.17% 5.44%
5.85% 5.98% 5.95% 5.42%*/DD
Portfolio turnover.......... 26% 69% 43%
53% 53% 119% 26%
<CAPTION>
August 1,
1994D
through
August 31,
1994
<S> <C>
----------
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period................. $ 11.32
----------
Income from investment
operations
Net investment incomeDD..... .04
Net realized and unrealized
gain (loss) on investment
transactions.............. (.03)
----------
Total from investment
operations.............. .01
----------
Less distributions
Dividends from net
investment income......... (.04)
Distributions from net
realized gains............ --
----------
Total distributions......... (.04)
----------
Net asset value, end of
period.................... $ 11.29
----------
----------
TOTAL RETURN#:.............. .05%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $200@
Average net assets (000).... $199@
Ratios to average net
assets: DD
Expenses, including
distribution fees....... 1.71%*
Expenses, excluding
distribution fees....... .96%*
Net investment income..... 4.87%*
Portfolio turnover.......... 69%
</TABLE>
- ---------------
D Commencement of offering of Class C shares.
DD Net of fee waiver.
* 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.
@ Figures are actual and not rounded to the nearest thousand.
See Notes to Financial Statements.
-16-
<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 H. 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
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 LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852, Collect (908) 417-7555
The accompanying financial statements as of February 28, 1995, 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.
744313107
744313206 MF116E2
744313701 (LOGO) Cat. #642111F
SEMI ANNUAL REPORT February 28, 1995
Prudential
California
Municipal Fund
- ---------------------------
(PICTURE)
California
Income Series
(LOGO)
<PAGE>
Letter to Shareholders
April 3, 1995
Dear Shareholder:
A powerful rally swept through the tax-exempt municipal bond market this
winter, lifting the value of your shares as interest rates fell and
newly-issued tax-exempt bonds became scarce. We are pleased to report
that your Prudential California Municipal Fund -- California Income Series
earned apositive total return. This finish was behind the average California
municipal bond fund as measured by Lipper Analytical Services, Inc., because
the Series held slightly shorter maturities during the most recent rally.
Our defensive position helped the Series as interest rates started to rise
again in early March.
<TABLE>
CUMULATIVE TOTAL RETURNS1
As of February 28, 1995
<CAPTION>
Six Months 1 Year Since Inception2
<S> <C> <C> <C>
Class A 2.0% 2.1% 42.2%
Class B 1.8% 1.7% 1.7%
Class C 1.7% N/A 2.2%
Lipper CA
Muni. Avg3 2.4% 0.2% 150.8%
</TABLE>
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS1
As of March 31, 1995
<CAPTION>
1 Year Since Inception2
<S> <C> <C>
Class A 4.2% 8.0%
Class B 2.0% -0.8%
Class C N/A 2.4%
</TABLE>
(GRAPH)
Less Means More...
For You!
Prudential mutual fund shareholders will
be seeing total returns increase
in the months to come, thanks to a
reduction in Fund management expenses.
Prudential Mutual Funds lowered the
rate on January 1, 1995, to 0.45% from
0.50%. It is our way of showing you
that we appreciate your business and
that we remain committedto managing the
Fund for your benefit.
Past performance is not indicative of future results. Principal and
investment return will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
1 Source: Prudential Mutual Fund Management Inc. and Lipper Analytical
Services, Inc. The cumulative total returns do not take into account
sales charges. The average annual returns do take into account applicable
sales charges. The Series charges a maximum front-end sales load of 3%
for Class A shares. Class B shares are subject to a contingent deferred
sales charge of 5%, 4%, 3%, 2%, 1% and 1% for six years. Class C shares
have a 1% CDSC for one year. Class B shares will automatically convert
to Class A shares on a quarterly basis, after approximately seven years.
2Inception dates: 12/3/90 Class A; 12/7/93, Class B; 8/1/94 Class C.
3Lipper average returns are for 89 funds for six months, 83 funds for one
year, 44 funds for five years, 16 funds for 10 years, and 13 funds since
inception of Class A shares on 12/3/90.
-1-
<PAGE>
Our Objective.
The Series seeks maximum income exempt from California state and federal
income taxes consistent with preservation of capital. Certain shareholders
may be subject to the federal alternative minimum tax, however. The Series
will invest primarily in California state, municipal and local government
obligations and obligations of U.S. territories (such as Puerto Rico, the
U.S. Virgin Islands and Guam), the income from which is also exempt from
federal and California state income taxes. In addition, the Series may
invest up to 30% of its total assets in high-yield securities, which are
below investment grade.
(GRAPH)
On the Hill:
In 1995, Congress will most likely consider
an initiative that would restore full income
tax deductibility for individual retirement
account (IRA) contributions for middle-income
wage earners. In addition, Congress may also
consider the creation of a new tax-deferred
savings account called the "American Dream
Savings Account." Prudential Mutual Funds
supports both of these proposals, and we urge
you to share your opinion with your Congressional
representatives. We will keep you updated on
these initiatives as they make their way through
the legislative process.
New Year Opens With Bond Rally.
What a difference six months can make! When we last reported to you, the
tax-exempt bond market was in turmoil because interest rates were rising
sharply, and prices (which move in the opposite direction of interest
rates) were falling sharply.
Volatility escalated last year when the Federal Reserve started to increase
short-term interest rates in a pre-emptive strike against inflation. By
November, after the Federal Reserve's sixth increase in the federal funds
rate (the interbank overnight lending rate), investors began to believe
that the economy was showing signs of slowing. As a result, long-term
interest rates in the tax-exempt bond market started to fall.
Long-term rates fell dramatically, and have continued to do so even though
the Federal Reserve raised short-term rates again on February 1, 1995. In
fact, on March 2, the Bond Buyer's Revenue Bond Index sank to 6.3% -- its
lowest since last June. That's more than a full percentage point below its
1994 high -- 7.4% recorded on November 17, 1994.
What We Did As Interest Rates Moved.
During this period of fluctuation, the Series sought to stabilize asset
values by maintaining a balance between bonds with higher coupons and those
with lower coupons, sometimes called premium and discount bonds. The higher
yielding premium bonds help cushion the impact of rising interest rates
while the lower coupon or discount bonds offer price appreciation
potential when interest rates decline.
Smaller Supply Supports Market, Too.
The tax-exempt municipal bond market has also been helped recently by a
scarcity of new supply. Last year's higher interest rates made many issuers
reluctant to borrow money. In fact, the Revenue Bond Index rose dramatically
to 6.9% from 5.5% -- nearly one and a half percentage points. As a result,
the level of new bonds issued nationwide fell by 44% and in California
by 33%.
-2-
<PAGE>
The Bankruptcy of Orange County.
The bankruptcy filing of Orange County in 1994 weighed heavily on the
tax-exempt municipal bond market last year, dragging prices of all
California bonds down below national averages. At the time of the
filing, the Prudential California Municipal Fund -- California Income
Series held less than 2% of its assets in direct obligations of Orange
County. The Series sold these bonds in December. The Series continues
to hold 8% of assets in bonds of participants in Orange County's
investment pool, of which almost 4% are insured. We believe the
long-term prospects for these issues remain positive.
A Tax Reminder...
As a result of the Revenue Reconciliation Act
of 1993, it is possible that this year you may
have some taxable income from your normally
tax-exempt municipal bond fund. The law
stipulates that the portion of any gain
realized on the sale or retirement of a
tax-exempt bond purchased at a market discount
to its face value may be taxed as ordinary
income. The law affects bonds purchased after
April 30, 1993.
California: The Recession Is Officially Over.
California's longest and deepest economic downturn since the Great Depression
is over. Unemployment has declined from 8.3% in June 1994 to 7.4% in December
1994. This dramatic improvement has lifted retail sales, personal income and
tax revenues. In addition, business loans have expanded and housing prices
appear to have stabilized. In short, the state is weaning itself from the
aerospace and defense manufacturing industries into the more diversified
service industries.
Although California's economy has strengthened, its recovery has lagged the
nation. For example, while unemployment has fallen substantially, it is the
highest of the nation's industrial states. In addition, the two-year plan
adopted by the Legislature in July to eliminate the state's deficit has fallen
out of balance by $2 billion, the state Legislative Analyst's Office has
reported. So California will continue to face program cutbacks and structural
budget problems.
Our California Strategy.
As a result of the uncertainty surrounding the state's budget, we have
refrained in recent years from purchasing California's general
obligation bonds. As the state's fiscal situation improves, we will
continue to review its debt in hopes of returning to the market.
The Outlook.
Tax-exempt municipal bonds have rallied substantially this winter. In fact,
the Lehman Brothers Municipal Bond Index has increased 2.8% over the last
six months. That is a substantial relief to investors who weathered
sharply rising interest rates and falling bond prices in 1994.
We expect long-term interest rates to stabilize in the year ahead, as
investors continue to gain confidence that the Federal Reserve is satisfied
that it has inflation under control. In addition, we expect the supply of
tax-exempt municipals to continue to contract, which should also provide
an additional reward to investors by supporting prices.
-3-
<PAGE>
As always, it is a pleasure to work for you. We thank you for remaining
with the Prudential California Municipal Fund -- California Income Series
through a most difficult 1994. We appreciate the confidence you have
shown in us.
Fund Update
Starting in February 1995, Class B shareholders
may have begun to notice a change in their Fund
holdings. That's when Class B shares began to
automatically convert to Class A shares, on a
quarterly basis, approximately seven years after
purchase. As you may know, Class A shares generally
carry lower annual distribution expenses than Class
B shares. Accordingly, after conversion you will
earn higher total returns on your investment than
you would have as a Class B shareholder.
Following the May cycle, conversions of eligible Class
B shares and special exchanges of Class B and C shares
will take place each calendar quarter (March, June,
September and December) starting in September 1995.
Sincerely,
Lawrence C. McQuade
President
Christian Smith
Portfolio Manager
-4-
<PAGE>
PORTFOLIO Q&A
(PICTURE)
Dennis Bushe
Many investors avoided bond funds in the past year, fearing that rising
interest rates would erode their returns and add volatility to their
investment portfolio. If you are contemplating putting cash into the
bond market -- in taxable or tax-exempt securities -- you might want
to consider some of the following points. We talked with Prudential
Mutual Funds chief fixed income strategist Dennis Bushe about why bonds
and bond mutual funds may make sense in today's investment environment.
Q. Why are bonds an attractive buy right now?
A. First, bond prices corrected in 1994, which put interest rates at very
attractive levels in 1995. Second, real rates of return (the interest rate
minus the inflation rate) are still very high historically. According to
Ibbotson Associates, a nationally recognized investment analysis firm, the
annual inflation-adjusted return on bonds from 1926 to 1994 was between 2.5%
and 3.0%. Today's investors receive over 4.5% in total inflation-adjusted,
annualized total return. Of course, these numbers are just for illustration,
but they show how much higher interest rates improve bond total returns when
inflation is only 2.7%, as measured by the Consumer Price Index. And beating
inflation is one primary goal of long-term investing.
Q. Why buy a bond fund instead of an individual bond?
A. One of the biggest risks to bond investing is credit quality. Of course
you can avoid virtually all credit risk in a government bond fund, but some
investors need higher income than Uncle Sam provides. Bond funds help manage
this risk, and that may be especially important in 1995. First of all, if the
U.S. economy is beginning to slow down, as many economists believe, then
credit quality is a concern. A credit team becomes very valuable, carefully
selecting bonds in different sectors and industries for bond portfolios. In
addition, few individual investors have the resources or clout to continually
monitor companies, unearth possible credit problems before they surface, and
negotiate favorable terms with troubled issuers -- a bond fund does. Finally,
the diversification of a bond fund may help investors avoid wide price swings
if one holding does experience financial difficulties.
-5-
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND Portfolio of Investments
CALIFORNIA INCOME SERIES February 28, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description(a) (Note 1)
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--98.5%
Alameda Cmnty. Facs.
Dist.,
Spec. Tax Rev. No. 1,
NR $ 3,000 7.75%, 9/1/19........... $ 3,115,950
Alameda Impvt. Bond Act of 1915,
Marina Vlg. Assmt. Dist. 89-1,
NR 1,000 7.65%, 9/2/10........... 1,031,280
NR 2,000 7.65%, 9/2/11........... 2,062,160
Arcadia Unified Sch.
Dist.,
Gen. Oblig., M.B.I.A.,
Ser. A,
Aaa 1,200 Zero Coupon, 9/1/09..... 504,672
Aaa 1,875 Zero Coupon, 9/1/11..... 687,581
Aaa 2,045 Zero Coupon, 9/1/12..... 703,316
Aaa 1,205 Zero Coupon, 9/1/13..... 388,516
Aaa 1,940 Zero Coupon, 9/1/18..... 452,389
Assoc. of Bay Area Govt's. Fin.
Auth., Cert. of Part., Ser. A
Channing House,
A* 1,500@ 7.125%, 1/1/21.......... 1,545,105
Baldwin Park Pub. Fin.
Auth. Rev.,
Tax Alloc. Bonds,
BBB* 1,225 7.10%, 9/1/24........... 1,234,543
Brea Pub. Fin. Auth.
Rev.,
Tax Alloc. Redev.
Proj.,
NR 3,000 8.10%, 3/1/21, Ser. C... 3,094,140
Buena Park Cmnty. Redev. Agcy.,
Cent. Bus. Dist. Proj.,
NR 3,325 7.80%, 9/1/14........... 3,259,730
California St. Dept. Wtr. Res. Rev.,
Central Valley Proj.,
Aa 1,000 7.00%, 12/1/12.......... 1,114,040
California St. Edl.
Facs. Auth.
Rev., Chapman Coll.,
Baa 600 7.50%, 1/1/18........... 615,960
Southwestern University
Proj.,
A 1,635 6.60%, 11/1/14.......... 1,669,499
California St. Gen.
Oblig.,
Aaa $ 1,250 6.50%, 9/1/10,
A.M.B.A.C............. $ 1,345,325
California St. Poll. Ctrl. Fin. Auth.,
Res. Recovery Rev., Waste
Mgmt., Inc.,
A1 2,000 7.15%, 2/1/11, Ser. A... 2,096,480
California Statewide
Cmnty. Dev. Rev.,
Cert. of Part.,
Villaview Cmnty.
Hosp.,
A* 1,000 7.00%, 9/1/09........... 1,036,900
Carson City Ltd. Oblig.
Impvt.
Rev., Assmt. Dist.,
NR 2,475 7.375%, 9/2/22.......... 2,505,467
Chula Vista Cmnty.
Redev. Agcy.,
Bayfront Tax Alloc.,
NR 2,500 8.25%, 5/1/24........... 2,649,575
BBB+* 2,500 7.625%, 9/1/24.......... 2,618,125
Contra Costa Cnty.,
Spec. Tax,
Cmnty. Facs. Pleasant
Hill,
NR 1,520 8.125%, 8/1/16.......... 1,604,102
Contra Costa Trans.
Auth.,
Sales Tax Rev.,
A1 1,000D 6.875%, 3/1/07, Ser.
A..................... 1,073,240
Delano, Cert. of Part.,
Regional Medical
Center,
NR 2,950 9.25%, 1/1/22, Ser.
92A................... 3,218,067
Desert Hosp. Dist., Cert. of Part.,
AAA* 2,000D 8.10%, 7/1/20........... 2,313,020
East Palo Alto San.
Dist.,
Cert. of Part., Aux.
Facs. Sch. Bldg.
Corp.,
NR 500 8.25%, 10/1/15.......... 529,045
El Dorado Cnty., Spec.
Tax,
NR 2,000 8.25%, 9/1/24........... 2,122,160
Fairfield Impvt. Bond
Act of 1915,
No. Cordella Impvt.
Dist.,
NR 825 7.20%, 9/2/09........... 850,996
NR 915 7.20%, 9/2/10........... 942,633
NR 760 8.00%, 9/2/11........... 784,046
NR 995 7.375%, 9/2/18.......... 1,025,328
Fairfield Pub. Fin.
Auth. Rev.,
Fairfield Redev.
Projs.,
NR 2,500D 7.90%, 8/1/21, Ser. A... 2,901,950
</TABLE>
-6- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description(a) (Note 1)
<C> <C> <S> <C>
Folsom Impvt. Bond Act
of 1915,
NR $ 1,000 7.25%, 9/2/19........... $ 1,001,390
Folsom Spec. Tax Dist.
No. 2,
NR 3,130 7.70%, 12/1/19.......... 3,196,951
Fontana Redev. Agcy.,
No. Fontana Redev.
Proj.,
NR 1,575D 7.65%, 12/1/09.......... 1,814,589
Fontana Special Tax
Cmnty. Facs.,
Dist. No. 2, Spec. Tax
Rev.,
NR 3,595 8.50%, 9/1/17, Ser. B... 3,797,075
Guam Pwr. Auth. Rev.,
Ser. A,
BBB* 1,000 6.625%, 10/1/14......... 1,006,750
Hemet Pub. Fin. Auth.,
Wtr. Rev.,
NR 1,720 6.50%, 2/1/12, Ser. A... 1,648,465
Industry Impvt. Bond Act
of 1915,
Assmt. Dist. No. 91-1,
NR 1,200 7.65%, 9/2/21........... 1,222,632
Kings Cnty. Wst. Mgmt.
Auth.,
Solid Wst. Rev.,
BBB+* 1,275 7.20%, 10/1/14.......... 1,291,856
La Quinta Redev. Agcy.,
Aaa 1,000 7.30%, 9/1/11,
M.B.I.A............... 1,157,960
Long Beach Redev. Agcy.
Hsg.,
Multifamily Hsg. Rev.,
Pacific Court Apts.,
NR 1,000 6.80%, 9/1/13........... 930,400
NR 1,500 6.95%, 9/1/23........... 1,386,945
Los Angeles Cmnty. Facs.
Dist.,
No. 5 Spec. Tax,
NR 1,500 7.25%, 9/1/19........... 1,478,025
Los Angeles Dept. of
Wtr. & Pwr.,
Elec. Rev.,
Aa 2,600 4.75%, 11/15/19......... 2,095,418
Waterworks Rev.,
Aa 1,900 4.50%, 5/15/23.......... 1,436,115
Met. Wtr. Dist. of
Southern
California, Waterworks
Rev.,
Aa 1,000 5.748%, 8/10/18......... 942,380
Aa 2,000@ 5.75%, 7/1/21, Ser. A... 1,908,600
Mojave Desert & Mtn.
Solid Wste. Jt. Pwrs.
Auth.,
Proj. Rev.,
Baa1 1,175 7.875%, 6/1/20.......... 1,230,636
Ontario Impvt. Bond Act
of 1915,
Assmt. Dist. 100,
NR $ 1,410 8.00%, 9/2/11........... $ 1,453,527
Orange Cnty. Cmnty.
Facs. Dist., Special
Tax Rev.,
No. 87-4, Foothill
Ranch,
NR 3,500D 7.375%, 8/15/18, Ser.
A..................... 4,001,795
No. 87-5B, Rancho Santa
Margarita,
NR 1,750D 7.50%, 8/15/17.......... 2,011,940
No. 88-1, Aliso Viejo,
NR 805D 7.15%, 8/15/06, Ser.
A..................... 914,713
AAA* 3,500D 7.35%, 8/15/18, Ser.
92.................... 4,019,960
Orange Cnty. Cmnty. Loc.
Trans. Tax,
NR 1,500 6.20%, 2/14/11.......... 1,464,345
Perris Sch. Dist., Cert.
of Part.,
Cap. Projs.,
NR 1,500D 7.75%, 3/1/21........... 1,718,085
Puerto Rico Hwy. &
Trans. Auth. Rev.,
AAA* 2,100D/@ 7.75%, 7/1/10, Ser. Q... 2,399,943
Puerto Rico Pub. Bldgs.
Auth.,
Gtd. Pub. Ed. & Hlth.
Facs.,
Baa1 1,605 Zero Coupon, 7/1/06,
Ser. J................ 840,089
Redding Cmnty. Elec.
Sys. Rev., Cert. of
Part.,
Aaa 3,750 6.368%, 7/1/22.......... 3,897,262
Richmond Jt. Pwrs. Fin.
Auth. Impvt. Bond Act
of 1915,
NR 2,500 7.40%, 9/2/19........... 2,576,150
Richmond Redev. Agcy. Rev.,
Multifamily Bridge Affordable Hsg.,
NR 2,500 7.50%, 6/1/23........... 2,456,700
Riverside Cnty. Cert. of
Part.,
Air Force Vlg. West,
NR 3,000 8.125%, 6/15/20......... 3,061,050
Riverside Cnty. Impvt.
Bond Act of 1915,
NR 2,500 7.625%, 9/2/14, Ser.
A..................... 2,478,675
Riverside Sch. Dist.
Special Tax,
Cmnty. Facs. Dist. No.
2,
NR 1,000 7.25%, 9/1/18, Ser. A... 1,005,420
</TABLE>
-7- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description(a) (Note 1)
<C> <C> <S> <C>
Rocklin Stanford Ranch Cmnty.
Facs., Dist. Spec. Tax,
NR $ 1,000 8.10%, 11/1/15.......... $ 1,044,550
Sacramento Cnty. Fin.
Auth.,
Cap. Apprec. Tax
Alloc., Project B,
NR 5,700 Zero Coupon, 11/1/16.... 1,488,156
Sacramento Cnty. Spec. Tax Rev.,
Dist. No. 1, Elliot Ranch,
NR 2,000 8.20%, 8/1/21........... 2,101,520
Dist. No. 1, Laguna
Creek Ranch,
NR 1,000 8.25%, 12/1/20.......... 1,062,010
Sacramento Spec. Purpose
Fac.,
NR 2,200 7.25%, 12/1/18.......... 2,172,654
San Bernardino Cnty.,
Cert. of
Part., Med. Ctr. Fin.
Proj.,
Baa1 4,540 5.50%, 8/1/22........... 3,644,530
Baa1 6,750 5.50%, 8/1/24........... 5,395,815
San Diego Cnty. Wtr.
Auth., Wtr. Rev.,
Aaa 2,000 5.681%, 4/23/08,
F.G.I.C............... 1,947,560
San Francisco City &
Cnty.,
Redev. Agcy., Lease
Rev.,
A 1,500 Zero Coupon, 7/1/06..... 762,960
A 2,250 Zero Coupon, 7/1/07..... 1,067,940
San Joaquin Hills Trans.
Corridor Agcy.,
Toll Road Rev.,
NR 2,000 Zero Coupon, 1/1/11..... 543,120
San Jose Redev. Proj.,
Aaa 2,900 6.00%, 8/1/15,
M.B.I.A............... 2,920,213
Santa Cruz Cnty. Pub. Fin. Auth.
Rev., Tax Alloc. Sub., Ser. B
AAA* 2,500D 7.625%, 9/1/21.......... 2,811,975
Santa Margarita, Dana Point Auth.,
Impvt. Dist., Ser B, M.B.I.A,
Aaa 905 7.25%, 8/1/09........... 1,039,700
Aaa 1,000 7.25%, 8/1/14........... 1,161,170
South Orange Cnty. Pub. Fin. Auth.,
NR 1,900 7.00%, 9/1/08........... 1,804,639
Aaa 2,535 7.00%, 9/1/10,
M.B.I.A............... 2,821,252
NR 2,000 7.25%, 9/1/13........... 1,930,960
South Orange Cnty. Pub.
Fin. Auth.,
Foothill Area Proj.,
F.G.I.C.,
Aaa $ 750 8.00%, 8/15/08.......... $ 905,843
Aaa 750 6.50%, 8/15/10.......... 792,855
South San Francisco
Redev.
Agcy., Tax Alloc.,
Gateway
Redev. Proj.,
NR 2,375 7.60%, 9/1/18........... 2,426,466
Southern California Pub. Pwr.
Auth., Proj. Rev.,
A 6,250 6.75%, 7/1/10........... 6,599,062
A 3,000 6.75%, 7/1/13........... 3,162,030
Aaa 8,400 Zero Coupon, 7/1/16..... 2,231,208
Aaa 1,500 4.75%, 7/1/16,
A.M.B.A.C............. 1,256,040
Sulphur Springs Unified
Sch. Dist.,
Aaa 3,000 Zero Coupon, 9/1/11,
Ser. A................ 1,114,200
Temecula Valley Unified
Sch. Cmnty. Facs.,
Spec. Tax Dist. No.
89-1,
NR 2,600 8.60%, 9/1/17........... 2,632,500
Torrance Redev. Agcy.,
Tax
Alloc. Downtown
Redev.,
Baa 3,925 7.125%, 9/1/22.......... 3,960,992
Tax Alloc. Ind. Redev.
Proj.,
NR 2,500 7.75%, 9/1/13........... 2,597,975
Vacaville Cmnty. Redev.
Agcy.,
Multifamily Hsg. Rev.,
A-* 1,110 7.375%, 11/1/14......... 1,158,884
Virgin Islands Pub. Fin. Auth. Rev.,
Hwy. Trans. Trust Fund,
BBB* 1,000 7.70%, 10/1/04.......... 1,079,160
Virgin Islands Territory,
Hugo Ins. Claims Fund Prog.,
NR 1,140 7.75%, 10/1/06, Ser.
91.................... 1,221,385
West Contra Costa Unified
Sch. Dist., Cert. of Part.,
Ba 1,140 6.875%, 1/1/09.......... 1,161,877
West Sacramento Impvt.
Bond Act of 1915,
Lighthouse Marina
Assmt. Dist. 90-1,
NR 2,500 8.50%, 9/2/17........... 2,578,250
</TABLE>
-8- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description(a) (Note 1)
<C> <C> <S> <C>
Westminster Redev.
Agcy.,
Tax Allocation Rev.,
Orange County, Proj.
No. 1,
Baa1 $ 3,000 7.30%, 8/1/21, Ser. A... $ 3,042,960
------------
Total long-term
investments
(cost $179,365,852)... 186,583,592
------------
SHORT-TERM INVESTMENTS--0.7%
California Poll. Ctrl.
Fin. Auth.
Rev.,
VMIG1 300 4.00%, 3/1/95,
F.R.D.D............... 300,000
California Poll. Ctrl.
Solid Waste Mgmt.
Rev.,
VMIG1 1,000 3.95%, 3/1/95,
F.R.D.D............... 1,000,000
------------
Total short-term
investments
(cost $1,300,000)..... 1,300,000
------------
Total Investments--99.2%
(cost $180,665,852; Note
4).................... 187,883,592
Other assets in excess
of
liabilities--0.8%..... 1,558,706
------------
Net Assets--100%........ $189,442,298
------------
------------
</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 such
securities 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.
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.
-9- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets
February 28, 1995
-----------------
<S>
<C>
Investments, at value (cost
$180,665,852).............................................. $ 187,883,592
Cash.........................................................................
.......... 132,487
Interest
receivable....................................................................
3,838,033
Receivable for investments
sold........................................................ 1,747,632
Receivable for Series shares
sold...................................................... 549,057
Deferred expenses and other
assets..................................................... 7,816
-----------------
Total
assets.........................................................................
194,158,617
-----------------
Liabilities
Payable for investments
purchased......................................................
2,602,356
Payable for Series shares
reacquired................................................... 1,875,318
Due to broker - variation
margin....................................................... 118,187
Dividends
payable......................................................................
73,101
Distribution fee
payable...............................................................
21,869
Accrued
expenses.......................................................................
11,606
Management fee
payable.................................................................
10,756
Deferred trustee's
fees................................................................
3,126
-----------------
Total
liabilities....................................................................
4,716,319
-----------------
Net
Assets.......................................................................
...... $ 189,442,298
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at
par................................................ $ 188,423
Paid-in capital in excess of
par..................................................... 187,229,927
-----------------
187,418,350
Accumulated net realized loss on
investments......................................... (4,959,604)
Net unrealized appreciation on
investments........................................... 6,983,552
-----------------
Net assets, February 28,
1995........................................................ $ 189,442,298
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($164,629,146 / 16,374,371 shares of beneficial interest issued and
outstanding)... $10.05
Maximum sales charge (3.0% of offering
price)........................................ .31
-----------------
Maximum offering price to
public..................................................... $10.36
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per share
($23,637,178 / 2,350,956 shares of beneficial interest issued and
outstanding)..... $10.05
-----------------
-----------------
Class C:
Net asset value, offer price and redemption price per share
($1,175,974 / 116,965 shares of beneficial interest issued and
outstanding)........ $10.05
-----------------
-----------------
</TABLE>
See Notes to Financial Statements.
-10-
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
February
28,
Net Investment Income 1995
-----------
<S> <C>
Income
Interest............................ $ 6,671,379
-----------
Expenses
Management fee, net of waiver of
$370,397.......................... 103,546
Distribution fee--Class A........... 83,831
Distribution fee--Class B........... 51,610
Distribution fee--Class C........... 4,764
Custodian's fees and expenses....... 48,000
Transfer agent's fees and
expenses.......................... 32,000
Registration fees................... 31,000
Reports to shareholders............. 25,000
Audit fee........................... 7,500
Legal fees.......................... 7,000
Trustees' fees...................... 4,000
Amortization of organizational
expenses.......................... 3,600
Miscellaneous....................... 11,926
-----------
Total expenses.................... 413,777
-----------
Net investment income................. 6,257,602
-----------
Realized and Unrealized Loss
on Investments
Net realized loss on:
Investment transactions............. (1,345,668)
Financial futures transactions...... (1,134,904)
-----------
(2,480,572)
-----------
Net change in unrealized appreciation
on:
Investments......................... (546,882)
Financial futures contracts......... (211,876)
-----------
(758,758)
-----------
Net loss on investments............... (3,239,330)
-----------
Net Increase in Net Assets
Resulting from Operations............. $ 3,018,272
-----------
-----------
</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 1995 1994
------------ ------------
<S> <C> <C>
Operations
Net investment
income............... $ 6,257,602 $ 12,628,785
Net realized loss on
investment
transactions......... (2,480,572) (1,000,583)
Net change in
unrealized
appreciation on
investments.......... (758,758) (6,676,047)
------------ ------------
Net increase in net
assets resulting from
operations........... 3,018,272 4,952,155
------------ ------------
Dividends and distributions (Note 1)
Dividends to shareholders
from net investment income
Class A.............. (5,570,497) (12,219,313)
Class B.............. (648,449) (407,719)
Class C.............. (38,656) (1,753)
------------ ------------
(6,257,602) (12,628,785)
------------ ------------
Distributions to
shareholders from net
realized gains
Class A.............. -- (1,957,806)
------------ ------------
Series share
transactions (net of
share conversions)
(Note 5)
Net proceeds from
shares subscribed.... 24,327,351 50,787,060
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions........ 2,770,410 6,449,654
Cost of shares
reaquired............ (38,143,267) (44,773,937)
------------ ------------
Net increase (decrease)
in net assets from
Series share
transactions......... (11,045,506) 12,462,777
------------ ------------
Total increase
(decrease)............. (14,284,836) 2,828,341
Net Assets
Beginning of period...... 203,727,134 200,898,793
------------ ------------
End of period............ $189,442,298 $203,727,134
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-11-
<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 Series values municipal securities (including
commitments to purchase such securities on a ``when-issued'' basis) on the basis
of prices provided by a pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining values. If market quotations are not readily available from such
pricing service, a security is valued at its fair value as determined under
procedures established by the Trustees.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
All securities are valued as of 4:15 P.M., New York time.
Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities at a set price
for delivery on a future date. Upon entering into a financial futures contract,
the Series is required to pledge to the broker an amount of cash and/or other
assets equal to a certain percentage of the contract amount. This amount is
known as the ``initial margin''. Subsequent payments, known as ``variation
margin'', are made or received by the Series each day, depending on the daily
fluctuations in the value of the underlying security. Such variation margin is
recorded for financial statement purposes on a daily basis as unrealized gain
or
loss. When the contract expires or is closed, the gain or loss is realized and
is presented in the statement of operations as net realized gain(loss) on
financial futures contracts.
The Series invests in financial futures contracts in order to hedge its
existing portfolio securities or securities the Series intends to purchase,
against fluctuations in value caused by changes in prevailing interest rates.
Should interest rates move unexpectedly, the Series may not achieve the
anticipated benefits of the financial futures contracts and may realize a loss.
The use of futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the underlying
hedged assets.
Securities Transactions and 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 unrealized and
realized gains or losses are allocated daily to each class of shares based upon
the relative proportion of net assets of each class at the beginning of the day.
Federal Income Taxes: For federal income tax purposes, each series in the Fund
is treated as a separate taxpaying entity. It is the intent of the Series to
continue to meet the requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute all of its net income to
shareholders. For this reason 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.
-12-
<PAGE>
<PAGE>
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
Reclassification of Capital Accounts: The Series accounts for and reports
distributions to shareholders in accordance with the A.I.C.P.A.'s Statement of
Position 93-2: Determination, Disclosure, and Financial Statement Presentation
of Income, Capital Gain and Return of Capital Distributions by Investment
Companies. The effect caused by applying this statement as of August 31, 1994
was to decrease paid-in capital and increase accumulated net realized loss on
investments by $21,495 due to overdistribution of capital gains. Net investment
income, net realized losses, and net assets were not affected by this change.
Deferred Organization Expenses: The Series incurred approximately $36,000 in
organization and initial registration expenses. 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.
Effective January 1, 1995, PMF increased its voluntary waiver from 75% to 85%
of
its management fee. The amount of such fees waived for the six months ended
February 28, 1995 amounted to $370,397 ($.02 per share, .39% 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 with Prudential Securities Incorporated (``PSI''), which
acts as distributor of the Class B and Class C shares of the Fund (collectively
the ``Distributors''). The Fund compensates the Distributors for distributing
and servicing the Fund's Class A, Class B and Class C shares, pursuant to plans
of distribution, (the ``Class A, B and C Plans'') regardless of expenses
actually incurred by them. The distribution fees are accrued daily and payable
monthly.
Pursuant to the Class A, B and C Plans, the Fund compensates the Distributors
for distribution-related activities at an annual rate of up to .30 of 1%, .50
of
1% and 1%, of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Plans were .10 of 1%, .50 of 1% and .75
of
1% of the average daily net assets of the Class A, B and C shares, respectively,
for the six months ended February 28, 1995.
PMFD has advised the Series that it has received approximately $201,300 in
front-end sales charges resulting from sales of Class A shares during the six
months ended February 28, 1995. From these fees, PMFD paid such sales charges
to
PSI and Pruco Securities Corporation, affiliated broker-dealers, which in turn
paid commissions to salespersons and incurred other distribution costs.
PSI has advised the Series that for the six months ended February 28, 1995,
it received approximately $36,000 and $1,400 in contingent deferred sales
charges imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
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, 1995, the Series incurred fees of
approximately $25,000 for the services of PMFS. As of February 28, 1995,
approximately $4,000 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, 1995 were $50,435,348 and $50,044,389, 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, 1995 net unrealized appreciation of investments for federal
income tax purposes was $7,217,740 (gross unrealized appreciation--$8,533,744;
gross unrealized depreciation--$1,316,004).
At February 28, 1995, the Series sold 122 financial futures contracts on U.S.
Treasury Bonds which expire in March 1995. The value at disposition of such
contracts was
-13-
<PAGE>
<PAGE>
$12,450,000. The value of such contracts on February 28, 1995 was $12,684,188,
thereby resulting in an unrealized loss of $234,188.
Note 5. Capital The Series currently offers
Class A, Class B and Class C shares. Class A
shares are sold with a front-end sales charge of up to 3.0%. Class B shares are
sold with a contingent deferred sales charge which declines from 5% to zero
depending on the period of time the shares are held. Class C shares are sold
with a contingent deferred sales charge of 1% during the first year. Commencing
in February, 1995, Class B shares automatically convert to Class A shares on a
quarterly basis approximately seven years after purchase. A special exchange
privilege is also available for shareholders who qualified to purchase Class A
shares at net asset value.
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, 1995 and the fiscal year ended August 31, 1994 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------ ---------- ------------
<S> <C> <C>
Six months ended February 28,
1995:
Shares sold................... 1,579,809 $ 15,508,657
Shares issued in reinvestment
of
dividends................... 250,790 2,456,074
Shares reacquired............. (3,539,973) (34,559,800)
---------- ------------
Net decrease in shares
outstanding before
conversion.................. (1,709,374) (16,595,069)
Shares issued upon conversion
from Class B................ 52,251 518,848
---------- ------------
Net decrease in shares
outstanding................. (1,657,123) $(16,076,221)
---------- ------------
---------- ------------
Year ended August 31, 1994:
Shares sold................... 2,832,276 $ 29,779,955
Shares issued in reinvestment
of
dividends and
distributions............... 603,170 6,281,627
Shares reacquired............. (4,212,175) (43,795,883)
---------- ------------
Net decrease in shares
outstanding................. (776,729) $ (7,734,301)
---------- ------------
---------- ------------
<CAPTION>
Class B Shares Amount
- ------------------------------ ---------- ------------
<S> <C> <C>
Six months ended February 28,
1995:
Shares sold................... 817,348 $ 8,022,602
Shares issued in reinvestment
of
dividends................... 28,977 283,752
Shares reacquired............. (300,937) (2,917,019)
---------- ------------
Net increase in shares
outstanding before
conversion.................. 545,388 5,389,335
Shares reacquired upon
conversion into Class A..... (52,251) (518,848)
---------- ------------
Net increase in shares
outstanding................. 493,137 $ 4,870,487
---------- ------------
---------- ------------
December 7, 1993* through
August 31, 1994:
Shares sold................... 1,938,204 $ 19,956,652
Shares issued in reinvestment
of
dividends................... 16,467 167,359
Shares reacquired............. (96,852) (978,054)
---------- ------------
Net increase in shares
outstanding................. 1,857,819 $ 19,145,957
---------- ------------
---------- ------------
<CAPTION>
Class C
- ------------------------------
<S> <C> <C>
Six months ended February 28,
1995:
Shares sold................... 79,947 $ 796,092
Shares issued in reinvestment
of
dividends................... 3,129 30,584
Shares reacquired............. (69,592) (666,448)
---------- ------------
Net increase in shares
outstanding................. 13,484 $ 160,228
---------- ------------
---------- ------------
August 1, 1994** through
August 31, 1994:
Shares sold................... 103,415 $ 1,050,453
Shares issued in reinvestment
of
dividends................... 66 668
---------- ------------
Net increase in shares
outstanding................. 103,481 $ 1,051,121
---------- ------------
---------- ------------
- ---------------
* Commencement of Class B operations.
** Commencement of Class C operations.
</TABLE>
-14-
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A
Class B
- -------------------------------------------------------------
- -----------------------------
December 3, December 7,
Six Months
1990* Six Months 1993DD
Ended Year Ended August 31,
Through Ended Through
February 28, ------------------------------
August 31, February 28, August 31,
1995 1994 1993 1992
1991 1995 1994
------------ -------- -------- --------
----------- ------------ -------------
<S> <C> <C> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period....................... $ 10.19 $ 10.68 $ 10.08 $ 9.76
$ 9.55 $ 10.19 $ 10.61
------------ -------- -------- --------
----------- ------------ -------------
Income from investment
operations
Net investment incomeD......... .33 .65 .67 .69
.51 .31 .44
Net realized and unrealized
gain (loss) on investment
transactions................. (.14) (.39) .65 .35
.21 (.14) (.42)
------------ -------- -------- --------
----------- ------------ -------------
Total from investment
operations................. .19 .26 1.32 1.04
.72 .17 .02
------------ -------- -------- --------
----------- ------------ -------------
Less distributions
Dividends from net investment
income....................... (.33) (.65) (.67)
(.69) (.51) (.31) (.44)
Distributions from net realized
gains........................ -- (.10) (.05)
(.03) -- -- --
------------ -------- -------- --------
----------- ------------ -------------
Total distributions.......... (.33) (.75) (.72)
(.72) (.51) (.31) (.44)
------------ -------- -------- --------
----------- ------------ -------------
Net asset value, end of
period....................... $ 10.05 $ 10.19 $ 10.68 $ 10.08
$ 9.76 $ 10.05 $ 10.19
------------ -------- -------- --------
----------- ------------ -------------
------------ -------- -------- --------
----------- ------------ -------------
TOTAL RETURN#.................. 1.98% 2.55% 13.67%
11.08% 7.97% 1.77% (.14)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000)........................ $164,629 $183,742 $200,899 $141,101
$72,241 $ 23,637 $18,931
Average net assets (000)....... $169,052 $195,610 $165,895 $102,227
$47,540 $ 20,815 $ 6,814
Ratios to average net assetsD:
Expenses, including
distribution fees.......... .38%** .35% .20%
.10% .0%** .78%** 1.11%**
Expenses, excluding
distribution fees.......... .28%** .25% .10%
.04% .0%** .28%** .43%**
Net investment income........ 6.64%** 6.25% 6.52%
6.91% 7.04%** 6.24%** 8.15%**
Portfolio turnover............. 27% 46% 34%
69% 35% 27% 46%
<CAPTION>
Class C
-------------------------
August 1,
Six Months 1994DDD
Ended Through
February 28, August 31,
1995 1994
------------ ----------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period....................... $10.19 $10.18
------ ----------
Income from investment
operations
Net investment incomeD......... .30 .05
Net realized and unrealized
gain (loss) on investment
transactions................. (.14) .01
------ ----------
Total from investment
operations................. .16 .06
------ ----------
Less distributions
Dividends from net investment
income....................... (.30) (.05)
Distributions from net realized
gains........................ -- --
------ ----------
Total distributions.......... (.30) (.05)
------ ----------
Net asset value, end of
period....................... $10.05 $10.19
------ ----------
------ ----------
TOTAL RETURN#.................. 1.65% .47%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000)........................ $1,176 $1,054
Average net assets (000)....... $1,281 $ 353
Ratios to average net assetsD:
Expenses, including
distribution fees.......... 1.03%** 1.12%**
Expenses, excluding
distribution fees.......... .28%** .37%**/@
Net investment income........ 5.99%** 6.25%**
Portfolio turnover............. 27% 46%
</TABLE>
- ---------------
* Commencement of investment operations.
** Annualized.
D Net of expense subsidy and/or fee waiver.
DD Commencement of offering of Class B shares.
DDD Commencement of offering of Class C 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.
@ Restated.
See Notes to Financial Statements.
-15-
<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 H. 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
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 LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852, Collect (908) 417-7555
The accompanying financial statements as of February 28, 1995, 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
744313404 MF146E2
744313800 (LOGO) Cat. #4443517
SEMI ANNUAL REPORT February 28, 1995
Prudential
California
Municipal Fund
- --------------------------------------
(PICTURE)
California
Money Market Series
(LOGO)
<PAGE>
Letter to Shareholders
April 3, 1995
Dear Shareholder:
The big story for California investors over the past six months was the
unexpected financial collapse of Orange County, one of the most affluent
communities in the United States. While we did own some Orange County
securities, the impact, thankfully, was minimal for shareholders of the
Prudential California Municipal Fund -- California Money Market Series.
Not only did the Series maintain its $1 net asset value, but the 7-day
current yield increased nearly one full percentage point since last
August to 3.3% from 2.6%, finishing slightly behind the 3.5% Donoghue
California tax-exempt money fund average, which tracks 43 California
tax-exempt money market funds.
<TABLE>
SERIES' PERFORMANCE
As of February 28, 1995
<CAPTION>
7-Day Weighted
Net Current Tax Equivalent Yield Average
Assets (mil.) Yield @31% @36% @39% Maturity
<S> <C> <C> <C> <C> <C> <C>
Cal. Money
Market Series $215 3.3% 5.3% 5.7% 6.1% 49 days
Donoghue Calif.
Tax-Exempt Funds* N/A 3.5% 5.7% 6.2% 6.5% 33 days
</TABLE>
Note: Yields will fluctuate from time to time and past performance is no
guarantee of future results. An investment in the Series 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.
* Donoghue returns as of 2/27/95.
Fund Overview.
Your California Money Market Series seeks to provide a high level of income
which is free from California and federal income taxes, while maintaining a
stable net asset value of $1 per share. There can be no assurance that the
Series' investment objective will be achieved. The Series invests primarily
in high quality, short-term, tax-exempt California state, municipal and local
bonds and bonds from other qualifying issuers.
-1-
<PAGE>
The Federal Reserve Tightens.
The U.S. economy grew in 1994 at the robust annual rate approximating 4%, a
stronger rate than many had anticipated as the year began. Three million new
jobs were created during the year and consumer confidence was at a four-year
high. Fearing that this dramatic growth would increase inflation, the Federal
Reserve started to increase short-term interest rates. By February 1995, the
central bank had increased the federal funds rate (the overnight interbank
lending rate) seven times, doubling the rate to 6% from 3% in a year.
There were some indications in late February that the Federal Reserve was
having some success in slowing economic growth. Inflation remains below 3%,
with no signs of rising anytime soon. Commodities prices (one precursor of
inflation) have traded within an acceptable range throughout the year, while
wages (another leading indicator) have stayed flat. With economic growth
slowing, we don't expect wage and price pressures to develop anytime soon.
Rising Rates Were Beneficial.
Rising rates were good news for the California Money Market Series. The
Series' 7-day current yield on February 28, 1995 stood at 3.3%, which is
nearly a percentage point higher than the 2.6% recorded on August 31, 1994.
An individual in the 39.6% federal tax bracket would have to have earned
about 6.1% from a taxable investment to match this return.
On the Hill:
In 1995, Congress will most likely consider
an initiative that would restore full income
tax deductibility for individual retirement
account (IRA) contributions for middle-income
wage earners. In addition, Congress may also
consider the creation of a new tax-deferred
savings account called the "American Dream
Savings Account." Prudential Mutual Funds
supports both of these proposals, and we urge
you to share your opinion with your Congressional
representatives. We will keep you updated on these
initiatives as they make their way through the
legislative process.
The Orange County Surprise.
When Orange County filed for bankruptcy protection in December, it took the
financial world by surprise. Orange County debt had been rated high quality
(Aa1/AA- by Moody's Investors Service and Standard & Poor's Corporation,
respectively) prior to the fiscal collapse. In the days following the
bankruptcy filing, the Series sold a portion of its Orange County holdings
without suffering a loss of principal. However, some Orange County holdings
remain in the portfolio, but, as explained in the accompanying financial
statements, these debt securities are credit enhanced.
California On the Rebound.
Orange County's bankruptcy filing notwithstanding, California's long-term
economic outlook is quite favorable. A variety of indicators point to
emerging strength in the state economy. Impressive job gains have translated
into gains in retail sales, personal income and tax revenues. This positive
outlook is also supported by the success of the state's job sector to wean
itself from the aerospace and defense industries.
This outlook is tempered by a number of factors. California's recovery
lags the rest of the country, unemployment remains high and it still faces
structural deficit problems.
-2-
<PAGE>
Where We Invested.
Our credit research analysts continue to closely monitor the creditworthiness
of state and local issues. As of this writing, we are currently invested
across a broad spectrum of 35 issuers from various regions of the state,
representing many types of public works projects. These are high quality
securities, such as the California Department of Water Resources which are
secured by revenue streams collected by the specific project. Or they may
be securities issued by state agencies or authorities, such as the Sacramento
Municipal Utility District and Southern California Public Power Authority.
Many of our holdings are backed by letters of credit from respected financial
institutions, like SwissBank, Morgan Guaranty and the Bank of America.
The Outlook.
We believe 1995 should be a positive year for money market investors
highlighted by moderate U.S. economic growth at a rate that is manageable.
Inflation may edge up a bit, but an increase has already been discounted by
the markets.
As always, it is a pleasure to work for you. We are pleased to be able to
report this news to you and thank you for the confidence you have shown in
us by choosing the Prudential California Municipal Fund -- California Money
Market Series.
Sincerely,
Lawrence C. McQuade
President
Kenneth Potts
Portfolio Manager
-3-
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND Portfolio of Investments
CALIFORNIA MONEY MARKET SERIES February 28, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<C> <C> <S> <C>
Alameda Cnty.,
T.R.A.N.,
MIG1 $ 3,500 4.75%, 8/11/95......... $ 3,508,203
Alameda Rev.,
KQED Inc. Proj.,
F.R.W.D.,
VMIG2 5,700 5.05%, 3/1/95, Ser.
90................... 5,700,000
California Hlth. Facs.
Fin. Auth. Rev.,
St. Francis Mem.
Hosp., F.R.D.D.,
VMIG1 1,000 3.75%, 3/1/95, Ser.
B.................... 1,000,000
California Hsg. Fin.
Agcy. Rev.,
Home Mtge. Rev.,
A.N.N.M.T.,
SP1* 1,720 4.30%, 5/1/95, Ser.
94-2................. 1,720,000
California Poll Ctrl.
Fin. Auth. Rev.,
Arco Proj., F.R.D.D.,
VMIG1 9,500 4.00%, 3/1/95, Ser.
94A.................. 9,500,000
Burney Forest Proj.,
F.R.D.D.,
P1 3,200 3.75%, 3/1/95, Ser.
88A.................. 3,200,000
P1 1,000 3.75%, 3/1/95, Ser.
89A.................. 1,000,000
Chevron U.S.A. Inc.
Proj., A.N.N.O.T.,
NR 4,155 3.10%, 5/15/95, Ser.
84................... 4,144,256
Delano Proj., F.R.D.D.,
P1 1,000 3.90%, 3/1/95, Ser.
90................... 1,000,000
P1 600 3.90%, 3/1/95, Ser.
91................... 600,000
Honey Lake Power Proj.,
F.R.D.D.,
NR 1,300 3.90%, 3/1/95, Ser.
88................... 1,300,000
NR 4,900 3.90%, 3/1/95, Ser.
89................... 4,900,000
Pacific Gas & Elec.,
T.E.C.P.,
A1+* 2,700 4.05%, 5/1/95, Ser.
88A.................. 2,700,000
San Diego Gas & Elec.
Co., A.N.N.O.T.,
A1* 9,000 4.25%, 9/1/95, Ser.
84A.................. 9,000,000
Shell Oil Co.,
F.R.D.D.,
VMIG1 4,600 3.95%, 3/1/95, Ser.
94................... 4,600,000
California Poll Ctrl.
Fin. Auth. Rev.,
Ultrapower Malaga
Fresno Proj.,
F.R.D.D.,
P1 $ 1,900 3.95%, 3/1/95, Ser.
88A.................. $ 1,900,000
P1 500 3.95%, 3/1/95, Ser.
88B.................. 500,000
Ultrapower Rocklin
Proj., F.R.D.D.,
P1 100 3.95%, 3/1/95, Ser.
88A.................. 100,000
P1 7,600 3.95%, 3/1/95, Ser.
88B.................. 7,600,000
California St. Dept.
Water Res., T.E.C.P.
P1 3,119 3.90%, 3/15/95......... 3,119,000
California Statewide
Cmntys. Dev. Auth.
Chevron U.S.A. Inc.
Proj., F.R.D.D.,
P1 3,290 3.95%, 3/1/95, Ser.
94................... 3,290,000
Conejo Valley Unified
Sch. Dist.
Rev., T.R.A.N.,
MIG1 5,000 4.25%, 7/5/95.......... 5,004,100
Contra Costa Trans.
Auth. Rev., F.R.W.D.,
VMIG1 3,700 3.90%, 3/1/95, Ser.
A.................... 3,700,000
Fremont Unified Sch.
Dist., T.R.A.N.,
SP1* 6,000 4.50%, 7/6/95.......... 6,016,098
Kings Cnty.
Multi-family Rev.
Hsg. Auth.,
Edgewatger Isle
Proj., F.R.W.D.,
VMIG1 9,170 3.95%, 3/1/95, Ser.
85A.................. 9,170,000
Los Angeles Cnty. Local
Ed.
Agy., Cert. of Part.,
T.R.A.N.,
MIG1 10,050 4.50%, 7/6/95, Ser
94-95A............... 10,075,247
Los Angeles Cnty. Met.
Trans. Auth. Rev.,
Union Station Proj.,
F.R.W.D.,
VMIG1 5,000 4.00%, 3/2/95, Ser.
A.................... 5,000,000
</TABLE>
-4- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA MONEY MARKET SERIES
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (a) (Note 1)
<C> <C> <S> <C>
Los Angeles Cnty.
Trans. Comm. Sales
Tax Rev., F.R.W.D.,
VMIG1 $ 4,600 3.70%, 3/1/95, Ser.
A.................... $ 4,600,000
Los Angeles Hsg. Auth.,
Multi-family Rev.,
Lanewood Apts. Proj.,
F.R.W.D.,
VMIG1 7,000 3.95%, 3/1/95, Ser.
85................... 7,000,000
Moorpark Ind. Dev.
Auth. Rev.,
Kavli & Kavli Co.,
F.R.W.D.,
VMIG1 6,795 4.15%, 3/2/95, Ser.
85................... 6,795,000
Oakland Multi-family
Hsg. Rev.,
Skyline Hills Assoc.,
F.R.W.D.,
MIG1 6,700 4.15%, 3/2/95, Ser.
85A.................. 6,700,000
Olcese Wtr. Dist.
Rio Bravo Wtr. Delivery
Sys.,
T.E.C.P.,
P1 7,900 4.15%, 5/18/95, Ser.
86A.................. 7,900,000
Ontario Multi-family
Hsg. Rev.,
Park Ctr. Proj.,
F.R.W.D.,
VMIG1 8,400 4.15%, 3/2/95, Ser.
85A.................. 8,400,000
Orange Cnty., T.R.A.N.,
SP-3* 10,000 4.50%, 7/19/95, Ser.
94-95A............... 9,100,000
Orange Cnty., T.R.A.N.,
Put option with
Prudential Securities
GroupD,
NR expires 3/6/95......... 927,668
Orange Cnty., Teeter
Plan,
F.R.M.I.N.,
SP-3* 15,000 4.24%, 6/30/95,
Ser. 94-95........... 12,600,000
Orange Cnty., Teeter
Plan
F.R.M.I.N., Put
option with
Prudential Securities
GroupD,
NR expires 3/6/95....... 2,400,000
Palmdale Cmnty. Redev.
Agy.,
Manzanita Villas Apt.
Proj., F.R.W.D.,
VMIG1 4,800 4.00%, 3/2/95, Ser.
93A.................. 4,800,000
Puerto Rico Comnwlth.,
Gov't. Dev. Bank.,
F.R.W.D.,
VMIG1 2,700 3.90%, 3/1/95, Ser.
85................... 2,700,000
Sacramento Mun. Util.
Dist. Rev.,
T.E.C.P.,
P1 $ 3,000 4.05%, 5/2/95, Ser.
H.................... $ 3,000,000
San Joaquin Cnty.Trans.
Auth.,
Sales Tax Rev.,
F.R.W.D.,
P1 5,700 3.90%, 3/1/95, Ser.
93................... 5,700,000
San Marcos Ind. Dev.
Auth. Rev.,
Village Square Proj.,
F.R.W.D.,
NR 3,900 4.05%, 3/2/95, Ser.
92................... 3,900,000
Southern Pub. Pwr.
Auth.,
Transmission Proj.
Rev., F.R.W.D.,
P1 4,300 3.70%, 3/1/95, Ser.
91................... 4,300,000
Visalia, Cert. of
Part.,
Convention Ctr.,
F.R.W.D.,
A1+* 8,680 4.00%, 3/1/95.......... 8,680,000
------------
Total Investments--97.1%
(amortized cost--
$208,849,572**)...... 208,849,572
Other assets in excess
of
liabilities--2.9%.... 6,140,687
------------
Net Assets--100%....... $214,990,259
------------
------------
</TABLE>
- ------------------
(a) The following abbreviations are used in portfolio descriptions:
A.N.N.M.T.--Annual Mandatory Tender.
A.N.N.O.T.--Annual Optional Tender.
F.R.D.D.--Floating Rate (Daily) Demand Note #.
F.R.M.I.N.--Floating Rate (Monthly) Index Note # (Indexed to 70% of LIBOR).
F.R.W.D.--Floating Rate (Weekly) Demand 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 such
securities is considered to be the later of the next date on which the
security can be redeemed at par or the next date on which the rate of
interest is adjusted.
NR--Not Rated by Moody's or Standard & Poor's.
* Standard & Poor's rating.
** The cost of securities for federal income tax purposes is substantially the
same as for financial reporting purposes.
D Illiquid security. See Note 3.
The Fund's current Statement of Additional Information contains
a description of Moody's and Standard & Poor's ratings.
-5- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA MONEY MARKET SERIES
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets
February 28, 1995
-----------------
<S>
<C>
Investments, at amortized cost which approximates market
value........................ $ 208,849,572
Cash.........................................................................
......... 29,162
Receivable for Series shares
sold..................................................... 6,470,567
Receivable for investments
sold....................................................... 2,086,822
Interest
receivable...................................................................
1,782,636
Other
assets..........................................................................
4,882
-----------------
Total
assets......................................................................
219,223,641
-----------------
Liabilities
Payable for Series shares
reacquired.................................................. 3,990,807
Accrued expenses and other
liabilities................................................ 107,499
Management fee
payable................................................................
80,608
Dividends
payable.....................................................................
41,134
Distribution fee
payable..............................................................
10,208
Deferred trustee
fee..................................................................
3,126
-----------------
Total
liabilities.................................................................
4,233,382
-----------------
Net
Assets.......................................................................
..... $ 214,990,259
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at $.01 par
value.................................... $ 2,149,903
Paid-in capital in excess of
par.................................................... 212,840,356
-----------------
Net assets, February 28,
1995......................................................... $ 214,990,259
-----------------
-----------------
Net asset value, offering price and redemption price per share ($214,990,259 /
214,990,259 shares
of beneficial interest issued and outstanding; unlimited number of shares
authorized)..................................................................
....... $ 1.00
-----------------
-----------------
</TABLE>
See Notes to Financial Statements.
-6-
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA MONEY MARKET SERIES
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income February 28, 1995
-----------------
<S> <C>
Income
Interest and discount earned........ $ 4,682,059
-----------------
Expenses
Management fee...................... 656,442
Distribution fee.................... 164,111
Transfer agent's fees and
expenses............................ 62,000
Custodian's fees and expenses....... 35,000
Reports to shareholders............. 25,000
Registration fees................... 10,000
Audit fee........................... 7,500
Legal fees.......................... 7,000
Insurance expense................... 4,000
Trustees' fees...................... 4,000
Miscellaneous....................... 3,926
-----------------
Total expenses.................... 978,979
-----------------
Net investment income................. 3,703,080
-----------------
Net Increase in Net Assets
Resulting from Operations............. $ 3,703,080
-----------------
-----------------
</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 1995 1994
------------ --------------
<S> <C> <C>
Operations
Net investment
income............... $ 3,703,080 $ 6,229,905
Net realized gain on
investment
transactions....... -- 20,403
------------ --------------
Net increase in net
assets resulting
from operations.... 3,703,080 6,250,308
------------ --------------
Dividends and
distributions to
shareholders (Note
1)................... (3,703,080) (6,250,308)
------------ --------------
Series share
transactions (at $1
per share)
Net proceeds from
shares sold........ 699,975,287 1,419,314,621
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions...... 3,564,903 5,984,806
Cost of shares
reacquired......... (789,225,484) (1,439,549,204)
------------ --------------
Net decrease in net
assets from Series
share
transactions....... (85,685,294) (14,249,777)
------------ --------------
Total decrease......... (85,685,294) (14,249,777)
Net Assets
Beginning of period.... 300,675,553 314,925,330
------------ --------------
End of period.......... $214,990,259 $ 300,675,553
------------ --------------
------------ --------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-7-
<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, except as described below. 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.
The Series' Orange County holdings are valued at fair market value, which is
less than amortized cost. The associated put options are valued as the
differential between the fair market value and amortized cost of the
corresponding securities.
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.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
Note 2. Agreements The Fund has a management
agreement with Prudential 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.
-8-
<PAGE>
<PAGE>
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, 1995, the Series incurred fees of
approximately $58,400 for the services of PMFS. As of February 28, 1995,
approximately $9,300 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.
On December 7, 1994, Prudential Securities Group, Inc. (``PSG''), an indirect
wholly-owned subsidiary of The Prudential Insurance Company of America and the
parent company of PSI, entered into two put agreements with the Series with
respect to the two Orange County, California obligations held by the Series.
Although the related puts were originally scheduled to be exercised by the
Series on March 6, 1995, the Series agreed to extend the put arrangements
through the maturity dates of the respective securities. The agreements provide
that the Fund has the unconditional right at maturity to require PSG to purchase
the Orange County, California obligations held in the Series at par value plus
accrued but unpaid interest.
-9-
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA MONEY MARKET SERIES
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
Year Ended August 31,
February 28,
- -------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 1995 1994
1993 1992 1991 1990
------------ --------
-------- -------- -------- --------
<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
(losses)......................................... .02 .02
.02 .03 .04D .05D
Dividends and distributions........................ (.02) (.02)
(.02) (.03) (.04) (.05)
------------ --------
-------- -------- -------- --------
Net asset value, end of period..................... $ 1.00 $ 1.00
$ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ --------
-------- -------- -------- --------
------------ --------
-------- -------- -------- --------
TOTAL RETURN#:..................................... 1.43% 1.94%
1.86% 2.91% 4.48% 5.59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).................... $ 214,990 $300,676
$314,925 $315,890 $341,625 $388,739
Average net assets (000)........................... $ 264,753 $326,429
$319,464 $339,941 $375,655 $330,581
Ratios to average net assets:
Expenses, including distribution fee............. .75%* .73%
.76% .76% .63%D .38%D
Expenses, excluding distribution fee............. .62%* .61%
.63% .63% .51%D .25%D
Net investment income............................ 2.82%* 1.91%
1.83% 2.89% 4.37%D 5.40%D
</TABLE>
- ---------------
D Net of management fee waiver and/or expense subsidy.
# Total return includes reinvestment of dividends and distributions. Total
returns for less than one year are not annualized.
* Annualized
See Notes to Financial Statements.
-10-
<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 H. 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 LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852, Collect (908) 417-7555
The accompanying financial statements as of February 28, 1995, 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.
744313503 MF139E2
(LOGO) Cat. #642861W
