(ICON)
Prudential
California
Municipal Fund
California Income
Series
Annual
Report
Aug. 31, 1995
(LOGO)
<PAGE>
Prudential California Municipal Fund
California Income Series
Performance At A Glance.
It has been a good year for shareholders of the Prudential California Municipal
Fund: California Income Series. Municipal bond investors earned not only their
coupon income, but also saw a gain in net asset value as well. We are pleased
to report that your Series outperformed the average California municipal bond
fund measured by Lipper Analytical Services over the past 12 months.
<TABLE>
Cumulative Total Returns1 As of 8/31/95
<CAPTION>
One Since
Year Inception2
<S> <C> <C>
Class A 7.7% 50.1%
Class B 7.2 7.1
Class C 7.0 7.5
Lipper CA Muni Avg3 7.1 N/A
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns1 As of 9/30/95
One Since
Year Inception2
<S> <C> <C>
Class A 6.0% 8.2%
Class B 3.8 1.9
Class C 7.5 6.7
</TABLE>
<TABLE>
<CAPTION>
Your Taxable Equivalent
Yield
Dividend Total Dividends 30-Day At Tax Rates Of
As of 8/31/95 Paid for 12 Mos. SEC Yield 36% 39.6%
<S> <C> <C> <C> <C>
Class A $0.65 5.79% 10.2% 10.8%
Class B $0.61 5.57 9.8 10.2
Class C $0.58 5.32 9.3 9.9
</TABLE>
Past performance is not a guarantee 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.
1Source: Prudential Mutual Fund Management and Lipper Analytical Services. The
cumulative total returns do not take into account sales charges. The average
annual returns do take into account applicable sales charges. The Series charges
a maximum front-end sales load of 3% for Class A shares and a contingent
deferred sales charge of 5%, 4%, 3%, 2%, 1% and 1% for six years, for Class B
shares. Class C shares have a 1% CDSC for one year. Class B shares 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.
3The Lipper California Municipal Bond fund average includes 91 funds for
one year.
How Investments Compared.
(As of 8/31/95)
(GRAPH)
Source: Lipper Analytical Services. Financial markets change, so a mutual fund's
past performance should never be used to predict future results. The risks to
each of the investments listed above are different -- we provide 12-month total
returns for several Lipper mutual fund categories to show you that reaching
for higher yields means tolerating more risk. The greater the risk, the
larger the potential reward or loss. In addition, we've added historical
20-year average annual returns. These returns assume the reinvestment of
dividends.
U.S. Growth Funds will fluctuate a great deal. Smaller capitalization stocks
offer greater potential for long-term growth but may be more volatile than
larger capitalization stocks. Investors receive higher historical total returns
from stocks than from most other investments.
General Bond Funds provide more income than stock funds, which can help smooth
out their total returns year by year. But their prices still fluctuate
(sometimes a good deal) and their returns are historically lower than those of
stock funds.
General Municipal Debt Funds invest in bonds issued by state governments, state
agencies and/or municipalities. This investment provides income that is usually
exempt from federal and state income taxes. (20-year returns are not available.)
Money Market Funds attempt to preserve a constant share value; they don't
fluctuate much in price but their returns are generally among the lowest of
the major investment categories.
*19 years for General Muni Debt Funds.
<PAGE>
Christian Smith, Fund Manager
(PICTURE)
Portfolio
Manager's Report
The Series invests primarily in carefully selected long-term municipal bonds
that offer a high level of current 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 invests primarily in obligations of California state, municipal and
local governments, including U.S. territories (such as Puerto Rico, the U.S.
Virgin Islands and Guam), the income of which is also exempt from federal and
California state income taxes.
High Yields.
The Series may invest up to 30% of its total assets in high yield securities,
which are below investment grade and subject to special risk considerations.
At present, the Series has 26% of assets invested in these bonds.
Strategy Session.
It has been a positive year for tax-free municipal bonds. Although interest
rates rose sharply in 1994 on inflation fears, they have tumbled back down
slowly so far in 1995, as economic growth slowed.
Sector Breakdown.
(CHART)
The Bond Buyer Revenue Bond Index Yield stood at 6.4% on September 1, 1994
(the index is calculated on Thursdays), and rose by a percentage point to a
high of 7.4% in mid-October 1994, before falling to 6.3% on August 31, 1995.
As you can see, when the dust had settled, long-term municipal bond interest
rates ended the period lower.
This year, we have been buying longer maturity bonds with discount coupons
(coupons lower than the prevailing market), and some zero coupon bonds, because
these are more likely to appreciate if interest rates continue to fall as we
expect. We have also increased our holdings in revenue bonds in the electric
utility sector. Many utility bonds have been inexpensively priced because of
concern about future deregulation of the industry.
State Of The State.
We found value by increasing our holdings in insured bonds and long-term,
non-callable zero coupon bonds because they have attractive price appreciation
potential when interest rates fall. What's more, they are in demand and as a
result are easier to trade in uncertain financial markets. Since the bankruptcy
filing of Orange County last year, many California tax-free municipal bond
investors have been seeking quality, making insured holdings more desirable
and generally better performers than uninsured bonds.
California is in its second year of economic recovery, but the recovery has
been spotty. Furthermore, questions about Orange County's fiscal health
continue to cloud the state's municipal bond market. As a result we have been
avoiding state general obligation bonds.
<PAGE>
What Went Well.
We Held On
To Good Yields.
We increased assets invested in non-callable bonds (those that can not be paid
off prematurely by the issuer to save on interest costs) to 33%, up from 11% a
year ago. These bonds not only offer attractive yields but also appreciate well
when interest rates decline. They are valuable because not many bonds offer
protection from call risk -- only about a third of the securities in the
Lehman Brothers' Municipal Bond Index are non-callable.
We Like San Bernadino.
We purchased certificates of participation in the county's medical center
financing project last fall when they became attractively priced because of
questions surrounding the county's financial position. Our research team
thought the county was a stronger investment than the market did, so we
purchased more.
Since then, the county issued more bonds to expand the project. These bonds
were insured, which helped our existing holdings to appreciate.
Five Largest
Issuers.*
6.7% Southern California
Public Power Authority
5.8% Orange County
Community Facilities Dist.
5.0% San Bernadino County
Medical Center
4.4% South Orange County
Public Finance Authority
3.9% Orange County
Comm. Local Trans. Auth.
Although none of our holdings are direct obligations of Orange County,
several of our larger holdings are issued by agencies that are located in
the county but are independent of its government. These bonds are backed by
separate and distinct revenue streams.
* Expressed as a percentage of total net assets as of 8/31/95.
And Not So Well.
A Longer Duration Would Have Helped.
Duration measures the sensitivity of a bond's price to interest rate changes.
The longer the duration, the more a bond's price appreciates when interest
rates fall and vice versa. Over the winter, our duration was shorter than that
of some competing funds, because we expected economic growth to remain strong.
As the slowdown became apparent in the second quarter, we extended duration.
On August 31, 1995 our duration was 7.7 years, up from 7.1 years on
August 31, 1994.
Municipals Suffered
From Tax Talk.
Congress is considering various changes in the federal income tax, including
a flat tax -- an income tax at a single, flat rate. One proposal would eliminate
taxes on most investment income. Clearly, this has created uncertainty in the
municipal market -- one reason why municipal bonds did not follow taxable bond
prices higher this spring. At this writing, we believe it is unlikely that a
flat tax proposal in this form is likely to pass Congress -- especially not
before next year's election.
Looking Ahead.
Municipal bond yields are very attractive now. As we mentioned earlier,
when U.S. government and corporate bond yields fell this spring, municipal
yields did not follow to the same extent. That means there are some good buying
opportunities now in the municipal market.
Nevertheless, municipal bond investors should be prepared to weather some
volatility this year as various proposals to change the country's income tax
structure are debated. Overall, we believe municipal bonds still offer good
value, and that volatility can offer some attractive buying opportunities.
1
<PAGE>
President's Letter October 11, 1995
(PICTURE)
Dear Shareholder:
We hope you like the fresh look and information we've given your shareholder
letter. We've also introduced another feature, called Getting the Most Out of
Your Prudential Mutual Fund, which will appear from time to time at the back
of your report. Look for topics like "Understanding Risk & Reward" as well as
easy-to-understand explanations of financial terms. Why are we providing such
information? Because at Prudential Mutual Funds, we believe an informed
investor makes smart investment decisions.
On the Hill
As an informed investor, you should know about the "American Dream Savings
Account" that is part of the federal budget package now under debate in the
Senate. It is a type of Individual Retirement Account that offers a
common-sense approach to long-term saving. Investors should like it because --
- - You can withdraw funds -- without penalty -- to pay for certain expenses
like buying a first home, medical care or educational needs;
- - All account earnings would accumulate tax-free, not merely tax-deferred like
the current IRA;
- - You can make contributions past age 70 1/2, instead of having to take
distributions as the current law requires.
Of course, the federal budget process is never easy and while we hope this
measure is adopted, there's no way of knowing if it will be. So why not let
your Senator and/or Representative know your opinion today? Simply
call 202-224-3121.
In Closing
One final note: if you're a Class B shareholder of Prudential Mutual Funds,
you'll begin noticing a change on your statements once you've held your shares
for seven years. At that time, they will automatically begin to convert to
Class A shares on a quarterly basis. Since Class A shares carry lower annual
distribution charges than Class B shares, your total returns will be higher
after the conversion than they would have been without it. Conversions started
earlier this year and beginning in December they will take place during each
calendar quarter -- December, March, June and September. It's our way of
thanking you for your loyalty -- and rewarding you for maintaining a long-term
investment program by helping you earn more total investment return on your
Prudential Mutual Fund. I hope you'll find this information useful as you work
with your financial advisor or registered representative to develop your
personal investment plan.
Thank you for choosing Prudential Mutual Funds for your mutual fund investment.
Sincerely,
Richard A. Redeker
President
2
<PAGE>
Portfolio of Investments as PRUDENTIAL CALIFORNIA MUNICIPAL FUND
of August 31, 1995 CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating
Interest Maturity Amount Value
Description (a) (Unaudited)
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
LONG-TERM INVESTMENTS--97.5%
- -----------------------------------------------------------------------------
- -------------------------------------------------
Alameda Cmnty. Facs. Dist., Spec. Tax Rev. No. 1 NR
7.75% 9/01/19 $ 3,000 $ 3,133,980
Arcadia Unified Sch. Dist.,
Gen. Oblig., Ser. A, M.B.I.A. Aaa
Zero 9/01/09 1,200 534,552
Gen. Oblig., Ser. A, M.B.I.A. Aaa
Zero 9/01/11 1,875 724,725
Gen. Oblig., Ser. A, M.B.I.A. Aaa
Zero 9/01/12 2,045 739,963
Gen. Oblig., Ser. A, M.B.I.A. Aaa
Zero 9/01/13 1,205 407,832
Gen. Oblig., Ser. A, M.B.I.A. Aaa
Zero 9/01/18 1,940 471,013
Assoc. of Bay Area Govt's. Fin. Auth., Cert. of Part.,
Ser. A, Channing House A(e)
7.125 1/01/21 1,500 1,591,455
Baldwin Park Pub. Fin. Auth. Rev., Tax Alloc. Bonds BBB(e)
7.10 9/01/24 1,225 1,256,948
Brea Pub. Fin. Auth. Rev., Tax Alloc. Redev. Proj., Ser. C NR
8.10 3/01/21 3,000 3,175,680
Buena Park Cmnty. Redev. Agcy., Cent. Bus. Dist. Proj. NR
7.80 9/01/14 3,325 3,471,067
California St. Dept. Wtr. Res. Rev., Central Valley Proj. Aa
7.00 12/01/12 1,000 1,145,030
California St. Edl. Facs. Auth. Rev., Chapman College Baa
7.50 1/01/18 600 633,756
California St. Gen. Oblig., A.M.B.A.C. Aaa
6.50 9/01/10 1,250 1,375,200
California Statewide Cmnty. Dev. Rev., Cert. of Part.,
Villaview Cmnty. Hosp. A(e)
7.00 9/01/09 1,000 1,068,480
Carson City Ltd. Oblig. Impvt. Rev., Assmt. Dist. NR
7.375 9/02/22 2,445 2,501,333
Chula Vista Cmnty. Redev. Agcy.,
Bayfront Tax Alloc. NR
8.25 5/01/24 2,500 2,732,925
Bayfront Tax Alloc. BBB/ /(e)
7.625 9/01/24 2,500 2,682,225
Contra Costa Cnty., Spec. Tax, Cmnty. Facs. Pleasant Hill NR
8.125 8/01/16 1,520 1,609,665
Delano, Cert. of Part., Reg. Med. Ctr., Ser. 92A NR
9.25 1/01/22 2,950 3,355,713
Desert Hosp. Dist., Cert. of Part. AAA(e)
8.10 7/01/20 2,000 (c) 2,353,640
East Palo Alto San. Dist., Cert. of Part. NR
8.25 10/01/15 500 535,120
El Dorado Cnty., Spec. Tax, Cmnty. Facs. Dist. No. 92-1 NR
8.25 9/01/24 2,000 2,189,200
Fairfield Impvt. Bond Act of 1915,
No. Cordella Impvt. Dist. NR
7.20 9/02/09 790 808,905
No. Cordella Impvt. Dist. NR
8.00 9/02/11 715 738,180
Fairfield Pub. Fin. Auth. Rev., Fairfield Redev. Projs.,
Ser. A NR
7.90 8/01/21 2,500 (c) 2,961,125
Folsom Spec. Tax Dist. No. 2 NR
7.70 12/01/19 3,130 3,242,054
Fontana Redev. Agcy., No. Fontana Redev. Proj. NR
7.65 12/01/09 1,575 (c) 1,853,113
Fontana Special Tax Cmnty. Facs., Dist. No. 2, Spec. Tax
Rev., Ser. B NR
8.50 9/01/17 3,595 3,808,148
Foothill/Eastern Trans. Corr. Agcy., Toll Rd., Ser. A Baa
Zero 1/01/20 10,000 1,809,200
Kings Cnty. Wst. Mgmt. Auth., Solid Wst. Rev. BBB/ /(e)
7.20 10/01/14 1,275 1,343,595
La Quinta Redev. Agcy.,
Tax Alloc., M.B.I.A. Aaa
7.30 9/01/10 1,000 1,181,100
Tax Alloc., M.B.I.A. Aaa
7.30 9/01/11 1,000 1,176,940
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
3
<PAGE>
<PAGE>
Portfolio of Investments as PRUDENTIAL CALIFORNIA MUNICIPAL FUND
of August 31, 1995 CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating
Interest Maturity Amount Value
Description (a) (Unaudited)
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
Long Beach Redev. Agcy. Hsg.,
Multifamily Hsg. Rev., Pacific Court Apts. NR
6.80% 9/01/13 $ 1,000 $ 919,920
Multifamily Hsg. Rev., Pacific Court Apts. NR
6.95 9/01/23 1,500 1,343,280
Los Angeles Cmnty. Facs. Dist., No. 5 Spec. Tax NR
7.25 9/01/19 1,500 1,524,960
Los Angeles Dept. of Wtr. & Pwr.,
Electric Rev., M.B.I.A. Aaa
5.375 9/01/23 1,500 1,369,800
Waterworks Rev. Aa
4.50 5/15/23 1,900 1,490,493
Met. Wtr. Dist. of Southern California,
Waterworks Rev. Aa
5.75 8/10/18 1,000 961,810
Waterworks Rev., Ser. A Aa
5.75 7/01/21 2,000 1,960,280
Mojave Desert & Mtn. Solid Wste. Jt. Pwrs. Auth., Proj.
Rev. Baa1
7.875 6/01/20 1,175 1,250,647
Ontario Impvt. Bond Act of 1915, Assmt. Dist. 100C NR
8.00 9/02/11 1,410 1,455,712
Orange Cnty. Facs. Dist., Spec. Tax Rev.,
No. 87-4, Foothill Ranch, Ser. A NR
7.375 8/15/18 3,500 (c) 4,102,805
No. 87-5B, Rancho Santa Margarita NR
7.50 8/15/17 1,750 (c) 2,059,697
No. 88-1, Aliso Viejo, Ser. 92 AAA(e)
7.35 8/15/18 3,500 (c) 4,129,790
No. 88-1, Aliso Viejo, Ser. A AAA(e)
7.15 8/15/06 805 (c) 940,345
Orange Cnty. Loc. Trans. Auth.,
Sales Tax Rev. Aa
6.20 2/14/11 1,500 1,482,330
Sales Tax Rev., A.M.B.A.C. Aaa
6.20 2/14/11 6,000 6,192,180
Perris Sch. Dist., Cert. of Part., Cap. Projs. NR
7.75 3/01/21 1,500 (c) 1,750,650
Puerto Rico Hwy. & Trans. Auth. Rev., Ser. Q AAA(e)
7.75 7/01/10 2,100 c)(d) 2,439,633
Puerto Rico Pub. Bldgs. Auth., Gtd. Pub. Ed. & Hlth.
Facs., Ser. J Baa1
Zero 7/01/06 1,605 892,589
Redding California Elec. Sys. Rev., Cert. of Part.,
M.B.I.A. Aaa
6.368 7/01/22 3,750 3,931,987
Richmond Redev. Agcy. Rev., Multifamily Bridge Affordable
Hsg. NR
7.50 6/01/23 2,500 2,514,825
Riverside Cnty. Cert. of Part., Air Force Vlg. West NR
8.125 6/15/20 3,000 3,099,060
Riverside Cnty. Impvt. Bond Act of 1915, Ser. A NR
7.625 9/02/14 2,500 2,575,000
Riverside Sch. Dist. Special Tax, Cmnty. Facs. Dist. No.
2, Ser. A NR
7.25 9/01/18 1,000 1,017,810
Rocklin Stanford Ranch Cmnty. Facs., Dist. Spec. Tax NR
8.10 11/01/15 1,000 1,063,540
Rocklin Unified Sch. Dist., Gen. Oblig.,
Cap. Apprec., Ser. C, M.B.I.A. Aaa
Zero 8/01/12 1,110 403,629
Cap. Apprec., Ser. C, M.B.I.A. Aaa
Zero 8/01/13 1,165 396,286
Cap. Apprec., Ser. C, M.B.I.A. Aaa
Zero 8/01/14 1,220 387,887
Cap. Apprec., Ser. C, M.B.I.A. Aaa
Zero 8/01/15 1,285 381,581
Cap. Apprec., Ser. C, M.B.I.A. Aaa
Zero 8/01/16 1,400 389,564
Roseville Jt. Union H.S. Dist., Ser. B, F.G.I.C. Aaa
Zero 6/01/20 5,000 1,077,050
Sacramento City Fin. Auth.,
Cap. Apprec. Tax Alloc., Ser. B, M.B.I.A. Aaa
Zero 11/01/16 5,700 1,562,028
Cap. Apprec. Tax Alloc., Ser. B, M.B.I.A. Aaa
Zero 11/01/17 5,695 1,461,736
Sacramento Cnty. Spec. Tax Rev.,
Dist. No. 1, Elliot Ranch NR
8.20 8/01/21 2,000 2,109,460
Dist. No. 1, Laguna Creek Ranch NR
8.25 12/01/20 1,000 1,066,520
</TABLE>
- --------------------------------------------------------------------------------
4 See Notes to Financial Statements.
<PAGE>
<PAGE>
Portfolio of Investments as PRUDENTIAL CALIFORNIA MUNICIPAL FUND
of August 31, 1995 CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating
Interest Maturity Amount Value
Description (a) (Unaudited)
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
Sacramento Spec. Purpose Fac., Y.M.C.A. of Sacramento NR
7.25% 12/01/18 $ 2,200 $ 2,202,772
San Bernardino Cnty., Cert. of Part.,
Med. Ctr. Fin. Proj. Baa1
5.50 8/01/22 4,540 3,935,136
Med. Ctr. Fin. Proj. Baa1
5.50 8/01/24 6,750 5,819,715
San Diego Cnty. Wtr. Auth., Water Rev., Cert. of Part.,
F.G.I.C. Aaa
5.681 4/23/08 2,000 2,026,860
San Francisco City & Cnty.,
Redev. Agcy., Lease Rev. A
Zero 7/01/06 1,500 812,505
Redev. Agcy., Lease Rev. A
Zero 7/01/07 2,250 1,137,240
San Joaquin Hills Trans. Corridor Agcy., Toll Road Rev. NR
Zero 1/01/11 2,000 592,400
San Jose Redev. Proj., M.B.I.A. Aaa
6.00 8/01/15 2,900 2,988,595
Santa Cruz Cnty. Pub. Fin. Auth. Rev., Tax Alloc. Sub.,
Ser. B AAA(e)
7.625 9/01/21 2,500 (c) 2,865,200
Santa Margarita, Dana Point Auth.,
Impvt. Dist., Ser. B, M.B.I.A. Aaa
7.25 8/01/09 905 1,064,352
Impvt. Dist., Ser. B, M.B.I.A. Aaa
7.25 8/01/14 1,000 1,171,510
South Orange Cnty.
Pub. Fin. Auth. NR
7.00 9/01/08 1,900 1,915,865
Pub. Fin. Auth. NR
7.25 9/01/13 2,000 2,009,100
Pub. Fin. Auth., M.B.I.A. Aaa
7.00 9/01/10 2,535 2,908,710
Pub. Fin. Auth., Foothill Area Proj., F.G.I.C. Aaa
8.00 8/15/08 750 933,997
Pub. Fin. Auth., Foothill Area Proj., F.G.I.C. Aaa
6.50 8/15/10 750 823,343
South San Francisco Redev. Agcy., Tax Alloc., Gateway
Redev. Proj. NR
7.60 9/01/18 2,375 2,472,161
Southern California Pub. Pwr. Auth.,
Proj. Rev. A
6.75 7/01/10 6,250 6,673,687
Proj. Rev. A
6.75 7/01/13 3,000 3,206,460
Proj. Rev., A.M.B.A.C. Aaa
Zero 7/01/16 8,400 (c) 2,421,720
Proj. Rev., A.M.B.A.C. Aaa
4.75 7/01/16 1,500 1,269,090
Sulphur Springs Unified Sch. Dist., Ser. A, M.B.I.A. Aaa
Zero 9/01/11 3,000 1,159,560
Temecula Valley Unified Sch. Cmnty. Facs., Spec. Tax Dist.
No. 89-1 NR
8.60 9/01/17 2,600 2,685,332
Torrance Redev. Agcy.,
Tax Alloc. Downtown Redev. Baa
7.125 9/01/22 3,925 4,044,124
Tax Alloc. Ind. Redev. Proj. NR
7.75 9/01/13 2,500 2,605,450
Vacaville Cmnty. Redev. Agcy., Multifamily Hsg. Rev. A-(e)
7.375 11/01/14 1,110 1,179,764
Victor Valley
Union H.S. Dist., M.B.I.A. Aaa
Zero 9/01/17 4,500 1,166,940
Union H.S. Dist., M.B.I.A. Aaa
Zero 9/01/19 5,450 1,238,512
Union H.S. Dist., M.B.I.A. Aaa
Zero 9/01/20 5,850 1,240,668
Virgin Islands Pub. Fin. Auth. Rev., Hwy. Trans. Trust
Fund BBB(e)
7.70 10/01/04 1,000 1,095,820
Virgin Islands Territory, Hugo Ins. Claims Fund Prog.,
Ser. 91 NR
7.75 10/01/06 1,140 1,242,235
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
<PAGE>
Portfolio of Investments as PRUDENTIAL CALIFORNIA MUNICIPAL FUND
of August 31, 1995 CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating
Interest Maturity Amount Value
Description (a) (Unaudited)
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
West Contra Costa Unified Sch. Dist., Cert. of Part. Ba
6.875% 1/01/09 $ 1,140 $ 1,183,514
West Sacramento Impvt. Bond Act of 1915, Lighthouse Marina
Assmt. Dist. 90-1 NR
8.50 9/02/17 2,500 2,581,100
Westminster Redev. Agcy., Tax Alloc. Rev., Orange County,
Proj. No. 1, Ser. A Baa1
7.30 8/01/21 3,000 3,073,800
------------
Total long-term investments (cost $179,131,601)
190,063,983
------------
SHORT-TERM INVESTMENTS--2.9%
California Poll. Ctrl. Fin. Auth. Rev.,
Burney Forest Proj., Ser. 88A, F.R.D.D. P1
3.65 9/01/95 600 600,000
Delano Proj., Ser. 91, F.R.D.D. P1
3.50 9/01/95 4,000 4,000,000
Honey Lake Pwr. Proj., Ser. 88, F.R.D.D. Aa3
3.50 9/01/95 600 600,000
Ultrapower Rocklin Proj., Ser. 88A, F.R.D.D. P1
3.55 9/01/95 100 100,000
California Poll. Ctrl. Solid Waste Disposal Rev.,
Shell Oil Co., Ser. 94, F.R.D.D. VMIG1
3.60 9/01/95 300 300,000
------------
Total short-term investments (cost $5,600,000)
5,600,000
------------
Total Investments--100.4%
(cost $184,731,601; Note 4)
195,663,983
Liabilities in excess of other assets--(0.4)%
(754,683)
------------
Net Assets--100%
$194,909,300
------------
------------
</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 (b).
M.B.I.A.--Municipal Bond Insurance Association.
(b) 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.
(c) Prerefunded issues are secured by escrowed cash and/or direct U.S.
guaranteed obligations.
(d) Pledged as initial margin on financial futures contracts.
(e) Standard & Poor's rating.
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.
- --------------------------------------------------------------------------------
6 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Statement of Assets and Liabilities CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<S>
<C>
Assets
August 31, 1995
Investments, at value (cost
$184,731,601)................................................................
.... $195,663,983
Cash.........................................................................
................................ 79,592
Interest
receivable...................................................................
....................... 3,459,149
Receivable for investments
sold.........................................................................
..... 2,275,434
Receivable for Series shares
sold............................................................................
137,145
Deferred expenses and other
assets.......................................................................
.... 5,527
------------
Total
assets.......................................................................
....................... 201,620,830
------------
Liabilities
Payable for investments
purchased....................................................................
........ 6,135,827
Payable for Series shares
reacquired...................................................................
...... 312,897
Dividends
payable......................................................................
...................... 123,914
Accrued
expenses.....................................................................
........................ 38,998
Due to broker - variation
margin.......................................................................
...... 56,844
Distribution fee
payable......................................................................
............... 27,064
Management fee
payable......................................................................
................. 12,086
Deferred trustees'
fees.........................................................................
............. 3,900
------------
Total
liabilities..................................................................
....................... 6,711,530
------------
Net
Assets.......................................................................
............................ $194,909,300
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at
par.....................................................................
$ 189,628
Paid-in capital in excess of
par..........................................................................
188,396,294
------------
188,585,922
Accumulated net realized loss on
investments..............................................................
(4,596,817)
Net unrealized appreciation on
investments................................................................
10,920,195
------------
Net assets, August 31,
1995.........................................................................
......... $194,909,300
------------
------------
Class A:
Net asset value and redemption price per share
($163,537,929 3 15,910,771 shares of beneficial interest issued and
outstanding)....................... $10.28
Maximum sales charge (3.0% of offering
price).............................................................
.32
------------
Maximum offering price to
public..........................................................................
$10.60
------------
------------
Class B:
Net asset value, offering price and redemption price per share
($28,609,408 3 2,783,307 shares of beneficial interest issued and
outstanding)......................... $10.28
------------
------------
Class C:
Net asset value, offering price and redemption price per share
($2,761,963 3 268,692 shares of beneficial interest issued and
outstanding)............................ $10.28
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income August 31, 1995
<S> <C>
Income
Interest................................... $13,141,056
---------------
Expenses
Management fee, net of waiver of
$779,180................................ 175,685
Distribution fee--Class A.................. 165,500
Distribution fee--Class B.................. 118,608
Distribution fee--Class C.................. 13,132
Custodian's fees and expenses.............. 100,000
Reports to shareholders.................... 98,000
Registration fees.......................... 74,000
Transfer agent's fees and expenses......... 61,000
Audit fee.................................. 15,000
Legal fees................................. 14,000
Trustees' fees............................. 8,000
Amortization of organizational expenses.... 7,200
Miscellaneous.............................. 20,370
---------------
Total expenses.......................... 870,495
Less: custodian fee credit................. (11,264)
---------------
Net expenses............................ 859,231
---------------
Net investment income......................... 12,281,825
---------------
Realized and Unrealized Loss
on Investments
Net realized loss on:
Investment transactions.................... (591,274)
Financial futures transactions............. (1,526,511)
---------------
(2,117,785)
---------------
Net change in unrealized appreciation on:
Investments................................ 3,167,760
Financial futures contracts................ 10,125
---------------
3,177,885
---------------
Net gain on investments....................... 1,060,100
---------------
Net Increase in Net Assets
Resulting from Operations..................... $13,341,925
---------------
---------------
</TABLE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended August 31,
<S> <C> <C>
in Net Assets 1995 1994
Operations
Net investment income.......... $ 12,281,825 $ 12,628,785
Net realized loss on investment
transactions................ (2,117,785) (1,000,583)
Net change in unrealized
appreciation (depreciation)
on investments.............. 3,177,885 (6,676,047)
------------ ------------
Net increase in net assets
resulting from operations... 13,341,925 4,952,155
------------ ------------
Dividends and distributions (Note 1)
Dividends to shareholders
from net investment income
Class A..................... (10,737,201) (12,219,313)
Class B..................... (1,442,735) (407,719)
Class C..................... (101,889) (1,753)
------------ ------------
(12,281,825) (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
sold........................ 45,224,907 50,787,060
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions........... 5,353,440 6,449,654
Cost of shares reacquired...... (60,456,281) (44,773,937)
------------ ------------
Net increase (decrease) in net
assets from Series share
transactions................ (9,877,934) 12,462,777
------------ ------------
Total increase (decrease)......... (8,817,834) 2,828,341
Net Assets
Beginning of year................. 203,727,134 200,898,793
------------ ------------
End of year....................... $194,909,300 $203,727,134
------------ ------------
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
8 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Notes to Financial Statements CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
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 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 Policies
The following is a summary of significant accounting policies 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.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
- --------------------------------------------------------------------------------
9
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Notes to Financial Statements CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
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 decrease accumulated net realized loss on
investments by $21,495 due to over distribution 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, 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 fiscal year ended August
31, 1995 amounted to $779,180 ($.04 per share, .41% 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 fiscal year ended August 31, 1995.
PMFD has advised the Series that it has received approximately $374,000 in
front-end sales charges resulting from sales of Class A shares during the fiscal
year ended August 31, 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 fiscal year ended August 31, 1995, it
received approximately $103,200 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 Transactions with Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During the fiscal year ended August
31, 1995, the Series incurred fees of approximately $49,600 for the services of
PMFS. As of August 31, 1995, approximately $3,800 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 Securities
Purchases and sales of portfolio securities of the Series, excluding short-term
investments, for the fiscal year ended August 31, 1995 were $73,217,211 and
$74,379,090, respectively.
The federal income tax cost basis of the Fund's investments, at August 31, 1995,
was $184,854,121 and, accordingly, net unrealized appreciation on investments
for federal income tax purposes was $10,809,862 (gross unrealized
appreciation--$11,437,165; gross unrealized depreciation-- $627,303).
- --------------------------------------------------------------------------------
10
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Notes to Financial Statements CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
At August 31, 1995, the Series sold 115 financial futures contracts on U.S.
Treasury Bonds which expire in September 1995. The value at disposition of such
contracts was $13,078,938. The value of such contracts on August 31, 1995 was
$13,091,125, thereby resulting in an unrealized loss of $12,187.
For federal income tax purposes, the Series had a capital loss carryforward at
August 31, 1995, of approximately $2,741,000 which expires in 2003. Accordingly,
no capital gains distributions are expected to be paid to shareholders until net
gains have been realized in excess of such amount.
The Series has elected to treat approximately $1,685,900 of net capital losses
incurred in the ten-month period ended August 31, 1995, as having occurred in
the following fiscal year.
- ------------------------------------------------------------
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. 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.
Transactions in shares of beneficial interest for the fiscal years ended August
31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ----------------------------------- ---------- ------------
<S> <C> <C>
Year ended August 31, 1995:
Shares sold........................ 2,688,054 $ 26,760,642
Shares issued in reinvestment of
dividends........................ 465,901 4,658,191
Shares reacquired.................. (5,339,235) (52,933,797)
---------- ------------
Net decrease in shares outstanding
before conversion................ (2,185,280) (21,514,964)
Shares issued upon conversion from
Class B.......................... 64,557 643,530
---------- ------------
Net decrease in shares
outstanding...................... (2,120,723) $(20,871,434)
---------- ------------
---------- ------------
<CAPTION>
Shares Amount
---------- ------------
<S> <C> <C>
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
- -----------------------------------
<S> <C> <C>
Year ended August 31, 1995:
Shares sold........................ 1,511,295 $ 15,116,805
Shares issued in reinvestment of
dividends........................ 61,615 617,971
Shares reacquired.................. (582,865) (5,794,588)
---------- ------------
Net increase in shares outstanding
before conversion................ 990,045 9,940,188
Shares reacquired upon conversion
into Class A..................... (64,557) (643,530)
---------- ------------
Net increase in shares
outstanding...................... 925,488 $ 9,296,658
---------- ------------
---------- ------------
December 7, 1993(a) 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>
Year ended August 31, 1995:
Shares sold........................ 330,637 $ 3,347,460
Shares issued in reinvestment of
dividends........................ 7,682 77,278
Shares reacquired.................. (173,108) (1,727,896)
---------- ------------
Net increase in shares
outstanding...................... 165,211 $ 1,696,842
---------- ------------
---------- ------------
August 1, 1994(b) 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
---------- ------------
---------- ------------
- ---------------
(a) Commencement of Class B operations.
(b) Commencement of Class C operations.
</TABLE>
- --------------------------------------------------------------------------------
11 -----
<PAGE>
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Financial Highlights CALIFORNIA
INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
Class B
- --------------------------------------------------------------- ------------
<S> <C> <C> <C>
<C> <C> <C>
December 3,
1990(a)
Year Ended August 31,
Through Year Ended
- ----------------------------------------------- August 31, August 31,
1995 1994 1993
1992 1991 1995
------
-------- -------- --------
- -------- -----------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period............................. $ 10.19 $ 10.68 $ 10.08
$ 9.76 $ 9.55 $ 10.19
------
-------- -------- --------
- -------- -----------
Income from investment operations
Net investment income(c).............. .65 .65 .67
.69 .51 .61
Net realized and unrealized gain
(loss) on investment
transactions....................... .09 (.39) .65
.35 .21 .09
------
-------- -------- --------
- -------- -----------
Total from investment operations... .74 .26 1.32
1.04 .72 .70
------
-------- -------- --------
- -------- -----------
Less distributions
Dividends from net investment
income............................. (.65) (.65) (.67)
(.69) (.51) (.61)
Distributions from net realized
gains.............................. -- (.10) (.05)
(.03) -- --
------
-------- -------- --------
- -------- -----------
Total distributions................ (.65) (.75) (.72)
(.72) (.51) (.61)
------
-------- -------- --------
- -------- -----------
Net asset value, end of period........ $ 10.28 $ 10.19 $ 10.68
$ 10.08 $ 9.76 $ 10.28
------
------
-------- -------- --------
- -------- -----------
-------- -------- --------
- -------- -----------
TOTAL RETURN(f)....................... 7.67% 2.55% 13.67%
11.08% 7.97% 7.24%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)....... $163,538 $183,742 $200,899
$141,101 $72,241 $ 28,609
Average net assets (000).............. $165,500 $195,610 $165,895
$102,227 $47,540 $ 23,722
Ratios to average net assets(c):
Expenses, including distribution
fees............................ .40% .35% .20%
.10% .0%(b) .80%
Expenses, excluding distribution
fees............................ .30% .25% .10%
.04% .0%(b) .30%
Net investment income.............. 6.49% 6.25% 6.52%
6.91% 7.04%(b) 6.09%
Portfolio turnover rate............... 39% 46% 34%
69% 35% 39%
<CAPTION>
Class C
- ---------------------------
<S> <C<C> <C> <C>
<C>
December 7,
August 1,
1993(d)
1994(e)
Through Year Ended
Through
August 31, August 31,
August 31,
1994 1995
1994
------ -----
- -----
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period............................. $ 10.61 $10.19
$10.18
------ -----
- -----
Income from investment operations
Net investment income(c).............. .44 .58
.05
Net realized and unrealized gain
(loss) on investment
transactions....................... (.42) .09
.01
------ -----
- -----
Total from investment operations... .02 .67
.06
------ -----
- -----
Less distributions
Dividends from net investment
income............................. (.44) (.58)
(.05)
Distributions from net realized
gains.............................. -- --
--
------ -----
- -----
Total distributions................ (.44) (.58)
(.05)
------ -----
- -----
Net asset value, end of period........ $ 10.19 $10.28
$10.19
------ -----
- -----
------ -----
- -----
TOTAL RETURN(f)....................... (.14)% 6.98%
.47%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)....... $18,931 $2,762
$1,054
Average net assets (000).............. $ 6,814 $1,751 $
353
Ratios to average net assets(c):
Expenses, including distribution
fees............................ 1.11%(b) 1.05%
1.12%(b)
Expenses, excluding distribution
fees............................ .43%(b) .30%
.37%(b)/(g)
Net investment income.............. 8.15%(b) 5.84%
6.25%(b)
Portfolio turnover rate............... 46% 39%
46%
</TABLE>
<TABLE>
<C> <S>
- ---------------
(a) Commencement of investment operations.
(b) Annualized.
(c) Net of expense subsidy and/or fee waiver.
(d) Commencement of offering of Class B shares.
(e) Commencement of offering of Class C shares.
(f) 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.
(g) Restated.
</TABLE>
- --------------------------------------------------------------------------------
- ----- 12 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND
Independent Auditors' Report CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees
Prudential California Municipal Fund, California Income Series
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Prudential California Municipal Fund,
California Income Series as of August 31, 1995, the related statements of
operations for the year then ended and of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
four years in the period then ended and for the period December 3, 1990
(commencement of investment operations) through August 31, 1991. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
August 31, 1995 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Prudential
California Municipal Fund, California Income Series, as of August 31, 1995, the
results of its operations, the changes in its net assets, and its financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
October 16, 1995
PRUDENTIAL MUNICIPAL SERIES FUND
Federal Income Tax Information CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days of the
Series' fiscal year end (August 31, 1995) as to the federal tax status of
dividends and distributions paid by the Series during such fiscal year.
Accordingly, we are advising you that in the fiscal year ended August 31, 1995,
dividends paid from net investment income of $.65 per Class A share, $.61 per
Class B share and $.58 per Class C shares were all federally tax-exempt interest
dividends.
- --------------------------------------------------------------------------------
13 -----
<PAGE>
Getting
The Most
From Your
Prudential
Mutual
Fund
Some mutual fund shareholders won't ever read this -- they don't read annual
and semi-annual reports. It's quite understandable. These annual and semi-annual
reports are prepared to comply with Federal regulations. They are often written
in language that is difficult to understand. So when most people run into those
particularly daunting sections of these reports, they don't read them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some changes to our report to make it
easier to understand and more pleasant to read, in hopes you'll find it
profitable to spend a few minutes familiarizing yourself with your investment.
Here's what you'll find in the report:
At A Glance
Since an investment's performance is often a shareholder's primary concern, we
present performance information in two different formats. You'll find it first
on the "At A Glance" page where we compare the Fund and the comparable average
calculated by Lipper Analytical Services, Inc., a nationally recognized mutual
fund rating agency. We report both the cumulative total returns and the average
annual total returns. The cumulative total return is the total amount of income
and appreciation the Fund has achieved in various time periods. The average
annual total return is an annualized representation of the Fund's performance
- -- it generally smoothes out returns and gives you an idea how much the Fund
has earned in an average year, for a given time period. Under the performance
box, you'll see legends that explain the performance information, whether fees
and sales charges have been included in returns, and the inception dates for
the Fund's share classes.
See the performance comparison charts at the back of the report for more
performance information.
And keep in mind that past performance is not indicative of future results.
Portfolio
Manager's Report
The portfolio manager who invests your money for you reports on successful --
and not-so-successful -- strategies in this section of your report. Look for
recent purchases and sales here, as well as information about the sectors the
portfolio managers favors and any changes that are on the drawing board.
Portfolio Of
Investments
This is where the report begins to look technical, but it's really just a
listing of each security held at the end of the reporting period, along with
valuations and other information. Please note that sometimes we discuss a
security in the Portfolio Manager's Report that doesn't appear in this listing
because it was sold before the close of the reporting period.
<PAGE>
Statement Of Assets
And Liabilities
The balance sheet shows the assets (the value of the Fund's holdings),
liabilities (how much the Fund owes) and net assets (the Fund's equity, or
holdings after the Fund pays its debts) as of the end of the reporting period.
It also shows how we calculate the net asset value per share for each class of
shares. The net asset value is reduced by payment of your dividend, capital
gain, or other distribution, but remember that the money or new shares are
being paid or issued to you and thus is not a realized loss. The net asset
value fluctuates daily along with the value of every security in the portfolio.
Statement Of Operations
This is the income statement, which details income (mostly interest and
dividends earned) and expenses (including what you pay us to manage your
money). You'll also see capital gains here -- both realized and unrealized.
Statement Of Changes
In Net Assets
This schedule shows how income and expenses translate into changes in net
assets, compared to last year's performance. The Fund is required to pay out
the bulk of its income to shareholders every year, and this statement shows
you how we do it -- through dividends and distributions -- and how that
affects the net assets. This statement also shows how money from investors
flowed into and out of the Fund.
Notes To Financial
Statements
This is the kind of technical material that can intimidate readers, but it
does contain useful information. The Notes provide a brief history and
explanation of your Fund's objectives. In addition, they also outline how
Prudential Mutual Funds prices securities. The Notes also explain who manages
and distributes the Fund's shares, and more importantly, how much they are
paid for doing so. Finally, the Notes explain how many shares are outstanding
and the number issued and redeemed over the period.
Financial Highlights
This information contains many elements from prior pages, but on a per share
basis. It is designed to help you understand how the Fund performed and
to compare this year's performance and expenses to those of prior years.
Independent
Auditor's Report
Once a year, an outside auditor looks over our books and certifies that the
information we've presented is fair and complies with generally accepted
accounting principles.
Tax Information
This is information which we report annually about how much of your total
return is taxable. Should you have any questions, you may want to consult
a tax advisor.
Performance
Comparison
These charts are included in the annual report and are required by the
Securities Exchange Commission. Performance is presented here as a
hypothetical $10,000 investment in the Fund since its inception or for 10
years (whichever is shorter). To help you put that return in context, we are
required to include the performance of an unmanaged, broad based securities
index, as well. The index does not reflect the cost of buying the securities
it contains or the cost of managing a mutual fund. Of course, the index holdings
do not mirror those of the fund -- the index is a broadly based reference
point commonly used by investors to measure how well they are doing.
A definition of the selected index is also provided. Investors generally
cannot invest directly in an index.
<PAGE>
Getting
The Most
From Your
Prudential
Mutual
Fund
When you invest through Prudential Mutual Funds, you receive financial advice
through a Prudential Securities financial advisor or Prudential/Pruco
Securities registered representative. Your advisor or representative can
provide you with the following services.
There's No Reward Without Risk; But Is This Risk Worth It?
Your financial adviser or registered representative can help you match the
reward you seek with the risk you can tolerate. And risk can be difficult to
gauge -- sometimes even the simplest investments bear surprising risks. The
educated investor knows that markets seldom move in just one direction -- there
are times when a market sector or asset class will lose value or provide little
in the way of total return. Managing your own expectations is easier with help
from someone who understands the markets and who knows you!
Keeping Up With The Joneses.
A financial adviser or registered representative can help you wade through the
numerous mutual funds available to find the ones that fit your own individual
investment profile and risk tolerance. While the newspapers and popular
magazines are full of advice about investing, they are aimed at generic groups
of people or representative individuals, not at you personally. Your financial
advisor or registered representative will review your investment objectives
with you. This means you can make financial decisions based on the assets and
liabilities in your current portfolio and your risk tolerance -- not just
based on the current investment fad.
Buy Low, Sell High.
Buying at the top of a market cycle and selling at the bottom are among the
most common investor mistakes. But sometimes it's difficult to hold on to an
investment when it's losing value every month. Your financial adviser or
registered representative can answer questions when you're confused or worried
about your investment, and remind you that you're investing for the long haul.
<PAGE>
Prudential California Municipal Fund: California Income Series --
Lehman Bros. General Municipal Debt Index
The Prudential California Municipal Fund: California Income Series
and the Lehman Bros. Index: Comparing a $10,000 Investment.
(Class A)
(GRAPH)
(Class B)
(GRAPH)
(Class C)
(GRAPH)
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so an investor's shares, when redeemed, will
be worth more or less than their original cost. The chart on the right is
designed to give you an idea how much the Series' returns can fluctuate from
year to year by measuring the best and worst years in terms of total annual
return since inception.
These graphs are furnished to you in accordance with SEC regulations. They
compare a $10,000 investment in the Prudential California Municipal Fund:
California Income Series (Class A, Class B and Class C) with a similar
investment in the Lehman Brothers Municipal Bond Index by portraying the
initial account values at the commencement of operations of each class, and
subsequent account values at the end of the most recent reporting period
(August 31), as measured on a quarterly basis, beginning in 1990 for Class A
shares, in 1993 for Class B shares and in 1994 for Class C shares. For purposes
of the graphs, and unless otherwise indicated, in the accompanying tables it
has been assumed (a) that the maximum applicable front-end sales charge was
deducted from the initial $10,000 investment in Class A shares; (b) the
maximum applicable contingent deferred sales charge was deducted from the
value of the investment in Class B and Class C shares, assuming full
redemption on August 31, 1995; (c) all recurring fees (including management
fees) were deducted; and (d) all dividends and distributions were reinvested.
Class B shares automatically convert to Class A shares on a quarterly basis,
approximately seven years after purchase. This conversion feature is not
reflected in the graph. The graph and accompanying tables reflect the past
subsidy and/or waiver of expenses and/or management fees.
* Without waivers and expense subsidies the value of the $10,000 investment in
the Series and the Series' average annual total return, as illustrated above,
would have been lower, as indicated in parentheses ( ).
The Index is a weighted index comprised of 21,000 municipal bonds (general
obligation bonds, revenue bonds, insured bonds and prerefunded bonds) selected
by Lehman Brothers as representative of the long-term investment grade municipal
bond market. It is an unmanaged index that includes the reinvestment of all
dividends, but does not reflect the transaction costs and advisory fees paid
by the Series' investors. The Index's holdings differ from the Series'
portfolio. The Index is not the only one that may be used to characterize
performance of bond funds and other indices may portray different comparative
performance.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
(LOGO)
Trustees
Edward D. Beach
Eugene C. Dorsey
Delayne Dedrick Gold
Harry A. Jacobs, Jr.
Thomas T. Mooney
Thomas H. O'Brien
Richard A. Redeker
Nancy Hays Teeters
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Eugene S. Stark, Treasurer
S. Jane Rose, Secretary
Stephen M. Ungerman, Assistant Treasurer
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
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
744313305
744313404 MF146E
744313800 CAT. #4443509
(ICON)
Prudential
California
Municipal
Fund
California
Money Market Series
ANNUAL REPORT
Aug. 31, 1995
(LOGO)
<PAGE>
Prudential California Municipal Fund
California Money Market Series
Performance At A Glance.
Over the past 12 months, California's economy has slowly grown and its
credit rating as of August 31, 1995, was A1, according to Moody's Investors
Service. Prudential California Municipal Fund: California Money Market Series'
7-day current yield on August 31, 1995 was 2.84%, compared to 3.25% six months
ago.
<TABLE>
Fund Facts As of 8/31/95
<CAPTION>
7-Day Net Asset Taxable Equivalent Yield* Weighted
Total Net
Current Yld. Value @31% @36% @39.6% Avg.
Mat. Assets (mil.)
<S> <C> <C> <C> <C> <C> <C>
<C>
CA Money
Market Fund 2.84% $1.00 4.62% 4.99% 5.28% 50 Days
$229
IBC/Donoghue
CA Tax-exempt 3.11 1.00 5.06 5.46 5.79 52 Days
N/A
Fund Average **
</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.
* Some investors may be subject to the federal alternative minimum tax.
**This is the average 7-day current yield, NAV and WAM of 44 funds in the
International Business Communications/Donoghue California tax-exempt money
market fund category as of August 31, 1995.
How Investments Compared.
(As of 8/31/95)
(CHART)
Source: Lipper Analytical Services. Financial markets change, so a mutual fund's
past performance should never be used to predict future results. The risks to
each of the investments listed above are different -- we provide 12-month total
returns for several Lipper mutual fund categories to show you that reaching
for higher yields means tolerating more risk. The greater the risk, the larger
the potential reward or loss. In addition, we've added historical 20-year
average annual returns. These returns assume the reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Smaller capitalization stocks
offer greater potential for long-term growth but may be more volatile than
larger capitalization stocks. Investors receive higher historical total
returns from stocks than from most other investments.
General Bond Funds provide more income than stock funds, which can help smooth
out their total returns year by year. But their prices still fluctuate
(sometimes a good deal) and their returns are historically lower than those
of stock funds.
General Municipal Debt Funds invest in bonds issued by state governments,
state agencies and/or municipalities. This investment provides income that
is usually exempt from federal and state income taxes.
Tax-Exempt Money Market Funds attempt to preserve a constant share value and
provide tax-free income; they don't fluctuate much in price but their returns
are generally among the lowest of the major investment categories.
* 19 years for General Muni Debt Funds.
17 years for Tax-Free Money Market Funds.
<PAGE>
Ken Potts, Fund Manager
Portfolio
Manager's Report
Prudential California Municipal Fund: California Money Market Series seeks the
highest current income that is exempt from federal and California income
taxes, consistent with liquidity, the preservation of capital, and maintenance
of a stable net asset value of $1 per share. The Series invests in a portfolio
of short-term debt securities and obligations from California state, its
municipalities, local governments and other qualifying issuers.
Strategy Session.
The California Money Market Series has followed a conservative, quality
oriented investment strategy. This means we look beyond a bond's current
credit rating and examine the issuer as well. In addition, we favor securities
that are backed by a secondary credit source like a letter of credit from a
major money center institution, like Morgan Guaranty, or bond insurance like
AMBAC. We also favor securities backed by revenue collected for the
specific project.
Interest Rates Trend Lower
(CHART)
Source: Bloomberg & the Bond Buyer. The One-Year Bond Buyer Index is an average
of one-year, tax-exempt notes of 10 issuers calculated by the Bond Buyer weekly
on Wednesdays.
Life After Orange County.
December's bankruptcy filing by Orange County after it suffered $1.7 billion
in investment losses surprised the municipal securities markets. We weathered
the Orange County shock and believe it to be an isolated event. The Series held
two Orange County notes, for which it received full payment of principal and
interest. Information about the Series' Orange County holdings is contained in
the notes to the financial statements.
The sudden collapse of a such a highly rated issuer underscored the importance
of quality credit research and diversification. The Series is invested across
a broad spectrum of issues and issuers from across the state to lessen risk.
As of August 31, 1995, we were invested in 44 securities from 35 issuers in
California and elsewhere and had no exposure to Orange County debt.
Credit-enhanced securities comprised 78% of the portfolio.
<PAGE>
State Of The State.
Down The Freeway To Recovery.
Over the past year, California's economy continued to recover slowly. In many
areas conditions were improving and the state's overall credit rating was A1,
according to Moody's.
Some highlights--
- - Job growth was strong in northern California, where financial services
and technology led the way.
- - The state also seemed to have absorbed the downsizing of defense industries
resulting from deep cuts in the defense budget by Congress. The housing market
had rebounded, especially in those areas with expanded employment opportunities.
- - And lower short-term interest rates (courtesy of the Federal Reserve), were
seen as another plus that could encourage business expansion and consumer
spending.
But the road was not always smooth --
- - The collapse of Orange County sent borrowing costs for California agencies
and municipalities higher.
- - Fast on the heels of Orange County was the devaluation of the peso and
near-collapse of neighboring Mexican financial markets, which had a negative
impact on the state's economy.
- - In Sacramento, the new state budget, while supported by more realistic
revenue forecasts than in the past, continued to rely upon uncertain budget
closing measures. The state's inability to raise taxes or cut spending has led
to fiscal problems and the cost-shifting of programs from the state to the
municipal level.
A Word
About Quality.
Your Series typically will purchase securities with maturities of one
year or less that are rated Aaa, Aa; Notes: MIG-1, MIG-2, P-1 or P-2 by
Moody's Investors Service, or AAA, AA; Notes: SP-1, SP-1+, A-1 or A-2 by
Standard & Poor's or, if not rated, deemed to be of comparable quality by the
Fund's investment adviser. Although there is never a guarantee that the share
price of the California Money Market Series will stay at $1, we at Prudential
emphasize a conservative, quality-oriented investment approach.
Looking Ahead.
The long-term outlook for the state's economy continues to be favorable.
Events that could negatively impact this picture include the ultimate
resolution of the Orange County bankruptcy, a slowdown in the national
economy, or another fiscal crisis in Mexico.
Going forward, we believe that yields for tax-free money market funds will
trend lower following the reduction in taxable short-term interest rates
engineered by the Federal Reserve in July. Whether the central bank cuts
rates further this year depends upon the health of the national economy.
1
<PAGE>
President's Letter October 11, 1995
(PICTURE)
Dear Shareholder:
We hope you like the fresh look and information we've given your shareholder
letter. We've also introduced another feature, called Getting the Most Out of
Your Prudential Mutual Fund, which will appear from time to time at the back
of your report. Look for topics like "Understanding Risk & Reward" as well as
easy-to-understand explanations of financial terms. Why are we providing such
information? Because at Prudential Mutual Funds, we believe an informed
investor makes smart investment decisions.
On the Hill
As an informed investor, you should know about the "American Dream Savings
Account" that is part of the federal budget package now under debate in the
Senate. It is a type of Individual Retirement Account that offers a
common-sense approach to long-term saving. Investors should like it because --
- - You can withdraw funds -- without penalty -- to pay for certain expenses
like buying a first home, medical care or educational needs;
- - All account earnings would accumulate tax-free, not merely tax-deferred like
the current IRA;
- - You can make contributions past age 70 1/2, instead of having to take
distributions as the current law requires.
Of course, the federal budget process is never easy and while we hope this
measure is adopted, there's no way of knowing if it will be. So why not let
your Senator and/or Representative know your opinion today? Simply call
202-224-3121.
In Closing
One final note: if you're a Class B shareholder of other Prudential Mutual
Funds, you'll begin noticing a change on your statements once you've held
your shares for seven years. At that time, they will automatically begin to
convert to Class A shares on a quarterly basis. Since Class A shares carry
lower annual distribution charges than Class B shares, your total returns will
be higher after the conversion than they would have been without it.
Conversions started earlier this year and will take place during each calendar
quarter -- December, March, June and September. It's our way of thanking you
for your loyalty -- and rewarding you for maintaining a long-term investment
program by helping you earn more total investment return on your Prudential
Mutual Fund. I hope you'll find this information useful as you work with your
financial advisor or registered representative to develop your personal
investment plan.
Thank you for choosing Prudential Mutual Funds for your mutual fund investment.
Sincerely,
Richard A. Redeker
President
2
<PAGE>
Portfolio of Investments as of PRUDENTIAL CALIFORNIA MUNICIPAL FUND
August 31, 1995 CALIFORNIA MONEY MARKET SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating
Interest Maturity Amount Value
Description (a) (Unaudited)
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
California Poll. Ctrl. Fin. Auth. Rev.,
Arco Proj., F.R.D.D., Ser. 94A VMIG1
3.65% 9/01/95 $ 2,700 $ 2,700,000
Burney Forest Proj., F.R.D.D., Ser. A P1
3.65 9/01/95 2,900 2,900,000
Chevron U.S.A. Inc. Proj., A.O.T., Ser. 84 NR
4.50 5/15/96 4,155 4,155,000
Delano Proj., F.R.D.D., Ser. 89 P1
3.50 9/01/95 2,600 2,600,000
Delano Proj., F.R.D.D., Ser. 90 P1
3.50 9/01/95 5,500 5,500,000
Delano Proj., F.R.D.D., Ser. 91 P1
3.50 9/01/95 3,200 3,200,000
Honey Lake Power Proj., F.R.D.D., Ser. 88 NR
3.50 9/01/95 5,500 5,500,000
Shell Oil Co. Proj., F,R.D.D., Ser. 94 VMIG1
3.60 9/01/95 3,400 3,400,000
So. Cal. Ed., F.R.D.D., Ser 86B P1
3.45 9/01/95 2,400 2,400,000
So. Cal. Ed., F.R.D.D., Ser. 86C P1
3.45 9/01/95 2,100 2,100,000
U.S. Borax, Inc. Proj., F.R.W.D., Ser. 95A NR
3.65 9/07/95 5,100 5,100,000
Ultrapower Malaga Fresno Proj., F.R.D.D., Ser. 88A P1
3.55 9/01/95 2,600 2,600,000
Ultrapower Malaga Fresno Proj., F.R.D.D., Ser. 88B P1
3.55 9/01/95 3,400 3,400,000
Ultrapower Rocklin Proj., F.R.D.D., Ser. 88A P1
3.55 9/01/95 2,000 2,000,000
Ultrapower Rocklin Proj., F.R.D.D., Ser. 88B P1
3.55 9/01/95 1,200 1,200,000
California St. Dept. Water Res.,
Central Valley Proj., F.R.W.D. VMIG1
3.35 9/06/95 6,000 6,000,000
Water Rev., T.E.C.P. P1
3.60 9/26/95 3,854 3,854,000
California Statewide Cmntys Dev. Auth.,
Apartment Dev. Rev., F.R.W.D., Ser. 95A A1+(c)
3.45 9/06/95 3,500 3,500,000
Multifamily Rev., F.R.W.D., Ser. 95B A1+(c)
3.65 9/06/95 8,000 8,000,000
Contra Costa Trans. Auth. Rev., F.R.W.D., Ser. A VMIG1
3.40 9/06/95 3,700 3,700,000
East Bay Mun. Util. Dist., T.E.C.P. P1
3.60 9/11/95 7,350 7,350,000
Kings Cnty. Multi-family Rev. Hsg. Auth., Edgewater Isle
Proj., F.R.W.D., Ser. 85A VMIG1
3.55 9/06/95 7,800 7,800,000
Los Angeles Cnty. Met. Trans. Auth. Rev., Union Station
Proj., F.R.W.D., Ser. A VMIG1
3.50 9/07/95 5,600 5,600,000
Los Angeles Cnty. Trans. Comm. Sales Tax Rev., F.R.W.D.,
Ser. A VMIG1
3.20 9/06/95 4,600 4,600,000
Los Angeles Cnty., T.R.A.N. MIG1
4.50 7/01/96 15,200 15,287,012
Los Angeles Hsg. Auth., Multi-family Rev., Lanewood Apts.
Proj., F.R.W.D., Ser. 85 VMIG1
3.55 9/06/95 7,000 7,000,000
Monterey Cnty. Fin. Auth. Rev., Adjusted Recl. & Dist.
Projs., F.R.W.D., Ser. 95A VMIG1
3.60 9/07/95 4,000 4,000,000
Moorpark Ind. Dev. Auth. Rev., Kavli & Kavli Co.,
F.R.W.D.,
Ser. 85 VMIG1
3.85 9/07/95 6,795 6,795,000
Oakland Multi-family Hsg. Rev., Skyline Hills Assoc.,
F.R.W.D.,
Ser. 85A MIG1
3.40 9/07/95 6,700 6,700,000
Olcese Wtr. Dist., Rio Bravo Wtr. Delivery Sys., T.E.C.P.,
Ser. 86A P1
3.90 9/20/95 7,900 7,900,000
Ontario Multi-family Hsg. Rev., Park Ctr. Proj., F.R.W.D.,
Ser. 85A VMIG1
3.45 9/07/95 8,400 8,400,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
3
<PAGE>
<PAGE>
Portfolio of Investments as of PRUDENTIAL CALIFORNIA MUNICIPAL FUND
August 31, 1995 CALIFORNIA MONEY MARKET SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating
Interest Maturity Amount Value
Description (a) (Unaudited)
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
Palmdale Cmnty. Redev. Agy., Manzanita Villas Apt. Proj.,
F.R.W.D.,
Ser. 93A VMIG1
3.65% 9/07/95 $ 4,800 $ 4,800,000
Puerto Rico Comnwlth.,
Gov't. Dev. Bank., F.R.W.D., Ser. 85 VMIG1
3.20 9/06/95 1,300 1,300,000
Gov't. Dev. Bank., F.R.W.D., Ser. 95 A1+(c)
4.10 9/08/95 1,500 1,500,000
Sacramento Mun. Util. Dist. Rev.,
T.E.C.P., P1
3.60 9/12/95 3,000 3,000,000
T.E.C.P., P1
3.75 9/12/95 1,200 1,200,000
San Francisco Cnty. Redev. Fin. Auth. Rev., Yerba Buena
Gardens, F.R.W.D., Ser. 95 VMIG1
3.70 9/06/95 7,000 7,000,000
San Francisco Cnty., Unified School Dist., T.R.A.N., Ser.
95 MIG1
4.50 7/25/96 7,200 7,237,204
San Joaquin Cnty. Trans. Auth., Sales Tax Rev., F.R.W.D.,
Ser. 93 P1
3.50 9/06/95 5,700 5,700,000
San Lorenzo Unified School Dist., T.R.A.N. SP1+(c)
4.75 7/05/96 4,800 4,832,241
San Marcos Ind. Dev. Auth. Rev., Village Square Proj.,
F.R.W.D., Ser. 92 NR
3.75 9/07/95 3,900 3,900,000
Santa Clara Cnty. Trans. Dist., F.R.D.D., Ser. 85A VMIG1
3.50 9/01/95 300 300,000
Southern Pub. Pwr. Auth., Transmission Proj. Rev.,
F.R.W.D., Ser. 91 P1
3.15 9/06/95 13,700 13,700,000
Visalia, Cert. of Part., Convention Ctr., F.R.W.D. A1+(c)
3.75 9/06/95 8,680 8,680,000
------------
Total Investments--95.2%
(amortized cost $218,390,457(d))
218,390,457
Other assets in excess of liabilities--4.8%
10,989,404
------------
Net Assets--100%
$229,379,861
------------
------------
</TABLE>
- ---------------
(a) The following abbreviations are used in portfolio descriptions:
A.O.T.--Annual Optional Tender.
F.R.D.D.--Floating Rate (Daily) Demand Note (b).
F.R.W.D.--Floating Rate (Weekly) Demand Note (b).
T.E.C.P.--Tax-Exempt Commercial Paper.
T.R.A.N.--Tax & Revenue Anticipation Note.
(b) 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.
(c) Standard & Poor's rating.
(d) The cost of securities for federal income tax purposes is substantially the
same as for financial reporting purposes.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information contains a description
of Moody's and Standard & Poor's ratings.
- --------------------------------------------------------------------------------
4 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Statement of Assets and Liabilities CALIFORNIA MONEY MARKET SERIES
- --------------------------------------------------------------------------------
<TABLE>
<S>
<C>
Assets
August 31, 1995
Investments, at amortized cost which approximates market
value............................................... $218,390,457
Receivable for investments
sold.........................................................................
..... 9,191,250
Receivable for Series shares
sold............................................................................
4,732,065
Interest
receivable...................................................................
....................... 904,165
Other
assets.......................................................................
.......................... 6,047
------------
Total
assets.......................................................................
....................... 233,223,984
------------
Liabilities
Payable for Series shares
reacquired...................................................................
...... 3,576,738
Management fee
payable......................................................................
................. 99,633
Accrued expenses and other
liabilities..................................................................
..... 77,152
Dividends
payable......................................................................
...................... 73,026
Distribution fee
payable......................................................................
............... 13,674
Deferred trustees'
fee..........................................................................
............. 3,900
------------
Total
liabilities..................................................................
....................... 3,844,123
------------
Net
Assets.......................................................................
............................ $229,379,861
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at $.01 par
value.......................................................... $
2,293,799
Paid-in capital in excess of
par..........................................................................
227,086,062
------------
Net assets, August 31,
1995.........................................................................
......... $229,379,861
------------
------------
Net asset value, offering price and redemption price per share
($229,379,861 / 229,379,861 shares of beneficial interest issued and
outstanding; unlimited number of
shares
authorized)..................................................................
...................... $1.00
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA MONEY MARKET SERIES CALIFORNIA MONEY MARKET SERIES
Statement of Operations Statement of Changes in Net Assets
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income August 31, 1995
---------------
<S> <C>
Income
Interest and discount earned............. $ 8,979,883
---------------
Expenses
Management fee........................... 1,215,652
Distribution fee......................... 303,913
Legal fees............................... 140,000
Transfer agent's fees and expenses....... 120,000
Custodian's fees and expenses............ 30,000
Reports to shareholders.................. 25,000
Registration fees........................ 20,000
Audit fee................................ 15,000
Insurance expense........................ 9,000
Trustees' fees........................... 8,000
Miscellaneous............................ 8,748
---------------
Total expenses........................ 1,895,313
Less: custodian fee credit.................. (42,250)
---------------
Net expenses............................. 1,853,063
---------------
Net investment income....................... 7,126,820
---------------
Realized Loss on Investments
Net realized loss on investment transactions
(Note 3)................................. (2,750,000)
---------------
Net Increase in Net Assets
Resulting from Operations................... $ 4,376,820
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended August 31,
in Net Assets 1995 1994
<S> <C> <C>
Operations
Net investment income..... $ 7,126,820 $ 6,229,905
Net realized gain (loss)
on investment
transactions........... (2,750,000) 20,403
--------------- ---------------
Net increase in net assets
resulting from
operations............. 4,376,820 6,250,308
--------------- ---------------
Dividends and distributions
to shareholders (Note
1)........................ (7,126,820) (6,250,308)
--------------- ---------------
Series share transactions (at
$1 per share)
Net proceeds from shares
sold................... 1,409,780,343 1,419,314,621
Net asset value of shares
issued to shareholders
in reinvestment of
dividends and
distributions.......... 6,813,982 5,984,806
Cost of shares
reacquired............. (1,487,890,017) (1,439,549,204)
--------------- ---------------
Net decrease in net assets
from Series share
transactions........... (71,295,692) (14,249,777)
--------------- ---------------
Capital contribution by
affiliate (Note 3)........ 2,750,000 --
--------------- ---------------
Total decrease............... (71,295,692) (14,249,777)
Net Assets
Beginning of year............ 300,675,553 314,925,330
--------------- ---------------
End of year.................. $ 229,379,861 $ 300,675,553
--------------- ---------------
--------------- ---------------
</TABLE>
- --------------------------------------------------------------------------------
6 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Notes to Financial Statements CALIFORNIA MONEY MARKET SERIES
- --------------------------------------------------------------------------------
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 Policies
The following is a summary of significant accounting policies followed by the
Fund, and the Series, in the preparation of its financial statements.
Securities Valuations: Portfolio securities of the Series are valued at
amortized cost, which approximates market value. The amortized cost method of
valuation involves valuing a security at its cost on the date of purchase and
thereafter assuming a constant amortization to maturity of any discount or
premium.
All securities are valued as of 4:30 P.M., New York time.
Securities Transactions and 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.
Reclassification of Capital Accounts: The effect of applying Statement of
Position 93-2: Determination, Disclosure and Financial Statement Presentation
of
Income, Capital Gain and Return of Capital Distributions by Investment Companies
during the year was to decrease accumulated loss on investments and decrease
paid-in capital by $2,750,000 due to the contribution of capital to the Series
(Note 3).
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Mutual Fund Management, Inc.
(``PMF''). Pursuant to this agreement PMF has responsibility for all investment
advisory services and supervises the subadviser's performance of such services.
PMF has entered into a subadvisory agreement with The Prudential Investment
Corporation (``PIC''); PIC furnishes investment advisory services in connection
with the management of the Fund. PMF pays for the cost of the subadviser's
services, the compensation of officers of the Fund, occupancy and certain
clerical and bookkeeping costs of the Fund. The Fund bears all other costs and
expenses.
The management fee paid PMF is computed daily and payable monthly, at the annual
rate of .50 of 1% of the average daily net assets of the Series.
The Fund has a distribution agreement with Prudential Mutual Fund Distributors,
Inc. (``PMFD''). To reimburse PMFD for its expenses incurred pursuant to a plan
of distribution, the Fund pays PMFD a reimbursement, accrued daily and payable
monthly, at an annual rate of .125 of 1% of the Series' average daily net
assets. PMFD pays various broker-dealers, including Prudential Securities
Incorporated (``PSI'') and Pruco Securities Corporation, affiliated
broker-dealers, for account servicing fees and other expenses incurred by such
broker-dealers.
PMFD is a wholly-owned subsidiary of PMF; PSI, PIC, and PMF are (indirect)
wholly-owned subsidiaries of The Prudential Insurance Company of America.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During the year ended August 31, 1995,
the Series incurred fees of approximately $112,000 for
- --------------------------------------------------------------------------------
7
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Notes to Financial Statements CALIFORNIA MONEY MARKET SERIES
- --------------------------------------------------------------------------------
the services of PMFS. As of August 31, 1995, approximately $8,000 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.
At the time of the financial crisis in Orange County, California in late 1994,
the Series held (i) $15,000,000 principal amount of Orange County, California,
Teeter Plan Tax-Exempt Notes due June 30, 1995 (Teeter Notes) and (ii)
$10,000,000 principal amount of Orange County, California, Tax Revenue
Anticipation Notes due July 19, 1995 (TRANS A Notes) (collectively, the Orange
County Notes).
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 put agreements with the Series with respect
to the Orange County Notes. The put agreements, originally scheduled to expire
on March 6, 1995, were subsequently extended to the maturity dates of the
respective Orange County Notes. The put agreements provided that the Fund had
the unconditional right at maturity to require PSG to purchase the Orange County
Notes from the Series at par value plus accrued interest. The Series recorded
a
loss on the Orange County Notes and an associated capital contribution to the
Series equal in value to the decline in fair market value of the Orange County
Notes as of December 7, 1994.
On June 30, 1995 the Teeter Notes matured, the Series received par value plus
accrued interest in the normal course of business from Orange County and the put
expired unexercised. On July 19, 1995, with Orange County having defaulted on
its obligations with respect to the TRANS A Notes, the Series put (sold) the
TRANS A Notes to PSG in return for par value plus accrued interest in accordance
with the terms of the put agreement. Accordingly, shareholders of the Series
have incurred no loss of principal or reduction in income, except for certain
legal costs, as a result of its ownership of the Orange County Notes. Since July
19, 1995 the Series has not owned any Orange County, California obligations.
- --------------------------------------------------------------------------------
8
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Financial Highlights CALIFORNIA MONEY MARKET SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year
Ended August 31,
- ------------------------------------------------------------
1995 1994
1993 1992 1991
-------- --------
-------- -------- --------
<S> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year.................. $ 1.00 $ 1.00
$ 1.00 $ 1.00 $ 1.00
Net investment income and net realized
gains/losses...................................... .02(c) .02
.02 .03 .04(a)
Dividends and distributions......................... (.03) (.02)
(.02) (.03) (.04)
Capital contribution by affiliate................... .01 --
-- -- --
-------- --------
-------- -------- --------
Net asset value, end of year........................ $ 1.00 $ 1.00
$ 1.00 $ 1.00 $ 1.00
-------- --------
-------- -------- --------
-------- --------
-------- -------- --------
TOTAL RETURN(b):.................................... 3.01%(c) 1.94%
1.86% 2.91% 4.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)....................... $229,380 $300,676
$314,925 $315,890 $341,625
Average net assets (000)............................ $243,130 $326,429
$319,464 $339,941 $375,655
Ratios to average net assets:
Expenses, including distribution fee............. .78% .73%
.76% .76% .63%(a)
Expenses, excluding distribution fee............. .65% .61%
.63% .63% .51%(a)
Net investment income............................ 2.93% 1.91%
1.83% 2.89% 4.37%(a)
</TABLE>
- ---------------
(a) Net of management fee waiver and/or expense subsidy.
(b) Total return includes reinvestment of dividends and distributions.
(c) Includes $.01 of net realized loss on investment transactions that were
offset by a capital contribution by affiliate.
Without the effect of the capital contribution, the Series' total return
would have been 1.88%.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
9
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Independent Auditors' Report CALIFORNIA MONEY MARKET SERIES
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees
Prudential California Municipal Fund, California Money Market Series
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Prudential California Municipal Fund,
California Money Market Series, as of August 31, 1995, the related statements
of
operations for the year then ended and of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
August 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Prudential
California Municipal Fund, California Money Market Series, as of August 31,
1995, the results of its operations, the changes in its net assets, and its
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
October 16, 1995
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Federal Income Tax Information CALIFORNIA MONEY MARKET SERIES
- --------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days of the
Series' fiscal year end (August 31, 1995) as to the federal tax status of
dividends and distributions paid by the Series during such fiscal year.
Accordingly, we are advising you that for the year ended August 31, 1995,
dividends paid from net investment income totalling $.03 per share were
federally tax-exempt interest dividends.
- --------------------------------------------------------------------------------
10
<PAGE>
Getting
The Most
From Your
Prudential
Mutual
Fund
When you invest through Prudential Mutual Funds, you receive financial advice
through a Prudential Securities financial advisor or Prudential/Pruco
Securities registered representative. Your advisor or representative can
provide you with the following services.
There's No Reward Without Risk; But Is This Risk Worth It?
Your financial adviser or registered representative can help you match the
reward you seek with the risk you can tolerate. And risk can be difficult to
gauge -- sometimes even the simplest investments bear surprising risks. The
educated investor knows that markets seldom move in just one direction --
there are times when a market sector or asset class will lose value or provide
little in the way of total return. Managing your own expectations is easier
with help from someone who understands the markets and who knows you!
Keeping Up With The Joneses.
A financial adviser or registered representative can help you wade through the
numerous mutual funds available to find the ones that fit your own individual
investment profile and risk tolerance. While the newspapers and popular
magazines are full of advice about investing, they are aimed at generic groups
of people or representative individuals, not at you personally. Your financial
advisor or registered representative will review your investment objectives
with you. This means you can make financial decisions based on the assets and
liabilities in your current portfolio and your risk tolerance -- not just
based on the current investment fad.
Buy Low, Sell High.
Buying at the top of a market cycle and selling at the bottom are among the
most common investor mistakes. But sometimes it's difficult to hold on to an
investment when it's losing value every month. Your financial adviser or
registered representative can answer questions when you're confused or worried
about your investment, and remind you that you're investing for the long haul.
<PAGE>
Getting
The Most
From Your
Prudential
Mutual
Fund
Some mutual fund shareholders won't ever read this -- they don't read annual
and semi-annual reports. It's quite understandable. These annual and
semi-annual reports are prepared to comply with Federal regulations. They are
often written in language that is difficult to understand. So when most people
run into those particularly daunting sections of these reports, they don't
read them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some changes to our report to make it
easier to understand and more pleasant to read, in hopes you'll find it
profitable to spend a few minutes familiarizing yourself with your investment.
Here's what you'll find in the report:
At A Glance
Since an investment's performance is often a shareholder's
primary concern, we present performance information in two different formats.
You'll find it first on the "At A Glance" page where we compare the Fund and
the comparable average calculated by Lipper Analytical Services, Inc., a
nationally recognized mutual fund rating agency. We report both the cumulative
total returns and the average annual total returns. The cumulative total
return is the total amount of income and appreciation the Fund has achieved
in various time periods. The average annual total return is an annualized
representation of the Fund's performance -- it generally smoothes out returns
and gives you an idea how much the Fund has earned in an average year, for a
given time period. Under the performance box, you'll see legends that explain
the performance information, whether fees and sales charges have been included
in returns, and the inception dates for the Fund's share classes.
See the performance comparison charts at the back of the report for more
performance information. And keep in mind that past performance is not
indicative of future results.
Portfolio
Manager's Report
The portfolio manager who invests your money for you reports on successful --
and not-so-successful -- strategies in this section of your report. Look for
recent purchases and sales here, as well as information about the sectors the
portfolio managers favors and any changes that are on the drawing board.
Portfolio Of
Investments
This is where the report begins to look technical, but it's really just a
listing of each security held at the end of the reporting period, along with
valuations and other information. Please note that sometimes we discuss a
security in the Portfolio Manager's Report that doesn't appear in this listing
because it was sold before the close of the reporting period.
<PAGE>
Statement Of Assets
And Liabilities
The balance sheet shows the assets (the value of the Fund's holdings),
liabilities (how much the Fund owes) and net assets (the Fund's equity, or
holdings after the Fund pays its debts) as of the end of the reporting period.
It also shows how we calculate the net asset value per share for each class of
shares. The net asset value is reduced by payment of your dividend, capital
gain, or other distribution, but remember that the money or new shares are
being paid or issued to you and thus is not a realized loss. The net asset
value fluctuates daily along with the value of every security in the portfolio.
Statement Of
Operations
This is the income statement, which details income (mostly interest and
dividends earned) and expenses (including what you pay us to manage your
money). You'll also see capital gains here -- both realized and unrealized.
Statement Of Changes
In Net Assets
This schedule shows how income and expenses translate into changes in net
assets, compared to last year's performance. The Fund is required to pay out
the bulk of its income to shareholders every year, and this statement shows
you how we do it -- through dividends and distributions -- and how that
affects the net assets. This statement also shows how money from investors
flowed into and out of the Fund.
Notes To Financial
Statements
This is the kind of technical material that can intimidate readers, but it does
contain useful information. The Notes provide a brief history and explanation
of your Fund's objectives. In addition, they also outline how Prudential Mutual
Funds prices securities. The Notes also explain who manages and distributes the
Fund's shares, and more importantly, how much they are paid for doing so.
Finally, the Notes explain how many shares are outstanding and the number
issued and redeemed over the period.
Financial Highlights
This information contains many elements from prior pages, but on a per
share basis. It is designed to help you understand how the Fund performed and
to compare this year's performance and expenses to those of prior years.
Independent
Auditor's Report
Once a year, an outside auditor looks over our books and certifies that the
information we've presented is fair and complies with generally accepted
accounting principles.
Tax Information
This is information which we report annually about how much of your total
return is taxable. Should you have any questions, you may want to consult
a tax advisor.
Performance
Comparison
These charts are included in the annual report and are required by the
Securities Exchange Commission. Performance is presented here as a hypothetical
$10,000 investment in the Fund since its inception or for 10 years (whichever
is
shorter). To help you put that return in context, we are required to include the
performance of an unmanaged, broad based securities index, as well. The index
does not reflect the cost of buying the securities it contains or the cost of
managing a mutual fund. Of course, the index holdings do not mirror those of
the fund -- the index is a broadly based reference point commonly used by
investors to measure how well they are doing. A definition of the selected
index is also provided. Investors generally cannot invest directly in an index.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
(LOGO)
Trustees
Edward D. Beach
Eugene C. Dorsey
Delayne Dedrick Gold
Harry A. Jacobs, Jr.
Thomas T. Mooney
Thomas H. O'Brien
Richard A. Redeker
Nancy Hays Teeters
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Eugene S. Stark, Treasurer
Stephen M. Ungerman, Assistant 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
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
MF139E
744313503 Cat. #642862U
(ICON)
Prudential
California
Municipal
Fund
California Series
Annual
Report
Aug. 31, 1995
(LOGO)
<PAGE>
Prudential California Municipal Fund
California Series
Performance At A Glance.
It has been a good year for shareholders of the Prudential California
Municipal Fund: California Series. Municipal bond investors earned not
only their coupon income, but also saw a gain in net asset value as well.
We are pleased to report that your Portfolio handily outperformed the
average California municipal bond fund measured by Lipper Analytical
Services over the past 12 months.
<TABLE>
Cumulative Total Returns1 As of 8/31/95
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 7.9% 48.0% N/A 50.7%
Class B 7.6 45.1 106.4% 137.8
Class C 7.3 N/A N/A 7.3
Lipper CA Muni Avg3 7.1 47.1 123.4 162.3
<CAPTION>
Average Annual Total Returns1 As of 9/30/95
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 6.4% 7.7% N/A 7.0%
Class B 4.4 7.7 7.7% 8.2
Class C 8.1 N/A N/A 6.6
</TABLE>
<TABLE>
Taxable Equivalent
Yield
Total Dividends 30-Day At Tax Rates Of
Paid for 12 Mos. SEC Yield 36% 39.6%
<S> <C> <C> <C> <C> <C>
Your Class A $0.66 5.02% 8.81% 9.34%
Dividend Class B $0.62 4.78 8.39 8.89
As of 8/31/95 Class C $0.59 4.54 7.97 8.45
</TABLE>
Past performance is not a guarantee 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.
1Source: Prudential Mutual Fund Management and Lipper Analytical Services.
The cumulative total returns do not take into account sales charges. The
average annual returns do take into account applicable sales charges. The
Series charges a maximum front-end sales load of 3% for Class A shares and
a contingent deferred sales charge of 5%, 4%, 3%, 2%, 1% and 1% for six
years, for Class B shares. Class C shares have a 1% CDSC for one year.
Class B shares 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.
3The Lipper California Municipal Bond fund average includes 91 funds
for one year, 47 funds for five years, 17 funds for 10 years, and 13
funds since inception of the Class B shares on 9/19/84.
How Investments Compared.
(GRAPH)
Source: Lipper Analytical Services. Financial markets change, so a
mutual fund's past performance should never be used to predict future
results. The risks to each of the investments listed above are
different -- we provide 12-month total returns for several Lipper
mutual fund categories to show you that reaching for higher yields
means tolerating more risk. The greater the risk, the larger the
potential reward or loss. In addition, we've added historical 20-year
average annual returns. These returns assume the reinvestment of
dividends.
U.S. Growth Funds will fluctuate a great deal. Smaller capitalization
stocks offer greater potential for long-term growth but may be more
volatile than larger capitalization stocks. Investors receive higher
historical total returns from stocks than from most other investments.
General Bond Funds provide more income than stock funds, which can help
smooth out their total returns year by year. But their prices still
fluctuate (sometimes a good deal) and their returns are historically
lower than those of stock funds.
General Municipal Debt Funds invest in bonds issued by state governments,
state agencies and/or municipalities. This investment provides income that
is usually exempt from federal and state income taxes. (20-year returns
are not available.)
Money Market Funds attempt to preserve a constant share value; they don't
fluctuate much in price but their returns are generally among the lowest
of the major investment categories.
*19 years for General Muni Debt Funds.
<PAGE>
Christian Smith, Fund Manager
(PHOTO)
Portfolio
Manager's Report
The Series invests primarily in carefully selected long-term municipal bonds
that offer a high level of current 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.
Strategy Session.
It has been a positive year for tax-free municipal bonds. Although interest
rates rose sharply in 1994 on inflation fears, they have tumbled back down
slowly so far in 1995, as economic growth slowed. The Bond Buyer Revenue
Bond Index Yield stood at 6.4% on September 1, 1994 (the index is calculated
on Thursdays), and rose by a percentage point to a high of 7.4% in mid-October
1994, before falling to 6.3% on August 31, 1995. As you can see, when the
dust had settled, long-term municipal bond interest rates ended the period
lower.
This year, we have been buying longer maturity bonds with discount coupons
(coupons lower than the prevailing market), and some zero coupon bonds,
because these are more likely to appreciate if interest rates continue to
fall as we expect. We have also increased our holdings in revenue bonds in
the electric utility sector. Many utility bonds have been inexpensively
priced because of concern about future deregulation of the industry.
State Of The State.
We found value by increasing our holdings in insured bonds and long-term,
non-callable zero coupon bonds because they have attractive price
appreciation potential when interest rates fall. What's more, they
are in demand and as a result are easier to trade in uncertain financial
markets. Since the bankruptcy filing of Orange County last year, many
California tax-free municipal bond investors have been seeking quality,
making insured holdings more desirable and generally better performers
than uninsured bonds.
California is in its second year of economic recovery, but the recovery
has been spotty. Furthermore, questions about Orange County's fiscal
health continue to cloud the state's municipal bond market. As a result
we have been avoiding state general obligation bonds.
Sector Breakdown.
(CHART)
Overview.
This Series invests primarily in obligations of California state,
municipal and local governments, including U.S. territories (such
as Puerto Rico, the U.S. Virgin Islands and Guam), the income of
which is also exempt from federal and California state income taxes.
<PAGE>
What Went Well.
We Held On
To Good Yields.
We increased assets invested in non-callable bonds (those that can not be
paid off prematurely by the issuer to save on interest costs) to 34%,
up from 17% a year ago. These bonds not only offer attractive yields
but also appreciate well when interest rates decline. They are valuable
because not many bonds offer protection from call risk -- only about a
third of the securities in the Lehman Brothers' Municipal Bond Index
are non-callable.
We Like
San Bernadino.
We purchased certificates of participation in the county's medical center
financing project last fall when they became attractively priced because
of questions surrounding the county's financial position. Our research
team thought the county was a stronger investment than the market did,
so we purchased more. Since then, the county issued more bonds to expand
the project. These bonds were insured, which helped our existing holdings
to appreciate.
And Not So Well.
A Longer Duration
Would Have Helped.
Duration measures the sensitivity of a bond's price to interest rate changes.
The longer the duration, the more a bond's price appreciates when interest
rates fall and vice versa. Over the winter, our duration was shorter than
that of some competing funds, because we expected economic growth to remain
strong. As the slowdown became apparent in the second quarter, we extended
duration. On August 31, 1995, duration was 7.5 years, up from 7.1 years
on August 31, 1994.
Municipals Suffered
From Tax Talk.
Congress is considering various changes in the federal income tax, including
a flat tax -- an income tax at a single, flat rate. One proposal would
eliminate taxes on most investment income. Clearly, this has created
uncertainty in the municipal market -- one reason why municipal bonds
did not follow taxable bond prices higher this spring. At this writing,
we believe it is unlikely that a flat tax proposal in this form is likely
to pass Congress -- especially not before next year's election.
Looking Ahead.
Municipal bond yields are very attractive now. As we mentioned earlier,
when U.S. government and corporate bond yields fell this spring, municipal
yields did not follow to the same extent. That means there are some good
buying opportunities now in the municipal market. Should interest rates
remain stable, municipal bond investors may look forward to earning their
coupon income. Plus, if interest rates fall further, investors could
reasonably expect some price appreciation as well.
Nevertheless, municipal bond investors should be prepared to weather
some volatility this year as various proposals to change the country's
income tax structure are debated. Overall, we believe municipal bonds
still offer good value, and that volatility can offer some attractive
buying opportunities.
<TABLE>
<CAPTION>
Five Largest Issuers.*
<C> <S>
7.4% Southern California
Public Power Authority
6.5% San Bernadino County
Medical Center Financing
4.7% Los Angeles
Dept. of Water & Power
4.0% Santa Margarita
Dana Point Authority
3.4% Desert Hosp. Dist.
Certificate of Participation
</TABLE>
Although none of our holdings are direct obligations of Orange County,
several of our larger holdings are issued by agencies that are located
in the county but are independent of its government. These bonds are
backed by separate and distinct revenue streams.
* Expressed as a percentage of total net assets as of 8/31/95.
1
<PAGE>
President's Letter October 11, 1995
(PHOTO)
Dear Shareholder:
We hope you like the fresh look and information we've given your shareholder
letter. We've also introduced another feature, called Getting the Most
Out of Your Prudential Mutual Fund, which will appear from time to time
at the back of your report. Look for topics like "Understanding Risk &
Reward" as well as easy-to-understand explanations of financial terms.
Why are we providing such information? Because at Prudential Mutual Funds,
we believe an informed investor makes smart investment decisions.
On the Hill
As an informed investor, you should know about the "American Dream Savings
Account" that is part of the federal budget package now under debate in
the Senate. It is a type of Individual Retirement Account that offers a
common-sense approach to long-term saving. Investors should like it
because --
- --You can withdraw funds -- without penalty -- to pay for certain expenses
like buying a first home, medical care or educational needs;
- --All account earnings would accumulate tax-free, not merely tax-deferred
like the current IRA;
- --You can make contributions past age 70 1/2, instead of having to take
distributions as the current law requires.
Of course, the federal budget process is never easy and while we hope this
measure is adopted, there's no way of knowing if it will be. So why not
let your Senator and/or Representative know your opinion today?
Simply call 202-224-3121.
In Closing
One final note: if you're a Class B shareholder of Prudential Mutual Funds,
you'll begin noticing a change on your statements once you've held your
shares for seven years. At that time, they will automatically begin to
convert to Class A shares on a quarterly basis. Since Class A shares
carry lower annual distribution charges than Class B shares, your total
returns will be higher after the conversion than they would have been
without it. Conversions started earlier this year and beginning in December
they will take place during each calendar quarter -- December, March,
June and September. It's our way of thanking you for your loyalty -- and
rewarding you for maintaining a long-term investment program by helping
you earn more total investment return on your Prudential Mutual Fund. I
hope you'll find this information useful as you work with your financial
advisor or registered representative to develop your personal investment
plan.
Thank you for choosing Prudential Mutual Funds for your mutual fund
investment.
Sincerely,
Richard A. Redeker
President
2
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Portfolio of Investments as of August 31, 1995
CALIFORNIA
SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating
Interest Maturity Amount Value
Description (a) (Unaudited)
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
LONG-TERM INVESTMENTS--98.6%
- -----------------------------------------------------------------------------
- -------------------------------------------------
Alameda Impvt. Bond Act of 1915,
Marina Vlg. Assmt. Dist. 89-1 NR
7.55% 9/02/06 $ 1,700 $ 1,755,403
Marina Vlg. Assmt. Dist. 89-1 NR
7.65 9/02/09 1,120 1,158,338
Arcadia Unified Sch. Dist.,
Gen. Oblig., Ser. A, M.B.I.A. Aaa
Zero 9/01/10 1,765 728,186
Gen. Oblig., Ser. A, M.B.I.A. Aaa
Zero 9/01/14 1,370 433,386
Gen. Oblig., Ser. A, M.B.I.A. Aaa
Zero 9/01/15 2,555 754,849
Gen. Oblig., Ser. A, M.B.I.A. Aaa
Zero 9/01/16 1,225 339,129
Gen. Oblig., Ser. A, M.B.I.A. Aaa
Zero 9/01/17 1,790 464,183
Bakersfield Pub. Fac. Corp., Cert. of Part., Wst. Wtr.
Treat. Plant, No. 3 A1
8.00 1/01/10 2,750 (c) 3,010,425
Baldwin Park California Pub. Fin. Auth. Rev. BBB(b)
7.05 9/01/14 1,020 1,049,070
Berkley Hosp. Rev., Alta Bates Hosp. Corp. Baa1
7.65 12/01/15 1,715 (c) 1,977,549
Brea Pub. Fin. Auth. Rev., Tax Alloc. Redev. Proj., Ser. C NR
8.10 3/01/21 5,000 5,292,800
Buena Park Cmnty. Redev. Agcy. Tax Allocation, Central
Bus. Dist. Proj. BBB+(b)
7.10 9/01/14 2,500 2,570,125
California St. Brd. of Pub. Wks., Lease Rev.,
Univ. of California at San Diego, High Technology
Facs., Ser. A A1
7.375 4/01/06 1,570 1,687,483
Univ. of California at Santa Barbara, High Technology
Facs.,
Ser. A A1
8.125 2/01/08 2,500 (c) 2,779,375
California St. Brd. of Pub., Wks. Lease Rev., Ser. A A1
5.00 6/01/23 3,115 2,597,474
California St. Hlth. Facs. Fin. Auth. Rev.,
Episcopal Homes Foundation, Ser. A A(b)
7.70 7/01/18 2,500 2,707,725
Eskaton Properties A(b)
7.50 5/01/20 4,500 (c) 5,096,475
Sutter Hlth. Sys., Ser. B NR
8.00 1/01/16 750 (c) 802,635
California St. Hsg. Fin. Agcy. Rev., Sngl. Fam. Mtge.,
Ser. A Aa
Zero 2/01/15 8,420 1,275,462
California St. Poll. Ctrl. Fin. Auth. Rev., Pacific Gas &
Elec. Co., Ser. A A2
8.20 12/01/18 3,250 3,519,132
California Statewide Cmnty. Dev. Corp., Children's Hosp.,
M.B.I.A. Aaa
4.75 6/01/21 1,700 1,401,769
Chula Vista Redev. Agcy., Refunding Tax Alloc. BBB+(b)
7.625 9/01/24 4,500 4,828,005
Contra Costa Cnty., Spec. Tax, Cmnty. Facs. Dist.
No.1991-1, Pleasant Hill NR
8.125 8/01/16 1,300 1,376,687
Desert Hosp. Dist., Cert. of Part. AAA(b)
8.10 7/01/20 5,000 (c) 5,884,100
East Palo Alto Sanit. Dist., Cert. of Part. NR
8.25 10/01/15 1,295 1,385,961
Fairfield Pub. Fin. Auth. Rev., Fairfield Redev. Projs.,
Ser. A NR
7.90 8/01/21 4,200 (c) 4,974,690
Fontana Cmnty. Facs., Dist. No. 2, Spec. Tax Rev.,
Ser. B NR
8.50 9/01/17 3,000 3,177,870
Foothill/Eastern Trans. Corridor Agcy.
Toll Rd. Rev. Baa
Zero 1/01/16 5,000 1,214,750
Toll Rd. Rev. Baa
Zero 1/01/18 2,950 616,904
Kings Cnty. Wst. Mgmt. Auth., Solid Wst. Rev. BBB+(b)
7.20 10/01/14 1,225 1,290,905
Long Beach Redev. Agcy. Dist. No. 3, Spec. Tax Rev. NR
6.375 9/01/23 3,000 2,795,370
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3 -----
<PAGE>
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Portfolio of Investments as of August 31, 1995
CALIFORNIA
SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating
Interest Maturity Amount Value
Description (a) (Unaudited)
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
Los Angeles Cnty., Cert. of Part.,
Civic Ctr. Heating & Refrigeration Plant A1
8.00% 6/01/10 $ 2,000 (c) $ 2,231,440
Correctional Facs. Proj., M.B.I.A. Aaa
Zero 9/01/10 3,770 1,539,630
Solheim Lutheran Nursing Home Proj. A(b)
8.125 11/01/17 2,000 (c) 2,207,460
Los Angeles Cnty., Hsg. Auth., Multifam. Mtge. Rev.,
MayFlower Gardens Proj., Ser. K, G.N.M.A. AAA(b)
8.875 12/20/10 2,100 (c) 2,573,046
Los Angeles Conv. & Exhib. Ctr. Auth., Cert. of Part. Aaa
9.00 12/01/10 1,250 c)(d) 1,663,725
Los Angeles Dept. of Wtr. & Pwr., Elec. Plant Rev. Aaa
5.375 9/01/23 8,940 8,164,008
Met. Wtr. Dist. of Southern California,
Rev. Linked S.A.V.R.S. & R.I.B.S. Aa
5.75 8/10/18 1,000 961,810
Waterworks Rev., Ser. A Aa
5.75 7/01/21 4,000 3,920,560
Mojave Desert & Solid Wst. Victor Valley Materials, Recov.
Fac. Baa1
7.875 6/01/20 1,175 1,250,647
Orange Cnty. Loc. Trans., Auth. Linked S.A.V.R.S. & R.I.B. Aa
6.20 2/14/11 1,500 1,482,330
Orange Cnty. Loc. Trans. Auth., S.A.V.R.S. & R.I.B.,
A.M.B.A.C. Aaa
6.20 2/14/11 4,000 4,128,120
Redding Elec. Sys. Rev., Cert. of Part., Reg. Linked
S.A.V.R.S. & R.I.B. Aaa
6.368 7/01/22 3,550 3,722,281
Riverside Wtr. Rev., Tyler Mall Cmnty. Facs. Aa
Zero 10/01/07 1,660 843,678
Roseville City Sch. Dist., Ser. A, F.G.I.C. Aaa
Zero 8/01/10 1,230 509,983
San Bernardino Cnty., Cert. of Part., Med. Ctr. Fin. Proj. Baa1
5.50 8/01/22 4,400 3,813,788
San Bernardino Cnty., Cert. of Part., Med. Ctr. Fin.
Proj., Ser. A, M.B.I.A. Aaa
5.50 8/01/22 8,000 7,418,320
San Diego Cnty. Regl. Trans. Cmnty., Sales Tax Rev., Ser.
A A1
6.00 4/01/08 1,750 1,793,418
San Francisco City & Cnty.,
Pub. Utils. Comn. Wtr. Rev. Aa
8.00 11/01/11 2,000 2,193,940
Redev. Agcy., Lease Rev. A
Zero 7/01/09 2,000 871,000
Santa Ana Tax Alloc., South Main St. Redev., M.B.I.A. Aaa
5.00 9/01/19 3,000 2,624,430
Santa Cruz Cnty. Pub. Fin. Auth. Rev., Tax Alloc. Sub.
Ln., Ser. B AAA(b)
7.625 9/01/21 2,350 (c) 2,693,288
Santa Margarita, Dana Point Auth., M.B.I.A.,
Impvt. Dists. 3, 3A, 4 & 4A Aaa
7.25 8/01/08 2,500 2,943,875
Impvt. Dists. 3, 3A, 4 & 4A Aaa
7.25 8/01/09 2,400 2,822,592
Impvt. Dists. 3, 3A, 4 & 4A Aaa
7.25 8/01/14 1,000 1,171,510
So. Orange Cnty. Pub. Fin. Auth.,
Foothill Area Proj., F.G.I.C. Aaa
8.00 8/15/08 750 933,997
Foothill Area Proj., F.G.I.C. Aaa
6.50 8/15/10 750 823,343
Spec. Tax Rev., M.B.I.A. Aaa
7.00 9/01/11 3,500 3,989,335
</TABLE>
- --------------------------------------------------------------------------------
- ----- 4 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Portfolio of Investments as of August 31, 1995
CALIFORNIA
SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating
Interest Maturity Amount Value
Description (a) (Unaudited)
Rate Date (000) (Note 1)
<S> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -------------------------------------------------
Sonoma Cnty., Cert. of Part., Correctional Facs. Proj. NR
8.125% 6/01/12 $ 4,000(c) $ 4,383,400
Southern California Pub. Pwr. Auth.,
Proj. Rev. A
6.75 7/01/10 2,250 2,402,528
Proj. Rev. A
6.75 7/01/12 2,435 2,602,479
Proj. Rev. A
6.75 7/01/13 4,000 4,275,280
Proj. Rev., A.M.B.A.C. Aaa
Zero 7/01/16 7,925 2,284,777
Proj. Rev., A.M.B.A.C. Aaa
4.75 7/01/16 1,500 1,269,090
Transmission Proj. Rev. Rfdg., Ser. A, F.G.I.C. Aaa
Zero 7/01/12 7,080 2,617,193
Sulphur Springs Union Sch. Dist., Ser. A, M.B.I.A. Aaa
Zero 9/01/09 2,000 890,920
Torrance Redev. Agcy., Tax. Alloc., Downtown Redev. Baa
7.125 9/01/21 1,580 1,627,953
Univ. of California Rev., Pkg. Sys., Ser. C A
7.75 11/01/14 2,000 (c) 2,130,280
Vacaville Cmnty. Redev. Agcy., Multifamily Rev. A-(b)
7.375 11/01/14 1,110 1,179,764
Victor Valley Union High Sch. Dist.
Gen. Oblig., M.B.I.A. Aaa
Zero 9/01/09 2,075 924,328
Gen. Oblig., M.B.I.A. Aaa
Zero 9/01/15 5,070 1,497,881
Virgin Islands Terr., Hugo Ins. Claims Fund Prog., Ser. 91 NR
7.75 10/01/06 880 958,918
Walnut Valley Unified School Dist., M.B.I.A. Aaa
6.00 8/01/15 1,870 1,918,171
Whittier Pub. Fin. Auth. Rev., Whittier Blvd. Redev.
Proj., Ser. A NR
7.50 9/01/14 825 856,334
------------
Total Investments--98.6%
(cost $158,640,003; Note 4)
170,057,065
Other assets in excess of liabilities--1.4%
2,365,890
------------
Net Assets--100%
$172,422,955
------------
------------
</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.--Residual Interest Bonds.
S.A.V.R.S.--Select Auction Variable Rate Securities.
<TABLE>
<C> <S>
(b) Standard & Poor's rating.
(c) Prerefunded issues are secured by escrowed cash and/or direct U.S.
guaranteed obligations.
(d) Entire principal amount pledged as initial margin on financial futures
contracts.
</TABLE>
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information contains a description
of
Moody's and Standard & Poor's ratings.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5 -----
<PAGE>
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Statement of Assets and Liabilities CALIFORNIA
SERIES
- --------------------------------------------------------------------------------
<TABLE>
<S>
<C>
Assets
August 31, 1995
Investments, at value (cost
$158,640,003)................................................................
.... $170,057,065
Cash.........................................................................
................................ 35,116
Receivable for investments
sold.........................................................................
..... 3,885,142
Interest
receivable...................................................................
....................... 2,798,656
Receivable for Series shares
sold............................................................................
40,197
Other
assets.......................................................................
.......................... 5,256
------------
Total
assets.......................................................................
....................... 176,821,432
------------
Liabilities
Payable for investments
purchased....................................................................
........ 4,035,546
Dividends
payable......................................................................
...................... 103,135
Due to broker - variation
margin.......................................................................
...... 73,437
Payable for Series shares
reacquired...................................................................
...... 67,513
Management fee
payable......................................................................
................. 65,247
Distribution fee
payable......................................................................
............... 49,699
Deferred trustees'
fees.........................................................................
............. 3,900
------------
Total
liabilities..................................................................
....................... 4,398,477
------------
Net
Assets.......................................................................
............................ $172,422,955
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at
par.....................................................................
$ 150,025
Paid-in capital in excess of
par..........................................................................
165,724,971
------------
165,874,996
Accumulated net realized loss on
investments..............................................................
(4,754,415)
Net unrealized appreciation on
investments................................................................
11,302,374
------------
Net assets, August 31,
1995.........................................................................
......... $172,422,955
------------
------------
Class A:
Net asset value and redemption price per share
($68,402,692 / 5,950,853 shares of beneficial interest issued and
outstanding)......................... $11.49
Maximum sales charge (3.0% of offering
price).............................................................
.36
Maximum offering price to
public..........................................................................
$11.85
Class B:
Net asset value, offering price and redemption price per share
($103,891,126 / 9,040,454 shares of beneficial interest issued and
outstanding)........................ $11.49
Class C:
Net asset value, offering price and redemption price per share
($129,137 / 11,237 shares of beneficial interest issued and
outstanding)............................... $11.49
</TABLE>
- --------------------------------------------------------------------------------
- ----- 6 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES CALIFORNIA
SERIES
Statement of Operations Statement of
Changes in Net Assets
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income August 31, 1995
---------------
<S> <C>
Income
Interest................................. $11,902,826
---------------
Expenses
Management fee, net of waiver of
$58,693............................... 836,149
Distribution fee--Class A................ 42,617
Distribution fee--Class B................ 681,374
Distribution fee--Class C................ 572
Transfer agent's fees and expenses....... 93,000
Custodian's fees and expenses............ 63,000
Registration fees........................ 55,000
Reports to shareholders.................. 50,000
Audit fee................................ 17,000
Legal fee................................ 15,000
Trustees' fees........................... 8,000
Miscellaneous............................ 6,379
---------------
Total expenses........................ 1,868,091
Less: custodian fee credit.................. (13,179)
---------------
Net expenses.......................... 1,854,912
---------------
Net investment income....................... 10,047,914
---------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions.................. 962,101
Financial futures transactions........... (1,160,490)
---------------
(198,389)
---------------
Net change in unrealized appreciation on:
Investments.............................. 2,551,628
Financial futures contracts.............. (41,406)
---------------
2,510,222
---------------
Net gain on investments..................... 2,311,833
---------------
Net Increase in Net Assets
Resulting from Operations................... $$12,359,747
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended August 31,
<S> <C> <C>
in Net Assets 1995 1994
Operations
Net investment income......... $ 10,047,914 $ 11,071,242
Net realized loss on
investment transactions.... (198,389) (1,281,438)
Net change in unrealized
appreciation/depreciation
of investments............. 2,510,222 (12,467,405)
------------- ------------
Net increase (decrease) in net
assets resulting from
operations................. 12,359,747 (2,677,601)
------------- ------------
Dividends and distributions (Note
1)
Dividends to shareholders from
net investment income
Class A.................... (2,510,344) (658,209)
Class B.................... (7,533,552) (10,413,033)
Class C.................... (4,018) --
------------- ------------
(10,047,914) (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....................... 14,662,935 27,913,990
Net asset value of shares
issued in reinvestment of
dividends and
distributions.............. 5,451,092 7,430,369
Cost of shares reacquired..... (47,070,094) (41,168,151)
------------- ------------
Net decrease in net assets
from Series share
transactions............... (26,956,067) (5,823,792)
------------- ------------
Total decrease................... (24,644,234) (21,682,480)
Net Assets
Beginning of year................ 197,067,189 218,749,669
------------- ------------
End of year...................... $ 172,422,955 $197,067,189
------------- ------------
------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7 -----
<PAGE>
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Notes to Financial Statements CALIFORNIA
SERIES
- --------------------------------------------------------------------------------
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 Policies
The following is a summary of significant accounting policies followed by the
Fund, and the Series, in the preparation of its financial statements.
Securities Valuations: The Series values municipal securities (including
commitments to purchase such securities on a ``when-issued'' basis) on the basis
of prices provided by a pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining values. If market quotations are not readily available from such
pricing service, a security is valued at its fair value as determined under
procedures established by the Trustees.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
All securities are valued as of 4:15 P.M., New York time.
Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities at a set price
for delivery on a future date. Upon entering into a financial futures contract,
the Series is required to pledge to the broker an amount of cash and/or other
assets equal to a certain percentage of the contract amount. This amount is
known as the ``initial margin''. Subsequent payments, known as ``variation
margin'', are made or received by the Series each day, depending on the daily
fluctuations in the value of the underlying security. Such variation margin is
recorded for financial statement purposes on a daily basis as unrealized gain
or
loss. When the contract expires or is closed, the gain or 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.
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
- --------------------------------------------------------------------------------
- ----- 8
<PAGE>
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Notes to Financial Statements CALIFORNIA
SERIES
- --------------------------------------------------------------------------------
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, 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 $58,693
($.004 per share, .03% of average net assets). 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 fiscal year ended August 31, 1995.
PMFD has advised the Series that it has received approximately $28,300 in
front-end sales charges resulting from sales of Class A shares during the fiscal
year ended August 31, 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 fiscal year ended August 31, 1995, it
received approximately $350,000 and $160 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 Transactions with Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During the fiscal year ended August
31, 1995, the Series incurred fees of approximately $66,500 for the services of
PMFS. As of August 31, 1995, approximately $5,000 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 Securities
Purchases and sales of portfolio securities of the Series, excluding short-term
investments, for the fiscal year ended August 31, 1995 were $76,235,223 and
$91,333,495, respectively.
At August 31, 1995, the Series sold 82 financial futures contracts on U.S.
Treasury Bonds and 58 financial futures contracts on the Municipal Bond Index,
both of which expire in September 1995. The value at disposition of such
contracts was $16,027,812. The value of such contracts on August 31, 1995 was
$16,142,500, thereby resulting in an unrealized loss of $114,688.
The cost basis of investments for federal income tax purposes was substantially
the same as for financial reporting purposes and, accordingly, at August 31,
1995 net unrealized appreciation of investments for federal income tax purposes
was $11,417,062 (gross unrealized appreciation--$12,199,936; gross unrealized
depreciation--$782,874).
For federal income tax purposes, the Series has a capital loss carryforward as
of August 31, 1995 of approximately $4,882,400 which expires in 2003.
- ------------------------------------------------------------
Note 5. Capital
The Series offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge of up to 3%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Class C shares are sold with a contingent
deferred sales charge of 1% during the first year. Class B shares will
automatically convert to Class A shares on a quarterly basis approximately seven
years after purchase.
- --------------------------------------------------------------------------------
9 -----
<PAGE>
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Notes to Financial Statements CALIFORNIA
SERIES
- --------------------------------------------------------------------------------
The Fund has authorized an unlimited number of shares of beneficial interest for
each class at $.01 par value per share. A special exchange privilege is also
available for shareholders who qualify to purchase Class A shares at net asset
value.
Transactions in shares of beneficial interest for the fiscal years ended August
31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------------ ---------- ------------
<S> <C> <C>
Year ended August 31, 1995:
Shares sold......................... 378,328 $ 4,180,841
Shares issued in reinvestment of
dividends......................... 117,773 1,337,448
Shares reacquired................... (1,225,036) (13,742,541)
---------- ------------
Net decrease in shares outstanding
before conversion................. (728,935) (8,224,252)
Shares issued upon conversion from
Class B........................... 5,610,964 62,338,422
---------- ------------
Net increase in shares
outstanding....................... 4,882,029 $ 54,114,170
---------- ------------
---------- ------------
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>
Year ended August 31, 1995:
Shares sold......................... 928,019 $ 10,337,210
Shares issued in reinvestment of
dividends......................... 370,841 4,111,099
Shares reacquired................... (3,028,920) (33,303,902)
---------- ------------
Net decrease in shares outstanding
before conversion................. (1,730,060) (18,855,593)
Shares reacquired upon conversion
into Class A...................... (5,610,964) (62,338,422)
---------- ------------
Net decrease in shares
outstanding....................... (7,341,024) $(81,194,015)
---------- ------------
---------- ------------
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>
Year ended August 31, 1995:
Shares sold......................... 13,073 $ 144,884
Shares issued in reinvestment of
dividends......................... 224 2,545
Shares reacquired................... (2,078) (23,651)
---------- ------------
Net increase in shares
outstanding....................... 11,219 $ 123,778
---------- ------------
---------- ------------
August 1, 1994* through August 31,
1994:
Shares sold......................... 18 $ 200
---------- ------------
---------- ------------
</TABLE>
- ---------------
* Commencement of offering of Class C shares.
- --------------------------------------------------------------------------------
- ----- 10
<PAGE>
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Financial Highlights CALIFORNIA
SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
- -----------------------------------------------------
<S> <C> <C> <C> <C>
<C>
Year Ended August 31,
- -----------------------------------------------------
1995 1994 1993
1992 1991
<CAPTION>
------- ------- -------
- ------ ------
<S> <C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year... $ 11.30 $ 12.16 $ 11.48
$11.01 $10.57
------- ------- -------
- ------ ------
Income from investment operations
Net investment income................ .66(a) .65 .69
.70 .69
Net realized and unrealized gain
(loss) on investment
transactions...................... .19 (.74) .68
.47 .44
------- ------- -------
- ------ ------
Total from investment
operations..................... .85 (.09) 1.37
1.17 1.13
------- ------- -------
- ------ ------
Less distributions
Dividends from net investment
income............................ (.66) (.65) (.69)
(.70) (.69)
Distributions from net realized
gains............................. -- (.12) --
- -- --
------- ------- -------
- ------ ------
Total distributions............... (.66) (.77) (.69)
(.70) (.69)
------- ------- -------
- ------ ------
Net asset value, end of year......... $ 11.49 $ 11.30 $ 12.16
$11.48 $11.01
------- ------- -------
- ------ ------
------- ------- -------
- ------ ------
TOTAL RETURN(b):..................... 7.90% (0.80)% 12.30%
10.95% 10.98%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)........ $68,403 $12,082 $11,116
$5,388 $4,188
Average net assets (000)............. $42,617 $11,812 $7,728
$4,322 $2,748
Ratios to average net assets:
Expenses, including distribution
fees........................... .73%(a) .73% .77%
.82% .88%
Expenses, excluding distribution
fees........................... .63%(a) .63% .67%
.72% .78%
Net investment income............. 5.90%(a) 5.57% 5.82%
6.25% 6.37%
Portfolio turnover rate.............. 44% 69% 43%
53% 53%
</TABLE>
<TABLE>
<C> <S>
- ---------------
(a) Net of fee waiver.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions.
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 11 -----
<PAGE>
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Financial Highlights CALIFORNIA
SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
Class B
-------------------------
- ------------------------------------------------------------
August 1,
Year 1994(d)
Year Ended August
31, Ended through
- ------------------------------------------------------------ August 31,
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............................ $ 11.29 $ 12.15 $ 11.48
$ 11.01 $ 10.57 $11.29 $11.32
----- -----
-------- -------- --------
-------- --------
Income from investment operations
Net investment income................ .62(a) .60 .64
.66 .64 .59(a) .04
Net realized and unrealized gain
(loss) on investment
transactions...................... .20 (.74) .67
.47 .44 .20 (.03)
----- -----
-------- -------- --------
-------- --------
Total from investment
operations..................... .82 (.14) 1.31
1.13 1.08 .79 .01
----- -----
-------- -------- --------
-------- --------
Less distributions
Dividends from net investment
income............................ (.62) (.60) (.64)
(.66) (.64) (.59) (.04)
Distributions from net realized
gains............................. -- (.12) --
-- -- -- --
----- -----
-------- -------- --------
-------- --------
Total distributions............... (.62) (.72) (.64)
(.66) (.64) (.59) (.04)
----- -----
-------- -------- --------
-------- --------
Net asset value, end of period....... $ 11.49 $ 11.29 $ 12.15
$ 11.48 $ 11.01 $11.49 $11.29
----- -----
----- -----
-------- -------- --------
-------- --------
-------- -------- --------
-------- --------
TOTAL RETURN(b):..................... 7.56% (1.20)% 11.74%
10.52% 10.54% 7.29% .05%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...... $103,891 $184,985 $207,634
$177,861 $169,190 $129 $200(e)
Average net assets (000)............. $136,275 $201,558 $190,944
$172,495 $169,220 $ 76 $199(e)
Ratios to average net assets:
Expenses, including distribution
fees........................... 1.13%(a) 1.13% 1.17%
1.22% 1.28% 1.38%(a) 1.71%(c)
Expenses, excluding distribution
fees........................... .63%(a) .63% .67%
.72% .78% .63%(a) .96%(c)
Net investment income............. 5.50%(a) 5.17% 5.44%
5.85% 5.98% 5.25%(a) 4.87%(c)
Portfolio turnover rate.............. 44% 69% 43%
53% 53% 44% 69%
</TABLE>
<TABLE>
<C> <S>
- ---------------
(a) Net of fee waiver.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes
reinvestment of dividends and distributions.
Total returns for periods of less than a full year are not annualized.
(c) Annualized.
(d) Commencement of offering of Class C shares.
(e) Figures are actual and not rounded to the nearest thousand.
</TABLE>
- --------------------------------------------------------------------------------
- ----- 12 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Independent Auditors' Report CALIFORNIA
SERIES
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees
Prudential California Municipal Fund, California Series
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Prudential California Municipal Fund,
California Series, as of August 31, 1995, the related statements of operations
for the year then ended and of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
August 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Prudential
California Municipal Fund, California Series, as of August 31, 1995, the results
of its operations, the changes in its net assets, and its financial highlights
for the respective stated periods, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
October 16, 1995
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Federal Income Tax Information CALIFORNIA
SERIES
- --------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days of the
Series' fiscal year end (August 31, 1995) as to the federal tax status of
dividends paid by the Series during such fiscal year. Accordingly, we are
advising you that in the fiscal year ended August 31, 1995, dividends paid from
net investment income of $.66 per Class A share, $.62 per Class B share and $.59
per Class C shares were all federally tax-exempt interest dividends.
- --------------------------------------------------------------------------------
13 -----
<PAGE>
<PAGE>
Getting The Most From Your Prudential Mutual Fund
Some mutual fund shareholders won't ever read this -- they don't read annual
and semi-annual reports. It's quite understandable. These annual and
semi-annual reports are prepared to comply with Federal regulations.
They are often written in language that is difficult to understand.
So when most people run into those particularly daunting sections of
these reports, they don't read them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some changes to our report to make
it easier to understand and more pleasant to read, in hopes you'll find it
profitable to spend a few minutes familiarizing yourself with your
investment. Here's what you'll find in the report:
At A Glance
Since an investment's performance is often a shareholder's primary concern,
we present performance information in two different formats. You'll find
it first on the "At A Glance" page where we compare the Fund and the
comparable average calculated by Lipper Analytical Services, Inc., a
nationally recognized mutual fund rating agency. We report both the
cumulative total returns and the average annual total returns. The
cumulative total return is the total amount of income and appreciation
the Fund has achieved in various time periods. The average annual total
return is an annualized representation of the Fund's performance -- it
generally smoothes out returns and gives you an idea how much the Fund
has earned in an average year, for a given time period. Under the
performance box, you'll see legends that explain the performance
information, whether fees and sales charges have been included in
returns, and the inception dates for the Fund's share classes.
See the performance comparison charts at the back of the report for more
performance information. And keep in mind that past performance is not
indicative of future results.
Portfolio Manager's Report
The portfolio manager who invests your money for you reports on
successful -- and not-so-successful -- strategies in this section
of your report. Look for recent purchases and sales here, as well
as information about the sectors the portfolio manager favors and
any changes that are on the drawing board.
Portfolio Of Investments
This is where the report begins to look technical, but it's really just a
listing of each security held at the end of the reporting period, along
with valuations and other information. Please note that sometimes we
discuss a security in the Portfolio Manager's Report that doesn't appear
in this listing because it was sold before the close of the reporting
period.
<PAGE>
Statement Of Assets And Liabilities
The balance sheet shows the assets (the value of the Fund's holdings),
liabilities (how much the Fund owes) and net assets (the Fund's equity,
or holdings after the Fund pays its debts) as of the end of the reporting
period. It also shows how we calculate the net asset value per share for
each class of shares. The net asset value is reduced by payment of your
dividend, capital gain, or other distribution, but remember that the money
or new shares are being paid or issued to you and thus is not a realized
loss. The net asset value fluctuates daily along with the value of every
security in the portfolio.
Statement Of Operations
This is the income statement, which details income (mostly interest and
dividends earned) and expenses (including what you pay us to manage your
money). You'll also see capital gains here -- both realized and unrealized.
Statement Of Changes In Net Assets
This schedule shows how income and expenses translate into changes in net
assets, compared to last year's performance. The Fund is required to pay
out the bulk of its income to shareholders every year, and this statement
shows you how we do it -- through dividends and distributions -- and how
that affects the net assets. This statement also shows how money from
investors flowed into and out of the Fund.
Notes To Financial Statements
This is the kind of technical material that can intimidate readers, but
it does contain useful information. The Notes provide a brief history and
explanation of your Fund's objectives. In addition, they also outline how
Prudential Mutual Funds prices securities. The Notes also explain who
manages and distributes the Fund's shares, and more importantly, how much
they are paid for doing so. Finally, the Notes explain how many shares
are outstanding and the number issued and redeemed over the period.
Financial Highlights
This information contains many elements from prior pages, but on a per share
basis. It is designed to help you understand how the Fund performed and to
compare this year's performance and expenses to those of prior years.
Independent Auditor's Report
Once a year, an outside auditor looks over our books and certifies that
the information we've presented is fair and complies with generally
accepted accounting principles.
Tax Information
This is information which we report annually about how much of your
total return is taxable. Should you have any questions, you may want
to consult a tax advisor.
Performance Comparison
These charts are included in the annual report and are required by the
Securities Exchange Commission. Performance is presented here as a
hypothetical $10,000 investment in the Fund since its inception or
for 10 years (whichever is shorter). To help you put that return in
context, we are required to include the performance of an unmanaged,
broad based securities index, as well. The index does not reflect the
cost of buying the securities it contains or the cost of managing a
mutual fund. Of course, the index holdings do not mirror those of the
fund -- the index is a broadly based reference point commonly used by
investors to measure how well they are doing. A definition of the
selected index is also provided. Investors generally cannot invest
directly in an index.
<PAGE>
Getting The Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds, you receive financial advice
through a Prudential Securities financial advisor or Prudential/Pruco
Securities registered representative. Your advisor or representative
can provide you with the following services.
There's No Reward Without Risk; But Is This Risk Worth It?
Your financial adviser or registered representative can help you match
the reward you seek with the risk you can tolerate. And risk can be
difficult to gauge --sometimes even the simplest investments bear
surprising risks. The educated investor knows that markets seldom
move in just one direction -- there are times when a market sector
or asset class will lose value or provide little in the way of total
return. Managing your own expectations is easier with help from someone
who understands the markets and who knows you!
Keeping Up With The Joneses.
A financial adviser or registered representative can help you wade through
the numerous mutual funds available to find the ones that fit your own
individual investment profile and risk tolerance. While the newspapers
and popular magazines are full of advice about investing, they are aimed
at generic groups of people or representative individuals, not at you
personally. Your financial advisor or registered representative will
review your investment objectives with you. This means you can make
financial decisions based on the assets and liabilities in your current
portfolio and your risk tolerance -- not just based on the current
investment fad.
Buy Low, Sell High.
Buying at the top of a market cycle and selling at the bottom are among
the most common investor mistakes. But sometimes it's difficult to hold
on to an investment when it's losing value every month. Your financial
adviser or registered representative can answer questions when you're
confused or worried about your investment, and remind you that you're
investing for the long haul.
<PAGE>
Prudential California Municipal Fund: California Series
Lehman Bros. General Municipal Debt Index
The Prudential California Municipal Fund: California Series
and the Lehman Bros. Index: Comparing a $10,000 Investment.
CLASS A
(CHART)
CLASS B
(CHART)
CLASS C
(CHART)
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so an investor's shares, when redeemed,
will be worth more or less than their original cost. The charts on the
right are designed to give you an idea how much the Series' returns can
fluctuate from year to year by measuring the best and worst years in terms
of total annual return since inception of each share class.
These graphs are furnished to you in accordance with SEC regulations. They
compare a $10,000 investment in the Prudential California Municipal Fund:
California Series (Class A, Class B and Class C) with a similar investment
in the Lehman Brothers Municipal Bond Index by portraying the initial account
values at the commencement of operations of Class A and C shares and for 10
years for Class B shares, and subsequent account values at the end of the
most recent reporting period (August 31), as measured on a quarterly basis,
beginning in 1990 for Class A shares, in 1985 for Class B shares and in
1994 for Class C shares. For purposes of the graphs, and unless otherwise
indicated, in the accompanying tables it has been assumed (a) that the
maximum applicable front-end sales charge was deducted from the initial
$10,000 investment in Class A shares; (b) the maximum applicable contingent
deferred sales charge was deducted from the value of the investment in
Class B and Class C shares, assuming full redemption on August 31, 1995;
(c) all recurring fees (including management fees) were deducted; and (d)
all dividends and distributions were reinvested. Class B shares
automatically convert to Class A shares, on a quarterly basis,
approximately seven years after purchase. This conversion feature
is not reflected in the graph. The graphs and accompanying tables
reflect the past subsidy and/or waiver of expenses and/or management
fees.
The Index is a weighted index comprised of 21,000 municipal bonds (General
obligation bonds, revenue bonds, insured bonds and prerefunded bonds)
selected by Lehman Brothers as representative of the long-term investment
grade municipal bond market. It is an unmanaged index that includes the
reinvestment of all dividends, but does not reflect the transaction costs
and advisory fees paid by the Fund's investors. The Index's holdings
differ from the Fund's portfolio. The Index is not the only one that
may be used to characterize performance of bond funds and other indices
may portray different comparative performance.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
(LOGO)
Trustees
Edward D. Beach
Eugene C. Dorsey
Delayne Dedrick Gold
Harry A. Jacobs, Jr.
Thomas T. Mooney
Thomas H. O'Brien
Richard A. Redeker
Nancy Hays Teeters
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Eugene S. Stark, Treasurer
S. Jane Rose, Secretary
Stephen M. Ungerman, Assistant Treasurer
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
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
744313107
744313206 MF116E
744313701 Cat. #642112D
