PRUDENTIAL CALIFORNIA MUNICIPAL FUND, N-30D, 1999-11-09

PRUDENTIAL CALIFORNIA MUNICIPAL FUND
N-30D, 1999-11-09

Previous: PRUDENTIAL MUNICIPAL SERIES FUND, N-30D, 1999-11-09

Next: SOURCE CAPITAL CORP, 10QSB, 1999-11-09

<PAGE>

(ICON)

Prudential
California
Municipal
Fund
- -------------------------
California Series

ANNUAL
REPORT

Aug. 31, 1999

(LOGO)

<PAGE>
A Message from the Fund's President October 5, 1999
(PHOTO)

Dear Shareholder,
Prudential California Municipal Fund--California Series' Class A shares posted
a negative return of 1.56% during our 12-month reporting period that ended
August 31, 1999. Its benchmark Lipper Average also generated a negative return
as inflation fears caused a broad sell-off in the U.S. bond markets. The
following report takes a closer look at recent bond market events and explains
how the Series was positioned.

While municipal bond prices gained early in our reporting period, the rally
was short-lived. Signs that the U.S. economy was continuing to grow at a rapid
pace fueled concerns about higher inflation. Since a rise in inflation would
reduce the value of bonds' fixed-income payments, investors demanded higher
yields on debt securities as compensation. This, in turn, caused bond prices
to fall during most of our reporting period.

One integrated and expanded team
I would like to take this opportunity to tell you about some changes we've
made to our Fixed Income Group. Earlier in the year, we combined our fixed-
income areas into one integrated group that will manage money for Prudential's
investors and policyholders. This group now manages approximately $135 billion
in assets, making it one of the three largest fixed-income money managers in
the country. Our expanded depth, breadth, and scale now also allow us to tap
the best talent and share investment ideas, proprietary research, and
analytical tools.

To utilize these resources effectively, we recently organized the group into
teams, each specializing in a different sector of the fixed-income market. The
Municipal Bonds Sector team, headed by Evan Lamp, is now responsible for the
day-to-day management of your Prudential California Municipal Fund--California
Series. Many of the investment professionals who supported the management of
the Series in the past are part of this new team.

Thank you for your continued confidence in Prudential mutual funds.

Sincerely,

John R. Strangfeld
President
Prudential California Municipal Fund

<PAGE>
Performance Review
(PHOTO)
Evan Lamp, team leader of the Municipal Bonds Sector team

Investment Goals and Style
The Series seeks to invest primarily in carefully selected, long-term
municipal bonds that provide the maximum amount of income that is exempt
from California State and federal income taxes, consistent with the
preservation of capital. Certain shareholders, however, may be subject to
the federal alternative minimum tax. There can be no assurance the Series
will achieve its investment objective.

Inflation fears battered the municipal bond market
Our fiscal year that ended on August 31, 1999, will be remembered as a
challenging period in the history of the municipal debt securities market.
For the first several weeks, prices of tax-exempt bonds rallied in sympathy
with U.S. Treasury securities. Many investors purchased Treasuries for their
relative safety after a global financial crisis spread beyond Asia to Russia
and Latin America in the summer of 1998.

But concern about the global financial crisis gave way to fears that a
surprisingly strong U.S. economy and soaring oil prices might boost inflation,
which eats into the value of bonds' fixed-interest payments. To compensate for
this risk, investors demanded higher yields on municipal bonds and many other
types of debt securities, causing their prices to tumble. Long-term municipal
bonds sold off the most since their prices fall more rapidly than prices of
shorter-term bonds for a given rise in yield. The Series posted negative
annual returns, as did its benchmark Lipper Average, amid this bearish trend.

Positioning duration for interest rate views
We began the reporting period with a longer-than-average duration stance
compared to our competitive universe. (Duration is a measure of the Series'
sensitivity to interest-rate fluctuations.) A longer duration enables the
Series' shares to gain more rapidly if interest rates should fall and
municipal bond prices, which move in the opposite direction of their yields,
rise. We expected long-term interest rates to continue to fall because the
U.S. economic expansion was poised to slow and inflation to remain tame after
the global financial crisis of last year. Our strategy benefited the Series
during the autumn of 1998 when interest rates fell and the Federal Reserve cut
the Federal funds rate three times. Furthermore, investors sought safety and
liquidity for their investments in this uncertain market environment and
purchased a multitude of fixed-income debt securities, especially U.S.
Treasuries and municipal bonds. This trend was referred to as a "flight to
quality."

We maintained our longer duration stance into the first quarter of 1999 since
we expected the ever-resilient U.S. economy to slow moderately. However, a
slowdown did not occur as the Fed's accommodative monetary policy in late
1998 bolstered U.S. economic

<PAGE>
growth. As a result, long-term interest rates rose, and the prices of
municipal bonds fell throughout the first eight months of 1999, hurting the
Series' performance. In addition, a "flight from quality" was taking place as
investors felt they no longer needed the safety of Treasury securities.
Therefore we shortened the Series' duration to a more neutral stance in the
late spring of 1999, as it was apparent that the U.S. economy would not slow
enough to alleviate inflation fears. A shorter duration helped performance
when the Fed stepped in and raised rates in June and August 1999.

Lower-rated bonds enhanced the Series' performance
In order to increase the Series' yield, we selectively bought lower-rated
bonds. When the tax-exempt bond market sold off, prices of lower-rated debt
securities tended to decline less than prices of more highly-rated ones. This
was particularly true of lower-rated debt securities in economically sensitive
sectors such as transportation and industrial development.

The Series still held noncallable zero coupon bonds, mostly intermediate term
in length. Just as prices of these bonds tend to

Performance at a Glance
<TABLE>
<CAPTION>
Cumulative Total Returns1 As of 8/31/99
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A -1.56% 32.99% (32.75) N/A 85.77% (85.77)
Class B -1.94 30.49 (30.26) 83.38% (83.05) 188.50 (184.21)
Class C -2.18 28.87 (28.65) N/A 28.93 (28.71)
Class Z -1.44 N/A N/A 16.66 (16.55)
Lipper CA Muni
Debt Fund Avg.3 -1.49 32.05 90.77 ***
</TABLE>

<TABLE>
<CAPTION
Average Annual Total Returns1 As of 9/30/99
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A -6.23% 5.50% (5.46) N/A 6.27% (6.25)
Class B -8.61 5.60 (5.57) 6.30% (6.28) 7.31 (7.20)
Class C -5.81 5.29 (5.25) N/A 4.85 (4.82)
Class Z -3.12 N/A N/A 5.26 (5.23)
</TABLE>

<TABLE>
<CAPTION>
Distributions & Yields As of 8/31/99
Total Taxable Equivalent Yield4
Distributions 30-Day At Tax Rates Of
Paid for 12 Mos. SEC Yield 36% 39.6%
<S> <C> <C> <C> <C>
Class A $0.59 4.12% 7.10% 7.52%
Class B $0.56 4.00 6.89 7.30
Class C $0.53 3.71 6.39 6.77
Class Z $0.62 4.50 7.75 8.21
</TABLE>

Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.

1 Source: Prudential Investments Fund Management LLC and Lipper, Inc. The
cumulative total returns do not take into account sales charges. The average
annual total returns do take into account applicable sales charges. The Series
charges a maximum front-end sales charge of 3% for Class A shares and a
declining contingent deferred sales charge (CDSC) of 5%, 4%, 3%, 2%, 1%, and
1% for six years for Class B shares. Class B shares will automatically convert
to Class A shares, on a quarterly basis, approximately seven years after
purchase. Class C shares are subject to a front-end sales charge of 1% and a
CDSC of 1% for 18 months. Class C shares bought before November 2, 1998, have
a 1% CDSC if sold within one year. Class Z shares are not subject to a sales
charge or distribution and service (12b-1) fees. Without waiver of management
fees and/or expense subsidization, the Series' cumulative and average annual
total returns would have been lower, as indicated in parentheses ( ).

2 Inception dates: Class A, 1/22/90; Class B, 9/19/84; Class C, 8/1/94; and
Class Z, 9/18/96.

3 Lipper average returns are for all funds in each share class for the one-,
five-, and ten-year periods in the California Municipal Debt Fund category.

4 Taxable equivalent yields reflect federal and applicable state tax rates.

***Lipper Since Inception returns are 87.32% for Class A; 222.28% for Class B;
32.38% for Class C; and 14.78% for Class Z, based on all funds in each share
class.
- -------------------------------------------------------------------------------
1

<PAGE>

Review Cont'd.

climb rapidly when interest rates fall, they tumble when the municipal bond
market sells off and interest rates head higher. Furthermore, we were
overweighted--held more than our competitive universe averages--in these
types of bonds when the Fed raised interest rates and municipal bond markets
sold off further. The declines in the prices of our noncallable zero coupon
bonds detracted from the Series' performance.

Looking Ahead
Fed poised to act again, if necessary
If the U.S. economy does not lose steam quickly enough, we believe the
Federal Reserve will continue to increase short-term interest rates to slow
the economic expansion to a more sustainable pace. After their latest meeting
in early October 1999, Fed policy makers released a statement saying they
were considering hiking rates again and would be "especially alert" to trends
that could boost inflationary pressures.

Should the Fed act and bond yields continue to rise, the supply of newly
issued municipal bonds could decline. State and local governments would have
fewer opportunities to refinance their higher-rate debt securities. Moreover,
if interest rates climbed sharply, some cost-conscious state and local
governments may postpone issuing bonds in order to raise money for new
projects. Retail investors, on the other hand, are attracted to tax-exempt
debt securities in higher-interest-rate environments. This combination of
shrinking supply and growing demand could allow municipal bonds to perform
better than comparable Treasuries.

But what if the Fed left monetary policy unchanged and bond yields failed to
move sharply higher? We believe municipal bonds are still a good buy on a
relative basis. In early October 1999, an insured, 30-year municipal bond
rated AAA yielded roughly 95% as much as comparable Treasuries. This is well
above the historical average of approximately 87%.

Five Largest Issuers
Expressed as a percentage of net assets
as of 8/31/99
Southern California 8.2%
Public Power Authority
Orange County Local 6.7
Transportation Authority
Santa Margarita 4.9
Dana Point Authority
Long Beach Harbor 4.1
Revenue
Brea Public Finance 3.6
Authority Revenue

Portfolio Composition
Expressed as a percentage of total investments
as of 8/31/99
General Obligations 47%
Revenue Bonds 34
Prerefunded Bonds 19

Credit Breakdown
Expressed as a percentage of total investments
as of 8/31/99
AAA 7%
AA 6
A 12
BBB 14
Insured 41
Not Rated 19
Cash Equivalents 1
- -------------------------------------------------------------------------------
2

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Portfolio of Investments as
of August 31, 1999 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--98.9%
- ------------------------------------------------------------------------------------------------------------------------------
Alisal Union Sch. Dist.,
Capital Apprec., Ser C, F.G.I.C. Aaa Zero 8/01/12 $ 1,025 $ 516,959
Capital Apprec., Ser C, F.G.I.C. Aaa Zero 8/01/14 1,030 456,516
Capital Apprec., Ser C, F.G.I.C. Aaa Zero 8/01/16 1,005 390,945
Arcadia Unified Sch. Dist., Gen. Oblig. 1993, Ser. A,
M.B.I.A. Aaa Zero 9/01/10 1,765 1,008,856
Baldwin Park Pub. Fin. Auth. Rev., Tax Alloc. BBB(d) 7.05% 9/01/14 1,020 1,105,721
Berkeley Hosp. Rev., Alta Bates Hosp. Corp. Aaa 7.65 12/01/15 1,420(c) 1,488,174
Brea Pub. Fin. Auth. Rev., Sub. Tax Alloc. Redev.
Proj., Ser. C NR 8.10 3/01/21 5,000 5,219,950
Buena Park Cmnty. Redev. Agcy., Central Bus. Dist.
Proj. BBB+(d) 7.10 9/01/14 2,500 2,648,175
California Infrastructure & Econ. Dev., Bank Rev.,
American Ctr. for Wine Food Arts A(d) 5.70 12/01/19 2,500 2,444,000
California St. Hlth. Facs. Fin. Auth. Rev.,
Eskaton Properties NR 7.50 5/01/20 4,500(c)(f) 4,700,835
Valleycare Hosp. Corp. AA-(d) 5.50 5/01/20 2,250 2,158,672
California St. Hsg. Fin. Agcy. Rev., Sngl. Fam. Mtge.,
Ser. A Aa2 Zero 2/01/15 8,420 1,821,835
Chula Vista Redev. Agcy., Bayfront Tax Alloc. BBB+(d) 7.625 9/01/24 4,500 5,021,145
Commerce California Cmnty. Dev. Comm., Rfdg. Merged
Redev. Proj., Ser. A NR 5.65 8/01/18 1,175 1,109,153
Contra Costa Cnty., Spec. Tax Cmnty. Facs. Dist.
Pleasant Hill NR 8.125 8/01/16 1,300(c) 1,376,453
Desert Hosp. Dist., Cert. of Part. AAA(d) 8.10 7/01/20 5,000(c)(f) 5,281,450
East Palo Alto Sanit. Dist., Cert. of Part. NR 8.25 10/01/15 1,295 1,349,027
Fairfield Pub. Fin. Auth. Rev., Fairfield Redev.
Projs., Ser. A NR 7.90 8/01/21 4,200(c) 4,579,260
Foothill/Eastern Trans. Corridor Agcy.,
Toll Rd. Rev. Baa3 Zero 1/01/16 5,000 2,022,150
Toll Rd. Rev. Baa3 Zero 1/01/18 2,950 1,056,513
Toll Rd. Rev. Baa3 Zero 1/15/26 5,200 2,768,636
Kings Cnty. Wst. Mgmt. Auth., Solid Wst. Rev., A.M.T. BBB(d) 7.20 10/01/14 1,150 1,242,414
La Canada Unified Sch. Dist.,
Capital Apprec., F.G.I.C. Aaa Zero 8/01/12 1,600 806,960
Unltd. Tax Gen. Oblig., F.G.I.C. Aaa Zero 8/01/13 1,680 793,850
Long Beach Harbor Rev., Ser. A, A.M.T., F.G.I.C. Aaa 6.00 5/15/16 5,500 5,816,030
Long Beach Redev. Agcy. Dist. No. 3, Spec. Tax Rev.
(cost $2,950,530; purchased 10/18/93) NR 6.375 9/01/23 3,000(h) 3,057,960
Los Angeles Cnty., Cert. of Part., Correctional Facs.
Proj., M.B.I.A. Aaa Zero 9/01/10 3,770 2,141,096
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)(f) 2,292,885
Los Angeles Conv. & Exhib. Ctr. Auth., Cert. of Part. Aaa 9.00 12/01/10 1,250(c)(e) 1,558,750
Madera Redev. Agcy Tax Rev. Tax Alloc. Redev. Proj.,
F.S.A. Aaa 4.75 9/01/28 1,000 848,880
Met. Wtr. Dist. of Southern California,
Rev. Linked S.A.V.R.S. & R.I.B.S. Aa2 5.75 8/10/18 1,000 1,027,950
Waterworks Rev. Rfdg., Ser. A Aa2 5.75 7/01/21 4,000 4,115,560
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Portfolio of Investments as
of August 31, 1999 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>
- ------------------------------------------------------------------------------------------------------------------------------
Midpeninsula Regional Open Space Dist. Fin. Auth. Rev.,
1996, A.M.B.A.C. Aaa Zero 9/01/15 $ 3,000 $ 1,230,150
Mojave Desert Solid Wst. Victor Vally Materials, Recov.
Fac., A.M.T. Baa1 7.875% 6/01/20 1,175 1,290,303
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 8,675,440
Linked R.I.B.S. Aa3 8.668 2/14/11 750(g) 870,000
Petaluma City Joint Union High Sch. Dist.,
Capital Apprec., M.B.I.A. Aaa Zero 8/01/14 1,170 518,567
Capital Apprec., M.B.I.A. Aaa Zero 8/01/15 1,600 664,256
Capital Apprec., M.B.I.A. Aaa Zero 8/01/16 1,455 565,995
Capital Apprec., M.B.I.A. Aaa Zero 8/01/17 3,015 1,101,440
Port Redwood City Rev., A.M.T. BBB(d) 5.40 6/01/19 500 459,545
Redding Elec. Sys. Rev., Cert. of Part.
Linked R.I.B.S., M.B.I.A. Aaa 9.015 7/01/22 1,750(g) 2,067,188
Linked S.A.V.R.S. & R.I.B.S., M.B.I.A. Aaa 6.368 7/01/22 50 54,555
Roseville City Sch. Dist., Cap. Apprec. Ser. A,
F.G.I.C. Aaa Zero 8/01/10 1,230 706,045
San Bernardino Cnty.,
Cert. of Part., Med. Ctr. Fin. Proj., M.B.I.A. Aaa 5.50 8/01/22 4,400 4,365,812
Fin. Auth. Ref. Impt., Granada Hills, Ser. A B-(d) 6.90 5/01/27 645 619,007
San Francisco City & Cnty., Redev. Agcy., Lease Rev.,
Cap. Apprec. A1 Zero 7/01/09 2,000 1,198,040
San Jose, Unified Sch. Dist., Santa Clara, Gen. Oblig.,
Ser. A, F.G.I.C. Aaa Zero 8/01/17 1,350 493,182
Santa Cruz Cnty. Pub. Fin. Auth. Rev., Tax Alloc. Sub.
Ln., Ser. B AAA(d) 7.625 9/01/21 2,350(c) 2,408,750
Santa Margarita, Dana Point Auth.,
Impvt. Dists. 3, Ser. B, M.B.I.A. Aaa 7.25 8/01/08 2,500 2,937,350
Impvt. Dists. 3, Ser. A, M.B.I.A. Aaa 7.25 8/01/09 1,400 1,658,930
Impvt. Dists. 3, Ser. B, M.B.I A. Aaa 7.25 8/01/09 1,000 1,184,950
Impvt. Dists. 3, Ser. B, M.B.I.A. Aaa 7.25 8/01/14 1,000 1,199,020
So. Orange Cnty. Pub. Fin. Auth.,
Foothill Area Proj., F.G.I.C. Aaa 6.50 8/15/10 750 846,698
Spec. Tax Rev., M.B.I.A. Aaa 7.00 9/01/11 3,500(f) 4,101,720
So. Tahoe Joint Pwrs. Fin. Auth. Rev., Rfdg. So. Tahoe
Redev. Proj., Ser. A BBB-(d) 5.375 10/01/30 1,250 1,129,925
Southern California Pub. Pwr. Auth.,
Proj. Rev. A3 6.75 7/01/10 2,265 2,572,926
Proj. Rev. A3 6.75 7/01/11 1,195 1,352,525
Proj. Rev. A3 6.75 7/01/12 2,935 3,330,286
Proj. Rev. A3 6.75 7/01/13 4,000 4,508,560
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Portfolio of Investments as
of August 31, 1999 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>
- ------------------------------------------------------------------------------------------------------------------------------
Southern California Pub. Pwr. Auth.,
Proj. Rev., A.M.B.A.C. Aaa Zero 7/01/16 $ 7,925(f) $ 3,117,537
Transmission Proj. Rev. Rfdg., Ser. A, F.G.I.C. Aaa Zero 7/01/12 7,080 3,573,205
Stockton Cmnty. Facs. Dist. No. 90-2, Brookside Estates NR 6.20% 8/01/15 700 702,989
Sulphur Springs Union Sch. Dist., Ser. A, M.B.I.A. Aaa Zero 9/01/09 2,000 1,215,780
Torrance Redev. Agcy., Rfdg. Tax. Alloc., Downtown
Redev. Baa2 7.125 9/01/21 1,580(c) 1,704,472
Vacaville Cmnty. Redev. Agcy., Cmnty. Hsg. Fin.
Multi-fam. NR 7.375 11/01/14 1,110 1,151,947
Victor Valley Union High Sch. Dist.,
Gen. Oblig., M.B.I.A. Aaa Zero 9/01/09 2,075 1,254,026
Gen. Oblig., M.B.I.A. Aaa Zero 9/01/15 5,070 2,105,014
Virgin Islands Terr., Hugo Ins. Claims Fund Proj., Ser.
91 NR 7.75 10/01/06 670(c) 715,493
Walnut Valley Unified Sch. Dist., M.B.I.A. Aaa 6.00 8/01/15 1,870 2,015,748
------------
Total long-term investments (cost $132,916,421) 141,894,136
SHORT-TERM INVESTMENTS--0.1%
California Poll. Ctrl. Fin. Auth., Solid Waste Disposal
Rev.,
Shell Oil Martinez Refining Co., Ser. 96B, F.R.D.D.
(cost $100,000) Aa1 2.65 9/01/99 100 100,000
------------
Total Investments--99.0%
(cost $133,016,421; Note 4) 141,994,136
Other assets in excess of liabilities--1.0% 1,444,938
------------
Net Assets--100% $143,439,074
------------
------------
</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.
(e) Segregated as collateral for financial futures contracts.
(f) When-issued security.
(g) Inverse floating rate bond. The coupon is inversely indexed to a floating
interest rate. The rate shown is the rate at year end.
(h) Indicates a restricted security. The aggregate cost of restricted securities
is $2,950,530 and the aggregate value is $3,057,960 which represents
approximately 2.1% of net assets.
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 CALIFORNIA SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets August 31, 1999
<S> <C>
Investments, at value (cost $133,016,421).................................................................. $ 141,994,136
Cash....................................................................................................... 200,358
Interest receivable........................................................................................ 1,826,126
Due from broker - variation margin......................................................................... 37,688
Receivable for Series shares sold.......................................................................... 35,668
Other assets............................................................................................... 3,718
---------------
Total assets............................................................................................ 144,097,694
---------------
Liabilities
Payable for Series shares reacquired....................................................................... 350,122
Dividends payable.......................................................................................... 117,324
Accrued expenses........................................................................................... 79,500
Management fee payable..................................................................................... 61,151
Distribution fee payable................................................................................... 41,139
Deferred trustee's fees.................................................................................... 9,384
---------------
Total liabilities....................................................................................... 658,620
---------------
Net Assets................................................................................................. $ 143,439,074
---------------
---------------
Net assets were comprised of:
Shares of beneficial interest, at par................................................................... $ 125,332
Paid-in capital in excess of par........................................................................ 137,085,913
---------------
137,211,245
Accumulated net realized loss on investments............................................................ (2,837,824)
Net unrealized appreciation on investments.............................................................. 9,065,653
---------------
Net assets, August 31, 1999................................................................................ $ 143,439,074
---------------
---------------
Class A:
Net asset value and redemption price per share
($92,868,075 / 8,113,751 shares of beneficial interest issued and outstanding)....................... $11.45
Maximum sales charge (3% of offering price)............................................................. .35
---------------
Maximum offering price to public........................................................................ $11.80
---------------
---------------
Class B:
Net asset value, offering price and redemption price per share
($48,196,168 / 4,212,044 shares of beneficial interest issued and outstanding)....................... $11.44
---------------
---------------
Class C:
Net asset value and redemption price per share
($1,446,924 / 126,449 shares of beneficial interest issued and outstanding).......................... $11.44
Sales charge (1% of offering price)..................................................................... .12
---------------
Offering price to public................................................................................ $11.56
---------------
---------------
Class Z:
Net asset value, offering price and redemption price per share
($927,907 / 81,028 shares of beneficial interest issued and outstanding)............................. $11.45
---------------
---------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6

<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND
CALIFORNIA SERIES
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income August 31, 1999
<S> <C>
Income
Interest................................... $ 8,950,165
---------------
Expenses
Management fee............................. 768,543
Distribution fee--Class A.................. 189,848
Distribution fee--Class B.................. 280,207
Distribution fee--Class C.................. 10,294
Custodian's fees and expenses.............. 93,000
Transfer agent's fees and expenses......... 75,000
Reports to shareholders.................... 43,000
Registration fees.......................... 42,000
Legal fees and expenses.................... 15,000
Audit fees and expenses.................... 13,000
Trustees' fees and expenses................ 7,000
Miscellaneous.............................. 4,703
---------------
Total expenses.......................... 1,541,595
Less: Custodian fee credit (Note 1)........ (444)
---------------
Net expenses............................ 1,541,151
---------------
Net investment income......................... 7,409,014
---------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain on:
Investment transactions.................... 149,312
Financial futures transactions............. 175,401
---------------
324,713
---------------
Net change in unrealized appreciation
(depreciation) on:
Investments................................ (10,126,674)
Financial futures contracts................ (59,562)
---------------
(10,186,236)
---------------
Net loss on investments....................... (9,861,523)
---------------
Net Decrease in Net Assets
Resulting from Operations..................... $(2,452,509)
---------------
---------------
</TABLE>
PRUDENTIAL MUNICIPAL SERIES FUND
CALIFORNIA SERIES
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended August 31,
in Net Assets 1999 1998
<S> <C> <C>
Operations
Net investment income.......... $ 7,409,014 $ 7,678,092
Net realized gain (loss) on
investment transactions..... 324,713 (274,855)
Net change in unrealized
appreciation (depreciation)
of investments.............. (10,186,236) 5,747,426
--------------- ------------
Net increase (decrease) in net
assets resulting from
operations.................. (2,452,509) 13,150,663
--------------- ------------
Dividends and distributions (Note 1)
Dividends from net investment
income
Class A..................... (4,684,010) (4,438,300)
Class B..................... (2,591,035) (3,163,906)
Class C..................... (60,435) (31,174)
Class Z..................... (73,534) (44,712)
--------------- ------------
(7,409,014) (7,678,092)
--------------- ------------
Distributions in excess of net
investment income
Class A..................... -- (53,531)
Class B..................... -- (42,305)
Class C..................... -- (231)
Class Z..................... -- (526)
--------------- ------------
-- (96,593)
--------------- ------------
Series share transactions (net of
share conversions) (Note 5)
Net proceeds from shares
sold........................ 18,346,773 13,997,164
Net asset value of shares
issued in reinvestment of
dividends and
distributions............... 4,059,444 4,324,099
Cost of shares reacquired...... (24,798,715) (20,676,442)
--------------- ------------
Net decrease in net assets from
Series share transactions... (2,392,498) (2,355,179)
--------------- ------------
Total increase (decrease)......... (12,254,021) 3,020,799
Net Assets
Beginning of year................. 155,693,095 152,672,296
--------------- ------------
End of year....................... $ 143,439,074 $155,693,095
--------------- ------------
--------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7

<PAGE>
PRUDENTIAL MUNICIPAL SERIES 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.

The Series held illiquid securities, including those which are restricted as to
disposition under securities law ('restricted securities'). None of the issues
of restricted securities held by the Series at August 31, 1999 include
registration rights under which the Series may demand registration by the
issuer. Restricted securities, sometimes referred to as private placements, are
valued pursuant to the valuation procedures noted above.

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 of 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.

Custody Fee Credits: The Fund has an arrangement with its custodian bank,
whereby uninvested monies earn credits which reduce the fees charged by the
custodian.
- --------------------------------------------------------------------------------
8

<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND
Notes to Financial Statements CALIFORNIA SERIES
- --------------------------------------------------------------------------------
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 Investment Management
Services LLC ('PIMS') which acts as the distributor of the Fund. The Fund
compensates PIMS for distributing and servicing the Fund's Class A, Class B and
Class C shares, pursuant to plans of distribution (the 'Class A, B and C
Plans'), regardless of expenses actually incurred by it. The distribution fees
are accrued daily and payable monthly. No distribution or service fees are paid
to PIMS as distributor of the Class Z shares of the Fund.

Pursuant to the Class A, B and C Plans, the Fund compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, .50 of 1%
and 1% of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Plans were .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 period September 1, 1998 through December 31, 1998. Effective January 1,
1999, such expenses under the plans were .25 of 1%, .50 of 1% and .75 of 1% of
the average daily net assets of the Class A, B and C shares, respectively.

PIMS has advised the Series that they have received approximately $47,400 and
$4,900 in front-end sales charges resulting from sales of Class A and Class C
shares during the year ended August 31, 1999. From these fees, PIMS paid such
sales charges to affiliated broker-dealers, which in turn paid commissions to
salespersons and incurred other distribution costs.

PIMS has advised the Series that for the year ended August 31, 1999, they
received approximately $46,900 and $5,000 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.

PIFM, PIMS and PIC are indirect, wholly owned subsidiaries of The Prudential
Insurance Company of America.

As of March 11, 1999, the Fund, along with other affiliated registered
investment companies (the 'Funds'), entered into a syndicated credit agreement
('SCA') with an unaffiliated lender. The maximum commitment under the SCA is $1
billion. Interest on any borrowings will be at market rates. The Funds pay a
commitment fee at an annual rate of .065 of 1% on the unused portion of the
credit facility, which is accrued and paid quarterly on a pro rata basis by the
Funds. The SCA expires on March 9, 2000. Prior to March 11, 1999, the Funds had
a credit agreement with a maximum commitment of $200,000,000. The commitment fee
was .055 of 1% on the unused portion of the credit facility. The Fund did not
borrow any amounts pursuant to either agreement during the year ended August 31,
1999. The purpose of the agreements is to serve as an alternative source of
funding for capital share redemptions.

- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates

Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the year ended August 31, 1999, the
Series incurred fees of approximately $47,100 for the services of PMFS. As of
August 31, 1999, 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 nonaffiliates.

- ------------------------------------------------------------
Note 4. Portfolio Securities

Purchases and sales of portfolio securities of the Series, excluding short-term
investments, for the year ended August 31, 1999 were $19,604,632 and
$22,779,752, respectively.

During the year ended August 31, 1999, the Fund entered into financial futures
contracts. Details of open contracts at August 31, 1999 are as follows:
<TABLE>
<CAPTION>
Value at Value at
Number of Expiration August 31, Trade Unrealized
Contracts Type Date 1999 Date Appreciation
- ----------- ---------------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Short position:
134 Muni Bond Sept. 1999 $15,322,062 $15,410,000 $ 87,938
</TABLE>

The cost basis of investments for federal income tax purposes at August 31, 1999
was substantially the same as for financial reporting purposes and, accordingly,
net unrealized appreciation of investments for federal income tax purposes was
$8,977,715 (gross unrealized appreciation--$10,038,715; gross unrealized
depreciation--$1,061,000).

For federal income tax purposes, the Series has a capital loss carryforward as
of August 31, 1999 of approximately $2,749,900, of which, $2,747,000 expires in
2003 and $2,900 expires in 2006. Accordingly, no capital gains
- --------------------------------------------------------------------------------
9

- ------------------------------------------------------------
Note 5. Capital

The Series offers Class A, Class B, Class C and Class Z shares. Class A shares
are sold with a front-end sales charge of up to 3%. Class B shares are sold with
a contingent deferred sales charge which declines from 5% to zero depending on
the period of time the shares are held. Class C shares are sold with a front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18 months. Prior to November 2, 1998, Class C shares were 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 qualify 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 fiscal years ended August
31, 1999 and August 31, 1998 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------------ ---------- ------------
<S> <C> <C>
Year ended August 31, 1999:
Shares sold......................... 795,762 $ 9,586,464
Shares issued in reinvestment of
dividends......................... 216,108 2,593,281
Shares reacquired................... (914,438) (10,998,324)
---------- ------------
Net increase in shares outstanding
before conversion................. 97,432 1,181,421
Shares issued upon conversion from
Class B........................... 541,419 6,534,806
---------- ------------
Net increase in shares
outstanding....................... 638,851 $ 7,716,227
---------- ------------
---------- ------------
Year ended August 31, 1998:
Shares sold......................... 551,486 $ 6,650,320
Shares issued in reinvestment of
dividends and distributions....... 210,942 2,535,590
Shares reacquired................... (767,076) (9,222,647)
---------- ------------
Net decrease in shares outstanding
before conversion................. (4,648) (36,737)
Shares issued upon conversion from
Class B........................... 571,041 6,863,328
---------- ------------
Net increase in shares
outstanding....................... 566,393 $ 6,826,591
---------- ------------
---------- ------------
<CAPTION>
Class B Shares Amount
<S> <C> <C>
- ------------------------------------ ---------- ------------
Year ended August 31, 1999:
Shares sold......................... 514,171 $ 6,183,598
Shares issued in reinvestment of
dividends......................... 114,358 1,373,595
Shares reacquired................... (952,947) (11,419,751)
---------- ------------
Net decrease in shares outstanding
before conversion................. (324,418) (3,862,558)
Shares reacquired upon conversion
into
Class A........................... (541,523) (6,534,806)
---------- ------------
Net decrease in shares
outstanding....................... (865,941) $(10,397,364)
---------- ------------
---------- ------------
Year ended August 31, 1998:
Shares sold......................... 493,897 $ 5,944,373
Shares issued in reinvestment of
dividends and distributions....... 143,690 1,726,117
Shares reacquired................... (929,330) (11,183,208)
---------- ------------
Net decrease in shares outstanding
before conversion................. (291,743) (3,512,718)
Shares reacquired upon conversion
into
Class A........................... (571,041) (6,863,328)
---------- ------------
Net decrease in shares
outstanding....................... (862,784) $(10,376,046)
---------- ------------
---------- ------------
<CAPTION>
Class C
- ------------------------------------
Year ended August 31, 1999:
Shares sold......................... 53,745 $ 647,299
Shares issued in reinvestment of
dividends......................... 3,582 42,860
Shares reacquired................... (33,739) (402,855)
---------- ------------
Net increase in shares
outstanding....................... 23,588 $ 287,304
---------- ------------
---------- ------------
Year ended August 31, 1998:
Shares sold......................... 87,614 $ 1,056,749
Shares issued in reinvestment of
dividends and distributions....... 2,094 25,178
Shares reacquired................... (15,196) (183,128)
---------- ------------
Net increase in shares
outstanding....................... 74,512 $ 898,799
---------- ------------
---------- ------------
<CAPTION>
Class Z
- ------------------------------------
Year ended August 31, 1999:
Shares sold......................... 161,138 $ 1,929,412
Shares issued in reinvestment of
dividends......................... 4,138 49,708
Shares reacquired................... (169,051) (1,977,785)
---------- ------------
Net decrease in shares
outstanding....................... (3,775) $ 1,335
---------- ------------
---------- ------------
Year ended August 31, 1998:
Shares sold......................... 28,803 $ 345,722
Shares issued in reinvestment of
dividends and distributions....... 3,094 37,214
Shares reacquired................... (7,224) (87,459)
---------- ------------
Net increase in shares
outstanding....................... 24,673 $ 295,477
---------- ------------
---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
10

<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND
Financial Highlights CALIFORNIA SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------
Year Ended August 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year......... $ 12.22 $ 11.80 $ 11.44 $ 11.49 $ 11.30
------- ------- ------- ------- -------
Income from investment operations
Net investment income...................... .59 .62 .65(a) .65(a) .66(a)
Net realized and unrealized gain (loss) on
investment transactions................. (.77) .43 .36 (.05) .19
------- ------- ------- ------- -------
Total from investment operations........ (.18) 1.05 1.01 .60 .85
------- ------- ------- ------- -------
Less distributions
Dividends from net investment income....... (.59) (.62) (.65) (.65) (.66)
Distributions in excess of net investment
income.................................. -- (.01) --(c) -- --
------- ------- ------- ------- -------
Total distributions..................... (.59) (.63) (.65) (.65) (.66)
------- ------- ------- ------- -------
Net asset value, end of year............... $ 11.45 $ 12.22 $ 11.80 $ 11.44 $ 11.49
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN(b):........................... (1.56)% 9.13% 9.01% 5.23% 7.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000).............. $92,868 $91,356 $81,535 $72,876 $68,403
Average net assets (000)................... $94,868 $85,624 $78,347 $71,119 $42,617
Ratios to average net assets:
Expenses, including distribution fees... .89% .78% .76%(a) .81%(a) .73(a)
Expenses, excluding distribution fees... .69% .68% .66%(a) .71%(a) .63(a)
Net investment income................... 4.94% 5.18% 5.53%(a) 5.58%(a) 5.90(a)
For Class A, B, C and Z shares:
Portfolio turnover rate................. 13% 11% 14% 26% 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 year reported and includes reinvestment of dividends and
distributions.
(c) Less than $.005 per share.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 11

<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND
Financial Highlights CALIFORNIA SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
--------------------------------------------------------
Year Ended August 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year......... $ 12.22 $ 11.80 $ 11.43 $ 11.49 $ 11.29
------- ------- ------- ------- --------
Income from investment operations
Net investment income...................... .56 .58 .60(a) .60(a) .62(a)
Net realized and unrealized gain (loss) on
investment transactions................. (.78) .43 .37 (.06) .20
------- ------- ------- ------- --------
Total from investment operations........ (.22) 1.01 .97 .54 .82
------- ------- ------- ------- --------
Less distributions
Dividends from net investment income....... (.56) (.58) (.60) (.60) (.62)
Distributions in excess of net investment
income.................................. -- (.01) --(c) -- --
------- ------- ------- ------- --------
Total distributions..................... (.56) (.59) (.60) (.60) (.62)
------- ------- ------- ------- --------
Net asset value, end of year............... $ 11.44 $ 12.22 $ 11.80 $ 11.43 $ 11.49
------- ------- ------- ------- --------
------- ------- ------- ------- --------
TOTAL RETURN(b):........................... (1.94)% 8.70% 8.67% 4.73% 7.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000).............. $48,196 $62,043 $70,093 $85,190 $103,891
Average net assets (000)................... $56,041 $66,086 $75,935 $96,525 $136,275
Ratios to average net assets:
Expenses, including distribution fees... 1.19% 1.18% 1.16%(a) 1.21%(a) 1.13(a)
Expenses, excluding distribution fees... .69% .68% .66%(a) .71%(a) .63(a)
Net investment income................... 4.62% 4.78% 5.13%(a) 5.18%(a) 5.50(a)
</TABLE>
- ---------------
(a) Net of management fee waiver.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions.
(c) Less than $.005 per share.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 12

<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND
Financial Highlights CALIFORNIA SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Class Z
-------------------------------------------------- ------------------
Year Ended
Year Ended August 31, August 31,
-------------------------------------------------- ------------------
1999 1998 1997 1996 1995 1999 1998
------ ------ ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $12.22 $11.80 $11.43 $11.49 $11.29 $ 12.23 $11.81
------ ------ ------ ------ ------ ------- ------
Income from investment operations
Net investment income...................... .53 .55 .57(a) .57(a) .59(a) .62 .63
Net realized and unrealized gain (loss) on
investment transactions................. (.78) .43 .37 (.06) .20 (.78) .43
------ ------ ------ ------ ------ ------- ------
Total from investment operations........ (.25) .98 .94 .51 .79 (.16) 1.06
------ ------ ------ ------ ------ ------- ------
Less distributions
Dividends from net investment income....... (.53) (.55) (.57) (.57) (.59) (.62) (.63)
Distributions in excess of net investment
income.................................. -- (.01) --(c) -- -- -- (.01)
------ ------ ------ ------ ------ ------- ------
Total distributions..................... (.53) (.56) (.57) (.57) (.59) (.62) (.64)
------ ------ ------ ------ ------ ------- ------
Net asset value, end of period............. $11.44 $12.22 $11.80 $11.43 $11.49 $ 11.45 $12.23
------ ------ ------ ------ ------ ------- ------
------ ------ ------ ------ ------ ------- ------
TOTAL RETURN(b):........................... (2.18)% 8.43% 8.40% 4.47% 7.29% (1.44)% 9.24%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............ $1,447 $1,257 $ 334 $ 543 $ 129 $ 928 $1,037
Average net assets (000)................... $1,373 $ 689 $ 480 $ 286 $ 76 $ 1,427 $ 847
Ratios to average net assets:
Expenses, including distribution fees... 1.44% 1.43% 1.41%(a) 1.46%(a) 1.38%(a) .69% .68%
Expenses, excluding distribution fees... .69% .68% .66%(a) .71%(a) .63%(a) .69% .68%
Net investment income................... 4.40% 4.53% 4.88%(a) 4.93%(a) 5.25%(a) 5.15% 5.28%

<CAPTION>
September 18,
1996(d)
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)(e)
Expenses, excluding distribution fees... .66%(a)(e)
Net investment income................... 5.35%(a)(e)
</TABLE>
- ---------------
(a) Net of management fee waiver.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(c) Less than $.005 per share.
(d) Commencement of offering of Class Z shares.
(e) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Report of Independent Accountants CALIFORNIA SERIES
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
Prudential California Municipal Fund, California Series

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential California Municipal
Fund, California Series (the 'Fund', one of the portfolios constituting
Prudential California Municipal Fund) at August 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the three years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as 'financial statements') are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above. The accompanying financial highlights for each of the two years in the
period ended August 31, 1996 were audited by other independent accountants,
whose opinion dated October 14, 1996 was unqualified.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
October 15, 1999
- --------------------------------------------------------------------------------
14

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Federal Income Tax Information
(Unaudited) CALIFORNIA SERIES
- --------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days of the
Series' fiscal year end (August 31, 1999) 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, 1999,
dividends paid from net investment income of $.59 per Class A share, $.56 per
Class B share, $.53 per Class C share and $.62 per Class Z share were all
federally tax-exempt interest dividends.

We wish to advise you that the corporate dividends received deduction for the
Series is zero. Only funds that invest in U.S. equity securities are entitled to
pass-through a corporate dividends received deduction.

In January 2000, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV
as to the federal tax status of the dividends and distributions received by you
in calendar year 1999.
- --------------------------------------------------------------------------------
15

<PAGE>
Comparing a $10,000 Investment
Prudential California Municipal Fund--California Series vs.
the Lehman Brothers Municipal Bond Index

Class A
(GRAPH)

Average Annual Total Returns
- ----------------------
With Sales Load
Since Inception 6.32% (6.30%)
Five Years 5.22% (5.19%)
One Year -4.51%

Without Sales Load
Since Inception 6.66% (6.64%)
Five Years 5.87% (5.83%)
One Year -1.56%

Class B
(GRAPH)

Average Annual Total Returns
- -----------------------------
With Sales Load
Since Inception 7.35% (7.24%)
Ten Years 6.25% (6.23%)
Five Years 5.30% (5.27%)
One Year -6.94%

Without Sales Load
Since Inception 7.35% (7.24%)
Ten Years 6.25% (6.23%)
Five Years 5.47% (5.43%)
One Year -1.94%

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. The lines beneath the graphs are
designed to give you an idea of how much the Series' returns can fluctuate
from year to year by measuring the best and worst calendar years in terms of
total annual return since the inception of each share class (or for the past
ten years for Class B shares).

These graphs compare a $10,000 investment in the Prudential California
Municipal Fund--California Series (Class A, B, C, and Z shares) with a similar
investment in the Lehman Brothers Municipal Bond Index (the Index) by
portraying the account values at the commencement of operations of Class A, C,
and Z shares, at the beginning of the ten-year period for Class B shares, and
at the end of the fiscal year (August 31), as measured on a quarterly basis,
beginning in 1990 for Class A, 1989 for Class B, 1994 for Class C, and 1996
for Class Z shares. For purposes of the graphs, and unless otherwise indicated,
it has been assumed that (a) the maximum applicable front-end sales charge was
deducted from the initial $10,000 investment in Class A and Class C shares;
(b) the maximum applicable contingent deferred sales charges were deducted
from the value of the investment in Class B and Class C shares, assuming full
redemption on August 31, 1999; (c) all recurring fees (including management
fees) were deducted; and (d) all dividends and distributions

<PAGE>

Class C
(GRAPH)

Average Annual Total Returns
- -----------------------------
With Sales Load
Since Inception 4.92% (4.88%)
Five Years 4.99% (4.96%)
One Year -4.16%

Without Sales Load
Since Inception 5.13% (5.09%)
Five Years 5.20% (5.17%)
One Year -2.18%

Class Z
(GRAPH)

Average Annual Total Returns
- -----------------------------
Since Inception 5.36% (5.33%)
One Year -1.44%

were reinvested. Class B shares will automatically convert to Class A shares,
on a quarterly basis, approximately seven years after purchase. This
conversion feature is not reflected in the graphs. Class Z shares are not
subject to a sales charge or distribution and service (12b-1) fees. The graphs
and accompanying tables reflect the past subsidy and/or waiver of expenses
and/or management fees. Without waiver of management fees and/or expense
subsidization, the Series' average annual total returns would have been
lower, as indicated in parentheses ( ).

The Index is a market value-weighted index comprising approximately 47,000
municipal bonds (state and local 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. The
Index is unmanaged, and the total return of the Index includes the
reinvestment of all dividends, but does not reflect the payment of transaction
costs and advisory fees associated with an investment in the Series. The
securities in the Index may differ substantially from the securities in the
Series. The Index is not the only index that may be used to characterize
performance of municipal bond funds. Other indexes may portray different
comparative performance. Investors cannot invest directly in an index.

These graphs are furnished to you in accordance with SEC regulations.

<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077

(800) 225-1852
http://www.prudential.com

Class NASDAQ Cusip
A PRMCX 744313107
B PBCMX 744313206
C -- 744313701
Z -- 744313883

Trustees
Edward D. Beach
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
Thomas H. O'Brien
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III

Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Deborah A. Docs, Secretary
David F. Connor, Assistant Secretary

Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street, Newark, NJ 07102-4077

Investment Adviser
The Prudential Investment Corporation
Prudential Plaza, Newark, NJ 07102-3777

Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street, Newark, NJ 07102-4077

Custodian
State Street Bank and Trust Company
One Heritage Drive, North Quincy, MA 02171

Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005, New Brunswick, NJ 08906

Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas, New York, NY 10036

Legal Counsel
Swidler Berlin Shereff Friedman, 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.

This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.

MF116E

<PAGE>

(ICON)

Prudential
California
Municipal
Fund
- -------------------
California Income
Series

ANNUAL
REPORT

Aug. 31, 1999

(LOGO)

<PAGE>
A Message from the Fund's President October 5, 1999
(LOGO)

Dear Shareholder,
Prudential California Municipal Fund--California Income Series' Class A shares
posted a negative return of 1.37% during our 12-month reporting period that
ended August 31, 1999. Its benchmark Lipper Average also generated a negative
return as inflation fears caused a broad sell-off in the U.S. bond markets.
The following report takes a closer look at recent bond market events and
explains how the Series was positioned.

To utilize these resources effectively, we recently organized the group into
teams, each specializing in a different sector of the fixed-income market. The
Municipal Bonds Sector team, headed by Evan Lamp, is now responsible for the
day-to-day management of your Prudential California Municipal Fund--California
Income Series. Many of the investment professionals who supported the
management of the Series in the past are part of this new team.

Thank you for your continued confidence in Prudential mutual funds.

Sincerely,

John R. Strangfeld
President
Prudential California Municipal Fund

<PAGE>
Performance Review
(PHOTO)

Evan Lamp, team leader of the
Municipal Bonds Sector team

Investment Goals and Style
The Series' investment objective is to maximize current income that is exempt
from California State and federal income taxes, consistent with the
preservation of capital. However, certain shareholders may be subject to the
alternative minimum tax (AMT) because some of the Series' bonds are AMT
eligible. There can be no assurance the Series will achieve its investment
objective.

Inflation fears battered the municipal bond market
Our fiscal year that ended on August 31, 1999, will be remembered as a
challenging period in the history of the municipal debt securities market. For
the first several weeks, prices of tax-exempt bonds rallied in sympathy with
U.S. Treasury securities. Many investors purchased Treasuries for their
relative safety after a global financial crisis spread beyond Asia to Russia
and Latin America in the summer of 1998.

Positioning duration for interest rate views

We began the reporting period with a longer-than-average duration stance
compared to our competitive universe. (Duration is a measure of the Series'
sensitivity to interest-rate fluctuations.) A longer duration enables the
Series' shares to gain more rapidly if interest rates should fall and
municipal bond prices, which move in the opposite direction of their yields,
rise. We expected long-term interest rates to continue to fall because the
U.S. economic expansion was poised to slow and inflation to remain tame after
the global financial crisis of last year. Our strategy benefited the Series
during the autumn of 1998 when interest rates fell and the Federal Reserve cut
the Federal funds rate three times. Furthermore, investors sought safety and
liquidity for their investments in this uncertain market environment and
purchased a multitude of fixed-income debt securities, especially U.S.
Treasuries and municipal bonds. This trend was referred to as a "flight to
quality."

<PAGE>
interest rates rose, and the prices of municipal bonds fell throughout the
first eight months of 1999, hurting the Series' performance. In addition, a
"flight from quality" was taking place as investors felt that they no longer
needed the safety of Treasury securities. Therefore we shortened the Series'
duration to a more neutral stance in the late spring of 1999, as it was
apparent that the U.S. economy would not slow enough to alleviate inflation
fears. A shorter duration helped performance when the Fed stepped in and
raised rates in June and August.

Performance at a Glance

<TABLE>
<CAPTION>
Cumulative Total Returns1 As of 8/31/99
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A -1.37% 37.11% (36.32) 91.10% (87.09)
Class B -1.67 34.54 (33.77) 34.86 (33.71)
Class C -1.91 32.87 (32.11) 33.50 (32.74)
Class Z -1.18 N/A 18.79 (18.67)
Lipper CA Muni
Debt Fund Avg.3 -1.49 32.05 ***
</TABLE>

<TABLE>
<CAPTION>
Average Annual Total Returns1 As of 9/30/99
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A -5.70% 6.14% (6.02) 7.28% (7.02)
Class B -8.06 6.24 (6.11) 5.19 (5.05)
Class C -5.27 5.92 (5.79) 5.60 (5.48)
Class Z -2.58 N/A 5.95 (5.91)
</TABLE>

<TABLE>
<CAPTION>
Distributions & Yields As of 8/31/99
Total Taxable Equivalent Yield4
Distributions 30-Day At Tax Rates Of
Paid for 12 Mos. SEC Yield 36% 39.6%
<S> <C> <C> <C> <C>
Class A $0.56 4.38% 7.55% 8.00%
Class B $0.53 4.26 7.34 7.78
Class C $0.50 3.97 6.84 7.25
Class Z $0.58 4.76 8.20 8.69
</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.

2 Inception dates: Class A, 12/3/90; Class B, 12/7/93; Class C, 8/1/94; and
Class Z, 9/18/96.

3 Lipper average returns are for all funds in each share class for the one-
and five-year periods in the California Municipal Debt Fund category.

4 Taxable equivalent yields reflect federal and applicable state tax rates.

*** Lipper Since Inception returns are 75.02% for Class A; 30.58% for Class B;
32.38% for Class C; and 14.78% for Class Z, based on all funds in each share
class.
- -------------------------------------------------------------------------------
1
<PAGE>
Review Cont'd.

Looking Ahead
Fed poised to act again, if necessary
If the U.S. economy does not lose steam quickly enough, we believe the Federal
Reserve will continue to increase short-term interest rates to slow the
economic expansion to a more sustainable pace. After their latest meeting in
early October 1999, Fed policy makers released a statement saying they were
considering hiking rates again and would be "especially alert" to trends that
could boost inflationary pressures.

Five Largest Issuers
Expressed as a percentage of net assets
as of 8/31/99

Southern California 4.8%
Public Power Authority
Orange County 4.1
Local Transportation Authority
Long Beach Harbor 3.0
Revenue
Foothill/Eastern 2.9
Transit Corridor Agency
El Dorado County 2.2
Special Tax

Portfolio Composition
Expressed as a percentage of total investments
as of 8/31/99

General Obligations 53%
Revenue Bonds 25
Prerefunded Bonds 19
Miscellaneous 2
Cash Equivalents 1

Credit Breakdown
Expressed as a percentage of total investments
as of 8/31/99
AAA 19%
AA 3
A 9
BBB 15
BB 9
B 14
Insured 29
Other 2
- -------------------------------------------------------------------------------
2

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Portfolio of Investments as
of August 31, 1999 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--99.0%
- ------------------------------------------------------------------------------------------------------------------------------
Alisal Union Sch. Dist.,
Cap. Apprec., Ser. C., F.G.I.C. Aaa Zero 8/01/13 $ 1,090 $ 515,058
Cap. Apprec., Ser. C., F.G.I.C. Aaa Zero 8/01/15 1,075 446,297
Cap. Apprec., Ser. C., F.G.I.C. Aaa Zero 8/01/19 1,615 520,175
Cap. Apprec., Ser. C., F.G.I.C. Aaa Zero 8/01/22 1,175 315,617
Arcadia Unif. Sch. Dist.,
Gen. Oblig., Ser. A, M.B.I.A. Aaa Zero 9/01/09 1,200 729,468
Gen. Oblig., Ser. A, M.B.I.A. Aaa Zero 9/01/11 1,875 1,006,762
Gen. Oblig., Ser. A, M.B.I.A. Aaa Zero 9/01/12 2,045 1,026,856
Assoc. of Bay Area Govt's. Fin. Auth.,
Cert. of Part., Channing House, Ser. A NR 7.125% 1/01/21 1,500(e) 1,588,410
Ref. Amer. Baptist Homes, Ser. A BBB(d) 6.20 10/01/27 2,000 1,984,100
Brea Pub. Fin. Auth. Rev., Tax Alloc. Redev. Proj., Ser. C NR 8.10 3/01/21 3,000 3,131,970
Brentwood Infrastructure Fin. Auth. Rev. NR 5.60 9/02/19 1,990 1,862,839
Buena Park Cmnty. Redev. Agcy. Cent. Bus. Dist. Proj. NR 7.80 9/01/14 3,325 3,533,278
Calabasas Spec. Tax Ref. Cmnty. Facs. Dist. No. 98-1 NR 5.75 9/01/28 1,000 932,170
California Hsg. Fin. Agcy., Single Fam. Mtge., Ser. A.,
A.M.T., M.B.I.A. Aaa 6.00 8/01/20 3,730(f) 3,767,151
California Infrastructure & Econ. Dev.,
Amer. Ctr. for Wine, Food & Arts A(d) 5.75 12/01/24 4,000 3,911,040
Amer. Ctr. for Wine, Food & Arts A(d) 5.80 12/01/29 1,000 980,340
California St. Dept. Wtr. Res. Rev., Central Valley Proj.,
Ser. J-3 Aa2 7.00 12/01/12 1,000 1,175,980
California St. Edl. Facs. Auth. Rev., Chapman College Baa2 7.50 1/01/18 600(e) 638,826
California St. Gen. Oblig., A.M.B.A.C. Aaa 6.50 9/01/10 1,250 1,415,100
California St. Hlth. Facs. Fin. Auth. Rev., Valleycare Hosp.
Corp. AA-(d) 5.50 5/01/20 1,500 1,439,115
California Statewide Cmnty. Cap. Apprec., Cmnty. Facs. Dist.
No. 97-1 NR Zero 9/01/22 4,440 935,464
Capistrano Unif. Sch. Dist. No. 98-2-Ladera NR 5.75 9/01/29 2,500 2,350,825
Capistrano Unif. Sch. Dist. No. 98-2 NR 5.70 9/01/20 2,000 1,885,700
Carson City Ltd. Oblig. Impvt. Rev., Assmt. Dist. NR 7.375 9/02/22 2,310 2,453,336
Cerritos Pub. Fin. Auth. Rev., Los Coyotes Redev. Proj., Loan
A, A.M.B.A.C. Aaa 6.50 11/01/23 3,000 3,380,760
Chula Vista Cmnty. Redev. Agcy.,
Ref. Tax Alloc. Sr. Bayfront, Ser. A BBB+(d) 7.625 9/01/24 2,500 2,789,525
Ref. Tax Alloc. Sub. Bayfront, Ser. C NR 8.25 5/01/24 2,500 2,793,350
Chula Vista Spec. Tax Cmnty. Facs. Dist. No. 97-3 NR 6.05 9/01/29 2,770 2,691,692
Commerce Cmnty. Dev., Merged Redev. Proj., Ser. A NR 5.70 8/01/28 2,250 2,126,835
Contra Costa Cnty., Spec. Tax Cmnty. Facs. Dist. No. 91-1 NR 8.125 8/01/16 1,520(e) 1,609,391
Corona Cert. of Part., Vista Hosp. Sys. Inc., Ser. C NR 8.375 7/01/11 2,000 1,927,660
Davis Ca. Pub. Facs. Fin. Auth., Mace Ranch, Ser. A NR 6.60 9/01/25 2,000 2,042,540
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Portfolio of Investments as
of August 31, 1999 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>
- ------------------------------------------------------------------------------------------------------------------------------
Delano Cert. of Part., Regl. Med. Ctr., Ser. 92-A NR 9.25% 1/01/22 $ 2,850(e) $ 3,326,862
Desert Hosp. Dist., Cert. of Part. AAA 8.10 7/01/20 2,000(e) 2,112,580
East Palo Alto San. Dist., Cert. of Part. NR 8.25 10/01/15 500 520,860
El Dorado Cnty., Spec. Tax,
Cmnty. Facs. Dist. No. 92-1 NR 6.125 9/01/16 1,000(i) 996,340
Cmnty. Facs. Dist. No. 92-1 NR 6.25 9/01/29 3,000(i) 2,995,950
El Dorado Hills Dev., Cmnty. Facs. Dist. No. 92-1 NR 8.25 9/01/24 1,945(e) 2,143,740
Fairfield Pub. Fin. Auth. Rev., Fairfield Redev. Proj., Ser. A NR 7.90 8/01/21 2,500(e) 2,725,750
Folsom Spec. Tax,
Cmnty. Facs. Dist. No. 7 NR 6.00 9/01/24 2,500 2,424,550
Cmnty. Facs. Dist. No. 2 NR 7.70 12/01/19 3,130(e) 3,224,182
Fontana Pub. Fin. Auth., N. Fontana Tax Alloc. Rev. NR 7.65 12/01/09 1,575(e) 1,726,547
Fontana Redev. Agcy. Tax Alloc.,
Ref. Jurupa Hills Redev. Proj. A BBB+(d) 5.50 10/01/17 2,150 2,057,356
Ref. Jurupa Hills Redev. Proj. A BBB+(d) 5.60 10/01/27 1,595 1,510,848
Foothill/Eastern Trans. Corr. Agcy.,
Conv. Cap. Apprec. Baa3 Zero 1/15/26 4,800 2,555,664
Conv. Cap. Apprec. Baa3 Zero 1/15/28 4,890 2,582,164
Toll Rd., Ser. A Baa3 Zero 1/01/20 10,000 3,170,400
Gateway Impvt. Auth. Rev., Marin City Cmnty. Facs. Dist. &
Redev. NR 7.75 9/01/25 2,100(e) 2,496,123
Glendale Unif. Sch. Dist., Ser. B, F.S.A. Aaa 5.125 9/01/23 1,250 1,158,163
Irvine Impvt. Bond Act of 1915,
Assmt. Dist. No. 87-8 Grp. NR 6.00 9/02/24 3,000 2,872,890
Assmt. Dist. No. 94-13 NR 6.00 9/02/22 1,000 968,520
Kings Cnty. Wst. Mgmt. Auth., Solid Wst. Rev., A.M.T. BBB(d) 7.20 10/01/14 1,200 1,296,432
La Mesa Impvt. Bond Act of 1915 Ltd. Oblig., Dist. No. 98-1 NR 5.75 9/02/23 1,000 952,560
La Mirada Redev. Agcy. Spec. Tax, Ref. Cmnty. Facs. Dist. No.
89-1 NR 5.70 10/01/20 1,000 938,650
La Quinta Redev. Agcy.,
Proj. Area No. 1, M.B.I.A. Aaa 7.30 9/01/10 1,000 1,194,400
Tax Alloc. Ref. Proj. No. 1, M.B.I.A. Aaa 7.30 9/01/11 1,000 1,198,350
Lincoln Impvt. Bond Act of 1915 Pub. Fin. Auth., Twelve
Bridges NR 6.20 9/02/25 3,000 2,884,140
Long Beach Hbr. Rev.,
Ref. Ser. A., A.M.T., F.G.I.C. Aaa 6.00 5/15/17 5,000(f) 5,274,300
Ref. Ser. A., A.M.T., F.G.I.C. Aaa 6.00 5/15/19 3,000 3,156,540
Long Beach Redev. Agcy. Hsg.,
Multifamily Hsg. Rev., Pacific Ct. Apts., Ser. B
(cost $1,490,475; purchased 10/18/93) NR 6.80 9/01/13 1,000(c)(g) 620,000
Multifamily Hsg. Rev., Pacific Ct. Apts., Ser. B
(cost $991,820; purchased 10/18/93) NR 6.95 9/01/23 1,500(c)(g) 930,000
Los Angeles Cmnty. Facs. Dist., No. 5, Rowland Heights Area NR 7.25 9/01/19 1,500(e) 1,718,520
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Portfolio of Investments as
of August 31, 1999 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>
- ------------------------------------------------------------------------------------------------------------------------------
Los Angeles Dept. of Wtr. & Pwr., Waterworks Rev. Aa3 4.50% 5/15/23 $ 1,900 $ 1,596,703
Lynwood Pub. Fin. Auth. Rev., Wtr. Sys. Impvt. Proj. BBB-(d) 6.50 6/01/21 1,500 1,575,120
Madera Redev. Agcy. Tax Rev. Tax Alloc. Redev. Proj., F.S.A. Aaa 4.75 9/01/28 1,205 1,022,900
Met. Wtr. Dist. of Southern California, Waterworks Rev.,
Linked S.A.V.R.S. & R.I.B.S. Aa2 5.75 8/10/18 1,000 1,027,950
Mojave Desert & Mtn. Solid Waste, Victor Valley Nat'l. Recov.
Facs., A.M.T. Baa1 7.875 6/01/20 1,175 1,290,303
Montebello Unified Sch. Dist.,
Cap. Apprec., F.G.I.C. Aaa Zero 8/01/18 2,195 753,895
Cap. Apprec., F.G.I.C. Aaa Zero 8/01/19 2,250 724,702
Cap. Apprec., F.G.I.C. Aaa Zero 8/01/20 2,300 696,992
Ontario California Impvt. Bond Act of 1915, Assmt. Dist. No.
100C,
Com. Ctr. III NR 8.00 9/02/11 1,050 1,090,614
Orange Cnty. Cmnty. Facs. Dist., Spec. Tax Rev.,
No. 87-4, Foothill Ranch, Ser. A AAA(d) 7.375 8/15/18 3,500(e) 3,886,085
No. 87-5B, Rancho Santa Margarita NR 7.50 8/15/17 1,750(e) 1,946,997
No. 88-1, Aliso Viejo, Ser. A AAA(d) 7.15 8/15/06 805(e) 888,801
Orange Cnty. Loc. Trans. Auth.,
Sales Tax Rev., Linked S.A.V.R.S. & R.I.B.S., A.M.B.A.C. Aaa 6.20 2/14/11 10,000 10,844,300
Sales Tax Rev., Linked S.A.V.R.S. & R.I.B.S. Aa3 8.668(h) 2/14/11 750 870,000
Paramount Unif. Sch. Dist., Ser. A, F.S.A. Aaa 5.125 9/01/19 2,500 2,369,725
Perris Sch. Dist., Cert. of Part., Cap. Proj. NR 7.75 3/01/21 1,500(e) 1,610,595
Pico Rivera California Wtr. Auth. Rev., Wtr. Sys. Proj., Ser.
A, M.B.I.A. Aaa 5.50 5/01/29 2,500 2,452,125
Placentia Pub. Fin. Auth., Spec. Tax Rev., Ser. B NR 6.60 9/01/15 1,500 1,527,060
Port Redwood Cty. Rev., A.M.T. BBB(d) 5.125 6/01/30 1,600 1,389,360
Poway Cmnty. Fac. Dist., No. 88-1, Parkway Bus. Ctr. NR 6.75 8/15/15 1,000 1,054,620
Puerto Rico Hwy. & Trans. Auth. Rev., Ser. Q AAA(d) 7.75 7/01/10 2,100(e)(f) 2,211,174
Puerto Rico Pub. Bldgs. Auth., Gtd. Pub. Ed. & Hlth. Facs.,
Ser. J Baa1 Zero 7/01/06 1,605 1,152,952
Redding Elec. Sys. Rev.,
Linked S.A.V.R.S. & R.I.B.S., M.B.I.A. Aaa 6.368 7/01/22 50 54,555
Cert. of Part., M.B.I.A. Aaa 9.015 7/01/22 1,850 2,185,312
Richmond Redev. Agcy. Tax Alloc.,
Cap. Apprec. Ref. Harbor, Ser. B., M.B.I.A. Aaa Zero 7/01/20 1,150 347,334
Cap. Apprec. Ref. Harbor, Ser. B., M.B.I.A. Aaa Zero 7/01/21 1,150 326,347
Multifamily Hsg., Bridge Affordable Hsg. NR 7.50 9/01/23 2,500 2,579,375
Rio Vista Impvt. Bond Act of 1915, Assmt. Dist. No. 96-1,
River View Pt. NR 7.50 9/02/22 1,940 1,962,174
Riverside Cnty. Cert. of Part., Air Force Village West NR 8.125 6/15/20 3,000(e)(f) 3,363,210
Riverside Cnty. Impvt. Bond Act of 1915, Assmt. Dist. No. 159,
Ser. A NR 7.625 9/02/14 2,465 2,539,196
Rocklin Stanford Ranch Cmnty., Spec. Tax Facs. Dist. No. 3 NR 8.10 11/01/15 1,000(e) 1,068,690
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Portfolio of Investments as
of August 31, 1999 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>
- ------------------------------------------------------------------------------------------------------------------------------
Rocklin Unif. Sch. Dist., Gen. Oblig.,
Cap. Apprec., Ser. C, M.B.I.A. Aaa Zero 8/01/12 $ 1,110 $ 559,829
Cap. Apprec., Ser. C, M.B.I.A. Aaa Zero 8/01/13 1,165 550,497
Cap. Apprec., Ser. C, M.B.I.A. Aaa Zero 8/01/14 1,220 540,728
Cap. Apprec., Ser. C, M.B.I.A. Aaa Zero 8/01/15 1,285 533,481
Cap. Apprec., Ser. C, M.B.I.A. Aaa Zero 8/01/16 1,400 544,600
Roseville California Spec. Tax,
N. Roseville Cmnty. Facs. Dist. No. 1 NR 5.75% 9/01/23 1,500 1,409,160
Ref. N. Central Cmnty. Dist. No. 1 NR 5.80 9/01/17 2,500 2,402,925
Sacramento City. Fin. Auth.,
Cap. Apprec., Tax Alloc. Comb. Proj., Ser. B, M.B.I.A. Aaa Zero 11/01/16 5,700 2,186,577
Cap. Apprec., Tax Alloc. Comb. Proj., Ser. B, M.B.I.A. Aaa Zero 11/01/17 5,695 2,051,510
Sacramento Cnty. Spec. Tax Rev.,
Dist. No. 1, Laguna Creek Ranch NR 5.70 12/01/20 2,000 1,887,960
Dist. No. 1, Laguna Creek Ranch NR 8.25 12/01/20 1,000(e) 1,072,620
Sacramento Impvt. Bond Act of 1915, Willowcreek II Assmt.
Dist.
No. 96-1 NR 6.70 9/02/22 2,500 2,576,800
Sacramento Spec. Purpose Fac., Y.M.C.A. of Sacramento NR 7.25 12/01/18 2,110 2,191,784
San Bernardino Cnty.,
Cert. of Part, Med. Ctr. Fin. Proj., M.B.I.A. Aaa 5.50 8/01/22 4,540 4,504,724
Fin. Auth. Ref. Impt., Granada Hills B-(d) 6.90 5/01/27 855 820,544
San Bruno Park Sch. Dist.,
Cap. Apprec., F.S.A. Aaa Zero 8/01/20 1,275 386,376
Cap. Apprec., F.S.A. Aaa Zero 8/01/21 1,220 347,492
Cap. Apprec., F.S.A. Aaa Zero 8/01/22 1,080 290,099
San Clemente Impvt. Bond Act of 1915, Assmt. Dist. No. 98-1 NR 6.05 9/02/28 2,000 1,928,620
San Diego Spec. Tax, Cmnty. Facs. Dist. No. 1, Ser. B NR 7.10 9/01/20 2,000(e) 2,310,800
San Francisco City & Cnty.,
Redev. Agcy., Lease Rev. A1 Zero 7/01/06 1,500 1,074,660
Redev. Agcy., Lease Rev. A1 Zero 7/01/07 2,250 1,521,202
San Joaquin Hills Trans. Corridor Agcy.,
Toll Rd. Rev. Aaa Zero 1/01/11 2,000 1,104,280
Toll Rd. Rev. Aaa Zero 1/01/22 15,000 4,210,800
San Jose Redev. Proj., M.B.I.A. Aaa 6.00 8/01/15 3,000 3,213,690
San Jose Unif. Sch. Dist., Santa Clara,
Gen. Oblig., Ser. A., F.G.I.C. Aaa Zero 8/01/16 2,630 1,023,070
Gen. Oblig., Ser. A., F.G.I.C. Aaa Zero 8/01/18 2,765 949,667
Gen. Oblig., Ser. A., F.G.I.C. Aaa Zero 8/01/19 2,835 913,125
San Luis Obispo, Certs. of Part., Vista Hosp. Sys. NR 8.375 7/01/29 1,000 947,880
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Portfolio of Investments as
of August 31, 1999 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>
- ------------------------------------------------------------------------------------------------------------------------------
San Marcos Pub. Fac. Auth. Rev., Ref., Ser. 1998 NR 5.80% 9/01/18 $ 1,000 $ 967,070
San Marino Unif. Sch. Dist.,
Gen. Oblig., Ser. A AA(d) 5.25 7/01/19 1,840 1,784,726
Gen. Oblig., Ser. A AA(d) 5.00 6/01/23 1,500 1,375,080
Santa Margarita Wtr. Dist. Spec. Tax,
Cmnty Fac. Dist. No. 99-1 NR 6.20 9/01/20 2,000 1,997,680
Cmnty Fac. Dist. No. 99-1 NR 6.25 9/01/29 2,000 2,006,700
Santa Margarita, Dana Point Auth.,
Impvt. Dists., Ser. A, M.B.I.A. Aaa 7.25 8/01/09 905 1,072,380
Impvt. Dists., Ser. B, M.B.I.A. Aaa 7.25 8/01/14 1,000 1,199,020
Santa Rosa Impvt. Bond Act of 1915, Ref. Fountaingrove Parkway NR 5.70 9/02/19 1,000 958,590
South Orange Cnty., Pub. Fin. Auth.,
Foothill Area Proj., Ser. C, F.G.I.C. Aaa 6.50 8/15/10 750 846,698
Spec. Tax Rev., M.B.I.A. Aaa 7.00 9/01/10 2,535 2,964,682
South San Francisco Redev. Agcy., Tax Alloc., Gateway Redev.
Proj. NR 7.60 9/01/18 2,375(e) 2,652,115
South Tahoe Joint Pwrs. Fin. Ref., Redev. Proj., Ser. A BBB-(d) 5.375 10/01/30 2,500 2,259,850
Southern California Pub. Pwr. Auth.,
Proj. Rev. A3 6.75 7/01/10 6,250 7,099,687
Proj. Rev. A3 6.75 7/01/13 3,000 3,381,420
Proj. Rev., A.M.B.A.C. Aaa Zero 7/01/16 8,400 3,304,392
Stockton Cmnty. Facs. Dist. No. 90-2, Brookside Estates NR 6.20 8/01/15 1,050 1,054,484
Sulphur Springs Unif. Sch. Dist., Ser. A, M.B.I.A. Aaa Zero 9/01/11 3,000 1,610,820
Temecula Valley Unif. Sch. Dist., Cmnty. Facs., Spec. Tax
Dist.,
No. 89-1 NR 8.60 9/01/17 2,600 2,707,354
Torrance Redev. Agcy.,
Ref. Tax Alloc. Sub. Lien NR 5.625 9/01/28 1,000 921,410
Tax Alloc. Downtown Redev. Baa2 7.125 9/01/22 2,105(e) 2,270,832
Tax Alloc. Ind. Redev. Proj. NR 7.75 9/01/13 2,500(e) 2,550,000
Vacaville Cmnty. Redev. Agcy., Multifamily Hsg. Rev. NR 7.375 11/01/14 1,110 1,151,947
Ventura California Port Dist. Cert. of Part. NR 6.375 8/01/28 4,000 3,783,440
Victor Valley,
Union H.S. Dist., M.B.I.A. Aaa Zero 9/01/17 4,500 1,647,765
Union H.S. Dist., M.B.I.A. Aaa Zero 9/01/19 5,450 1,771,032
Union H.S. Dist., M.B.I.A. Aaa Zero 9/01/20 5,850 1,786,122
Virgin Islands Pub. Fin. Auth. Rev., Hwy. Trans. Trust Fund AAA(d) 7.70 10/01/04 1,000(e) 1,023,250
Virgin Islands Territory, Hugo Ins. Claims Fund Proj., Ser. 91 NR 7.75 10/01/06 870(e) 929,073
West Contra Costa Unif. Sch. Dist., Cert. of Part. Baa3 6.875 1/01/09 1,100 1,188,528
Westminster Redev. Agcy., Tax Alloc. Rev., Orange Cnty., Proj.
No. 1, Ser. A AAA(d) 7.30 8/01/21 3,000(e) 3,241,020
------------
Total long-term investments (cost $272,033,253) 281,612,844
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Portfolio of Investments as
of August 31, 1999 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>
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--1.0%
California Poll. Ctrl. Fin. Auth. Ref., Pacific Gas & Elec.
Co.,
Ser. 96C, F.R.D.D. A1+(d) 2.65% 9/01/99 $ 400 $ 400,000
Ser. 96D, F.R.D.D. A1+(d) 2.65 9/01/99 900 900,000
California Poll. Ctrl. Fin. Auth., Solid Wst. Disp. Rev.,
Shell Oil Martinez Refining Co., Ser. 96A, F.R.D.D., A.M.T. VMIG1 2.55 9/01/99 1,100 1,100,000
Shell Oil Martinez Refining Co., Ser. 96B, F.R.D.D. NR 2.65 9/01/99 500 500,000
------------
Total short-term investments (cost $2,900,000) 2,900,000
------------
Total Investments--100.0 %
(cost $274,933,253; Note 4) 284,512,844
Liabilities in excess of other assets (77,052)
------------
Net Assets--100% $284,435,792
------------
------------
</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 Notes (b).
F.S.A.--Financial Security Assurance.
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.
Y.M.C.A.--Young Mens Christian Association.
(b) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be the later of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
(c) Issue in default on interest payment, non-income producing security.
(d) Standard & Poor's Rating.
(e) Prerefunded issues secured by escrowed cash and/or direct U.S. guaranteed
obligations.
(f) All or a portion of the securities are segregated as collateral for
financial futures contracts.
(g) Indicates a restricted security. The aggregate cost of restricted securities
is $2,482,295 and the aggregate value is ($1,550,000) which represents
approximately 0.5% of net assets.
(h) Inverse floating rate bond. The coupon is inversely indexed to a floating
interest rate. The rate shown is the rate at year end.
(i) When-issued securities.
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. 8

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Statement of Assets and Liabilities CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets August 31, 1999
<S> <C>
Investments, at value (cost $274,933,253)................................................................. $ 284,512,844
Cash...................................................................................................... 58,909
Interest receivable....................................................................................... 4,188,542
Receivable for Series shares sold......................................................................... 503,399
Due from broker - variation margin........................................................................ 87,750
Receivable for investments sold........................................................................... 80,450
Other assets.............................................................................................. 5,766
---------------
Total assets........................................................................................... 289,437,660
---------------
Liabilities
Payable for investments purchased......................................................................... 3,993,470
Payable for Series shares reacquired...................................................................... 456,360
Dividends payable......................................................................................... 236,931
Management fee payable.................................................................................... 120,586
Accrued expenses.......................................................................................... 103,490
Distribution fee payable.................................................................................. 81,647
Deferred trustee's fees................................................................................... 9,384
---------------
Total liabilities...................................................................................... 5,001,868
---------------
Net Assets................................................................................................ $ 284,435,792
---------------
---------------
Net assets were comprised of:
Shares of beneficial interest, at par.................................................................. $ 271,125
Paid-in capital in excess of par....................................................................... 278,297,870
---------------
278,568,995
Accumulated net realized loss on investments........................................................... (3,869,419)
Net unrealized appreciation on investments............................................................. 9,736,216
---------------
Net assets, August 31, 1999............................................................................... $ 284,435,792
---------------
---------------
Class A:
Net asset value and redemption price per share
($183,593,374 / 17,500,481 shares of beneficial interest issued and outstanding).................... $10.49
Maximum sales charge (3% of offering price)............................................................ .32
---------------
Maximum offering price to public....................................................................... $10.81
---------------
---------------
Class B:
Net asset value, offering price and redemption price per share
($84,545,838 / 8,058,635 shares of beneficial interest issued and outstanding)...................... $10.49
---------------
---------------
Class C:
Net asset value and redemption price per share
($10,847,351 / 1,033,953 shares of beneficial interest issued and outstanding)...................... $10.49
Sales charge (1% of offering price).................................................................... .11
---------------
Offering price to public............................................................................... $10.60
---------------
---------------
Class Z:
Net asset value, offering price and redemption price per share
($5,449,229 / 519,469 shares of beneficial interest issued and outstanding)......................... $10.49
---------------
---------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income August 31, 1999
<S> <C>
Income
Interest................................... $16,463,562
---------------
Expenses
Management fee............................. 1,410,411
Distribution fee--Class A.................. 375,487
Distribution fee--Class B.................. 405,815
Distribution fee--Class C.................. 68,161
Custodian's fees and expenses.............. 95,000
Transfer agent's fees and expenses......... 58,000
Reports to shareholders.................... 43,000
Registration fees.......................... 36,000
Audit fees and expenses.................... 13,000
Legal fees and expenses.................... 10,000
Trustees' fees and expenses................ 7,000
Miscellaneous.............................. 7,656
---------------
Total expenses.......................... 2,529,530
Less: Management fee waiver (Note 2)....... (104,983)
Custodian fee credit (Note 1)........... (2,406)
---------------
Net expenses............................ 2,422,141
---------------
Net investment income......................... 14,041,421
---------------
Realized and Unrealized Gain
(Loss) on Investments
Net realized gain (loss) on:
Investment transactions.................... (1,136,923)
Financial futures transactions............. 310,965
---------------
(825,958)
---------------
Net change in unrealized
appreciation/depreciation on:
Investments................................ (17,823,742)
Financial futures contracts................ 13,719
---------------
(17,810,023)
---------------
Net loss on investments....................... (18,635,981)
---------------
Net Decrease in Net Assets
Resulting from Operations..................... $(4,594,560)
---------------
---------------
</TABLE>

PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA INCOME SERIES
Statement of Changes in Net Assets
- ------------------------------------------------------------

<TABLE>
<CAPTION>
Increase (Decrease) Year Ended August 31,
in Net Assets 1999 1998
<S> <C> <C>
Operations
Net investment income........ $ 14,041,421 $ 12,132,906
Net realized loss on
investment transactions... (825,958) (88,023)
Net change in unrealized
appreciation/depreciation
on investments............ (17,810,023) 10,200,239
------------ ------------
Net increase (decrease) in
net assets resulting from
operations................ (4,594,560) 22,245,122
------------ ------------
Dividends and distributions
(Note 1):
Dividends from net investment
income
Class A................... (9,496,580) (8,943,420)
Class B................... (3,882,376) (2,795,615)
Class C................... (413,457) (211,960)
Class Z................... (249,008) (181,911)
------------ ------------
(14,041,421) (12,132,906)
------------ ------------
Distributions in excess of
net investment income
Class A................... -- (77,784)
Class B................... -- (24,826)
Class C................... -- (1,879)
Class Z................... -- (1,255)
------------ ------------
-- (105,744)
------------ ------------
Series share transactions (net
of share conversions) (Note
5):
Net proceeds from shares
sold...................... 92,907,502 72,607,907
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions......... 6,830,426 6,072,757
Cost of shares reacquired.... (59,179,182) (35,867,889)
------------ ------------
Net increase in net assets
from Series share
transactions.............. 40,558,746 42,812,775
------------ ------------
Total increase.................. 21,922,765 52,819,247
Net Assets
Beginning of year............... 262,513,027 209,693,780
------------ ------------
End of year..................... $284,435,792 $262,513,027
------------ ------------
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 10

<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.
The Series will invest primarily in investment grade municipal obligations but
may also invest a portion of its assets in lower-quality municipal obligations
or in nonrated securities which 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 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.

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.

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.

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.

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, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.

The management fee paid PIFM is computed daily and payable monthly, at an annual
rate of .50 of 1% of the average daily net assets of the Series. Prior to June
1, 1999, PIFM has agreed to voluntarily waived a portion (.05 of 1% of the
Series' average daily net assets) of its management fee, which amounted to
$104,983 ($.004 per share). Effective June 1, 1999, PIFM eliminated such waiver.
The Series is not required to reimburse PIFM for such waiver.

Pursuant to the Class A, B and C Plans, the Fund compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, .50 of 1%
and 1% of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Plans were .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 period September 1, 1998 through December 31, 1998. Effective January 1,
1999, such expenses under the Plans were .25 of 1%, .50 of 1% and .75 of 1% of
the average daily net assets of the Class A, B and C shares, respectively.

PIMS has advised the Series that it received approximately $371,300 and $40,800
in front-end sales charges resulting from sales of Class A and Class C shares,
respectively, during the year ended August 31, 1999. From these fees, PIMS paid
such sales charges to affiliated broker-dealers which in turn paid commissions
to sales persons and incurred other distribution costs.

PIMS has advised the Series that for the year ended August 31, 1999, it received
approximately $203,900 and $8,800 in contingent deferred sales charges imposed
upon certain redemptions by Class B and Class C shareholders, respectively.

PIFM, PIMS and PIC are indirect, wholly owned subsidiaries of The Prudential
Insurance Company of America.

- ------------------------------------------------------------
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 year ended August 31, 1999, the
Series incurred fees of approximately $50,700 for the services of PMFS. As of
August 31, 1999 approximately $4,200 of such fees were due to PMFS. Transfer
agent fees and expenses in the Statement of Operations include certain
out-of-pocket expenses paid to nonaffiliates.

- ------------------------------------------------------------
Note 4. Portfolio Securities

Purchases and sales of portfolio securities of the Series, excluding short-term
investments, for the year ended August 31, 1999 were $102,971,773 and
$64,755,427, respectively.

The United States federal income tax cost basis of the Fund's investments as of
August 31, 1999 was substantially the same as for financial reporting purposes
and, accordingly, net unrealized appreciation on investments for federal income
tax purposes was $9,579,591 (gross unrealized appreciation--$15,398,831; gross
unrealized depreciation--$5,819,240).
- --------------------------------------------------------------------------------
12

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Notes to Financial Statements CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
During the year ended August 31, 1999, the Fund entered into financial futures
contracts. Details of open contracts at August 31, 1999 are as follows:
<TABLE>
<CAPTION>
Value at Value at Unrealized
Number of Expiration February 28, Trade Appreciation
Contracts Type Date 1999 Date (Depreciation)
- --------- ---------------- ---------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
Short Position:
312 Muni Bond Sept. 1999 $ 35,675,250 $35,831,875 $156,625
</TABLE>

For federal income tax purposes, the Series has a capital loss carryforward at
August 31, 1999 of approximately $2,496,600 of which $1,520,900 expires in 2003
and $975,700 expires in 2004. Accordingly, no capital gains distributions are
expected to be paid to shareholders until net gains have been realized in excess
of such amount.

For federal income tax purposes, the Series will elect to treat net capital
losses of $1,104,800 incurred in the ten month period ending August 31, 1999 as
having been incurred in the following fiscal year.

- ------------------------------------------------------------
Note 5. Capital

The Series offers Class A, Class B, Class C and Class Z shares. Class A shares
are sold with a front-end sales charge of up to 3%. Class B shares are sold with
a contingent deferred sales charge which declines from 5% to zero depending on
the period of time the shares are held. Class C shares are sold with front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18 months. Prior to November 2, 1998, Class C shares were 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 qualify 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 fiscal years ended August
31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ----------------------------------- ---------- ------------
<S> <C> <C>
Year ended August 31, 1999:
Shares sold........................ 4,622,707 $ 50,892,275
Shares issued in reinvestment of
dividends........................ 417,857 4,593,136
Shares reacquired.................. (3,868,964) (42,458,852)
---------- ------------
Net increase in shares outstanding
before conversion................ 1,171,600 13,026,559
Shares issued upon conversion from
Class B.......................... 109,917 1,217,865
---------- ------------
Net increase in shares
outstanding...................... 1,281,517 $ 14,244,424
---------- ------------
---------- ------------
Year ended August 31, 1998:
Shares sold........................ 3,414,327 $ 37,583,169
Shares issued in reinvestment of
dividends and distributions...... 412,571 4,525,799
Shares reacquired.................. (2,333,125) (25,610,559)
---------- ------------
Net increase in shares outstanding
before conversion................ 1,493,773 16,498,409
Shares issued upon conversion from
Class B.......................... 101,309 1,102,989
---------- ------------
Net increase in shares
outstanding...................... 1,595,082 $ 17,601,398
---------- ------------
---------- ------------
<CAPTION>
Class B
- -----------------------------------
Year ended August 31, 1999:
Shares sold........................ 2,701,343 $ 29,886,200
Shares issued in reinvestment of
dividends........................ 160,200 1,758,724
Shares reacquired.................. (995,244) (10,928,291)
---------- ------------
Net increase in shares outstanding
before conversion................ 1,866,299 20,716,633
Shares reacquired upon conversion
into Class A..................... (109,917) (1,217,865)
---------- ------------
Net increase in shares
outstanding...................... 1,756,382 $ 19,498,768
---------- ------------
---------- ------------
Year ended August 31, 1998:
Shares sold........................ 2,527,906 $ 27,786,255
Shares issued in reinvestment of
dividends and distributions...... 111,980 1,228,995
Shares reacquired.................. (663,467) (7,259,153)
---------- ------------
Net increase in shares outstanding
before conversion................ 1,976,419 21,756,097
Shares reacquired upon conversion
into Class A..................... (101,309) (1,102,989)
---------- ------------
Net increase in shares
outstanding...................... 1,875,110 $ 20,653,108
---------- ------------
---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
13

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Notes to Financial Statements CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Shares Amount
- ----------------------------------- ---------- ------------
Year ended August 31, 1999:
<S> <C> <C>
Shares sold........................ 696,989 $ 7,705,871
Shares issued in reinvestment of
dividends........................ 26,026 285,305
Shares reacquired.................. (221,550) (2,436,064)
---------- ------------
Net increase in shares
outstanding...................... 501,465 $ 5,555,112
---------- ------------
---------- ------------
Year ended August 31, 1998:
Shares sold........................ 384,457 $ 4,221,764
Shares issued in reinvestment of
dividends and distributions...... 13,751 150,931
Shares reacquired.................. (202,715) (2,225,783)
---------- ------------
Net increase in shares
outstanding...................... 195,493 $ 2,146,912
---------- ------------
---------- ------------
<CAPTION>
Class Z
- -----------------------------------
Year ended August 31, 1999:
Shares sold........................ 405,701 $ 4,423,156
Shares issued in reinvestment of
dividends........................ 17,560 193,261
Shares reacquired.................. (306,708) (3,355,975)
---------- ------------
Net increase in shares
outstanding...................... 116,553 $ 1,260,442
---------- ------------
---------- ------------
Year ended August 31, 1998:
Shares sold........................ 274,705 $ 3,016,719
Shares issued in reinvestment of
dividends and distributions...... 15,212 167,032
Shares reacquired.................. (70,320) (772,394)
---------- ------------
Net increase in shares
outstanding...................... 219,597 $ 2,411,357
---------- ------------
---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
14

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Financial Highlights CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------
Year Ended August 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........ $ 11.19 $ 10.71 $ 10.33 $ 10.28 $ 10.19
-------- -------- -------- -------- --------
Income from investment operations
Net investment income(a).................. .56 .59 .60 .63 .65
Net realized and unrealized gain (loss) on
investment transactions................ (.70) .49 .38 .05 .09
-------- -------- -------- -------- --------
Total from investment operations....... (.14) 1.08 .98 .68 .74
-------- -------- -------- -------- --------
Less distributions
Dividends from net investment income...... (.56) (.59) (.60) (.63) (.65)
Distributions in excess of net investment
income................................. -- (.01) --(c) -- --
-------- -------- -------- -------- --------
Total distributions.................... (.56) (.60) (.60) (.63) (.65)
-------- -------- -------- -------- --------
Net asset value, end of year.............. $ 10.49 $ 11.19 $ 10.71 $ 10.33 $ 10.28
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN(b):.......................... (1.37)% 10.31% 9.72% 6.67% 7.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)............. $183,593 $181,512 $156,684 $153,236 $163,538
Average net assets (000).................. $187,106 $165,771 $153,019 $161,420 $165,500
Ratios to average net assets(a):
Expenses, including distribution
fees................................ .76% .68% .73% .50% .40%
Expenses, excluding distribution
fees................................ .56% .58% .63% .40% .30%
Net investment income.................. 5.03% 5.39% 5.66% 6.01% 6.49%
For Class A, B, C and Z shares:
Portfolio turnover rate................ 23% 10% 16% 22% 39%
</TABLE>
- ---------------
(a) Net of management fee waiver.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions.
(c) Less than $.005 per share.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 15

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Financial Highlights CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------
Year Ended August 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........ $ 11.19 $ 10.71 $ 10.33 $ 10.28 $ 10.19
------- ------- ------- ------- -------
Income from investment operations
Net investment income(a).................. .53 .55 .55 .59 .61
Net realized and unrealized gain (loss) on
investment transactions................ (.70) .49 .38 .05 .09
------- ------- ------- ------- -------
Total from investment operations....... (.17) 1.04 .93 .64 .70
------- ------- ------- ------- -------
Less distributions
Dividends from net investment income...... (.53) (.55) (.55) (.59) (.61)
Distributions in excess of net investment
income................................. -- (.01) --(c) -- --
------- ------- ------- ------- -------
Total distributions.................... (.53) (.56) (.55) (.59) (.61)
------- ------- ------- ------- -------
Net asset value, end of year.............. $ 10.49 $ 11.19 $ 10.71 $ 10.33 $ 10.28
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN(b):.......................... (1.67)% 9.87% 9.28% 6.25% 7.24%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)............. $84,546 $70,535 $47,436 $35,983 $28,609
Average net assets (000).................. $81,163 $56,011 $40,983 $32,555 $23,722
Ratios to average net assets(a):
Expenses, including distribution
fees................................ 1.06% 1.08% 1.13% .90% .80%
Expenses, excluding distribution
fees................................ .56% .58% .63% .40% .30%
Net investment income.................. 4.78% 4.99% 5.26% 5.61% 6.09%
</TABLE>
- ---------------
(a) Net of management fee waiver.
(b) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions.
(c) Less than $.005 per share.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 16

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Financial Highlights CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Class Z
--------------------------------------------------- -----------------
Year Ended
Year Ended August 31, August 31,
--------------------------------------------------- -----------------
1999 1998 1997 1996 1995 1999 1998
------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 11.19 $10.71 $10.33 $10.28 $10.19 $11.19 $10.71
------- ------ ------ ------ ------ ------ ------
Income from investment operations
Net investment income(a).................. .50 .52 .53 .56 .58 .58 .61
Net realized and unrealized gain (loss) on
investment transactions................ (.70) .49 .38 .05 .09 (.70) .49
------- ------ ------ ------ ------ ------ ------
Total from investment operations....... (.20) 1.01 .91 .61 .67 (.12) 1.10
------- ------ ------ ------ ------ ------ ------
Less distributions
Dividends from net investment income...... (.50) (.52) (.53) (.56) (.58) (.58) (.61)
Distributions in excess of net investment
income................................. -- (.01) --(e) -- -- -- (.01)
------- ------ ------ ------ ------ ------ ------
Total distributions.................... (.50) (.53) (.53) (.56) (.58) (.58) (.62)
------- ------ ------ ------ ------ ------ ------
Net asset value, end of period............ $ 10.49 $11.19 $10.71 $10.33 $10.28 $10.49 $11.19
------- ------ ------ ------ ------ ------ ------
------- ------ ------ ------ ------ ------ ------
TOTAL RETURN(b):.......................... (1.91)% 9.60% 9.01% 5.99% 6.98% (1.18)% 10.42%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $10,847 $5,960 $3,611 $3,269 $2,762 $5,449 $4,507
Average net assets (000).................. $ 9,088 $4,491 $3,135 $3,300 $1,751 $4,725 $3,312
Ratios to average net assets(a):
Expenses, including distribution
fees................................ 1.31% 1.33% 1.38% 1.15% 1.05% .56% .58%
Expenses, excluding distribution
fees................................ .56% .58% .63% .40% .30% .56% .58%
Net investment income.................. 4.53% 4.74% 5.01% 5.36% 5.84% 5.28% 5.49%

<CAPTION>
September 18,
1996(d)
Through
August 31,
1997
-------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 10.38
-----
Income from investment operations
Net investment income(a).................. .57
Net realized and unrealized gain (loss) on
investment transactions................ .33
-----
Total from investment operations....... .90
-----
Less distributions
Dividends from net investment income...... (.57)
Distributions in excess of net investment
income................................. --(e)
-----
Total distributions.................... (.57)
-----
Net asset value, end of period............ $ 10.71
-----
-----
TOTAL RETURN(b):.......................... 8.86%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $ 1,963
Average net assets (000).................. $ 970
Ratios to average net assets(a):
Expenses, including distribution
fees................................ .63%(c)
Expenses, excluding distribution
fees................................ .63%(c)
Net investment income.................. 5.76%(c)
</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) Annualized.
(d) Commencement of offering of Class Z shares.
(e) Less than $.005 per share.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 17

<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
Report of Independent Accountants CALIFORNIA INCOME SERIES
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
Prudential California Municipal Fund, California Income Series:

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential California Municipal
Fund, California Income Series (the 'Fund', one of the portfolios constituting
Prudential California Municipal Fund) at August 31, 1999, the results of its
operations for the year then ended and the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the three years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as 'financial statements') are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above. The accompanying financial highlights for each of the two years in the
period ended August 31, 1996 were audited by other independent accountants,
whose opinion dated October 14, 1996 was unqualified.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
October 15, 1999
- --------------------------------------------------------------------------------
18

<PAGE>
PRUDENTIAL MUNICIPAL SERIES FUND
Federal Income Tax Information (Unaudited) 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, 1999) 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, 1999, dividends paid from
net investment income of $.56 per share for Class A shares, $.53 per Class B
share, $.50 per Class C share and $.58 per Class Z share were all federally
tax-exempt interest dividends.

In January 2000 you will be advised on IRS Form 1099 DIV or substitute 1099 DIV
as to federal tax status of the distributions received by you in calendar year
1999.
- --------------------------------------------------------------------------------
19

<PAGE>
Comparing a $10,000 Investment
- -------------------------------------------------------------------
Prudential California Municipal Fund--California Income Series vs.
the Lehman Brothers Municipal Bond Index

Class A
(GRAPH)

Average Annual Total Returns
- ----------------------
With Sales Load
Since Inception 7.31% (7.06%)
Five Years 5.87% (5.75%)
One Year -4.33%

Without Sales Load
Since Inception 7.69% (7.43%)
Five Years 6.52% (6.39%)
One Year -1.37%

Class B
(GRAPH)

Average Annual Total Returns
- -----------------------------
With Sales Load
Since Inception 5.22% (5.06%)
Five Years 5.95% (5.83%)
One Year -6.67%

Without Sales Load
Since Inception 5.36% (5.20%)
Five Years 6.11% (5.99%)
One Year -1.67%

These graphs compare a $10,000 investment in the Prudential California
Municipal Fund--California Income Series (Class A, B, C, and Z shares) with a
similar investment in the Lehman Brothers Municipal Bond Index (the Index) by
portraying the account values at the commencement of operations of Class A, B,
C, and Z shares; and at the end of the fiscal year (August 31), as measured on
a quarterly basis, beginning in 1990 for Class A, 1993 for Class B, 1994 for
Class C, and 1996 for Class Z shares. For purposes of the graphs, and unless
otherwise indicated, it has been assumed that (a) the maximum applicable front-
end sales charge was deducted from the initial $10,000 investment in Class A
and Class C shares; (b) the maximum applicable contingent deferred sales
charges were deducted from the value of the investment in Class B and Class C
shares, assuming full redemption on August 31, 1999; (c) all recurring fees
(including management fees) were deducted; and (d) all dividends and
distributions were reinvested. Class B shares will automatically convert to
Class A shares, on a

<PAGE>

Class C
(GRAPH)

Average Annual Total Returns
- -----------------------------
With Sales Load
Since Inception 5.64% (5.52%)
Five Years 5.64% (5.52%)
One Year -3.89%

Without Sales Load
Since Inception 5.85% (5.73%)
Five Years 5.85% (5.73%)
One Year -1.91%

Class Z
(GRAPH)

Average Annual Total Returns
- -----------------------------
Since Inception 6.01% (5.98%)
One Year -1.18%

quarterly basis, approximately seven years after purchase. This conversion
feature is not reflected in the graphs. Class Z shares are not subject to a
sales charge or distribution and service (12b-1) fees. The graphs and
accompanying tables reflect the past subsidy and/or waiver of expenses and/or
management fees. Without waiver of management fees and/or expense
subsidization, the Series' average annual total returns would have been
lower, as indicated in parentheses ( ).

The Index is a market value-weighted index comprising approximately 47,000
municipal bonds (state and local 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. The
Index is unmanaged, and the total return of the Index includes the reinvestment
of all dividends, but does not reflect the payment of transaction costs and
advisory fees associated with an investment in the Series. The securities in
the Index may differ substantially from the securities in the Series. The
Index is not the only index that may be used to characterize performance of
municipal bond funds. Other indexes may portray different comparative
performance. Investors cannot invest directly in an index.

These graphs are furnished to you in accordance with SEC regulations.

<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077

(800) 225-1852
http://www.prudential.com

Class NASDAQ Cusip
A PBCAX 744313305
B PCAIX 744313404
C -- 744313800
Z -- 744313875