<PAGE>
A N U A L R E P O R T
April 30, 1994
Prudential
Municipal
Bond Fund
High Yield Series
Insured Series
Modified Term Series
(LOGO)
<PAGE>
LETTER TO
SHAREHOLDERS
May
24, 1994
Dear Shareholder:
The last six months have been turbulent for U.S. financial markets
in general.
After producing double-digit total returns last year, as determined
by Lipper
Analytical Services, virtually all municipal bond funds fell in
1994 when
interest rates rose sharply, pushing bond prices down. Throughout
this
difficult period, the portfolio managers of the Prudential
Municipal Bond Fund
sought to minimize risk while enhancing your tax-exempt income.*
When we last reported to you on October 31, 1993, interest rates
were
continuing their steady decline and had hit record lows. At that
time we were
working to maximize your tax-free income and total returns as rates
fell and
bond prices rose. Then, as it became apparent that interest rates
would move
up, we assumed a more defensive posture by shortening the Fund's
maturities
and raising cash.
The Fed Stepped In In February, the turmoil began when the Federal
Reserve
started to increase the federal funds rate--the rate that banks
charge each
other for overnight loans. By May, the Fed had raised its target
rate from
3.00% to 4.25% in four steps as a preemptive strike against
inflation. (Many
investors fear rising inflation because it erodes the purchasing
power of a
bond's fixed interest payments.)
Traders sold bonds after short-term interest rates rose; long-term
yields
increased to compensate for falling prices. The municipal bond
market is less
efficient than the larger and more actively traded government bond
market.
Trying to raise cash by selling bonds, municipal bond funds put
downward
pressure on prices in an already weak market. By the fourth
tightening in
May, investors appeared more comfortable with the Fed's stand
against
inflation, and prices began to rebound.
*Interest on certain municipal obligations may be subject to the
federal
alternative minimum tax. Seee the Fund's prospectus for more
details.
-3-
<PAGE>
HIGH YIELD SERIES
The High Yield Series seeks to maximize income by investing in
higher yielding
municipal bonds that are rated B or better by recognized outside
rating
agencies such as Standard & Poor's and Moody's, or unrated bonds
that our
analysts believe to be of comparable quality. On April 30, 1994,
more than 60%
of the portfolio was comprised of investment grade municipal bonds
rated BBB or
better (or unrated bond of comparable quality), with the balance in
noninvestment grade bonds rated below BBB (also known as ""junk''
bonds) or
unrated bonds of comparable quality.
As of April 30, 1994, the Series' net asset value was $10.74 for
Class A and B
shares, down from $11.43 for both share classes on October 31,
1993. Dividends
totalling $0.72 for Class A shares and $0.68 for Class B shares
were paid
during the period. On April 30, 1994, total net assets were $1,154
million.
Performance Is The Story
High yield bonds generally outperformed the broader municipal
market during
the period because they carry higher coupons and tend to have
shorter
maturities. Improving credit conditions in a growing economy also
helped
since municipal junk bonds react to both interest rate and credit
changes. As
economic growth increased, so did tax revenues of many issuers,
which
facilitated coupon payments.
As prices weakened in the first quarter, the Series took the
opportunity to
buy bonds with attractive yields, strong credit trends and good
structure.
For example, we added non-callable bonds, raising this exposure to
8.60% of
assets. The Series' call protection averages about 7.0 years and
compares
very favorably to many similar but older municipal high yield
funds.
We continued to focus our non-investment grade holdings on
BB-quality bonds
from municipal projects with strong management and proven track
records.
Many of these issues are in the industrial development and housing
sectors.
On the investment grade side,we purchased some insured and discount
bonds
that we believed would appreciate nicely if the market turned
around.
Purchases included bonds issued by the New York Dormitory Authority
for the
City University, and bonds from the Texas Municipal Power Agency.
The Series still hold about 3.00% of assets in Denver City and
County Airport
bonds. While the opening of the $4 billion facility has been
delayed, we
think both airlines<DASH>Continental and United Airlines<DASH>have
a vested
interest in seeing this project through. We believe the bonds still
represent
good value.
-4-
<PAGE>
INSURED SERIES
The Insured Series invests primarily in AAA-quality bonds whose
timely coupon
and principal payments, but not market value, are guaranteed by a
municipal
bond insurance company rated AAA or Aaa by Standard & Poor's or
Moody's.
As of April 30, 1994, the Series' net asset value was $10.71 for
Class A
and B shares, changing down from $11.71 and $11.72, respectively,
on October 31,
1993. Dividends totalling $0.58 for Class A shares and $0.54 for
Class B
shares were paid during the period. On April 30, 1994, total
assets were
$771 million.
The Best Offense Was A Good Defense
Insured municipal bonds are considered to be of the highest
quality, but their
prices are more sensitive to interest rate movements. Since a
bond's price
moves inversely to interest rates, we raised the Series' cash
position to 11%
of assets when rates began to rise.
This action was necessary because insured bonds underperformed
other municipal
bonds over the last six months. The Lipper insured municipal bond
fund average
was -4.85% while the Lipper general municipal bond fund average was
4.61%.
By comparison, insured municipals had outperformed the municipal
market when
rates were falling in 1992 and 1993.
The Series raised its cash level by selling longer-term bonds and
shifted
assets from long- to intermediate-term maturities, adding higher
coupon,
non-callable bonds at good prices. At the end of April, 25.25% of
assets were
invested in non-callable bonds.
While maintaining a defensive stand, the Series continued to trade
among
""specialty states,'' or states that have high income tax rates and
are
generally in demand by investors. Demand for these bonds should
increase their
prices relative to other bonds as issuance declines.
New purchases during the period included bonds from the City of
Philadelphia
Water and Waste Authority, San Jose, CA, Redevelopment Bonds, and
Texas
Municipal Power Agency. Sales included pre-refunded bonds from the
Corona, CA,
Vista Hospital, and long-term bonds issued by the Illinois Health
Facilities
Authority for Children's Memorial Hospital.
MODIFIED TERM SERIES
The Modified Term Series seeks to balance an attractive income
level with
modest price volatility. It invests primarily in investment grade
bonds with
5- to 15-year maturities, which are usually less price sensitive to
interest
rate changes than longer-term bonds. This proved true in the market
over the
past several months.
-5-
<PAGE>
As of April 30, 1994, the Series' net asset value was $10.67 for
Class A
shares and $10.68 for Class B shares. On October 31, 1993, the net
asset
value of Class A shares was $11.37 and $11.38 for Class B.
Dividends
totalling $0.53 for Class A shares and $0.48 for Class B shares
were paid
during the period. Total net assets increased from $66 million to
$71 million.
The Difference Is The Maturity
The Series' effective intermediate maturity range helped it
outperform longer
term funds during the first quarter's weak market. We adopted a
defensive
position during the period, increasing the Series' cash position to
as high
as 6% on April 30, 1994, from its average level of about 2% to 3%.
At the
same time, we searched the market for inexpensive bonds with good
long-term
value. Like in the High Yield and Insured Series, we focused new
purchases
on higher coupon, non-callable bonds, which hold their value better
in a
rising rate environment. We also added some discount bonds, which
offer
potential price gains if rates begin to move lower again. New
purchases
included bonds issued by San Jose Redevelopment Tax Allocation and
California
Statewide Community for the J. Paul Getty Trust; and Harris County,
TX, Toll
Roads.
We remained dedicated to our core strategy of trading among
""specialty''
states, like California and New York. These states have high
income taxes
and strong demand from investors. When supply falls, we sell bonds
at a
healthy price; and when supply rises, we look for bargains.
THE OUTLOOK FOR TAX-FREE MUNICIPALS
Investors can expect continued volatility in the bond markets in
the near term.
Interest rates will likely fluctuate until the market believes that
the threat
of inflation is contained. In fact, the Federal Reserve tightened
monetary
policy again in May, raising the fed funds rate to 4.25%.
-6-
<PAGE>
There Is Some Good News
When buyers return to the market in earnest, some of the positive
fundamentals
being obscured by today's turbulence should take over. We believe
there are
two critical factors that will support municipal bond prices for
the balance
of this year:
- -- New supply is dropping. Issuance of municipal bonds fell by 30%
in the
first quarter, and by 58% in April. For calendar 1994, we expect
that only
half as many bonds will be issued as last year.
- -- Demand should pick up. The more people feel the affects of
higher
taxes, the more they are likely to look for tax-advantaged income.
As always, it is a pleasure to have you as a shareholder of the
Prudential
Municipal Bond Fund and to take the opportunity to report our
activities to you.
Sincerely,
Lawrence C. McQuade
President
-7-
PRUDENTIAL MUNICIPAL B0ND FUND
HIGH YIELD SERIES
<PAGE>
PRUDENTIAL MUNICIPAL B0ND FUND Portofolio of Investments
HIGH YIELD SERIES April 30, 1994
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--97.8%
Alabama--0.8%
Cullman Med. Clinic
Brd. Rev., Regl.
Med. Ctr.,
Baa $ 5,000 6.50%, 2/15/23, Ser. 93A $ 4,610,500
Ft. Payne, Ind. Dev.
Brd. Rev.,
Gametime
Expansion Proj.,
NR 4,528 10.25%, 8/1/09...... 4,807,921
--------------
9,418,421
--------------
Alaska--0.2%
No. Slope Boro.,
Gen. Oblig.,
Baa1 2,000 8.35%, 6/30/98, Ser.
C................. 2,249,100
--------------
Arizona--1.6%
Ft. Mojave Indian
Tribe,
Wtr. & Swr. Rev.,
NR 3,000 10.25%,
9/1/19(D)(D)...... 1,800,000
Pima Cnty. Ind. Dev.
Auth.,
Multifamily Mtge.
Rev., Cntry. Club
La Cholla Proj.,
NR 10,000 8.50%, 7/1/20....... 9,500,000
Scottsdale Ind. Dev.
Auth. Rev., 1st
Mtge.,
Westminster Vlg.
Inc. Proj.,
NR 5,000 9.50%, 6/1/97....... 5,330,400
Tempe Ind. Dev.
Auth. Rev.,
Friendship
Vlg. of Tempe,
NR 1,400 8.75%, 9/1/16#...... 1,508,416
--------------
18,138,816
--------------
Arkansas--0.2%
Independence Cnty.
Poll. Ctrl. Rev.,
Ark. Pwr.
& Lt. Co. Proj.,
Baa2 $ 3,000 6.25%, 1/1/21....... $ 2,815,230
--------------
California--8.2%
Alameda Cmnty. Facs.
Dist., Spec. Tax
Rev. No. 1,
NR 8,175 7.75%, 9/1/19....... 8,417,144
California Hsg. Fin.
Agcy. Rev.,
Aa 1,430 8.15%, 8/1/19, Ser.
G................. 1,465,450
Delano, Cert. of
Part.,
Regl. Med. Ctr.,
NR 6,900 9.25%, 1/1/22, Ser.
92A............... 7,608,906
Fairfield Green
Valley Rd.,
Impvt. Bd.,
NR 2,690 7.375%, 9/2/18...... 2,771,130
Folsom Spec. Tax
Dist. No. 2,
NR 3,130 7.70%, 12/1/19...... 3,190,722
Fontana Cmnty. Spec.
Tax Rev. Facs.,
Dist. No. 2,
NR 3,500 8.50%, 9/1/17, Ser.
B................. 3,807,930
Long Beach Redev.
Agcy. Hsg.,
Multifamily Hsg.
Rev., Pacific
Court Apts.,
NR 3,805 6.80%, 9/1/13....... 3,616,500
NR 6,195 6.95%, 9/1/23....... 6,080,083
</TABLE>
-8- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL B0ND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
California (cont'd)
Orange Cnty. Cmnty.
Facs. Dist. Spec.
Tax
Rev., No. 87-4
Foothill Ranch,
NR $ 7,500 7.375%, 8/15/18,
Ser. A............ $ 7,565,850
Richmond Redev.
Agcy.
Rev., Multifamily
Bridge Affordable
Hsg.,
NR 10,000 7.50%, 6/1/23....... 9,599,200
Sacramento Cnty.
Spec.
Tax Rev., Dist.
No. 1,
Elliot Ranch,
NR 3,750 8.20%, 8/1/21....... 3,888,525
Dist. No. 1, Laguna
Creek Ranch,
NR 4,500 8.25%, 12/1/20...... 4,864,410
San Joaquin Hills
Trans. Corridor
Agcy.,
Toll Road Rev.,
NR 12,900 Zero Coupon,
1/1/11............ 3,192,750
NR 10,000 7.00%, 1/1/30....... 9,998,500
NR 5,000 5.00%, 1/1/33....... 3,645,300
San Jose Redev.,
Tax Allo.,
M.B.I.A.,
Aaa 1,750 6.00%, 8/1/09....... 1,761,970
So. San Francisco
Redev., Agcy.,
Tax Alloc.,
Gateway Redev.
Proj.,
NR 2,375 7.60%, 9/1/18....... 2,460,595
Southern California
Home Fin. Auth.,
Sngl. Fam. Mtge.
Rev., G.N.M.A.
AAA* 8,450 7.625%, 10/1/22,
Ser. 89A.......... 8,831,433
West Contra Costa
Hosp.,
Cert. of Part.,
Ba $ 1,600 7.125%, 1/1/24...... $ 1,567,872
--------------
94,334,270
--------------
Colorado--5.5%
Colorado Hsg. Fin.
Auth.,
Sngl. Fam. Mtge.
Rev.,
AA* 2,190 7.65%, 8/1/22, Ser.
C3................ 2,237,873
Denver City & Cnty.
Arpt. Rev.,
Baa1 7,500 8.875%, 11/15/12,
Ser. A............ 8,180,550
Baa1 1,500 7.75%, 11/15/13,
Ser. D............ 1,544,265
Baa1 12,195 7.25%, 11/15/23,
Ser. B............ 11,680,737
Baa1 3,095 8.50%, 11/15/23,
Ser. A............ 3,285,466
Baa1 5,000 8.75%, 11/15/23,
Ser. A............ 5,409,200
Baa1 6,000 7.25%, 11/15/25,
Ser. A............ 5,919,060
Baa1 3,360 8.00%, 11/15/25,
Ser. A............ 3,453,274
Denver City & Cnty.
Ind. Dev. Rev.,
Univ. of Denver,
BBB* 1,450 7.50%, 3/1/11....... 1,525,255
Eagle Cnty. Hsg.
Proj.,
Lake Creek
Affordable Hsg.
Corp.,
NR 11,610 8.00%, 12/1/23, Ser.
A................. 11,339,023
Miguel Cnty.,
Mtn. Vlg. Met.
Dist. Colo. San
Miguel Co.,
NR 3,200 8.10%, 12/1/11...... 3,448,160
San Miguel Cnty.
Hsg. Auth., Multi
Hsg.
Ref. Rev.,
NR 1,100 6.30%, 7/1/13....... 1,005,224
NR 4,675 6.40%, 7/1/23....... 4,220,917
--------------
63,249,004
--------------
</TABLE>
-9- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL B0ND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
District Of Columbia--3.1%
Dist. of Columbia
Rev.,
America
Geophysical,
BBB-* $ 1,350 5.75%, 9/1/13....... $ 1,199,907
BBB-* 4,200 5.875%, 9/1/23...... 3,708,516
M.B.I.A.,
Aaa 12,000 6.50%, 6/1/10....... 12,399,360
Dist. of Columbia,
Cert. of Part.,
BBB* 9,500 7.30%, 1/1/13....... 9,688,860
National Public
Radio,
NR 8,800 7.625%, 1/1/18...... 9,123,576
--------------
36,120,219
--------------
Florida--6.2%
Brevard Cnty.
Tourist Dev. Tax
Rev.,
4th Central
Florida Marlins,
Spring
Training Fac.,
NR 1,000 6.375%, 3/1/03...... 1,052,030
NR 2,000 6.875%, 3/1/13...... 2,037,200
Broward Cnty. Res.
Rec. Rev., Broward
Waste Energy,
L.P. North,
A 2,710 7.95%, 12/1/08...... 2,995,499
L.P. South,
A 3,780 7.95%, 12/1/08...... 4,178,223
Escambia Cnty. Hlth.
Facs.
Auth. Rev., L.P.
South,
Azalea Trace,
Ref.,
NR 2,605 9.25%, 1/1/06....... 2,847,395
Baptist Hosp., Ref.,
BBB+* 4,385 8.60%, 10/1/02, Ser.
A................. 4,792,630
Florida Hsg. Fin.
Agcy., Palm Aire
Proj.,
Multifamily Hsg.
Rev.,
NR $ 9,922 10.00%,
1/1/20(D)(D)...... $ 5,952,954
Florida St. Cmnty.
Svcs. Corp.,
Kissimmee Suburb
Utils. Rev.,
NR 1,000 8.625%, 10/1/03#.... 1,161,270
Walton Cnty. Utils.
Rev.,
NR 1,000 9.00%, 3/1/18#...... 1,168,990
Greater Orlando
Aviation Auth.
Rev., Orlando
Florida Arpt.
Facs.,
A1 2,250 8.00%, 10/1/18...... 2,466,180
Hillsborough Cnty.
Ind. Dev. Auth.
Rev.,
Ind. Lvg. Ctr.,
Tampa Proj., Ser.
89,
NR 5,460 11.00%,
3/1/19(D)(D)...... 3,985,800
Osceola Cnty. Ind.
Dev. Auth. Rev.,
NR 9,000 7.75%, 7/1/17....... 8,874,720
Palm Beach Cnty.
Hsg. Auth.,
Banyan Club Apts.,
NR 4,675 7.75%, 3/1/23, Ser.
A................. 4,692,157
Sarasota Hlth.
Facs.,
Kobernick House
Meadow Park Proj.,
NR 7,000 10.00%, 7/1/22...... 7,376,880
Seminole Cnty. Ind.
Dev. Auth. Rev.,
Ind. Dev. Fern
Park,
NR 6,430 9.25%, 4/1/12....... 6,857,659
</TABLE>
-10- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL B0ND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
Florida (cont'd)
St. Petersburg Ind.
Dev. Rev., Harbour
View Hotel Proj.,
NR $ 7,915 9.75%,
11/1/06(D)(D)..... $ 2,611,950
Tampa Rev.,
Tampa Aquarium
Proj.,
NR 7,500 7.75%, 5/1/27....... 8,001,450
--------------
71,052,987
--------------
Georgia--1.4%
Atlanta Urban Res.
Fin.
Auth., Clark
Atlanta
Univ. Dorm. Proj.,
NR 5,155 9.25%, 6/1/10#...... 6,266,470
Effingham Cnty. Dev. Auth.,
Ft. Howard Corp.,
B1 10,000 7.90%, 10/1/05...... 10,371,800
--------------
16,638,270
--------------
Hawaii--0.6%
Hawaii Cnty. Impvt.
Dist. No. 17,
NR 7,345 9.50%, 8/1/11....... 7,124,650
--------------
Illinois--6.4%
Chicago O'Hare
Int'l. Arpt. Rev.,
2nd Lien,
M.B.I.A.,
Aaa 6,950 5.00%, 1/1/10, Ser.
C................. 6,197,662
Chicago O'Hare
Int'l. Arpt.,
Spec. Fac. Rev.,
Amer. Airlines,
Ser. A,
Baa2 4,000 7.875%, 11/1/25..... 4,120,800
United Airlines,
Ser. B,
Baa3 6,000 8.45%, 5/1/07....... 6,399,600
Baa3 6,500 8.50%, 5/1/18....... 6,938,620
Baa3 2,850 8.85%, 5/1/18....... 3,151,103
Baa3 2,435 8.95%, 5/1/18....... 2,680,618
Hennepin Ind. Dev.
Rev.,
Exolon Esk. Co.
Proj.,
NR $ 8,000 8.875%, 1/1/18...... $ 8,113,120
Methchem Corp.
Proj.,
NR 4,420 10.25%, 1/1/05,
Ser. 89(D)(D)..... 397,800
Illinois Dev. Fin.
Auth. Rev.,
Multifamily Hsg.
Town & Garden
Apts.,
BBB+* 9,460 7.20%, 9/1/08....... 9,383,563
Illinois Hlth. Facs. Auth. Rev.,
Adventist Living Ctr.,
NR 2,245 11.00%,
12/1/15(D)(D)..... 493,802
Beacon Hill Proj.,
NR 7,500 9.00%, 8/15/19, Ser.
A................. 8,135,625
Friendship Vlg.
Schaumburg Proj.,
NR 2,900 9.00%, 12/1/08...... 3,154,388
Westlake Cmnty. Hosp.,
Baa1 7,000 7.875%, 1/1/13...... 7,362,740
Kankakee Ind. Dev.
Rev.,
Kroger Co. Proj.,
Ba3 2,500 7.85%, 9/1/15....... 2,662,200
Winnebago Cnty. Hsg.
Fin. Corp., Park
Tower Assoc. Sec.
8,
NR 4,559 8.125%, 1/1/11...... 4,580,981
--------------
73,772,622
--------------
Indiana--1.7%
Bluffton Econ. Dev.
Rev.,
Kroger Co. Proj.,
Ba3 7,500 7.85%, 8/1/15....... 7,962,825
East Chicago Poll.
Ctrl.
Rev., Inland Steel
Co. Proj. No. 10,
BB-* 4,000 6.80%, 6/1/13,
Ser. 1993......... 3,807,160
</TABLE>
-11- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL B0ND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
Indiana (cont'd)
Wabash Econ. Dev.
Rev.
Bonds, Connell
L.P.,
NR $ 7,250 8.50%, 11/24/17..... $ 7,779,540
--------------
19,549,525
--------------
Iowa--1.3%
Iowa Fin. Auth.
Hosp. Facs. Rev.,
Trinity
Regl. Hosp. Proj.,
BBB+* 4,000 7.00%, 7/1/22....... 3,989,680
Iowa Fin. Auth.,
Hlth. Care Facs.
Rev.,
Mercy Hlth.
Initiatives,
NR 10,000 9.95%, 7/1/19....... 10,575,500
--------------
14,565,180
--------------
Kentucky--0.3%
Trimble Cnty. Poll.
Ctrl. Rev.,
Louisville
Gas & Elec. Co.
Aa2 3,130 7.625%, 11/1/20..... 3,388,569
--------------
Louisiana--4.8%
Hodge Util. Rev.,
IDB Stone
Container Corp.,
NR 10,000 9.00%, 3/1/10....... 10,291,200
New Orleans Home
Mtge. Auth. Rev.,
Sngl. Fam. Mtge.,
G.N.M.A.
Aaa 1,670 8.60%, 12/1/19, Ser.
A................. 1,772,221
Port of New Orleans
Ind.
Dev. Rev.,
Continental
Grain Co. Proj.,
BB-* 5,000 7.50%, 7/1/13....... 4,936,750
St. Charles Parish,
Poll.
Ctrl. Rev.,
Louisiana
Pwr. & Lt. Co.,
NR $10,000 8.25%, 6/1/14....... $ 10,977,400
Baa3 10,000 8.00%, 12/1/14,
Ser. 1989......... 10,731,500
West Feliciana
Parish Poll. Ctrl.
Rev.,
Gulf St. Util. Co.
Proj.,
BBB-* 3,000 7.70%, 12/1/14...... 3,191,850
AA-* 7,000 7.50%, 5/1/15, Ser.
A................. 7,431,060
Baa3 5,250 9.00%, 5/1/15....... 5,978,700
--------------
55,310,681
--------------
Maryland--1.5%
Anne Arundel Cnty.
First Mtge. Rev.,
Pleasant Living
Conv.,
NR 3,565 8.50%, 7/1/13....... 3,817,259
Anne Arundel Cnty.
Rev.,
Annapolis Life
Care Inc., Ginger
Cove,
NR 1,250 6.00%, 1/1/18....... 1,135,700
Maryland Hlth. &
Higher Edl. Facs.
Auth. Rev.,
Doctors Cmnty.
Hosp.,
BBB-* 3,900 8.75%, 7/1/22#...... 4,672,473
Northeast Waste
Disp. Auth.,
Baltimore
City Sludge
Compositing Fac.,
NR 4,790 7.25%, 7/1/07....... 4,713,648
NR 3,500 8.50%, 7/1/07....... 3,450,370
--------------
17,789,450
--------------
</TABLE>
-12- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL B0ND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
Massachusetts--5.7%
Mass. St. Cons. Ln.,
Aaa $ 5,000 7.625%, 6/1/08,
Ser. A#........... $ 5,757,800
Mass. St. Hlth. &
Edl. Facs. Auth.
Rev.,
Cardinal Cushing
Gen. Hosp.,
NR 7,500 8.875%, 7/1/18...... 7,900,275
Cooley Dickinson
Hosp.,
NR 7,200 7.125%, 11/15/18.... 7,328,952
St. Josephs Hosp.,
NR 5,840 9.50%, 10/1/20,
Ser. C#........... 7,039,595
Valley Regl. Hlth.
Sys.,
Baa 3,950 8.00%, 7/1/18, Ser.
B................. 4,256,046
Mass. St. Hsg. Fin.
Agcy. Rev.,
Residential,
BBB+* 2,000 8.10%, 8/1/23, Ser.
B................. 2,066,960
Mass. St. Ind. Fin.
Agcy. & Hlth. Care
Fac. Rev.,
Hampden Nursing
Home Proj. A,
NR 3,855 9.75%, 10/1/17...... 4,081,404
Mass. St. Ind. Fin.
Agcy. Rev.,
Berkshire
Retirement Facs.,
NR 2,000 9.875%, 7/1/18...... 2,287,040
Continental Res.,
NR 3,300 9.50%, 2/1/00, Ser.
A................. 3,508,032
Merrimack College,
BBB-* 3,235 7.125%, 7/1/12...... 3,306,073
Mass. St. Wtr. Res. Auth.,
Aaa 10,000 7.625%, 4/1/14,
Ser. A#........... 11,358,400
Randolph Hsg. Auth.,
Multifamily Hsg.,
Liberty Place
Proj. A,
NR $ 6,075 9.00%, 12/1/21, Ser.
A................. $ 6,458,393
--------------
65,348,970
--------------
Michigan--4.4%
Gratiot Cnty. Econ.
Dev. Corp. Ltd.,
Oblig. Econ. Dev.
Rev., Danley Die
Proj. Connell
L.P.,
NR 3,200 7.625%, 4/1/07...... 3,263,328
Greater Detroit Res.
Rec. Auth. Rev.,
BBB-* 6,490 9.25%, 12/13/08,
Ser. C............ 6,925,868
BBB-* 8,500 9.25%, 12/13/08,
Ser. H............ 9,070,860
Holland Sch. Dist.,
Sch.
Dist. Cap.
Apprec.,
Aaa 2,950 Zero Coupon, 5/1/17,
A.M.B.A.C......... 662,245
Lowell Area Sch.,
Aaa 5,000 Zero Coupon, 5/1/14,
F.G.I.C........... 1,361,250
Meridian Econ. Dev.
Corp. Rev.,
Burcham Hills
Retirement Fac.,
NR 2,910 9.625%, 7/1/19...... 3,270,753
Michigan St. Hosp.
Fin. Auth. Rev.,
Saratoga
Cmnty. Hosp.,
NR 7,300 8.75%, 6/1/10, Ser.
A................. 7,857,209
Michigan Strategic
Fund,
Gennese Pwr.
Station,
NR 4,000 7.50%, 1/1/21....... 3,904,840
</TABLE>
-13- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL B0ND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
Michigan (cont'd)
Monroe Cnty. Poll.
Ctrl. Rev.,
Detroit
Edison Co. Proj.,
Baa1 $ 8,000 7.75%, 12/1/19, Ser.
A................. $ 8,629,520
Romulus Michigan
Cmnty. Sch.,
F.G.I.C.,
Aaa 5,000 Zero Coupon,
5/1/21............ 863,400
Wayne Cnty. Bldg.
Auth.,
Baa 3,500 8.00%, 3/1/17, Ser.
A................. 4,076,940
West Ottawa Pub.
Sch. Dist.,
F.G.I.C.,
Aaa 4,825 Zero Coupon,
5/1/15............ 1,233,415
--------------
51,119,628
--------------
Minnesota--0.4%
Minneapolis St. Paul
Hsg. Fin. Brd.,
Multifamily Rev.,
Riverside Plz.,
AAA* 4,000 8.25%, 12/20/30,
G.N.M.A.(D)....... 4,273,280
--------------
Mississipi--2.1%
Claiborne Cnty.,
Poll.
Ctrl. Rev., Middle
So. Energy Sys.,
NR 10,350 9.50%, 12/1/13, Ser.
A................. 11,773,228
NR 6,100 9.875%, 12/1/14,
Ser. C............ 7,028,176
Mississippi Hosp.
Equip. & Facs.
Auth. Rev.,
Methodist Hosp. &
Rehab. Ctr.,
NR 5,000 9.375%, 5/1/12#..... 5,920,300
--------------
24,721,704
--------------
Missouri--0.6%
St. Louis Cnty. Ind.
Dev. Auth. Rev.,
Conv. & Sports
Complex,
NR $ 4,250 7.90%, 8/15/21, Ser.
C................. $ 4,675,127
Soemm Proj.,
NR 2,510 10.25%, 7/1/08...... 2,665,972
NR 10.25%, 7/1/08......
--------------
7,341,099
--------------
Montana--0.7%
Montana Brd. Inv.
Res. Rec. Rev.,
Yellowstone Energy
L.P. Proj.,
NR 8,000 7.00%, 12/31/19..... 7,858,640
--------------
Nebraska--0.3%
Nebraska Invest.
Fin.
Auth., G.N.M.A.,
Sngl. Fam. Mtge.
Rev.,
Aaa 3,335 8.125%, 8/15/38,
Ser. I,
M.B.I.A........... 3,462,797
--------------
Nevada--0.6%
Clark Cnty. Ind.
Dev. Rev.,
Southwest Gas
Corp.,
Ba1 6,500 7.50%, 9/1/32, Ser.
B................. 6,653,725
--------------
New Hampshire--3.0%
New Hampshire Higher
Edl. & Hlth. Facs.
Auth.,
Antioch College,
NR 5,530 7.875%, 12/1/22..... 5,664,711
Havenwood/Heritage
Heights,
NR 7,840 9.75%, 12/1/19...... 8,576,882
</TABLE>
-14- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL B0ND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
New Hampshire (cont'd)
New Hampshire St.
Ind. Dev. Auth.,
Poll. Ctrl. Rev.,
Ba1 $ 4,125 8.00%, 12/1/14, Ser.
A................. $ 4,414,946
Baa3 2,750 7.50%, 5/1/21, Proj.
B................. 2,854,280
Baa3 12,000 7.65%, 5/1/21, Proj.
A................. 12,560,520
--------------
34,071,339
--------------
New Jersey--3.1%
Camden Cnty. Poll.
Ctrl.
Fin. Auth., Solid
Waste Res. Rec.
Rev.,
Baa1 2,500 7.50%, 12/1/09, Ser.
B................. 2,556,250
Howell Twnshp. Mun.
Utils. Auth. Rev.,
NR 1,750 8.60%, 1/1/14,
2nd Ser.#......... 2,015,037
Hudson Cnty. Impvt.
Auth.,
Solid Waste Sys.,
BBB-* 10,000 7.10%, 1/1/20....... 10,065,400
New Jersey St. Econ.
Dev. Auth., 1st
Mtge.
Keswick Pines
Proj.,
NR 10,845 7.75%, 1/1/01....... 10,699,460
New Jersey St. Econ.
Dist. Heating &
Cool.,
Trigen Trenton
Proj.,
BBB-* 5,640 6.20%, 12/1/10...... 5,381,350
New Jersey St. Hlth. Care
Facs. Fin. Auth. Rev.,
Columbus Hosp.,
Ba1 4,400 7.50%, 7/1/21, Ser.
A................. 4,422,396
Union Cnty. Utils.
Auth.,
Solid Waste Rev.,
A-* 1,000 7.20%, 6/15/14, Ser.
A................. 1,031,770
--------------
36,171,663
--------------
New Mexico--0.6%
Farmington New
Mexico Poll. Ctrl.
Rev.,
San Juan Proj.,
Ba2 $ 7,500 6.40%, 8/15/23, Ser.
A................. $ 6,737,100
--------------
New York--9.4%
Met. Trans. Auth.
Facs. Rev.,
F.G.I.C.,
Aaa 8,340 Zero Coupon, 7/1/13,
Ser. N............ 2,539,113
Nassau Cnty. Ind.
Dev. Agcy. Rev.,
S&S Incinerator
Jt. Venture Proj.,
NR 8,000 9.00%, 1/1/07....... 6,720,000
New York City Ind.
Dev. Agcy.,
Amer. Airlines
Inc.,
Baa2 3,320 8.00%, 7/1/20....... 3,474,280
Mesorah Publications Ltd.,
NR 1,968 10.25%, 3/1/19...... 2,175,211
New York City Mun.
Wtr. Fin. Auth.,
Wtr. & Swr. Sys.
Rev., M.B.I.A.,
Aaa 4,000 5.125%, 6/15/04,
Ser. B............ 3,899,560
New York City, Gen.
Oblig.,
Baa1 2,000 8.00%, 6/1/99, Ser.
B................. 2,218,240
Baa1 2,000 7.50%, 2/1/03, Ser.
B................. 2,211,740
Baa1 4,000 8.00%, 8/1/03, Ser.
D................. 4,549,080
Baa1 6,000 7.50%, 2/1/04, Ser.
B................. 6,603,780
Baa1 1,500 8.00%, 8/1/04, Ser.
D................. 1,686,930
Baa1 5,000 8.20%, 11/15/04,
Ser. F............ 5,700,800
Baa1 5,000 6.00%, 8/1/06....... 4,935,500
New York Hosp. Rev.,
Newark Wayne
Cmnty. Hosp.,
Inc.,
NR 5,450 7.60%, 9/1/15, Ser.
A................. 5,506,789
</TABLE>
-15- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL B0ND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
New York (cont'd)
New York St. Dorm.
Auth. Rev.,
City Univ.,
Baa1 $ 7,000 5.75%, 7/1/13, Ser.
A................. $ 6,500,690
New York St. Energy
Research & Dev.
Auth.,
Brooklyn Union Gas
Co.,
Aaa 2,000 8.533%, 7/8/26,
Ser. D,
M.B.I.A.@......... 1,655,000
New York St. Env.
Facs.
Corp., Occidental
Pet. Corp. Proj.,
Baa 2,375 5.70%, 9/1/28....... 2,051,478
New York St. Med. Hlth.
Care Facs. Fin. Auth. Rev.,
Mental Hlth. Svcs.,
Baa1 7,510 5.375%, 2/15/14..... 6,598,511
Baa1 15,000 5.25%, 2/15/19, Ser.
F................. 12,623,400
Aaa 6,250 5.25%, 2/15/21,
F.S.A............. 5,434,313
Baa1 2,215 5.25%, 8/15/23,
Ser. 1993 D....... 1,831,783
New York St. Mtge.
Agcy. Rev.,
Homeowner Mtge.
Aa 3,815 8.125%, 4/1/20, Ser. GG 4,087,734
New York St. Urban
Dev. Corp. Rev.,
Correctional
Facs.,
Baa1 2,000 5.50%, 1/1/14....... 1,791,740
Baa1 10,000 5.50%, 1/1/15....... 8,880,900
Port Auth. of New
York & New Jersey
Spec. Oblig.,
U.S. Air,
LaGuardia Airport,
NR $ 4,000 9.125%, 12/1/15..... $ 4,459,240
--------------
108,135,812
--------------
Ohio--0.5%
Montgomery Cnty.
Hlth. Care Facs.
Rev.,
Friendship Vlg.
Dayton Proj. B,
NR 4,500 9.25%, 2/1/16....... 4,432,635
Ohio Hsg. Fin.
Agcy.,
Sngl. Fam. Mtge.
Rev., G.N.M.A.
AAA* 1,535 8.25%, 12/15/19,
Ser. B............ 1,591,718
--------------
6,024,353
--------------
Oklahoma--1.1%
Tulsa Mun. Arpt.
Trust Rev., Amer.
Airlines, Inc.,
Baa2 13,000 7.375%, 12/1/20..... 13,035,360
--------------
Pennsylvania--6.4%
Allegheny Cnty.
Hosp. Dev. Auth.
Rev.,
West Penn. Hosp.
Hlth. Proj.,
NR 2,800 8.50%, 1/1/20....... 3,124,380
Berks Cnty. Ind.
Dev. Auth. Rev.,
Lutheran Home
Proj.,
NR 3,500 6.875%, 1/1/23...... 3,354,120
</TABLE>
-16- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL B0ND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
Pennsylvania (cont'd)
Berks Cnty. Mun.
Auth.
Rev., Adventist
Living Ctrs.
Proj.,
NR $ 367 11.00%,
12/1/15(D)(D)..... $ 80,842
Alvernia Coll.
Proj.,
NR 5,240 7.75%, 11/15/16..... 5,509,388
Bucks Cnty. Ind.
Dev. Auth. Rev.,
Mill Run Care,
NR 4,000 10.00%, 7/1/19...... 3,000,000
Chartiers Valley
Ind. & Coml. Dev.
Auth. Rev.,
Friendship
Village/
South Hills,
NR 3,750 9.50%, 8/15/18...... 4,184,437
Doylestown Hosp.
Auth. Rev., Pine
Run,
NR 1,180 7.20%, 7/1/23....... 1,209,406
Lancaster Cnty.
Solid Waste Mgmt.,
Res. Rec. Auth.
Sys. Rev.,
A 5,965 8.50%, 12/15/10,
Ser. A............ 6,586,613
Montgomery Cnty.
Redev. Auth.,
Multifamily Hsg.,
NR 10,000 6.50%, 7/1/25, Ser.
A................. 9,099,200
North Umberland
Cnty. Ind. Dev.
Auth. Rev.,
Roaring Creek
Wtr.,
NR 6,000 6.375%, 10/15/23.... 5,424,720
Pennsylvania Hsg.
Fin. Agcy.,
Sngl. Fam. Mtge.
Rev.,
Aa 3,460 8.15%, 10/1/21, Ser. 27 3,729,499
Aa 1,050 8.769%, 4/1/25@..... 925,313
Pennsylvania St.
Higher Edl. Facs.
Auth. Rev.,
Med. Coll. of
Pennsylvania,
Baa1 $ 5,200 8.375%, 3/1/11, Ser.
A................. $ 5,665,764
Philadelphia Gas
Wks. Rev.,
Aaa 4,800 7.70%, 6/15/21,
Ser. 13#.......... 5,535,936
Philadelphia Hosp. & Hgr.
Edl. Facs. Auth. Rev.,
Temple Univ. Hosp.,
Baa1 5,250 6.625%, 11/15/23, Ser. A 5,036,850
Philadelphia Mun. Auth. Rev.,
Criminal Justice Lease,
Ba 2,500 6.40%, 11/15/16,
Ser. 93B.......... 2,294,025
Shenango Valley
Hosp. Auth. Rev.,
Osteopathic Hosp.
Med. Ctr.,
BBB+* 4,900 7.875%, 4/1/10...... 5,211,444
Wilkes Barre Gen.
Mun. Auth. Coll.
Rev.,
Misericordia
Coll.,
NR 2,660 7.75%, 12/1/12, Ser.
B................. 2,770,842
NR 1,245 7.75%, 12/1/12, Ser.
A................. 1,305,345
--------------
74,048,124
--------------
Puerto Rico--1.9%
Puerto Rico Aqueduct
& Swr. Auth. Rev.,
Baa 3,500 7.875%, 7/1/17, Ser.
A................. 3,854,620
Puerto Rico Elec.
Pwr. Auth., Pwr.
Rev.
Refunding Bonds,
Baa1 7,375 6.125%, 7/1/09, Ser.
S................. 7,235,170
</TABLE>
-17- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL B0ND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
Puerto Rico (cont'd)
Puerto Rico Tel. Auth. Rev.,
M.B.I.A., Ser. I,
Aaa $ 6,500 7.671%, 1/25/07@.... $ 6,085,625
Aaa 6,150 7.989%, 1/16/15@.... 5,281,312
--------------
22,456,727
--------------
Rhode Island--1.6%
Rhode Island
Depositors Econ.
Protn. Corp.,
Sub. Gen. Oblig.,
NR 7,000 10.00%, 7/1/07, Ser.
B................. 7,612,500
Rhode Island Hsg. &
Mtge. Fin. Corp.,
Aa 5,000 6.40%, 10/1/24, Ser.
5................. 4,763,600
Homeownership
Opportunity,
A1 6,000 8.20%, 10/1/17, Ser.
1A................ 6,219,600
--------------
18,595,700
--------------
South Carolina--1.1%
Charleston Cnty.
Hosp. Facs. Rev.,
Baker Hosp.,
AAA* 3,100 9.25%, 10/1/11#..... 3,520,732
Lee Cnty. Ind. Dev.
Rev.,
Mid American
Waste System,
NR 5,450 7.00%, 9/15/13...... 5,292,168
So. Carolina St.
Hsg. Fin. & Dev.
Auth.,
Homeownership
Mtge.
Aa 4,345 7.75%, 7/1/22....... 4,476,480
--------------
13,289,380
--------------
South Dakota--0.5%
So. Dakota Econ.
Dev. Fin. Auth.,
Dakota Park,
NR $ 5,165 10.25%, 1/1/19...... $ 4,751,800
Lomar Dev. Co.
Proj.,
NR 1,300 10.25%, 8/1/08...... 1,383,954
--------------
6,135,754
--------------
Tennessee--1.3%
Knox Cnty. Hlth. &
Edl. Facs. Rev.,
Baptist Hlth.
Hosp.,
NR 7,525 8.50%, 4/15/04...... 8,057,017
Memphis Shelby Cnty.
Arpt. Auth.,
Spec. Facs. &
Proj. Rev.,
Federal Express,
Baa3 7,000 6.20%, 7/1/14....... 6,391,770
--------------
14,448,787
--------------
Texas--2.8%
Beaumont Hsg. Fin.
Corp., Sngl. Fam.
Mtge. Rev.,
A 2,460 9.20%, 3/1/12....... 2,689,838
Bell Cnty. Hlth.
Facs. Dev. Corp.,
Adventist
Living Tech.,
Inc.,
NR 2,500 10.50%, 6/15/18,
Ser. A............ 2,450,000
NR 3,040 10.50%, 6/15/18,
Ser. A............ 2,979,200
Harris Cnty. Toll
Rd.,
Aaa 7,000 5.00%, 8/15/16,
A.M.B.A.C......... 5,939,360
Port Corpus Christi
Ind.
Dev. Corp., Valero
Refining & Mfg.
Co.,
Baa3 1,300 10.25%, 6/1/17, Ser.
A................. 1,465,139
</TABLE>
-18- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL B0ND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<C> <C> <S> <C>
Texas (cont'd)
Retama Dev. Corp.,
Spec. Fac., Retama
Park Racetrack,
NR $ 7,500 8.75%, 12/15/18..... $ 7,443,750
Tarrant Cnty. Hlth.
Facs.
Dev. Corp., Rev.,
3927 Fndtn. Proj.,
NR 5,000 10.25%, 9/1/19...... 5,408,200
Texas St. Mun. Pwr.
Agcy. Rev.,
M.B.I.A.
Aaa 15,000 Zero Coupon,
9/1/15............ 3,752,400
--------------
32,127,887
--------------
U. S. Virgin Islands--0.7%
Virgin Islands
Terr.,
Hugo Ins. Claims
Fund Proj.,
NR 2,305 7.75%, 10/1/06, Ser.
91................ 2,544,098
Virgin Islands Wtr. & Pwr. Auth.,
Wtr. Sys. Rev.,
NR 4,600 8.50%, 1/1/10, Ser.
A................. 5,100,388
--------------
7,644,486
--------------
Utah--0.3%
Intermountain Pwr.
Agcy.,
Pwr. Sup. Rev.,
Aa 4,500 7.773%, 7/1/21@..... 3,543,750
--------------
Virginia--0.5%
West Point Ind. Dev. Auth.,
Chesapeake Corp.,
Baa3 5,750 6.25%, 3/1/19....... 5,458,187
--------------
Washington--2.8%
Washington St. Pub.
Pwr. Sup. Sys.
Rev.,
Nuclear Proj. No.
1,
Aa 5,000 7.25%, 7/1/09, Ser.
B(D).............. 5,484,850
Nuclear Proj. No. 2,
Aa 5,000 6.00%, 7/1/07....... 4,945,750
Aa 5,000 5.375%, 7/1/11...... 4,446,250
Nuclear Proj. No. 3,
Aa $ 7,500 7.25%, 7/1/15,
Ser. B#........... $ 8,370,000
Aa 10,000 Zero Coupon, 7/1/16,
Ser. C............ 2,184,300
Aa 5,000 7.125%, 7/1/16, Ser.
B(D).............. 5,450,700
Aa 5,000 Zero Coupon, 7/1/17,
Ser C............. 1,019,750
--------------
31,901,600
--------------
West Virginia--1.6%
So. Charleston Ind.
Dev.
Rev., Union
Carbide
Chem. & Plastics
Co.,
Baa2 2,450 8.00%, 8/1/20....... 2,645,216
Weirton Poll. Ctrl.
Rev.,
Steel Proj.,
B2 4,000 8.625%, 11/1/14..... 4,089,520
West Virginia St.
Hsg. Dev. Auth.,
Fund Hsg. Fin.,
A1 8,030 7.95%, 5/1/17, Ser.
A................. 8,554,921
West Virginia St.
Pkwys. Econ. Dev.
& Tourism Auth.,
F.G.I.C.
Aaa 3,250 8.595%, 5/16/19@.... 2,868,125
--------------
18,157,782
--------------
Total long-term
investments
(cost
$1,117,026,880)... 1,128,280,628
--------------
Total Investments--97.8%
(cost
$1,117,026,880;
Note 4)........... 1,128,280,628
Other assets in
excess of
liabilities--2.2%... 25,849,783
--------------
Net Assets--100%.... $1,154,130,411
--------------
--------------
</TABLE>
-19- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL B0ND FUND
HIGH YIELD SERIES
(a) The following abbreviations are used in portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation
F.G.I.C.--Financial Guaranty Insurance Company
F.S.A.--Financial Securities Assurance
G.N.M.A.--Government National Mortgage Association
M.B.I.A.--Municipal Bond Insurance Association
# Prerefunded issues are secured by escrowed cash and direct U.S.
guaranteed
obligations.
(D) Pledged as initial margin on financial futures contract.
(D)(D) Issuer in default, non-income producing security.
@ Inverse floating rate bond. The coupon is inversely indexed to
a floating
interest rate. The rate shown is the rate at period end.
* Standard & Poor's Rating.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Prospectus contains a description of Moody's and
Standard &
Poor's ratings.
-20- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Assets
April 30, 1994
--------------
<S>
<C>
Investments, at value (cost
$1,117,026,880).............................................
$1,128,280,628
Accrued interest
receivable.......................................................
...... 26,124,015
Receivable for investments
sold.........................................................
15,783,103
Receivable for Fund shares
sold.........................................................
2,005,954
Due from broker-variation
margin........................................................
49,988
Deferred
expenses.........................................................
.............. 38,022
--------------
Total
assets...........................................................
............. 1,172,281,710
--------------
Liabilities
Bank
overdraft........................................................
.................. 686,280
Payable for investments
purchased.......................................................
12,160,322
Payable for Fund shares
reacquired......................................................
2,175,744
Dividends
payable..........................................................
............. 2,015,284
Management fee
payable..........................................................
........ 477,460
Distribution fee
payable..........................................................
...... 459,272
Accrued
expenses.........................................................
............... 176,937
--------------
Total
liabilities......................................................
............. 18,151,299
--------------
Net
Assets...........................................................
................... $1,154,130,411
--------------
--------------
Net assets were comprised of:
Shares of beneficial interest, at
par................................................. $
1,074,787
Paid-in capital in excess of
par......................................................
1,146,471,811
--------------
1,147,546,598
Undistributed net investment
income...................................................
324,000
Accumulated net realized
loss.........................................................
(6,097,060)
Net unrealized
appreciation.....................................................
...... 12,356,873
--------------
Net assets, April 30,
1994............................................................
$1,154,130,411
--------------
--------------
Class A:
Net asset value and redemption price per share
($54,490,530 / 5,075,702 shares of beneficial interest issued
and outstanding)...... $10.74
Maximum sales charge (4.5% of offering
price)......................................... .51
--------------
Maximum offering price to
public......................................................
$11.25
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($1,099,639,881 / 102,403,026 shares of beneficial interest
issued and
outstanding).....................................................
................... $10.74
--------------
--------------
</TABLE>
See Notes to Financial Statements.
-21-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
April 30,
Net Investment Income 1994
-----------
<S> <C>
Income
Interest and discount earned......... $84,299,967
-----------
Expenses
Management fee....................... 5,928,174
Distribution fee--Class A............ 52,981
Distribution fee--Class B............ 5,663,266
Transfer agent's fees and expenses... 520,000
Custodian's fees and expenses........ 254,000
Registration fees.................... 120,000
Reports to shareholders.............. 60,000
Insurance expense.................... 30,000
Legal fees........................... 25,000
Audit fee............................ 16,500
Trustees' fees....................... 16,500
Miscellaneous........................ 6,302
-----------
Total expenses....................... 12,692,723
-----------
Net investment income.................. 71,607,244
-----------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions.............. (6,503,652)
Financial futures contracts.......... 822,975
-----------
(5,680,677)
-----------
Net change in unrealized appreciation of:
Investments.......................... (40,476,217)
Financial futures contracts.......... 1,103,125
-----------
(39,373,092)
-----------
Net loss on investments................ (45,053,769)
-----------
Net Increase in Net Assets
Resulting from Operations.............. $26,553,475
-----------
-----------
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended April 30,
Increase (Decrease) -------------------------------
in Net Assets 1994 1993
-------------- --------------
<S> <C> <C>
Operations
Net investment
income............. $ 71,607,244 $ 61,700,645
Net realized gain
(loss) on
investment
transactions....... (5,680,677) 3,440,013
Net change in
unrealized
appreciation/depreciation
of investments..... (39,373,092) 34,000,369
-------------- --------------
Net increase in net
assets
resulting from
operations......... 26,553,475 99,141,027
-------------- --------------
Dividends and distributions (Note 1)
Dividends to
shareholders from
net investment
income
Class A............ (3,401,705) (2,230,916)
Class B............ (68,205,539) (59,469,729)
-------------- --------------
(71,607,244) (61,700,645)
-------------- --------------
Distributions to
shareholders from
net realized gains
Class A............ (35,027) --
Class B............ (724,132) --
-------------- --------------
(759,159) --
-------------- --------------
Fund share transactions (Note 5)
Net proceeds from
shares
issued............. 307,757,433 307,450,090
Net asset value of
shares
issued to
shareholders in
reinvestment of
dividends and
distributions...... 32,076,014 26,753,882
Cost of shares
reacquired......... (211,899,598) (128,197,926)
-------------- --------------
Increase in net
assets from
Fund share
transactions....... 127,933,849 206,006,046
-------------- --------------
Total increase......... 82,120,921 243,446,428
Net Assets
Beginning of year...... 1,072,009,490 828,563,062
-------------- --------------
End of year............ $1,154,130,411 $1,072,009,490
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial
Statements.
-22-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES April 30, 1994
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<S> <C> <C> <C>
LONG-TERM INVESTMENTS--95.3%
Alabama--1.1%
Huntsville Solid
Waste Disp. Auth.,
Aaa $ 2,000 7.00%, 10/1/08,
F.G.I.C............ $ 2,143,580
Mobile Wtr. & Swr.
Rev.,
Aaa 4,840 5.00%, 1/1/13,
A.M.B.A.C.......... 4,221,690
Univ. Alabama Rev.,
Hosp. Birmingham,
Aaa 2,500 5.00%, 10/1/14,
M.B.I.A............ 2,139,550
------------
8,504,820
------------
Alaska--1.0%
Alaska St. Energy
Auth. Pwr.
Rev., Bradley Lake
Hydro, A.M.B.A.C.,
Aaa 2,000 7.25%, 7/1/16, 1st
Ser................ 2,181,900
Anchorage Hosp. Rev.,
Sisters of
Providence,
Aaa 5,000 7.125%, 10/1/05,
A.M.B.A.C.......... 5,466,400
------------
7,648,300
------------
Arizona--3.3%
Chandler, Gen.
Oblig.,
Aaa 2,000 4.375%, 7/1/13,
F.G.I.C............ 1,599,460
Maricopa Cnty. Ind.
Dev. Auth. Rev.,
Hosp. Fac., John C.
Lincoln Hosp.,
F.S.A.,
Aaa 2,740 7.00%, 12/1/00....... 2,997,588
Aaa 2,250 7.50%, 12/1/13....... 2,494,215
Pima Cnty. Ind. Dev. Auth. Rev.,
Tucson Elec. Pwr. Co.,
Aaa 14,000 7.25%, 7/15/10,
F.S.A.............. 14,918,540
Tucson, Gen. Oblig.,
Aaa $ 3,140 7.625%, 7/1/14,
F.G.I.C............ $ 3,680,802
------------
25,690,605
------------
California--5.4%
Contra Costa Wtr.
Dist.,
Wtr. Rev.,
A.M.B.A.C.,
Aaa 1,455 6.25%, 10/1/12, Ser.
E.................. 1,488,596
Rancho Wtr. Dist.
Fin. Auth. Rev.,
Aaa 5,000 5.00%, 8/15/14,
A.M.B.A.C.......... 4,276,000
Sacramento Mun. Util. Dist.,
Elec. Rev., M.B.I.A.,
Aaa 3,250 5.75%, 8/15/13, Ser.
A.................. 3,075,897
San Diego Cnty. Wtr.
Auth.
Wtr. Rev., Cert. of
Part.,
Aaa 11,600 5.559%, 4/26/06,
F.G.I.C............ 11,371,480
San Jose Redev.,
Tax Allocation,
M.B.I.A.,
Aaa 3,050 6.00%, 8/1/07........ 3,091,419
Aaa 4,340 6.00%, 8/1/08........ 4,385,093
Aaa 3,250 6.00%, 8/1/09........ 3,272,230
Aaa 5,000 6.00%, 8/1/11........ 4,983,450
Santa Monica Wst. Wtr. Entrpr.,
Hyperion Proj.,
Aaa 3,225 4.75%, 1/1/12,
A.M.B.A.C.......... 2,717,643
West & Central Basin
Fin. Auth. Rev.,
Central Basin
Proj.,
Aaa 3,840 5.00%, 8/1/13,
F.G.I.C............ 3,310,272
------------
41,972,080
------------
Colorado--0.4%
Jefferson Cnty. Sngl.
Fam. Mtge. Rev.,
M.B.I.A.,
Aaa 1,280 8.875%, 10/1/13, Ser.
A.................. 1,372,774
</TABLE>
-23- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<S> <C> <C> <C>
Colorado (cont'd)
Met. Wst. Wtr.
Reclamation Dist.,
Gross Rev.,
M.B.I.A.,
Aaa $ 2,300 4.75%, 4/1/12, Ser.
B.................. $ 1,958,680
------------
3,331,454
------------
Delaware--1.7%
Delaware Econ. Dev.
Auth. Rev.,
Delmarva
Pwr. & Lt.,
M.B.I.A.,
Aaa 5,000 7.60%, 3/1/20, Ser.
A.................. 5,557,450
Wilmington, Gen. Oblig., F.G.I.C.,
Aaa 5,500 5.00%, 7/1/08........ 4,994,110
Aaa 2,500 5.10%, 7/1/10, Ser.
B.................. 2,249,750
------------
12,801,310
------------
District Of Columbia--2.2%
Dist. of Columbia Met.
Area Transit Auth.
Gross Rev., F.G.I.C.,
Aaa 2,400 6.00%, 7/1/09........ 2,421,168
Aaa 1,500 6.00%, 7/1/10........ 1,504,470
Aaa 5,000 5.25%, 7/1/14........ 4,420,200
Dist. of Columbia, Gen. Oblig.,
Aaa 5,550 7.40%, 6/1/05, Ser.
B, F.S.A.#......... 6,258,013
Aaa 2,500 6.75%, 6/1/08, Ser.
A, M.B.I.A......... 2,621,825
------------
17,225,676
------------
Florida--3.4%
Gulf Breeze Local
Gov't. Loan Proj.,
F.G.I.C.,
Aaa 1,500 8.00%, 12/1/15, Ser.
85B................ 1,688,505
Hillsborough Cnty.
Hosp. Auth. Rev.,
Tampa Gen. Hosp.
Proj.,
Aaa 8,000 6.375%, 10/1/13,
F.S.A.............. 8,148,800
Orange Cnty. Solid
Waste Fac. Rev.,
Aaa $ 3,000 6.25%, 10/1/12,
F.G.I.C............ $ 3,034,140
Orlando & Orange Cnty.
Expwy. Auth. Rev., F.G.I.C.,
Aaa 5,000 6.50%, 7/1/10........ 5,277,200
Aaa 2,550 6.50%, 7/1/11........ 2,685,201
Univ. Cmnty. Hosp.
Inc.,
Hosp. Rev.,
Aaa 5,000 7.375%, 9/1/07,
F.S.A.............. 5,649,700
------------
26,483,546
------------
Georgia--3.7%
Atlanta Arpt. Facs.
Rev., A.M.B.A.C.,
Aaa 2,000 6.50%, 1/1/06........ 2,134,800
Aaa 2,000 6.50%, 1/1/09........ 2,126,640
Aaa 2,000 6.50%, 1/1/10........ 2,110,880
De Kalb Cnty. Hsg.
Auth.,
Sngl. Fam. Mtge.
Rev., G.N.M.A.,
AAA* 3,075 7.70%, 2/1/24........ 3,187,545
Fulton Cnty. Hosp. Auth. Rev.,
Northside Hosp.,
Aaa 2,790 5.375%, 10/1/12,
M.B.I.A............ 2,527,740
Georgia St., Gen.
Oblig., Ser. F,
Aaa 10,000 6.50%, 12/1/05....... 10,983,100
Aaa 5,000 6.50%, 12/1/09....... 5,355,600
------------
28,426,305
------------
Guam--0.4%
Guam Gov't. Ltd.
Oblig. Hwy. Rev.,
C.G.I.C.
Aaa* 3,000 6.30%, 5/1/12, Ser.
A,................. 3,055,620
------------
</TABLE>
-24- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<S> <C> <C> <C>
Hawaii--1.1%
Hawaii Arpts. Sys.
Rev.,
F.G.I.C., 2nd Ser.
90,
Aaa $ 7,750 7.50%, 7/1/20........ $ 8,436,340
------------
Illinois--4.7%
Chicago O'Hare Int'l.
Arpt.,
Spec. Fac. Rev., Ser.
C, M.B.I.A.,
Aaa 2,490 5.75%, 1/1/09........ 2,427,177
Aaa 5,950 5.00%, 1/1/11........ 5,256,290
Chicago Residential
Mtge. Rev.,
M.B.I.A.,
Aaa 9,000 Zero Coupon, 10/1/09,
Ser. B............. 3,114,630
Chicago Sch. Fin.
Auth., M.B.I.A.,
Aaa 5,000 5.00%, 6/1/08, Ser.
A.................. 4,503,250
City of Chicago,
Ser. B, A.M.B.A.C.,
Aaa 7,890 5.00%, 1/1/09........ 7,098,160
Aaa 6,260 5.00%, 1/1/10........ 5,582,355
Onterie Ctr. Hsg.
Fin. Corp. Mtge.
Rev.,
Ser. A, M.B.I.A.,
Aaa 1,575 7.00%, 7/1/12........ 1,617,635
Aaa 6,400 7.05%, 7/1/27........ 6,546,112
------------
36,145,609
------------
Indiana--2.9%
Indianapolis Arpt. Auth. Rev.,
Aaa 2,450 9.00%, 7/1/15,
M.B.I.A............ 2,719,941
Lake Central Multi
Dist. Sch. Bldg.,
First Mtge.,
Aaa 3,000 6.50%, 1/15/14,
M.B.I.A............ 3,044,310
Marion Cnty. Hosp.
Auth. Facs. Rev.,
Aaa $ 8,500 8.625%, 10/1/12,
A.M.B.A.C.......... $ 9,848,100
Rockport Poll. Ctrl.
Rev.,
Ind. & Mich. Elec.
Co., B.I.G.,
Aaa 6,000 9.25%, 8/1/14, Ser.
A(D)............... 6,489,240
------------
22,101,591
------------
Kansas--0.8%
Kansas City Util.
Sys. Rev.,
Aaa 3,000 6.25%, 9/1/14,
F.G.I.C............ 2,999,640
Sedgwick Cnty. Mtge.
Loan Rev.,
A.M.B.A.C.,
Aaa 2,915 7.80%, 6/1/22, Ser.
B.................. 3,020,057
------------
6,019,697
------------
Kentucky--0.7%
Kentucky Hsg. Corp.
Rev., F.H.A.,
Aaa 2,765 7.45%, 1/1/23, Ser.
D.................. 2,859,065
Louisville & Jefferson Cnty.
Regl. Arpt. Auth., M.B.I.A.,
Aaa 2,000 8.375%, 7/1/07, Ser.
A.................. 2,231,600
------------
5,090,665
------------
Louisiana--0.7%
Jefferson Parish
Sales Tax Dist.,
F.G.I.C.,
Aaa 5,000 6.75%, 12/1/06, Ser.
A.................. 5,324,300
------------
Maryland--0.9%
Baltimore Cert. of
Part.,
Pension Funding, M.B.I.A.,
Aaa 2,000 7.25%, 4/1/16, Ser.
A#................. 2,235,000
</TABLE>
-25- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<S> <C> <C> <C>
Maryland (cont'd)
Prince Georges Cnty.,
Cons. Pub. Impvt.,
Aaa $ 4,745 4.80%, 3/15/08,
M.B.I.A............ $ 4,292,327
------------
6,527,327
------------
Massachusetts--2.2%
Boston Wtr. & Swr.
Auth., F.G.I.C.,
Ser. A,
Aaa 3,500 7.10%, 11/1/19#...... 3,885,385
Mass. Bay Trans.
Auth.,
Gen. Trans.,
M.B.I.A.,
Aaa 4,000 5.50%, 3/1/09, Ser.
A.................. 3,835,200
Mass. St. Hlth. &
Edl. Facs. Auth.
Rev.,
Fallon Hlthcare,
C.G.I.C.,
Aaa 3,000 6.875%, 6/1/11, Ser.
A.................. 3,162,300
Mass. Gen. Hosp,
A.M.B.A.C.,
Aaa 1,500 6.25%, 7/1/12, Ser.
F.................. 1,503,045
Mass. St. Hsg. Fin.
Agcy.,
Hsg. Rev., B.I.G.,
Aaa 3,550 7.75%, 12/1/19, Ser.
A.................. 3,703,182
Mass. St. Mun.
Wholesale Elec.
Co.,
Aaa 1,000 5.00%, 7/1/13, Ser.
B.................. 866,390
------------
16,955,502
------------
Michigan--4.1%
Holland Sch. Dist., A.M.B.A.C.,
Aaa 4,000 Zero Coupon,
5/1/12............. 1,253,360
Michigan St. Bldg. Auth. Rev.,
A.M.B.A.C.,
Aaa 8,735 6.00%, 10/1/09, Ser.
II................. 8,755,178
Michigan St. Hosp.
Fin. Auth. Rev.,
Mid Michigan,
Aaa 2,350 7.50%, 6/1/15,
M.B.I.A............ 2,561,453
Michigan St. Hsg.
Dev. Auth.,
F.G.I.C.,
Aaa $ 1,500 7.70%, 7/1/18, Ser.
A.................. $ 1,590,555
Monroe Cnty. Poll. Ctrl. Rev.,
Detroit Edison Co. Proj. 1,
Aaa 8,000 7.65%, 9/1/20,
F.G.I.C............ 8,859,040
Detroit Edison Co.
Proj., A.M.B.A.C.,
Aaa 3,250 7.30%, 9/1/19, Ser.
I.................. 3,558,295
Saginaw Hosp. Fin.
Auth. Hosp. Rev.,
St. Luke's Hosp.,
M.B.I.A.,
Aaa 4,000 6.50%, 7/1/11, Ser.
C.................. 4,110,640
Wayne Charter Cnty. Arpt. Rev.,
Aaa 1,000 5.55%, 12/1/04,
M.B.I.A............ 993,620
------------
31,682,141
------------
Mississipi--1.0%
Harrison Cnty.
Wastewater Mgmt.
Dist. Rev.,
Aaa 2,400 6.50%, 2/1/06,
F.G.I.C............ 2,512,104
Mississippi Hosp.
Equip. & Facs.
Auth. Rev.,
Baptist Med. Ctr.,
Aaa 2,000 7.40%, 5/1/07,
M.B.I.A............ 2,177,000
Mississippi Hsg. Fin.
Corp.,
Sngl. Fam. Mtge.
Rev., F.G.I.C.,
Aaa 2,595 7.80%, 10/15/16, Ser.
A.................. 2,666,726
------------
7,355,830
------------
Missouri--1.9%
Missouri St. Hlth. & Edl.
Facs. Auth. Rev., M.B.I.A.,
Lester E. Cox Med. Ctr.,
Aaa 2,000 5.25%, 6/1/15, Ser.
I.................. 1,762,980
SSM Healthcare,
Aaa 4,250 6.25%, 6/1/16, Ser.
AA................. 4,271,718
St. Lukes Hlth. Sys.,
Aaa 3,000 5.10%, 11/15/13...... 2,647,590
</TABLE>
-26- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<S> <C> <C> <C>
Missouri (cont'd)
Sikeston Elec. Auth.
Rev., M.B.I.A.,
Aaa $ 6,000 6.25%, 6/1/12, Ser.
A.................. $ 6,098,280
------------
14,780,568
------------
Montana--1.4%
Forsyth Poll. Ctrl.
Rev.,
Puget Sound Pwr. &
Lt. Co.,
A.M.B.A.C.,
Aaa 2,000 7.05%, 8/1/21, Ser.
A.................. 2,144,280
Washington Wtr. Pwr. Proj.,
Aaa 8,000 7.125%, 12/1/13,
M.B.I.A.(D)........ 8,591,600
------------
10,735,880
------------
Nebraska--0.9%
Nebraska Invest. Fin.
Auth., G.N.M.A.,
Sngl. Fam. Mtge.
Rev.,
Aaa 1,980 8.00%, 7/15/17, Ser.
B, F.G.I.C......... 2,070,268
Aaa 4,825 8.125%, 8/15/38, Ser.
I, M.B.I.A......... 5,009,894
------------
7,080,162
------------
Nevada--0.6%
Clark Cnty. Arpt.
Auth.,
Visitors Bldg.,
Aaa 4,230 6.90%, 6/1/07,
F.G.I.C.#.......... 4,627,958
------------
New Jersey--5.8%
Garfield Sch. Dist.,
Cert. of Part.,
Wtr. Impvt. Dist.
No. 31,
Aaa 3,150 7.65%, 6/1/08,
B.I.G.............. 3,460,401
Jersey City Swr.
Auth., A.M.B.A.C.,
Aaa 2,585 6.00%, 1/1/10........ 2,592,548
Aaa 4,255 6.25%, 1/1/14........ 4,386,352
Lacey Mun. Utils.
Auth., Wtr. Rev.,
Aaa $ 2,325 6.00%, 12/1/19,
B.I.G.#............ $ 2,466,453
New Jersey Hlth. Care
Facs. Fin. Auth.
Rev.,
Burdett Tonin Meml.
Hosp., F.G.I.C.,
Aaa 1,200 6.50%, 7/1/12, Ser.
D.................. 1,233,192
Hackensack Med. Ctr.,
F.G.I.C.,
Aaa 2,000 6.625%, 7/1/11....... 2,072,680
Aaa 5,000 6.625%, 7/1/17....... 5,156,950
Irvington Gen. Hosp.,
Aaa 2,500 9.625%, 8/1/25,
M.B.I.A............ 2,717,150
St. Peters Med. Ctr.,
M.B.I.A.,
Aaa 10,000 5.00%, 7/1/16, Ser.
E.................. 8,595,700
New Jersey St. Hsg. &
Mtge. Fin. Agcy.
Rev., M.B.I.A.,
Ser. B,
Aaa 3,840 7.90%, 10/1/22....... 4,006,848
New Jersey St. Transit Corp.,
Cert. of Part.,
Aaa 5,000 6.50%, 10/1/16,
F.S.A.............. 5,181,500
No. Jersey Dist. Wtr. Supply
Comm., Wanaque
So. Proj., M.B.I.A.,
Aaa 3,000 6.00%, 7/1/21........ 2,925,150
------------
44,794,924
------------
New Mexico--0.8%
Socorro Hosp. Sys.
Rev.,
Cmnty. Hlth. Svcs.,
M.B.I.A.,
Aaa 5,315 9.25%, 8/1/12, Ser.
A.................. 5,764,171
------------
</TABLE>
-27- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<S> <C> <C> <C>
New York--4.2%
Erie Cnty. Wtr. Auth.
Rev., A.M.B.A.C.,
Aaa $ 770 Zero Coupon,
12/1/17............ $ 142,958
Islip Res. Rec.,
Aaa 1,750 7.20%, 7/1/10, Ser.
B.................. 1,936,358
Met. Trans. Auth.
Facs. Rev.,
F.G.I.C.,
Aaa 1,500 6.375%, 7/1/10, Ser.
J.................. 1,541,040
New York City Mun.
Wtr. Fin. Auth.,
Aaa 3,750 5.50%, 6/15/15, Ser.
F, M.B.I.A......... 3,393,787
New York St. Energy
Res. & Dev. Auth.,
Poll. Ctrl. Rev.,
Aaa 4,000 7.375%, 10/1/14,
F.G.I.C............ 4,444,680
New York St. Hsg.
Fin. Agcy. Rev.,
Multifamily Hsg.,
Ser. A,
Aaa 2,965 7.45%, 11/1/28,
A.M.B.A.C.......... 3,167,954
New York St. Pwr.
Auth., M.B.I.A.,
Aaa 7,155 7.875%, 1/1/13, Ser.
V.................. 7,894,899
Suffolk Cnty. Ind. Dev. Agcy.,
Aaa 5,000 6.00%, 2/1/08,
F.G.I.C............ 5,036,650
Suffolk Cnty. Wtr.
Auth. Waterworks
Rev.,
Aaa 5,165 6.00%, 6/1/14,
M.B.I.A............ 5,058,498
------------
32,616,824
------------
North Carolina--2.9%
North Carolina Mun.
Pwr. Agcy. Elec.
Rev.,
No. 1 Catawba,
M.B.I.A.,
Aaa 7,500 6.00%, 1/1/11........ 7,499,100
North Carolina St., Gen. Oblig.,
Cap. Impvt., Ser. A,
Aaa $15,000 4.75%, 2/1/12........ $ 13,026,750
North Carolina St., Gen. Oblig.,
Cap. Impvt., Ser. A,
Aaa 2,500 4.75%, 2/1/13........ 2,153,325
------------
22,679,175
------------
Ohio--2.5%
Cleveland Arpt. Sys.
Rev., M.B.I.A.,
Aaa 1,500 7.40%, 1/1/20, Ser.
90A................ 1,639,920
Cleveland Waterworks Rev.,
Aaa 2,500 6.25%, 1/1/15........ 2,517,750
Franklin Cnty. Hosp.
Rev.,
Holy Cross Hlth.,
A.M.B.A.C.,
Aaa 2,000 7.65%, 6/1/10, Ser.
B#................. 2,280,940
Hamilton Cnty. Wtr. Sys. Rev.,
Aaa 4,500 5.00%, 12/1/14,
F.G.I.C............ 3,900,015
Hamilton Elec. Rev.,
Ser. A,
F.G.I.C.,
Aaa 5,085 6.00%, 10/15/12...... 5,088,661
Aaa 2,750 6.00%, 10/15/23...... 2,668,628
Montgomery Cnty. Hlth. Facs. Rev.,
Sisters of Charity Hlth. Care,
Aaa 1,500 6.25%, 5/15/14,
A.M.B.A.C.......... 1,513,035
------------
19,608,949
------------
Oklahoma--1.9%
Oklahoma St. Tpke.
Auth. Rev.,
M.B.I.A.,
Aaa 14,250 6.25%, 1/1/22, Ser.
C.................. 14,365,568
------------
Oregon--0.8%
Oregon St.,
Dept. Trans. Rev.,
Aaa 5,610 7.00%, 6/1/03,
M.B.I.A............ 6,251,896
------------
</TABLE>
-28- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<S> <C> <C> <C>
Pennsylvania--5.1%
Allegheny Cnty. Arpt.
Rev.,
Pittsburgh Int'l.
Arpt., M.B.I.A.,
Aaa $ 4,800 8.25%, 1/1/16, Ser.
C.................. $ 5,372,928
North Umberland Cnty. Lease Auth.
Rev.,
Correctional Facs., M.B.I.A.,
Aaa 7,500 Zero Coupon,
10/15/10........... 2,736,225
Pennsylvania St.
Cert. of Part.,
A.M.B.A.C.,
Aaa 4,275 5.00%, 7/1/15, Ser.
A.................. 3,638,581
Philadelphia Arpt.
Sys. Rev.,
Aaa 6,750 9.00%, 6/15/15,
A.M.B.A.C.......... 7,280,887
Philadelphia Mun. Auth. Rev.,
Criminal Justice Ctr.,
M.B.I.A.,
Aaa 3,000 6.90%, 11/15/03, Ser.
A.................. 3,329,640
Philadelphia, Sch.
Dist.,
M.B.I.A.#
Aaa 2,000 7.00%, 7/1/05, Ser.
B.................. 2,182,940
Aaa 4,200 5.65%, 7/1/06, Ser.
A.................. 4,174,044
Philadelphia Wtr. &
Waste Auth. Rev.,
M.B.I.A.,
Aaa 5,000 5.625%, 6/15/08...... 4,911,250
Pittsburgh Gen. Oblig., F.G.I.C.,
Aaa 5,000 7.00%, 3/1/06, Ser.
B.................. 5,343,900
------------
38,970,395
------------
Puerto Rico--1.9%
Puerto Rico Tel. Auth. Rev.,
M.B.I.A., Ser. I.,
Aaa 8,200 5.25%, 1/25/07....... 7,902,094
Aaa 7,600 5.45%, 1/16/15....... 7,065,112
------------
14,967,206
------------
Rhode Island--3.2%
Conv. Ctr. Auth. Rev., M.B.I.A.,
Aaa 12,000 5.25%, 5/15/15, Ser.
B.................. 10,643,640
Pawtucket, Gen, Oblig., F.G.I.C.,
Aaa $ 3,215 7.00%, 4/15/02....... $ 3,531,099
Aaa 3,625 7.00%, 4/15/03....... 3,989,385
Rhode Island Hsg. &
Mtge. Fin. Corp.,
M.B.I.A.,
Aaa 6,500 7.875%, 10/1/22...... 6,786,065
------------
24,950,189
------------
South Carolina--0.3%
Berkeley Cnty. Wtr. & Swr. Rev.,
Aaa 2,500 6.50%, 6/1/06,
M.B.I.A............ 2,622,100
------------
Tennessee--1.9%
Clarksville Wtr. Swr.
& Gas Rev.,
Aaa 1,500 6.25%, 2/1/18,
M.B.I.A............ 1,497,975
Knox Cnty. Hlth. Edl.
Hosp. Facs. Rev.,
Aaa 5,090 5.75%, 1/1/14, Ser.
C, M.B.I.A......... 4,820,077
Tennessee Hsg. Dev.
Agcy.,
Aaa 7,950 7.65%, 7/1/20,
B.I.G.............. 8,246,297
------------
14,564,349
------------
Texas--11.1%
Austin Util. Sys.
Rev.,
Aaa 3,250 7.25%, 11/15/03,
Ser. B, F.G.I.C.... 3,569,280
Aaa 5,750 Zero Coupon,
11/15/09,
A.M.B.A.C.......... 2,133,710
Aaa 5,000 6.50%, 5/15/11,
A.M.B.A.C.......... 5,144,200
Aaa 5,000 8.00%, 11/15/16,
Ser. A, B.I.G.#.... 5,794,400
Brazos River Auth.
Rev.,
Houston Lt. & Pwr.,
Aaa 5,000 6.70%, 3/1/17, Ser.
A, A.M.B.A.C....... 5,144,450
</TABLE>
-29- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<S> <C> <C> <C>
Texas (cont'd)
Aaa $ 1,000 7.20%, 12/1/18, Ser.
B, F.G.I.C......... $ 1,088,480
Corpus Christi Hsg. Fin. Corp.,
Sngl. Fam. Mtge., M.B.I.A.,
Aaa 2,705 7.70%, 7/1/11, Ser.
A.................. 2,862,945
Harris Cnty. Toll
Rd.,
Aaa 10,290 8.00%, 8/15/11,
F.G.I.C............ 12,151,461
Aaa 10,000 5.00%, 8/15/16,
A.M.B.A.C.......... 8,484,800
Houston Arpt. Sys.
Rev.,
Aaa 3,900 7.20%, 7/1/13........ 4,457,466
Houston Wtr. & Swr. Sys. Rev.,
Aaa 1,000 6.375%, 12/1/17, Ser.
C, A.M.B.A.C....... 999,920
Matagorda Cnty. Navigation
Poll Ctrl. Rev.,
Dist. No. 1,
Aaa 2,300 7.50%, 12/15/14,
A.M.B.A.C.......... 2,565,903
Northwest Indpt. Sch. Dist.,
Aaa 4,890 Zero Coupon, 8/15/12,
A.M.B.A.C.......... 1,503,919
Plano Indpt. Sch.
Dist., Gen. Oblig.,
Aaa 2,375 8.50%, 2/15/03....... 2,860,711
Port Arthur Nav.
Dist.,
Gen. Oblig. Bonds,
Aaa 3,200 6.00%, 3/1/15,
A.M.B.A.C.......... 3,107,200
Tarrant Cnty. Wtr. Ctrl. & Imp.,
Aaa 1,500 4.75%, 3/1/12,
A.M.B.A.C.......... 1,277,925
Texas St. Mun. Pwr. Agcy. Rev.,
Aaa 3,960 6.75%, 9/1/12, Ser.
A, A.M.B.A.C....... 4,117,846
Aaa 9,000 Zero Coupon, 9/1/13,
M.B.I.A............ 2,573,190
Aaa 5,000 5.00%, 9/1/14,
F.G.I.C............ 4,285,500
Texas St. Pub. Fin.
Auth. Bldg. Rev.,
M.B.I.A.,
Aaa $ 6,900 Zero Coupon,
2/1/14............. $ 1,909,299
United Indpt. Sch.
Dist., Ser. A,
Aaa 2,225 4.375%, 8/15/11...... 1,795,664
Aaa 2,340 4.00%, 8/15/12....... 1,756,006
Willis Indpt. Sch.
Dist.,
Aaa 3,650 6.50%, 2/15/16....... 3,696,209
Wtr. Res. Fin. Auth.
Rev.,
Aaa 2,000 7.50%, 8/15/13,
A.M.B.A.C.......... 2,121,080
------------
85,401,564
------------
Utah--1.0%
Intermountain Pwr. Agcy.
Pwr. Supply Rev., M.B.I.A.,
Aaa 9,250 5.00%, 7/1/12, Ser.
A.................. 8,012,813
------------
Virginia--2.1%
Arlington Cnty., Gen
Oblig.,
Aaa 2,000 6.00%, 6/1/11........ 2,019,060
Loudoun Cnty.
Sanitation Auth.
Wtr. & Swr. Rev.,
Aaa 8,020 6.25%, 1/1/16,
F.G.I.C............ 8,043,739
Southeastern Pub.
Svc. Auth. Rev.,
Regl. Waste Sys.,
Aaa 3,000 7.00%, 7/1/13,
B.I.G.............. 3,306,540
Virginia Beach Hosp.
Rev., A.M.B.A.C.
Aaa 1,220 6.00%, 2/15/10....... 1,224,819
Aaa 1,455 6.00%, 2/15/13....... 1,445,106
------------
16,039,264
------------
</TABLE>
-30- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<S> <C> <C> <C>
Washington--2.7%
Washington Hlth. Care
Facs. Auth.,
Fred Hutchinson Cancer Ctr.,
Aaa $ 2,500 7.30%, 1/1/12........ $ 2,666,450
Tacoma Multicare Med. Ctr.,
Aaa 5,000 7.875%, 8/15/11,
F.G.I.C............ 5,531,300
Washington St. Pub.
Pwr. Supply Sys.,
Nuclear Proj. No.
1,
Aaa 5,000 7.00%, 7/1/04, Ser.
A,................. 5,427,500
B.I.G.
Nuclear Proj. No.
2,
Aaa 3,000 7.25%, 7/1/03, Ser.
B, F.G.I.C......... 3,319,170
Aaa 5,210 Zero Coupon, 7/1/11,
Ser. A, M.B.I.A.... 1,705,389
Nuclear Proj. No. 3, F.G.I.C.,
Aaa 2,000 7.00%, 7/1/05, Ser.
B.................. 2,168,580
------------
20,818,389
------------
Wisconsin--0.6%
Wisconsin St. Hlth. &
Edl. Facs. Auth.
Rev.,
Meritor Hosp.,
F.G.I.C.,
Aaa 4,450 6.30%, 12/1/09, Ser.
A.................. 4,542,649
------------
Total long-term
investments
(cost $726,867,316
).................. 734,973,711
------------
SHORT-TERM INVESTMENTS--8.5%
California--0.1%
California St. Poll.
Ctrl. Fin. Auth.
Rev.,
Delano Proj.,
F.R.D.D.,
P1 800 3.05%, 5/2/94, Ser.
91................. 800,000
------------
Connecticut--0.3%
Connecticut St. Spec. Tax
Oblig., Trans. Infrastructure
Rev., F.R.W.D.,
VMIG1 $ 2,000 3.30%, 5/4/94, Ser.
90I................ $ 2,000,000
------------
Florida--0.2%
Broward Cnty. Hsg. Fin. Auth.,
Welleby Apts.,
VMIG1 800 3.20%, 5/4/94,
F.R.W.D............ 800,000
Pinellas Cnty. Hlth.
Facs. Auth. Rev.,
Pooled Hosp. Loan
Prog.,
VMIG1 400 2.95%, 5/2/94,
F.R.D.D............ 400,000
------------
1,200,000
------------
Illinois--0.3%
Southwestern Illinois Dev. Auth.,
Solid Waste Disp. Rev.,
VMIG1 2,500 3.10%, 5/2/94........ 2,500,000
------------
Kentucky--1.0%
Davies Cnty. Solid
Wst. Disp. Fac.
Rev.,
Scott Paper Co.
Proj.,
A1+* 2,200 3.10%, 5/2/94, Ser.
A.................. 2,200,000
A1+* 5,800 3.15%, 5/2/94, Ser.
B.................. 5,800,000
------------
8,000,000
------------
Louisiana--1.6%
Louisiana Pub. Facs.
Auth. Rev., Adj.
Ind. Dev. Kenner
Hotel Ltd.,
P1 400 2.85%, 5/2/94........ 400,000
St. Charles Parish
Poll. Ctrl. Rev.,
Shell Oil Co. Norco
Proj.,
VMIG1 8,900 3.10%, 5/2/94........ 8,900,000
Shell Oil Co. Proj., F.R.D.D.,
VMIG1 1,200 3.10%, 5/2/94, Ser.
A.................. 1,200,000
</TABLE>
-31- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<S> <C> <C> <C>
Louisiana (cont'd)
West Baton Rouge
Parish Ind. Dist.
No. 3 Rev.,
Dow Chemical Co.
Proj.,
P1 $ 2,000 3.30%, 5/2/94........ $ 2,000,000
------------
12,500,000
------------
Mississipi--1.3%
Jackson Cnty. Port Fac. Rev.,
Chevron U.S.A., Inc. Proj.
P1 9,900 2.95%, 5/2/94........ 9,900,000
------------
North Carolina--0.6%
Cleveland Cnty., Ind.
Facs. Auth. Rev.,
Metals America
Proj., F.R.W.D.,
P1 4,365 3.95%, 5/4/94, Ser.
90................. 4,365,000
------------
Pennsylvania--0.1%
Allegheny Cnty. Hosp.
Dev. Auth. Rev.,
F.R.W.D.,
VMIG1 1,000 3.20%, 5/5/94, Ser.
B.................. 1,000,000
------------
Rhode Island--0.5%
Rhode Island Hsg. &
Mtge. Fin. Corp.,
M.B.I.A.,
VMIG1 3,500 3.40%, 5/4/94........ 3,500,000
------------
Texas--2.4%
Brazos River Harbor
Nav. Dist. Harbor
Rev.,
Various Dow Chem.
Co. Proj.,
P1 18,500 3.30%, 5/2/94........ 18,500,000
------------
Wyoming--0.1%
Green River Poll.
Ctrl. Rev.,
Rhone Poulenc, Inc.
Proj.,
NR 800 2.95%, 5/2/94........ 800,000
------------
Total short-term
investment
(cost $65,065,000)... 65,065,000
------------
PUT OPTIONS--0.0%
US Treasury Bond
Futures,
NR $200,000 expiring 5/20/94,
@108............... $ 28,125
------------
Total put options
purchased
(cost $101,750).... 28,125
------------
Total Investments--103.8%
(cost $792,034,066;
Note 4)............ 800,066,836
Liabilities in excess
of other
assets--(3.8%)..... (28,950,557)
------------
Net Assets--100%..... $771,116,279
------------
------------
</TABLE>
- ---------------
(a) The following abbreviations are used in portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation
B.I.G.--Bond Investors Guaranty Insurance Company
C.G.I.C.--Capital Guaranty Insurance Corporation
F.G.I.C.--Financial Guaranty Insurance Company
F.R.D.D.--Floating Rate (Daily) Demand Note**
F.R.W.D.--Floating Rate (Weekly) Demand Note**
F.H.A.--Federal Housing Administration
F.S.A.--Financial Security Assurance
G.N.M.A.--Government National Mortgage Association
M.B.I.A.--Municipal Bond Insurance Association
# Prerefunded issues are secured by escrowed cash and direct U.S.
guaranteed
obligations.
(D) Pledged as initial margin on financial futures contracts.
* Standard & Poor's rating.
** For purposes of amortized cost valuation, the maturity date of
Floating Rate
Demand Notes is considered to be the later of the next date on
which the
security can be redeemed at par or the next date on which the
rate of
interest is adjusted.
NR--Not rated by Moody's or Standard & Poor's.
The Fund's current Prospectus contains a description of Moody's and
Standard &
Poor's ratings.
-32- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
April 30,
Assets
1994
------------
<S>
<C>
Investments, at value (cost
$792,034,066).................................................
$800,066,836
Cash.............................................................
......................... 26,137
Interest
receivable.......................................................
................ 13,068,123
Receivable for investments
sold...........................................................
6,450,341
Receivable for Fund shares
sold...........................................................
978,525
Due from broker-variation
margin..........................................................
40,625
Deferred
expenses.........................................................
................ 27,507
------------
Total
assets...........................................................
............... 820,658,094
------------
Liabilities
Payable for investments
purchased.........................................................
44,431,459
Payable for Fund shares
reacquired........................................................
3,330,422
Dividends
payable..........................................................
............... 1,019,613
Management fee
payable..........................................................
.......... 326,940
Distribution fee
payable..........................................................
........ 307,454
Accrued
expenses.........................................................
................. 125,927
------------
Total
liabilities......................................................
............... 49,541,815
------------
Net
Assets...........................................................
..................... $771,116,279
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at
par................................................... $
719,704
Paid-in capital in excess of
par........................................................
765,926,937
------------
766,646,641
Accumulated net realized
losses.........................................................
(4,895,320)
Net unrealized
appreciation.....................................................
........ 9,364,958
------------
Net assets, April 30,
1994..............................................................
$771,116,279
------------
------------
Class A:
Net asset value and redemption price per share
($30,669,217 / 2,864,511 shares of beneficial interest issued
and outstanding)........ $10.71
Maximum sales charge (4.5% of offering
price)........................................... .50
------------
Maximum offering price to
public........................................................
$11.21
------------
------------
Class B:
Net asset value, offering price and redemption price per share
($740,447,062 / 69,105,877 shares of beneficial interest issued
and outstanding)...... $10.71
------------
------------
</TABLE>
See Notes to Financial Statements.
-33-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
April 30,
Net Investment Income 1994
------------
<S> <C>
Income
Interest and discount earned....... $ 48,722,050
------------
Expenses
Management fee..................... 4,200,554
Distribution fee--Class A.......... 32,309
Distribution fee--Class B.......... 4,038,968
Transfer agent's fees and
expenses........................... 530,000
Custodian's fees and expenses...... 196,400
Registration fees.................. 88,000
Reports to shareholders............ 50,000
Insurance expense.................. 20,000
Legal fees......................... 20,000
Trustees' fees..................... 16,500
Audit fee.......................... 15,500
Miscellaneous...................... 14,258
------------
Total expenses..................... 9,222,489
------------
Net investment income................ 39,499,561
------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions............ 10,226,538
Financial futures contracts........ (1,290,750)
------------
8,935,788
------------
Net change in unrealized appreciation of:
Investments........................ (43,570,096)
Financial futures contracts........ 1,332,188
------------
(42,237,908)
------------
Net loss on investments.............. (33,302,120)
------------
Net Increase in Net Assets
Resulting from Operations............ $ 6,197,441
------------
------------
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended April 30,
Increase (Decrease) -----------------------------
in Net Assets 1994 1993
------------- -------------
<S> <C> <C>
Operations
Net investment
income................. $ 39,499,561 $ 37,048,952
Net realized gain on
investment
transactions......... 8,935,788 19,006,974
Net change in
unrealized
appreciation/depreciation
of investments....... (42,237,908) 27,731,724
------------- -------------
Net increase in net
assets
resulting from
operations........... 6,197,441 83,787,650
------------- -------------
Dividends and
distributions (Note 1)
Dividends to
shareholders from net
investment
income
Class A.............. (1,643,190) (1,342,046)
Class B.............. (37,856,371) (35,706,906)
------------- -------------
(39,499,561) (37,048,952)
------------- -------------
Distributions to
shareholders from net
realized gains
Class A.............. (834,417) (571,552)
Class B.............. (20,909,142) (16,807,084)
------------- -------------
(21,743,559) (17,378,636)
------------- -------------
Fund share transactions
(Note 5)
Net proceeds from
shares issued.......... 189,769,487 228,787,332
Net asset value of
shares
issued to
shareholders in
reinvestment of
dividends and
distributions........ 35,730,676 30,164,592
Cost of shares
reacquired............. (199,496,131) (145,782,073)
------------- -------------
Increase in net assets
from Fund share
transactions......... 26,004,032 113,169,851
------------- -------------
Total increase
(decrease)............. (29,041,647) 142,529,913
Net Assets
Beginning of year........ 800,157,926 657,628,013
------------- -------------
End of year.............. $ 771,116,279 $ 800,157,926
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial
Statements.
-34-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES April 30, 1994
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<S> <C> <C> <C>
LONG-TERM INVESTMENTS--93.9%
Alabama--2.6%
Alabama St. Mun. Elec.
Auth.,
Pwr. Supply Rev.,
M.B.I.A.,
Aaa $ 500 5.75%, 9/1/01, Ser.
A................... $ 516,250
Univ. So. Alabama
Hosp. & Auxiliary
Rev.,
Aaa 1,250 7.00%, 5/15/04,
A.M.B.A.C.#......... 1,364,700
-----------
1,880,950
-----------
Alaska--3.0%
Alaska Ind. Dev. &
Expt. Auth.,
Revolving Loan Fund,
A 1,005 5.40%, 4/1/01......... 981,724
No. Slope Boro., Gen.
Oblig.,
Baa1 1,000 8.35%, 6/30/98, Ser.
C................... 1,124,550
-----------
2,106,274
-----------
Arizona--4.0%
Glendale, Gen. Oblig.,
Aaa 1,000 4.80%, 7/1/00,
F.G.I.C............. 985,770
Maricopa Cnty.,
Trans. Brd. Excise Tax
Rev.,
Aaa 500 5.75%, 7/1/05,
A.M.B.A.C........... 509,450
Univ. Arizona Rev.,
A1 1,515 4.60%, 6/1/05......... 1,376,999
-----------
2,872,219
-----------
California--8.7%
California St. Pub.
Wks. Brd.,
Lease Rev.,
A.M.B.A.C.,
Aaa 1,000 6.25%, 12/1/08, Ser.
A................... 1,025,610
Oxnard Fin. Auth.
Lease Rev., F.S.A.,
Aaa 2,000 5.375%, 6/1/08........ 1,894,840
San Jose Redev.,
Tax Allocation,
M.B.I.A.,
Aaa $ 500 6.00%, 8/1/08......... $ 505,195
San Jose Redev.,
M.B.I.A.,
Aaa 500 6.00%, 8/1/06......... 511,275
Statewide Cmntys. Dev.
Corp.,
Aaa 1,500 4.80%, 10/1/08........ 1,337,145
Cedars Sinai Med.
Ctr.,
Aa 1,000 4.80%, 11/1/04........ 931,820
-----------
6,205,885
-----------
Colorado--3.4%
Colorado Student
Oblig. Bond Auth.,
Student Loan Rev.,
A 1,480 7.25%, 9/1/05, Ser.
A3.................. 1,522,816
Jefferson Cnty. Sch.
Dst. R-001,
AA* 1,000 4.50%, 12/15/03....... 922,430
-----------
2,445,246
-----------
Connecticut--1.5%
Connecticut Spec. Tax
Oblig. Rev.,
A1 1,000 7.00%, 6/1/03, Ser.
A................... 1,098,130
-----------
District Of Columbia--0.9%
Dist. Columbia Rev.,
America Geophysical
Union,
BBB-* 700 5.50%, 9/1/03, Ser.
199................. 669,403
-----------
Florida--2.2%
Brevard Cnty. Util.
Rev.,
Aaa 745 5.25%, 3/1/08,
A.M.B.A.C........... 706,312
</TABLE>
-35- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<S> <C> <C> <C>
Florida (cont'd)
Dade Cnt. Pub. Facs.
Rev.,
Jackson Mem. Hosp.,
M.B.I.A.,
Aaa $ 1,000 4.75%, 6/1/08, Ser.
A................... $ 892,700
-----------
1,599,012
-----------
Guam--1.3%
Guam Pwr. Auth. Rev.,
BBB* 1,000 5.25%, 10/1/05, Ser.
A................... 939,360
-----------
Hawaii--1.6%
Hawaii Cnty., Gen.
Oblig., F.G.I.C.,
Aaa 1,000 7.20%, 6/1/05, Ser.
A#.................. 1,109,940
-----------
Illinois--0.6%
Illinois Hlth. Facs.
Auth. Rev.,
Edward Hosp.,
A 450 5.75%, 2/15/09, Ser.
A................... 415,769
-----------
Indiana--2.1%
Indiana Univ. Stud.
Fee,
A1 500 6.90%, 8/1/03, Ser.
G................... 538,725
Indianapolis Gas Util.
Rev.,
F.G.I.C.,
Aaa 1,000 5.00%, 6/1/06, Ser.
B................... 941,040
-----------
1,479,765
-----------
Kansas--2.0%
Kansas St. Dept.
Trans.,
Hwy. Rev.,
Aa 1,500 5.40%, 3/1/08......... 1,440,555
-----------
Maryland--3.2%
Northeast Maryland
Waste Disp. Auth.,
Mont. Co. Res. Rec.,
A 1,250 5.90%, 7/1/05......... 1,232,813
Washington Suburban
San. Dist.,
Aa1 $ 1,000 5.90%, 6/1/04......... $ 1,045,570
-----------
2,278,383
-----------
Massachusetts--1.5%
Mass. Gen. Oblig.,
A 1,000 6.75%, 8/1/06, Ser.
C#.................. 1,101,250
-----------
Michigan--2.1%
Michigan Mun. Bond
Auth. Rev.,
Wayne Cnty. Proj.,
Aaa 500 7.40%, 12/1/02,
M.B.I.A............. 559,580
Michigan St. Hosp.
Fin. Auth. Rev.,
Sisters Of Mercy,
Aaa 1,000 4.70%, 8/15/03,
M.B.I.A............. 925,800
-----------
1,485,380
-----------
Minnesota--1.6%
Minneapolis-St. Paul
Hsg.,
Redev. Auth., Hlth.
Care Sys. Rev.,
M.B.I.A.,
Aaa 1,000 7.20%, 8/15/00, Ser.
A................... 1,103,260
-----------
Missouri--1.3%
Missouri St. Regl.
Conv. & Sports
Complex Auth.,
A1 1,000 5.10%, 8/15/06, Ser.
A................... 915,900
-----------
Nebraska--1.4%
Omaha Pub. Pwr. Dist.
Elec. Sys. Rev.,
Aa 1,000 5.30%, 2/1/07......... 963,990
-----------
New Jersey--1.5%
New Jersey Bldg. Auth.
Rev.,
Garden St. Svg.,
Aa 2,050 Zero Coupon, 6/15/05,
Ser. A.............. 1,044,762
-----------
</TABLE>
-36- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<S> <C> <C> <C>
New York--8.5%
Nassau Cnty. Sewer
Gen. Oblig.,
F.G.I.C.,
Aaa $ 1,075 4.75%, 5/1/06, Ser.
B................... $ 982,679
New York City, Gen.
Oblig.,
Baa1 1,000 7.50%, 2/1/01, Ser.
B................... 1,098,450
Baa1 1,000 7.00%, 2/1/07......... 1,056,260
New York St. Dorm.
Auth. Rev.,
St. Univ. Edl. Facs.,
Baa1 2,000 5.50%, 5/15/08, Ser.
A................... 1,864,580
Triborough Bridge &
Tunl. Auth. Rev.,
Aa 1,150 4.30%, 1/1/03, Ser.
A................... 1,043,889
-----------
6,045,858
-----------
North Carolina--1.4%
No. Carolina Mun. Pwr.
Agcy. Elec. Rev.,
No. 1 Catawba,
A 1,000 5.90%, 1/1/03......... 1,009,340
-----------
Ohio--1.4%
Cleveland Waterworks
Rev., M.B.I.A.,
Aaa 1,000 5.40%, 1/1/06, Ser.
G................... 972,920
-----------
Oregon--1.2%
Oregon St.,
Dept. Trans. Rev.,
Aaa 750 7.00%, 6/1/03,
M.B.I.A............. 835,815
-----------
Pennsylvania--6.9%
Montgomery Cnty.
Redev. Auth.,
Multifamily Hsg. Rev.,
NR 780 5.75%, 7/1/99, Ser.
A................... 774,088
Pennsylvania Hsg. Fin.
Agcy.,
Sngl. Fam. Mtge. Rev.,
AAA* $ 1,000 6.20%, 7/1/25......... $ 1,044,520
Pennsylvania St. Gen.
Oblig., F.S.A.,
Aaa 1,000 6.25%, 11/1/06, Ser.
A................... 1,028,840
Philadelphia Hosp.
Auth. & Higher Ed.
Auth.,
Childrens Seashore
House,
BBB+* 1,000 7.00%, 8/15/03, Ser.
A................... 1,063,730
Philadelphia Sch.
Dist.,
Gen. Oblig., M.B.I.A.,
Aaa 1,000 5.75%, 7/1/07, Ser.
A................... 991,710
-----------
4,902,888
-----------
Puerto Rico--7.9%
Puerto Rico Elec. Pwr.
Auth. Rev.,
Baa1 1,500 6.00%, 7/1/04, Ser.
S................... 1,533,060
Puerto Rico Hsg.
Bank & Fin. Agcy.,
Baa 1,000 5.125%, 12/1/05....... 925,240
Puerto Rico Hwy. &
Trans. Auth. Rev.,
Baa1 750 4.90%, 7/1/01, Ser.
X................... 728,962
Baa1 330 7.50%, 7/1/01, Ser.
Q................... 367,610
Baa1 975 7.60%, 7/1/02, Ser.
Q................... 1,086,628
Puerto Rico Ind. Poll.
Auth. Rev.,
Aa 1,000 4.00%, 9/1/13, Ser.
A................... 962,480
-----------
5,603,980
-----------
South Carolina--2.7%
So. Carolina St. Pub.
Svc.
Auth. Rev.,
M.B.I.A.,
Aaa 2,000 5.50%, 7/1/08, Ser.
A................... 1,901,560
-----------
</TABLE>
-37- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (a) (Note 1)
<S> <C> <C> <C>
Texas--11.2%
Carrollton Farmers
Indpt. Sch. Dist.,
Aa $ 1,300 8.375%, 2/15/99....... $ 1,478,906
Dallas Ft. Worth
Int'l. Arpt.,
NR 1,000 5.875%, 11/1/06, Ser.
A................... 1,026,080
Harris Cnty., Toll
Rd.,
Aa 500 7.20%, 8/1/98......... 544,035
Aaa 1,500 5.125%, 8/15/08,
A.M.B.A.C........... 1,395,495
Aa 1,000 6.50%, 8/15/08, Ser.
A................... 1,047,420
Plano Ind., Sch.
Dist., F.G.I.C.,#
Aaa 1,000 8.625%, 2/15/03, Ser.
B................... 1,185,010
San Antonio Elec. &
Gas Rev., F.G.I.C.,
Aaa 1,000 Zero Coupon, 2/1/05,
Ser. A.............. 531,690
Texas Gen. Oblig.,
Veterans Hsg. Asst.,
Aa 750 6.05%, 12/1/12,
F.H.A............... 737,625
-----------
7,946,261
-----------
U. S. Virgin Islands--0.6%
Virgin Islands Wtr. &
Pwr. Auth.,
Wtr. Sys. Rev.,
NR 400 7.20%, 1/1/02, Ser.
B................... 413,244
-----------
Utah--1.5%
Utah St. Brd. of
Regents,
Student Loan Rev.,
A.M.B.A.C.,
Aaa 1,000(D) 7.00%, 11/1/01, Ser.
F................... 1,069,040
-----------
Washington--4.1%
Washington St. Pub.
Pwr. Supp. Sys.,
Nuclear Proj. No. 2,
Aa 2,000 4.90%, 7/1/05, Ser.
A................... 1,811,960
Washington St. Pub.
Pwr.
Nuclear Proj. No.3,
Aa $ 1,000 7.00%, 7/1/99, Ser.
B................... $ 1,068,940
-----------
2,880,900
-----------
Total long-term
investments
(cost $66,451,997).... 66,737,239
-----------
SHORT-TERM INVESTMENTS--7.9%
Illinois--2.4%
Chicago O'Hare Int'l.
Arpt.,
Amer. Airlines Inc.,
F.R.D.D.,
P1 600 3.15%, 5/2/94, Ser.
84B................. 600,000
Southwestern Dev.
Auth. Solid Waste
Disp. Rev.,
Shell Oil Co. Wood
River Proj.,
VMIG1 1,100 3.10%, 5/2/94......... 1,100,000
-----------
1,700,000
-----------
Kentucky--0.6%
Davies Cnty. Solid
Wst. Disp. Fac.
Rev.,
Scott Paper Co. Proj.,
A1+* 400 3.15%, 5/2/94, Ser.
B................... 400,000
-----------
Wyoming--4.9%
Lincoln Cnty. Ctrl.
Rev.,
Exxon Proj.,
P1 3,500 2.95%, 5/2/94......... 3,500,000
-----------
Total short-term
investments
(cost $5,600,000)..... 5,600,000
-----------
Total Investments--101.8%
(cost $72,051,997;
Note 4)............. 72,337,239
Liabilities in excess
of other
assets--(1.8%)...... (1,312,106)
-----------
Net Assets--100%...... $71,025,133
-----------
-----------
</TABLE>
-38- See Notes to
Financial Statements.
<PAGE>
<PAGE>
(a) The following abbreviations are used in portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation
F.G.I.C.--Financial Guaranty Insurance Company
F.H.A.--Federal Housing Administration
F.R.D.D.--Floating Rate (Daily) Demand Note**
F.R.W.D.--Floating Rate (Weekly) Demand Note**
F.S.A.--Financial Security Assurance
M.B.I.A.--Municipal Bond Insurance Association
T.R.A.N.--Tax Revenue Anticipation Note
# Prerefunded issues are secured by escrowed cash and direct U.S.
guaranteed
obligations.
(D) Pledged as initial margin on financial futures contract.
* Standard & Poor's Rating.
** For purposes of amortized cost valuation, the maturity date of
Floating Rate
Demand Notes is considered to be the later of the next date on
which the
security can be redeemed at par or the next date on which the
rate of
interest is adjusted.
NR--Not rated by Moody's or Standard & Poor's.
The Fund's current Prospectus contains a description of Moody's and
Standard &
Poor's ratings.
-39- See Notes to
Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Assets
April 30, 1994
----------------
<S>
<C>
Investments, at value (cost
$72,051,997)..................................................
$ 72,337,239
Cash.............................................................
......................... 50,925
Accrued interest
receivable.......................................................
........ 1,195,536
Receivable for Fund shares
sold...........................................................
196,898
Due from broker-variation
margin..........................................................
39,375
Deferred
expenses.........................................................
................ 2,267
----------------
Total
assets...........................................................
............... 73,822,240
----------------
Liabilities
Payable for investments
purchased.........................................................
2,556,244
Dividends
payable..........................................................
............... 90,965
Accrued
expenses.........................................................
................. 75,964
Management fee
payable..........................................................
.......... 28,895
Distribution fee
payable..........................................................
........ 26,968
Payable for Fund shares
reacquired........................................................
18,071
----------------
Total
liabilities......................................................
............... 2,797,107
----------------
Net
Assets...........................................................
..................... $ 71,025,133
----------------
----------------
Net assets were comprised of:
Shares of beneficial interest, at
par................................................... $
66,509
Paid-in capital in excess of
par........................................................
69,441,440
----------------
69,507,949
Accumulated net realized capital
gains..................................................
1,011,224
Net unrealized
appreciation.....................................................
........ 505,960
----------------
Net assets, April 30,
1994..............................................................
$ 71,025,133
----------------
----------------
Class A:
Net asset value and redemption price per share
($5,810,335 / 544,300 shares of beneficial interest issued and
outstanding)........... $10.67
Maximum sales charge (4.5% of offering
price)........................................... 0.50
----------------
Maximum offering price to
public........................................................
$11.17
----------------
----------------
Class B:
Net asset value, offering price and redemption price per share
($65,214,798 / 6,106,554 shares of beneficial interest issued
and outstanding)........ $10.68
----------------
----------------
</TABLE>
See Notes to Financial Statements.
-40-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
April 30,
Net Investment Income 1994
-----------
<S> <C>
Income
Interest and discount earned........ $ 3,649,790
-----------
Expenses
Management fee...................... 323,960
Distribution fee--Class A........... 4,981
Distribution fee--Class B........... 299,054
Custodian's fees and expenses....... 97,000
Transfer agent's fees and
expenses............................ 50,000
Reports to shareholders............. 43,000
Registration fees................... 27,000
Trustees' fees...................... 16,500
Legal fees.......................... 13,000
Audit fees.......................... 10,500
Insurance expense................... 1,000
Miscellaneous....................... 3,134
-----------
Total expenses...................... 889,129
-----------
Net investment income................. 2,760,661
-----------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions............. 1,680,114
Financial futures contracts......... 383,381
-----------
2,063,495
-----------
Net change in unrealized appreciation
of:
Investments......................... (3,894,040)
Financial futures contracts......... 220,718
-----------
(3,673,322)
-----------
Net loss on investments............... (1,609,827)
-----------
Net Increase in Net Assets
Resulting from Operations............. $ 1,150,834
-----------
-----------
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended April 30,
Increase (Decrease) --------------------------
in Net Assets 1994 1993
------------ -----------
<S> <C> <C>
Operations
Net investment income..... $ 2,760,661 $ 2,441,838
Net realized gain on
investment
transactions............ 2,063,495 315,581
Net change in unrealized
appreciation/depreciation
of investments.......... (3,673,322) 2,496,198
------------ -----------
Net increase in net assets
resulting from
operations.............. 1,150,834 5,253,617
------------ -----------
Dividends and distributions
(Note 1)
Dividends to shareholders
from net investment
income
Class A................. (230,644) (95,893)
Class B................. (2,530,017) (2,345,945)
------------ -----------
(2,760,661) (2,441,838)
------------ -----------
Distributions to
shareholders from net
realized gains
Class A................. (104,832) (15,563)
Class B................. (1,198,718) (464,459)
------------ -----------
(1,303,550) (480,022)
------------ -----------
Fund share transactions
(Note 5)
Net proceeds from shares
issued.................... 28,144,358 19,077,157
Net asset value of shares
issued to shareholders
in
reinvestment of
dividends and
distributions........... 2,666,224 1,649,384
Cost of shares
reacquired................ (17,514,873) (9,279,351)
------------ -----------
Increase in net assets
from Fund share
transactions.............. 13,295,709 11,447,190
------------ -----------
Total increase.............. 10,382,332 13,778,947
Net Assets
Beginning of year........... 60,642,801 46,863,854
------------ -----------
End of year................. $ 71,025,133 $60,642,801
------------ -----------
------------ -----------
</TABLE>
See Notes to Financial Statements. See Notes to Financial
Statements.
-41-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Notes to Financial Statements
Prudential Municipal Bond Fund (the ``Fund'') is registered
under the
Investment Company Act of 1940 as a diversified, open-end
management investment
company. The Fund was organized as an unincorporated business trust
in
Massachusetts on November 3, 1986 and consists of three series: the
High Yield
Series, the Insured Series and the Modified Term Series. The Fund
had no
operations until July 27, 1987 when 10,005 shares of beneficial
interest (3,335
shares of each of the series) were sold at $10.00 per share to
Prudential
Securities Incorporated (``PSI''). The monies of each series are
invested in
separate, independently managed portfolios. Investment operations
for Class A
and Class B shares commenced on January 22, 1990 and September 17,
1987,
respectively.
The investment objectives of the series are as follows: (i) the
objective of
the High Yield Series is to provide the maximum amount of income
that is
eligible for exclusion from federal income taxes, (ii) the
objective of the
Insured and Modified Term Series is to provide the maximum amount
of income that
is eligible for exclusion from federal income taxes consistent with
the
preservation of capital. The ability of issuers of debt securities
held by the
Fund to meet their obligations may be affected by economic and
political
developments in a specific state, region or industry.
The following is a summary of significant accounting policies
followed by the
Fund in the preparation of its financial statements.
Note 1. Accounting Securities Valuation:
Policies Municipal securities (includ
ing commitments to purchase such
securities on a
``when-issued'' basis) are valued on the basis of prices provided
by a pricing
service which uses information with respect to transactions in
bonds, quotations
from bond dealers, market transactions in comparable securities and
various
relationships between securities in determining values. If market
quotations are
not readily available from such pricing service, a security is
valued at its
fair value as determined under procedures established by the
Trustees.
Short-term securities which mature in more than 60 days are
valued at current
market quotations. Short-term securities which mature in 60 days or
less are
valued at amortized cost.
Financial Futures Contracts: A financial futures contract is an
agreement to
purchase (long) or sell (short) an agreed amount of debt securities
at a set
price for delivery on a future date. Upon entering into a financial
futures
contract, the Fund is required to pledge to the broker an amount of
cash and/or
other assets equal to a certain percentage of the contract amount.
This amount
is known as the ``initial margin''. Subsequent payments, known as
``variation
margin'', are made or received by the Fund each day, depending on
the daily
fluctuations in the value of the underlying security. Such
variation margin is
recorded for financial statement purposes on a daily basis as
unrealized gain or
loss.
The Fund invests in financial futures contracts solely for the
purpose of
hedging its existing portfolio securities or securities the Fund
intends to
purchase against fluctuations in value caused by changes in
prevailing market
interest rates. Should interest rates move unexpectedly the Fund
may not achieve
the anticipated benefits of the financial futures contracts and may
realize a
loss. The use of futures transactions involves the risk of
imperfect correlation
in movements in the price of futures contracts, interest rates and
the
underlying hedged assets.
Securities Transactions and Investment Income: Securities
transactions are
recorded on the trade date. Realized gains and losses on sales of
securities are
calculated on the identified cost basis. Interest income is
recorded on the
accrual basis. Premiums paid on purchases of portfolio securities
are amortized
as adjustments to interest income. Net investment income, other
than
distribution fees, and realized and unrealized gains or losses are
allocated
daily to each class of shares based upon the relative proportion of
net assets
of each class at the beginning of the day.
Federal Income Taxes: For federal income tax purposes, each series
in the Fund
is treated as a separate tax paying entity. It is the intent of
each series to
continue to meet the requirements of the Internal Revenue Code
applicable to
regulated investment companies and to distribute all net income to
shareholders.
For this reason and because substantially all of the Fund's gross
income
consists of tax-exempt interest, no federal income tax provision is
required.
Dividends and Distributions: Dividends from net investment income
are declared
daily and paid monthly. The Fund will distribute at least annually
any net
capital gains. Dividends and distributions are recorded on the
ex-dividend date.
Income distributions and capital gain distributions are determined
in accordance
with income tax regulations
-42-
<PAGE>
<PAGE>
which may differ from generally accepted accounting principles.
Reclassification of Capital Accounts: Effective May 1, 1993, the
Fund began
accounting and reporting for distributions to shareholders in
accordance with
Statement of Position 93-2: Determination, Disclosure, and
Financial Statement
Presentation of Income, Capital Gain, and Return of Capital
Distributions by
Investment Companies. As a result of this statement, the Fund
changed the
classification of distributions to shareholders to better disclose
the
differences between financial statement amounts and distributions
determined in
accordance with income tax regulations. The effect of adopting this
statement
was to decrease paid-in capital and increase accumulated net
realized gain/loss
by $17,345, $19,792 and $870 for the High Yield Series, Insured
Series and the
Modified Term Series, respectively, compared to amounts previously
reported
through April 30, 1993. The undistributed net investment income in
the High
Yield Series results from the treatment of legal workout
expenditures for tax
purposes which is different from book purposes. Net investment
income, net
realized gains and net assets were not affected by this change.
Note 2. Agreements The Fund has amanage
ment agreement with Prudential Mutual
Fund
Management, Inc. (``PMF''). Pursuant to this agreement, PMF has
responsibility
for all investment advisory services and supervises the
subadviser's performance
of such services. PMF has entered into a subadvisory agreement with
The
Prudential Investment Corporation (``PIC''); PIC furnishes
investment advisory
services in connection with the management of the Fund. PMF pays
for the cost of
the subadviser's services, the compensation of officers of the
Fund, occupancy
and certain clerical and bookkeeping costs of the Fund. The Fund
bears all other
costs and expenses.
PMF has agreed that, in any fiscal year, it will reimburse the
Fund for
expenses (including the fees of PMF but excluding interest, taxes,
brokerage
commissions, distribution fees, litigation and indemnification
expenses and
other extraordinary expenses) in excess of the most restrictive
expense
limitation imposed by state securities commissions. The most
restrictive expense
limitation is presently believed to be 2.5% of a series' average
daily net
assets during the year up to $30 million, 2.0% of the next $70
million of
average daily net assets and 1.5% of the average daily net assets
in excess of
$100 million. Such expense reimbursement, if any, will be estimated
and accrued
daily and payable monthly. No reimbursement was required for the
year ended
April 30, 1994.
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as the distributor of the
Class A
shares of the Fund, and with PSI, which acts as distributor of the
Class B
shares of the Fund (collectively the ``Distributors''). To
reimburse the
Distributors for their expenses incurred in distributing the Fund's
Class A and
B shares, the Fund, pursuant to plans of distribution, pays the
Distributors a
reimbursement, accrued daily and payable monthly.
Pursuant to the Class A Plan, the Fund reimburses PMFD for its
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. Such expenses under the
Class A Plan
were .10 of 1% of the average daily net assets of the Class A
shares for the
year ended April 30, 1994. PMFD pays various broker-dealers,
including PSI and
Pruco Securities Corporation (``Prusec''), affiliated
broker-dealers, for
account servicing fees and other expenses incurred by such
broker-dealers.
Pursuant to the Class B Plan, the Fund reimburses PSI for its
distribution-related expenses with respect to Class B shares at an
annual rate
of up to .50 of 1% of the average daily net assets of the Class B
shares. Unlike
the Class A Plan, there are carryforward amounts under the Class B
Plan and
interest expenses are incurred under the Class B Plan.
The distribution expenses include commission credits to PSI
branch offices
for payments of commissions to financial advisers and an allocation
on account
of overhead and other branch office distribution-related expenses,
interest
and/or carrying charges (Class B only), the cost of printing and
mailing
prospectuses to potential investors and of advertising incurred in
connection
with the distribution of shares. In addition, the Distributors pay
other
broker-dealers, including Pruco Securities Corporation
(``Prusec''), an
affiliated broker-dealer, for commissions and other expenses
incurred by such
broker-dealers in distributing Fund shares. The Distributors
recover the
distribution expenses incurred through the receipt of reimbursement
payments
from the Fund under the Plans and the receipt of initial sales
charges (Class A
only) and contingent deferred sales charges (Class B only) from
shareholders.
PMFD has advised the Fund that it received approximately
$1,075,400
($682,400-High Yield Series; $298,900-Insured Series;
$94,100-Modified Term
Series) in front-end sales charges resulting from sales of Class A
shares during
the year ended April 30, 1994. From these fees, PMFD paid such
sales charges to
dealers (PSI and
-43-
<PAGE>
<PAGE>
Prusec) which in turn paid commissions to salespersons and incurred
other
distribution costs.
With respect to the Class B Plan, at any given time the amount
of expenses
incurred by PSI in distributing the Fund's shares and not recovered
through the
imposition of contingent deferred sales charges in connection with
certain
redemptions of shares may exceed the total reimbursement made by
the Fund
pursuant to the Class B Plan. For the year ended April 30, 1994,
PSI advised the
Fund that it received approximately $3,428,400 ($2,068,000-High
Yield Series;
$1,243,400-Insured Series; $117,000-Modified Term Series) in
contingent deferred
sales charges imposed upon certain redemptions by shareholders.
PSI, as
distributor, has also advised the Fund that at April 30, 1994, the
amount of
distribution expenses incurred by PSI and not yet reimbursed by the
Fund or
recovered through contingent deferred sales charges was
approximately
$64,370,000 ($37,170,000-High Yield Series; $24,938,000-Insured
Series;
$2,262,000-Modified Term Series). This amount may be recovered
through future
payments under the Class B Plan or contingent deferred sales
charges.
In the event of termination or noncontinuation of the Class B
Plan, the Fund
would not be contractually obligated to pay PSI, as distributor,
for any
expenses not previously reimbursed or recovered through contingent
deferred
sales charges.
PMFD is a wholly-owned subsidiary of PMF; PSI, PIC and PMF are
indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of
America.
Note 3. Other Prudential Mutual Fund Ser
Transactions With vices, Inc. (``PMFS''), a
Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer
agent. During
the year ended April 30, 1994, the Fund incurred fees of
approximately $791,000
($417,000--High Yield Series; $338,000--Insured Series;
$36,000--Modified Term
Series) for the services of PMFS. As of April 30, 1994,
approximately $68,000
($36,000--High Yield Series; $28,600--Insured Series;
$3,400--Modified Term
Series) of such fees were due to PMFS. Transfer agent fees and
expenses in the
Statement of Operations also include certain out of pocket expenses
paid to
non-affiliates.
Note 4. Portfolio Purchases and sales of port
Securities folio securities, excluding
short-term investments, for the year
ended April
30, 1994, were as follows:
<TABLE>
<CAPTION>
Series Purchases Sales
- -------------------------- ------------ ------------
<S> <C> <C>
High Yield................ $553,372,285 $413,166,959
Insured................... 849,219,243 853,786,516
Modified Term............. 45,267,226 33,926,343
</TABLE>
At April 30, 1994, the High Yield Series and the Insured Series
sold 200 and
500 financial futures contracts, respectively, of U.S. Treasury
Bonds expiring
in June 1994. The Modified Term Series sold 70 financial futures
contracts on
the Municipal Bond Index expiring in June 1994. The Insured Series
also bought
100 financial futures contracts on the Municipal Bond Index
expiring in June
1994.
The values of these financial futures contracts at April 30,
1994 were as
follows:
<TABLE>
<CAPTION>
Finnacial Futures
Contracts Bought/Sold
----------------------------------------
<S> <C> <C> <C>
High Yield Insured Modified
Series Series Series
----------- ----------- ----------
Value at
dispo-
sition...... $22,003,125 $44,472,813 $6,597,281
Value at April
30, 1994.... 20,900,000 43,140,625 6,376,563
----------- ----------- ----------
Unrealized
gain
(loss)...... $ 1,103,125 $ 1,332,188 $ 220,718
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
The federal income tax basis of the Fund's investments, at April
30, 1994 was
$1,117,640,497-High Yield Series; $792,035,366-Insured Series; and
$72,051,997-Modified Term Series and, accordingly, net unrealized
appreciation
of investments for federal income tax purposes was as follows:
<TABLE>
<CAPTION>
Net Gross Gross
unrealized unrealized unrealized
Series appreciation appreciation depreciation
- ------------ ----------- ----------- -----------
<S> <C> <C> <C>
High
Yield..... $10,640,131 $49,909,572 $39,269,441
Insured..... 8,031,470 25,373,012 17,341,542
Modified.... 285,242 1,934,262 1,649,020
</TABLE>
The High Yield Series has a net capital loss carryforward as of
October 31,
1993 of approximately $2,024,000 expiring in the year 2002. In
addition, the
High Yield Series and the Insured Series elected to treat net
realized capital
losses of approximately $2,447,000 and $3,562,000 incurred in the
six month
period ended April 30, 1994 as having been incurred in the
following year.
-44-
<PAGE>
<PAGE>
Note 5. Capital Each series offers both Class
A and Class B shares. Class A shares
are sold with
a front-end sales charge of up to 4.5%. Class B shares are sold
with a
contingent deferred sales charge which declines from 5% to zero
depending on the
period of time the shares are held. Both classes of shares have
equal rights as
to earnings, assets and voting privileges except that each class
bears different
distribution expenses and has exclusive voting rights with respect
to its
distribution plan.
The Fund has authorized an unlimited number of shares of
beneficial interest
at $.01 par value, divided into two classes, designated Class A and
Class B.
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
High Yield Series
Insured Series Modified Term Series
Class A
Class A Class A
----------------------------
- ---------------------------- -------------------------
Year Ended April 30, 1994 Shares Amount
Shares Amount Shares Amount
- ----------------------------- ----------- -------------
- ----------- ------------- ---------- -----------
<S> <C> <C>
<C> <C> <C> <C>
Shares issued................ 2,534,562 $ 28,590,668
781,363 $ 9,004,329 299,213 $ 3,353,193
Shares issued in reinvestment
of dividends and
distributions.............. 139,629 1,569,710
136,891 1,570,343 20,276 226,541
Shares reacquired............ (1,507,559) (16,901,433)
(685,468) (7,770,170) (99,485) (1,103,936)
----------- -------------
- ----------- ------------- ---------- -----------
Increase in shares
outstanding................ 1,166,632 $ 13,258,945
232,786 $ 2,804,502 220,004 $ 2,475,798
----------- -------------
- ----------- ------------- ---------- -----------
----------- -------------
- ----------- ------------- ---------- -----------
<CAPTION>
Year Ended April 30, 1993
- -----------------------------
<S> <C> <C>
<C> <C> <C> <C>
Shares issued................ 2,277,906 $ 25,087,037
1,154,309 $ 12,992,614 243,975 $ 2,675,290
Shares issued in reinvestment
of dividends............... 93,369 1,024,196
104,309 1,171,113 5,224 56,810
Shares reacquired............ (776,888) (8,534,791)
(372,948) (4,195,286) (59,435) (647,183)
----------- -------------
- ----------- ------------- ---------- -----------
Increase in shares
outstanding................ 1,594,387 $ 17,576,442
885,670 $ 9,968,441 189,764 $ 2,084,917
----------- -------------
- ----------- ------------- ---------- -----------
----------- -------------
- ----------- ------------- ---------- -----------
<CAPTION>
Class B
Class B Class B
----------------------------
- ---------------------------- -------------------------
Year Ended April 30, 1994 Shares Amount
Shares Amount Shares Amount
- ----------------------------- ----------- -------------
- ----------- ------------- ---------- -----------
<S> <C> <C>
<C> <C> <C> <C>
Shares issued................ 24,747,145 $ 279,166,765
15,666,431 $ 180,765,158 2,220,623 $24,791,165
Shares issued in reinvestment
of dividends and
distributions.............. 2,712,412 30,506,304
2,973,210 34,160,333 218,375 2,439,683
Shares reacquired............ (17,392,980) (194,998,165)
(16,827,416) (191,725,961) (1,478,665) (16,410,937)
----------- -------------
- ----------- ------------- ---------- -----------
Increase in shares
outstanding................ 10,066,577 $ 114,674,904
1,812,225 $ 23,199,530 960,333 $10,819,911
----------- -------------
- ----------- ------------- ---------- -----------
----------- -------------
- ----------- ------------- ---------- -----------
<CAPTION>
Year Ended April 30, 1993
- -----------------------------
<S> <C> <C>
<C> <C> <C> <C>
Shares issued................ 25,663,857 $ 282,363,053
19,174,144 $ 215,794,718 1,505,904 $16,401,867
Shares issued in reinvestment
of dividends and
distributions.............. 2,347,811 25,729,686
2,581,306 28,993,479 146,751 1,592,574
Shares reacquired............ (10,908,368) (119,663,135)
(12,551,568) (141,586,787) (795,069) (8,632,168)
----------- -------------
- ----------- ------------- ---------- -----------
Increase in shares
outstanding................ 17,103,300 $ 188,429,604
9,203,882 $ 103,201,410 857,586 $ 9,362,273
----------- -------------
- ----------- ------------- ---------- -----------
----------- -------------
- ----------- ------------- ---------- -----------
</TABLE>
-45-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
Financial Highlights
<TABLE>
<CAPTION>
Class
A Class B
- -----------------------------------------------------------------
---------------------------
January 22,
1990@
Years Ended April
30, Through Years Ended April 30,
PER SHARE OPERATING
- -------------------------------------------------- April 30,
---------------------------
PERFORMANCE: 1994 1993 1992
1991 1990 1994 1993
-------- ------------
- ------------ ------------ ------------ ------------
- ------------
<S> <C> <C> <C>
<C> <C> <C> <C>
Net asset value, beginning of
period....................... $ 11.14 $ 10.68 $ 10.45
$ 10.33 $10.58 $ 11.14 $ 10.68
-------- --------- --------
-------- ------ ------------ ------------
Income from investment
operations
Net investment income.......... .72 .77
.77(D) .79(D) .23(D) .68 .73
Net realized and unrealized
gain (loss) on investment
transactions................. (.39) .46 .23
.12 (.25) (.39) .46
-------- --------- --------
-------- ------ ------------ ------------
Total from investment
operations................. .33 1.23 1.00
.91 (.02) .29 1.19
-------- --------- --------
-------- ------ ------------ ------------
Less distributions
Dividends from net investment
income....................... (.72) (.77)
(.77) (.79) (.23) (.68) (.73)
Distributions from capital
gains........................ (.01) -- --
-- -- (.01) --
-------- --------- --------
-------- ------ ------------ ------------
Total distributions.......... (.73) (.77)
(.77) (.79) (.23) (.69) (.73)
-------- --------- --------
-------- ------ ------------ ------------
Net asset value, end of
period....................... $ 10.74 $ 11.14 $ 10.68
$ 10.45 $10.33 $ 10.74 $ 11.14
-------- --------- --------
-------- ------ ------------ ------------
-------- --------- --------
-------- ------ ------------ ------------
TOTAL RETURN#: 2.88% 11.90%
9.82% 9.14% (1.49)*% 2.46% 11.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)........................ $ 54,491 $ 43,529 $ 24,725
$ 15,089 $3,905 $ 1,099,640 $ 1,028,480
Average net assets (000)....... $ 52,982 $ 31,658 $ 19,702
$ 11,594 $1,914 $ 1,132,653 $ 893,203
Ratios to average net assets:
Expenses, including
distribution fees.......... 0.69% 0.74%
0.65%() 0.60%() 0.60%*() 1.09% 1.14%
Expenses, excluding
distribution fees.......... 0.59% 0.64%
0.55%() 0.50%() 0.50%*() 0.59% .64%
Net investment income........ 6.42% 7.04%
7.25%() 7.62%() 8.17%*() 6.02% 6.66%
Portfolio turnover rate........ 36% 27%
34% 29% 44% 36% 27%
<CAPTION>
PER SHARE OPERATING
PERFORMANCE: 1992 1991 1990
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of
period....................... $ 10.45 $ 10.34 $ 10.56
-------- -------- --------
Income from investment
operations
Net investment income.......... .73) .75) .79)
Net realized and unrealized
gain (loss) on investment
transactions................. .23 .11 (.17)
-------- -------- --------
Total from investment
operations................. .96 .86 .62
-------- -------- --------
Less distributions
Dividends from net investment
income....................... (.73) (.75) (.79)
Distributions from capital
gains........................ -- -- (.05)
-------- -------- --------
Total distributions.......... (.73) (.75) (.84)
-------- -------- --------
Net asset value, end of
period....................... $ 10.68 $ 10.45 $ 10.34
-------- -------- --------
-------- -------- --------
TOTAL RETURN#: 9.40% 8.59% 6.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)........................ $803,838 $701,483 $622,970
Average net assets (000)....... $759,779 $667,751 $549,485
Ratios to average net assets:
Expenses, including
distribution fees.......... 1.05) 1.00) 0.83)
Expenses, excluding
distribution fees.......... 0.55) 0.50) 0.33)
Net investment income........ 6.85) 7.22) 7.24)
Portfolio turnover rate........ 34% 29% 44%
</TABLE>
<TABLE>
<C> <S>
- ---------------
@ Commencement of offering of Class A shares.
* Annualized.
# Total return does not consider the effects of sales loads.
Total return is calculated assuming a purchase
of shares on the first day and a sale on the last day of each
period reported and reinvestment of
dividends and distributions.
(D) Net of expense subsidy, fee waivers and distribution fee
deferrals.
</TABLE>
See Notes to Financial Statements.
-46-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Financial Highlights
<TABLE>
<CAPTION>
Class A Class B
- -----------------------------------------------------------------
---------------------------
January 22,
1990@
Years Ended April
30, Through Years Ended April 30,
PER SHARE OPERATING
- -------------------------------------------------- April 30,
---------------------------
PERFORMANCE: 1994 1993 1992
1991 1990 1994 1993
-------- ------------
- ------------ ------------ ------------ ------------
- ------------
<S> <C> <C> <C>
<C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 11.44 $ 10.98 $
10.76 $10.25 $10.51 $ 11.44 $ 10.99
-------- --------
- -------- ------ ------ --------
- ---------
Income from investment operations
Net investment income............ .58 .61
.66(D) .67(D) .18(D) .54 .56
Net realized and unrealized
gain (loss) on investment
transactions................... (.43) .73
.24 .54 (.26) (.43) .72
-------- --------
- -------- ------ ------ --------
- ---------
Total from investment
operations................... .15 1.34
.90 1.21 (.08) .11 1.28
-------- --------
- -------- ------ ------ --------
- ---------
Less distributions
Dividends from net investment
income......................... (.58) (.61)
(.66) (.67) (.18) (.54) (.56)
Distributions from capital
gains.......................... (.30) (.27)
(.02) (.03) -- (.30) (.27)
-------- --------
- -------- ------ ------ --------
- ---------
Total distributions............ (.88) (.88)
(.68) (.70) (.18) (.84) (.83)
-------- --------
- -------- ------ ------ --------
- ---------
Net asset value, end of period... $ 10.71 $ 11.44 $
10.98 $10.76 $10.25 $ 10.71 $ 11.44
-------- --------
- -------- ------ ------ --------
- ---------
-------- --------
- -------- ------ ------ --------
- ---------
TOTAL RETURN#: 1.04% 12.68%
8.59% 11.86% (3.37)*% 0.63% 12.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).......................... $ 30,669 $ 30,098 $
19,177 $7,630 $2,700 $740,447 $770,060
Average net assets (000)......... $ 32,309 $ 24,589 $
12,731 $5,164 $1,280 $807,794 $705,846
Ratios to average net assets:
Expenses, including
distribution fees............ 0.71% 0.72%
0.62%() 0.61%(D) 0.62%*() 1.11% 1.12%
Expenses, excluding
distribution fees............ 0.61% 0.62%
0.52%() 0.51%(D) 0.52%*() 0.61% 0.62%
Net investment income.......... 5.09% 5.46%
6.06%() 6.38%(D) 6.64%*() 4.69% 5.06%
Portfolio turnover rate.......... 105% 85%
56% 51% 82% 105% 85%
</TABLE>
<TABLE>
<C> <S>
- ---------------
@ Commencement of offering of Class A shares.
* Annualized.
# Total return does not consider the effects of sales loads.
Total return is calculated assuming a purchase
of shares on the first day and a sale on the last day of each
period reported and reinvestment of
dividends and distributions.
(D) Net of expense subsidy, fee waivers and distribution fee
deferrals.
</TABLE>
See Notes to Financial Statements.
-47-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
Financial Highlights
<TABLE>
<CAPTION>
Class
A Class B
- -----------------------------------------------------------------
- ----- ----------------------
January 22,
1990@
Years Ended April
30, Through Years Ended April 30,
PER SHARE OPERATING
- ------------------------------------------------------- April
30, ----------------------
PERFORMANCE: 1994 1993 1992
1991 1990 1994 1993
------------ ------------
- ------------ ------------ ------------ ------------ -------
<S> <C> <C> <C>
<C> <C> <C> <C>
Net asset value, beginning of
period...................... $11.08 $10.59
$10.48 $ 9.98 $ 10.21 $ 11.09 $ 10.60
------ ------
- ------ ------ -------- -------- -------
Income from investment
operations
Net investment income......... .53 .54(D)
.57(D) .59(D) .18(D) .48 .50(D)
Net realized and unrealized
gain (loss) on investment
transactions................ (.19) .60
.26 .50 (.23) (.19) .60
------ ------
- ------ ------ -------- -------- -------
Total from investment
operations................ .34 1.14
.83 1.09 (.05) .29 1.10
------ ------
- ------ ------ -------- -------- -------
Less distributions
Dividends from net investment
income...................... (.53) (.54)
(.57) (.59) (.18) (.48) (.50)
Distributions from capital
gains....................... (.22) (.11)
(.15) -- -- (.22) (.11)
------ ------
- ------ ------ -------- -------- -------
Total distributions......... (.75) (.65)
(.72) (.59) (.18) (.70) (.61)
------ ------
- ------ ------ -------- -------- -------
Net asset value, end of
period...................... $10.67 $11.08
$10.59 $10.48 $ 9.98 $ 10.68 $ 11.09
------ ------
- ------ ------ -------- -------- -------
------ ------
- ------ ------ -------- -------- -------
TOTAL RETURN#: 2.83% 11.13%
8.14% 11.20% (2.49)*% 2.43% 10.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)....................... $5,810 $3,594
$1,424 $ 397 $ 164 $ 65,215 $57,049
Average net assets (000)...... $4,981 $1,883 $
599 $ 305 $ 80 $ 59,811 $50,154
Ratios to average net
assets:(D)
Expenses, including
distribution fees......... 1.00% 1.06%
1.06% 0.92% 0.63%* 1.40% 1.46%
Expenses, excluding
distribution fees......... 0.90% 0.96%
0.96% 0.82% 0.53%* 0.90% 0.96%
Net investment income....... 4.63% 5.09%
5.41% 5.92% 6.26%* 4.23% 4.69%
Portfolio turnover rate....... 55% 22%
78% 128% 91% 55% 22%
<CAPTION>
PER SHARE OPERATING
PERFORMANCE: 1992 1991 1990
------- ------- -------
<S> <<C> <C> <C>
Net asset value, beginning of
period...................... $ 10.48 $ 9.98 $ 10.17
------- ------- -------
Income from investment
operations
Net investment income......... .53) .56) .62)
Net realized and unrealized
gain (loss) on investment
transactions................ .27 .50 (.16)
------- ------- -------
Total from investment
operations................ .80 1.06 .46
------- ------- -------
Less distributions
Dividends from net investment
income...................... (.53) (.56) (.62)
Distributions from capital
gains....................... (.15) -- (.03)
------- ------- -------
Total distributions......... (.68) (.56) (.65)
------- ------- -------
Net asset value, end of
period...................... $ 10.60 $ 10.48 $ 9.98
------- ------- -------
------- ------- -------
TOTAL RETURN#: 7.68% 10.82% 4.61%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)....................... $45,440 $45,401 $47,838
Average net assets (000)...... $44,439 $46,521 $46,246
Ratios to average net
assets:(D)
Expenses, including
distribution fees......... 1.46% 1.32% 0.83%
Expenses, excluding
distribution fees......... 0.96% 0.82% 0.33%
Net investment income....... 5.01% 5.52% 6.03%
Portfolio turnover rate....... 78% 128% 91%
</TABLE>
<TABLE>
<C> <S>
- ---------------
@ Commencement of offering of Class A shares.
* Annualized.
# Total return does not consider the effects of sales loads.
Total return is calculated assuming a purchase
of shares on the first day and a sale on the last day of each
period reported and reinvestment of
dividends and distributions.
(D) Net of expense subsidy, fee waivers and distribution fee
deferrals.
</TABLE>
See Notes to Financial Statements.
-48-
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Trustees
Prudential Municipal Bond Fund
We have audited the accompanying statements of assets and
liabilities of
Prudential Municipal Bond Fund (consisting of the High Yield
Series, Insured
Series and Modified Term Series), including the portfolios of
investments, as of
April 30, 1994, the related statements of operations for the year
then ended and
of changes in net assets for each of the two years in the period
then ended, and
the financial highlights for each of the five years in the period
then ended.
These financial statements and financial highlights are the
responsibility of
the Fund's management. Our responsibility is to express an opinion
on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing
standards. Those standards require that we plan and perform the
audit to obtain
reasonable assurance about whether the financial statements and
financial
highlights are free of material misstatement. An audit includes
examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial
statements. Our procedures included confirmation of the securities
owned as of
April 30, 1994, by correspondence with the custodian and brokers;
where replies
were not received from brokers, we performed other auditing
procedures. An audit
also includes assessing the accounting principles used and
significant estimates
made by management, as well as evaluating the overall financial
statement
presentation. We believe that our audits provide a reasonable basis
for our
opinion.
In our opinion, such financial statements and financial
highlights present
fairly, in all material respects, the financial position of each of
the
portfolios constituting the Prudential Municipal Bond Fund as of
April 30, 1994,
the results of their operations, the changes in their net assets,
and the
financial highlights for the respective stated periods in
conformity with
generally accepted accounting principles.
Deloitte & Touche
New York, New York
June 16, 1994
FEDERAL INCOME TAX INFORMATION
As required by the Internal Revenue Code, we wish to advise you
as to the
federal tax status of dividends and distributions paid by the Fund
during its
fiscal year ended April 30, 1994.
During its fiscal year ended April 30, 1994, the Fund paid
aggregate
dividends from net investment income, all of which were federally
tax-exempt
interest dividends, as follows:
<TABLE>
<CAPTION>
Dividends per Share
-----------------------
Series
Class A Class B
- --------------------------------------------------------------
- ------- -------
<S>
<C> <C>
High Yield
Series............................................. $ .72
$ .68
Insured
Series................................................ $ .58
$ .54
Modified Term
Series.......................................... $ .53
$ .48
</TABLE>
The High Yield Series paid a short-term capital gain
distribution of $.004
per share (taxable as ordinary income) and a long-term capital gain
of $.003 per
share (taxable as capital gains income) to Class A and Class B
shareholders. The
Insured Series paid a short-term capital gain distribution of $.23
per share
(taxable as ordinary income) and a long-term capital gain of $.07
per share
(taxable as capital gains income) to Class A and Class B
shareholders. The
Modified Term Series paid a short-term capital gain distribution of
$.08 per
share (taxable as ordinary income) and a long-term capital gain
distribution of
$.14 per share (taxable as capital gains income) to Class A and
Class B
shareholders.
Shortly after the close of the calendar year ending December 31,
1994, you
will be advised again as to the federal tax status of the dividends
and
distributions received in calendar 1994. In addition, you will be
advised at
that time as to the portion of your dividends which may be subject
to the
Alternative Minimum Tax (AMT) as well as information with respect
to state
taxability.
-49-
<PAGE>
<PAGE>
Past performance is no guarantee of future performance, and an
investor's
shares when redeemed, may be worth more or less than their original
value.
These graphs are furnished to you in accordance with SEC
regulations. They
compare a $10,000 investment in Prudential Municipal Bond Fund
(High Yield
Series) (Class A and Class B) with a similar investment in the
Lehman Brothers
Municipal Bond Index (Lehman Muni Bond Index) by portraying the
initial account
values on January 22, 1990 for Class A shares and September 17,
1987 for Class B
shares and subsequent account values at the end of each fiscal year
(April 30),
as measured on a quarterly basis, beginning in 1990 for Class A
shares and in
1987 for Class B shares. For purposes of the graphs and, unless
otherwise
indicated, the accompanying tables, it has been assumed that (a)
the maximum
sales charge was deducted from the initial $10,000 investment in
Class A shares;
(b) the maximum applicable contingent deferred sales charge was
deducted from
the value of the investment in Class B shares assuming full
redemption on April
30, 1994; (c) all recurring fees (including management fees) were
deducted; and
(d) all dividends and distributions were reinvested.
The Lehman Muni Bond Index is a weighted index comprised of
21,000 municipal
bonds (general obligation bonds, revenue bonds, insured bonds and
prerefunded
bonds) selected by Lehman Brothers as representative of the
long-term investment
grade municipal bond market. The Lehman Muni Bond Index is an
unmanaged index
and includes the reinvestment of all dividends, but does not
reflect the payment
of transaction costs and advisory fees associated with an
investment in the
Fund. The securities which comprise the Lehman Muni Bond Index may
differ
substantially from the securities in the Fund's portfolio. The
Lehman Muni Bond
Index is not the only index that can be used to characterize
performance of
municipal bond funds and other indexes may portray different
comparative
performance.
-50-
<PAGE>
<PAGE>
Past performance is no guarantee of future performance, and an
investor's
shares when redeemed, may be worth more or less than their original
value.
These graphs are furnished to you in accordance with SEC
regulations. They
compare a $10,000 investment in Prudential Municipal Bond Fund
(Insured Series)
(Class A and Class B) with a similar investment in the Lehman
Brothers Municipal
Bond Index (Lehman Muni Bond Index) by portraying the initial
account values on
January 22, 1990 for Class A shares and September 17, 1987 for
Class B shares
and subsequent account values at the end of each fiscal year (April
30), as
measured on a quarterly basis, beginning in 1990 for Class A shares
and in 1987
for Class B shares. For purposes of the graphs and, unless
otherwise indicated,
the accompanying tables, it has been assumed that (a) the maximum
sales charge
was deducted from the initial $10,000 investment in Class A shares;
(b) the
maximum applicable contingent deferred sales charge was deducted
from the value
of the investment in Class B shares assuming full redemption on
April 30, 1994;
(c) all recurring fees (including management fees) were deducted;
and (d) all
dividends and distributions were reinvested.
The Lehman Muni Bond Index is a weighted index comprised of
21,000 municipal
bonds (general obligation bonds, revenue bonds, insured bonds and
prerefunded
bonds) selected by Lehman Brothers as representative of the
long-term investment
grade municipal bond market. The Lehman Muni Bond Index is an
unmanaged index
and includes the reinvestment of all dividends, but does not
reflect the payment
of transaction costs and advisory fees associated with an
investment in the
Fund. The securities which comprise the Lehman Muni Bond Index may
differ
substantially from the securities in the Fund's portfolio. The
Lehman Muni Bond
Index is not the only index that can be used to characterize
performance of
municipal bond funds and other indexes may portray different
comparative
performance.
-51-
<PAGE>
<PAGE>
Past performance is no guarantee of future performance, and an
investor's
shares when redeemed, may be worth more or less than their original
value.
These graphs are furnished to you in accordance with SEC
regulations. They
compare a $10,000 investment in Prudential Municipal Bond Fund
(Modified Term
Series) (Class A and Class B) with a similar investment in the
Lehman Brothers
Municipal Bond Index (Lehman Muni Bond Index) by portraying the
initial account
values on January 22, 1990 for Class A shares and September 17,
1987 for Class B
shares and subsequent account values at the end of each fiscal year
(April 30),
as measured on a quarterly basis, beginning in 1990 for Class A
shares and in
1987 for Class B shares. For purposes of the graphs and, unless
otherwise
indicated, the accompanying tables, it has been assumed that (a)
the maximum
sales charge was deducted from the initial $10,000 investment in
Class A shares;
(b) the maximum applicable contingent deferred sales charge was
deducted from
the value of the investment in Class B shares assuming full
redemption on April
30, 1994; (c) all recurring fees (including management fees) were
deducted; and
(d) all dividends and distributions were reinvested.
The Lehman Muni Bond Index is a weighted index comprised of
21,000 municipal
bonds (general obligation bonds, revenue bonds, insured bonds and
prerefunded
bonds) selected by Lehman Brothers as representative of the
long-term investment
grade municipal bond market. The Lehman Muni Bond Index is an
unmanaged index
and includes the reinvestment of all dividends, but does not
reflect the payment
of transaction costs and advisory fees associated with an
investment in the
Fund. The securities which comprise the Lehman Muni Bond Index may
differ
substantially from the securities in the Fund's portfolio. The
Lehman Muni Bond
Index is not the only index that can be used to characterize
performance of
municipal bond funds and other indexes may portray different
comparative
performance.
-52-
<PAGE>
