(ICON)
Prudential
California
Municipal
Fund
California Series
SEMI
ANNUAL
REPORT
Feb. 28, 1998
(LOGO)
<PAGE>
Prudential California Municipal Fund
California Series
Performance At A Glance.
Tax-exempt bond prices climbed (and interest rates
fell) over
the past six months as investors cheered the
unusually subdued
inflation in the U.S. but fretted over an economic
crisis in Asia.
Your Prudential California Municipal Fund --
California Series'
heavy investment in non-callable bonds -- that
perform particularly
well when the market rallies -- helped it surpass
the return on
the average comparable fund tracked by Lipper
Analytical Services
for the six-month period ended February 28, 1998.
<TABLE>
Cumulative Total Returns1 As of 2/28/98
<CAPTION>
Six One Five
Ten Since
Months Year Years
Years Inception2
<S> <C> <C> <C>
<C> <C>
Class A 5.45% 9.65% 34.82% (34.60)
N/A 82.34% (82.03)
Class B 5.15 9.12 32.28 (32.06)
97.96% (97.47) 184.61 (181.55)
Class C 5.02 8.85 N/A
N/A 27.66 (27.45)
Class Z 5.41 9.66 N/A
N/A 14.22 (14.12)
Lipper CA
Muni Avg.3 5.06 9.37 34.62
110.00 ***
</TABLE>
<TABLE>
Average Annual Total Returns1
As of 3/31/98
<CAPTION>
One Five Ten
Since
Year Years Years
Inception2
<S> <C> <C> <C>
<C>
Class A 7.45% 5.79% (5.76) N/A
7.20% (7.18)
Class B 5.43 5.87 (5.84) 7.22%
(7.20) 8.03 (7.95)
Class C 9.16 N/A N/A
6.87 (6.83)
Class Z 10.98 N/A N/A
9.07 (9.01)
</TABLE>
<TABLE>
Distributions & Yields
As of 2/28/98
<CAPTION>
Taxable Equivalent Yield4
Total Distributions 30-Day
At Tax Rates Of
Paid for Six Mos. SEC Yield
36% 39.6%
<S> <C> <C>
<C> <C>
Class A $0.33 4.03%
6.94% 7.36%
Class B $0.30 3.75
6.46 6.85
Class C $0.29 3.50
6.03 6.39
Class Z $0.33 4.26
7.34 7.78
</TABLE>
Past performance is not indicative of future
results. Principal
and investment return will fluctuate so that an
investor's shares,
when redeemed, may be worth more or less than
their original cost.
1 Source: Prudential Investments Fund Management
and Lipper
Analytical Services. The cumulative total returns
do not take
into account sales charges. The average annual
returns do take
into account applicable sales charges. The Fund
charges a
maximum front-end sales load of 3% for Class A
shares and a
six-year declining contingent deferred sales
charge (CDSC) of
5%, 4%, 3%, 2%, 1% and 1% for Class B shares.
Class C shares
have a 1% CDSC for one year. Without waiver of
management fees
and/or expense subsidization, the Series'
cumulative and average
annual total returns and distributions would have
been lower,
as indicated in parentheses ( ). Class B shares
automatically
convert to Class A shares on a quarterly basis,
after
approximately seven years. Class Z shares do not
carry a
sales charge or a distribution fee.
2 Inception dates: Class A, 1/22/90; Class B,
9/19/84; Class
C, 8/1/94; and Class Z, 9/18/96.
3 The Lipper California Municipal Bond fund
average are for
all funds in each share class for the six-month,
one-, five-
and 10-year categories.
4 Taxable equivalent yields reflect federal and
applicable
state tax rates.
***The Lipper Since Inception category return for
Class A
shares is 84.29%; for Class B is 225.84%; for
Class C is
30.10% and for Class Z is 12.91% for all funds in
each
share class.
How Investments Compared.
(As of 2/28/98)
(PIE 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
included historical
20-year average annual returns. These returns
assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal.
Investors have
received higher historical total returns from
stocks than from
most other invest-ments. Smaller capitalization
stocks offer
greater potential for long-term growth but may be
more volatile
than larger capitalization stocks.
General Bond Funds provide more income than stock
funds, which
can help smooth out their total returns year by
year. But their
prices still fluctuate (sometimes significantly)
and their
returns have been historically lower than those of
stock funds.
General Municipal Debt Funds invest in bonds
issued by state
governments, state agencies and/or municipalities.
This
investment provides income that is usually exempt
from
federal and state income taxes.
U.S. Tax-Exempt Money Funds attempt to preserve a
constant
share value; they don't fluctuate much in price
but,
historically, their returns have been generally
among
the lowest of the major investment categories.
*18 years for Tax-Exempt Money Funds.
<PAGE>
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 income
exempt from
California state and federal income taxes, while
still
attempting to preserve capital. Certain
shareholders,
however, may be subject to the federal alternative
minimum
tax. There can be no assurance that the Series
will achieve
its investment objective.
Is Inflation Conquered?
Inflation inched up a mere 1.7% in 1997 and will
likely remain
tame this year as U.S. companies face increased
competition
from cheaper Asian imports. This is good news for
bondholders
because inflation hurts the value of their bonds'
fixed interest
and principal payments.
Strategy Session.
Asian Contagion
Lifts Muni Bonds.
Californians benefited from falling unemployment
and solid job
growth that pushed up personal income and consumer
spending.
Local housing markets also strengthened as home
prices and
sales rose. This economic recovery, coupled with
financial
stability, were among the key factors that
prompted Fitch
Investors Service to upgrade California general
obligation
bonds to AA- from A+ in October.
On the opposite side of the Pacific Rim, however,
economic
upheaval erupted in Asia in late October. Driven
by imprudent
lending practices of local banks and finance
companies,
frightened investors began selling Asian stocks
and
emerging market bonds and bought U.S. Treasury
securities.
The ensuing rally in Treasuries spilled over into
the municipal
securities market, driving tax-exempt bond prices
higher and
yields lower. Investors also believed
difficulties in Asia
would help keep a lid on inflation in the U.S., so
they worried
less that rising inflation would erode bond
returns.
By mid-January, the Bond Buyer Revenue Bond Index,
a widely
watched gauge of tax-exempt yields, reached a
record low of
5.25%. This occurred during the same week that the
30-year
Treasury bond yield sank to 5.66%, its lowest
point since 1977. Cash
poured into Treasuries as investors were worried
by the failure
of Hong Kong's largest investment bank. Thus
developments in
Asia indirectly aided municipal bonds by boosting
Treasuries.
During the reporting period, we extended your
Series' duration
(a measure of sensitivity to interest rate
changes) to nearly
nine years from a low of 7.4 years, because a
longer duration
enabled the Series to appreciate faster as bond
yields plunged.
Portfolio Composition.
Expressed as a percentage of
total investments as of 2/28/98.
(PIE CHART)
<PAGE>
What Went Well.
Not Taking Any Calls.
As the bond rally accelerated, we positioned your
Fund to
take better advantage of price gains by increasing
noncallable
bonds to 58% of total investments as of February
28 from 52%
at the start of the reporting period. Emphasizing
noncallable bonds
proved a sound strategy: they gain more rapidly as
interest
rates decline because the bonds cannot be retired
early.
In addition, many of our noncallable bonds are
zero coupon
bonds, which tend to rise quickly during a rally
since they
typically trade at a deep discount to maturity
value. For
example, we bought noncallable, zero coupon bonds
of Alisal California
Unified School District in the autumn. The bonds
surged
during the reporting period. Because interest and
principal
payments are insured, Moody's Investors Service
and Standard
& Poor's assigned the bonds a triple-A rating.
And Not So Well.
A Difficult Finish.
The final month of the reporting period proved
challenging
for the bond market. Some investors sold municipal
bonds
after a speech by Federal Reserve Chairman Alan
Greenspan
dashed hopes for a federal funds rate cut in the
near future.
(Bond prices typically rise after the key short-
term rate is
lowered.) Greenspan suggested that the U.S.
central bank will
not have to move soon because the effect of the
Asian crisis
will probably be enough to ward off an outbreak of
inflation.
The sell-off that followed his remarks pushed tax
exempt
bond prices markedly lower, partially erasing the
hefty
gains scored in January.
Credit Quality.
Expressed as a percentage of
total investments as of 2/28/98.
(PIE CHART)
Five Largest Issuers.
12.4% Southern California
Public Power Authority
6.5% Orange County Local
Transportation Authority
4.8% Santa Margarita
Dana Point Authority
4.0% Long Beach
Harbor Rev.
3.6% Metro Water District
of Southern California
Expressed as a percentage of net assets
as of 2/28/98.
Looking Ahead.
U.S. economic growth is bound to slow this year
because we expect struggling Asian countries will
purchase fewer exports from the U.S. and flood our
market with cheaper imports. We, too, believe this
dampening of economic momentum will prove
sufficient
to quell any incipient inflationary pressures.
Furthermore,
bond prices will likely rise (and yields fall) as
evidence
of a less robust economic expansion emerges. Our
bond
market outlook therefore remains decidedly
positive.
1
<PAGE>
President's Letter
April 3, 1998
(PICTURE)
Investing Smart.
Dear Shareholder:
This is the season when many investors receive
income tax
refunds or have a CD or two maturing. What will
you do with
these assets? Investing smart can be a challenge
especially
given today's new investment choices.
The Federal Taxpayer Relief Act of 1997 is
changing the way
Americans invest and accumulate wealth, save for
college or
build a nest egg for retirement. While the law
offers
opportunity, it is also complex. You may need help
to
put things in perspective.
Now may be an excellent time for you and your
Prudential
Financial Professional to update your investment
strategy
and retirement plan. A wise investor does so
periodically.
You could find the tax law opening doors that may
benefit
you now or over the long term, such as --
- -- Revised Capital Gains Tax Rates & Exclusions.
Long-term
rates are down. Is your portfolio positioned to
benefit? Also,
new rules allow you to keep more of the profit
from the sale of
your home (perhaps up to $500,000 more).
- -- New Roth IRAs. The Roth IRA features tax-free
distributions
and does not require mandatory withdrawals, which
should be of
particular interest to retirees seeking to shelter
assets in a
tax-free account.
- -- New Education IRAs. Similar to a traditional
IRA, but
specifically designed for higher education. The
new law also
creates credits and deductions to help defray
college costs.
- -- Expanded IRAs. Rules governing traditional
IRAs have
been extensively revised. Deductibility and
contribution
limits have been broadened as has the list for
penalty-free
early withdrawals, including first-time home
buyers.
As you can see, what you don't know may cost you!
That's why
I recommend you call your Prudential Financial
Professional
and get a free investment plan checkup. Let us
give you the
information and tools to invest smart.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds & Annuities
2
<PAGE>
Portfolio of Investments as
of February 28, 1998 PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
(Unaudited) CALIFORNIA
SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
LONG-TERM INVESTMENTS--98.9%
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Alisal Unified Sch. Dist.,
Capital Apprec., Ser. C, F.G.I.C.
Aaa Zero 8/01/12 $ 1,025
$ 504,085
Capital Apprec., Ser. C, F.G.I.C.
Aaa Zero 8/01/14 1,030
451,789
Capital Apprec., Ser. C, F.G.I.C.
Aaa Zero 8/01/16 1,005
393,749
Capital Apprec., Ser. C, F.G.I.C.
Aaa Zero 8/01/21 1,635
481,916
Arcadia Unified Sch. Dist., Gen. Oblig., Ser. A,
M.B.I.A. Aaa Zero 9/01/10
1,765 977,422
Baldwin Park Pub. Fin. Auth. Rev., Tax Alloc.
BBB(d) 7.05% 9/01/14 1,020
1,138,901
Berkeley Hosp. Rev., Alta Bates Hosp. Corp.
Aaa 7.65 12/01/15 1,500 (c)
1,631,355
Brea Pub. Fin. Auth. Rev., Sub. Tax Alloc. Redev.
Proj.,
Ser. C
NR 8.10 3/01/21 5,000
5,402,050
Buena Park Cmnty. Redev. Agcy., Central Bus. Dist.
Proj. BBB+(d) 7.10 9/01/14
2,500 2,741,175
California St. Hlth. Facs. Fin. Auth. Rev.,
Episcopal Homes Foundation, Ser. A
A+(d) 7.70 7/01/18 2,500
2,579,000
Eskaton Properties
NR 7.50 5/01/20 4,500 (c)
4,916,475
Valleycare Hosp. Corp.
A+(d) 5.50 5/01/20 2,250
2,312,258
California St. Hsg. Fin. Agcy. Rev., Sngl. Fam.
Mtge., Ser.
A
Aa Zero 2/01/15 8,420
1,732,920
Chula Vista Redev. Agcy., Bayfront Tax Alloc.
BBB+(d) 7.625 9/01/24 4,500
5,254,065
Contra Costa Cnty., Spec. Tax Cmnty. Facs. Dist.
Pleasant
Hill
NR 8.125 8/01/16 1,300
1,393,743
Desert Hosp. Dist., Cert. of Part.
AAA(d) 8.10 7/01/20 5,000 (c)
5,571,450
East Palo Alto Sanit. Dist., Cert. of Part.
NR 8.25 10/01/15 1,295
1,399,144
Fairfield Pub. Fin. Auth. Rev., Fairfield Redev.
Projs.,
Ser. A
NR 7.90 8/01/21 4,200 (c)
4,790,058
Fontana Cmnty. Facs., Dist. No. 2, Spec. Tax Rev.,
Ser. B NR 8.50 9/01/17
3,000 3,107,400
Foothill/Eastern Trans. Corridor Agcy.,
Toll Rd. Rev., 1995-A
Baa Zero 1/01/16 5,000
1,922,050
Toll Rd. Rev.
Baa Zero 1/01/18 2,950
1,014,859
Kings Cnty. Wst. Mgmt. Auth., Solid Wst. Rev.,
A.M.T. BBB+(d) 7.20
10/01/14 1,225 1,378,419
La Canada Unified Sch. Dist.,
Capital Apprec., F.G.I.C.
Aaa Zero 8/01/12 1,600
786,864
Unltd. Tax Gen. Oblig., F.G.I.C.
Aaa Zero 8/01/13 1,680
780,646
Long Beach Harbor Rev., Ser A, A.M.T.
Aaa 6.00 5/15/16 5,500
6,110,060
Long Beach Redev. Agcy. Dist. No. 3, Spec. Tax
Rev. NR 6.375
9/01/23 3,000 3,188,970
Los Angeles Cnty., Cert. of Part., Correctional
Facs.
Proj., M.B.I.A.
Aaa Zero 9/01/10 3,770 (c)
2,097,967
Los Angeles Cnty., Hsg. Auth., Multi-fam. Mtge.
Rev.,
Mayflower Gardens Proj., Ser. K, G.N.M.A.
NR 8.875 12/20/10 2,100 (c)
2,428,503
Los Angeles Conv. & Exhib. Ctr. Auth., Cert. of
Part. Aaa 9.00 12/01/10
1,250 (c) 1,643,750
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
1,095,280
Waterworks Rev Rfdg., Ser. A
Aa 5.75 7/01/21 4,000
4,404,400
Midpeninsula Regional Open Space Dist. Fin. Auth.
Rev.,
A.M.B.A.C.
Aaa Zero 9/01/15 3,000
1,204,440
Mojave Desert Solid Wst. Victor Vally Materials,
Recov.
Fac., A.M.T.
Baa1 7.875 6/01/20 1,175
1,356,878
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as
of February 28, 1998 PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
(Unaudited) CALIFORNIA
SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Orange Cnty. Loc. Trans. Auth.,
Linked S.A.V.R.S. & R.I.B.S., A.M.B.A.C.
Aaa 6.20% 2/14/11 $ 8,000
$ 9,152,800
R.I.B.S.
AA3(d) 6.20 2/14/11 750
953,437
Pasadena California Spec. Tax
Capital Apprec., Cmnty. Facs., Dist. 1-A
Aaa Zero 12/01/16 1,015
390,988
Capital Apprec., Cmnty. Facs., Dist. 1-A
Aaa Zero 12/01/17 1,080
392,364
Capital Apprec., Cmnty. Facs., Dist. 1-A
Aaa Zero 12/01/18 1,210
413,433
Capital Apprec., Cmnty. Facs., Dist. 1-A
Aaa Zero 12/01/19 1,310
422,344
Capital Apprec., Cmnty. Facs., Dist. 1-A
Aaa Zero 12/01/20 1,405
430,014
Petaluma City Joint Union High Sch. Dist.,
Capital Apprec., M.B.I.A.
Aaa Zero 8/01/14 1,170
513,197
Capital Apprec., M.B.I.A.
Aaa Zero 8/01/15 1,600
661,824
Capital Apprec., M.B.I.A.
Aaa Zero 8/01/16 1,455
570,055
Capital Apprec., M.B.I.A.
Aaa Zero 8/01/17 3,015
1,114,223
Redding Elec. Sys. Rev., Cert. of Part., Linked
S.A.V.R.S.
& R.I.B.S., M.B.I.A.
Aaa 6.368 7/01/22 3,550
4,082,571
Roseville City Sch. Dist., Cap. Apprec. Ser. A,
F.G.I.C. Aaa Zero 8/01/10
1,230 683,831
San Bernardino Cnty.,
Cert. of Part, Med. Ctr. Fin. Proj., M.B.I.A.
Aaa 5.50 8/01/22 4,400
4,682,348
Fin. Auth. Ref. Impt., Granada Hills, Ser. A
BBB-(d) 6.90 5/01/27 1,715
1,899,671
San Francisco City & Cnty., Redev. Agcy., Lease
Rev., Cap.
Apprec.
A1 Zero 7/01/09 2,000
1,163,840
San Jose, Unified Sch. Dist., Santa Clara,
Gen. Oblig., Ser. A, F.G.I.C.
Aaa Zero 8/01/17 1,350
498,906
Gen. Oblig., Ser. A, F.G.I.C.
Aaa Zero 8/01/21 2,980
878,355
Santa Cruz Cnty. Pub. Fin. Auth. Rev., Tax Alloc.
Sub. Ln.,
Ser. B
AAA(d) 7.625 9/01/21 2,350 (c)
2,540,280
Santa Margarita, Dana Point Auth.,
Impvt. Dists. 3, Ser. A, M.B.I.A.
Aaa 7.25 8/01/09 1,400
1,743,826
Impvt. Dists. 3, Ser. B, M.B.I.A.
Aaa 7.25 8/01/08 2,500
3,083,550
Impvt. Dists. 3, Ser. B, M.B.I A.
Aaa 7.25 8/01/09 1,000
1,245,590
Impvt. Dists. 3, Ser. B, M.B.I.A.
Aaa 7.25 8/01/14 1,000
1,273,550
So. Orange Cnty., Pub. Fin. Auth.,
Foothill Area Proj., F.G.I.C.
Aaa 6.50 8/15/10 750
888,758
Spec. Tax Rev., M.B.I.A.
Aaa 7.00 9/01/11 3,500
4,330,270
Southern California Pub. Pwr. Auth.,
Proj. Rev.
A 6.75 7/01/10 2,265
2,693,629
Proj. Rev.
A 6.75 7/01/11 1,195
1,427,810
Proj. Rev.
A 6.75 7/01/12 2,935
3,509,702
Proj. Rev.
A 6.75 7/01/13 4,000
4,791,360
Proj. Rev., A.M.B.A.C.
Aaa Zero 7/01/16 7,925 (c)
3,112,623
Transmission Proj. Rev. Rfdg., Ser. A, F.G.I.C.
Aaa Zero 7/01/12 7,080 (c)
3,515,786
Stockton Cmnty. Facs. Dist. No. 90-2, Brookside
Estates NR 6.20 8/01/15
700 729,883
Sulphur Springs Union Sch. Dist., Ser. A, M.B.I.A.
Aaa Zero 9/01/09 2,000
1,174,260
Torrance Redev. Agcy., Rfdg. Tax. Alloc., Downtown
Redev. Baa 7.125 9/01/21
1,580 1,718,250
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as
of February 28, 1998 PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
(Unaudited) CALIFORNIA
SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- --------------------------------------------------
- --------------------------------------------------
- --------------------------
Vacaville Cmnty. Redev. Agcy., Cmnty. Hsg. Fin.
Multi-family
A-(d) 7.375% 11/01/14 $ 1,110
$ 1,193,794
Vallecito Ca. Union Sch. Dist., Ser A, F.S.A.
Aaa Zero 9/01/20 1,155
358,119
Victor Valley Union High Sch. Dist.,
Gen. Oblig., M.B.I.A.
Aaa Zero 9/01/09 2,075
1,218,295
Gen. Oblig., M.B.I.A.
Aaa Zero 9/01/15 5,070
2,088,282
Virgin Islands Terr., Hugo Ins. Claims Fund Proj.,
Ser. 91 NR 7.75 10/01/06
730 813,870
Walnut Valley Unified Sch. Dist., M.B.I.A.
Aaa 6.00 8/01/15 1,870 (c)
2,130,491
Whittier Pub. Fin. Auth. Rev., Whittier Blvd.
Redev. Proj.,
Ser. A
NR 7.50 9/01/14 825
850,080
- ------------
Total long-term investments (cost $134,003,151)
151,528,300
SHORT-TERM INVESTMENTS--0.1%
California St. Cmntys. Dev. Auth., Chevron Proj.,
Ser 94,
F.R.D.D. (cost $200,000)
P-1 3.65 3/02/98 200
200,000
- ------------
Total Investments--99.0%
(cost $134,203,151; Note 4)
151,728,300
Other assets in excess of liabilities--1.0%
1,500,825
- ------------
Net Assets--100%
$153,229,125
- ------------
- ------------
</TABLE>
- ---------------
(a) The following abbreviations are used in
portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance
Corporation.
A.M.T.--Alternative Minimum Tax.
F.G.I.C.--Financial Guaranty Insurance
Company.
F.R.D.D.--Floating Rate (Daily) Demand Note
(b).
F.S.A.--Financial Security Assurance.
G.N.M.A.--Government National Mortgage
Association.
M.B.I.A.--Municipal Bond Insurance
Association.
R.I.B.S.--Residual Interest Bearing
Securities.
S.A.V.R.S.--Select Auction Variable Rate
Securities.
(b) For purposes of amortized cost valuation, the
maturity date of Floating Rate
Demand Notes is considered to be the later of
the next date on which the
security can be redeemed at par, or the next
date on which the rate of
interest is adjusted.
(c) Prerefunded issues are secured by escrowed
cash and/or direct U.S.
guaranteed obligations.
(d) Standard & Poor's Rating.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional
Information contains a description of
Moody's and Standard & Poor's ratings.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Statement of Assets and Liabilities
(Unaudited) CALIFORNIA
SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Assets
February 28, 1998
<S>
<C>
Investments, at value (cost
$134,203,151).....................................
............................ $ 151,728,300
Cash..............................................
..................................................
...... 13,866
Interest
receivable........................................
...............................................
1,888,130
Receivable for Series shares
sold..............................................
........................... 257,744
Other
assets............................................
..................................................
3,147
- -----------------
Total
assets............................................
...............................................
153,891,187
- -----------------
Liabilities
Payable for investments
purchased.........................................
................................
363,917
Payable for Series shares
reacquired........................................
..............................
74,310
Dividends
payable...........................................
..............................................
67,658
Management fee
payable...........................................
.........................................
58,990
Accrued
expenses..........................................
................................................
57,172
Distribution fee
payable...........................................
.......................................
32,700
Deferred trustee's
fees..............................................
.....................................
7,315
- -----------------
Total
liabilities.......................................
...............................................
662,062
- -----------------
Net
Assets............................................
..................................................
.. $ 153,229,125
- -----------------
- -----------------
Net assets were comprised of:
Shares of beneficial interest, at
par...............................................
................... $ 126,578
Paid-in capital in excess of
par...............................................
........................ 138,471,087
- -----------------
138,597,665
Accumulated net realized loss on
investments.......................................
.................... (2,893,689)
Net unrealized appreciation on
investments.......................................
...................... 17,525,149
- -----------------
Net assets, February 28,
1998..............................................
............................... $
153,229,125
- -----------------
- -----------------
Class A:
Net asset value and redemption price per share
($84,465,673 / 6,976,585 shares of
beneficial interest issued and
outstanding)......................
$12.11
Maximum sales charge (3% of offering
price)............................................
................ .37
- -----------------
Maximum offering price to
public............................................
........................... $12.48
- -----------------
- -----------------
Class B:
Net asset value, offering price and redemption
price per share
($67,417,473 / 5,570,192 shares of
beneficial interest issued and
outstanding)......................
$12.10
- -----------------
- -----------------
Class C:
Net asset value, offer price and redemption
price per share
($538,058 / 44,456 shares of beneficial
interest issued and
outstanding)............................
$12.10
- -----------------
- -----------------
Class Z:
Net asset value, offer price and redemption
price per share
($807,921 / 66,707 shares of beneficial
interest issued and
outstanding)............................
$12.11
- -----------------
- -----------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
Statement of Operations (Unaudited)
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income
February 28, 1998
<S> <C>
Income
Interest................................ $
4,609,518
----
- -------------
Expenses
Management fee..........................
380,184
Distribution fee--Class A...............
41,579
Distribution fee--Class B...............
169,360
Distribution fee--Class C...............
1,478
Custodian's fees and expenses...........
44,000
Transfer agent's fees and expenses......
38,000
Registration fees.......................
20,000
Reports to shareholders.................
15,000
Legal fees and expenses.................
7,000
Audit fee...............................
6,500
Trustees' fees and expenses.............
4,000
Miscellaneous...........................
6,047
----
- -------------
Total expenses.......................
733,148
----
- -------------
Net investment income......................
3,876,370
----
- -------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions.................
267,973
Financial futures transactions..........
(274,285)
----
- -------------
(6,312)
----
- -------------
Net change in unrealized appreciation on:
Investments.............................
3,962,561
Financial futures contracts.............
58,125
----
- -------------
4,020,686
----
- -------------
Net gain on investments....................
4,014,374
----
- -------------
Net Increase in Net Assets
Resulting from Operations.................. $
7,890,744
----
- -------------
----
- -------------
</TABLE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
Statement of Changes in Net Assets (Unaudited)
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Six Months
Ended
Year Ended
Increase (Decrease) February 28,
August 31,
in Net Assets 1998
1997
<S> <C>
<C>
Operations
Net investment income........ $ 3,876,370
$ 8,269,890
Net realized gain (loss) on
investment transactions... (6,312)
1,514,692
Net change in unrealized
appreciation of
investments............... 4,020,686
3,405,416
----------------
- - ---------------
Net increase in net assets
resulting from
operations................ 7,890,744
13,189,998
----------------
- - ---------------
Dividends and distributions
(Note 1)
Dividends from net investment
income
Class A................... (2,194,180)
(4,328,873)
Class B................... (1,652,140)
(3,893,152)
Class C................... (9,152)
(23,434)
Class Z................... (20,898)
(24,431)
----------------
- - ---------------
(3,876,370)
(8,269,890)
----------------
- - ---------------
Distributions in excess of
net investment income
Class A................... (53,532)
(14,903)
Class B................... (42,305)
(14,710)
Class C................... (231)
(110)
Class Z................... (525)
(68)
----------------
- - ---------------
(96,593)
(29,791)
----------------
- - ---------------
Series share transactions (net
of share conversions) (Note
5)
Net proceeds from shares
sold...................... 3,935,351
8,712,231
Net asset value of shares
issued in reinvestment of
dividends and
distributions............. 2,235,182
4,528,865
Cost of shares reacquired.... (9,531,485)
(24,068,018)
----------------
- - ---------------
Net decrease in net assets
from Series share
transactions.............. (3,360,952)
(10,826,922)
----------------
- - ---------------
Total increase (decrease)....... 556,829
(5,936,605)
Net Assets
Beginning of period............. 152,672,296
158,608,901
----------------
- - ---------------
End of period................... $ 153,229,125
$ 152,672,296
----------------
- - ---------------
----------------
- - ---------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Notes to Financial Statements
(Unaudited) 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
transactions.
The Series invests in financial futures contracts
in order to hedge its existing
portfolio securities or securities the Series
intends to purchase, against
fluctuations in value caused by changes in
prevailing interest rates. Should
interest rates move unexpectedly, the Series may
not achieve the anticipated
benefits of the financial futures contracts and
may realize a loss. The use of
futures transactions involves the risk of
imperfect correlation in movements in
the price of futures contracts, interest rates and
the underlying hedged assets.
Securities Transactions and Net Investment Income:
Securities transactions are
recorded on the trade date. Realized gains and
losses on sales of securities are
calculated on the identified cost basis. Interest
income is recorded on the
accrual basis. The Series amortizes premiums and
original issue discount paid on
purchases of portfolio securities as adjustments
to interest income. Expenses
are recorded on the accrual basis which may
require the use of certain estimates
by management.
Net investment income (other than distribution
fees) and 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 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.
- --------------------------------------------------
- ------------------------------
8
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Notes to Financial Statements
(Unaudited) CALIFORNIA
SERIES
- --------------------------------------------------
- ------------------------------
Reclassification of Capital Accounts: The Fund
accounts and reports for
distributions to shareholders in accordance with
Statement of Position 93-2:
Determination, Disclosure, and Financial Statement
Presentation of Income,
Capital Gain and Return of Capital Distributions
by Investment Companies. The
effect of applying this statement was to increase
undistributed net investment
income and increase accumulated net realized loss
by $96,593, due to the sale of
securities purchased with market discount. Net
investment income, net realized
gains and net assets were not affected by this
change.
- --------------------------------------------------
- ----------
Note 2. Agreements
The Fund has a management agreement with
Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has
responsibility for all
investment advisory services and supervises the
subadviser's performance of such
services. PIFM has entered into a subadvisory
agreement with The Prudential
Investment Corporation ('PIC'); PIC furnishes
investment advisory services in
connection with the management of the Fund. PIFM
pays for the 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 PIFM is computed daily and
payable monthly, at an annual
rate of .50 of 1% of the average daily net assets
of the Series.
The Fund has a distribution agreement with
Prudential Securities Incorporated
('PSI') which acts as the distributor of the Class
A, Class B, Class C and Class
Z shares of the Fund. The Fund compensates PSI for
distributing and servicing
the Fund's Class A, Class B and Class C shares,
pursuant to plans of
distribution, (the 'Class A, B and C Plans'),
regardless of expenses actually
incurred by PSI. The distribution fees are accrued
daily and payable monthly. No
distribution or service fees are paid to PSI as
distributor of the Class Z
shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund
compensates PSI for
distribution-related activities at an annual rate
of up to .30 of 1%, .50 of 1%
and 1% of the average daily net assets of the
Class A, B and C shares,
respectively. Such expenses under the Plans were
.10 of 1%, .50 of 1% and .75 of
1% of the average daily net assets of the Class A,
B and C shares, respectively,
for the six months ended February 28, 1998.
PSI has advised the Series that they have received
approximately $11,700 in
front-end sales charges resulting from sales of
Class A shares during the six
months ended February 28, 1998. From these fees,
PSI paid such sales charges to
affiliated broker-dealers, which in turn paid
commissions to salespersons and
incurred other distribution costs.
PSI has advised the Series that for the six months
ended February 28, 1998, it
received approximately $49,000 in contingent
deferred sales charges imposed upon
certain redemptions by Class B shareholders.
PSI, PIFM and PIC are indirect, wholly owned
subsidiaries of The Prudential
Insurance Company of America.
The Series, along with other affiliated registered
investment companies (the
'Funds'), has a credit agreement (the 'Agreement')
with an unaffiliated lender.
The maximum commitment under the Agreement is
$200,000,000. Interest on any such
borrowings outstanding will be at market rates.
The purpose of the Agreement is
to serve as an alternative source of funding for
capital share redemptions. The
Series has not borrowed any amounts pursuant to
the Agreement during the six
months ended February 28, 1998. The Funds pay a
commitment fee at an annual rate
of .055 of 1% on the unused portion of the credit
facility. The commitment fee
is accrued and paid quarterly on a pro rata basis
by the Funds. The Agreement
expired on December 30, 1997 and has been extended
through December 29, 1998
under the same terms.
- --------------------------------------------------
- ----------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a
wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the
six months ended February 28,
1998, the Series incurred fees of approximately
$26,900 for the services of
PMFS. As of February 28 1998, approximately $4,500
of such fees were due to
PMFS. Transfer agent fees and expenses in the
Statement of Operations include
certain out-of-pocket expenses paid to
nonaffiliates.
- --------------------------------------------------
- ----------
Note 4. Portfolio Securities
Purchases and sales of portfolio securities of the
Series, excluding short-term
investments, for the six months ended February 28,
1998 were $13,005,091 and
$17,713,962, respectively.
The cost basis of investments for federal income
tax purposes at February 28,
1998 was substantially the same as for financial
reporting purposes and,
accordingly, net unrealized appreciation of
investments for federal income tax
purposes was $17,525,149 (gross unrealized
appreciation--$17,666,917; gross
unrealized depreciation--$141,768).
For federal income tax purposes, the Series has a
capital loss carryforward as
of August 31, 1997 of approximately $2,945,800
which expires in 2003.
- --------------------------------------------------
- ------------------------------
9
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Notes to Financial Statements
(Unaudited)
CALIFORNIA SERIES
- --------------------------------------------------
- ------------------------------
Accordingly, no capital gains distribution is
expected to be paid to
shareholders until net gains have been realized in
excess of such carryforward.
- --------------------------------------------------
- ----------
Note 5. Capital
The Series offers Class A, Class B, Class C and
Class Z shares. Class A shares
are sold with a front-end sales charge of up to
3%. Class B shares are sold with
a contingent deferred sales charge which declines
from 5% to zero depending on
the period of time the shares are held. Class C
shares are sold with a
contingent deferred sales charge of 1% during the
first year. Class B shares
will automatically convert to Class A shares on a
quarterly basis approximately
seven years after purchase. A special exchange
privilege is also available for
shareholders who qualified to purchase Class A
shares at net asset value.
The Fund has authorized an unlimited number of
shares of beneficial interest for
each class at $.01 par value per share.
Transactions in shares of beneficial interest for
the period ended February 28,
1998 and the fiscal year ended August 31, 1997
were as follows:
<TABLE>
<CAPTION>
Class A Shares
Amount
- ------------------------------------ ----------
- ------------
<S> <C>
<C>
Six months ended February 28, 1998:
Shares sold......................... 63,320
$ 761,220
Shares issued in reinvestment of
dividends and distributions....... 106,384
1,277,773
Shares reacquired................... (383,157)
(4,604,132)
----------
- ------------
Net decrease in shares outstanding
before conversion................. (213,453)
(2,565,139)
Shares issued upon conversion from
Class B........................... 281,531
3,363,091
----------
- ------------
Net increase in shares
outstanding....................... 68,078
$ 797,952
----------
- ------------
----------
- ------------
<CAPTION>
Class A Shares
Amount
- ------------------------------------ ----------
- ------------
<S> <C>
<C>
Year ended August 31, 1997:
Shares sold......................... 217,828
$ 2,553,793
Shares issued in reinvestment of
dividends and distributions....... 205,336
2,392,394
Shares reacquired................... (867,579)
(10,113,668)
----------
- ------------
Net decrease in shares outstanding
before conversion................. (444,415)
(5,167,481)
Shares issued upon conversion from
Class B........................... 980,623
11,397,357
----------
- ------------
Net increase in shares
outstanding....................... 536,208
$ 6,229,876
----------
- ------------
----------
- ------------
<CAPTION>
Class B
- ------------------------------------
<S> <C>
<C>
Six months ended February 28, 1998:
Shares sold......................... 235,240
$ 2,828,408
Shares issued in reinvestment of
dividends and distributions....... 77,506
930,145
Shares reacquired................... (401,792)
(4,828,229)
----------
- ------------
Net decrease in shares outstanding
before conversion................. (89,046)
(1,069,676)
Shares reacquired upon conversion
into
Class A........................... (281,531)
(3,363,091)
----------
- ------------
Net decrease in shares
outstanding....................... (370,577)
$ (4,432,767)
----------
- ------------
----------
- ------------
Year ended August 31, 1997:
Shares sold......................... 458,940
$ 5,365,324
Shares issued in reinvestment of
dividends and distributions....... 179,511
2,089,875
Shares reacquired................... (1,168,280)
(13,597,983)
----------
- ------------
Net decrease in shares outstanding
before conversion................. (529,829)
(6,142,784)
Shares reacquired upon conversion
into
Class A........................... (980,623)
(11,397,357)
----------
- ------------
Net decrease in shares
outstanding....................... (1,510,452)
$(17,540,141)
----------
- ------------
----------
- ------------
</TABLE>
- --------------------------------------------------
- ------------------------------
10
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Notes to Financial Statements
(Unaudited) CALIFORNIA
SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class C Shares
Amount
- ------------------------------------ ----------
- ------------
<S> <C>
<C>
Six months ended February 28, 1998:
Shares sold......................... 17,709
$ 215,263
Shares issued in reinvestment of
dividends and distributions....... 707
8,493
Shares reacquired................... (2,309)
(27,769)
----------
- ------------
Net increase in shares
outstanding....................... 16,107
$ 195,987
----------
- ------------
----------
- ------------
Year ended August 31, 1997:
Shares sold......................... 7,546
$ 88,551
Shares issued in reinvestment of
dividends and distributions....... 1,947
22,646
Shares reacquired................... (28,622)
(334,140)
----------
- ------------
Net decrease in shares
outstanding....................... (19,129)
$ (222,943)
----------
- ------------
----------
- ------------
<CAPTION>
Class Z
- ------------------------------------
<S> <C>
<C>
Six months ended February 28, 1998:
Shares sold......................... 10,903
$ 130,460
Shares issued in reinvestment of
dividends and distributions....... 1,562
18,771
Shares reacquired................... (5,888)
(71,355)
----------
- ------------
Net increase in shares
outstanding....................... 6,577
$ 77,876
----------
- ------------
----------
- ------------
September 18, 1996(a) through
August 31, 1997:
Shares sold......................... 60,003
$ 704,563
Shares issued in reinvestment of
dividends and distributions....... 2,051
23,950
Shares reacquired................... (1,924)
(22,227)
----------
- ------------
Net increase in shares
outstanding....................... 60,130
$ 706,286
----------
- ------------
----------
- ------------
</TABLE>
- ---------------
(a) Commencement of offering of Class Z shares.
- --------------------------------------------------
- ------------------------------
11
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Financial Highlights (Unaudited)
CALIFORNIA SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class A
- --------------------------------------------------
- ----------------------
Six Months
Ended Year Ended August
31,
February 28, ---------------------------------
- ----------------------
1998 1997 1996 1995
1994 1993
- ------------ ------- ------- -------
- ------- -------
<S>
<C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.............
$ 11.80 $ 11.44 $ 11.49 $ 11.30
$ 12.16 $ 11.48
- ------ ------- ------- ------- -
- ------ -------
Income from investment operations
Net investment income............................
.32 .65(a) .65(a) .66(a)
.65 .69
Net realized and unrealized gain (loss) on
investment transactions.......................
.32 .36 (.05) .19
(.74) .68
- ------ ------- ------- ------- -
- ------ -------
Total from investment operations..............
.64 1.01 .60 .85
(.09) 1.37
- ------ ------- ------- ------- -
- ------ -------
Less distributions
Dividends from net investment income.............
(.32) (.65) (.65) (.66)
(.65) (.69)
Distributions in excess of net investment
income........................................
(.01) --(c) -- --
- -- --
Distributions from net realized gains............
- -- -- -- --
(.12) --
- ------ ------- ------- ------- -
- ------ -------
Total distributions...........................
(.33) (.65) (.65) (.66)
(.77) (.69)
- ------ ------- ------- ------- -
- ------ -------
Net asset value, end of period...................
$ 12.11 $ 11.80 $ 11.44 $ 11.49
$ 11.30 $ 12.16
- ------ ------- ------- ------- -
- ------ -------
- ------ ------- ------- ------- -
- ------ -------
TOTAL RETURN(b):.................................
5.45% 9.01% 5.23% 7.90%
(0.80)% 12.30%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................
$ 84,466 $81,535 $72,876 $68,403
$12,082 $11,116
Average net assets (000).........................
$ 83,846 $78,347 $71,119 $42,617
$11,812 $ 7,728
Ratios to average net assets:
Expenses, including distribution fees.........
.78%(d) .76%(a) .81%(a) .73%(a)
.73% .77%
Expenses, excluding distribution fees.........
.68%(d) .66%(a) .71%(a) .63%(a)
.63% .67%
Net investment income.........................
5.28%(d) 5.53%(a) 5.58%(a) 5.90%(a)
5.57% 5.82%
For Class A, B, C and Z shares:
Portfolio turnover rate.......................
9% 14% 26% 44%
69% 43%
</TABLE>
- ---------------
(a) Net of management fee waiver.
(b) Total return does not consider the effects of
sales loads. Total return is
calculated assuming a purchase of shares on
the first day and a sale on the
last day of each period reported and includes
reinvestment of dividends and
distributions. Total returns for periods of
less than a full year are not
annualized.
(c) Less than $.005 per share.
(d) Annualized.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 12
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Financial Highlights (Unaudited)
CALIFORNIA SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class B
- --------------------------------------------------
- --------------------------
Six Months
Ended Year Ended August
31,
February 28, ---------------------------------
- --------------------------
1998 1997 1996 1995
1994 1993
- ------------ ------- -------- --------
- -------- --------
<S>
<C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.............
$ 11.80 $ 11.43 $ 11.49 $ 11.29
$ 12.15 $ 11.48
- ------ ------- -------- --------
- -------- --------
Income from investment operations
Net investment income............................
.29 .60(a) .60(a) .62(a)
.60 .64
Net realized and unrealized gain (loss) on
investment transactions.......................
.31 .37 (.06) .20
(.74) .67
- ------ ------- -------- --------
- -------- --------
Total from investment operations..............
.60 .97 .54 .82
(.14) 1.31
- ------ ------- -------- --------
- -------- --------
Less distributions
Dividends from net investment income.............
(.29) (.60) (.60) (.62)
(.60) (.64)
Distributions in excess of net investment
income........................................
(.01) --(c) -- --
- -- --
Distributions from net realized gains............
- -- -- -- --
(.12) --
- ------ ------- -------- --------
- -------- --------
Total distributions...........................
(.30) (.60) (.60) (.62)
(.72) (.64)
- ------ ------- -------- --------
- -------- --------
Net asset value, end of period...................
$ 12.10 $ 11.80 $ 11.43 $ 11.49
$ 11.29 $ 12.15
- ------ ------- -------- --------
- -------- --------
- ------ ------- -------- --------
- -------- --------
TOTAL RETURN(b):.................................
5.15% 8.67% 4.73% 7.56%
(1.20)% 11.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................
$ 67,417 $70,093 $ 85,190 $103,891
$184,985 $207,634
Average net assets (000).........................
$ 68,305 $75,935 $ 96,525 $136,275
$201,558 $190,944
Ratios to average net assets:
Expenses, including distribution fees.........
1.18%(d) 1.16%(a) 1.21%(a) 1.13%(a)
1.13% 1.17%
Expenses, excluding distribution fees.........
.68%(d) .66%(a) .71%(a) .63%(a)
.63% .67%
Net investment income.........................
4.88%(d) 5.13%(a) 5.18%(a) 5.50%(a)
5.17% 5.44%
</TABLE>
- ---------------
(a) Net of management fee waiver.
(b) Total return does not consider the effects of
sales loads. Total return is
calculated assuming a purchase of shares on
the first day and a sale on the
last day of each period reported and includes
reinvestment of dividends and
distributions. Total returns for periods of
less than a full year are not
annualized.
(c) Less than $.005 per share.
(d) Annualized.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 13
<PAGE>
PRUDENTIAL
CALIFORNIA MUNICIPAL FUND
Financial Highlights (Unaudited) CALIFORNIA
SERIES
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class C Class Z
- --------------------------------------------------
- ---------- ------------
August 1,
Six Months
1994(d) Six Months
Ended Year Ended August 31,
through Ended
February 28, ----------------------------
August 31, February 28,
1998 1997 1996 1995
1994 1998
- ------------ ------ ------ ------
- ---------- ------------
<S>
<C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.............
$11.80 $11.43 $11.49 $11.29
$11.32 $11.81
- ----- ------ ------ ------ -
- ---- -----
Income from investment operations
Net investment income............................
.28 .57(a) .57(a) .59(a)
.04 .32
Net realized and unrealized gain (loss) on
investment transactions.......................
.31 .37 (.06) .20
(.03) .31
- ----- ------ ------ ------ -
- ---- -----
Total from investment operations..............
.59 .94 .51 .79
.01 .63
- ----- ------ ------ ------ -
- ---- -----
Less distributions
Dividends from net investment income.............
(.28) (.57) (.57) (.59)
(.04) (.32)
Distributions in excess of net investment
income........................................
(.01) --(c) -- --
- -- (.01)
- ----- ------ ------ ------ -
- ---- -----
Total distributions...........................
(.29) (.57) (.57) (.59)
(.04) (.33)
- ----- ------ ------ ------ -
- ---- -----
Net asset value, end of period...................
$12.10 $11.80 $11.43 $11.49
$11.29 $12.11
- ----- ------ ------ ------ -
- ---- -----
- ----- ------ ------ ------ -
- ---- -----
TOTAL RETURN(b):.................................
5.02% 8.40% 4.47% 7.29%
.05% 5.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................
$ 538 $ 334 $ 543 $ 129 $
200(e) $ 808
Average net assets (000).........................
$ 397 $ 480 $ 286 $ 76 $
199(e) $ 269
Ratios to average net assets:
Expenses, including distribution fees.........
1.43%(g) 1.41%(a) 1.46%(a) 1.38%(a)
1.71%(g) .68%(g)
Expenses, excluding distribution fees.........
.68%(g) .66%(a) .71%(a) .63%(a)
.96%(g) .68%(g)
Net investment income.........................
4.63%(g) 4.88%(a) 4.93%(a) 5.25%(a)
4.87%(g) 5.38%(g)
<CAPTION>
September 18,
1996(f)
through
August 31,
1997
- -------------
<S>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.............
$ 11.50
- -----
Income from investment operations
Net investment income............................
.64(a)
Net realized and unrealized gain (loss) on
investment transactions.......................
.31
- -----
Total from investment operations..............
.95
- -----
Less distributions
Dividends from net investment income.............
(.64)
Distributions in excess of net investment
income........................................
- --(c)
- -----
Total distributions...........................
(.64)
- -----
Net asset value, end of period...................
$ 11.81
- -----
- -----
TOTAL RETURN(b):.................................
8.35%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................
$ 710
Average net assets (000).........................
$ 458
Ratios to average net assets:
Expenses, including distribution fees.........
.66%(a)/(g)
Expenses, excluding distribution fees.........
.66%(a)/(g)
Net investment income.........................
5.35%(a)/(g)
</TABLE>
- ---------------
(a) Net of management fee waiver.
(b) Total return does not consider the effects of
sales loads. Total return is
calculated assuming a purchase of shares on
the first day and a sale on the
last day of each period reported and includes
reinvestment of dividends and
distributions. Total returns for periods of
less than a full year are not
annualized.
(c) Less than $.005 per share.
(d) Commencement of offering of Class C shares.
(e) Figures are actual and not rounded to the
nearest thousand.
(f) Commencement of offering of Class Z shares.
(g) Annualized.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 14
<PAGE>
Getting The Most From Your Prudential Mutual Fund.
How many times have you read these letters -- or
other
financial materials -- and stumbled across a word
that
you don't understand?
Many shareholders have run into the same problem.
We'd
like to help. So we'll use this space from time to
time
to explain some of the words you might have read,
but not
understood. And if you have a favorite word that
no one can
explain to your satisfaction, please write to us.
Basis Point: One 1/100th of 1%. For example, one
half of one
percentage point is 50 basis points.
Call Option: A contract giving the holder a right
to buy
stocks or bonds at a predetermined price (called
the strike
price) before a predetermined expiration date. A
buyer of a
call option generally expects to benefit from a
rise in the
price of the stock or bond.
Capital Gain/Capital Loss: The difference between
the cost
of a capital asset (for example, a stock, bond or
mutual
fund share) and its selling price. Under current
law the
federal income tax rate for individuals on a long-
term
capital gain is up to 28%.
Collateralized Mortgage Obligations (CMOs): Pools
of
mortgage-backed securities sliced in maturity
ranges
that bear differing interest rates. These
instruments
are sensitive to changes in interest rates and
homeowner
refinancing activity. They are subject to
prepayment and
maturity extension risk.
Derivatives: Securities that derive their value
from
another security. The rate of return of these
financial
products rises and falls -- sometimes very
suddenly -- in
response to changes in some specific interest
rate,
currency, stock or other variable.
Discount Rate: The interest rate charged by the
Federal
Reserve on loans to banks and other depository
institutions.
Federal Funds Rate: The interest rate charged by
one bank
to another on overnight loans.
Futures Contract: An agreement to deliver a
specific amount
of a commodity or financial instrument at a set
price at a
stipulated time in the future.
Leverage: The use of borrowed assets to enhance
return on
equity. The expectation is that the interest rate
charged
will be lower than the return on the investment.
While
leverage can increase profits, it can also magnify
losses.
Liquidity: The ease with which a financial
instrument (or
mutual fund) can be bought or sold (converted into
cash)
in the financial markets.
Price/Earnings Ratio: The price of a share of
stock divided
by the earnings per share for a 12-month period.
Option: An agreement to sell something, such as
shares of
stock, by a certain time for a specified price. An
option
need not be exercised.
Spread: The difference between two values; most
often used
to describe the difference between prices bid
and asked
for a security.
Yankee Bond: A bond denominated in U.S. dollars
but sold
by a foreign company or government in the U.S.
market.
<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 advisor 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 advisor 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 advisor 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 Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Trustees
Edward D. Beach
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Harry A. Jacobs, Jr.
Mendel A. Melzer, CFA
Thomas T. Mooney
Thomas H. O'Brien
Richard A. Redeker
Nancy H. Teeters
Louis A. Weil, III
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Deborah A. Docs, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, NY 10022
The views expressed in this report and information
about
the Series' portfolio holdings are for the period
covered
by this report and are subject to change
thereafter.
The accompanying financial statements as of
February 28,
1998 were not audited and, accordingly, no opinion
is
expressed on them.
This report is not authorized for distribution to
prospective
investors unless preceded or accompanied by a
current prospectus.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
744313107
744313206 MF116E2
744313701 Cat#642111F
744313883
