ANNUAL REPORT April 30, 1995
Prudential
Municipal
Bond Fund
- - -----------
(ICON)
High Yield Series
Insured Series
Modified Term Series
Prudential Mutual Fund
Building Your Future (LOGO)<PAGE>
On Our Strengths
<PAGE>
PRUDENTIAL
MUNCIPAL
BOND FUND AT A GLANCE
<TABLE>
Effective Maturity As of 4/30/95
<CAPTION>
High Yield Insured Modified
Series Series Term Series
<S> <C> <C>
12.1 Years 11.8 Years 8.6 Years
</TABLE>
<TABLE>
Municipal Bond Fund Yields
April 30, 1995
<CAPTION>
High Yield Insured Modified
30-day SEC Yield Series Series Term Series
<S> <C> <C> <C>
Class A 6.4% 5.0% 4.2%
Class B 6.2 4.7 4.0
Class C 6.0 4.5 3.8
Taxable Equivalent Yield @ 36%
Class A 10.0% 7.8% 6.6%
Class B 9.7 7.3 6.3
Class C 9.4 7.0 5.9
Taxable Equivalent Yield @ 39.6%
Class A 10.6% 8.3% 7.0%
Class B 10.3 7.8 6.6
Class C 9.9 7.5 6.3
</TABLE>
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Past performance is no guarantee of future results.
<PAGE>
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS*
As of 3/31/95
High Yield Series
<CAPTION>
Class A Shares % Return % Return
without FESL with FESL
<S> <C> <C>
One Year: 7.18% 3.97%
Five Year: 7.81% 7.16%
From Inception
(1/22/90): 7.65% 7.02%
Class B Shares % Return % Return
without CDSC with CDSC
One Year: 6.66% 1.66%
Five Year: 7.39% 7.24%
From Inception
(9/17/87): 8.47% 8.47%
Class C Shares % Return % Return
without CDSC with CDSC
Since Inception:
(8/1/94) 3.85% 2.85%
Insured Series
Class A Shares % Return % Return
without FESL with FESL
One Year: 7.10% 3.88%
Five Year: 7.80% 7.15%
From Inception
(1/22/90): 7.63% 7.00%
Class B Shares % Return % Return
without CDSC with CDSC
One Year: 6.67% 1.67%
Five Year: 7.39% 7.24%
From Inception
(9/17/87): 8.07% 8.07%
Class C Shares % Return % Return
without CDSC with CDSC
Since Inception:
(8/1/94) 4.00% 3.00%
Modified Term Series
Class A Shares % Return % Return
without FESL with FESL
One Year: 4.63% 1.49%
Five Year: 7.37% 6.72%
From Inception
(1/22/90): 7.08% 6.45%
Class B Shares % Return % Return
without CDSC with CDSC
One Year: 4.20% (0.80)%
Five Year: 6.96% 6.81%
From Inception
(9/17/87): 7.13% 7.13%
Class C Shares % Return % Return
without CDSC with CDSC
Since Inception:
(8/1/94) 2.18% 1.18%
</TABLE>
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Past performance is no guarantee of future results. Average annual returns
are not actual yearly results but even out performance so that investors can
compare different funds on an equal basis.
*Source: Prudential Mutual Fund Management, Inc. Returns with CDSC or FESL
do take into account applicable sales charges. The Fund charges a maximum
front-end sales load (FESL) of 3% for Class A shares. Class B shares are
subject to a declining contingent deferred sales charge (CDSC) of 5%, 4%, 3%,
2%, 1% and 1%, for six years. Class C shares has a 1% CDSC for one year.
Class B shares will automatically convert to Class A shares on a quarterly
basis, after approximately seven years.
-2-
<PAGE>
Letter to
Shareholders
-----------------------
June 15, 1995
Dear Shareholder:
What a year it has been for investors in the Prudential Municipal Bond Fund!
Overall, municipal bond market prices took a roller coaster ride over the last
12 months, falling sharply in 1994 only to recover dramatically in early 1995,
almost back to where they started. Long-term investors who remained with the
Fund over the period have benefited from their tax-exempt income (although some
interest may be subject to the federal alternative minimum tax), while their
share prices have recovered from their 1994 lows.
Performance over the 12 months varied widely among the three series: share
prices have appreciated significantly in the Insured Series, are virtually
unchanged in the High Yield Series and have fallen in the Modified Term Series,
which has now shortened its effective maturity to make it less vulnerable to
gyrations of intermediate and long-term interest rates.
Municipals Top Governments As Bonds Rally.
Municipal bonds performed better than U.S government bonds on a total return
basis for the last six months, as an extraordinary rally swept through the bond
market. Investor sentiment turned around on speculation that the Federal
Reserve's efforts to slow the economy and keep inflation under control had
finally succeeded.
The rally carried all bonds higher, but municipal bonds posted a total
return of 7.7% for the six months ending April 30, ahead of U.S. governments,
which returned 6.5%, as measured by Lehman Brothers. Most municipal bonds
recovered from their 1994 losses, which had been more severe than those of
government bonds.
Bonds Rally As Economy Slows.
Since February 1994, the Federal Reserve has doubled short-term interest
rates, to 6% from 3%, hoping to slow the economy down to a more moderate,
sustainable growth rate without causing a recession. Accomplishing this feat
is what economists like to call a "soft landing." Investors were heartened in
late April when the government announced that the economy had grown at an
annualized rate of 2.8% in the first quarter, much lower than last year's 4.1%
rate. If the economy continues to grow at this pace, or slower, market
participants believe the Federal Reserve will keep short-term interest rates
steady, or perhaps even lower them.
-3-
<PAGE>
Last year, as the Federal Reserve increased short-term interest rates, the
bond market forced longer term interest rates higher as well. The Bond Buyer's
Revenue Bond Index graphically shows how interest rates have risen and then
fallen over the past 12 months. As you can see in the margin to your left, the
index yield stood at 6.42% on April 28, 1994. It then rose sharply to 7.32% on
November 23, only to fall once again to 6.29% on April 27, 1995. (The index is
calculated weekly on Thursdays.)
The Advantage of Staying the Course.
Past performance doesn't guarantee future results, but we can learn from it.
While there is a tremendous temptation to sell fund shares when bond prices
fall, long-term investors who stay the course know to expect these types of
fluctuations. A shareholder who stayed with municipal bonds during the
difficult days of 1994 would have recouped much of last year's price declines
while continuing to receive a steady stream of tax-exempt income. So patience
can pay.
Statistically, we can show this for the broad market by looking at the
Lehman Brothers Municipal Bond Index, a widely recognized barometer of
municipal bond prices. In all of 1994, the index lost 5.2% on a total return
basis (including interest). In the first four months of 1995, the index has
gained 7.2% in total return. (For the past 12 months covered by this report,
the index has gained 6.7% in total return.) Clearly, the long-term investor
(an individual with an investment horizon of five years or more) would have
recovered from last year.
Supply Shrinking.
Tax-free municipals have performed better than governments over the last six
months in part because few are being brought to market. Supply of new tax-free
municipal bonds hit a five-year low in the first four months of 1994, falling
by 41% compared to the same period last year. New bond issuance peaked in
1993, when many high-coupon bonds were refunded with new bonds with lower
coupons. This summer, those who simply want to reinvest their coupons and
proceeds from maturing bonds will need as much as $64 billion in municipal
bonds to do so. But to date only $25 billion in new issues are expected.
Should demand for tax-free municipals remain constant, this shrinking supply
may help support prices.
-4-
<PAGE>
Senate Considers "Dream Account"
The U.S. Senate will soon be considering a tax-deferred sav-ings vehicle
called the "American Dream Savings Account," which was approved by the House
of Representatives earlier in the year as part of the "Contract with America"
legislative agenda.
While similar to a traditional individual retirement account or IRA, the
American Dream Savings Account goes further by raising the contribution ceiling
for non-working spouses and permitting tax-free and penalty-free with-drawals
prior to age 59 1/2 for certain major expenses. Prudential Mutual Funds
supports the American Dream Savings Account and we urge you to share your
opinion with your legislators.
HIGH YIELD SERIES
The High Yield Series seeks to maximize income by investing in non-
investment grade municipal bonds that are rated B or better by recognized
outside rating agencies such as Standard & Poor's ratings group (S&P) and
Moody's Investors Service, or unrated bonds that our analysts believe to be of
comparable quality. On April 30, 1995, approximately 41% of the portfolio was
comprised of investment grade municipal bonds rated BBB or better (or unrated
bonds of comparable quality) and the balance in non-investment grade bonds.
Performance Recap.
Over the past 12 months, the Series performed better than the average Lipper
high yield municipal fund, because its higher yielding bonds held their value
better than lower yielding bonds as interest rates rose in 1994.
On April 30, 1995, the Series' net asset value was $10.72 for Class A
shares, compared with $10.74 on April 30, 1994. For Class B shares, the April
30, 1995 net asset value was $10.72, compared with $10.74 on April 30, 1994.
Class C shares had a NAV of $10.72 on April 30, 1995, while they were first
offered on August 1, 1994 at $10.79. Dividends paid during the year totaled
$0.72 for Class A shares, $0.68 for Class B shares and $0.49 for Class C
shares. On April 30, 1995, total net assets were $1.503 billion.
High Yield: The Focus Is On Research.
Since we expect economic growth to slow this year, the High Yield Series is
focusing on those issuers that have both a strong financial position and growth
potential. Our portfolio manager has a strong background in credit research,
and we have a seasoned team of credit analysts. We have the ability to search
for bonds carrying higher coupons, but still with a strong, reliable repayment
source. For example, we bought bonds issued for Northwest Medical Center, a
200-bed hospital located 60 miles from Pittsburgh in Washington County, Pa.
The facility has sole provider status in the area, yet its bonds yield 8.63%.
We also found a 9.25% yield in Northern Michigan, investing in a de-inking
facility which turns newsprint into recycled paper.
Drawing on our credit analysis resources, the Series has increased the
percentage of assets in not-rated credits to 59% from 46% over the period.
(Of the 59% of assets held in not-rated bonds, 54% of assets were invested in
not-rated bonds deemed by our analysts to be comparable to investment grade
bonds rated BBB or better and 46% were invested in not-rated bonds deemed by
our analysts to be below investment grade.)
-5-
<PAGE>
We Concentrated On Improving The Series' Structure.
The Series concentrates assets in two areas: high-yielding bonds on one
side and longer term, non-callable bonds on the other. The high coupon bonds
provide stability if interest rates rise, and the longer-term bonds provide
capital appreciation potential should interest rates fall. The Series also
emphasizes specialty states, where we hope to capitalize on market imbalances
whereby unusual situations temporarily depress bond prices, which we expect
will recover. The Series has been increasing exposure to California, where the
economy is recovering, and Texas, where municipal bonds generally hold their
prices better than those of other states.
In addition, we now have doubled our assets in zero coupon bonds to 8% in
the last six months and increased the percentage of non-callable bonds to 16%.
These types of securities gives the Series greater capital appreciation
potential should interest rates continue to fall. Some of the non-callable
bonds we purchased were from Bellevue, Washington, special obligation revenue
bonds; Romulus, MI, school district general obligation bonds and New York State
Triborough Bridge and Tunnel Authority bonds.
If there was anything we regret over the last 12 months, it was holding
bonds with shorter maturities during the early 1995 rally. The strength of the
bond rally surprised many: it was the strongest first quarter in nine years.
INSURED SERIES
The Insured Series invests in AAA-rated municipal obligations, most of which
are insured and whose timely coupon and principal payments, but not market
value, are guaranteed by a municipal bond insurance company rated AAA or Aaa by
S&P or Moody's.
Performance Recap.
The Series performed better than the average Lipper insured municipal bond
fund over the past 12 months because it held as much as 11% in cash in 1994
when bond prices were falling. Of course, cash doesn't fluctuate in price when
interest rates are on the move. While we earned less income on our cash, it
provided a cushion of stability as the Federal Reserve was raising interest
rates.
As of April 30, 1995, the Series' net asset value was $10.83 for Class A
shares, up from $10.71 on April 30, 1994. Class B shares had a NAV of $10.84
on April 30, 1995, an increase from $10.71 on April 30, 1994. Class C shares'
NAV on April 30, 1995 was $10.84, higher than their initial offering price on
August 1, 1994 of $10.79. Dividends paid during the period totaled $0.58 for
Class A shares, $0.54 for Class B shares and $0.39 for Class C shares. Total
net assets were $644.0 million on April 30, 1995.
-6-
<PAGE>
Insured Performed Best In 1995 Rally.
Insured municipal bonds are the highest quality -- rated triple-A by major
rating agencies. But they are also more volatile than other municipal bonds
since they carry no credit risk -- their coupon and principal payments are
guaranteed. Their prices react primarily to interest rate movements. As a
result, as interest rates fell sharply early this year, insured bonds performed
better than other types of municipal bonds. For example, insured bonds returned
a total of 7.7% during the first four months of this year, compared with 7.2%
for all municipal bonds, as measured by Lehman Brothers. On the other hand,
when interest rates rose in 1994, all municipal bonds performed better than
insured municipal bonds, losing 5.2% versus a 6% loss, Lehman
reported.
Increased Emphasis on Non-Callable Bonds.
We have increased the percentage of assets in non-callable bonds,
particularly premium non-callables, to provide more income and price stability.
Bonds that are not callable, or redeemable, before maturity are considered more
valuable because an investor does not have to incur the expense of replacing
them if it were possible to call them. The Series now holds more than 30% of
assets in non-callable bonds, while six months ago it held 12% in premium,
non-callable bonds.
While it is difficult to find higher-yielding, insured bonds, we were
fortunate to be able to purchase Louisiana housing bonds which are backed by
GNMAs (Government National Mortgage Association bonds) and yielding 6.75% to
their earliest call date (the earliest date the bonds can be paid off prior to
maturity).
In addition, the Series has increased its holdings in zero coupon bonds to
5% from less than 2% to give it capital appreciation potential should interest
rates continue to fall.
The Series also continued to trade among specialty states, such as New York
and Massachusetts: states that have high income tax rates. Demand for these
bonds should increase their price when compared to other bonds as issuance
declines.
MODIFIED TERM SERIES
The Modified Term Series seeks to provide a high level of income consistent
with preservation of capital. It invests primarily in investment grade
municipal obligations with five- to 15-year maturities. This mixture of
maturities allows the Fund to be less price sensitive to interest rate changes
than if it held only longer term bonds.
Fund Update
Starting in February 1995, Class B shareholders may have begun to notice a
change in their Fund holdings. That's when Class B shares began to
automatically convert to Class A shares, on a quarterly basis, approximately
seven years after purchase. As you may know, Class A shares generally carry
lower annual distribution expenses than Class B shares. Accordingly, after
conversion as a Class A shareholder, you will earn higher total returns on your
investment than you would have as a Class B shareholder.
Conversions of eligible Class B shares and special exchanges of Class B and
C shares will take place each calendar quarter (March, June, September and
December) starting in September 1995.
Board Renames Series
The Board of Trustees of the Prudential Muncipal Bond Fund has approved a
name change for the Modified Term Series to the Intermediate Series, effective
June 29, 1995
-7-
<PAGE>
Performance Recap.
The Series lagged behind the average Lipper intermediate-term municipal bond
fund because its average effective maturity was longer in 1994 when interest
rates were rising rapidly. The Series' maturity has now been adjusted so that
it is more in line with its peer group.
As of April 30, 1995, the Series net asset value (NAV) was $10.45 for Class
A shares, compared with $10.67 on April 30, 1994. The NAV of Class B shares on
April 30, 1995 was $10.45, compared with $10.68 on April 30, 1994. The NAV of
Class C shares on April 30, 1995 was $10.45, while they were originally offered
at $10.54 on August 1, 1994. For the 12-month period, dividends totaled $0.52
for Class A shares, $0.46 for Class B shares and $0.37 for Class C shares.
Total net assets were $62 million on April 30, 1995.
Longer Was Better in 1995.
As interest rates fell earlier this year, the performance of intermediate-
term bonds fell behind longer term maturities. For example, in the first four
months of 1995 longer term bonds (those with maturities of 22 years or more)
have returned 9.9%, while eight- to 12-year bonds have returned 7.1%, as
measured by Lehman Brothers. Anticipating that interest rates were peaking
late last year, we reinvested a 5% cash position that we held at the end of
November.
We Found Value in California.
We searched the market for inexpensive bonds offering good value, and as a
result have increased our concentration in California. There was a large
supply of California bonds available in the market in 1994, which was priced
attractively. In addition, after Orange County, CA., filed for bankruptcy,
bonds issued by many government agencies in California declined in value
because of uncertainty in the market. Over the long term, as the state's
prospects improve, these bonds should become more valuable. Supply this year
has sharply contracted -- in the first quarter, California supply fell by 53%,
tying it with Michigan for second place in the nation behind New Jersey among
the states with the largest reduction in supply.
The Outlook.
We are heartened by the municipal bond market's performance so far in 1995.
In four months we have reversed all of last year's losses on a total return
basis. However, we believe it is important to caution investors that a rally
this strong is not likely to continue at the same pace.
-8-
<PAGE>
With that said, there are compelling arguments to believe that tax-exempt
bonds may continue to perform better than taxable bonds this year, particularly
if supply continues to drop and demand remains constant or increases.
As always, it is a pleasure to work for you. We appreciate the confidence
you have shown in us by choosing the Prudential Municipal Bond Fund.
Sincerely,
Peter Allegrini PatDolan
High Yield Series Insured Series
Portfolio Manager Portfolio Manager
Marie Conti
Modified Term Series
Portfolio Manager
Richard A. Redeker
President
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<PAGE>
PORTFOLIO Q&A
Dennis Bushe
The bond market has been a strong performer in the first four months of 1995.
If you are contemplating putting cash into the bond market, you might want to
consider some of the following points. We talked with Prudential Mutual Funds
chief fixed-income strategist Dennis Bushe about why bonds and bond mutual
funds may make some sense in today's investment environment.
Q. What are the prospects for bonds for the rest of 1995?
A. I believe bonds will perform well over the remainder of the year, although
I do not expect to see the same kind of price appreciation we saw in the first
four months. That's because interest rates have already fallen dramatically
this year. For example, the yield on the 30-year Treasury bond has declined by
more than one percentage point since reaching its peak last November. But as
long as the economy maintains a sustainable growth rate of 2.5% or lower, bonds
should provide coupon income and possibly a modest amount of capital
appreciation. And municipal bond supply is very low right now -- if that
scenario continues, it could help prices rise. The principal risk to this
outlook would be an acceleration of the U.S. economy, which could put upward
pressure on interest rates.
Q. What is a flat tax and why are municipal bond investors worried about it?
A. Congress is considering a move to simplify the income tax code by
implementing a "flat" tax or an income tax at a single, flat rate rather than
the different tax brackets in existence now. Most tax deductions would be
disallowed under the proposal, including municipal bond income. Therefore,
under this proposal, municipal bond income would not be as valuable as it
currently is for individuals in the higher tax brackets. I believe there is
little chance such a proposal could pass Congress, certainly not before the
1996 elections. However, I do expect municipal bond prices will be very
sensitive to any proposal designed to drastically reduce the federal income tax
paid by the nation's wealthier individuals. Municipal bond investors should be
prepared to weather some volatility this year as a consequence.
Media Mentions
Dennis Bushe also discussed his views on the bond market in the Wall Street
Journal (4/5/95) and Business Week (1/16/95). See the Wall Street Journal
(4/26/95), Capital Markets Report (4/25/95), and The Bond Buyer (1/4/95) for
Peter Allegrini's opinions on the municipal bond markest.
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<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND Portfolio of Investments
HIGH YIELD SERIES April 30, 1995
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
LONG TERM INVESTMENTS--97.9%
Alabama--0.7%
Alabama Agric. & Mechanic Univ., M.B.I.A.................... Aaa
5.50 % 11/01/20 $ 1,500 $ 1,384,305
Cullman Med. Clinic Brd. Rev., Regl. Med. Ctr., Ser. 93A.... Baa
6.50 2/15/23 2,000 1,823,580
Ft. Payne, Ind. Dev. Brd. Rev., Gametime Expansion Proj..... NR
10.25 8/01/09 4,405 4,663,353
--------------
7,871,238
--------------
Alaska--0.4%
No. Slope Boro., Gen. Oblig., Ser. B, C.G.I.C............... Aaa
Zero 6/30/04 8,000 4,697,280
--------------
Arizona--1.6%
Ft. Mojave Indian Tribe, Wtr. & Swr. Rev.................... NR
10.25 9/01/19 3,000DD 1,800,000
Pima Cnty. Ind. Dev. Auth., Multifamily Mtge. Rev., Cntry.
Club La Cholla Proj....................................... NR
8.50 7/01/20 10,000 9,502,200
Scottsdale Ind. Dev. Auth. Rev., 1st Mtge., Westminster Vlg.
Inc. Proj................................................. NR
9.50 6/01/97 5,000 5,123,150
--------------
16,425,350
--------------
California--12.7%
Alameda Cmnty. Facs. Spec. Tax Rev. No. 1, Harbor Bay....... NR
7.75 9/01/19 8,175 8,449,680
California Hsg. Fin. Agcy. Rev., Ser. G..................... Aa
8.15 8/01/19 1,120 1,188,432
Chula Vista Cmnty. Redev. Agcy., Bayfront Tax Alloc......... BBB+*
7.625 9/01/24 5,000 5,327,200
Delano, Cert. of Part., Regl. Med. Ctr., Ser. 92A........... NR
9.25 1/01/22 6,865 7,478,044
Folsom Spec. Tax Dist. No. 2................................ NR
7.70 12/01/19 3,130 3,209,001
Long Beach Redev. Agcy. Hsg.,
Multifamily Hsg. Rev., Pacific Court Apts.,............... NR
6.80 9/01/13 3,805 3,613,799
Multifamily Hsg. Rev., Pacific Court Apts.,............... NR
6.95 9/01/23 6,195 5,782,475
Los Angeles Regional Arpts. Improv. Corp. Lease Rev......... NR
9.25 8/01/24 15,345 16,142,019
Orange Cnty. Cmnty. Facs. Dist. Spec. Tax Rev., No. 87-4,
Foothill Ranch, Ser. A.................................... NR
7.375 8/15/18 7,500 8,631,825
Orange Cnty. Cmnty. Loc. Trans. Auth., Tax Reg. Linked Savrs
& Ribs.................................................... Aa
6.20 2/14/11 7,000 6,854,470
Richmond Redev. Agcy. Rev., Multifamily Bridge Affordable
Hsg....................................................... NR
7.50 6/01/23 10,000 9,814,300
Sacramento City Fin. Auth. Rev., Comb. Project B,
M.B.I.A................................................... Aaa
Zero 11/01/15 5,695 1,595,967
Sacramento Cnty. Spec. Tax Rev., Dist. No. 1,
Elliot Ranch,............................................. NR
8.20 8/01/21 3,750 3,963,075
Laguna Creek Ranch,....................................... NR
8.25 12/01/20 4,500 4,755,960
San Bernardino Cnty., Cert. of Part.,
Medical Cent. Fin. Proj.,................................. Baa1
6.00 8/01/09 2,500 2,257,625
Medical Cent. Fin. Proj.,................................. Baa1
5.50 8/01/24 4,900 3,834,593
San Joaquin Hills Trans. Corridor Agcy., Toll Road Rev.,
Toll Road Rev............................................. NR
Zero 1/01/24 50,000 6,398,000
Toll Road Rev............................................. NR
Zero 1/01/25 15,700 1,870,027
Toll Road Rev., Orange Co................................. NR
Zero 1/01/11 12,900 3,578,460
</TABLE>
-11- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
California--cont'd
Santa Margarita/Dana Point Auth. M.B.I.A.,
Impvt. Dists 1-2-2A-8, Ser. A............................. Aaa
7.25 8/01/13 $ 1,990D $ 2,287,565
Impvt. Dists 3-3A-4A, Ser. B.............................. Aaa
7.25 8/01/12 3,000D 3,448,530
So. San Francisco Redev., Agcy., Tax Alloc., Gateway Redev.
Proj...................................................... NR
7.60 9/01/18 2,375 2,428,699
Southern California Home Fin. Auth., Sngl. Fam. Mtge. Rev.,
G.N.M.A., Ser. 89A........................................ AAA*
7.625 10/01/22 7,945# 8,364,178
Southern California Pub. Pwr. Auth., Proj. Rev.............. A
6.75 7/01/10 6,000 6,296,640
Southern California Pub. Pwr. Auth. Tran.................... Aa
Zero 7/01/14 8,500 2,539,800
Victor Valley California Union High School District,
M.B.I.A................................................... Aaa
Zero 9/01/12 3,605 1,250,394
M.B.I.A................................................... Aaa
Zero 9/01/14 4,740 1,428,020
M.B.I.A................................................... Aaa
Zero 9/01/16 3,990 1,050,886
--------------
133,839,664
--------------
Colorado--3.2%
Colorado Health Facilities Auth. Rev., Rocky Mountain
Adventist................................................. Baa
6.625 2/01/13 6,450 6,080,544
Eagle Cnty. Hsg. Proj., Lake Creek Affordable Hsg. Corp.,
Ser. A.................................................... NR
8.00 12/01/23 11,610 11,518,281
Miguel Cnty., Mountain Vlg. Met. Dist. Colo. San Miguel
Cnty...................................................... NR
8.10 12/01/11 3,200 3,394,368
Superior Met. Dist. No. 1 Colorado Wtr. & Swr.,
Rev....................................................... NR
7.50 12/01/98 3,300 3,303,729
Rev....................................................... NR
8.50 12/01/13 8,900 9,062,870
--------------
33,359,792
--------------
District Of Columbia--1.4%
Dist. of Columbia Rev.,
America Geophysical Union, M.B.I.A........................ Aaa
6.50 6/01/10 6,000# 6,168,300
National Public Radio..................................... NR
7.625 1/01/18 8,800 8,867,232
--------------
15,035,532
--------------
Florida--5.9%
Escambia Cnty. Hlth. Facs. Auth. Rev., L.P. South,
Azalea Trace, Ref......................................... NR
9.25 1/01/06 2,605 2,848,854
Baptist Hosp., Ref., Ser. A............................... BBB+*
8.60 10/01/02 4,385 4,781,755
Fleming Island Cmnty. Dev. Dist., Clay Cnty................. NR
8.25 5/01/16 8,000 7,984,000
Florida Hsg. Fin. Agcy., Palm Aire Proj., Multifamily Hsg.
Rev....................................................... NR
10.00 1/01/20 9,921D 6,647,465
No. Springs Imprt. Dist. Water Mgt.,
Series A.................................................. NR
8.20 5/01/24 2,000 2,114,360
Series B.................................................. NR
8.30 5/01/24 1,755 1,857,580
Osceola Cnty. Ind. Dev. Auth. Rev.,......................... NR
7.75 7/01/17 9,000 9,531,090
Palm Beach Cnty. Hsg. Auth., Banyan Club Apts., Ser. A...... NR
7.75 3/01/23 4,630 4,850,666
Sarasota Hlth. Facs., Kobernick House Meadow Park Proj...... NR
10.00 7/01/22 7,000 7,371,770
Seminole Cnty. Ind. Dev. Auth. Rev., Ind. Dev. Fern Park.... NR
9.25 4/01/12 6,345 6,629,763
Tampa Rev., Tampa Aquarium Proj............................. NR
7.75 5/01/27 7,500 7,711,800
--------------
62,329,103
--------------
</TABLE>
-12- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
Georgia--2.9%
Atlanta Urban Res. Fin. Auth., Clark Atlanta Univ. Dorm.
Proj...................................................... NR
9.25 6/01/10 $ 4,810 $ 5,835,588
Effingham Cnty. Dev. Auth., Ft. Howard Corp................. B1
7.90 10/01/05 10,000 10,312,100
Fulton Cnty. Wtr. & Swr. Rev., F.G.I.C...................... Aaa
6.375 1/01/14 6,000D 6,319,320
Georgia St, Gen. Oblig., Ser. C............................. Aaa
5.00 7/01/10 5,475D 5,046,855
Savannah Econ. Dev. Auth., Stone Container.................. NR
8.125 7/01/15 3,160 3,285,041
--------------
30,798,904
--------------
Hawaii--0.7%
Hawaii Cnty. Impvt., Dist. No. 17........................... NR
9.50 8/01/11 7,175 7,031,500
--------------
Illinois--9.1%
Chicago O'Hare Int'l. Arpt., Spec. Fac. Rev.,
Amer. Airlines, Ser. A.................................... Baa2
7.875 11/01/25 4,000 4,163,800
United Airlines, Ser. B................................... Baa2
8.45 5/01/07 6,000 6,407,880
United Airlines, Ser. B................................... Baa3
8.50 5/01/18 6,500 6,955,325
United Airlines, Ser. B................................... Baa2
8.85 5/01/18 2,805 3,108,669
United Airlines, Ser. B................................... Baa2
8.95 5/01/18 2,400 2,642,712
United Airlines, Ser. B................................... Baa2
8.20 12/01/24 1,000 1,104,160
Hennepin Ind. Dev. Rev.,
Exolon Esk. Co. Proj...................................... NR
8.875 1/01/18 8,000 8,179,840
Methchem Corp. Proj., Ser. 89............................. NR
10.25 1/01/05 4,420DD 397,800
Illinois Dev. Fin. Auth. Rev., Multifamily Hsg. Town &
Garden Apts............................................... BBB+*
7.20 9/01/08 9,460 9,619,117
Illinois Hlth. Facs. Auth. Rev.,
Adventist Living Ctr...................................... NR
11.00 12/01/15 2,245DD 538,693
Beacon Hill Proj., Ser. A................................. NR
9.00 8/15/19 7,422 7,976,572
Midwest Physician Group Limited Project................... BBB-*
8.125 11/15/19 3,285 3,360,062
Midwest Physician Group Limited Project................... BBB-*
8.10 11/15/14 3,135 3,200,741
Kane & De Kalb Cntys. Illinois Cmnty. Unit School, A.M.B.A.C.
District Number 301....................................... Aaa
Zero 12/01/11 3,360 1,202,477
District Number 301....................................... Aaa
Zero 12/01/13 4,065 1,276,085
Kankakee Ind. Dev. Rev., Kroger Co. Proj.................... Ba2
7.85 9/01/15 2,500 2,632,450
Metro Pier & Exposition Auth. Rev., McCormick Place,
F.G.I.C................................................... Aaa
Zero 6/15/14 15,000D 4,469,550
Village of Robbins, Cook City, Robbins Res. Rec............. NR
9.25 10/15/14 22,000 23,711,380
Winnebago Cnty. Hsg. Fin. Corp., Park Tower Assoc. Sec. 8... NR
8.125 1/01/11 4,437 4,545,244
--------------
95,492,557
--------------
Indiana--1.5%
Bluffton Econ. Dev. Rev., Kroger Co. Proj................... Ba2
7.85 8/01/15 7,500 7,849,050
Wabash Econ. Dev. Rev. Bonds, Connell....................... NR
8.50 11/24/17 7,250 7,713,493
--------------
15,562,543
--------------
Iowa--1.0%
Iowa Fin. Auth., Hlth. Care Facs. Rev., Mercy Hlth.
Initiatives............................................... NR
9.95 7/01/19 10,000 10,561,900
--------------
</TABLE>
-13- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
Kentucky--0.3%
Owensboro Kentucky Elec. Lt. & Pwr. Rev. Ser. B,
A.M.B.A.C................................................. Aaa
Zero 1/01/14 $ 5,000D $ 1,575,650
Owensboro Kentucky Elec. Lt. & Pwr. Rev. Ser. B,
A.M.B.A.C................................................. Aaa
Zero 1/01/16 6,650D 1,840,720
--------------
3,416,370
--------------
Louisiana--4.0%
Hodge Util. Rev., IDB Stone Container Corp.................. NR
9.00 3/01/10 10,000 10,501,100
New Orleans Home Mtge. Auth. Rev., Sngl. Fam. Mtge.,
G.N.M.A.,
Ser. A.................................................... Aaa
8.60 12/01/19 1,670# 1,804,301
New Orleans Ind. Dev. Rev................................... BB*
8.75 10/01/19 3,600 3,766,356
New Orleans Louisiana, Cap. Apprec, A.M.B.A.C............... Aaa
Zero 9/01/18 3,090 719,816
Port of New Orleans Ind. Dev. Rev., Continental Grain Co.
Proj...................................................... BB-*
7.50 7/01/13 5,000 5,038,050
St. Charles Parish, Poll. Ctrl. Rev.,
Louisiana Pwr. & Lt. Co................................... NR
8.25 6/01/14 10,000 10,800,900
Louisiana Pwr. & Lt. Co., Ser. 1989....................... Baa3
8.00 12/01/14 3,500 3,768,940
West Feliciana Parish Poll. Ctrl. Rev., Gulf St. Util. Co.
Proj...................................................... NR
9.00 5/01/15 5,250 5,898,480
--------------
42,297,943
--------------
Maryland--1.9%
Anne Arundel Cnty. First Mtge. Rev., Pleasant Living
Conv...................................................... NR
8.50 7/01/13 3,490 3,643,525
Maryland St. Hlth. & Higher Ed. Facs., Auth. Rev., Doctors
Cmnty. Hosp............................................... Baa
5.50 7/01/24 11,100 8,579,856
Northeast Waste Disp. Auth.,
Baltimore City Sludge Compositing Fac..................... NR
7.25 7/01/07 4,582 4,607,018
Baltimore City Sludge Compositing Fac..................... NR
8.50 7/01/07 3,400 3,487,448
--------------
20,317,847
--------------
Massachusetts--3.6%
Mass. St. Coll. Bldg. Project and Refunding Bonds........... A
7.50 5/01/14 1,750 2,062,935
Mass. St. Hlth. & Edl. Facs. Auth. Rev.,
Cardinal Cushing Gen. Hosp................................ NR
8.875 7/01/18 7,500 7,840,950
St. Josephs Hosp., Ser. C................................. NR
9.50 10/01/20 5,740 6,787,952
Valley Regl. Hlth. Sys., Ser. B........................... Baa
8.00 7/01/18 3,950 4,539,340
Mass. St. Hsg. Fin. Agcy. Rev., Residential, Hsg., Ser. B... BBB+*
8.10 8/01/23 335 347,867
Mass. St. Ind. Fin. Agcy. & Hlth. Care Fac. Rev., Hampden
Nursing Home Proj. A...................................... NR
9.75 10/01/17 3,810 3,429,000
Mass. St. Ind. Fin. Agcy. Rev.,
Continental Res., Ser. A.................................. NR
9.50 2/01/00 2,750 2,912,580
Merrimack College......................................... BBB-*
7.125 7/01/12 3,140 3,238,627
Randolph Hsg. Auth., Multifamily Hsg., Liberty Place Proj.
A, Ser. A................................................. NR
9.00 12/01/21 6,075 6,254,638
--------------
37,413,889
--------------
Michigan--6.5%
Grand Rapids Michigan Dev. Auth.
Cap. Apprec., M.B.I.A..................................... Aaa
Zero 6/01/10 3,000 1,193,790
Cap. Apprec., M.B.I.A..................................... Aaa
Zero 6/01/11 3,160 1,179,280
</TABLE>
-14- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
Michigan--(cont'd)
Cap. Apprec., M.B.I.A..................................... Aaa
Zero 6/01/12 $ 3,000 $ 1,049,580
Gratiot Cnty. Econ. Dev. Corp. Ltd., Oblig. Econ. Dev. Rev.,
Danley Die Proj. Connell.................................. NR
7.625 4/01/07 3,200 3,280,160
Holland Sch. Dist., Sch. Dist. Cap. Apprec., A.M.B.A.C...... Aaa
Zero 5/01/17 2,950 750,038
Lowell Area Sch., F.G.I.C................................... Aaa
Zero 5/01/14 5,000 1,543,500
Meridian Econ. Dev. Corp. Rev., Burcham Hills Retirement
Fac....................................................... NR
9.625 7/01/19 2,875 3,134,584
Michigan St Strategic Fund Ltd. Oblig. Rev., Great Lakes
Pulp & Fibre Project...................................... NR
10.25 12/01/16 20,000 21,297,600
Michigan St. Hosp. Fin. Auth. Rev., Saratoga Cmnty. Hosp.,
Ser. A.................................................... NR
8.75 6/01/10 7,100 7,355,103
Michigan Stragitic Fund, Gennese Pwr. Station............... NR
7.50 1/01/21 12,000 11,691,840
Monroe Cnty. Poll. Ctrl. Rev., Detroit Edison Co. Proj.,
Ser. A.................................................... Baa1
7.75 12/01/19 8,000 8,566,400
Romulus Michigan Cmnty. Sch., F.G.I.C....................... Aaa
Zero 5/01/21 5,000 973,850
Wayne Cnty. Bldg. Auth., Ser. A............................. Baa
8.00 3/01/17 3,500 4,084,955
West Ottawa Pub. Sch. Dist.,
F.G.I.C................................................... Aaa
Zero 5/01/15 4,825 1,394,762
F.G.I.C................................................... Aaa
Zero 5/01/18 3,215 764,688
--------------
68,260,130
--------------
Minnesota--1.0%
Minneapolis St. Paul Hsg. Fin. Brd., Multifamily Rev.,
Riverside Plaza, G.N.M.A.................................. AAA*
8.25 12/20/30 4,000D 4,281,320
Southern Minnesota Mun. Pwr. Agcy. Supply Sys.,
Ser. A, M.B.I.A........................................... Aaa
Zero 1/01/19 25,875# 6,166,789
Ser. A, M.B.I.A........................................... Aaa
Zero 1/01/20 1,500 336,480
--------------
10,784,589
--------------
Mississippi--1.8%
Claiborne Cnty. Poll. Ctrl. Rev., Middle So. Energy Sys.,
Ser. A.................................................... NR
9.50 12/01/13 10,350 11,758,428
Ser. C.................................................... NR
9.875 12/01/14 6,100 7,003,044
--------------
18,761,472
--------------
Missouri--0.7%
St. Louis Cnty. Ind. Dev. Auth. Rev.,
Conv. & Sports Complex, Ser. C............................ NR
7.90 8/15/21 4,250 4,533,687
Soemm Proj................................................ NR
10.25 7/01/08 2,435 2,504,398
--------------
7,038,085
--------------
Nebraska--0.3%
Nebraska Invest. Fin. Auth., G.N.M.A., Sngl. Fam. Mtge.
Rev., Ser. I, M.B.I.A..................................... Aaa
8.125 8/15/38 2,695# 2,839,236
--------------
New Hampshire--3.0%
New Hampshire Higher Edl. & Hlth. Facs. Auth.,
Antioch College........................................... NR
7.875 12/01/22 5,530 5,859,698
Havenwood/Heritage Heights................................ NR
9.75 12/01/19 7,765 8,461,909
</TABLE>
-15- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
New Hampshire--cont'd
New Hampshire St. Ind. Dev. Auth., Poll. Ctrl. Rev.,
Ser. A.................................................... Baa3
8.00 12/01/14 $ 4,125 $ 4,292,970
Proj. A................................................... Baa3
7.65 5/01/21 12,000 12,517,800
--------------
31,132,377
--------------
New Jersey--3.0%
Hudson Cnty. Impvt. Auth., Solid Waste Sys.................. BBB-*
7.10 1/01/20 10,000 9,339,900
New Jersey St. Econ. Dev. Auth. Rev., 1st Mtge.,
Fellowship Village Project A.............................. NR
9.25 1/01/25 11,500 11,652,720
Keswick Pines Proj.......................................... NR
7.75 1/01/01 10,845 10,880,789
--------------
31,873,409
--------------
New York--4.2%
Met. Trans. Auth. Facs. Rev., F.G.I.C., Ser. N.............. Aaa
Zero 7/01/13 8,340D 2,822,923
Nassau Cnty. Ind. Dev. Agcy. Rev., S&S Incinerator Jt.
Venture Proj.............................................. NR
9.00 1/01/07 8,000DD 4,640,000
New York City Ind. Dev. Agcy., Mesorah Publications Ltd..... NR
10.25 3/01/19 1,950 2,168,459
New York City Ind. Dev. Agcy., Spec. Fac. Rev., Amer.
Airlines Inc.............................................. Baa2
8.00 7/01/20 3,320 3,482,215
New York Hosp. Rev., Newark Wayne Cmnty. Hosp., Inc., Ser.
A......................................................... NR
7.60 9/01/15 5,380 5,398,238
New York St. Dorm. Auth. Rev., City Univ., Ser. A........... Baa1
5.75 7/01/13 7,000 6,465,060
New York St. Energy Resh. & Dev. Auth. Rev., Brooklyn Union
Gas Co.,
Ser. D, M.B.I.A........................................... Aaa
6.78 7/08/26 2,000@ 1,710,000
New York St. Mtge. Agcy. Rev., Homeowner Mtge., Ser. GG..... Aa
8.125 4/01/20 3,505# 3,712,461
Port Auth. of New York & New Jersey Spec. Oblig., U.S. Air,
La Guardia Airport........................................ B2
9.125 12/01/15 4,000 4,431,920
Triborough Bridge & Tunnel Auth. Rev.
General Purpose, Series A................................. Aa
6.00 1/01/10 5,000 5,077,600
General Purpose, Series Y................................. Aa
5.50 1/01/17 5,170 4,834,519
--------------
44,743,395
--------------
Ohio--2.8%
Cleveland Ohio Public Pwr. Sys. Rev.
First Mortgage Series A, M.B.I.A.......................... Aaa
Zero 11/15/09 3,000 1,285,710
First Mortgage Series A, M.B.I.A.......................... Aaa
Zero 11/15/12 1,000 345,450
First Mortgage Series A, M.B.I.A.......................... Aaa
Zero 11/15/13 1,500 487,725
Mahoning Valley Ohio San Dist. Wtr. Rev..................... NR
7.75 5/15/19 8,000 8,318,480
Montgomery Cnty. Hlth. Care Facs. Rev., Friendship Vlg.
Dayton, Proj. B........................................... NR
9.25 2/01/16 4,500 4,646,475
Ohio St Wtr. Dev. Auth. Poll. Ctrl. Facs., 1st Mrtge.
Cleveland Elec............................................ Ba2
8.00 10/01/23 3,000 3,078,750
Toledo Edison............................................. Ba2
8.00 10/01/23 7,000 7,183,750
Ohio St Wtr. Dev. Auth. Rev., Mid America Waste Systems
Inc....................................................... NR
7.75 9/01/07 3,850 3,918,222
--------------
29,264,562
--------------
</TABLE>
-16- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
Pennsylvania--7.0%
Allegheny Cnty. Hosp. Dev. Auth. Rev., West Penn. Hosp.
Hlth. Proj................................................ NR
8.50 1/01/20 $ 2,800 $ 3,091,676
Berks Cnty. Mun. Auth. Rev.,
Adventist Living Ctrs. Proj............................... NR
11.00 12/01/15 367DD 88,191
Alvernia Coll. Proj....................................... NR
7.75 11/15/16 5,240 5,626,922
Chartiers Valley Ind. & Coml. Dev. Auth. Rev., Friendship
Village/South Hills....................................... NR
9.50 8/15/18 3,750 4,040,063
Dauphin County Gen. Auth. Hosp. Rev., Northwest Med. Center
Project................................................... NR
8.625 10/15/13 6,675 6,598,771
Lancaster Cnty. Solid Waste Mgmt., Res. Rec. Auth. Sys.
Rev., Ser. A.............................................. A
8.50 12/15/10 5,965 6,292,479
North Umberland Cnty. Ind. Dev. Auth. Rev., Roaring Creek
Wtr....................................................... NR
6.375 10/15/23 3,700 3,308,022
Penn. Hsg. Fin. Agcy.,
Sngl. Fam. Mtge. Rev...................................... Aa
7.604 4/01/25 1,050@ 939,750
Sngl. Fam. Mtge. Rev., Ser. 27............................ Aa
8.15 10/01/21 3,460 3,685,973
Penn. St. Higher Edl. Facs. Auth. Rev., Med. Coll. of
Pennsylvania, Ser. A...................................... Baa
8.375 3/01/11 5,200 5,496,452
Pennsylvania Econ. Dev. Fin. Auth. Rev., Ponderosa Fibres
Project, Ser. A........................................... NR
9.25 1/01/22 10,000 10,047,000
Philadelphia Wtr. & Waste Auth. Rev.,
M.B.I.A................................................... Aaa
6.25 8/01/08 3,250 3,448,607
M.B.I.A................................................... Aaa
6.25 8/01/10 2,500 2,607,450
M.B.I.A................................................... Aaa
6.25 8/01/12 3,000 3,118,980
M.B.I.A................................................... Aaa
5.00 6/15/18 5,005D 4,310,256
M.B.I.A................................................... Aaa
5.00 6/15/19 2,200D/# 1,888,744
Shenango Valley Hosp. Auth. Rev., Osteopathic Hosp. Med.
Ctr....................................................... BBB+*
7.875 4/01/10 4,600 4,734,044
Wilkes Barre Gen. Mun. Auth. Coll. Rev.,
Misericordia Coll., Ser. A................................ NR
7.75 12/01/12 1,245 1,329,013
Misericordia Coll., Ser. B................................ NR
7.75 12/01/12 2,545 2,716,736
--------------
73,369,129
--------------
Puerto Rico--1.8%
Puerto Rico Elec. Pwr. Auth., Pwr. Rev. Refunding Bonds,
Ser. S.................................................... Baa1
6.125 7/01/09 7,375 7,447,349
Puerto Rico Tel. Auth. Rev.,
M.B.I.A., Ser. I.......................................... Aaa
5.967 1/25/07 6,500@ 6,215,625
M.B.I.A., Ser. I.......................................... Aaa
6.389 1/16/15 6,150@ 5,519,625
--------------
19,182,599
--------------
Rhode Island--2.2%
Rhode Island Depositors Econ. Protn. Corp., Sub. Gen.
Oblig., Ser. B............................................ NR
10.00 7/01/07 4,903 5,405,179
Rhode Island Hsg. & Mtge. Fin. Corp., Homeownership
Opportunity, Ser. 1A...................................... A1
8.20 10/01/17 6,000 6,379,800
Rhode Island Redev. Agcy., Ser. A........................... NR
8.00 9/01/24 11,000 11,286,660
--------------
23,071,639
--------------
South Carolina--0.9%
Lee Cnty. Ind. Dev. Rev., Mid American Waste System......... NR
7.00 9/15/13 5,450 5,164,256
So. Carolina St. Hsg. Fin. & Dev. Auth., Homeownership
Mtge...................................................... Aa
7.75 7/01/22 4,345# 4,560,599
--------------
9,724,855
--------------
</TABLE>
-17- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
South Dakota--0.6%
So. Dakota Econ. Dev. Fin. Auth.,
Dakota Park............................................... NR
10.25 1/01/19 $ 5,115 $ 4,705,800
Lomar Dev. Co. Proj....................................... NR
10.25 8/01/08 1,300 1,355,367
--------------
6,061,167
--------------
Tennessee--1.4%
Knox Cnty. Hlth. & Edl. Facs. Rev., Baptist Hlth. Hosp...... NR
8.50 4/15/04 7,055 7,570,932
Rutherford Cnty. Hlth. & Edl. Facs. Rev., 1st Mtg........... NR
9.50 12/01/19 7,300 7,547,543
--------------
15,118,475
--------------
Texas--4.7%
Beaumont Hsg. Fin. Corp., Sngl. Fam. Mtge. Rev.............. A
9.20 3/01/12 2,080 2,320,386
Bell Cnty. Hlth. Facs. Dev. Corp.,
Adventist Living Tech., Inc., Ser. A...................... NR
10.50 6/15/18 5,540 5,207,600
Harris Cnty. Texas Cultural Ed. Facs. Fin. Corp. Rev. Space
Ctr., Houston Proj........................................ NR
9.25 8/15/15 7,000 5,670,000
Houston Texas Wtr. & Swr. Sys. Rev., Ser. C................. Aaa
Zero 12/01/10 5,000 1,929,800
New Braunfels Texas Independent School District
Cap. Apprec............................................... Aaa
Zero 2/01/08 2,365 1,109,658
Cap. Apprec............................................... Aaa
Zero 2/01/09 2,365 1,033,268
Cap. Apprec............................................... Aaa
Zero 2/01/12 2,365 844,542
Cap. Apprec............................................... Aaa
Zero 2/01/13 1,365 456,811
Port Corpus Christi Ind. Dev. Corp., Valero Refining & Mfg.
Co., Ser. A............................................... Baa3
10.25 6/01/17 1,300 1,452,360
Retama Dev. Corp., Spec. Fac., Retama Park Racetrack........ NR
8.75 12/15/18 7,500 7,462,500
Round Rock Texas Independent School District................ Aaa
Zero 8/15/11 4,385 1,615,960
San Antonio Texas Electric & Gas Rev., Ser. B, F.G.I.C...... Aaa
Zero 2/01/09 5,000 2,184,500
San Antonio Texas Electric & Gas Rev., Cap. Apprec., Ser. B,
F.G.I.C................................................... Aaa
Zero 2/01/12 7,500 2,678,250
Tarrant Cnty. Hlth. Facs. Dev. Corp., Rev., Fndtn. Proj..... NR
10.25 9/01/19 5,000 5,351,450
Texas Mun. Pwr. Agcy. Rev., M.B.I.A......................... Aaa
Zero 9/01/15 15,000 4,247,250
Texas St. Water Development,
Series A.................................................. Aa
5.25 8/01/20 3,135 2,771,591
Series C.................................................. Aa
5.75 8/01/18 2,600 2,499,874
--------------
48,835,800
--------------
U. S. Virgin Islands--0.2%
Virgin Islands Terr., Hugo Ins. Claims Fund Proj., Ser.
91........................................................ NR
7.75 10/01/06 2,195 2,350,604
--------------
Virginia--1.7%
Pittsylvania Cnty. Virginia Ind. Dev. Auth. Rev.
Multitrade................................................ NR
7.45 1/01/09 5,500 5,619,515
Pittsylvania Cnty. Virginia Ind. Dev. Auth., Rev.
Multitrade................................................ NR
7.55 1/01/19 12,000 12,174,600
--------------
17,794,115
--------------
Washington--1.5%
Bellevue Washington Conv. Ctr. Auth.
Obligation Revenue........................................ Aaa
Zero 2/01/10 870 349,792
Obligation Revenue........................................ Aaa
Zero 2/01/11 1,200 452,208
Obligation Revenue........................................ Aaa
Zero 2/01/12 1,300 458,978
Obligation Revenue........................................ Aaa
Zero 2/01/14 1,385 428,727
</TABLE>
-18- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
Washington--cont'd
Washington St. Pub. Pwr. Sup. Sys. Rev.,
Nuclear Proj. No. 1, Ser. B............................... Aa
7.25 7/01/09 $ 5,000D $ 5,474,800
Nuclear Proj. No. 3....................................... Aa
Zero 7/01/16 10,000 2,363,100
Nuclear Proj. No. 3....................................... Aa
Zero 7/01/17 5,000 1,101,400
Nuclear Proj. No. 3, Ser. B............................... Aa
7.125 7/01/16 5,000D 5,410,400
--------------
16,039,405
--------------
West Virginia--1.7%
So. Charleston Ind. Dev. Rev., Union Carbide Chem. &
Plastics Co............................................... Baa2
8.00 8/01/20 2,450 2,609,960
Weirton Poll. Ctrl. Rev., Weirton Steel Proj................ B2
8.625 11/01/14 4,000 4,146,080
West Virginia St. Hsg. Dev. Auth., Fund Hsg. Fin., Ser. A... Aa1
7.95 5/01/17 8,030 8,522,400
West Virginia St. Pkwys. Econ. Dev. & Tourism Auth.,
F.G.I.C................................................... Aaa
7.068 5/16/19 3,250@ 2,981,875
--------------
18,260,315
--------------
Total Long Term Investments (cost
$1,007,878,109).......................................................
1,030,956,770
--------------
SHORT TERM INVESTMENTS--0.9%
Kentucky--0.1%
Daviess Cnty. Solid Wst. Disp. Fac. Rev., Scott Paper Co.
Proj. Ser. 94b, F.R.D.D................................... P1
5.10 5/24/95 800 800,000
--------------
Louisiana--0.4%
Plaquemines Parish Envir. Rev.,
Exploration & Oil Incorporated Project, Ser. 94,
F.R.D.D................................................... P1
5.10 10/24/95 1,600 1,600,000
West Baton Rouge Parish Ind. Dist. Rev., Dow Chemical Co.
Proj., F.R.D.D.,
Ser. 93................................................... P1
5.10 12/23/95 3,100 3,100,000
--------------
4,700,000
--------------
Tennessee--0.2%
Maury County Ind. Dev. Brd., Sewage Disposal Facility,
F.R.W.D................................................... VMIG2
4.85 6/27/95 2,000 2,000,000
--------------
Texas--0.1%
Brazos River Harbor Nav. Dist. Harbor Rev., Dow Chemical Co.
Proj., F.R.D.D., Ser. 93.................................. A1
5.10 5/23/95 600 600,000
--------------
Virginia--0.1%
King George Cnty. Ind. Dev. Auth., Birchwood Pur. Project
Ser. 94B, F.R.D.D......................................... A1+*
5.10 10/14/95 1,400 1,400,000
--------------
Total Short Term Investments (cost
$9,500,000)..........................................................
9,500,000
--------------
Total Investments--98.8% (cost $1,017,378,109; Note
4).................................................. 1,040,456,770
Other assets in excess of
liabilities--1.2%.............................................................
12,976,954
--------------
Net
Assets--100%.................................................................
....................... $1,053,433,724
--------------
--------------
</TABLE>
-19- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
(a) The following abbreviations are used in portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation
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**
G.N.M.A.--Government National Mortgage Association
M.B.I.A.--Municipal Bond Insurance Association
D Portion of or entire principal amount pledged as initial margin on financial
futures contracts.
DD Issuer in default, non-income producing security.
* 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.
# Indicates a when-issued security.
@ Inverse floating rate bond. The coupon is inversely indexed to a floating
interest rate. The rate shown is the rate at period end.
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, 1995
-----------------
<S>
<C>
Investments, at value (cost
$1,017,378,109)............................................ $ 1,040,456,770
Cash.........................................................................
.......... 81,850
Accrued interest
receivable............................................................
21,398,702
Receivable for investments
sold........................................................ 11,108,980
Receivable for Fund shares
sold........................................................ 2,427,397
Due from broker-variation
margin....................................................... 62,500
Deferred
expenses......................................................................
33,454
-----------------
Total
assets.........................................................................
1,075,569,653
-----------------
Liabilities
Payable for investments
purchased......................................................
17,241,836
Payable for Fund shares
reacquired.....................................................
2,083,016
Dividends
payable......................................................................
1,935,000
Distribution fee
payable...............................................................
399,061
Management fee
payable.................................................................
393,178
Accrued
expenses.......................................................................
83,838
-----------------
Total
liabilities....................................................................
22,135,929
-----------------
Net
Assets.......................................................................
...... $ 1,053,433,724
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at
par................................................ $ 982,659
Paid-in capital in excess of
par..................................................... 1,051,068,176
-----------------
1,052,050,835
Accumulated net realized loss on
investments......................................... (21,832,397)
Net unrealized appreciation on
investments........................................... 23,215,286
-----------------
Net assets, April 30,
1995........................................................... $
1,053,433,724
-----------------
-----------------
Class A:
Net asset value and redemption price per share ($115,500,580 / 10,770,920
shares of
beneficial interest issued and
outstanding)........................................ $10.72
Maximum sales charge (3% of offering
price).......................................... .33
-----------------
Maximum offering price to
public..................................................... $11.05
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per share ($934,724,978
/
87,195,815 shares of beneficial interest issued and
outstanding)................... $10.72
-----------------
-----------------
Class C:
Net asset value, offer price and redemption price per share ($3,208,166 /
299,208
shares of beneficial interest issued and
outstanding).............................. $10.72
-----------------
-----------------
</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 1995
------------
<S> <C>
Income
Interest............................ $ 81,396,363
------------
Expenses
Management fee, net of waiver of
$172,278.......................... 5,279,570
Distribution fee--Class A........... 65,207
Distribution fee--Class B........... 5,120,663
Distribution fee--Class C........... 7,743
Transfer agent's fees and
expenses.......................... 530,000
Reports to shareholders............. 260,000
Custodian's fees and expenses....... 216,000
Registration fees................... 50,000
Legal fees.......................... 40,000
Insurance expense................... 37,000
Audit fee........................... 16,500
Trustees' fees...................... 15,000
Miscellaneous....................... 7,161
------------
Total expenses.................... 11,644,844
------------
Net investment income................. 69,751,519
------------
Realized and Unrealized Gain (Loss) on
Investments
Net realized gain (loss) on:
Investment transactions............. (18,935,337)
Financial futures contract
transactions...................... 3,451,285
------------
(15,484,052)
------------
Net change in unrealized
appreciation/(depreciation) on:
Investments......................... 11,824,913
Financial futures contracts......... (966,500)
------------
10,858,413
------------
Net loss on investments............... (4,625,639)
------------
Net Increase in Net Assets Resulting
from Operations....................... $ 65,125,880
------------
------------
</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 1995 1994
-------------- --------------
<S> <C> <C>
Operations
Net investment
income............. $ 69,751,519 $ 71,607,244
Net realized loss on
investment
transactions....... (15,484,052) (5,680,677)
Net change in
unrealized
appreciation/depreciation
of investments..... 10,858,413 (39,373,092)
-------------- --------------
Net increase in net
assets resulting
from operations.... 65,125,880 26,553,475
-------------- --------------
Dividends and
distributions:
Dividends to
shareholders from
net investment
income
Class A............ (4,456,405) (3,401,705)
Class B............ (65,229,614) (68,205,539)
Class C............ (65,500) --
-------------- --------------
(69,751,519) (71,607,244)
-------------- --------------
Distributions to
shareholders in
excess of net
investment income
Class A............ (2,229) --
Class B............ (47,585) --
Class C............ (60) --
-------------- --------------
(49,874) --
-------------- --------------
Distributions to
shareholders from
net realized gains
Class A............ -- (35,027)
Class B............ -- (724,132)
Class C............ -- --
-------------- --------------
-- (759,159)
-------------- --------------
Series share transactions (net
of share conversions) (Note 5)
Net proceeds from
shares sold........ 135,404,221 307,757,433
Net asset value of
shares issued in
reinvestment of
dividends and
distributions...... 31,059,195 32,076,014
Cost of shares
reacquired......... (262,484,590) (211,899,598)
-------------- --------------
Net increase
(decrease) in net
assets from Series
share
transactions....... (96,021,174) 127,933,849
-------------- --------------
Total increase
(decrease)........... (100,696,687) 82,120,921
Net Assets
Beginning of year...... 1,154,130,411 1,072,009,490
-------------- --------------
End of year............ $1,053,433,724 $1,154,130,411
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-22-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND Portfolio of Investments
INSURED SERIES April 30, 1995
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
LONG TERM INVESTMENTS--95.7%
Alabama--1.3%
Huntsville Solid Waste Disp. Auth., F.G.I.C.................. Aaa
7.00 % 10/01/08 $ 2,000 $ 2,137,600
Mobile Wtr. & Swr. Rev., A.M.B.A.C........................... Aaa
5.00 1/01/13 4,840 4,292,499
Univ. Alabama Rev., Birmingham Hosp., M.B.I.A................ Aaa
5.00 10/01/14 2,500 2,199,700
------------
8,629,799
------------
Alaska--1.5%
Alaska St. Energy Auth. Pwr. Rev., Bradley Lake Hydro, 1st
Ser., A.M.B.A.C............................................ Aaa
7.25 7/01/16 2,000 2,143,580
Anchorage Hosp. Rev., Sisters of Providence, A.M.B.A.C....... Aaa
7.125 10/01/05 5,000 5,527,950
North Slope Boro. Cap. Apprec., Ser. B, C.G.I.C.............. Aaa
Zero 6/30/05 4,000 2,198,760
------------
9,870,290
------------
Arizona--4.4%
Maricopa Cnty. Ind. Dev. Auth. Rev.,
Hosp. Fac., John C. Lincoln Hosp., F.S.A................... Aaa
7.00 12/01/00 2,740 2,938,075
Hosp. Fac., John C. Lincoln Hosp., F.S.A................... Aaa
7.50 12/01/13 2,250 2,490,232
Maricopa Cnty. Unified Sch. Dist., No.69, Paradise Valley,
Ser. E, F.G.I.C............................................ Aaa
6.80 7/01/12 3,700 4,120,024
Pima Cnty. Ind. Dev. Auth. Rev., Tucson Elec. Pwr. Co.,
F.S.A...................................................... Aaa
7.25 7/15/10 14,000# 15,325,800
Tucson, Gen. Oblig., Ser. 1984, F.G.I.C...................... Aaa
7.625 7/01/14 3,140 3,776,949
------------
28,651,080
------------
California--10.4%
Brea Redev. Agncy., Proj. AB, M.B.I.A........................ Aaa
5.75 8/01/23 2,000 1,877,940
California St. Gen. Oblig.,
M.B.I.A.................................................... Aaa
6.30 9/01/08 6,000 6,338,340
F.G.I.C.................................................... Aaa
6.60 2/01/11 8,510 9,132,847
Victor Valley Union H.S. Dist.,
Gen. Oblig., M.B.I.A....................................... Aaa
Zero 9/01/10 2,635 1,048,150
Gen. Oblig., M.B.I.A....................................... Aaa
Zero 9/01/11 3,780 1,404,724
Gen. Oblig., M.B.I.A....................................... Aaa
Zero 9/01/13 4,450 1,439,175
Gen. Oblig., M.B.I.A....................................... Aaa
Zero 9/01/18 4,240 974,394
California St. Hlth. Facs. Fin. Auth. Rev., Catholic Hlth.
Facs., A.M.B.A.C........................................... Aaa
5.00 7/01/14 5,000 4,362,300
Contra Costa Wtr. Dist., Wtr. Rev., Ser. E, A.M.B.A.C........ Aaa
6.25 10/01/12 1,455 1,517,972
San Diego Cnty. Wtr. Auth. Wtr. Rev., Cert. of Part.,
F.G.I.C.................................................... Aaa
5.56 4/26/06 11,600@ 11,562,068
San Jose Redev.,
Rev. Ref. Tax Alloc., M.B.I.A.............................. Aaa
6.00 8/01/07 3,050 3,154,066
Rev. Ref. Tax Alloc., M.B.I.A.............................. Aaa
6.00 8/01/08 4,340 4,455,444
Rev. Ref. Tax Alloc., M.B.I.A.............................. Aaa
6.00 8/01/09 3,250 3,318,445
San Pablo Redev. Agncy., Tax Alloc., F.G.I.C................. Aaa
5.25 12/01/23 3,000 2,613,120
Santa Margarita/Dana Point Auth., Impt. Dist.,
M.B.I.A.................................................... Aaa
7.25 8/01/10 2,180 2,494,509
M.B.I.A.................................................... Aaa
7.25 8/01/11 1,750 2,002,560
</TABLE>
-23- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
California--cont'd
So. Orange Cnty. Pub. Fin. Auth.,
Foothill Area Proj., F.G.I.C............................... Aaa
8.00 8/15/08 $ 2,500D $ 3,009,725
Foothill Area Proj., F.G.I.C............................... Aaa
6.50 8/15/10 2,725 2,893,568
West & Central Basin Fin. Auth. Rev., Central Basin Proj.,
F.G.I.C.................................................... Aaa
5.00 8/01/13 3,840 3,347,712
------------
66,947,059
------------
Colorado--0.2%
Jefferson Cnty. Sngl. Fam. Mtge. Rev., Ser. A, M.B.I.A....... Aaa
8.875 10/01/13 970 1,044,787
------------
Delaware--0.8%
Delaware St. Econ. Dev. Auth. Rev., Delmarva Pwr. & Lt., Ser.
A, M.B.I.A................................................. Aaa
7.60 3/01/20 5,000 5,439,350
------------
District Of Columbia--2.3%
Dist. of Columbia Met. Area Transit Auth.,
Gross Rev., F.G.I.C........................................ Aaa
6.00 7/01/09 2,400 2,450,352
Gross Rev., F.G.I.C........................................ Aaa
6.00 7/01/10 1,500 1,526,805
Gross Rev., F.G.I.C........................................ Aaa
5.25 7/01/14 5,000 4,502,050
Dist. of Columbia Rev., Ser. A, M.B.I.A...................... Aaa
6.50 6/01/10 6,000 6,168,300
------------
14,647,507
------------
Florida--1.1%
Gulf Breeze Local Gov't. Loan Proj., Ser. 85B, F.G.I.C....... Aaa
8.00 12/01/15 1,500 1,674,420
Univ. Cmnty. Hosp. Inc., Hosp. Rev., F.S.A................... Aaa
7.375 9/01/07 5,000 5,639,550
------------
7,313,970
------------
Georgia--5.4%
Atlanta Arpt. Facs. Rev., A.M.B.A.C.......................... Aaa
6.50 1/01/09 2,000 2,138,540
Atlanta Arpt. Facs. Rev., A.M.B.A.C.......................... Aaa
6.50 1/01/10 2,000 2,134,800
Burke Cnty. Dev. Auth., Oglethorpe Pwr. Corp., 1st Mtg.,
M.B.I.A.................................................... Aaa
8.00 1/01/22 11,000 12,767,920
De Kalb Cnty. Hsg. Auth., Sngl. Fam. Mtge. Rev., G.N.M.A..... AAA*
7.70 2/01/24 3,075# 3,261,099
Fulton Cnty. Hosp. Auth. Rev., Northside Hosp., M.B.I.A...... Aaa
5.375 10/01/12 2,790 2,571,794
Georgia St., Gen. Oblig.,
Ser. D..................................................... Aaa
6.75 8/01/07 3,750 4,224,375
Ser. F..................................................... Aaa
6.50 12/01/09 7,000 7,673,400
------------
34,771,928
------------
Illinois--2.6%
Chicago Residential Mtge. Rev., Ser. B, M.B.I.A.............. Aaa
Zero 10/01/09 9,000 3,430,170
City of Chicago, Cook Cnty., Gen. Oblig., F.G.I.C............ Aaa
5.375 1/01/13 3,400 3,090,804
Kane and De Kalb Cntys. Comnty. Unit Sch.,
District No. 301, A.M.B.A.C................................ Aaa
Zero 12/01/07 2,265 1,075,921
District No. 301, A.M.B.A.C................................ Aaa
Zero 12/01/09 1,740 715,888
Onterie Ctr. Hsg. Fin. Corp. Mtge. Rev.,
Ser. A, M.B.I.A............................................ Aaa
7.00 7/01/12 1,575 1,625,305
Ser. A, M.B.I.A............................................ Aaa
7.05 7/01/27 6,400 6,608,896
------------
16,546,984
------------
</TABLE>
-24- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
Indiana--2.9%
Indianapolis Arpt. Auth. Rev., M.B.I.A....................... Aaa
9.00 7/01/15 $ 2,450# $ 2,625,151
Marion Cnty. Hosp. Auth. Facs. Rev., A.M.B.A.C............... Aaa
8.625 10/01/12 8,500# 9,667,475
Rockport Poll. Ctrl. Rev., Ind. & Mich. Elec. Co., Ser. A,
B.I.G...................................................... Aaa
9.25 8/01/14 6,000D 6,194,760
------------
18,487,386
------------
Kansas--0.4%
Sedgwick Cnty. Mtge. Loan Rev., Ser. B, A.M.B.A.C............ Aaa
7.80 6/01/22 2,505 2,650,716
------------
Kentucky--1.7%
Kentucky St. Tpk. Auth. Econ. Dev. Revit. Projs.,
A.M.B.A.C.................................................. Aaa
6.50 7/01/08 8,000 8,671,600
Louisville & Jefferson Cnty. Regl. Arpt. Auth., Ser A,
M.B.I.A.................................................... Aaa
8.375 7/01/07 2,000 2,173,580
------------
10,845,180
------------
Louisiana--2.6%
Jefferson Parish Sales Tax Dist., Ser. A, F.G.I.C............ Aaa
6.75 12/01/06 5,000 5,351,300
Louisiana Hsg. Fin. Agncy., Sngl. Fam. Mtge., Ser. A.,
G.N.M.A.................................................... Aaa
7.80 12/01/26 8,000 8,715,040
New Orleans, Gen. Oblig., Cap. Apprec., A.M.B.A.C............ Aaa
Zero 9/01/09 4,000 1,687,280
New Orleans, Gen. Oblig., Cap. Apprec., A.M.B.A.C............ Aaa
Zero 9/01/18 3,000 698,850
------------
16,452,470
------------
Massachusetts--1.6%
Mass. Bay Trans. Auth., Gen. Trans., Ser. A, M.B.I.A......... Aaa
5.50 3/01/09 4,000 3,890,200
Mass. Hlth. & Edl. Facs. Auth. Rev., Mass. Gen. Hosp, Ser.
F., A.M.B.A.C.............................................. Aaa
6.25 7/01/12 1,500 1,546,200
Mass. St. Hsg. Fin. Agcy., Hsg. Rev., Ser. A, B.I.G.......... Aaa
7.75 12/01/19 1,500 1,557,750
Mass. St. Hlth. & Edl. Facs. Auth. Rev., Fallon Hlthcare,
Ser. A, C.G.I.C............................................ Aaa
6.875 6/01/11 3,000 3,189,780
------------
10,183,930
------------
Michigan--4.4%
Michigan St. Bldg. Auth. Rev., A.M.B.A.C..................... Aaa
5.20 10/01/09 8,050 7,492,457
Michigan St. Hosp. Fin. Auth. Rev., Mid Michigan, M.B.I.A.... Aaa
7.50 6/01/15 2,350 2,576,352
Michigan St. Hsg. Dev. Auth., Ser. A, F.G.I.C................ Aaa
7.70 7/01/18 1,500 1,581,090
Monroe Cnty. Poll. Ctrl. Rev.,
Detroit Edison Co. Proj., Ser. I, A.M.B.A.C................ Aaa
7.30 9/01/19 3,250 3,540,615
Detroit Edison Co., Proj. 1, F.G.I.C....................... Aaa
7.65 9/01/20 8,000 8,772,960
Saginaw Hosp. Fin. Auth. Hosp. Rev., St. Luke's Hosp., Ser.
C, M.B.I.A................................................. Aaa
6.50 7/01/11 4,000 4,156,040
------------
28,119,514
------------
Minnesota--1.4%
St. Louis Park Hlth. Facs., Hlthsys. Oblig. Group, Ser. C,
A.M.B.A.C.................................................. Aaa
5.20 7/01/16 10,000 8,958,900
------------
Mississippi--1.9%
Harrison Cnty. Wastewater Mgmt. Dist. Rev., F.G.I.C.......... Aaa
6.50 2/01/06 2,400 2,534,136
Mississippi Hosp. Equip. & Facs. Auth. Rev., Baptist Med.
Ctr., M.B.I.A.............................................. Aaa
7.40 5/01/07 2,000 2,241,560
Mississippi Hsg. Fin. Corp., Sngl. Fam. Mtge. Rev., F.G.I.C.,
Ser. A..................................................... Aaa
7.80 10/15/16 2,210 2,285,737
Mississippi St. Hwy. Ref. Bd................................. Aaa
6.20 2/01/08 5,000 5,256,300
------------
12,317,733
------------
</TABLE>
-25- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
Missouri--1.1%
Missouri St. Hlth. & Edl. Facs. Auth. Rev., M.B.I.A.,
SSM Healthcare, Ser. AA.................................... Aaa
6.25 6/01/16 $ 3,750 $ 3,791,138
St. Lukes Hlth. Sys........................................ Aaa
5.10 11/15/13 4,000 3,571,480
------------
7,362,618
------------
Montana--1.7%
Forsyth Poll. Ctrl. Rev.,
Puget Sound Pwr. & Lt. Co., Ser. A, A.M.B.A.C.............. Aaa
7.05 8/01/21 2,000 2,152,980
Washington Wtr. Pwr. Proj., M.B.I.A........................ Aaa
7.125 12/01/13 8,000D 8,567,840
------------
10,720,820
------------
Nebraska--1.0%
Nebraska Invest. Fin. Auth., G.N.M.A.,
Sngl. Fam. Mtge. Rev., Ser. B, F.G.I.C..................... Aaa
8.00 7/15/17 1,980 2,076,327
Sngl. Fam. Mtge. Rev., Ser. I, M.B.I.A..................... Aaa
8.125 8/15/38 3,900# 4,108,728
------------
6,185,055
------------
New Jersey--6.2%
Garfield Sch. Dist., Cert. of Part., Wtr. Impvt. Dist. No.
31, B.I.G.................................................. Aaa
7.65 6/01/08 3,150D 3,462,165
Jersey City Swr. Auth.,
A.M.B.A.C.................................................. Aaa
6.00 1/01/10 2,585 2,645,618
A.M.B.A.C.................................................. Aaa
6.25 1/01/14 4,255 4,426,604
New Jersey Hlth. Care Facs. Fin. Auth. Rev.,
Allegany Hlth., Our Lady of Lourdes, M.B.I.A............... Aaa
5.125 7/01/13 1,500 1,361,970
Hackensack Med. Ctr., F.G.I.C.............................. Aaa
6.625 7/01/17 5,000 5,205,500
Irvington Gen. Hosp., M.B.I.A.............................. Aaa
9.625 8/01/25 2,500 2,597,800
New Jersey St. Hsg. & Mtge. Fin. Agcy. Rev., Ser. B,
M.B.I.A.................................................... Aaa
7.90 10/01/22 3,385# 3,566,673
New Jersey St. Tpke. Auth.
Ser. C, F.S.A.............................................. Aaa
6.50 1/01/16 4,000 4,274,080
Ser. C, M.B.I.A............................................ Aaa
6.50 1/01/16 11,730 12,533,740
------------
40,074,150
------------
New Mexico--0.9%
Socorro Hosp. Sys. Rev., Cmnty. Hlth. Svcs., Ser. A,
M.B.I.A.................................................... Aaa
9.25 8/01/12 5,315D 5,515,163
------------
New York--6.2%
Erie Cnty. Wtr. Auth. Rev., A.M.B.A.C........................ Aaa
Zero 12/01/17 770 151,359
Islip Res. Rec., Ser. B, A.M.B.A.C........................... Aaa
7.20 7/01/10 1,750 1,990,975
New York City, Ser. D, M.B.I.A............................... Aaa
6.20 2/01/07 8,520 8,947,534
New York St. Dorm. Auth. Rev., Univ. Edl. Facs.,
A.M.B.A.C.................................................. Aaa
5.50 5/15/09 5,000 4,866,400
New York St. Energy Res. & Dev. Auth., Poll. Ctrl. Rev.,
F.G.I.C.................................................... Aaa
7.375 10/01/14 4,000 4,370,200
New York St. Thrwy. Auth. Gen. Rev., Ser. B, M.B.I.A......... Aaa
5.00 1/01/14 10,420 9,172,830
Suffolk Cnty. Ind. Dev. Agcy., SW Swr. Sys. Rev., F.G.I.C.... Aaa
6.00 2/01/08 5,000 5,125,000
Suffolk Cnty. Wtr. Auth. Wtrwks. Rev., M.B.I.A............... Aaa
6.00 6/01/14 5,165 5,199,760
------------
39,824,058
------------
</TABLE>
-26- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
North Carolina--1.2%
North Carolina Mun. Pwr. Agcy. Elec. Rev., No. 1 Catawba,
M.B.I.A.................................................... Aaa
6.00 1/01/11 $ 7,500 $ 7,644,525
------------
Ohio--0.9%
Cleveland Pub. Pwr. Sys. Rev., Ser. A, M.B.I.A............... Aaa
Zero 11/15/11 2,685 993,396
Hamilton Elec. Rev., Ser. A, F.G.I.C......................... Aaa
6.00 10/15/12 5,085 5,088,407
------------
6,081,803
------------
Oklahoma--0.6%
Oklahoma St.Tpke. Auth. Rev., Ser. C, M.B.I.A................ Aaa
6.25 1/01/22 3,950 4,007,315
------------
Pennsylvania--6.8%
Allegheny Cnty. Arpt. Rev., Pittsburgh Int'l. Arpt., Ser. C,
M.B.I.A.................................................... Aaa
8.25 1/01/16 4,800D 5,274,672
North Umberland Cnty. Lease Auth. Rev., Correctional Facs.,
M.B.I.A.................................................... Aaa
Zero 10/15/10 7,500 3,033,450
Pennsylvania Intergov't. Coop. Auth. Spec. Tax Rev.,
M.B.I.A.................................................... Aaa
5.625 6/15/23 8,790 8,197,466
Pennsylvania St. Cert. Part., Ser. A, A.M.B.A.C.............. Aaa
5.00 7/01/15 8,740 7,631,943
Philadelphia Arpt. Sys. Rev., A.M.B.A.C...................... Aaa
9.00 6/15/15 6,750# 7,016,557
Philadelphia Mun. Auth. Rev., Criminal Justice Ctr., Ser. A,
M.B.I.A.................................................... Aaa
6.90 11/15/03 3,000 3,322,710
Philadelphia Wtr. & Waste Auth. Rev., M.B.I.A................ Aaa
5.50 6/15/15 4,500 4,184,055
Pittsburgh Gen. Oblig., Ser. B, F.G.I.C...................... Aaa
7.00 3/01/06 5,000 5,271,900
------------
43,932,753
------------
Puerto Rico--2.4%
Puerto Rico Tel. Auth. Rev.,
Ser. I, M.B.I.A............................................ Aaa
5.25 1/25/07 8,200@ 8,023,864
Ser. I, M.B.I.A............................................ Aaa
5.45 1/16/15 7,600@ 7,214,300
------------
15,238,164
------------
Rhode Island--1.1%
Rhode Island Hsg. & Mtge. Fin. Corp., M.B.I.A................ Aaa
7.875 10/01/22 6,500# 6,847,880
------------
South Carolina--0.4%
Berkeley Cnty. Wtr. & Swr. Rev., M.B.I.A..................... Aaa
6.50 6/01/06 2,500 2,651,300
------------
Tennessee--2.0%
Knox Cnty. Hlth Edl. Hosp. Facs. Rev., Ser. A, M.B.I.A....... Aaa
5.75 1/01/14 4,840 4,688,798
Tennessee Hsg. Dev. Agcy., B.I.G............................. Aaa
7.65 7/01/20 7,950 8,378,187
------------
13,066,985
------------
Texas--9.3%
Austin Util. Sys. Rev.,
A.M.B.A.C.................................................. Aaa
6.50 5/15/11 5,000 5,189,800
Ser. B, F.G.I.C............................................ Aaa
7.25 11/15/03 3,250 3,577,340
Brazos River Auth. Rev.,
Houston Lt. & Pwr., Ser. A, A.M.B.A.C...................... Aaa
6.70 3/01/17 5,000 5,240,350
Houston Lt. & Pwr., Ser. B, F.G.I.C........................ Aaa
7.20 12/01/18 1,000 1,090,050
</TABLE>
-27- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
Texas--cont'd
Corpus Christi Hsg. Fin. Corp., Sngl. Fam. Mtge., Ser. A,
M.B.I.A.................................................... Aaa
7.70 7/01/11 $ 2,310 $ 2,490,573
Harris Cnty. Toll Rd., Ser. A, F.G.I.C....................... Aaa
8.00 8/15/11 10,290D 12,654,436
Houston Arpt. Sys. Rev....................................... Aaa
7.20 7/01/13 3,900 4,517,487
Matagorda Cnty. Navigation Poll. Ctrl. Rev., Dist. No. 1,
A.M.B.A.C.................................................. Aaa
7.50 12/15/14 2,300 2,538,234
New Braunfels Ind. Sch. Dist. Gen. Oblig..................... Aaa
Zero 2/01/07 2,000 1,006,020
Round Rock Ind. Sch. Dist. Gen. Oblig., M.B.I.A.............. Aaa
Zero 8/15/11 4,300 1,584,636
Texas St. Mun. Pwr. Agcy. Rev.,
A.M.B.A.C.................................................. Aaa
6.75 9/01/12 3,960 4,189,521
F.G.I.C.................................................... Aaa
5.00 9/01/14 5,000 4,405,750
M.B.I.A.................................................... Aaa
Zero 9/01/13 12,300 3,970,932
M.B.I.A.................................................... Aaa
Zero 9/01/14 10,000 3,024,000
Texas St. Pub. Fin. Auth. Bldg. Rev., M.B.I.A................ Aaa
Zero 2/01/14 6,900 2,163,219
Texas Wtr. Res. Fin. Auth. Rev., A.M.B.A.C................... Aaa
7.50 8/15/13 2,000 2,107,260
------------
59,749,608
------------
Utah--1.3%
Intermountain Pwr. Agcy. Pwr. Supply Rev., Ser. A,
M.B.I.A.................................................... Aaa
5.00 7/01/12 9,250 8,184,308
------------
Virginia--1.2%
Arlington Cnty., Gen Oblig................................... Aaa
6.00 6/01/11 2,000 2,068,920
Southeastern Pub. Svc. Auth. Rev., Regl. Waste Sys.,
B.I.G...................................................... Aaa
7.00 7/01/13 3,000 3,280,410
Virginia Beach Auth. Hosp. Fac., A.M.B.A.C................... Aaa
6.00 2/15/10 1,220 1,236,604
Virginia Beach Auth. Hosp. Fac., A.M.B.A.C................... Aaa
6.00 2/15/13 1,455 1,464,356
------------
8,050,290
------------
Washington--4.5%
Washington Hlth. Care Facs. Auth., Tacoma Multicare Med.
Ctr., F.G.I.C.............................................. Aaa
7.875 8/15/11 5,000 5,477,850
Washington St. Pub. Pwr. Supply Sys.,
Nuclear Proj. No. 1, Ser. A, B.I.G......................... Aaa
7.00 7/01/04 5,000 5,414,050
Nuclear Proj. No. 2, Ser. A, M.B.I.A....................... Aaa
Zero 7/01/11 5,210 1,854,239
Nuclear Proj. No. 2, Ser. B, F.G.I.C....................... Aaa
7.25 7/01/03 3,000 3,324,450
Nuclear Proj. No. 3, Ser. B, F.G.I.C....................... Aaa
7.00 7/01/05 2,000 2,155,580
Nuclear Proj. No. 3, F.G.I.C............................... Aaa
Zero 7/01/08 4,500 1,989,990
Nuclear Proj. No. 3, Ser. C, F.S.A......................... Aaa
5.375 7/01/15 10,000 8,919,400
------------
29,135,559
------------
Total Long Term Investments (cost
$592,542,884)..........................................................
616,150,937
------------
SHORT TERM INVESTMENTS--1.7%
California--0.6%
California St. Poll. Ctrl. Fin. Auth. Rev., Delano Proj.,
Ser. 91, F.R.D.D........................................... P1
5.20 5/01/95 3,600 3,600,000
------------
Florida--0.8%
Dade Cnty. Ind. Dev. Auth., Pwr. & Lt. Co., Ser. 95,
F.R.D.D.................................................... P1
5.00 5/01/95 3,900 3,900,000
Hillsborough Cnty. Poll. Ctrl. Rev., Tampa Elec. Co. Proj.,
Ser. 93, F.R.D.D........................................... VMIG
5.00 5/01/95 1,500 1,500,000
------------
5,400,000
------------
</TABLE>
-28- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C>
<C> <C> <C> <C>
Texas--0.3%
Brazos River Harbor Nav. Dist. Harbor Rev., Dow Chemical Co.
Proj., Ser. 93, F.R.D.D.................................... P1
5.10 5/01/95 $ 1,900 $ 1,900,000
------------
Total Short Term Investments (cost
$10,900,000)..........................................................
10,900,000
------------
Total Investments--97.4% (cost $603,442,884; Note
4)..................................................... 627,050,937
Other assets in excess of
liabilities--2.6%..............................................................
16,922,059
------------
Net
Assets--100%.................................................................
........................ $643,972,996
------------
------------
</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.S.A.--Financial Security Assurance
G.N.M.A.--Government National Mortgage Association
M.B.I.A.--Municipal Bond Insurance Association
@ Inverse floating rate bond. The coupon is inversely indexed to a floating
interest rate. The rate shown is the rate at period end.
D Portion of or entire principal amount pledged as initial margin on financial
futures contracts.
# Indicates a when-issued security.
* 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.
The Fund's current Prospectus contains a description of Moody's and Standard &
Poor's ratings.
-29- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Assets
April 30, 1995
--------------
<S>
<C>
Investments, at value (cost
$603,442,884)................................................. $ 627,050,937
Cash.........................................................................
............. 27,657
Receivable for investments
sold........................................................... 23,580,252
Interest
receivable...................................................................
.... 10,251,538
Receivable for Fund shares
sold........................................................... 539,107
Due from broker-variation
margin..........................................................
31,250
Deferred
expenses.....................................................................
.... 22,833
--------------
Total
assets..........................................................................
661,503,574
--------------
Liabilities
Payable for investments
purchased.........................................................
14,456,616
Payable for Fund shares
reacquired........................................................
1,505,841
Dividends
payable.........................................................................
899,073
Distribution fee
payable..................................................................
243,659
Management fee
payable....................................................................
241,947
Accrued
expenses.....................................................................
..... 183,442
--------------
Total
liabilities.....................................................................
17,530,578
--------------
Net
Assets.......................................................................
......... $ 643,972,996
--------------
--------------
Net assets were comprised of:
Shares of beneficial interest, at
par................................................... $ 594,308
Paid-in capital in excess of
par........................................................ 634,714,541
--------------
635,308,849
Accumulated net realized
losses.........................................................
(15,065,062)
Net unrealized
appreciation.............................................................
23,729,209
--------------
Net assets, April 30,
1995.............................................................. $
643,972,996
--------------
--------------
Class A:
Net asset value and redemption price per share
($75,799,616 / 7,000,662 shares of beneficial interest issued and
outstanding)........ $10.83
Maximum sales charge (3.0% of offering
price)........................................... .33
--------------
Maximum offering price to
public........................................................ $11.16
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($567,647,970 / 52,381,685 shares of beneficial interest issued and
outstanding)...... $10.84
--------------
--------------
Class C:
Net asset value, offering price and redemption price per share
($525,410 / 48,483 shares of beneficial interest issued and
outstanding).............. $10.84
--------------
--------------
</TABLE>
See Notes to Financial Statements.
-30-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
April 30,
Net Investment Income 1995
------------
<S> <C>
Income
Interest........................... $ 42,883,847
------------
Expenses
Management fee, net of waiver of
$106,923........................... 3,392,455
Distribution fee--Class A.......... 39,472
Distribution fee--Class B.......... 3,301,184
Distribution fee--Class C.......... 1,254
Transfer agent's fees and
expenses........................... 570,000
Reports to shareholders............ 208,000
Custodian's fees and expenses...... 104,000
Registration fees.................. 68,000
Legal fees......................... 36,000
Insurance expense.................. 20,000
Trustees' fees..................... 16,000
Audit fees......................... 15,500
Miscellaneous...................... 14,688
------------
Total expenses................... 7,786,553
------------
Net investment income................ 35,097,294
------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized loss on:
Investment transactions............ (10,038,501)
Financial futures contracts........ (68,632)
------------
(10,107,133)
------------
Net change in unrealized
appreciation/(depreciation) of:
Investments........................ 15,575,283
Financial futures contracts........ (1,211,032)
------------
14,364,251
------------
Net gain on investments.............. 4,257,118
------------
Net Increase in Net Assets
Resulting from Operations............ $ 39,354,412
------------
------------
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended April 30,
Increase (Decrease) -----------------------------
in Net Assets 1995 1994
------------- -------------
<S> <C> <C>
Operations
Net investment
income................. $ 35,097,294 $ 39,499,561
Net realized gain
(loss) on
investment
transactions......... (10,107,133) 8,935,788
Net change in
unrealized
appreciation/(depreciation)
of investments....... 14,364,251 (42,237,908)
------------- -------------
Net increase in net
assets resulting from
operations........... 39,354,412 6,197,441
------------- -------------
Dividends and
distributions (Note 1)
Dividends to
shareholders
from net investment
income
Class A.............. (2,149,982) (1,643,190)
Class B.............. (32,939,088) (37,856,371)
Class C.............. (8,224) --
------------- -------------
(35,097,294) (39,499,561)
------------- -------------
Distributions to
shareholders in
excess of net
investment income
Class A.............. (2,529) --
Class B.............. (60,060) --
Class C.............. (20) --
------------- -------------
(62,609) --
------------- -------------
Distributions to
shareholders from net
realized gains on
investments
Class A.............. -- (834,417)
Class B.............. -- (20,909,142)
Class C.............. -- --
------------- -------------
-- (21,743,559)
------------- -------------
Series share transactions
(net of share
conversions) (Note 5)
Net proceeds from
shares subscribed.... 46,070,613 189,769,487
Net asset value of
shares
issued to
shareholders in
reinvestment of
dividends............ 19,337,321 35,730,676
Cost of shares
reacquired............. (196,745,726) (199,496,131)
------------- -------------
Increase (decrease) in
net assets from
Series share
transactions......... (131,337,792) 26,004,032
------------- -------------
Total decrease........... (127,143,283) (29,041,647)
Net Assets
Beginning of year........ 771,116,279 800,157,926
------------- -------------
End of year.............. $ 643,972,996 $ 771,116,279
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-31-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND Portfolio of Investments
MODIFIED YIELD SERIES April 30, 1995
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C> <C>
<C> <C> <C>
LONG TERM INVESTMENTS--96.2%
Alabama--2.2%
Univ. So. Alabama Hosp. & Auxiliary Rev., A.M.B.A.C.......... Aaa
7.00 % 5/15/04 $ 1,250#/DD $ 1,360,263
-----------
Alaska--4.9%
Alaska Ind. Dev. & Expt. Auth., Revolving Loan Fund.......... A
5.40 4/01/01 1,005 984,538
Alaska St. Hsg. Fin. Corp. Collat. Mtge. Oblig............... Aaa
5.70 12/01/11 1,000 925,160
No. Slope Boro., Gen. Oblig., Ser. C......................... Baa1
8.35 6/30/98 1,000 1,090,590
-----------
3,000,288
-----------
Arizona--4.7%
Maricopa Cnty., Cmnty. Coll.................................. Aa
6.00 7/01/06 1,500 1,555,515
Univ. Arizona Rev............................................ A1
4.60 6/01/05 1,515 1,376,423
-----------
2,931,938
-----------
California--8.4%
Oxnard Fin. Auth. Lease Rev., F.S.A.......................... Aaa
5.375 6/01/08 2,000 1,898,020
San Jose Redev.,
Rev. Ref. Tax Alloc., M.B.I.A.............................. Aaa
6.00 8/01/08 500 513,300
Tax Allocation, M.B.I.A.................................... Aaa
6.00 8/01/06 500 520,725
Statewide Cmntys. Dev. Corp.,
Cedars Sinai Med. Ctr...................................... A1
4.80 11/01/04 1,000 928,380
J. Paul Getty Trust........................................ Aaa
4.80 10/01/08 1,500 1,340,685
-----------
5,201,110
-----------
Colorado--6.1%
Colorado Student Oblig. Bond Auth., Student Loan Rev., Ser.
A3......................................................... A
7.25 9/01/05 1,480# 1,550,241
Denver City & Cnty. Arprt. Rev., Ser. A...................... Baa
7.30 11/15/03 1,250 1,297,312
Jefferson Cnty. Sch. Dst. R-001.............................. AA*
4.50 12/15/03 1,000 923,520
-----------
3,771,073
-----------
Connecticut--1.8%
Connecticut Spec. Tax Oblig. Rev., Ser. A.................... A1
7.00 6/01/03 1,000 1,095,820
-----------
District Of Columbia--1.1%
Dist. Columbia Rev., America Geophysical Union, Ser. 199..... BBB-*
5.50 9/01/03 700 656,684
-----------
Florida--1.5%
Dade Cnty. Pub. Facs. Rev., Jackson Mem. Hosp., M.B.I.A.,
Ser. A..................................................... Aaa
4.75 6/01/08 1,000 905,390
-----------
Georgia--1.8%
Burke Cnty. Dev. Auth. Poll. Ref. Oglethorpe Pwr. Co. Vogtle,
M.B.I.A.................................................... Aaa
7.50 1/01/03 1,000 1,098,780
-----------
Guam--1.5%
Guam Pwr. Auth. Rev., Ser. A................................. BBB*
5.25 10/01/05 1,000 953,610
-----------
</TABLE>
-32- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C> <C>
<C> <C> <C>
Hawaii--1.8%
Hawaii Cnty., Gen. Oblig., F.G.I.C., Ser. A#................. Aaa
7.20 6/01/05 $ 1,000D $ 1,105,530
-----------
Illinois--0.7%
Illinois Hlth. Facs. Auth. Rev., Edward Hosp., Ser. A........ A
5.75 2/15/09 450 424,391
-----------
Indiana--2.4%
Indiana Univ. Student Fee, Ser. G............................ A1
6.90 8/01/03 500 540,240
Indianapolis Gas Util. Rev., F.G.I.C., Ser. B................ Aaa
5.00 6/01/06 1,000 948,890
-----------
1,489,130
-----------
Maryland--3.6%
Maryland St. Stadium Auth. Lease Rev. Conv. Ctr. Expansion,
A.M.B.A.C.................................................. Aaa
5.375 12/15/00 1,000 1,012,750
Northeast Maryland Waste Disp. Auth., Mont. Co. Res. Rec..... A
5.90 7/01/05 1,250 1,236,700
-----------
2,249,450
-----------
Massachusetts--1.8%
Mass. Gen. Oblig., Ser. C#................................... A
6.75 8/01/06 1,000 1,104,780
-----------
Michigan--4.0%
Greenville Pub. Sch., M.B.I.A................................ Aaa
5.75 5/01/09 1,000 992,400
Michigan Mun. Bond Auth. Rev., Wayne Cnty. Proj.,
M.B.I.A.#.................................................. Aaa
7.40 12/01/02 500 566,890
Michigan St. Hosp. Fin. Auth. Rev., Sisters Of Mercy,
M.B.I.A.................................................... Aaa
4.70 8/15/03 1,000 939,250
-----------
2,498,540
-----------
Minnesota--1.8%
Minneapolis-St. Paul Hsg., Redev. Auth., Hlth. Care Sys.
Rev., M.B.I.A., Ser. A..................................... Aaa
7.20 8/15/00 1,000# 1,097,760
-----------
Missouri--0.8%
New Madrid Elec. Pwr. Place Rev. Ref., A.M.B.A.C............. Aaa
5.35 12/01/00 500 504,775
-----------
New Jersey--3.2%
New Jersey Econ. Dev. Auth.,
Mkt. Transition Fac. Rev., M.B.I.A......................... Aaa
5.75 7/01/06 950 952,233
Mkt. Transition Fac. Rev., M.B.I.A......................... Aaa
5.80 7/01/07 1,000 998,170
-----------
1,950,403
-----------
New York--5.1%
Met.Transportation Auth. Trans. Facs. Rev., M.B.I.A.......... Aaa
4.30 7/01/01 1,150 1,081,357
Nassau Cnty. Swr. Gen. Oblig., F.G.I.C., Ser. B.............. Aaa
4.75 5/01/06 1,075 995,654
New York City Gen. Oblig., Ser. B............................ Baa1
7.50 2/01/01 1,000 1,070,990
-----------
3,148,001
-----------
</TABLE>
-33- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C> <C>
<C> <C> <C>
Ohio--0.8%
Ohio St. Bldg. Auth., Admin. Bldg. Fund Projs., M.B.I.A...... Aaa
5.60 10/01/06 $ 500 $ 505,020
-----------
Oregon--3.0%
Multnomah Cnty. Sch. Dist. No. 3, Park Rose, F.G.I.C......... Aaa
5.60 12/01/07 1,000 1,002,310
Oregon St., Dept. Trans. Rev., M.B.I.A....................... Aaa
7.00 6/01/03 750 840,825
-----------
1,843,135
-----------
Pennsylvania--7.2%
Allegheny Cnty. Ind. Dev. Rev., USX Proj..................... Baa3
5.30 12/01/96 1,000 991,690
Montgomery Cnty. Redev. Auth., Multifamily Hsg. Rev., Ser.
A.......................................................... NR
5.75 7/01/99 780 758,534
Pennsylvania Hsg. Fin. Agcy., Sngl. Fam. Mtge. Rev........... AAA*
6.20 7/01/25 1,000 1,022,360
Pennsylvania St. Gen. Oblig., F.S.A., Ser. A................. Aaa
6.25 11/01/06 600 623,226
Philadelphia Hosp. Auth. & Higher Ed. Auth., Childrens
Seashore House, Ser. A..................................... A-*
7.00 8/15/03 1,000 1,033,480
-----------
4,429,290
-----------
Puerto Rico--10.3%
Puerto Rico Comnwlth., M.B.I.A., Ser. A...................... Aaa
6.25 7/01/10 750 775,830
Puerto Rico Elec. Pwr. Auth. Rev., Ser. S.................... Baa1
6.00 7/01/04 1,500 1,541,355
Puerto Rico Hsg. Bank & Fin. Agcy............................ Baa
5.125 12/01/05 1,000 936,540
Puerto Rico Hwy. & Trans. Auth. Rev.,
Ser. Q..................................................... Baa1
7.50 7/01/01 330 363,756
Ser. Q..................................................... Baa1
7.60 7/01/02 975 1,086,579
Ser. X..................................................... Baa1
4.90 7/01/01 750 725,497
Puerto Rico Ind. Med. & Environ. Fac. Fin. Auth. Rev......... A3
4.00 9/01/13 1,000@ 952,370
-----------
6,381,927
-----------
Texas--9.3%
Carrollton Farmers Indpt. Sch. Dist.......................... Aa
8.375 2/15/99 1,300 1,456,546
Dallas Ft. Worth Int'l. Arpt., Ser. A........................ NR
5.875 11/01/06 1,000 1,013,720
Harris Cnty., Toll Rd........................................ Aa
7.20 8/01/98 500 537,460
Harris Cnty., Toll Rd., A.M.B.A.C............................ Aaa
5.125 8/15/08 1,500 1,398,990
San Antonio Elec. & Gas Rev., F.G.I.C., Ser. A............... Aaa
Zero 2/01/05 1,000 575,110
Texas Gen. Oblig., Veterans Hsg. Asst., F.H.A................ Aa
6.05 12/01/12 750# 741,952
-----------
5,723,778
-----------
Utah--1.7%
Utah St. Brd. of Regents, Student Loan Rev., A.M.B.A.C., Ser.
F.......................................................... Aaa
7.00 11/01/01 1,000D/# 1,069,850
-----------
</TABLE>
-34- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED SERIES
<TABLE>
<CAPTION>
Moody's
Par
Rating
Interest Maturity Value Market
Description (Unaudited)
Rate Date (000) Value
<S> <C> <C>
<C> <C> <C>
Washington--4.7%
Washington St. Pub. Pwr. Supp. Sys.,
Nuclear Proj. No. 2, Ser. A................................ Aa
4.90 7/01/05 $ 2,000 $ 1,819,860
Nuclear Proj. No.3, Ser. B................................. Aa
7.00 7/01/99 1,000 1,063,200
-----------
2,883,060
-----------
Total Investments--96.2% (cost $ 58,808,272; Note
4)..................................................... 59,383,776
Other assets in excess of
liabilities--3.8%..............................................................
2,329,701
-----------
Net
Assets--100%.................................................................
........................ $61,713,477
-----------
-----------
</TABLE>
- - ---------------
(a) The following abbreviations are used in portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation
F.G.I.C.--Financial Guaranty Insurance Company
F.S.A.--Financial Security Assurance
M.B.I.A.--Municipal Bond Insurance Association
D Portion of or entire principal amount pledged as initial margin on financial
futures contracts.
DD Prerefunded issues are secured by escrowed cash and direct U.S. guaranteed
obligations.
# Indicates a when-issued security.
@ Indicates a variable rate security.
* 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.
-35- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Assets
April 30, 1995
--------------
<S>
<C>
Investments, at value (cost
$58,808,272).................................................. $ 59,383,776
Cash.........................................................................
............. 53,385
Interest
receivable...................................................................
.... 1,126,512
Receivable for investments
sold........................................................... 1,081,758
Receivable for Fund shares
sold........................................................... 229,281
Due from broker-variation
margin.......................................................... 1,562
Deferred
expenses.....................................................................
.... 2,077
--------------
Total
assets..........................................................................
61,878,351
--------------
Liabilities
Dividends
payable.........................................................................
75,213
Payable for Fund shares
reacquired........................................................
38,212
Management fee
payable....................................................................
23,001
Distribution fee
payable..................................................................
22,079
Accrued
expenses.....................................................................
..... 6,369
--------------
Total
liabilities.....................................................................
164,874
--------------
Net
Assets.......................................................................
......... $ 61,713,477
--------------
--------------
Net assets were comprised of:
Shares of beneficial interest, at
par................................................... $ 59,055
Paid-in capital in excess of
par........................................................ 62,049,545
--------------
62,108,600
Accumulated net realized loss on
investments............................................ (929,782)
Net unrealized appreciation on
investments.............................................. 534,659
--------------
Net assets, April 30,
1995.............................................................. $
61,713,477
--------------
--------------
Class A:
Net asset value and redemption price per share
($10,507,353 / 1,005,718 shares of beneficial interest issued and
outstanding)........ $10.45
Maximum sales charge (3.0% of offering
price)........................................... .32
--------------
Maximum offering price to
public........................................................ $10.77
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($51,039,018 / 4,883,778 shares of beneficial interest issued and
outstanding)........ $10.45
--------------
--------------
Class C:
Net asset value, offering price and redemption price per share
($167,106 / 15,989 shares of beneficial interest issued and
outstanding).............. $10.45
--------------
--------------
</TABLE>
See Notes to Financial Statements.
-36-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
April 30,
Net Investment Income 1995
----------
<S> <C>
Income
Interest............................. $3,927,905
----------
Expenses
Management fee, net of waiver of
$10,233.............................. 329,452
Distribution fee--Class A............ 7,742
Distribution fee--Class B............ 300,869
Distribution fee--Class C............ 158
Custodian's fees and expenses........ 93,000
Reports to shareholders.............. 89,200
Transfer agent's fees and expenses... 54,000
Legal fees........................... 23,000
Registration Fees.................... 17,000
Trustees' fees....................... 16,500
Audit fees........................... 10,500
Miscellaneous........................ 6,979
----------
Total expenses..................... 948,400
----------
Net investment income.................. 2,979,505
----------
Realized and Unrealized
Gain (Loss) on Investments
Net realized loss on:
Investment transactions.............. (485,302)
Financial futures contracts.......... (173,569)
----------
(658,871)
----------
Net change in unrealized
appreciation (depreciation) of:
Investments.......................... 290,262
Financial futures contracts.......... (261,563)
----------
28,699
----------
Net loss on investments................ (630,172)
----------
Net Increase in Net Assets
Resulting from Operations.............. $2,349,333
----------
----------
</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 1995 1994
------------ ------------
<S> <C> <C>
Operations
Net investment income.... $ 2,979,505 $ 2,760,661
Net realized gain (loss)
on investment
transactions........... (658,871) 2,063,495
Net change in unrealized
appreciation
(depreciation) of
investments............ 28,699 (3,673,322)
------------ ------------
Net increase in net
assets
resulting from
operations............. 2,349,333 1,150,834
------------ ------------
Dividends and distributions (Note 1)
Dividends to shareholders
from net investment
income
Class A................ (368,417) (230,644)
Class B................ (2,610,175) (2,530,017)
Class C................ (913) --
------------ ------------
(2,979,505) (2,760,661)
------------ ------------
Distributions to
shareholders in
excess of net
investment income
Class A................ (4,934) --
Class B................ (34,699) --
Class C................ (9) --
------------ ------------
(39,642) --
------------ ------------
Distributions to
shareholders from net
realized gains
Class A................ (102,830) (104,832)
Class B................ (1,139,663) (1,198,718)
Class C................ -- --
------------ ------------
(1,242,493) (1,303,550)
------------ ------------
Series share transactions
(net of share conversions)
(Note 5)
Net proceeds from shares
issued 13,939,416 28,144,358
Net asset value of shares
issued to shareholders
in
reinvestment of
dividends and
distributions.......... 2,761,015 2,666,224
Cost of shares
reacquired............... (24,099,780) (17,514,873)
------------ ------------
Increase (decrease) in
net assets from Fund
share transactions..... (7,399,349) 13,295,709
------------ ------------
Total increase
(decrease)................. (9,311,656) 10,382,332
------------ ------------
Net Assets
Beginning of year.......... 71,025,133 60,642,801
------------ ------------
End of year................ $ 61,713,477 $ 71,025,133
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-37-
<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,
Class B and Class C shares commenced on January 22, 1990, September 17, 1987 and
August 1, 1994, 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 which may differ from generally accepted accounting
principles.
-38-
<PAGE>
<PAGE>
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. For
the fiscal year ended April 30, 1995, the effect of applying this statement was
to increase undistributed net investment income and increase accumulated
realized losses by $49,874, $62,609 and $39,642 for the High Yield Series,
Insured Series and Modified Term Series, respectively. Net investment income,
net realized gains and net assets were not affected by this change.
Note 2. Agreements The Fund has a management
agreement with Prudential Mutual Fund Management,
Inc. (``PMF''). Pursuant to this agreement, PMF has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PMF has entered into a subadvisory agreement with The Prudential
Investment Corporation (``PIC''); PIC furnishes investment advisory services in
connection with the management of the Fund. PMF pays for the cost of the
subadviser's services, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.
The management fee paid PMF is computed daily and payable monthly at an
annual rate of .50 of 1% of the average daily net assets of each series.
Effective January 1, 1995, PMF has agreed to voluntarily waive a portion of each
Series' management fee, which amounted to $172,278, $106,923, and $10,233 for
the High Yield Series, Insured Series, and Modified Series, respectively. Such
amounts represented .05 of 1% of average daily net assets, as annualized, for
each Series.
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as the distributor of the Class A
shares of the Fund, and with Prudential Securities Incorporated (``PSI''), which
acts as the distributor of the Class B and Class C shares of the Fund
(collectively the ``Distributors''). The Fund compensates the Distributors for
distributing and servicing the Fund's Class A, Class B and Class C shares,
pursuant to plans of distribution, (the ``Class A, B and C Plans'') regardless
of expenses actually incurred by them. The distribution fees are accrued daily
and payable monthly.
On July 19, 1994, shareholders of the Fund approved amendments to the Class
A
and Class B distribution plans under which the distribution plans became
compensation plans, effective August 1, 1994. Prior thereto, the distribution
plans were reimbursement plans, under which PMFD and PSI were reimbursed for
expenses actually incurred by them up to the amount permitted under the Class
A
and Class B Plans, respectively. The Fund is not obligated to pay any prior or
future excess distribution costs (costs incurred by the Distributors in excess
of distribution fees paid by the Fund or contingent deferred sales charges
received by the Distributors). The rate of the distribution fees charged to
Class A and Class B shares of the Fund did not change under the amended plans
of
distribution. The Fund began offering Class C shares on August 1, 1994.
Pursuant to the Class A, B and C Plans, the Fund compensates the Distributors
for distribution-related activities at an annual rate of up to .30 of 1%, .50
of
1% and 1%, of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Plans were .10 of 1%, .50 of 1% and .75
of
1% of the average daily net assets of the Class A, B and C shares, respectively,
for the year ended April 30, 1995.
PMFD has advised the Fund that it received approximately $261,200
($164,400-High Yield Series; $56,600-Insured Series; $40,200-Modified Term
Series) in front-end sales charges resulting from sales of Class A shares during
the year ended April 30, 1995. From these fees, PMFD paid such sales charges to
dealers which in turn paid commissions to salespersons and incurred other
distribution costs.
PSI has advised the Fund that for the year ended April 30, 1995, it received
approximately $4,173,000 ($2,350,000-High Yield Series; $1,588,400-Insured
Series; $234,600-Modified Term Series) in contingent deferred sales charges
imposed upon certain redemptions by Class B shareholders.
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, 1995, the Fund incurred fees of approximately $763,000
($410,000--High Yield Series; $315,000--Insured Series; $38,000--Modified Term
Series) for the services of PMFS. As of April 30, 1995, approximately $61,900
($33,700--High Yield Series; $25,100--Insured Series; $3,100--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.
-39-
<PAGE>
<PAGE>
Note 4. Portfolio Purchases and sales of port-
Securities folio securities, excluding
short-term investments, for the year ended April
30, 1995, were as follows:
<TABLE>
<CAPTION>
Series Purchases Sales
- - --------------------------- ------------ ------------
<S> <C> <C>
High Yield................. $408,920,993 $502,349,941
Insured.................... 418,558,042 543,026,752
Modified Term.............. 19,658,214 26,832,624
</TABLE>
At April 30, 1995, the Modified Term Series bought 30 financial futures
contracts of U.S. Treasury Bonds expiring in June, 1995. In addition, the High
Yield Series, Insured Series and Modified Term Series sold 200, 100, and 5
financial futures contracts, respectively, on the Municipal Bond Index expiring
in June, 1995.
The values of these financial futures contracts at April 30, 1995 were as
follows:
<TABLE>
<CAPTION>
Financial Futures
Contracts Bought/Sold
-----------------------------------------
High Yield Insured Modified
Series Series Series
------------ ----------- ----------
<S> <C> <C> <C>
Value at
disposi-
tion......... $ 17,955,375 $ 9,030,531 $3,564,936
Value at April
30, 1995..... 17,818,750 8,909,375 3,605,781
------------ ----------- ----------
Unrealized gain
(loss)....... $ 136,625 $ 121,156 $ (40,845)
------------ ----------- ----------
------------ ----------- ----------
</TABLE>
The federal income tax basis of the Fund's investments, at April 30, 1995 was
$1,017,378,109-High Yield Series; $603,444,184-Insured Series; and
$58,808,272-Modified Term Series and, accordingly, net unrealized appreciation
of investments for federal income tax purposes was as follows:
<TABLE>
<CAPTION>
Net
unrealized Gross Gross
appreciation unrealized unrealized
Series (depreciation) appreciation depreciation
- - ------------ ------------ ----------- ------------
<S> <C> <C> <C>
High
Yield..... $ 23,078,661 $46,457,947 $(23,379,286)
Insured..... 23,606,753 28,071,538 (4,464,785)
Modified.... 575,504 1,779,939 (1,204,435)
</TABLE>
The High Yield Series has a net capital loss carryforward as of April 30,
1995 of approximately $7,385,000, of which $2,024,000 expires in 2002 and
$5,361,000 expires in 2003. The Insured Series has a net capital loss
carryforward of $11,614,000, which expires in 2003. In addition, the High Yield
Series, Insured Series and Modified Term Series elected to treat net realized
capital losses of approximately $13,718,000, $3,357,000, and $971, 000,
respectively incurred in the six month period ended April 30, 1995, as having
been incurred in the following year.
Note 5. Capital Each series currently offers
Class A, Class B and Class C shares. Class A
shares are sold with a front-end sales charge of up to 3.0%. Class B shares are
sold with a contingent deferred sales charge which declines from 5% to zero
depending on the period of time the shares are held. Class C shares are sold
with a contingent deferred sales charge of 1% during the first year. Commencing
in February 1995, Class B shares automatically convert to Class A shares on a
quarterly basis approximately seven years after purchase. A special exchange
privilege is also available for shareholders who qualified to purchase Class A
shares at net asset value. 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.
-40-
<PAGE>
<PAGE>
The Fund has authorized an unlimited number of shares of beneficial interest
of each class at $.01 par value per share. 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, 1995 Shares Amount Shares
Amount Shares Amount
- - ----------------------------- ----------- ------------- -----------
------------- ---------- ------------
<S> <C> <C> <C>
<C> <C> <C>
Shares issued................ 1,722,172 $ 18,074,186 578,436
$ 6,194,773 386,371 $ 4,053,460
Shares issued in reinvestment
of dividends and
distributions.............. 191,061 2,032,345 117,327
1,252,497 28,292 294,023
Shares reacquired............ (2,449,412) (25,729,145) (1,161,102)
(12,310,078) (528,916) (5,396,007)
----------- ------------- -----------
------------- ---------- ------------
Net increase (decrease) in
shares outstanding before
conversion................. (536,179) (5,622,614) (465,339)
(4,862,808) (114,253) (1,048,524)
Shares issued upon conversion
from Class B............... 6,231,397 65,928,185 4,601,490
49,190,670 575,671 5,946,716
----------- ------------- -----------
------------- ---------- ------------
Net increase (decrease) in
shares outstanding......... 5,695,218 $ 60,305,571 4,136,151
$ 44,327,862 461,418 $ 4,898,192
----------- ------------- -----------
------------- ---------- ------------
----------- ------------- -----------
------------- ---------- ------------
<CAPTION>
Year Ended April 30, 1994
- - -----------------------------
<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>
Class B
Class B Class B
----------------------------
- - ---------------------------- --------------------------
Year Ended April 30, 1995 Shares Amount Shares
Amount Shares Amount
- - ----------------------------- ----------- ------------- -----------
------------- ---------- ------------
<S> <C> <C> <C>
<C> <C> <C>
Shares issued................ 10,730,386 $ 113,885,074 3,705,037
$ 39,356,337 933,582 $ 9,719,753
Shares issued in reinvestment
of dividends and
distributions.............. 2,736,532 28,982,453 1,703,306
18,078,117 236,331 2,466,290
Shares reacquired............ (22,442,732) (236,469,222) (17,535,273)
(184,427,038) (1,817,018) (18,703,768)
----------- ------------- -----------
------------- ---------- ------------
Net decrease in shares out-
standing before
conversion................. (8,975,814) (93,601,695) (12,126,930)
(126,992,584) (647,105) (6,517,725)
Shares reacquired upon
conversion into Class A.... (6,231,397) (65,928,185) (4,597,262)
(49,190,670) (575,671) (5,946,716)
----------- ------------- -----------
------------- ---------- ------------
Net decrease in shares out-
standing................... (15,207,211) $(159,529,880) (16,724,192)
$(176,183,254) (1,222,776) $(12,464,441)
----------- ------------- -----------
------------- ---------- ------------
----------- ------------- -----------
------------- ---------- ------------
<CAPTION>
Year Ended April 30, 1994
- - -----------------------------
<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 2,439,638
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 $ 10,819,866
----------- ------------- -----------
------------- ---------- ------------
----------- ------------- -----------
------------- ---------- ------------
<CAPTION>
Class C
Class C Class C
August 1, 1994* through April ----------------------------
- - ---------------------------- --------------------------
30, 1995 Shares Amount Shares
Amount Shares Amount
- - ----------------------------- ----------- ------------- -----------
------------- ---------- ------------
<S> <C> <C> <C>
<C> <C> <C>
Shares issued................ 322,757 $ 3,444,961 48,655
$ 519,503 15,922 $ 166,203
Shares issued in reinvestment
of dividends and
distributions.............. 4,207 44,397 631
6,707 67 702
Shares reacquired............ (27,756) (286,223) (803)
(8,610) -- (5)
----------- ------------- -----------
------------- ---------- ------------
Increase in shares
outstanding................ 299,208 $ 3,203,135 48,483
$ 517,600 15,989 $ 166,900
----------- ------------- -----------
------------- ---------- ------------
----------- ------------- -----------
------------- ---------- ------------
- - ---------------
* Commencement of offering of Class C shares.
</TABLE>
-41-
<PAGE>
<PAGE>
Note 6. Subsequent The Board of Trustees of the
Event Prudential Municipal Bond
Fund has approved a name change for the Modified
Term Series to the Intermediate Series, effective June 29, 1995.
-42-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
Financial Highlights
<TABLE>
<CAPTION>
Class A
Class B
- - ----------------------------------------------------
- - --------------------------------------
Years Ended April 30,
Years Ended April 30,
PER SHARE OPERATING
- - ----------------------------------------------------
- - --------------------------------------
PERFORMANCE: 1995 1994 1993 1992
1991 1995 1994 1993
-------- ------- ------- -------
------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 10.74 $ 11.14 $ 10.68 $ 10.45
$ 10.33 $ 10.74 $ 11.14 $ 10.68
-------- ------- ------- -------
------- ---------- ---------- ----------
Income from investment
operations
Net investment income........... .72D .72 .77 .77D
.79D .68D .68 .73
Net realized and unrealized gain
(loss) on investment
transactions................... (.02) (.39) .46 .23
.12 (.02) (.39) .46
-------- ------- ------- -------
------- ---------- ---------- ----------
Total from investment
operations................... .70 .33 1.23 1.00
.91 .66 .29 1.19
-------- ------- ------- -------
------- ---------- ---------- ----------
Less distributions
Dividends from net investment
income......................... (.72) (.72) (.77) (.77)
(.79) (.68) (.68) (.73)
Distributions from capital
gains.......................... -- (.01) -- --
-- -- (.01) --
-------- ------- ------- -------
------- ---------- ---------- ----------
Total distributions............ (.72) (.73) (.77) (.77)
(.79) (.68) (.69) (.73)
-------- ------- ------- -------
------- ---------- ---------- ----------
Net asset value, end of
period......................... $ 10.72 $ 10.74 $ 11.14 $ 10.68
$ 10.45 $ 10.72 $ 10.74 $ 11.14
-------- ------- ------- -------
------- ---------- ---------- ----------
-------- ------- ------- -------
------- ---------- ---------- ----------
TOTAL RETURN#: 6.90% 2.88% 11.90% 9.82%
9.14% 6.37% 2.46% 11.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).......................... $115,501 $54,491 $43,529 $24,725
$15,089 $934,725 $1,099,640 $1,028,480
Average net assets (000)........ $65,207 $52,982 $31,658 $19,702
$11,594 $1,024,132 $1,132,653 $893,203
Ratios to average net assets:##
Expenses, including
distribution fees............ 0.69%D 0.69% 0.74% 0.65%D
0.60%D 1.09%D 1.09% 1.14%
Expenses, excluding
distribution fees............ 0.59%D 0.59% 0.64% 0.55%D
0.50%D 0.59%D 0.58% .64%
Net investment income.......... 6.83%D 6.42% 7.04% 7.25%D
7.62%D 6.37%D 6.02% 6.66%
Portfolio turnover rate......... 39% 36% 27% 34%
29% 39% 36% 27%
<CAPTION>
Class C
----------
August 1,
1994@
Through
PER SHARE OPERATING April 30,
PERFORMANCE: 1992 1991 1995
-------- -------- ----------
<S> <C> <C> <C>
Net asset value, beginning of
period......................... $ 10.45 $ 10.34 $10.79
-------- -------- -----
Income from investment
operations
Net investment income........... .73D .75D .49D
Net realized and unrealized gain
(loss) on investment
transactions................... .23 .11 (.07)
-------- -------- -----
Total from investment
operations................... .96 .86 .42
-------- -------- -----
Less distributions
Dividends from net investment
income......................... (.73) (.75) (.49)
Distributions from capital
gains.......................... -- -- --
-------- -------- -----
Total distributions............ (.73) (.75) (.49)
-------- -------- -----
Net asset value, end of
period......................... $ 10.68 $ 10.45 $10.72
-------- -------- -----
-------- -------- -----
TOTAL RETURN#: 9.40% 8.59% 3.91%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).......................... $803,838 $701,483 $3,208
Average net assets (000)........ $759,779 $667,751 $1,385
Ratios to average net assets:##
Expenses, including
distribution fees............ 1.05%D 1.00%D 1.34%D*
Expenses, excluding
distribution fees............ 0.55%D 0.50%D 0.59%D*
Net investment income.......... 6.85%D 7.22%D 6.34%D*
Portfolio turnover rate......... 34% 29% 39%
</TABLE>
- - ---------------
@ Commencement of offering of Class C 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. Total returns for periods of less than a full year are not
annualized.
## Because of the event referred to in @ and the timing of such, the ratios
for the Class C shares are not necessarily comparable to that of Class A
or B shares and are not necessarily indicative of future ratios.
D Net of expense subsidy, fee waivers and distribution fee deferrals.
See Notes to Financial Statements.
-43-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Financial Highlights
<TABLE>
<CAPTION>
Class A
Class B
- - --------------------------------------------------
- - --------------------------------
Years Ended April 30,
Years Ended April 30,
PER SHARE OPERATING
- - --------------------------------------------------
- - --------------------------------
PERFORMANCE: 1995 1994 1993 1992
1991 1995 1994 1993
------- ------- -------
- - ------- ------ -------- -------- --------
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 10.71 $ 11.44 $ 10.98 $
10.76 $10.25 $ 10.71 $ 11.44 $ 10.99
------- ------- -------
- - ------- ------ -------- -------- --------
Income from investment operations
Net investment income................. .58D .58 .61
.66D .67D .54D .54 .56
Net realized and unrealized
gain (loss) on investment
transactions......................... .12 (.43) .73
.24 .54 .13 (.43) .72
------- ------- -------
- - ------- ------ -------- -------- --------
Total from investment operations..... .70 .15 1.34
.90 1.21 .67 .11 1.28
------- ------- -------
- - ------- ------ -------- -------- --------
Less distributions
Dividends from net investment
income............................... (.58) (.58) (.61)
(.66) (.67) (.54) (.54) (.56)
Distributions from capital gains...... -- (.30) (.27)
(.02) (.03) -- (.30) (.27)
------- ------- -------
- - ------- ------ -------- -------- --------
Total distributions.................. (.58) (.88) (.88)
(.68) (.70) (.54) (.84) (.83)
------- ------- -------
- - ------- ------ -------- -------- --------
Net asset value, end of period........ $ 10.83 $ 10.71 $ 11.44 $
10.98 $10.76 $ 10.84 $ 10.71 $ 11.44
------- ------- -------
- - ------- ------ -------- -------- --------
------- ------- -------
- - ------- ------ -------- -------- --------
TOTAL RETURN#: 6.73% 1.04% 12.68%
8.59% 11.86% 6.40% 0.63% 12.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)....... $75,800 $30,669 $30,098
$19,177 $7,630 $567,648 $740,447 $770,060
Average net assets (000).............. $39,471 $32,309 $24,589
$12,731 $5,164 $660,237 $807,794 $705,846
Ratios to average net assets:##
Expenses, including distribution
fees............................... .74%D 0.71% 0.72%
0.62%D 0.61%D 1.14%D 1.11% 1.12%
Expenses, excluding distribution
fees............................... .64%D 0.61% 0.62%
0.52%D 0.51%D .64%D 0.61% 0.62%
Net investment income................ 5.45%D 5.09% 5.46%
6.06%D 6.38%D 4.99%D 4.69% 5.06%
Portfolio turnover rate............... 64% 105% 85%
56% 51% 64% 105% 85%
<CAPTION>
Class C
----------
August 1,
1994@
Through
PER SHARE OPERATING April 30,
PERFORMANCE: 1992 1991 1995
-------- -------- ----------
<S> <C> <C> <C>
Net asset value, beginning of
period............................... $ 10.76 $ 10.25 $10.79
-------- -------- -----
Income from investment operations
Net investment income................. .62D .63D .39D
Net realized and unrealized
gain (loss) on investment
transactions......................... .25 .54 .05
-------- -------- -----
Total from investment operations..... .87 1.17 .44
-------- -------- -----
Less distributions
Dividends from net investment
income............................... (.62) (.63) (.39)
Distributions from capital gains...... (.02) (.03) --
-------- -------- -----
Total distributions.................. (.64) (.66) (.39)
-------- -------- -----
Net asset value, end of period........ $ 10.99 $ 10.76 $10.84
-------- -------- -----
-------- -------- -----
TOTAL RETURN#: 8.24% 11.43% 4.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)....... $638,451 $578,412 $ 525
Average net assets (000).............. $609,516 $537,275 $ 224
Ratios to average net assets:##
Expenses, including distribution
fees............................... 1.02%D 1.01%D 1.39%*D
Expenses, excluding distribution
fees............................... 0.52%D 0.51%D .64%*D
Net investment income................ 5.66%D 5.98%D 4.92%*D
Portfolio turnover rate............... 56% 51% 64%
</TABLE>
- - ---------------
@ Commencement of offering of Class C 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 includes reinvestment of
dividends and distributions. Total returns for periods of less than a
full year are not annualized.
## Because of the event referred to in @ and the timing of such, the ratios
for the Class C shares are not necessarily comparable to that of Class A
or B shares and are not necessarily indicative of future ratios.
D Net of expense subsidy, fee waivers and distribution fee deferrals.
See Notes to Financial Statements.
-44-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
Financial Highlights
<TABLE>
<CAPTION>
Class A
Class B
- - --------------------------------------------------
- - --------------------------------
Years Ended April 30,
Years Ended April 30,
PER SHARE OPERATING
- - --------------------------------------------------
- - --------------------------------
PERFORMANCE: 1995 1994 1993 1992
1991 1995 1994 1995
------- ------- -------
- - ------- ------ -------- -------- ------
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Net asset value, beginning
of period........................... $ 10.67 $11.08 $10.59
$10.48 $ 9.98 $ 10.68 $ 11.09 $ 10.60
------- ------ ------
- - ------ ------ ------- ------- -------
Income from investment operations
Net investment income.................. .51D .53 .54D
.57D .59D .45D .48 .50D
Net realized and unrealized gain
(loss) on investment transactions..... (.03) (.19) .60 .26
.50 (.04) (.19) .60
------- ------ ------
- - ------ ------ ------- ------- -------
Total from investment
operations........................... .48 .34 1.14
.83 1.09 .41 .29 1.10
------- ------ ------
- - ------ ------ ------- ------- -------
Less distributions
Dividends from net investment income.. (.51) (.53) (.54)
(.57) (.59) (.45) (.48) (.50)
Distributions in excess of net
investment income.................... (.01) -- --
- - -- -- (.01) -- --
Distributions from capital gains...... (.18) (.22) (.11)
(.15) -- (.18) (.22) (.11)
------- ------ ------
- - ------ ------ ------- ------- -------
Total distributions.................. (.70) (.75) (.65)
(.72) (.59) (.64) (.70) (.61)
------- ------ ------
- - ------ ------ ------- ------- -------
Net asset value, end of period......... $ 10.45 $10.67 $11.08
$10.59 $10.48 $ 10.45 $ 10.68 $11.09
------- ------ ------
- - ------ ------ ------- ------- -------
------- ------ ------
- - ------ ------ ------- ------- -------
TOTAL RETURN#: 4.52% 2.83% 11.13%
8.14% 11.20% 3.99% 2.43% 10.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........ $10,507 $5,810 $3,594
$1,424 $397 $51,039 $65,215 $57,049
Average net assets (000)............... $7,742 $4,981 $1,883
$599 $305 $60,174 $59,811 $50,154
Ratios to average net assets:##
Expenses, including distribution
fees................................. 1.05%D 1.00% 1.06%D
1.06%D 0.92%D 1.45%D 1.40% 1.46%D
Expenses, excluding distribution
fees................................. .95%D 0.90% 0.96%D
0.96%D 0.82%D .95%D 0.90% 0.96%D
Net investment income................ 4.75%D 4.63% 5.09%D
5.41%D 5.92%D 4.35%D 4.23% 4.69%D
Portfolio turnover rate............... 30% 55% 22%
78% 128% 30% 55% 22%
<CAPTION>
Class C
----------
August 1,
1994@
Through
PER SHARE OPERATING April 30,
PERFORMANCE: 1992 1991 1995
-------- -------- ----------
<S> <C> <C> <C>
Net asset value, beginning of
period............................. $ 10.48 $ 9.98 $10.54
------- ------- -------
Income from investment operations
Net investment income................. .53D .56D .36D
Net realized and unrealized gain
(loss) on investment transactions.... .27 .50 (.09)
------- ------- -------
Total from investment operations..... .80 1.06 .27
------- ------- -------
Less distributions
Dividends from net investment income.. (.53) (.56) (.35)
Distributions in excess of net
investment income.................... -- -- (.01)
Distributions from capital gains...... (.15) -- --
------- ------- -------
Total distributions.................. (.68) (.56) (.36)
------- ------- -------
Net asset value, end of period........ $ 10.60 $ 10.48 $10.45
------- ------- -------
------- ------- -------
TOTAL RETURN#: 10.62% 7.68% 10.82% 2.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)....... $45,440 $45,401 $167
Average net assets (000).............. $44,439 $46,521 $28
Ratios to average net assets:##
Expenses, including distribution
fees................................ 1.46%D 1.32%D 1.81%*D
Expenses, excluding distribution
fees................................ 0.96%D 0.82%D 1.06%*D
Net investment income................ 5.01%D 5.52%D 4.34%*D
Portfolio turnover rate............... 78% 128% 30%
</TABLE>
- - ---------------
@ Commencement of offering of Class C 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. Total returns for periods of less than a full year are not
annualized.
## Because of the event referred to in @ and the timing of such, the ratios
for the Class C shares are not necessarily comparable to that of Class A
or B shares and are not necessarily indicative of future ratios.
D Net of expense subsidy, fee waivers and distribution fee deferrals.
See Notes to Financial Statements.
-45-
<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, 1995, the related statements of operations for the year then ended and
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
April 30, 1995, by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
portfolios constituting the Prudential Municipal Bond Fund as of April 30, 1995,
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 LLP
New York, New York
June 15, 1995
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, 1995.
During its fiscal year ended April 30, 1995, 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 Class C
------------------------------------------------------
- - ------- ------- -------
<S> <C>
<C> <C>
High Yield Series..................................... $ .72
$ .68 $ .49
Insured Series........................................ $ .58
$ .54 $ .39
Modified Term Series.................................. $ .51
$ .45 $ .35
</TABLE>
The Modified Term Series paid an ordinary distribution of $.061 per share
(taxable as ordinary income) to Class A and Class B shareholders and $.006 per
share (taxable as ordinary income) to Class C shareholders, and a long-term
capital gain distribution of $.13 per share (taxable as capital gains income)
to
Class A and Class B shareholders. The High Yield Series and the Insured Series
paid ordinary distributions of $.0005 and $.001 per share, respectively (taxable
as ordinary income) to Class A, B & C shareholders.
Shortly after the close of the calendar year ending December 31, 1995, you
will be advised again as to the federal tax status of the dividends and
distributions received in calendar 1995. 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.
-46-
<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 in accordance with SEC regulations. They compare
a
$10,000 in the Prudential Municipal Bond Fund (High Yield Series, Class A, B &
C
shares) 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, September 17, 1987 for Class B shares, and August 1,
1994 for Class C 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, 1987 for Class B shares and 1994 for Class C shares. For purposes of the
graphs, and unless otherwise indicated, the accompanying tables, it has been
assumed that the maximum sales charge was deducted from the initial $10,000
investment in Class A shares; the maximum applicable contingent deferred sales
charges were deducted from the value of the investment in Class B and Class C
shares assuming full redemption on April 30, 1995; all recurring fees--including
management fees--were deducted; and all dividends and distributions were
reinvested. Class B shares will automatically convert to Class A shares on a
quarterly basis, approximately seven years after purchase. This conversion
feature was implemented in February 1995 and is not reflected in the graph.
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 held in the Fund's portfolio. The Lehman Muni
Bond Index is not the only benchmark that can be used to characterize
performance of municipal bond funds and other indexes may portray different
comparative performance.
<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 in accordance with SEC regulations. They compare
a
$10,000 in the Prudential Municipal Bond Fund (Insured Series, Class A, B & C
shares) 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, September 17, 1987 for Class B shares, and August 1,
1994 for Class C 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, 1987 for Class B shares and 1994 for Class C shares. For purposes of the
graphs, and unless otherwise indicated, the accompanying tables, it has been
assumed that the maximum sales charge was deducted from the initial $10,000
investment in Class A shares; the maximum applicable contingent deferred sales
charges were deducted from the value of the investment in Class B and Class C
shares assuming full redemption on April 30, 1995; all recurring fees--including
management fees--were deducted; and all dividends and distributions were
reinvested. Class B shares will automatically convert to Class A shares on a
quarterly basis, approximately seven years after purchase. This conversion
feature was implemented in February 1995 and is not reflected in the graph.
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 held in the Fund's portfolio. The Lehman Muni
Bond Index is not the only benchmark that can be used to characterize
performance of municipal bond funds and other indexes may portray different
comparative performance.
<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 in accordance with SEC regulations. They compare
a
$10,000 in the Prudential Municipal Bond Fund (Modified Term Series, Class A,
B
& C shares) 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, September 17, 1987 for Class B shares, and
August 1, 1994 for Class C 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, 1987 for Class B shares and 1994 for Class C shares. For
purposes of the graphs, and unless otherwise indicated, the accompanying tables,
it has been assumed that the maximum sales charge was deducted from the initial
$10,000 investment in Class A shares; the maximum applicable contingent deferred
sales charges were deducted from the value of the investment in Class B and
Class C shares assuming full redemption on April 30, 1995; all recurring
fees--including management fees--were deducted; and all dividends and
distributions were reinvested. Class B shares will automatically convert to
Class A shares on a quarterly basis, approximately seven years after purchase.
This conversion feature was implemented in February 1995 and is not reflected
in
the graph.
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 held in the Fund's portfolio. The Lehman Muni
Bond Index is not the only benchmark that can be used to characterize
performance of municipal bond funds and other indexes may portray different
comparative performance.
<PAGE>
Trustees
Edward D. Beach
Donald D. Lennox
Douglas H. McCorkindale
Thomas T. Mooney
Richard A. Redeker
Louis A. Weil, III
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Marguerite E.H. Morrison, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852, Collect (908) 417-7555
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
74435L103 74435L301 74435L509 MF133E
74436L202 74435L400 74435L608 Cat. #44416EK
74436L707 74435L707 74435L889
Prudential Mutual Fund Management (LOGO)<PAGE>
