PRUDENTIAL MUNICIPAL BOND FUND, DEFS14A, 1994-04-22

PRUDENTIAL MUNICIPAL BOND FUND
DEFS14A, 1994-04-22

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PRUDENTIAL MUTUAL FUNDS
ONE SEAPORT PLAZA
NEW YORK, NY 10292

APRIL 18, 1994
RE: IMPORTANT PROXY MATERIAL -- IMMEDIATE ACTION REQUIRED
Dear Shareholder:

We are pleased to enclose a notice and proxy statement for a special meeting
of shareholders of the Prudential Mutual Funds to be held on June 23, 1994. You
are being asked to approve, among other things, a proposal to permit the
automatic conversion of Class B shares to Class A shares after a specified
number of years. Thereafter, converted shares will be subject to the lower
annual distribution-related fees applicable to Class A shares.

The proxy statement also includes proposals to revise the current
distribution and service plans for Class A and Class B shares and other
proposals recommended by the Fund's Manager and Subadviser.

Please read the enclosed materials carefully. The proxy statement discusses
each proposal in detail and the reasons why the Board of Directors/Trustees
recommend that you vote in favor of those proposals.

The Fund is using Shareholder Communications Corporation (SCC), a
professional proxy solicitation firm, to assist shareholders in the voting
process. If we have not yet received your proxy card as the date of the meeting
approaches, you may receive a telephone call from SCC reminding you to exercise
your right to vote.

Your vote is critical in allowing your Fund to hold the meeting as
scheduled. Please take a moment now to sign and return the proxy card in the
enclosed postage-paid envelope. If less than a majority of the eligible shares
are represented, the Fund, at shareholders' expense, will have to continue to
solicit votes until a quorum is obtained. Your prompt attention in this matter
benefits all shareholders. Thank you.

Sincerely,

Lawrence C. McQuade
PRESIDENT

<TABLE>
<S> <C> <C>
SPECIAL NOTE: If you hold shares in more than one
Prudential fund, you will receive a separate proxy
package for each Fund you hold. Please be sure to
sign and return each proxy card regardless of how
many you receive.
</TABLE>
<PAGE>

PRUDENTIAL MUNICIPAL BOND FUND

ONE SEAPORT PLAZA
NEW YORK, N.Y. 10292
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
------------------------

To our Shareholders:

Notice is hereby given that a Special Meeting of Shareholders of the High
Yield Series, the Insured Series and the Modified Term Series (each a Series) of
Prudential Municipal Bond Fund (the Fund) will be held at 3:00 P.M. on June 23,
1994, at 199 Water Street, New York, N.Y. 10292, for the following purposes:

1. To elect Trustees.

2. To approve an amendment of the Fund's Declaration of Trust to permit
a conversion feature for Class B shares.

3. To approve an amended and restated Class A Distribution and Service
Plan.

4. To approve an amended and restated Class B Distribution and Service
Plan.

5. To approve amendments of the Series' investment restrictions
regarding restricted and illiquid securities.

6. To approve the elimination of each Series' investment restriction
limiting the Series' ability to invest in the securities of any issuer in
which officers and Trustees of the Fund or officers and directors of its
investment adviser own more than a specified interest.

7. To transact such other business as may properly come before the
Meeting or any adjournment thereof.

Only shares of beneficial interest of each Series of record at the close of
business on March 31, 1994 are entitled to notice of and to vote at this Meeting
or any adjournment thereof.

S. JANE ROSE
SECRETARY

Dated: April 18, 1994

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND PROMPTLY RETURN
THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. IN ORDER TO AVOID
THE ADDITIONAL EXPENSE TO THE FUND OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING IN YOUR PROXY PROMPTLY.
<PAGE>

PRUDENTIAL MUNICIPAL BOND FUND

ONE SEAPORT PLAZA
NEW YORK, N.Y. 10292

------------------------

PROXY STATEMENT
------------------------

This statement is furnished to the shareholders of the High Yield Series,
the Insured Series and the Modified Term Series (each a Series) of Prudential
Municipal Bond Fund (the Fund) by the Trustees in connection with their
solicitation of proxies for use at a Special Meeting of Shareholders to be held
at 3:00 P.M. on June 23, 1994 at 199 Water Street, New York, New York 10292, the
Fund's principal executive office. The purpose of the Meeting and the matters to
be acted upon are set forth in the accompanying Notice of Special Meeting.

If the accompanying form of Proxy is executed properly and returned, shares
represented by it will be voted at the Meeting in accordance with the
instructions on the Proxy. However, if no instructions are specified, shares
will be voted for the election of Trustees and for each of the other proposals.
A Proxy may be revoked at any time prior to the time it is voted by written
notice to the Secretary of the Fund or by attendance at the Meeting. If
sufficient votes to approve one or more of the proposed items are not received,
the persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares present at the Meeting or
represented by proxy. When voting on a proposed adjournment, the persons named
as proxies will vote for the proposed adjournment all shares that they are
entitled to vote with respect to each item, unless directed to disapprove the
item, in which case such shares will be voted against the proposed adjournment.

If a Proxy that is properly executed and returned accompanied by
instructions to withhold authority to vote represents a broker "non-vote" (that
is, a Proxy from a broker or nominee indicating that such person has not
received instructions from the beneficial owner or other person entitled to vote
shares on a particular matter with respect to which the broker or nominee does
not have discretionary power), the shares represented thereby will be considered
not to be present at the Meeting for purposes of determining the existence of a
quorum for the transaction of business and be deemed not cast with respect to
such proposal. If no instructions are received by the broker or nominee from the
shareholder with reference to routine matters, the shares represented thereby

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may be considered for purposes of determining the existence of a quorum for the
transaction of business and will be deemed cast with respect to such proposal.
Also, a properly executed and returned Proxy marked with an abstention will be
considered present at the Meeting for purposes of determining the existence of a
quorum for the transaction of business. However, abstentions and broker
"non-votes" do not constitute a vote "for" or "against" the matter, but have the
effect of a negative vote on matters which require approval by a requisite
percentage of the outstanding shares.

The close of business on March 31, 1994 has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote at, the
Meeting. On that date, the Fund had 108,641,174 shares of beneficial interest
outstanding and entitled to vote in the High Yield Series, consisting of
5,215,131 Class A shares and 103,426,043 Class B shares, 73,385,437 shares of
beneficial interest outstanding and entitled to vote in the Insured Series,
consisting of 2,938,998 Class A shares and 70,446,439 Class B shares and
6,560,470 shares of beneficial interest outstanding and entitled to vote in the
Modified Term Series, consisting of 554,860 Class A shares and 6,005,609 Class B
shares. Each share will be entitled to one vote at the Meeting. It is expected
that the Notice of Special Meeting, Proxy Statement and form of Proxy will first
be mailed to shareholders on or about April 22, 1994.

As of the record date for the Meeting, the only beneficial owners, directly
or indirectly, of more than 5% of the outstanding shares of beneficial interest
of either class of any Series of the Fund were Doris E. Lemmon, 6403
Forestshire, Dallas, TX 75230-2820 and Gary & Patricia Oliver, Co-Conserv, FBO
Laura Lee Oliver A MNR Conservatorship, 12020 SE Bull Run Road, Sandy, OR
97055-9516, which held 45,735 and 66,225 Class A shares, respectively, of the
Modified Term Series, representing 8.24% and 11.9%, respectively, of the Class A
Modified Term Series shares outstanding as of the record date, and LA Adams &
Mae B. Adams TTE, FBO LA Adams & Mae B. Adams, 1990 Trust DTD 11/28/90, P.O. Box
1090, Carson City, NV 89702-1090, which held 182,414 Class A shares of the
Insured Series, representing 6.2% of the Class A Insured Series shares
outstanding as of the record date.

The expense of solicitation will be borne by the Fund and will include
reimbursement of brokerage firms and others for expenses in forwarding proxy
solicitation material to beneficial owners. The solicitation of proxies will be
largely by mail. The Trustees of the Fund have authorized management to retain
Shareholder Communications Corporation, a proxy solicitation firm, to assist in
the solicitation of proxies for this Meeting. This cost, including specified
expenses, is not expected to exceed $67,000 and will be borne by the Fund. In

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addition, solicitation may include, without cost to the Fund, telephonic,
telegraphic or oral communication by regular employees of Prudential Securities
Incorporated (Prudential Securities) and its affiliates.

ELECTION OF TRUSTEES
(PROPOSAL NO. 1)

At the Meeting, seven Trustees will be elected to hold office for a term of
unlimited duration until their successors are elected and qualify. It is the
intention of the persons named in the accompanying form of Proxy to vote for the
election of Edward D. Beach, Donald D. Lennox, Douglas H. McCorkindale, Lawrence
C. McQuade, Thomas T. Mooney, Richard A. Redeker and Louis A. Weil, III, all of
whom are currently Trustees. Each of the nominees has consented to be named in
the Proxy Statement and to serve as a Trustee if elected. All of the Trustees,
except for Mr. Redeker, have previously been elected by shareholders. Messrs.
Beach, Mooney and Weil have served as Trustees since November 6, 1986, Messrs.
Lennox and McCorkindale since March 12, 1987 and Mr. McQuade since February 18,
1988. Mr. Redeker has served as a Trustee since November 9, 1993.

The Trustees have no reason to believe that any of the nominees named above
will become unavailable for election as a Trustee, but if that should occur
before the Meeting, proxies will be voted for such persons as the Trustees may
recommend.

As a Massachusetts business trust, the Fund is not required to hold annual
meetings of shareholders. Accordingly, the Fund does not intend to submit the
election of Trustees to the shareholders on an annual basis. See "Shareholder
Proposals."

INFORMATION REGARDING TRUSTEES

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<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL
INTEREST
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND POSITION WITH OWNED AT
DIRECTORSHIPS FUND MARCH 31, 1994
- ------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Certified Public Accountant; Secretary and Treasurer of Broyhill Fami-
ly Foundation, Inc.; President, Treasurer and Director of First Finan-
cial Fund, Inc. and The High Yield Plus Fund, Inc.; President and Di-
rector of Global Utility Fund, Inc.; Director of The Global Government
Plus Fund, Inc., The Global Yield Fund, Inc., Prudential Adjustable
Rate Securities Fund, Inc., Prudential Equity Fund, Inc., Prudential
Global Genesis Fund, Prudential Global Natural Resources Fund,
Prudential GNMA Fund, Prudential Government Plus Fund, Prudential
Multi-Sector Fund, Inc. and Prudential Special Money Market Fund;
Trustee of The BlackRock Government Income Trust, Command Government
Fund, Command Money Fund, Command Tax-Free Fund, Prudential California
Municipal Fund, Prudential Equity Income Fund, Prudential FlexiFund,
Prudential Municipal Bond Fund and Prudential Municipal Series Fund.
Donald D. Lennox (75), Chairman (since February 1990) and Director Trustee 1,605
(since April 1989) of International Imaging Materials, Inc.; Retired
Chairman, Chief Executive Officer and Director of Schlegel Corporation
(industrial manufac-
turing) (March 1987-February
</TABLE>

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<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL
INTEREST
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND POSITION WITH OWNED AT
DIRECTORSHIPS FUND MARCH 31, 1994
- ------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
1989); Director of Gleason Corporation, Navistar International Cor-
poration, Personal Sound Technologies, Inc., Prudential Global Genesis
Fund, Prudential Global Natural Resources Fund, Prudential In-
stitutional Liquidity Portfolio, Inc., Prudential Multi-Sector Fund,
Inc., The Global Government Plus Fund, Inc. and The High Yield Income
Fund, Inc.; Trustee of Prudential Equity Income Fund, Prudential
FlexiFund, Prudential Municipal Bond Fund and The Target Portfolio
Trust.
Douglas H. McCorkindale (54), Vice Chairman, Gannett Co. Inc. Trustee -0-
(publishing and media) (since March 1984); Director of Continental
Airlines, Inc., Gannett Co., Inc., Rochester Telephone Corporation,
Prudential Global Genesis Fund, Prudential Global Natural Resources
Fund, Prudential Multi-Sector Fund, Inc. and The Global Government Plus
Fund, Inc.; Trustee of Prudential Equity Income Fund, Prudential
FlexiFund and Prudential Municipal Bond Fund.
*Lawrence C. McQuade (66), Vice Chairman of Prudential Mutual Fund President and -0-
Management, Inc. (PMF) (since 1988); Managing Director, Investment Trustee
Banking, Prudential Securities (1988-1991); Director of
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL
INTEREST
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND POSITION WITH OWNED AT
DIRECTORSHIPS FUND MARCH 31, 1994
- ------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Quixote Corporation (since February 1992) and BUNZL, PLC (since June
1991); formerly Director of Crazy Eddie Inc. (1987-1990) and Kaiser
Tech, Ltd. and Kaiser Aluminum and Chemical Corp. (March 1987-November
1988); formerly Executive Vice President and Director of W.R. Grace &
Company; President and Director of Prudential Adjustable Rate
Securities Fund, Inc., Prudential Equity Fund, Inc., Prudential Global
Fund, Inc., Prudential Global Genesis Fund, Prudential Global Natural
Resources Fund, Prudential GNMA Fund, Prudential Government Plus Fund,
Prudential Growth Fund, Inc., Prudential Growth Opportunity Fund,
Prudential High Yield Fund, Prudential IncomeVertible-R- Fund, Inc.,
Prudential Institutional Liquidity Portfolio, Inc., Prudential
Intermediate Global Income Fund, Inc., Prudential MoneyMart Assets,
Prudential Multi-Sector Fund, Inc., Prudential National Municipals
Fund, Prudential Pacific Growth Fund, Inc., Prudential Short-Term
Global Income Fund, Inc., Prudential Special Money Market Fund,
Prudential Structured Maturity Fund, Prudential Tax-Free Money Fund,
Prudential Utility Fund, The Global Government Plus Fund, Inc., The
Global Yield
</TABLE>

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<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL
INTEREST
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND POSITION WITH OWNED AT
DIRECTORSHIPS FUND MARCH 31, 1994
- ------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Fund, Inc. and The High Yield Income Fund, Inc.; President and Trustee
of The BlackRock Government Income Trust, Command Government Fund,
Command Money Fund, Command Tax-Free Fund, Prudential California Munic-
ipal Fund, Prudential Equity Income Fund, Prudential FlexiFund,
Prudential Government Securities Trust, Prudential Municipal Bond Fund,
Prudential Municipal Series Fund, Prudential U.S. Government Fund and
The Target Portfolio Trust.
Thomas T. Mooney (52), President of the Greater Rochester Metro Chamber Trustee -0-
of Commerce; former Rochester City Manager; Trustee
of Center for Governmental Research, Inc.; Director of Blue Cross of
Rochester, Monroe County Water Authority, Rochester Jobs, Inc.,
Executive Service Corps of Rochester, Monroe County Industrial
Development Corporation, Northeast Midwest Institute, Global Utility
Fund, Inc., Prudential Adjustable Rate Securities Fund, Inc.,
Prudential Equity Fund, Inc., Prudential Global Genesis Fund, Pru-
dential Global Natural Resources Fund, Prudential GNMA Fund, Prudential
Government Plus Fund, Prudential Multi-Sector Fund, Inc., First
Financial Fund, Inc., The Global Government Plus
</TABLE>

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<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL
INTEREST
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND POSITION WITH OWNED AT
DIRECTORSHIPS FUND MARCH 31, 1994
- ------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Fund, Inc., The Global Yield Fund, Inc. and The High Yield Plus Fund,
Inc.; Trustee of Prudential California Municipal Fund, Prudential
Equity Income Fund, Prudential FlexiFund, Prudential Municipal Bond
Fund and Prudential Municipal Series Fund.
*Richard A. Redeker (50), President, Chief Executive Officer and Direc- Trustee -0-
tor (since October 1993), PMF; Executive Vice President, Director and
Member of the Operating Committee (since October 1993), Prudential
Securities; Director (since October 1993) of Prudential Securities
Group, Inc. (PSG); formerly Senior Executive Vice President and
Director of Kemper Financial Services, Inc. (September 1978-September
1993); Director of Global Utility Fund, Inc., Prudential Adjustable
Rate Securities Fund, Inc., Prudential Equity Fund, Inc., Prudential
Global Fund, Inc., Prudential Global Genesis Fund, Prudential Global
Natural Resources Fund, Prudential GNMA Fund, Prudential Government
Plus Fund, Prudential GrowthFund, Inc., Prudential IncomeVertible-R-
Fund, Inc., Prudential Institutional Liquidity Portfolio, Inc.,
Prudential Intermediate Global Income Fund, Inc., Prudential MoneyMart
Assets, Prudential Multi-Sector Fund, Inc.,
</TABLE>

8
<PAGE>

<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL
INTEREST
NAME, AGE, BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AND POSITION WITH OWNED AT
DIRECTORSHIPS FUND MARCH 31, 1994
- ------------------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
Prudential Pacific Growth Fund, Inc., Prudential Short-Term Global
Income Fund, Inc., Prudential Special Money Market Fund, Prudential
Structured Maturity Fund, Prudential Utility Fund, The Global Yield
Fund, Inc., The Global Government Plus Fund, Inc., and The High Yield
Income Fund, Inc.; Trustee of The BlackRock Government Income Trust,
Command Government Fund, Command Money Fund, Command Tax-Free Fund,
Prudential California Municipal Fund, Prudential Equity Income Fund,
Prudential FlexiFund, Prudential Municipal Bond Fund, Prudential
Municipal Series Fund, Prudential U.S. Government Fund, and The Target
Portfolio Trust.
Louis A. Weil, III (52), Publisher and Chief Executive Officer, Phoenix Trustee 1,205
Newspapers, Inc. (since August 1991); Director of Central Newspapers,
Inc. (since September 1991); prior thereto, Publisher of Time Magazine
(May 1989-March 1991); formerly President, Publisher and CEO of The
</TABLE>

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The Trustees and officers of the Fund as a group owned beneficially 2,007
shares of the High Yield Series, 398 shares of the Insured Series and 405 shares
of the Modified Term Series of the Fund at March 31, 1994, representing less
than 1% of the outstanding shares of each Series.

The Fund pays annual compensation of $9,000, plus travel and incidental
expenses, to each of the five Trustees not affiliated with PMF or Prudential
Securities. The Trustees have the option to receive the Trustee's fee pursuant
to a deferred fee agreement with the Fund. Under the terms of the agreement, the
Fund accrues daily the amount of such Trustee's fee which accrues interest at a
rate equivalent to the prevailing rate applicable to 90-day U.S. Treasury Bills
at the beginning of each calendar quarter or, pursuant to an exemptive order of
the Securities and Exchange Commission (SEC), at the rate of return of the Fund.
Payment of the interest so accrued is also deferred and accruals become payable
at the option of the Trustee. The Fund's obligation to make payments of deferred
Trustees' fees, together with interest thereon, is a general obligation of

10
<PAGE>

the Fund. During the fiscal year ended April 30, 1993 and the six-month period
ended October 31, 1993, the Fund paid Trustees' fees of approximately $54,000
and $25,300, respectively, and travel and incidental expenses of approximately
$5,600 and $1,800, respectively.

There were four regular meetings and two special meetings of the Fund's
Trustees held during the fiscal year ended April 30, 1993 and two regular
meetings and no special meetings held during the period from May 1, 1993 through
October 31, 1993. The Trustees presently have an Audit Committee, the members of
which are Messrs. Beach, Lennox, McCorkindale, Mooney and Weil, the Fund's
non-interested Trustees. The Audit Committee met three times during the fiscal
year ended April 30, 1993 and once during the period from May 1, 1993 through
October 31, 1993. The Audit Committee makes recommendations to the Trustees with
respect to the engagement of independent accountants and reviews with the
independent accountants the plan and results of the audit engagement and matters
having a material effect upon the Fund's financial operations. The Trustees also
have a Nominating Committee, comprised of the Fund's non-interested Trustees,
which selects and proposes candidates for election as Trustees. The Nominating
Committee met once during the fiscal year ended April 30, 1993 and once during
the period from May 1, 1993 through October 31, 1993. The Nominating Committee
does not consider nominees recommended by shareholders to fill Trustee
vacancies.

During the fiscal year ended April 30, 1993, no Trustee attended fewer than
75% of the aggregate of the total number of meetings of the Trustees and any
committees thereof of which such Trustee was a member. During the period May 1,
1993 to October 31, 1993, Donald D. Lennox and Douglas H. McCorkindale attended
fewer than 75% of the aggregate of the total number of meetings of the Trustees
and any committees thereof of which such Trustees were members.

The executive officers of the Fund, other than as shown above, are: S. Jane
Rose, Secretary, having held office since November 6, 1986; Robert F. Gunia,
Vice President, and Susan C. Cote, Treasurer and Principal Financial and
Accounting Officer, both having held office since October 7, 1987; and
Marguerite E.H. Morrison, Assistant Secretary, having held office since May 15,
1991. Mr. Gunia is 47 years old and is currently Chief Administrative Officer
(since July 1990), Director (since January 1989), Executive Vice President,
Treasurer and Chief Financial Officer (since June 1987) of PMF and a Senior Vice
President (since March 1987) of Prudential Securities. He is also Vice President
and Director (since May 1989) of The Asia Pacific Fund, Inc. Ms. Cote is 39
years old and is a Senior Vice President (since January 1989) of PMF and a

11
<PAGE>

Senior Vice President of Prudential Securities (since January 1992). Prior
thereto, she was a Vice President (January 1986-December 1991) of Prudential
Securities. Ms. Rose is 48 years old and is a Senior Vice President (since
January 1991) and Senior Counsel (since June 1987) of PMF and a Senior Vice
President and Senior Counsel of Prudential Securities (since July 1992). Prior
thereto, she was a First Vice President (June 1987-December 1990) of PMF and a
Vice President and Associate General Counsel of Prudential Securities. Ms.
Morrison is 38 years old and is a Vice President and Associate General Counsel
(since June 1991) of PMF and a Vice President and Associate General Counsel of
Prudential Securities. The executive officers of the Fund are elected annually
by the Trustees.

REQUIRED VOTE

Trustees must be elected by a vote of a plurality of the shares present at
the Meeting in person or by proxy and entitled to vote thereupon, provided that
a quorum is present.

MANAGEMENT OF THE FUND

THE MANAGER

Prudential Mutual Fund Management, Inc. (PMF or the Manager), One Seaport
Plaza, New York, New York 10292, serves as the Fund's Manager under a management
agreement dated as of March 1, 1988 (the Management Agreement).

The Management Agreement was last approved by the Trustees of the Fund,
including a majority of the Trustees who are not parties to such contract or
interested persons of such parties (as defined in the Investment Company Act) on
May 4, 1993 and was approved by shareholders of each Series on February 19,
1988.

TERMS OF THE MANAGEMENT AGREEMENT

Pursuant to the Management Agreement, PMF, subject to the supervision of the
Fund's Trustees and in conformity with the stated policies of the Fund, is
responsible for managing or providing for the management of the investment of
the assets of each Series. In this regard, PMF provides supervision of the
Fund's investments, furnishes a continuous investment program for the Fund's
portfolios and places purchase and sale orders for portfolio securities of the
Fund and other investments. The Prudential Investment Company (PIC), a
wholly-owned subsidiary of The Prudential Insurance Company of America
(Prudential), provides such services pursuant to a subadvisory agreement (the
Subadvisory

12
<PAGE>
Agreement) with PMF. PMF also administers the Fund's business affairs, subject
to the supervision of the Fund's Trustees, and, in connection therewith,
furnishes the Fund with office facilities, together with those ordinary clerical
and bookkeeping services which are not being furnished by the Fund's Transfer
and Dividend Disbursing Agent and Custodian.

PMF has authorized any of its directors, officers and employees who have
been elected as Trustees or officers of the Fund to serve in the capacities in
which they have been elected. All services furnished by PMF under the Management
Agreement may be furnished by any such directors, officers or employees of PMF.
In connection with its administration of the corporate affairs of the Fund, PMF
bears the following expenses:

(a) the salaries and expenses of all personnel of the Fund and PMF,
except the fees and expenses of Trustees not affiliated with PMF or the
Fund's investment adviser;

(b) all expenses incurred by PMF or by the Fund in connection with
administering the ordinary course of the Fund's business, other than those
assumed by the Fund, as described below; and

The Fund pays PMF for the services performed and the facilities furnished by
it a fee at an annual rate of .50 of 1% of the average net assets of each
Series. The fee is computed daily and paid monthly. For the fiscal year ended
April 30, 1993, PMF received management fees of $4,624,309, $3,652,176 and
$239,872 (net of waiver in the case of the Modified Term Series of $20,291) on
behalf of the High Yield Series, the Insured Series and the Modified Term
Series, respectively. For the six-month period ended October 31, 1993, PMF
received management fees of $2,912,734, $2,116,060 and $150,350 on behalf of the
High Yield Series, the Insured Series and the Modified Term Series,
respectively.

The Management Agreement provides that, if the expenses of the Fund
(including the fees of PMF, but excluding interest, taxes, brokerage
commissions, distribution fees and litigation and indemnification expenses and
other extraordinary expenses not incurred in the ordinary course of the Fund's
business) for any fiscal year exceed the lowest applicable annual expense
limitation established and enforced pursuant to the statutes or regulations of
any jurisdiction in which shares of the Fund are then qualified for offer and
sale, the compensation due PMF will be reduced by the amount of such excess, or
if such reduction exceeds the compensation payable to PMF, PMF will pay the Fund
the amount of such reduction which exceeds the amount of such compensation.

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<PAGE>
Any such reductions or payments are subject to readjustment during the year. No
such reductions or payments were required during the fiscal year ended April 30,
1993. The Fund believes the most restrictive of such annual limitations is
2 1/2% of a Series' average daily net assets up to $30 million, 2% of the next
$70 million of such assets and 1 1/2% of such assets in excess of $100 million.

Except as indicated above, the Fund is responsible under the Management
Agreement for the payment of its expenses, including (a) the fees payable to
PMF, (b) the fees and expenses of Trustees who are not affiliated with PMF or
the investment adviser, (c) the fees and certain expenses of the Fund's
Custodian and Transfer and Dividend Disbursing Agent, including the cost of
providing records of the Fund and of pricing Fund shares, (d) the charges and
expenses of the Fund's legal counsel and independent accountants, (e) brokerage
commissions and any issue or transfer taxes chargeable to the Fund in connection
with its securities transactions, (f) all taxes and corporate fees payable by
the Fund to governmental agencies, (g) the fees of any trade association of
which the Fund may be a member, (h) the cost of any stock certificates
representing shares of the Fund, (i) the cost of fidelity and liability
insurance, (j) certain organization expenses of the Fund and the fees and
expenses involved in registering and maintaining registration of the Fund and of
its shares with the SEC and registering the Fund and qualifying its shares under
state securities laws, including the preparation and printing of the Fund's
registration statements and prospectuses for such purposes, (k) allocable
communications expenses with respect to investor services and all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing
reports, proxy statements and prospectuses to shareholders in the amount
necessary for distribution to the shareholders, (l) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business and (m) distribution fees.

The Management Agreement provides that PMF will not be liable to the Fund
for any error of judgment by PMF or for any loss suffered by the Fund in
connection with the matters to which the Management Agreement relates except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or willful misfeasance, bad faith, gross negligence or
reckless disregard of duty. The Management Agreement also provides that it will
terminate automatically if assigned and that it may be terminated without
penalty by the Trustees of the Fund, by vote of a majority of the Fund's
outstanding voting securities (as defined in the Investment Company Act) or by
the Manager, upon not more than 60 days' nor less than 30 days' written notice.

14
<PAGE>
INFORMATION ABOUT PMF

PMF, a subsidiary of Prudential Securities and an indirect, wholly-owned
subsidiary of Prudential, was organized in May 1987 under the laws of the State
of Delaware. Prudential's address is Prudential Plaza, Newark, New Jersey 07102.
PMF acts as manager for the following investment companies:

Open-End Management Investment Companies: Command Government Fund,
Command Money Fund, Command Tax-Free Fund, Prudential Adjustable Rate
Securities Fund, Inc., Prudential California Municipal Fund, Prudential
Equity Fund, Inc., Prudential Equity Income Fund, Prudential FlexiFund,
Prudential Global Fund, Inc., Prudential-Bache Global Genesis Fund, Inc.
(d/b/a Prudential Global Genesis Fund), Prudential-Bache Global Natural
Resources Fund, Inc. (d/b/a Prudential Global Natural Resources Fund),
Prudential-Bache GNMA Fund, Inc. (d/b/a Prudential GNMA Fund),
Prudential-Bache Government Plus Fund, Inc. (d/b/a Prudential Government
Plus Fund), Prudential Government Securities Trust, Prudential Growth Fund,
Inc., Prudential-Bache Growth Opportunity Fund, Inc. (d/b/a Prudential
Growth Opportunity Fund), Prudential-Bache High Yield Fund, Inc. (d/b/a
Prudential High Yield Fund), Prudential IncomeVertible-R- Fund, Inc.,
Prudential-Bache MoneyMart Assets Fund, Inc. (d/b/a Prudential MoneyMart
Assets), Prudential Multi-Sector Fund, Inc., Prudential Municipal Bond Fund,
Prudential Municipal Series Fund, Prudential-Bache National Municipals Fund,
Inc. (d/b/a Prudential National Municipals Fund), Prudential Pacific Growth
Fund, Inc., Prudential Short-Term Global Income Fund, Prudential-Bache
Special Money Market Fund, Inc. (d/b/a Prudential Special Money Market
Fund), Prudential-Bache Structured Maturity Fund, Inc. (d/b/a Prudential
Structured Maturity Fund), Prudential-Bache Tax-Free Money Fund, Inc. (d/b/a
Prudential Tax-Free Money Fund), Prudential U.S. Government Fund,
Prudential-Bache Utility Fund, Inc. (d/b/a Prudential Utility Fund),
Prudential Institutional Liquidity Portfolio, Inc., Prudential Intermediate
Global Income Fund, Inc., Global Utility Fund, Inc., Nicholas-Applegate
Fund, Inc. and The BlackRock Government Income Trust.

Closed-End Management Investment Companies: The Global Government Plus
Fund, Inc., The Global Yield Fund, Inc. and The High Yield Income Fund, Inc.

The consolidated statement of financial condition of PMF and its
subsidiaries as of December 31, 1993 is set forth as Exhibit A to this Proxy
Statement.

15
<PAGE>
Certain information regarding the directors and principal executive officers
of PMF is set forth below. Except as otherwise indicated, the address of each
person is One Seaport Plaza, New York, New York 10292.

<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATIONS
- ----------------------------- -------------------- ------------------------------
<S> <C> <C>
Brendan D. Boyle............. Executive Vice Executive Vice President and
President and Director of Marketing, PMF
Director of
Marketing
John D. Brookmeyer, Jr. Director Senior Vice President,
Two Gateway Center Prudential; Senior Vice
Newark, NJ 07102 President, PIC
Susan C. Cote ............... Senior Vice Senior Vice President, PMF;
President Senior Vice President,
Prudential Securities
Fred A. Fiandaca ............ Executive Vice Executive Vice President,
Raritan Plaza One President, Chief Chief Operating Officer and
Edison, NJ 08847 Operating Officer Director, PMF; Chairman,
and Director Chief Operating Officer and
Director, Prudential Mutual
Fund Services, Inc.
Stephen P. Fisher ........... Senior Vice Senior Vice President, PMF;
President Senior Vice President,
Prudential Securities
Frank W. Giordano ........... Executive Vice Executive Vice President,
President, General General Counsel and
Counsel and Secretary, PMF; Senior Vice
Secretary President, Prudential
Securities
</TABLE>

16
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PMF PRINCIPAL OCCUPATIONS
- ----------------------------- -------------------- ------------------------------
<S> <C> <C>
Robert F. Gunia ............. Executive Vice Executive Vice President,
President, Chief Chief Financial and
Financial and Administrative Officer,
Administrative Treasurer and Director, PMF;
Officer, Treasurer Senior Vice President,
and Director Prudential Securities
Eugene B. Heimberg .......... Director Senior Vice President,
Prudential Plaza Prudential; President,
Newark, NJ 07102 Director and Chief
Investment Officer, PIC
Lawrence C. McQuade ......... Vice Chairman Vice Chairman, PMF
Leland B. Paton ............. Director Executive Vice President and
Director, Prudential
Securities; Director, PSG
Richard A. Redeker .......... President, Chief President, Chief Executive
Executive Officer Officer and Director, PMF;
and Director Executive Vice President,
Director and Member of the
Operating Committee,
Prudential Securities;
Director, PSG
S. Jane Rose ................ Senior Vice Senior Vice President, Senior
President, Senior Counsel and Assistant
Counsel and Secretary, PMF; Senior Vice
Assistant President and Senior
Secretary Counsel, Prudential
Securities
Donald G. Southwell ......... Director Senior Vice President,
213 Washington Street Prudential; Director, PSG
Newark, NJ 07102
</TABLE>

17
<PAGE>
THE SUBADVISER

Investment advisory services are provided to the Fund by PMF through its
affiliate, The Prudential Investment Corporation (PIC or the Subadviser),
Prudential Plaza, Newark, New Jersey 07102, under a Subadvisory Agreement. The
Subadvisory Agreement was approved by shareholders of each Series on February
19, 1988 and was last approved by the Trustees of the Fund, including a majority
of the Trustees who are not parties to such contract or interested persons of
such parties (as defined in the Investment Company Act), on May 4, 1993.

TERMS OF THE SUBADVISORY AGREEMENT

Pursuant to the Subadvisory Agreement, PIC, subject to the supervision of
PMF and the Trustees and in conformity with the stated policies of the Fund,
manages the investment operations of the Fund and the composition of the Fund's
portfolio, including the purchase, retention and disposition of securities and
other investments. PIC is reimbursed by PMF for reasonable costs and expenses
incurred by it in furnishing such services. The fees paid by the Fund to PMF
under the Management Agreement with PMF are not affected by this arrangement.
PIC keeps certain books and records required to be maintained pursuant to the
Investment Company Act. The investment advisory services of PIC to the Fund are
not exclusive under the terms of the Subadvisory Agreement and PIC is free to,
and does, render investment advisory services to others.

PIC has authorized any of its directors, officers and employees who may be
elected as Trustees or officers of the Fund to serve in the capacities in which
they have been elected. Services furnished by PIC under the Subadvisory
Agreement may be furnished by any such directors, officers or employees of PIC.
The Subadvisory Agreement provides that PIC shall not be liable for any error of
judgment or for any loss suffered by the Fund or PMF in connection with the
matters to which the Subadvisory Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on PIC's part in the
performance of its duties or from its reckless disregard of duty. The
Subadvisory Agreement provides that it shall terminate automatically if assigned
or upon termination of the Management Agreement and that it may be terminated
without penalty by the Fund, PMF or PIC upon not more than 60 days' nor less
than 30 days' written notice.

INFORMATION ABOUT PIC

PIC was organized in June 1984 under the laws of the State of New Jersey.
The business and other connections of PIC's directors and executive officers are
as set forth below. Except as otherwise indicated, the address of each person is
Prudential Plaza, Newark, New Jersey 07102.

18
<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
- ----------------------------- ----------------------- ---------------------------
<S> <C> <C>
Martin A. Berkowitz ......... Senior Vice President Vice President, Prudential;
and Chief Financial Senior Vice President and
and Compliance Chief Financial and
Officer Compliance Officer, PIC
William M. Bethke ........... Senior Vice President Senior Vice President,
Two Gateway Center Prudential; Senior Vice
Newark, NJ 07102 President, PIC
John D. Brookmeyer, Jr. . Senior Vice President Senior Vice President,
Two Gateway Center Prudential; Senior Vice
Newark, NJ 07102 President, PIC
Eugene B. Heimberg .......... President, Director and Senior Vice President,
Chief Investment Prudential; President,
Officer Director and Chief
Investment Officer, PIC
Garnett L. Keith, Jr. ....... Director Vice Chairman and Director,
Prudential; Director, PIC
Harry E. Knapp, Jr........... Vice President Vice President, Prudential;
Four Gateway Center Vice President, PIC
Newark, NJ 07102
William P. Link ............. Senior Vice President Executive Vice President,
Four Gateway Center Prudential; Senior Vice
Newark, NJ 07102 President, PIC
Robert E. Riley ............. Executive Vice Executive Vice President,
800 Boylston Avenue President Prudential; Executive
Boston, MA 02199 Vice President, PIC;
Director, PSG
James W. Stevens ............ Executive Vice Executive Vice President,
Four Gateway Center President Prudential; Executive
Newark, NJ 07102 Vice President, PIC;
Director, PSG
</TABLE>

19
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
- ----------------------------- ----------------------- ---------------------------
<S> <C> <C>
Robert C. Winters ........... Director Chairman of the Board and
Chief Executive Officer,
Prudential; Director,
PIC; Chairman of the
Board, PSG
Claude J. Zinngrabe, Jr. . Executive Vice Vice President, Prudential;
President Executive Vice President,
PIC
</TABLE>

THE DISTRIBUTORS

Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza, New
York, New York 10292, acts as the distributor of the Class A shares of each
Series of the Fund. Prudential Securities, One Seaport Plaza, New York, New York
10292, acts as the distributor of the Class B shares of each Series of the Fund.

Under separate Distribution and Service Plans (the Class A Plan and the
Class B Plan, collectively, the Plans) adopted by the Fund under Rule 12b-1
under the Investment Company Act and separate distribution agreements (the
Distribution Agreements), PMFD and Prudential Securities (collectively, the
Distributor) incur the expenses of distributing the Fund's Class A and Class B
shares, respectively.

The Plans were last approved by the Trustees, including a majority of the
Trustees who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Class A or Class B Plan or
in any agreement related to either Plan (the Rule 12b-1 Trustees), on May 4,
1993. The Class A Plan was approved by the Class A shareholders of each Series
on December 19, 1990. The Class B Plan was approved by the then shareholders of
each Series (the Class B shareholders) on December 18, 1989.

The Plans are proposed to be amended as set forth in Proposals No. 3 and 4
below.

CLASS A PLAN. Under the Class A Plan, the Fund reimburses PMFD for its
distribution-related expenses with respect to Class A shares at an annual rate
of up to .30 of 1% of the average daily net assets of the Class A shares. The
Class A Plan provides that (i) up to .25 of 1% of the average daily net assets
of the Class A shares may be used for personal service and/or the maintenance of
shareholder accounts (service fee) and (ii) total distribution fees (including
the

20
<PAGE>
service fee of .25 of 1%) may not exceed .30 of 1% of the average daily net
assets of the Class A shares. PMFD has advised the Fund that
distribution-related expenses of the Fund will not exceed .10 of 1% of the
average daily net assets of the Class A shares for the fiscal year ending April
30, 1995.

For the fiscal year ended April 30, 1993 and the six-month period ended
October 31, 1993, PMFD received payments of $31,658 and $25,029, respectively,
for the High Yield Series, $24,589 and $15,955, respectively, for the Insured
Series and $1,883 and $2,166, respectively, for the Modified Term Series under
the Class A Plan representing .10 of 1% of the average daily net assets of the
Class A shares of each Series as reimbursement of expenses related to the
distribution of Class A shares. These amounts were expended on account servicing
fees to Prudential Securities and Pruco Securities Corporation, an affiliated
broker-dealer (Prusec), for payment to financial advisers and other salespersons
who sell Class A shares. For the fiscal year ended April 30, 1993 and the
six-month period ended October 31, 1993, PMFD also received $688,000 and
$431,300, respectively, on behalf of the High Yield Series, $401,000 and
$165,200, respectively, on behalf of the Insured Series and $61,000 and $46,600,
respectively, on behalf of the Modified Term Series, in initial sales charges.

CLASS B PLAN. The Class B Plan provides for the payment of a service fee to
Prudential Securities at a rate not to exceed .25 of 1% of the average daily net
assets of Class B shares. Under the Class B Plan, the Fund reimburses Prudential
Securities for its distribution-related expenses with respect to Class B shares
at an annual rate of up to .50 of 1% (including the service fee) of the average
daily net assets of the Class B shares. The aggregate distribution fee for Class
B shares (asset-based sales charge plus service fee) will not exceed .50 of 1%
of average daily net assets under the Class B Plan.

For the fiscal year ended April 30, 1993, Prudential Securities received
$4,466,017, $3,529,230 and $250,771 and for the six-month period ended October
31, 1993, Prudential Securities received $2,787,588, $2,036,246 and $139,522 on
behalf of the High Yield Series, the Insured Series and the Modified Term

21
<PAGE>
Series, respectively, under the Class B Plan. For the fiscal year ended April
30, 1993, the Distributor spent approximately the following amounts on behalf of
each Series of the Fund:

<TABLE>
<CAPTION>
COMPENSATION
TO PRUSEC FOR
COMMISSION COMMISSION APPROXIMATE
PAYMENTS TO PAYMENTS TO TOTAL AMOUNT
SALES INTEREST FINANCIAL OVERHEAD ACCOUNT SPENT BY
MATERIAL AND ADVISERS OF COSTS OF EXECUTIVES DISTRIBUTOR ON
AND CARRYING PRUDENTIAL PRUDENTIAL AND OTHER BEHALF OF
SERIES ADVERTISING CHARGES SECURITIES SECURITIES* EXPENSES* SERIES
- ------------------------- ------------ ------------- ----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
High Yield Series ....... $29,900 $ 1,065,900 $4,247,800 $4,968,000 $1,139,800 $11,451,000
Insured Series . 21,900 796,900 1,514,500 1,317,700 3,485,200 7,136,000
Modified Term Series .... 12,300 58,900 159,100 159,300 187,600 577,000
<FN>
* Including lease, utility and sales promotion expenses.
</TABLE>

For the six-month period ended October 31, 1993, the Distributor spent
approximately the following amounts on behalf of each Series of the Fund:

<TABLE>
<CAPTION>
COMPENSATION
TO PRUSEC FOR
COMMISSION COMMISSION APPROXIMATE
PAYMENTS TO PAYMENTS TO TOTAL AMOUNT
SALES INTEREST FINANCIAL OVERHEAD ACCOUNT SPENT BY
MATERIAL AND ADVISERS OF COSTS OF EXECUTIVES DISTRIBUTOR ON
AND CARRYING PRUDENTIAL PRUDENTIAL AND OTHER BEHALF OF
SERIES ADVERTISING CHARGES SECURITIES SECURITIES* EXPENSES* SERIES
- ------------------------- ------------ ------------- ------------ ------------ ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
High Yield Series ....... $61,800 $ 615,000 $ 2,651,131 $ 4,218,900 $ 932,500 $ 8,574,100
Insured Series . 16,600 424,800 840,700 1,215,400 2,369,700 4,867,200
Modified Term Series .... 3,500 33,900 92,600 207,300 178,700 553,900
<FN>
* Including lease, utility and sales promotion expenses.
</TABLE>

Prudential Securities also receives the proceeds of contingent deferred
sales charges paid by holders of Class B shares upon certain redemptions of
Class B shares. Under the current Class B Plan, the amount of distribution
expenses reimbursable by Class B shares of the Fund is reduced by the amount of
such contingent deferred sales charges. For the fiscal year ended April 30,
1993, Prudential Securities received approximately $1,747,000, $1,386,000 and
$108,000 on behalf of the High Yield Series, the Insured Series and the Modified
Term Series, respectively, in contingent deferred sales charges. For the six-
month period ended October 31, 1993, Prudential Securities received
approximately $820,000, $437,000 and $36,800 on behalf of the High Yield Series,
the

22
<PAGE>
Insured Series and the Modified Term Series, respectively, in contingent
deferred sales charges. As of December 31, 1993, the aggregate amount of
unreimbursed distribution expenses for the Fund's Class B shares was
approximately $64,857,000 ($37,448,000 for the High Yield Series, $25,224,000
for the Insured Series and $2,185,000 for the Modified Term Series).

The Class A and Class B Plans continue in effect from year to year, provided
that each such continuance is approved at least annually by a vote of the
Trustees, including a majority vote of the Rule 12b-1 Trustees, cast in person
at a meeting called for the purpose of voting on such continuance. The Class A
and Class B Plans may each be terminated at any time, without penalty, by the
vote of a majority of the Rule 12b-1 Trustees or by the vote of the holders of a
majority of the outstanding shares of the applicable class on not more than 30
days' written notice to any other party to the Plans. Neither Plan may be
amended to increase materially the amounts to be spent for the services
described therein without approval by the shareholders of the applicable class,
and all material amendments are required to be approved by the Trustees in the
manner described above. Each Plan will automatically terminate in the event of
its assignment. The Fund will not be contractually obligated to pay expenses
incurred under either the Class A Plan or the Class B Plan if it is terminated
or not continued. In the event of termination or noncontinuation of the Class B
Plan, the Trustees may consider the appropriateness of having the Fund reimburse
Prudential Securities for the outstanding carry forward amounts plus interest
thereon.

Pursuant to each Plan, the Trustees review at least quarterly a written
report of the distribution expenses incurred on behalf of the Class A and Class
B shares of the Fund by PMFD and Prudential Securities, respectively. The report
includes an itemization of the distribution expenses and the purposes of such
expenditures. In addition, as long as the Plans remain in effect, the selection
and nomination of Rule 12b-1 Trustees shall be committed to the Rule 12b-1
Trustees.

Pursuant to each Distribution Agreement, the Fund has agreed to indemnify
PMFD and Prudential Securities to the extent permitted by applicable law against
certain liabilities under the Securities Act. Each Distribution Agreement was
last approved by the Trustees, including a majority of the Rule 12b-1 Trustees,
on May 4, 1993.

PORTFOLIO TRANSACTIONS

The Manager is responsible for decisions to buy and sell securities and
financial futures for each Series of the Fund, the selection of brokers, dealers

23
<PAGE>
and futures commission merchants to effect the transactions and the negotiation
of brokerage commissions, if any. For purposes of this section, the term
"Manager" includes the Subadviser. Purchases and sales of securities on a
securities exchange, which are not expected to be a significant portion of the
portfolio securities of any Series, are effected through brokers who charge a
commission for their services. Orders may be directed to any broker or futures
commission merchant including, to the extent and in the manner permitted by
applicable law, Prudential Securities.

In the over-the-counter market, securities are generally traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission, although the price of the security usually includes a profit to the
dealer. In underwritten offerings, securities are purchased at a fixed price
which includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. On occasion, certain money
market instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid. The Fund will not deal with Prudential
Securities (or any affiliate) in any transaction in which Prudential Securities
acts as principal. Thus it will not deal in over-the-counter securities with
Prudential Securities (or any affiliate) acting as a market maker, and it will
not execute a negotiated trade with Prudential Securities if the execution
involves Prudential Securities (or any affiliate) acting as principal with
respect to any part of the Fund's order.

In placing orders for portfolio securities of the Fund, the Manager is
required to give primary consideration to obtaining the most favorable price and
efficient execution. Within the framework of this policy, the Manager will
consider the research and investment services provided by brokers, dealers or
futures commission merchants who effect or are parties to portfolio transactions
of the Fund, the Manager or the Manager's other clients. Such research and
investment services are those which brokerage houses customarily provide to
institutional investors and include statistical and economic data and research
reports on particular companies and industries. Such services are used by the
Manager in connection with all of its investment activities, and some of such
services obtained in connection with the execution of transactions for the Fund
may be used in managing other investment accounts. Conversely, brokers, dealers
or futures commission merchants furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets are far
larger than the Fund's, and the services furnished by such brokers, dealers or
futures commission merchants may be used by the Manager in providing investment
management for the Fund. Commission rates are established pursuant to
negotiations with the broker, dealer or futures commission merchant based on the
quality and quantity of execution services provided by

24
<PAGE>

the broker in light of generally prevailing rates. The policy of the Manager is
to pay higher commissions to brokers, other than Prudential Securities, for
particular transactions than might be charged if a different broker had been
selected, on occasions when, in the Manager's opinion, this policy furthers the
objective of obtaining best price and execution. In addition, the Manager is
authorized to pay higher commissions on brokerage transactions for the Fund to
brokers other than Prudential Securities in order to secure research and
investment services described above, subject to review by the Fund's Trustees
from time to time as to the extent and continuation of this practice. The
allocation of orders among brokers and the commission rates paid are reviewed
periodically by the Fund's Trustees. Portfolio securities may not be purchased
from any underwriting or selling syndicate of which Prudential Securities,
during the existence of the syndicate, is a principal underwriter (as defined in
the Investment Company Act), except in accordance with rules of the SEC. This
limitation, in the opinion of the Fund, will not significantly affect the
Series' ability to pursue their present investment objectives. However, in the
future in other circumstances, the Series may be at a disadvantage because of
this limitation in comparison to other funds with similar objectives but not
subject to this limitation.

Subject to the above considerations, Prudential Securities may act as a
securities broker or futures commission merchant for the Fund. In order for
Prudential Securities (or any affiliate) to effect any portfolio transactions
for the Fund, the commissions, fees or other remuneration received by Prudential
Securities (or any affiliate) must not exceed certain rates set forth in the
Investment Company Act and must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers or futures
commission merchants in connection with comparable transactions involving
similar securities or futures being purchased or sold on an exchange during a
comparable period of time. This standard would allow Prudential Securities (or
any affiliate) to receive no more than the remuneration which would be expected
to be received by an unaffiliated broker or futures commission merchant in a
commensurate arm's-length transaction. Furthermore, the Trustees of the Fund,
including a majority of the Rule 12b-1 Trustees, have adopted procedures which
are reasonably designed to provide that any commissions, fees or other
remuneration paid to Prudential Securities (or any affiliate) are consistent
with the foregoing standard. In accordance with Section 11(a) of the Securities
Exchange Act of 1934, Prudential Securities may not retain compensation for
effecting transactions on a national securities exchange for the Fund unless the
Fund has expressly authorized the retention of such compensation. Prudential
Securities must furnish to the Fund at least annually a statement setting forth
the total amount of all compensation retained by Prudential Securities from

25
<PAGE>

transactions effected for the Fund during the applicable period. Brokerage and
futures transactions with Prudential Securities (or any affiliate) are also
subject to such fiduciary standards as may be imposed upon Prudential Securities
(or such affiliate) by applicable law.

During the fiscal year ended April 30, 1993 and the six-month period ended
October 31, 1993, the Fund paid $23,012 and $10,000, respectively, in brokerage
commissions on certain futures transactions. No such brokerage commissions were
paid to Prudential Securities.

APPROVAL OF A PROPOSAL TO AMEND
THE FUND'S DECLARATION OF TRUST
TO PERMIT THE IMPLEMENTATION OF A CONVERSION FEATURE
(FOR CONSIDERATION BY CLASS A AND CLASS B SHAREHOLDERS, VOTING JOINTLY)
(PROPOSAL NO. 2)

The Trustees are recommending that shareholders approve an amendment to the
Fund's Declaration of Trust to permit the implementation of a conversion feature
for Class B shares. The conversion feature is authorized pursuant to an
exemptive order of the SEC (the SEC Order) and would provide for the automatic
conversion of Class B shares to Class A shares at relative net asset value
approximately seven years after purchase. Class A shares are subject to a lower
annual distribution and service fee than Class B shares and conversions would
occur without the imposition of any additional sales charge. A description of
the conversion feature is set forth in greater detail below. Amendment of the
Declaration of Trust requires approval by a majority of the Fund's outstanding
shares.

THE CLASSES OF SHARES

The Fund currently offers two classes of shares, designated as Class A and
Class B shares pursuant to the Alternative Purchase Plan, in reliance upon the
SEC Order. Class A shares are currently offered with an initial sales charge of
up to 4.5% of the offering price and are subject to an annual distribution and
service fee of up to .30 of 1% of the average daily net assets of the Class A
shares pursuant to a Rule 12b-1 plan. This fee is currently charged at a rate of
.10 of 1% of the average daily net assets of the Class A shares and PMFD has
agreed to so limit its fee under the Class A Plan for the fiscal year ending
April 30, 1995. Class B shares are currently offered without either an initial
or a deferred sales charge but are subject to a contingent deferred sales charge
or CDSC (declining from 5% to zero of the lesser of the amount invested or the
redemption

26
<PAGE>

proceeds) on certain redemptions generally made within six years of purchase and
to an annual distribution and service fee pursuant to a Rule 12b-1 plan of up to
.50 of 1% of the average daily net assets of the Class B shares.

In accordance with the SEC Order, the Trustees may, among other things,
authorize the creation of additional classes of shares from time to time. The
Trustees have approved the offering of a new class of shares, to be designated
Class C shares, which will be offered simultaneously with the offering of Class
B shares with the proposed conversion feature. It is anticipated that Class C
shares will be offered without an initial sales charge but will be subject to an
annual distribution and service fee not to exceed 1% of the average daily net
assets of the Class C shares and, subject to approval by the Trustees, a 1% CDSC
on certain redemptions made within one year of purchase. If the proposed
conversion feature for Class B shares is not approved, Class C shares will not
be offered.

THE PROPOSED CONVERSION FEATURE

On March 17, 1993, the Fund's Trustees, including a majority of the Rule
12b-1 Trustees, approved an amendment to the Fund's Declaration of Trust to
permit the implementation of a conversion feature for the Fund's Class B shares.
A copy of the proposed amendment to the Fund's Declaration of Trust is attached
hereto as Exhibit B.

If this proposal is approved, it is currently contemplated that conversions
of Class B shares to Class A shares will occur on a quarterly basis
approximately seven years from purchase. The first conversion is currently
anticipated to occur in or about January 1995. Conversions will be effected
automatically at relative net asset value without the imposition of any
additional sales charge. Class B shareholders will benefit from the conversion
feature because they will thereafter be subject to the lower annual distribution
and service fee applicable to Class A shares.

Since the Fund tracks amounts paid rather than the number of shares bought
on each purchase of Class B shares, it is currently anticipated that the number
of Class B shares eligible to convert to Class A shares (excluding shares
acquired through the automatic reinvestment of dividends and other
distributions) (the Eligible Shares) will be determined for each Series on each
conversion date in accordance with the following formula: (i) the ratio of (a)
the amounts paid for Class B shares purchased at least seven years prior to the
conversion date to (b) the total amount paid for all Class B shares purchased
and then held in a shareholder's account (ii) multiplied by the total number of
Class B shares then held in such shareholder's account. Each time any Eligible
Shares in a shareholder's account convert to Class A shares, all shares or

27
<PAGE>
amounts representing Class B shares then in such account that were acquired
through the automatic reinvestment of dividends and other distributions will
convert to Class A shares.

For purposes of determining the number of Eligible Shares, if the Class B
shares in a shareholder's account on any conversion date are the result of
multiple purchases at different net asset values per share, the number of
Eligible Shares calculated as described above will generally be either more or
less than the number of shares actually purchased approximately seven years
before such conversion date. For example, if 100 shares were initially purchased
at $10 per share (for a total of $1,000) and a second purchase of 100 shares was
subsequently made at $11 per share (for a total of $1,100), 95.24 shares would
convert approximately seven years from the initial purchase (I.E., $1,000
divided by $2,100 (47.62%), multiplied by 200 shares equals 95.24 shares). The
Manager reserves the right to modify the formula for determining the number of
Eligible Shares in the future as it deems appropriate on notice to shareholders.

If the net asset value per share of Class A is higher than that of Class B
at the time of conversion (which may be the case because of the higher
distribution and service fee applicable to Class B shares), shareholders will
receive fewer Class A shares than Class B shares converted, although the
aggregate dollar value will be the same.

For purposes of calculating the applicable holding period for conversions,
all payments for purchases of Class B shares during a month will be deemed to
have been made on the last day of the month, or for Class B shares acquired
through exchange, or a series of exchanges, on the last day of the month in
which the original payment for purchases of such Class B shares was made. For
Class B shares previously exchanged for shares of a money market fund, the time
period during which such shares were held in the money market fund will be
excluded. For example, Class B shares held in a money market fund for a period
of one year will not convert to Class A shares until approximately eight years
from purchase. For purposes of measuring the time period during which shares are
held in a money market fund, exchanges will be deemed to have been made on the
last day of the month. Class B shares acquired through exchange will convert to
Class A shares after expiration of the conversion period applicable to the
original purchase of such shares. As of the date of the first conversion (which,
as noted above, is currently anticipated to occur in or about January 1995) all
amounts representing Class B shares then outstanding beyond the expiration of
the applicable conversion period will automatically convert to

28
<PAGE>
Class A shares, together with all shares or amounts representing Class B shares
acquired through the automatic reinvestment of dividends and distributions then
held in the shareholder's account.

The Fund has obtained an opinion of counsel to the effect that the
conversion of Class B shares into Class A shares does not constitute a taxable
event for U.S. income tax purposes. However, such opinion is not binding on the
Internal Revenue Service.

If approved by shareholders, the conversion feature may be subject to the
continuing availability of opinions of counsel or rulings of the Internal
Revenue Service (i) that the dividends and other distributions paid on Class A
and Class B shares will not constitute "preferential dividends" under the
Internal Revenue Code of 1986, as amended, and (ii) that the conversion of
shares does not constitute a taxable event. The conversion of Class B shares
into Class A shares may be suspended if such opinions or rulings are no longer
available. If conversions are suspended, Class B shares of the Fund will
continue to be subject, possibly indefinitely, to their higher annual
distribution and service fee.

REQUIRED VOTE

The proposed amendment to the Fund's Declaration of Trust to implement the
conversion feature requires the affirmative vote of a majority of the Fund's
outstanding shares. In the event shareholders of the Fund do not approve the
proposed amendment, the conversion feature will not be implemented for the Fund
and Class B shares of the Fund will continue to be subject, possibly
indefinitely, to their higher annual distribution and service fee.

THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" THIS PROPOSAL NO. 2.

APPROVAL OF AMENDED AND RESTATED CLASS A DISTRIBUTION
AND SERVICE PLAN
(FOR CONSIDERATION BY CLASS A AND CLASS B SHAREHOLDERS, VOTING SEPARATELY)
(PROPOSAL NO. 3)

On May 4, 1993, the Fund's Trustees approved an amended and restated Class A
Distribution and Service Plan pursuant to Rule 12b-1 under the Investment
Company Act and an amended and restated Distribution Agreement with PMFD for
Class A shares of the Fund (the Proposed Class A Plan and the Proposed Class A
Distribution Agreement, respectively) and recommend submission of the Proposed
Class A Plan to the Class A shareholders of each Series

29
<PAGE>

for approval or disapproval at this Special Meeting of Shareholders. As
contemplated by the SEC Order (previously defined under Proposal No. 2 above),
the Proposed Class A Plan is also being submitted for approval by Class B
shareholders because, subject to approval of Proposal No. 2, Class B shares will
automatically convert to Class A shares approximately seven years after
purchase. The Proposed Class A Distribution Agreement does not require, and is
not being submitted for, shareholder approval.

The purpose of the Proposed Class A Plan is to compensate PMFD, the
distributor of the Fund's Class A shares, for providing distribution assistance
to broker-dealers, including Prudential Securities and Prusec, affiliated
broker-dealers, and other qualified broker-dealers, if any, whose customers
invest in Class A shares of the Fund and to defray the costs and expenses,
including the payment of account servicing fees, of the services provided and
activities undertaken to distribute Class A shares (Distribution Activities).

The Trustees previously adopted a plan of distribution for the Fund's Class
A shares pursuant to Rule 12b-1 under the Investment Company Act which was
approved by shareholders on December 19, 1990 and last approved by the Trustees
on May 4, 1993 (the Existing Class A Plan). Shareholders of the Class A and
Class B shares of each Series are being asked to approve amendments to the
Existing Class A Plan that change it from a reimbursement type plan to a
compensation type plan. The amendments do not change the maximum annual fee that
may be paid to PMFD under the Existing Class A Plan, although the possibility
exists that expenses incurred by PMFD and for which it is entitled to be
reimbursed under the Existing Class A Plan may be less than the fee PMFD will
receive under the Proposed Class A Plan. The amendments are being proposed to
facilitate administration and accounting. The Trustees believe that the Proposed
Class A Plan is in the best interest of each Series and is reasonably likely to
benefit the Fund's Class A shareholders. A copy of the Proposed Class A Plan is
attached hereto as Exhibit C.

THE EXISTING CLASS A PLAN

Under the Existing Class A Plan, the Fund reimburses PMFD for expenses
incurred for Distribution Activities at an annual rate of up to .30 of 1% of the
average daily net assets of the Class A shares (up to .25 of 1% of which may
constitute a service fee for the servicing and maintenance of shareholder
accounts). Article III, Section 26 of the NASD Rules of Fair Practice (the NASD
Rules) places an annual limit of .25 of 1% on fees that may be imposed for the
provision of personal service and/or the maintenance of shareholder accounts
(service fees) and an annual limit of .75 of 1% on asset-based sales charges (as
defined in the NASD Rules). Subject to these limits, the Fund may impose any

30
<PAGE>

combination of service fees and asset-based sales charges under both the
Existing Class A Plan and the Proposed Class A Plan; provided that the total
fees do not exceed .30 of 1% per annum of the average daily net assets of the
Class A shares.

The Existing Class A Plan may not be amended to increase materially the
amount to be spent for the services described therein without approval by a
majority of the holders of the Class A shares of each Series of the Fund. In
addition, all material amendments thereof must be approved by vote of a majority
of the Trustees, including a majority of the Rule 12b-1 Trustees, cast in person
at a meeting called for the purpose of voting on the Plan. So long as the
Existing Class A Plan is in effect, the selection and nomination of Rule 12b-1
Trustees will be committed to the discretion of the Rule 12b-1 Trustees.

The Existing Class A Plan may be terminated at any time without payment of
any penalty by the vote of a majority of the Rule 12b-1 Trustees or by the vote
of a majority of the outstanding Class A shares of a Series (as defined in the
Investment Company Act) on written notice to any other party to such Plan and
will automatically terminate in the event of its assignment (as defined in the
Investment Company Act). For a more detailed description of the Existing Class A
Plan, see "Management of the Fund -- The Distributors -- Class A Plan."

THE PROPOSED CLASS A PLAN

The Proposed Class A Plan amends the Existing Class A Plan in one material
respect. Under the Existing Class A Plan, the Fund reimburses PMFD for expenses
actually incurred for Distribution Activities up to a maximum of .30 of 1% per
annum of the average daily net assets of the Class A shares. The Proposed Class
A Plan authorizes the Fund to pay PMFD the same maximum annual fee as
compensation for its Distribution Activities regardless of the expenses incurred
by PMFD for Distribution Activities. The Distributor may, however, as it
currently does, voluntarily agree to limit its fee to an amount less than the
maximum annual fee. In contrast to the Existing Class A Plan, the amounts
payable by the Fund under the Proposed Class A Plan would not be directly
related to the expenses actually incurred by PMFD for its Distribution
Activities. Consequently, if PMFD's expenses for Distribution Activities are
less than the distribution and service fees it receives under the Proposed Class
A Plan, it will retain its full fees and realize a profit.

Since inception of the Existing Class A Plan, the reimbursable expenses
incurred thereunder by PMFD have generally equalled or exceeded the amount
reimbursed by the Fund. For each of the fiscal years ended April 30, 1991, 1992

31
<PAGE>

and 1993, PMFD received payments of $11,594, $19,702 and $31,658, respectively,
on behalf of the High Yield Series, $5,164, $12,731 and $24,589, respectively,
on behalf of the Insured Series and $305, $599 and $1,883, respectively, on
behalf of the Modified Term Series under the Existing Class A Plan, representing
.10 of 1% of the average daily net assets of the Class A shares of each Series,
as reimbursement of expenses incurred for Distribution Activities. Although PMFD
agreed to limit its fees under the Existing Class A Plan to .10 of 1% for the
fiscal years ended April 30, 1991 and 1992 and to .25 of 1% for the fiscal year
ended April 30, 1993, it in fact limited its fees to .10 of 1% for all three
fiscal years even though its direct and indirect reimbursable distribution
expenses exceeded such amount. PMFD believes that it would have similarly
limited its fee had the Proposed Class A Plan been in effect during the past
three fiscal years, although it could have assessed the maximum annual fee of
.30 of 1%. Regardless of which Plan will be in effect, the Distributor has
voluntarily agreed to limit its fees for Distribution Activities to no more than
.10 of 1% of the average daily net assets of the Class A shares for the fiscal
year ending April 30, 1995. Other expenses incurred by PMFD for Distribution
Activities have been, and will continue to be, paid from the proceeds of initial
sales charges.

Among the major perceived benefits of a compensation type plan, such as the
Proposed Class A Plan, over a reimbursement type plan, such as the Existing
Class A Plan, is the facilitation of administration and accounting. Under
reimbursement plans, all expenses must be specifically accounted for by the
Distributor and attributed to the specific class of shares of a fund in order to
qualify for reimbursement. Although the Proposed Class A Plan will continue to
require quarterly reporting to the Trustees of the amounts accrued and paid
under the Plan and of the expenses actually borne by the Distributor, there will
be no need to match specific expenses to reimbursements as under the Existing
Class A Plan. Thus, the accounting for the Proposed Class A Plan would be
simplified and the timing of when expenditures are to be made by the Distributor
would not be an issue. These considerations, combined with the reasonable
likelihood, although there is no assurance, that the per annum payment rate
under the Proposed Class A Plan will not exceed the expenses incurred by PMFD
for Distribution Activities, suggest that the costs and efforts associated with
a reimbursement plan are unwarranted.

In considering whether to approve the Proposed Class A Plan, the Trustees
reviewed, among other things, the nature and scope of the services to be
provided by PMFD, the purchase options available to investors under the
Alternative Purchase Plan, the amount of expenditures under the Exisiting Class
A Plan, the relationship of such expenditures to the overall cost structure

32
<PAGE>
of each Series, and comparative data with respect to distribution arrangements
adopted by other investment companies. Based upon such review, the Trustees,
including a majority of the Rule 12b-1 Trustees, determined that there is a
reasonable likelihood that the Proposed Class A Plan will benefit the Fund and
its Class A shareholders.

If approved by shareholders, the Proposed Class A Plan will continue in
effect from year to year, provided such continuance is approved at least
annually by vote of a majority of the Trustees, including a majority of the Rule
12b-1 Trustees.

REQUIRED VOTE

If Proposal No. 2 is approved by shareholders, the Proposed Class A Plan
will require the approval of a majority of the outstanding Class A shares and
Class B shares (as defined in the Investment Company Act) of each Series, voting
separately. If Proposal No. 2 is not approved by shareholders, the Proposed
Class A Plan will only require the approval of a majority of each Series'
outstanding Class A shares. Under the Investment Company Act, a majority of a
class' outstanding voting shares is defined as the lesser of (i) 67% of a class'
outstanding voting shares represented at a meeting at which more than 50% of the
outstanding voting shares of the class are present in person or represented by
proxy, or (ii) more than 50% of a class' outstanding voting shares. If the
Proposed Class A Plan is not approved as described above by the shareholders of
a Series, the Existing Class A Plan will continue in its present form with
respect to such Series.

THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" THIS PROPOSAL NO. 3.

APPROVAL OF AMENDED AND RESTATED CLASS B DISTRIBUTION
AND SERVICE PLAN
(FOR CONSIDERATION BY CLASS B SHAREHOLDERS ONLY)
(PROPOSAL NO. 4)

On May 4, 1993, the Fund's Trustees approved an amended and restated Class B
Distribution and Service Plan pursuant to Rule 12b-1 under the Investment
Company Act and an amended and restated Class B Distribution Agreement with
Prudential Securities for Class B shares of the Fund (the Proposed Class B Plan
and the Proposed Class B Distribution Agreement, respectively) and recommend
submission of the Proposed Class B Plan to the Class B

33
<PAGE>

shareholders of each Series for approval or disapproval at this Special Meeting
of Shareholders. The Proposed Class B Distribution Agreement does not require,
and is not being submitted for, shareholder approval.

The purpose of the Proposed Class B Plan is to compensate Prudential
Securities, the distributor of the Fund's Class B shares, for providing
distribution assistance to broker-dealers, including Prusec, an affiliated
broker-dealer, and other qualified broker-dealers, if any, whose customers
invest in Class B shares of the Fund and to defray the costs and expenses,
including the payment of account servicing fees, of the services provided and
activities undertaken to distribute Class B shares (Distribution Activities).

The Trustees previously adopted a plan of distribution for the Fund's Class
B shares pursuant to Rule 12b-1 under the Investment Company Act which was
approved by shareholders on December 18, 1989 and last approved by the Trustees
on May 4, 1993 (the Existing Class B Plan). Shareholders of the Class B shares
of each Series are being asked to approve amendments to the Existing Class B
Plan that change it from a reimbursement type plan to a compensation type plan.
The amendments do not change the maximum annual fee that may be paid to
Prudential Securities under the Existing Class B Plan, although the possibility
exists that expenses incurred by Prudential Securities and for which it is
entitled to be reimbursed under the Existing Class B Plan may be less than the
fee Prudential Securities will receive under the Proposed Class B Plan. The
amendments are being proposed to facilitate administration and accounting. The
Trustees believe that the Proposed Class B Plan is in the best interest of each
Series and is reasonably likely to benefit the Fund's Class B shareholders. A
copy of the Proposed Class B Plan is attached hereto as Exhibit D.

THE EXISTING CLASS B PLAN

Under the Existing Class B Plan, the Fund reimburses Prudential Securities
for expenses incurred for Distribution Activities at an annual rate of up to .50
of 1% of the average daily net assets of the Class B shares (up to .25 of 1% of
which may constitute a service fee for the servicing and maintenance of
shareholder accounts). Amounts reimbursable under the Plan that are not paid
because they exceed the maximum fee payable thereunder are carried forward and
may be recovered in future years by Prudential Securities from asset-based sales
charges imposed on Class B shares, to the extent such charges do not exceed .50
of 1% per annum of the average daily net assets of the Class B shares, and from
contingent deferred sales charges received from certain redeeming shareholders,
subject to the limitations of Article III, Section 26 of the NASD Rules. The
NASD Rules place an annual limit of .25 of 1% on fees that may be imposed for
the provision of personal service

34
<PAGE>

and/or the maintenance of shareholder accounts (service fees) and an annual
limit of .75 of 1% on asset-based sales charges (as defined in the NASD Rules).
Pursuant to the NASD Rules, the aggregate deferred sales charges and asset based
sales charges on Class B shares of each Series may not, subject to certain
exclusions, exceed 6.25% of total gross sales of Class B shares.

The Existing Class B Plan may not be amended to increase materially the
amount to be spent for the services described therein without approval by a
majority of the holders of the Class B shares of each Series of the Fund. In
addition, all material amendments thereof must be approved by vote of a majority
of the Trustees, including a majority of the Rule 12b-1 Trustees, cast in person
at a meeting called for the purpose of voting on the Plan. So long as the
Existing Class B Plan is in effect, the selection and nomination of Rule 12b-1
Trustees will be committed to the discretion of the Rule 12b-1 Trustees.

The Existing Class B Plan may be terminated at any time without payment of
any penalty by the vote of a majority of the Rule 12b-1 Trustees or by the vote
of a majority of the outstanding Class B shares of a Series (as defined in the
Investment Company Act) on written notice to any other party to such Plan and
will automatically terminate in the event of its assignment (as defined in the
Investment Company Act). For a more detailed description of the Existing Class B
Plan, see "Management of the Fund -- The Distributors -- Class B Plan."

THE PROPOSED CLASS B PLAN

The Proposed Class B Plan amends the Existing Class B Plan in one material
respect. Under the Existing Class B Plan, the Fund reimburses Prudential
Securities for expenses actually incurred for Distribution Activities up to a
maximum of .50 of 1% per annum of the average daily net assets of the Class B
shares. The Proposed Class B Plan authorizes the Fund to pay Prudential
Securities the same maximum annual fee as compensation for its Distribution
Activities regardless of the expenses incurred by Prudential Securities for
Distribution Activities. In contrast to the Existing Class B Plan, the amounts
payable by the Fund under the Proposed Class B Plan would not be directly
related to the expenses actually incurred by Prudential Securities for its
Distribution Activities. Consequently, if Prudential Securities' expenses are
less than its distribution and service fees, it will retain its full fees and
realize a profit. However, if Prudential Securities' expenses exceed the
distribution and service fees received under the Proposed Class B Plan, it will
no longer carry forward such amounts for reimbursement in future years.

Since inception of the Existing Class B Plan, the cumulative reimbursable
expenses incurred thereunder by Prudential Securities have exceeded the amounts
reimbursed by the Fund. As of December 31, 1993, the aggregate amount of

35
<PAGE>
distribution expenses incurred and not yet reimbursed by the Fund or recovered
through contingent deferred sales charges was approximately $37,448,000 for the
High Yield Series, $25,224,000 for the Insured Series and $2,185,000 for the
Modified Term Series.

For the fiscal years ended April 30, 1991, 1992 and 1993, Prudential
Securities received $3,338,559, $3,798,894 and $4,466,017, respectively, on
behalf of the High Yield Series under the Existing Class B Plan, representing
.50 of 1% of the average net assets of the Class B shares of the High Yield
Series, $2,686,375, $3,047,578 and $3,529,230, respectively, on behalf of the
Insured Series under the Existing Class B Plan, representing .50 of 1% of the
average net assets of the Class B shares of the Insured Series and $232,609,
$222,195 and $250,771, respectively, on behalf of the Modified Term Series under
the Existing Class B Plan, representing .50 of 1% of the average net assets of
the Class B shares of the Modified Term Series. Since the maximum annual fee
under the Existing Class B Plan is the same as under the Proposed Class B Plan,
Prudential Securities would have received the same annual fee under the Proposed
Class B Plan as it did under the Existing Class B Plan for the fiscal years
ended April 30, 1991, 1992 and 1993.

Among the major perceived benefits of a compensation type plan, such as the
Proposed Class B Plan, over a reimbursement type plan, such as the Existing
Class B Plan, is the facilitation of administration and accounting. Under
reimbursement plans, all expenses must be specifically accounted for by the
Distributor and attributed to the specific class of shares of a fund in order to
qualify for reimbursement. Although the Proposed Class B Plan will continue to
require quarterly reporting to the Trustees of the amounts accrued and paid
under the Plan and of the expenses actually borne by the Distributor, there will
be no need to match specific expenses to reimbursements and no carrying forward
of such amounts, as under the Existing Class B Plan. Thus, the accounting for
the Proposed Class B Plan would be simplified and the timing of when
expenditures are to be made by the Distributor ordinarily would not be an issue.
Currently, because the Existing Class B Plan is a reimbursement plan, the
Distributor retains an independent expert to perform a study of its methodology
for determining and substantiating which of its expenses should properly be
allocated to the Series' Class B shares for reimbursement, the cost of which is
borne by the Fund and other funds for which Prudential Securities serves as
distributor. These considerations, combined with the fact that the cumulative
expenses incurred by Prudential Securities for Distribution Activities have
exceeded the amounts reimbursed by the Series under the Existing Class B Plan,
suggest that the costs and efforts associated with a reimbursement plan are
unwarranted.

36
<PAGE>

In considering whether to approve the Proposed Class B Plan, the Trustees
reviewed, among other things, the nature and scope of the services to be
provided by Prudential Securities, the purchase options available to investors
under the Alternative Purchase Plan, the amount of expenditures under the
Existing Class B Plan, the relationship of such expenditures to the overall cost
structure of each Series and comparative data with respect to distribution
arrangements adopted by other investment companies. Based upon such review, the
Trustees, including a majority of the Rule 12b-1 Trustees, determined that there
is a reasonable likelihood that the Proposed Class B Plan will benefit the Fund
and its Class B shareholders.

If approved by Class B shareholders, the Proposed Class B Plan will continue
in effect from year to year, provided such continuance is approved at least
annually by vote of a majority of the Trustees, including a majority of the Rule
12b-1 Trustees.

REQUIRED VOTE

The Proposed Class B Plan requires the approval of a majority of the
outstanding Class B shares of each Series as defined in the Investment Company
Act and described under Proposal No. 3. If the Proposed Class B Plan is not
approved, the Existing Class B Plan will continue in its present form.

THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" THIS PROPOSAL NO. 4.

APPROVAL OF AMENDMENTS OF THE SERIES' FUNDAMENTAL
INVESTMENT RESTRICTIONS REGARDING RESTRICTED
AND ILLIQUID SECURITIES
(PROPOSAL NO. 5)

On May 4, 1993, at the request of the Fund's Manager and Subadviser, the
Trustees considered and recommend for shareholder approval revision of the
Series' fundamental investment restrictions regarding illiquid and restricted
securities. The Trustees recommend elimination of Investment Restriction No. 11,
which limits the purchase of securities for which there are legal or contractual
restrictions on resale, including repurchase agreements having maturities of
longer than seven days and other illiquid securities. Further, the Trustees
recommend modification of Investment Restriction No. 14 to eliminate the
restrictions on investments in repurchase agreements with maturities of longer
than seven days.

37
<PAGE>
Investment Restriction No. 11, which is proposed to be eliminated, currently
provides as follows:

Each Series may not:

Purchase securities for which there are legal or contractual
restrictions on resale or illiquid securities (including repurchase
agreements having maturities of more than seven days) if more than 10% of
the total assets of the Series would be invested in such securities.

Investment Restriction No. 14 is proposed to be modified to provide as
follows (deleted language in brackets):

Each Series may not:

Make loans, except through [(i)] repurchase agreements [(repurchase
agreements with a maturity of longer than 7 days, together with other
illiquid securities (referred to in Restriction 11), being limited to 10% of
the total assets of any Series) and (ii)] and loans of portfolio securities
(limited to 33% of the Series' total assets).

The Trustees recommend replacement of such fundamental investment
restrictions with a non-fundamental investment policy that could be modified by
the vote of the Trustees in response to regulatory or market developments
without further approval by shareholders. The proposed non-fundamental policy
would provide as follows:

Each Series may invest up to 15% of its net assets in illiquid
securities including repurchase agreements which have a maturity of longer
than seven days, securities with legal or contractual restrictions on resale
(restricted securities) and securities that are not readily marketable.
Securities, including municipal lease obligations, that have a readily
available market are not considered illiquid for purposes of this
limitation. The investment adviser will monitor the liquidity of such
restricted securities under the supervision of the Trustees. Repurchase
agreements subject to demand are deemed to have a maturity equal to the
applicable notice period.

An open-end investment company may not hold a significant amount of
restricted securities or illiquid securities because such securities may present
problems of accurate valuation and because it is possible that the investment
company would have difficulty satisfying redemptions within seven days. The
proposed investment policy is not expected by the investment adviser or the
Trustees to affect the Series' liquidity.

Historically, illiquid securities have been defined to include securities
subject to contractual or legal restrictions on resale, securities for which
there is no readily available market and repurchase agreements having a maturity
of longer than

38
<PAGE>
seven days. In recent years, however, the securities markets have evolved
significantly, with the result that new types of instruments have developed
which make the Series' present restrictions on illiquid investments overly broad
and unnecessarily restrictive in the view of the Fund's Manager. In 1992, the
SEC staff issued amended guidelines to the effect that up to 15% (as opposed to
10%) of an open-end fund's net assets may be invested in illiquid securities,
including repurchase agreements with a maturity of longer than seven days. The
guidelines were amended in connection with the SEC's efforts to remove
unnecessary barriers to capital formation and to facilitate access to the
capital markets by small businesses.

In reaching liquidity decisions, the Manager and the Subadviser will
consider, INTER ALIA, the following factors:

1. the frequency of trades and quotes for the security;

2. the number of dealers wishing to purchase or sell the security and
the number of other potential purchasers;

3. dealer undertakings to make a market in the security; and

4. the nature of the security and the nature of the marketplace trades
(E.G., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer).

With respect to municipal lease obligations, the investment adviser also
considers: (1) the willingness of the municipality to continue, annually or
biannually, to appropriate funds for payment of the lease; (2) the general
credit quality of the municipality and the essentiality to the municipality of
the property covered by the lease; (3) in the case of unrated municipal lease
obligations, an analysis of factors similar to that performed by nationally
recognized statistical rating organizations in evaluating the credit quality of
a municipal lease obligation, including (i) whether the lease can be cancelled,
(ii) if applicable, what assurance there is that the assets represented by the
lease can be sold, (iii) the strength of the lessee's general credit (E.G., its
debt, administrative, economic and financial characteristics), (iv) the
likelihood that the municipality will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to the
operation of the municipality (E.G., the potential for an event of
non-appropriation), and (v) the legal recourse in the event of failure to
appropriate; and (4) any other factors unique to municipal lease obligations as
determined by the investment adviser.

The Trustees believe that adoption of Proposal No. 5 is in the best
interests of each Series and its shareholders.

REQUIRED VOTE

Amendment of each Series' investment restrictions to eliminate Investment
Restriction No. 11 and modify Investment Restriction No. 14 requires the
approval

39
<PAGE>

of a majority of the outstanding voting securities of each Series. Under the
Investment Company Act, a majority of a Series' outstanding voting securities is
defined as the lesser of (i) 67% of the Series' outstanding voting shares
represented at a meeting at which more than 50% of the Series' outstanding
voting shares are present in person or represented by proxy, or (ii) more than
50% of the Series' outstanding voting shares. In the event shareholders do not
approve the proposed modification of each Series' investment policies, the
current limitations would remain fundamental policies which could not be changed
without the approval of a majority of the outstanding voting securities of each
Series.

THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" THIS PROPOSAL NO. 5.

APPROVAL OF ELIMINATION OF THE SERIES' INVESTMENT
RESTRICTIONS LIMITING INVESTMENT IN THE SECURITIES OF
ANY ISSUER IN WHICH THE OFFICERS AND TRUSTEES OF THE
FUND OR THE OFFICERS AND DIRECTORS OF
ITS INVESTMENT ADVISER OWN MORE THAN A SPECIFIED INTEREST
(PROPOSAL NO. 6)

On May 4, 1993, at the request of the Fund's Manager, the Trustees
considered and recommend for shareholder approval elimination of each Series'
Investment Restriction No. 6, which provides that each Series may not:

Invest in securities of any issuer if, to the knowledge of the Fund, any
officer or Trustee of the Fund or officer or director of the Manager or
Subadviser owns more than 1/2 of 1% of the outstanding securities of the
issuer, and those officers, Trustees and directors, who own more than 1/2 of
1%, own in the aggregate more than 5% of the outstanding securities of the
issuer.

The Manager has advised the Trustees that the restriction upon the Series'
investing in companies in which officers and Trustees of the Fund or officers
and directors of the Manager own more than 1/2 of 1% of the outstanding
securities of such company was initially adopted to comply with a restriction
imposed in connection with the sale of each Series' shares in Ohio. If the
proposal is approved, each Series would continue to comply with the restriction
as a non-fundamental operating policy so long as the Series sells its shares in
Ohio. However, if Ohio were to eliminate the requirement or the Series stopped
offering their shares for sale in Ohio, the Trustees could eliminate the
operating policy without the necessity of shareholder approval. None of the
Series currently intends to stop offering its shares in Ohio, nor is the Fund or
the Fund's Manager aware of any proposal to change the Ohio law.

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<PAGE>
The Trustees believe that adoption of Proposal No. 6 is in the best
interests of each Series and their shareholders.

REQUIRED VOTE
Amendment of each Series' investment restrictions to delete Investment
Restriction No. 6 requires the approval of a majority of each Series'
outstanding voting securities as defined in the Investment Company Act and
described under Proposal No. 5. If the proposed change in investment policy is
not approved, the current limitations would remain a fundamental policy which
could not be changed without the approval of a majority of the outstanding
voting securities of each Series.

THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" THIS PROPOSAL NO. 6.

OTHER MATTERS

No business other than as set forth herein is expected to come before the
Meeting, but should any other matter requiring a vote of shareholders arise,
including any question as to an adjournment of the Meeting, the persons named in
the enclosed proxy will vote thereon according to their best judgment in the
interest of the Fund.

SHAREHOLDER PROPOSALS

As a Massachusetts business trust, the Fund is not required to hold annual
meetings of shareholders and the Trustees currently do not intend to hold such
meetings unless shareholder action is required in accordance with the Investment
Company Act or the Fund's Declaration of Trust. A shareholder proposal intended
to be presented at any meeting of shareholders of the Fund hereinafter called
must be received by the Fund a reasonable time before the Trustees' solicitation
relating thereto is made in order to be included in the Fund's proxy statement
and form of proxy relating to that meeting and presented at the meeting. The
mere submission of a proposal by a shareholder does not guarantee that such
proposal will be included in the proxy statement because certain rules under the
federal securities laws must be complied with before inclusion of the proposal
is required.

S. JANE ROSE
SECRETARY

Dated: April 18, 1994

SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO
HAVE THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE REQUIRED IF MAILED IN THE UNITED
STATES.

41
<PAGE>
EXHIBIT A

PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993

ASSETS

<TABLE>
<S> <C>
CASH AND SHORT-TERM INVESTMENTS....................... $42,667,507
LOAN TO AFFILIATE..................................... 85,000,000
MANAGEMENT, ADMINISTRATION AND OTHER FEES
RECEIVABLE........................................... 17,897,292
TRANSFER AGENCY AND FIDUCIARY FEES RECEIVABLE......... 3,744,874
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS,
NET.................................................. 10,495,702
OTHER ASSETS.......................................... 4,676,430
-----------
$164,481,805
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due to affiliates................................... $48,794,366
Accounts payable and accrued expenses............... 11,208,209
Income taxes payable to affiliate -- net............ 2,937,828
-----------
62,940,403
-----------
COMMITMENTS (Note 6)
STOCKHOLDERS' EQUITY:
Class A common stock, $1 par value (1,000 shares
authorized, 850 shares outstanding)................ 850
Class B common stock, $1 par value (1,000 shares
authorized, 150 shares outstanding)................ 150
Additional paid-in capital.......................... 24,999,000
Retained earnings................................... 76,541,402
-----------
101,541,402
-----------
$164,481,805
-----------
-----------
</TABLE>

See notes to consolidated statement of financial condition.

A-1
<PAGE>
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Prudential Mutual Fund Management, Inc. ("PMF") and subsidiaries (the
"Company"), an indirect wholly-owned subsidiary of The Prudential Insurance
Company of America (the "Prudential"), were created to operate as the manager,
distributor and/or transfer agent for investment companies.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statement includes the accounts of PMF and its
wholly-owned subsidiaries, Prudential Mutual Fund Services, Inc. ("PMFS") and
Prudential Mutual Fund Distributors, Inc. ("PMFD"). All intercompany profits,
transactions and balances have been eliminated.

INCOME TAXES

The Company is a member of a group of affiliated companies which join in
filing a consolidated Federal income tax return. Pursuant to a tax allocation
agreement, tax expense is determined for individual profitable companies on a
separate return basis. Profit members pay this amount to an affiliated company
which in turn apportions the payment among the loss members in proportion to
their losses. In January 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The
adoption of SFAS 109 did not have a material effect on the Company's financial
position.

2. SHORT-TERM INVESTMENTS
At December 31, 1993, the Company had invested $35,411,571 in several money
market funds which PMF manages.

3. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements consist of the following:

<TABLE>
<S> <C>
Furniture...................................... $6,481,799
Equipment...................................... 9,181,984
Leasehold improvements......................... 3,407,213
----------
19,070,996
Less accumulated depreciation and
amortization.................................. 8,575,294
----------
$10,495,702
----------
----------
</TABLE>

A-2
<PAGE>
4. RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company participates in a variety of
financial and administrative transactions with affiliates.

The loan to affiliate bears interest at 3.45 percent at December 31, 1993
and is due on demand.

The caption "Due to affiliates" includes $18,241,795 at December 31, 1993
for reimbursement of employee compensation and benefits, and other
administrative and operating expenses. This amount is noninterest-bearing and
payable on demand.

The Company has entered into subadvisory agreements with The Prudential
Investment Corporation ("PIC"), a wholly-owned subsidiary of Prudential. Under
these agreements, PIC furnishes investment advisory services to substantially
all the funds for which the Company acts as Manager. At December 31, 1993 there
were unpaid fees due to PIC of $23,926,277, included in the caption "Due to
affiliates."

Distribution expenses include commissions and account servicing fees paid
to, or on account of, financial advisors of Prudential Securities Incorporated
("Prudential Securities") and Pruco Securities Corporation ("PruSec"),
affiliated broker-dealers and indirect wholly-owned subsidiaries of Prudential,
advertising expenses, the cost of printing and mailing prospectuses to potential
investors, and indirect and overhead costs of Prudential Securities and PruSec,
including lease, utility, communications and sales promotion expenses. At
December 31, 1993 there were unpaid distribution expenses of approximately
$6,626,000, included in the caption "Due to affiliates."

5. CAPITAL
PMFD is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1), which
requires the maintenance of minimum net capital and requires that the ratio of
aggregate indebtedness to net capital, both as defined, shall not exceed 15 to
1. At December 31, 1993, PMFD had net capital of $2,308,981, which was
$1,859,405 in excess of its required net capital of $449,576. PMFD had a ratio
of aggregate indebtedness to net capital of 2.9 to 1.

A-3
<PAGE>
6. COMMITMENTS
The Company leases office space under operating leases expiring in 2003. The
leases are subject to escalation based upon certain costs incurred by the
lessor. Future minimum rentals, as of December 31, 1993, under the leases, are
as follows:

<TABLE>
<CAPTION>
YEAR MINIMUM RENTAL
- -------------------------------------------------------- ----------------
<S> <C>
1994.................................................... $ 2,738,000
1995.................................................... 2,865,000
1996.................................................... 3,375,000
1997.................................................... 3,385,000
1998.................................................... 3,230,000
Thereafter.............................................. 13,800,000
----------------
$ 29,393,000
----------------
----------------
</TABLE>

7. PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company has two defined benefit pension plans (the "Plans") sponsored by
the Prudential and Prudential Securities. The Plans cover substantially all of
the Company's employees. The funding policy is to contribute annually the amount
necessary to satisfy the Internal Revenue Service funding standards. In
addition, the Company has two defined benefit plans for key executives, the
Supplemental Retirement Plan (SRP) for which estimated pension costs are
currently accrued but not funded.

The Company provides certain health care and life insurance benefits for
eligible retired employees. Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS 106"). SFAS 106 changed the
practice of accounting for postretirement benefits on a cash basis to an accrual
basis, whereby employers record the projected future cost of providing such
postretirement benefits as employees render services instead of when benefits
are paid. This new accounting method has no effect on the Company's cash outlays
for these retirement benefits. The adoption of SFAS 106 did not materially
impact the Company's financial position.

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," ("SFAS 112") which is effective for fiscal years beginning after
December 15, 1993. Although several benefits are fully insured which result in
no SFAS 112 obligation, the Company currently has an obligation and resulting

A-4
<PAGE>
7. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
expense under SFAS 112 for medical benefits provided under long-term disability.
The Company will adopt SFAS 112 on January 1, 1994. Management believes that
implementation will have no material effect on the Company's financial position.

8. CONTINGENCY
On October 12, 1993, a purported class action lawsuit was instituted against
PMF, et al and certain current and former directors of a fund managed by PMF.
The plaintiffs seek damages in an unspecified amount for excessive management
and distribution fees they allege were incurred by them. Although the outcome of
this litigation cannot be predicted at this time, the defendants believe they
have meritorious defenses to the claims asserted in the complaint and intend to
defend this action vigorously. In any case, management does not believe that the
outcome of this action is likely to have a material adverse effect on the
Company's financial position.

A-5
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of
Prudential Mutual Fund Management, Inc.:

We have audited the accompanying consolidated statement of financial
condition of Prudential Mutual Fund Management, Inc. and subsidiaries as of
December 31, 1993. This consolidated financial statement is the responsibility
of the Company's management. Our responsibility is to express an opinion on this
consolidated financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statement is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated statement of
financial condition. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, such consolidated statement of financial condition presents
fairly, in all material respects, the financial position of Prudential Mutual
Fund Management, Inc. and subsidiaries at December 31, 1993 in conformity with
generally accepted accounting principles.

DELOITTE & TOUCHE

New York, New York
January 26, 1994

A-6
<PAGE>
EXHIBIT B

PRUDENTIAL MUNICIPAL BOND FUND
FORM OF AMENDMENT TO CERTIFICATE OF DESIGNATION

(a) Paragraphs 3 and 4 of the Certificate of Designation dated December 18,
1989 and filed with the Secretary of State of The Commonwealth of Massachusetts
on January 18, 1990 (the "Certificate of Designation") are deleted in their
entirety and the following six new paragraphs, numbered 3 through 8, are
inserted immediately after paragraph 2, reading as follows:

3. The shares of beneficial interest of each series of the Trust are
classified into three classes, designated "Class A Shares," "Class B
Shares," and "Class C Shares." An unlimited number of each such class of
each such series may be issued. All Class A Shares and Class B Shares of
each such series outstanding on the date on which the amendments provided
for herein become effective shall be and continue to be Class A Shares and
Class B Shares, respectively, of such series.

4. The holders of Class A Shares, Class B Shares and Class C Shares of
each series having the same shall be considered Shareholders of such series,
and shall have the relative rights and preferences set forth herein and in
the Declaration of Trust with respect to Shares of such series, and shall
also be considered Shareholders of the Trust for all other purposes
(including, without limitation, for purposes of receiving reports and
notices and the right to vote) and, for matters reserved to the Shareholders
of one or more other classes or series by the Declaration of Trust or by any
instrument establishing and designating a particular class or series, or as
required by the Investment Company Act of 1940 and/or the rules and
regulations of the Securities and Exchange Commission thereunder
(collectively, as from time to time in effect, the "1940 Act") or other
applicable laws.

5. The Class A Shares, Class B Shares and Class C Shares of each series
shall represent an equal proportionate interest in the share of such class
in the Trust Property belonging to that series, adjusted for any liabilities
specifically allocable to the Shares of that class, and each Share of any
such class shall have identical voting, dividend, liquidation and other
rights and the same terms and conditions, except that the expenses related
directly or indirectly to the distribution of the Shares of a class, and any
service fees to which such class is subject (as determined by the Trustees),
shall be borne solely by such class, and such expenses shall be
appropriately reflected in the determination of net asset value and the
dividend, distribution and liquidation rights of such class.

B-1
<PAGE>

6. (a) Class A Shares of each series shall be subject to (i) a front-
end sales charge and (ii)(A) an asset-based sales charge pursuant to a plan
under Rule 12b-1 of the 1940 Act (a "Plan"), and/or (B) a service fee for
the maintenance of shareholder accounts and personal services, in such
amounts as shall be determined from time to time.

(b) Class B Shares of each series shall be subject to (i) a
contingent deferred sales charge and (ii)(A) an asset-based sales charge
pursuant to a Plan, and/or (B) a service fee for the maintenance of
shareholder accounts and personal services, in such amounts as shall be
determined from time to time.

(c) Class C Shares of each series shall be subject to (i) a
contingent deferred sales charge and (ii) (A) an asset-based sales charge
pursuant to a Plan, and/or (B) a service fee for the maintenance of
shareholder accounts and personal services, in such amounts as shall be
determined from time to time.

7. Subject to compliance with the requirements of the 1940 Act, the
Trustees shall have the authority to provide that holders of Shares of any
series shall have the right to convert said Shares into Shares of one or
more other series of registered investment companies specified for the
purpose in this Trust's Prospectus for the series accorded such right, that
holders of any class of Shares of a series shall have the right to convert
such Shares into Shares of one or more other classes of such series, and
that Shares of any class of a series shall be automatically converted into
Shares of another class of such series, in each case in accordance with such
requirements and procedures as the Trustees may from time to time establish.
The requirements and procedures applicable to such mandatory or optional
conversion of Shares of any such class or series shall be set forth in the
Prospectus in effect with respect to such Shares.

8. Shareholders of each series and class shall vote as a separate
series or class, as the case may be, on any matter to the extent required
by, and any matter shall be deemed to have been effectively acted upon with
respect to any series or class as provided in, Rule 18f-2, as from time to
time in effect, under the 1940 Act, or any successor rule and by the
Declaration of Trust. Except as otherwise required by the 1940 Act, the
Shareholders of each class of any series having more than one class of
Shares, voting as a separate class, shall have sole and exclusive voting
rights with respect to the provisions of any Plan applicable to Shares of
such class, and shall have no voting rights with respect to provisions of
any Plan applicable solely to any other class of Shares of such series.

B-2
<PAGE>
EXHIBIT C

PRUDENTIAL MUNICIPAL BOND FUND
DISTRIBUTION AND SERVICE PLAN
(CLASS A SHARES)
INTRODUCTION

The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Article III, Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (NASD) has been adopted by Prudential Municipal Bond Fund (the Fund) and by
Prudential Mutual Fund Distributors, Inc., the Fund's distributor (the
Distributor).

The Fund has entered into a distribution agreement pursuant to which the
Fund will employ the Distributor to distribute Class A shares issued by the Fund
(Class A shares). Under the Plan, the Fund intends to pay to the Distributor, as
compensation for its services, a distribution and service fee with respect to
Class A shares.

A majority of the Trustees of the Fund, including a majority of those
Trustees who are not "interested persons" of the Fund (as defined in the
Investment Company Act) and who have no direct or indirect financial interest in
the operation of this Plan or any agreements related to it (the Rule 12b-1
Trustees), have determined by votes cast in person at a meeting called for the
purpose of voting on this Plan that there is a reasonable likelihood that
adoption of this Plan will benefit the Fund and its shareholders. Expenditures
under this Plan by the Fund for Distribution Activities (defined below) are
primarily intended to result in the sale of Class A shares of the Fund within
the meaning of paragraph (a)(2) of Rule 12b-1 promulgated under the Investment
Company Act.

The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.

C-1
<PAGE>
THE PLAN

The material aspects of the Plan are as follows:

1. DISTRIBUTION ACTIVITIES

The Fund shall engage the Distributor to distribute Class A shares of
the Fund and to service shareholder accounts using all of the facilities of
the distribution networks of Prudential Securities Incorporated (Prudential
Securities) and Pruco Securities Corporation (Prusec), including sales
personnel and branch office and central support systems, and also using such
other qualified broker-dealers and financial institutions as the Distributor
may select. Services provided and activities undertaken to distribute Class
A shares of the Fund are referred to herein as "Distribution Activities."

2. PAYMENT OF SERVICE FEE

The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of
.25 of 1% per annum of the average daily net assets of the Class A shares
(service fee). The Fund shall calculate and accrue daily amounts payable by
the Class A shares of the Fund hereunder and shall pay such amounts monthly
or at such other intervals as the Trustees may determine.

3. PAYMENT FOR DISTRIBUTION ACTIVITIES

The Fund shall pay to the Distributor as compensation for its services a
distribution fee, together with the service fee (described in Section 2
hereof), of .30 of 1% per annum of the average daily net assets of the Class
A shares of the Fund for the performance of Distribution Activities. The
Fund shall calculate and accrue daily amounts payable by the Class A shares
of the Fund hereunder and shall pay such amounts monthly or at such other
intervals as the Trustees may determine. Amounts payable under the Plan
shall be subject to the limitations of Article III, Section 26 of the NASD
Rules of Fair Practice.

Amounts paid to the Distributor by the Class A shares of the Fund will
not be used to pay the distribution expenses incurred with respect to any
other class of shares of the Fund except that distribution expenses
attributable to the Fund as a whole will be allocated to the Class A shares
according to the ratio of the sales of Class A shares to the total sales of
the Fund's shares over the Fund's fiscal year or such other allocation
method approved by the Trustees. The allocation of distribution expenses
among classes will be subject to the review of the Trustees.

C-2
<PAGE>
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:

(a) amounts paid to Prudential Securities for performing services
under a selected dealer agreement between Prudential Securities and the
Distributor for sale of Class A shares of the Fund, including sales
commissions and trailer commissions paid to, or on account of, account
executives and indirect and overhead costs associated with Distribution
Activities, including central office and branch expenses;

(b) amounts paid to Prusec for performing services under a selected
dealer agreement between Prusec and the Distributor for sale of Class A
shares of the Fund, including sales commissions and trailer commissions
paid to, or on account of, agents and indirect and overhead costs
associated with Distribution Activities;

(c) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund prospectuses,
statements of additional information and periodic financial reports and
sales literature to persons other than current shareholders of the Fund;
and

(d) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and financial institutions (other than
Prudential Securities and Prusec) which have entered into selected
dealer agreements with the Distributor with respect to Class A shares of
the Fund.

4. QUARTERLY REPORTS; ADDITIONAL INFORMATION

An appropriate officer of the Fund will provide to the Trustees of the
Fund for review, at least quarterly, a written report specifying in
reasonable detail the amounts expended for Distribution Activities
(including payment of the service fee) and the purposes for which such
expenditures were made in compliance with the requirements of Rule 12b-1.
The Distributor will provide to the Trustees of the Fund such additional
information as the Trustees shall from time to time reasonably request,
including information about Distribution Activities undertaken or to be
undertaken by the Distributor.

The Distributor will inform the Trustees of the Fund of the commissions
and account servicing fees to be paid by the Distributor to account
executives of the Distributor and to broker-dealers and financial
institutions which have selected dealer agreements with the Distributor.

C-3
<PAGE>
5. EFFECTIVENESS; CONTINUATION

The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class A shares of the Fund.

If approved by a vote of a majority of the outstanding voting securities
of the Class A shares of the Fund, the Plan shall, unless earlier terminated
in accordance with its terms, continue in full force and effect thereafter
for so long as such continuance is specifically approved at least annually
by a majority of the Trustees of the Fund and a majority of the Rule 12b-1
Trustees by votes cast in person at a meeting called for the purpose of
voting on the continuation of the Plan.

6. TERMINATION

This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act) of the Class A shares
of the Fund.

7. AMENDMENTS

The Plan may not be amended to change the combined service and
distribution expenses to be paid as provided for in Sections 2 and 3 hereof
so as to increase materially the amounts payable under this Plan unless such
amendment shall be approved by the vote of a majority of the outstanding
voting securities (as defined in the Investment Company Act) of the Class A
shares of the Fund. All material amendments of the Plan shall be approved by
a majority of the Trustees of the Fund and a majority of the Rule 12b-1
Trustees by votes cast in person at a meeting called for the purpose of
voting on the Plan.

8. RULE 12B-1 TRUSTEES

While the Plan is in effect, the selection and nomination of the Rule
12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.

9. RECORDS

The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Section 4 hereof, for a period of not less
than six years from the date of effectiveness of the Plan, such agreements
or reports, and for at least the first two years in an easily accessible
place.

C-4
<PAGE>
10. ENFORCEMENT OF CLAIMS

The name "Prudential Municipal Bond Fund" is the designation of the
Trustees under a Declaration of Trust dated November 3, 1986 and all persons
dealing with the Fund must look solely to the property of the Fund for the
enforcement of any claims against the Fund, and neither the Trustees,
officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.

Dated:

C-5
<PAGE>
EXHIBIT D

PRUDENTIAL MUNICIPAL BOND FUND
DISTRIBUTION AND SERVICE PLAN
(CLASS B SHARES)
INTRODUCTION

The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Article III, Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (NASD) has been adopted by Prudential Municipal Bond Fund (the Fund) and by
Prudential Securities Incorporated (Prudential Securities), the Fund's
distributor (the Distributor).

The Fund has entered into a distribution agreement pursuant to which the
Fund will employ the Distributor to distribute Class B shares issued by the Fund
(Class B shares). Under the Plan, the Fund wishes to pay to the Distributor, as
compensation for its services, a distribution and service fee with respect to
Class B shares.

A majority of the Trustees of the Fund including a majority who are not
"interested persons" of the Fund (as defined in the Investment Company Act) and
who have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it (the Rule 12b-1 Trustees), have determined by
votes cast in person at a meeting called for the purpose of voting on this Plan
that there is a reasonable likelihood that adoption of this Plan will benefit
the Fund and its shareholders. Expenditures under this Plan by the Fund for
Distribution Activities (defined below) are primarily intended to result in the
sale of Class B shares of the Fund within the meaning of paragraph (a)(2) of
Rule 12b-1 promulgated under the Investment Company Act.

D-1
<PAGE>
THE PLAN

The material aspects of the Plan are as follows:

1. DISTRIBUTION ACTIVITIES

The Fund shall engage the Distributor to distribute Class B shares of
the Fund and to service shareholder accounts using all of the facilities of
the Prudential Securities distribution network including sales personnel and
branch office and central support systems, and also using such other
qualified broker-dealers and financial institutions as the Distributor may
select, including Pruco Securities Corporation (Prusec). Services provided
and activities undertaken to distribute Class B shares of the Fund are
referred to herein as "Distribution Activities."

2. PAYMENT OF SERVICE FEE

The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of
.25 of 1% per annum of the average daily net assets of the Class B shares
(service fee). The Fund shall calculate and accrue daily amounts payable by
the Class B shares of the Fund hereunder and shall pay such amounts monthly
or at such other intervals as the Trustees may determine.

3. PAYMENT FOR DISTRIBUTION ACTIVITIES

The Fund shall pay to the Distributor as compensation for its services a
distribution fee, together with the service fee (described in Section 2
hereof), of .50 of 1% per annum of the average daily net assets of the Class
B shares of the Fund for the performance of Distribution Activities. The
Fund shall calculate and accrue daily amounts payable by the Class B shares
of the Fund hereunder and shall pay such amounts monthly or at such other
intervals as the Trustees may determine. Amounts payable under the Plan
shall be subject to the limitations of Article III, Section 26 of the NASD
Rules of Fair Practice.

Amounts paid to the Distributor by the Class B shares of the Fund will
not be used to pay the distribution expenses incurred with respect to any
other class of shares of the Fund except that distribution expenses
attributable to the Fund as a whole will be allocated to the Class B shares
according to the ratio of the sale of Class B shares to the total sales of
the Fund's shares over the Fund's fiscal year or such other allocation
method approved by the Trustees. The allocation of distribution expenses
among classes will be subject to the review of the Trustees.

D-2
<PAGE>
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:

(a) sales commissions (including trailer commissions) paid to, or on
account of, account executives of the Distributor;

(b) indirect and overhead costs of the Distributor associated with
performance of Distribution Activities including central office and
branch expenses;

(c) amounts paid to Prusec for performing services under a selected
dealer agreement between Prusec and the Distributor for sale of Class B
shares of the Fund, including sales commissions and trailer commissions
paid to, or on account of, agents and indirect and overhead costs
associated with Distribution Activities;

(d) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund prospectuses,
statements of additional information and periodic financial reports and
sales literature to persons other than current shareholders of the Fund;
and

(e) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and other financial institutions (other than
Prusec) which have entered into selected dealer agreements with the
Distributor with respect to Class B shares of the Fund.

4. QUARTERLY REPORTS; ADDITIONAL INFORMATION

An appropriate officer of the Fund will provide to the Trustees of the
Fund for review, at least quarterly, a written report specifying in
reasonable detail the amounts expended for Distribution Activities
(including payment of the service fee) and the purposes for which such
expenditures were made in compliance with the requirements of Rule 12b-1.
The Distributor will provide to the Trustees of the Fund such additional
information as they shall from time to time reasonably request, including
information about Distribution Activities undertaken or to be undertaken by
the Distributor.

The Distributor will inform the Trustees of the Fund of the commissions
and account servicing fees to be paid by the Distributor to account
executives of the Distributor and to broker-dealers and other financial
institutions which have selected dealer agreements with the Distributor.

D-3
<PAGE>
5. EFFECTIVENESS; CONTINUATION

The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class B shares of the Fund.

If approved by a vote of a majority of the outstanding voting securities
of the Class B shares of the Fund, the Plan shall, unless earlier terminated
in accordance with its terms, continue in full force and effect thereafter
for so long as such continuance is specifically approved at least annually
by a majority of the Trustees of the Fund and a majority of the Rule 12b-1
Trustees by votes cast in person at a meeting called for the purpose of
voting on the continuation of the Plan.

6. TERMINATION

This plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act) of the Class B shares
of the Fund.

7. AMENDMENTS

The Plan may not be amended to change the combined service and
distribution expenses to be paid as provided for in Sections 2 and 3 hereof
so as to increase materially the amounts payable under this Plan unless such
amendment shall be approved by the vote of a majority of the outstanding
voting securities (as defined in the Investment Company Act) of the Class B
shares of the Fund. All material amendments of the Plan shall be approved by
a majority of the Trustees of the Fund and a majority of the Rule 12b-1
Trustees by votes cast in person at a meeting called for the purpose of
voting on the Plan.

8. RULE 12B-1 TRUSTEES

While the Plan is in effect, the selection and nomination of the Rule
12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.

9. RECORDS

D-4
<PAGE>
10. ENFORCEMENT OF CLAIMS.

Dated:

D-5
<PAGE>
PLEASE MARK, SIGN,
DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PROXY (CLASS A)

YOUR PROXY WILL BE ELECTRONICALLY SCANNED.
CAREFULLY DETACH HERE AND RETURN BOTTOM PORTION ONLY.

PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292

THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES.

The undersigned hereby appoints Susan C. Cote, S. Jane Rose and Marguerite E.H.
Morrison as Proxies, each with the power of substitution, and hereby authorizes
each of them to represent and to vote as designated below, all the Class A
shares of beneficial interest of Prudential Municipal Bond Fund - High Yield
Series held of record by the undersigned on ___________,1994 at the Special
Meeting of Shareholders to be held on ________, 1994, or any adjournment
thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL THE PROPOSALS LISTED BELOW.

Your Account No.:
Your voting shares are:

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

1. Election of Trustees

APPROVE ALL NOMINEES WITHHOLD ALL NOMINEES WITHHOLD THOSE LISTED ON BACK

To withhold authority for any individual nominee, please write name on back of
form.

Edward D. Beach
Donald D. Lennox
Douglas H. McCorkindale
Lawrence C. McQuade
Thomas T. Mooney
Richard A. Redeker
Louis A. Weil, III

2. To approve an amendment of the Fund's Declaration of Trust to permit a
conversion feature for Class B shares.

FOR AGAINST ABSTAIN
2

3. To approve an amended and restated Class A Distribution and Service Plan.

4. Not applicable to class A shareholders.

5. To approve amendments of the High Yield Series' investment policies and
restrictions regarding restricted and illiquid securities.

6. To approve the elimination of the High Yield Series' investment
restrictions
limiting the Series' ability to invest in the securities of any issuer in which
officers and Trustees of the Fund or officers and directors of its investment
adviser own more than a specified interest.

IN THEIR DIRECTION THE PROXIES ARE AUTHORIZED TO VOTE UPON OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING.

Only shares of beneficial interest of the Fund of record at the close of
business on ___________, 1994 are entitled to notice of and to vote at the
Meeting or any adjournment thereof.

Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.

_____________________________________
SIGNATURE DATE

_____________________________________
SIGNATURE (JOINT OWNERSHIP)
<PAGE>
PLEASE MARK, SIGN,
DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PROXY (CLASS A)

YOUR PROXY WILL BE ELECTRONICALLY SCANNED.
CAREFULLY DETACH HERE AND RETURN BOTTOM PORTION ONLY.
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292

This Proxy is Solicited on Behalf of the Trustees.
The undersigned hereby appoints Susan C. Cote, S. Jane Rose and Marguerite E.H.
Morrison as Proxies, each with the power of substitution, and hereby authorizes
each of them to represent and to vote as designated below, all the Class A
shares of beneficial interest of Prudential Municipal Bond Fund - Insured
Series held of record by the undersigned on ___________,1994 at the Special
Meeting of Shareholders to be held on ________, 1994, or any adjournment
thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL THE PROPOSALS LISTED BELOW.

Your Account No.:
Your voting shares are:

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

1. Election of Trustees

APPROVE ALL NOMINEES WITHHOLD ALL NOMINEES WITHHOLD THOSE LISTED ON BACK

To withhold authority for any individual nominee, please write name on back of
form.

Edward D. Beach
Donald D. Lennox
Douglas H. McCorkindale
Lawrence C. McQuade
Thomas T. Mooney
Richard A. Redeker
Louis A. Weil, III

2. To approve an amendment of the Fund's Declaration of Trust to permit a
conversion feature for Class B shares.

FOR AGAINST ABSTAIN

3. To approve an amended and restated Class A Distribution and Service Plan.

4. Not applicable to Class A shareholders.

5. To approve amendments of the Insured Series' investment policies and
restrictions regarding restricted and illiquid securities.

6. To approve the elimination of the Insured Series' investment restrictions
limiting the Series' ability to invest in the securities of any issuer in which
officers and Trustees of the Fund or officers and directors of its investment
adviser own more than a specified interest.

IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING.

Only shares of beneficial interest of the Fund of record at the close of
business on ___________, 1994 are entitled to notice of and to vote at the
Meeting or any adjournment thereof.

___________________________________________
SIGNATURE DATE

___________________________________________
SIGNATURE (JOINT OWNERSHIP)
<PAGE>
PLEASE MARK, SIGN,
DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

PROXY (CLASS A)

YOUR PROXY WILL BE ELECTRONICALLY SCANNED.
CAREFULLY DETACH HERE AND RETURN BOTTOM PORTION ONLY.
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292

This Proxy is Solicited on Behalf of the Trustees.

The undersigned hereby appoints Susan C. Cote, S. Jane Rose and Marguerite E.H.
Morrison as Proxies, each with the power of substitution, and hereby authorizes
each of them to represent and to vote as designated below, all the Class A
shares of beneficial interest of Prudential Municipal Bond Fund - Modified Term
Series held of record by the undersigned on ___________,1994 at the Special
Meeting of Shareholders to be held on ________, 1994, or any adjournment
thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL THE PROPOSALS LISTED BELOW.

Your Account No.:
Your voting shares are:

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

1. Election of Trustees

APPROVE ALL NOMINEES WITHHOLD ALL NOMINEES WITHHOLD THOSE LISTED ON BACK

To withhold authority for any individual nominee, please write name on back of
form.
Edward D. Beach
Donald D. Lennox
Douglas H. McCorkindale
Lawrence C. McQuade
Thomas T. Mooney
Richard A. Redeker
Louis A. Weil, III

2. To approve an amendment of the Fund's Declaration of Trust to permit a
conversion feature for Class B shares.

FOR AGAINST ABSTAIN

3. To approve an amended and restated Class A Distribution and Service Plan.

4. Not applicable to Class A shareholders.

5. To approve amendments of the Modified Term Series' investment policies and
restrictions regarding restricted and illiquid securities.

6. To approve the elimination of the Modified Term Series' investment
restrictions limiting the Series' ability to invest in the securities of any
issuer in which officers and Trustees of the Fund or officers and directors of
its investment adviser own more than a specified interest.

IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING.

Only shares of beneficial interest of the Fund of record at the close of
business on ___________, 1994 are entitled to notice of and to vote at the
Meeting or any adjournment thereof.
Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.

____________________________________
SIGNATURE DATE

____________________________________
SIGNATURE (JOINT OWNERSHIP)
<PAGE>
PLEASE MARK, SIGN,
DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PROXY (CLASS B)

YOUR PROXY WILL BE ELECTRONICALLY SCANNED.
CAREFULLY DETACH HERE AND RETURN BOTTOM PORTION ONLY.
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292

This Proxy is Solicited on Behalf of the Trustees.
The undersigned hereby appoints Susan C. Cote, S. Jane Rose and Marguerite
E.H. Morrison as Proxies, each with the power of substitution, and hereby
authorizes each of them to represent and to vote as designated below, all the
Class B shares of beneficial
interest of Prudential Municipal Bond Fund - Insured Series held of record by
the undersigned on ___________,1994 at the Special Meeting of Shareholders to
be held on ________, 1994, or any adjournment thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL THE PROPOSALS LISTED BELOW.

Your Account No.:
Your voting shares are:

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

1. Election of Trustees

APPROVE ALL NOMINEES WITHHOLD ALL NOMINEES WITHHOLD THOSE LISTED ON BACK

To withhold authority for any individual nominee, please write name on back of
form.

Edward D. Beach
Donald D. Lennox
Douglas H. McCorkindale
Lawrence C. McQuade
Thomas T. Mooney
Richard A. Redeker
Louis A. Weil, III

2. To approve an amendment of the Fund's Declaration of Trust to permit a
conversion feature for Class B shares.

FOR AGAINST ABSTAIN

3. To approve an amended and restated Class A Distribution and Service Plan.

4. To approve an amended and restated Class B Distribution and Service Plan.

5. To approve amendments of the Insured Series' investment policies and
restrictions regarding restricted and illiquid securities.

6. To approve the elimination of the Insured Series' investment restrictions
limiting the Series' ability to invest in the securities of any issuer in
which officers and Trustees of the Fund or officers and directors of its
investment adviser own more
than a specified interest.

IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING.

Only shares of beneficial interest of the Fund of record at the close of
business on ___________, 1994 are entitled to notice of and to vote at the
Meeting or any adjournment thereof.

Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate
name by president or other authorized officer. If a partnership, please sign
in partnership name by authorized person.

_______________________________________
SIGNATURE DATE

_______________________________________
SIGNATURE (JOINT OWNERSHIP)
<PAGE>
PLEASE MARK, SIGN,
DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

PROXY (CLASS B)

YOUR PROXY WILL BE ELECTRONICALLY SCANNED.
CAREFULLY DETACH HERE AND RETURN BOTTOM PORTION ONLY.
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292

This Proxy is Solicited on Behalf of the Trustees.

The undersigned hereby appoints Susan C. Cote, S. Jane Rose and Marguertie E.H.
Morrison as Proxies, each with the power of substitution, and hereby authorizes
each of them to represent and to vote, as designated below, all the Class B
shares of beneficial interest of Prudential Municipal Bond Fund - Modified Term
Series held of record by the undersigned on ___________,1994 at the Special
Meeting of Shareholders to be held on ___________, 1994, or any adjournment
thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL THE PROPOSALS LISTED BELOW.

Your Account No.:
Your voting shares are:

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

1. Election of Trustees

APPROVE ALL NOMINEES WITHHOLD ALL NOMINEES WITHHOLD THOSE LISTED ON BACK

2. To approve an amendment of the Fund's Declaration of Trust to permit a
conversion feature for Class B shares.

FOR AGAINST ABSTAIN

3. To approve an amended and restated Class A Distribution and Service Plan.

4. To approve an amended and restated Class B Distribution and Service Plan.

5. To approve amendments of the Modified Term Series' investment policies and
restrictions regarding restricted and illiquid securities.

IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING

Only shares of beneficial interest of the Fund of record at the close of
business on _________, 1994 are entitled to notice of and to vote at the
Meeting or any adjournment thereof.

__________________________________________
SIGNATURE DATE

__________________________________________
SIGNATURE (JOINT OWNERSHIP)