SEMI ANNUAL REPORT
October 31, 1994
Prudential
Municipal
Bond Fund
- ----------
(ICON)
High Yield Series
Insured Series
Modified Term Series
(LOGO)
<PAGE>
AT A GLANCE
<TABLE>
<CAPTION>
Weighted Average Monthly
As of October 31, 1994
<S> <C>
Years
High Yield Series 20.8
Insured Series 18.7
Modified Term Sales 10.2
</TABLE>
<TABLE>
<CAPTION>
Municipal Bond Fund Yields (%)
October 31, 1994
30-day Taxable Equivalent Taxable Equivalent
SEC Yield Yield @ 36% Yield @ 39.6%
Class Class Class
A B C A B C A B C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Yield Series 6.51 6.31 6.06 10.17 9.36 9.47 10.78 10.45 10.03
Insured Series 5.27 5.02 4.78 8.23 7.84 7.47 8.73 8.31 7.91
Modified Term Series 4.74 4.49 4.23 7.41 7.02 6.61 7.85 7.43 7.00
</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 September 30, 1994
<CAPTION>
High Yield Series
- ------------------------------------------------------
<S> <C> <C>
Class A Shares % Return % Return
without FESL with FESL
One Year: -1.41 -4.37
From Inception (1/22/90): +7.30 +6.60
Class B Shares % Return % Return
without CDSC with CDSC
One Year: -1.89 -6.89
Five Year: 7.05 6.87
From Inception (9/17/87): 8.32 8.32
Class C Shares % Return % Return
without CDSC with CDSC
Since Inception: N/A N/A
Lipper High Yield Municipal Average**
Insured Series
- ---------------------------------------------------------
Class A Shares % Return % Return
without FESL with FESL
One Year: -4.06 -6.94
From Inception (1/22/90): 7.11 6.42
Class B Shares % Return % Return
without CDSC with CDSC
One Year: -4.52 -9.52
Five Year: 6.87 6.71
From Inception (9/17/87): 7.77 7.77
Class C Shares % Return % Return
without CDSC with CDSC
Since Inception: N/A N/A
Lipper Insured Municipal Average**
Modified Term Series
- ----------------------------------------------------------
Class A Shares % Return % Return
without FESL with FESL
One Year: 1.45 4.41
From Inception (1/22/90): 7.09 6.39
Class B Shares % Return % Return
without CDSC with CDSC
One Year: -1.75 -6.75
Five Year: 6.94 6.79
From Inception (9/17/87): 7.18 7.18
Class C Shares % Return % Return
without CDSC with CDSC
Since Inception: N/A N/A
Lipper Insured Municipal Average**
</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 assume payment of
applicable sales charges. Class A shares assume the imposition of a 3% front
end sales load (FESL). For Class B shares the one year, five year and from
inception returns assume the effects of a contingent deferred sales charge
(CDSC) of 5%, 1% and 0% respectively. Class B shares will automatically convert
to Class A shares approximately seven years after purchase. Class C shares are
sold subject to a contingent deferred sales charge of 1% during the first year.
Note: in the past, the Series were partially subsidized and management fees
were waived. These figures do not include subsidized and fee waivers.
**Source: Lipper Analytical Services, Inc.
<PAGE>
Letter to
Shareholders
----------------------------
December 15, 1994
Dear Shareholder:
The performance of the Prudential Municipal Bond Fund over the last six
months has been relatively flat, but the closing statistics masked the frequent
price swings in the municipal bond market as interest rates surged or sagged
over the summer. Throughout these turbulent times, the portfolio managers of
your High Yield Series, Insured Series and Modified Term Series worked to
minimize risk to principal while maximizing tax-exempt income.*
While the past six months' performance might seem trendless, the year has
been somewhat painful for investors in bonds, since interest rates have risen
sharply this year at a pace unseen in decades. Of course as interest rates
rise, bond prices fall, because investors no longer want to hold an old
investment yielding less than a new one. We believe that yields could continue
to rise but are, for now, closer to the top than the bottom of their cycle. In
addition, when interest rates do stabilize, we believe that the shrinking
supply of tax-free investments may support their prices.
The Fed Moves
While the Federal Reserve has increased short-term interest rates six times
this year, to 5.50% from 3%, it moved only twice since we last wrote you on May
24. The later increases have been the most dramatic -- by three quarters of
a percentage point in November and by half a percentage point each in May and
August. The increases in February, March and April were a quarter of a
percentage point each.
The Fed is trying to foster moderate economic growth without increasing
inflation. Despite that effort, third-quarter gross national product (a
measure of economic activity) grew at an annualized rate of 3.9% -- faster
than expected and more than the 2.5% to 3% the Fed would like. Pessimists
have argued that inflation must surely follow, since anxious buyers of
materials and labor bid up prices when the economy grows so rapidly that
shortages occur. Still, inflation to date is within the Fed's target when
measured on an actual basis; inflation has been running at 2.8% this year,
versus 2.7% in 1993. So, it is the fear of rising inflation that has
spooked the markets -- the prospect, rather than the reality -- of any
increase.
*Shareholders may be subject to state and/or local taxes and certain
shareholders may be subject to the federal alternative minimum tax.
-3-
<PAGE>
This fear has forced the yield of the Bond Buyer's Revenue Bond Index to
6.95% on October 27 from a low of 5.49% on February 3 -- an extraordinary
increase of nearly one and a half percentage points in eight months. This is
what has knocked bond prices down this year.
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 Corp. (S&P) and Moody's
Investors Service Inc., or unrated bonds that our analysts believe to be of
comparable quality. On October 31, 1994, approximately 50% 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.
On October 31, 1994, the Series' net asset value was $10.40 for Class A and
Class B shares, down from $10.74 for both share classes on April 30, 1994.
Class C shares were first offered on August 1, 1994 at $10.79 and their net
asset value was $10.40 on October 31, 1994. Dividends totalling $0.35 for
Class A shares, $0.33 for Class B shares and $0.14 for Class C shares were
paid during the period. On October 31, 1994, total net assets were $1,073
million.
Higher Yield Bought Higher Performance
High yield bonds generally performed better than the broader municipal
market during the period because they carry higher coupons, which tend to
cushion price declines as interest rates rise. Municipal junk bonds were also
helped by a growing economy, which improved credit conditions. As economic
growth increased, so did tax revenues of many issuers, which facilitated
coupon payments. Of course, high yield bonds have higher market and credit
risk than investment grade bonds.
The Series' new portfolio manager, Peter Allegrini, took a defensive
position to guard against higher interest rates by raising the cash position to
3% from 0.1%. The average maturity of the Series is 13 years, slightly longer
than the 12.8 years it held at the beginning of the period. The manager has
also sold off smaller, less marketable holdings, using the assets to add
larger, core holdings.
Drawing on our considerable credit analysis resources and Allegrini's
background in research, the Series has raised the percentage of assets in
credits that are not rated by rating agencies to 53% from 46%, and may take
the percentage as high as 55%. (Of the 53% of assets held in non-rated
bonds, 9% of assets were invested in non-rated bonds deemed by our analysts
to be comparable to investment grade bonds rated BBB or better and 44% were
-4-
<PAGE>
invested in non-rated bonds deemed by our analysts to be below
investment grade.)
We favor industrial development, utility, health care and transportation
bonds. To implement this strategy, we have maintained a healthy 23% position
in industrial development bonds to take advantage of a growing economy. We
have also added utility bonds where we found values, raising their weighting
to nearly 16% of assets from 13%. Several issues with 8% coupons have been
purchased, including Toledo Edison, Ohio Water and Sewer and Port of
Providence, R.I.
We have sold substantially all of the Series' Denver Airport bonds, reducing
the position to 0.4% of assets from 3.3%. Uncertainty surrounding the
project has caused short-term volatility, but we continue to believe the
project is viable over the long term. Should the bonds be attractively
priced in the future, we may purchase them once again. The Series' largest
holding is now New York State Medical Care Facilities Financing Agency-Mental
Health bonds, at 2.1% of assets.
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.
As of October 31, 1994, the Series' net asset value was $10.33 for Class A
shares and $10.34 for Class B shares, down from $10.71 each on April 30, 1994.
Dividends totalling $0.38 for Class A shares, $0.37 for Class B shares, and
$0.13 for Class C shares were paid during the period. Class C shares were
offered on August 1, 1994 at $10.79 and their NAV was $10.34 on October 31,
1994. Total assets were $688.8 million on October 31, 1994.
Quality Is Sensitive To Interest Rates
Insured municipal bonds are considered to be of a high quality. But they are
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, insured bonds underperformed
other municipal bonds over the last six months. The Lipper insured municipal
bond fund average returned -1.49% while the Lipper general municipal bond
fund average returned -1.34%. By comparison, insured municipals outperformed
the municipal market when rates were falling in 1992 and 1993.
Concerned that interest rates could continue to rise, we took aggressive
action, increasing the Series' cash and futures position to 20% from 11%
over the six-month period.
-5-
<PAGE>
The Series raised its cash and futures level by selling longer-term bonds.
We also shifted assets from long-term to intermediate-term maturities and
added higher coupon, non-callable bonds at favorable prices, particularly
in the transportation and utility sectors. Currently, nearly 12% of assets
are invested in premium, non-callable bonds.
While maintaining a defensive stance, the Series continued to trade among
specialty states, states that have high income tax rates with municipal
bonds that are generally considered desirable by investors. Demand for
these bonds should increase their price when compared to other bonds, as
issuance declines.
New purchases during the period included revenue bonds from the Texas
Municipal Power Agency, the Series' largest holding, Pennsylvania
certificates of participation, California Catholic Health Facility, New
Jersey Economic Development Authority and Metropolitan Transportation
Authority bonds. Sales included North Carolina general obligations, New York
State Energy Research and Development Authority (Brooklyn Union Gas) revenue
bonds, Georgia general obligations, and Pawtucket, R.I., bonds.
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. The Series is
structured to be less price sensitive to interest rate changes than if it held
only longer-term bonds. This proved true in the market over the past several
months.
As of October 31, 1994, the Series' net asset value was $10.22 for Class A
and Class B shares. On April 30, 1994, the net asset value of Class A shares
was $10.67 and for Class B, $10.68. Dividends and distributions and totalling
$0.44 for Class A shares, $0.43 for Class B shares, and $0.11 for Class C
shares were paid during the period. Class C shares were originally offered at
$10.54 and their net asset value was $10.22 on October 31, 1994. Total net
assets were $71 million on October 31, 1994.
The Shorter Term Performed Better Than the Long
The Series' intermediate-term effective maturity helped it perform better
than longer-term funds during the past six months, because intermediate-term
bonds are less volatile than long-term bonds when short-term interest rates
rise. The Lipper general municipal bond fund average was -1.34% during the
period.
-6-
<PAGE>
We maintained a defensive posture during the period, slightly increasing the
Series' cash and futures position to more than 22% from 20% of assets. We
also searched the market for inexpensive bonds offering good value. Like the
High Yield and Insured Series, we focused new purchases on higher coupon,
non-callable bonds, which hold their value better in a rising rate environment.
We also added some discount bonds, which offer potential price gains if rates
begin to move lower again.
New purchases included: New Jersey Economic Development Authority, Maryland
Stadium Authority lease revenue bonds and Allegheny County (Pennsylvania)
industrial revenue bonds.
There was a large supply of California bonds available in the market this
year because of the state's fiscal problems. Because of this abundance of
value, California has become the Series' largest state holding. Over the long
term, if the state's prospects improve, supply will diminish and these bonds
should become more valuable.
A Tax Reminder
As a result of the federal Revenue Reconciliation Act of 1993, which affects
bonds purchased after April 30, 1993, it is possible that this year you may
have some taxable income from your tax-free municipal bond fund. The law
stipulates that the portion of any gain realized on the sale or retirement
of a tax-free bond purchased at a market discount to its face value must be
taxed as ordinary income.
Following this change in federal tax law, some discount bonds have been
selling at levels so cheap they will produce a higher after-tax return than
other bonds not subject to the provisions of the new law. We have occasionally
taken advantage of this market imbalance because we have determined that at
very low prices these bonds can still provide you with a higher after-tax
return on your investment.
The Outlook: Rates Near Highs, Supply Is Falling
Given the performance of the stock and bond markets to date, it is apparent
that total returns for the full year will be well below historic averages.
Until the bond market becomes convinced that the Fed will successfully prevent
inflation from accelerating, interest rates and bond prices will remain quite
volatile.
After the Fed again increased short-term interest rates in November, it did
not announce that it would pause for a time, as it had done earlier. This
left analysts to conclude that the Fed is not willing to say its work is
finished. It is important to emphasize here that the Fed directly controls
only short-term interest rates, not long-term rates. The market may well
take long-term interest rates higher, but we believe that the 30-year U.S.
Treasury yield at 8%
-7-
<PAGE>
is closer to the top of the interest rate cycle than the bottom. That's a five
percentage point premium over the inflation rate, a very healthy premium by
historic standards. This makes real, inflation-adjusted yields attractive.
At the same time, the supply of tax-free municipal bonds is contracting
sharply, and the zeal for austerity in government now sweeping the country
might further curtail borrowing. Through October, issuance of municipal bonds
has fallen by 44%. For calendar 1994, we expect that only half as many bonds
will be issued as last year. A year from now, there will be far fewer bonds
outstanding. When interest rates stabilize and investors return to the
market, we might see better performance from the tax-exempt municipal bond
market.
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,
Lawrence C. McQuade
President
Peter Allegrini Pat Dolan
High Yield Series Insured Series
Portfolio Manager Portfolio Manager
Marie Conti
Modified Term Series
Portfolio Manager
-8-
<PAGE>
PORTFOLIO Q&A
- ------------------------------
PHOTO
Peter J. Allegrini
Peter J. Allegrini took over management of the Prudential Municipal Bond
Fund -- High Yield Series -- in July after he was named managing director and
senior portfolio manager of Prudential Investment Corp. He joined Prudential
from Fidelity Investments, where he managed more than $3 billion in high yield
municipal bond assets. He first joined Fidelity in 1982 as a senior bond
analyst and group leader of municipal research. We asked Peter recently to
outline his investment philosophy and plans for the fund.
Q. How would you describe your investment style?
A. I'm a contrarian. I look for value. The price must be low, the potential
for appreciation strong, and the relationship between risk and reward must be
favorable. I take advantage of out-of-favor opportunities, provided solid
credit research supports my investment conclusion. Research is vitally
important. Unlike the insured or higher quality municipal bonds, the high
yield market is more vulnerable to the ups and downs of the economy. We want
to know, over the long term, will the project be economically viable? Can it
pass an economic stress test?
Q. How do you make that judgement?
A. After seven years in research, I understand the fundamentals. I believe you
start looking for value in a sector, or industry, and then look at the market
of the business, and its market share. Quality of management is crucial
because management can make or break the situation. They must be able to
compete cost-effectively. Then you look at the balance sheet.
Q. What sectors are you looking at now?
A. I like health care, industrial development and utilities. There have been a
lot of changes in health care. Cost pressures are high. You have to assess the
credibility and quality of management. Then you apply the balance sheet tests.
Is it liquid or leveraged? Are costs high or is it a niche player with a
specialty no one else can compete with? Industrial development is a strong
sector in a growing economy, particularly in commodity-related businesses, as
demand increases for products such as steel and paper. The electric utilities
have fallen substantially this year, and are becoming increasingly attractive.
Q. It sounds like there is a lot of opportunity.
A. We're in an economic expansion. That's good news for the high yield sector.
A growing economy helps balance sheets, providing the capital to make interest
payments. But remember, you really shouldn't compare the high yield municipal
market with the high yield corporate market.
-9-
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND Portfolio of Investments
HIGH YIELD SERIES October 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--96.7%
Alabama--0.7%
Cullman Med. Clinic
Brd.
Rev., Regl. Med.
Ctr.,
Baa $ 2,900 6.50%, 2/15/23,
Ser. 93A............ $ 2,492,028
Ft. Payne, Ind. Dev.
Brd. Rev.,
Gametime Expansion
Proj.,
NR 4,405 10.25%, 8/1/09........ 4,617,982
--------------
7,110,010
--------------
Alaska--0.2%
No. Slope Boro.,
Gen. Oblig.,
Baa1 2,000 8.35%, 6/30/98, Ser.
C................... 2,228,540
--------------
Arizona--1.6%
Ft. Mojave Indian
Tribe,
Wtr. & Swr. Rev.,
NR 3,000 10.25%,
9/1/19(D)(D)........ 1,800,000
Pima Cnty. Ind. Dev.
Auth.,
Multifamily Mtge.
Rev.,
Cntry. Club La
Cholla Proj.,
NR 10,000 8.50%, 7/1/20......... 9,825,000
Scottsdale Ind. Dev.
Auth. Rev., 1st
Mtge.,
Westminster Vlg.
Inc. Proj.,
NR 5,000 9.50%, 6/1/97......... 5,184,750
--------------
16,809,750
--------------
California--9.3%
Alameda Cmnty. Facs.
Spec. Tax Rev. No. 1,
Harbor Bay,
NR 8,175 7.75%, 9/1/19......... 8,264,189
California Hsg. Fin.
Agcy. Rev.,
Aa 1,120 8.15%, 8/1/19, Ser.
G................... 1,145,446
Delano, Cert. of
Part.,
Regl. Med. Ctr.,
NR $ 6,900 9.25%, 1/1/22, Ser.
92A................. $ 7,503,750
Fairfield Green Valley
Rd.,
Impvt. Bd.,
NR 2,685 7.375%, 9/2/18........ 2,692,088
Folsom Spec. Tax Dist.
No. 2,
NR 3,130 7.70%, 12/1/19........ 3,227,625
Fontana Cmnty. Spec.
Tax
Rev. Facs., Dist.
No. 2,
NR 3,500 8.50%, 9/1/17, Ser.
B................... 3,727,430
Long Beach Redev.
Agcy. Hsg.,
Multifamily Hsg. Rev.,
Pacific Court Apts.,
NR 3,805 6.80%, 9/1/13......... 3,603,868
NR 6,195 6.95%, 9/1/23......... 5,807,874
Orange Cnty. Cmnty.
Facs. Dist. Spec.
Tax Rev.,
No. 87-4 Foothill
Ranch,
NR 7,500 7.375%, 8/15/18, Ser.
A#.................. 8,362,050
Richmond Redev. Agcy.
Rev.,
Multifamily Bridge
Affordable Hsg.,
NR 10,000 7.50%, 6/1/23......... 9,438,600
Sacramento Cnty. Spec.
Tax Rev., Dist. No.
1,
Elliot Ranch,
NR 3,750 8.20%, 8/1/21......... 3,878,287
Dist. No. 1, Laguna
Creek Ranch,
NR 4,500 8.25%, 12/1/20........ 4,671,090
San Joaquin Hills
Trans.
Corridor Agcy.
Toll Road Rev.,
NR 12,900 Zero Coupon, 1/1/11... 3,153,405
NR 50,000 Zero Coupon, 1/1/24... 5,218,000
NR 10,000 7.00%, 1/1/30......... 9,669,500
</TABLE>
-10- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
California (cont'd)
San Jose Redev.,
Tax Allocation,
M.B.I.A.,
Aaa $ 1,750 6.00%, 8/1/09......... $ 1,685,180
Santa Margarita/Dana
Point Auth.
M.B.I.A.,
Impvt. Dists
1-2-2A-8
Aaa 1,990 7.25%, 8/1/13, Ser.
A................... 2,163,787
Improvement Dists
3-3A-4A,
Aaa 3,000 7.25%, 8/1/12, Ser.
B................... 3,237,870
So. San Francisco
Redev.,
Agcy., Tax Alloc.,
Gateway Redev.
Proj.,
NR 2,375 7.60%, 9/1/18......... 2,368,113
Southern California
Home Fin. Auth.,
Sngl. Fam. Mtge. Rev.,
G.N.M.A.,
AAA* 8,335 7.625%, 10/1/22,
Ser. 89A............ 8,487,364
West Contra Costa
School
Dist., Cert. of
Part.,
Ba 1,600 7.125%, 1/1/24........ 1,495,184
--------------
99,800,700
--------------
Colorado--3.7%
Colorado Hsg. Fin.
Auth.,
Sngl. Fam. Mtge. Rev.,
AA* 1,985 7.65%, 8/1/22, Ser.
C3.................. 1,986,925
Denver City & Cnty.
Arpt. Rev.,
Baa 1,500 7.75%, 11/15/13, Ser.
D................... 1,477,920
Baa 3,360 8.00%, 11/15/25, Ser.
A................... 3,310,507
Denver City & Cnty.
Ind. Dev. Rev.,
Univ. of Denver,
BBB* 1,450 7.50%, 3/1/11, Ser.
91.................. 1,506,159
Eagle Cnty. Hsg.
Proj.,
Lake Creek Affordable
Hsg. Corp.,
NR $ 11,610 8.00%, 12/1/23, Ser.
A................... $ 11,288,867
Miguel Cnty.,
Mtn. Vlg. Met. Dist.
Colo. San Miguel
Co.,
NR 3,200 8.10%, 12/1/11........ 3,213,824
San Miguel Cnty. Hsg.
Auth.,
Multi Hsg. Ref. Rev.,
Telluride Mountain
Village,
NR 1,100 6.30%, 7/1/13......... 988,658
NR 4,675 6.40%, 7/1/23......... 4,027,887
Superior Met. Dist.
No. 1
Colorado Wtr. & Swr.
Rev.,
NR 3,300 7.50%, 12/1/98........ 3,300,000
NR 8,900 8.50%, 12/1/13........ 8,877,750
--------------
39,978,497
--------------
District Of Columbia--2.5%
Dist. of Columbia
Rev.,
America Geophysical
Union,
Aaa 6,000 6.50%, 6/1/10,
M.B.I.A.,........... 5,895,840
BBB-* 1,350 5.75%, 9/1/13......... 1,131,395
BBB-* 4,200 5.875%, 9/1/23........ 3,419,262
National Public Radio,
NR 8,800 7.625%, 1/1/18........ 8,875,856
We Care Prods. Inc.,
NR 8,000 9.50%, 11/1/19........ 8,000,000
--------------
27,322,353
--------------
Florida--6.1%
Brevard Cnty. Tourist
Dev. Tax Rev.,
4th Central Florida
Marlins, Spring
Training Fac.,
NR 1,000 6.325%, 3/1/03........ 1,020,980
</TABLE>
-11- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
Florida (cont'd)
Broward Cnty. Res.
Rec. Rev.,
Broward Waste Energy,
L.P. North,
A $ 2,710 7.95%, 12/1/08........ $ 2,918,128
Broward Waste Energy,
L.P. South,
A 3,780 7.95%, 12/1/08........ 4,070,304
Escambia Cnty. Hlth.
Facs. Auth. Rev.,
L.P. South,
Azalea Trace, Ref.,
NR 2,605 9.25%, 1/1/06......... 2,794,045
Baptist Hosp., Ref.,
BBB+* 4,385 8.60%, 10/1/02, Ser.
A................... 4,740,623
Florida Hsg. Fin.
Agcy., Palm Aire
Proj.,
Multifamily Hsg. Rev.,
NR 9,922 10.00%,
1/1/20(D)(D)........ 5,952,954
Florida St. Cmnty.
Svcs. Corp.,
Kissimmee Suburb
Utils. Rev.,
NR 1,000 8.625%, 10/1/03#...... 1,136,230
Walton Cnty. Utils.
Rev.,
NR 1,000 9.00%, 3/1/18#........ 1,140,070
Greater Orlando
Aviation
Auth. Rev., Orlando
Florida Arpt. Facs.,
A1 2,250 8.00%, 10/1/18........ 2,424,510
Hillsborough Cnty.
Ind.
Dev. Auth. Rev.,
Ind. Lvg. Ctr.,
Tampa Proj., Ser.
89(D)(D),
NR 5,460 11.00%, 3/1/19........ 4,368,000
Osceola Cnty. Ind.
Dev. Auth. Rev.,
NR 9,000 7.75%, 7/1/17......... 8,856,990
Palm Beach Cnty. Hsg.
Auth.,
Banyan Club Apts.,
NR 4,655 7.75%, 3/1/23, Ser.
A................... 4,504,225
Sarasota Hlth. Facs.,
Kobernick House
Meadow Park Proj.,
NR $ 7,000 10.00%, 7/1/22........ $ 7,187,880
Seminole Cnty. Ind.
Dev. Auth. Rev.,
Ind. Dev. Fern Park,
NR 6,430 9.25%, 4/1/12......... 6,633,895
Tampa Rev.,
Tampa Aquarium Proj.,
NR 7,500 7.75%, 5/1/27......... 7,567,800
--------------
65,316,634
--------------
Georgia--1.5%
Atlanta Urban Res.
Fin.
Auth., Clark Atlanta
Univ. Dorm. Proj.,
NR 5,010 9.25%, 6/1/10#........ 5,961,048
Effingham Cnty. Dev.
Auth.,
Ft. Howard Corp.,
B1 10,000 7.90%, 10/1/05........ 10,004,800
--------------
15,965,848
--------------
Hawaii--0.6%
Hawaii Cnty. Impvt.
Dist. No. 17,
NR 7,175 9.50%, 8/1/11......... 6,959,750
--------------
Illinois--6.4%
Chicago O'Hare Int'l.
Arpt., Spec. Fac.
Rev.,
Amer. Airlines, Ser.
A,
Baa2 4,000 7.875%, 11/1/25....... 3,938,400
United Airlines, Ser.
B,
Baa3 6,000 8.45%, 5/1/07......... 6,165,180
Baa3 6,500 8.50%, 5/1/18......... 6,756,230
Baa3 2,850 8.85%, 5/1/18......... 3,070,305
Baa3 2,435 8.95%, 5/1/18......... 2,601,262
Hennepin Ind. Dev.
Rev.,
Exolon Esk. Co. Proj.,
NR 8,000 8.875%,
1/1/18(D)(D)........ 7,855,760
Methchem Corp. Proj.,
NR 4,420 10.25%, 1/1/05, Ser.
89.................. 397,800
</TABLE>
-12- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
Illinois (cont'd)
Illinois Dev. Fin.
Auth. Rev.,
Multifamily Hsg. Town
& Garden Apts.,
BBB+* $ 9,460 7.20%, 9/1/08......... $ 9,360,764
Illinois Hlth. Facs.
Auth. Rev.,
Adventist Living Ctr.,
NR 2,245 11.00%,
12/1/15(D)(D)....... 493,802
Beacon Hill Proj.,
NR 7,422 9.00%, 8/15/19, Ser.
A................... 7,951,188
Friendship Vlg.
Schaumburg Proj.,
NR 2,900 9.00%, 12/1/08#....... 3,329,026
Westlake Cmnty. Hosp.,
Baa1 7,000 7.875%, 1/1/13........ 7,102,620
Kankakee Ind. Dev.
Rev.,
Kroger Co. Proj.,
Ba2 2,500 7.85%, 9/1/15......... 2,533,200
Met. Pier & Exposition
Auth. Rev.,
McCormick Place,
Aaa 10,000 Zero Coupon, 6/15/14,
F.G.I.C............. 2,592,200
Winnebago Cnty. Hsg.
Fin. Corp., Park
Tower Assoc. Sec. 8,
NR 4,494 8.125%, 1/1/11........ 4,462,904
--------------
68,610,641
--------------
Indiana--2.2%
Bluffton Econ. Dev.
Rev.,
Kroger Co. Proj.,
Ba2 7,500 7.85%, 8/1/15......... 7,599,600
East Chicago Poll.
Ctrl.
Rev., Inland Steel
Co.
Proj. No. 10,
BB-* 4,000 6.80%, 6/1/13, Ser.
1993................ 3,654,080
Indianapolis Indiana
Arpt. Auth. Rev.
Federal Express
Corp.
Project,
Baa1 $ 5,000 7.10%, 1/15/17........ $ 4,875,000
Wabash Econ. Dev. Rev.
Bonds, Connell L.P.,
NR 7,250 8.50%, 11/24/17....... 7,573,930
--------------
23,702,610
--------------
Iowa--1.0%
Iowa Fin. Auth., Hlth.
Care Facs. Rev.,
Mercy Hlth.
Initiatives,
NR 10,000 9.95%, 7/1/19......... 10,513,900
--------------
Kentucky--1.5%
Kenton Cnty. Kentucky
Arpt. Brd. Arpt.
Rev.
Delta Airlines
Proj.,
Ba1 8,000 7.50%, 2/1/20......... 7,625,520
Owensboro Kentucky
Elec. Lt. & Pwr.
Rev.
Ser. B, A.M.B.A.C.,
Aaa 5,000 Zero Coupon, 1/1/14... 1,352,300
Aaa 6,650 Zero Coupon, 1/1/16... 1,553,174
Perry Cnty., Solid
Waste
TJ Proj.,
NR 2,250 7.00%, 6/1/24......... 2,104,110
Trimble Cnty. Poll.
Ctrl. Rev.,
Louisville Gas &
Elec. Co.,
Aa2 3,130 7.625%, 11/1/20....... 3,299,270
--------------
15,934,374
--------------
Louisiana--5.0%
Hodge Util. Rev.,
IDB Stone
Container Corp.,
NR 10,000 9.00%, 3/1/10......... 10,158,200
</TABLE>
-13- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
Louisiana (cont'd)
New Orleans Home
Mtge. Auth. Rev.,
Sngl. Fam. Mtge.,
G.N.M.A.,
Aaa $ 1,670 8.60%, 12/1/19, Ser.
A................... $ 1,795,868
Port of New Orleans
Ind.
Dev. Rev.,
Continental
Grain Co. Proj.,
BB-* 5,000 7.50%, 7/1/13......... 4,814,900
St. Charles Parish,
Poll. Ctrl. Rev.,
Louisiana Pwr. & Lt.
Co.,
NR 10,000 8.25%, 6/1/14......... 10,705,500
Baa3 10,000 8.00%, 12/1/14, Ser.
1989................ 10,619,200
West Feliciana Parish
Poll. Ctrl. Rev.,
Gulf St. Util. Co.
Proj.,
BBB-* 3,000 7.70%, 12/1/14........ 3,134,430
BBB-* 7,000 7.50%, 5/1/15, Ser.
A................... 7,091,140
Baa3 5,250 9.00%, 5/1/15......... 5,872,020
--------------
54,191,258
--------------
Maryland--2.0%
Anne Arundel Cnty.
First Mtge. Rev.,
Pleasant Living
Conv.,
NR 3,490 8.50%, 7/1/13......... 3,546,887
Anne Arundel Cnty.
Rev.,
Annapolis Life Care
Inc., Ginger Cove,
NR 1,250 6.00%, 1/1/18......... 1,056,013
Maryland Hlth. &
Higher Edl. Facs.
Auth. Rev.,
Doctors Cmnty.
Hosp.,
BBB-* 3,900 8.75%, 7/1/22#........ 4,562,610
Baa 6,100 5.50%, 7/1/24......... 4,453,549
Northeast Waste Disp.
Auth.,
Baltimore City
Sludge Compositing
Fac.,
NR $ 4,582 7.25%, 7/1/07......... $ 4,459,477
NR 3,400 8.50%, 7/1/07......... 3,327,274
--------------
21,405,810
--------------
Massachusetts--4.4%
Mass. St. Coll. Bldg.
Project and
Refunding Bonds,
A 1,750 7.50%, 5/1/14......... 1,911,210
Mass. St. Hlth. & Edl.
Facs. Auth. Rev.,
Cardinal Cushing
Gen. Hosp.,
NR 7,500 8.875%, 7/1/18........ 7,701,300
Cooley Dickinson
Hosp.,
NR 7,200 7.125%, 11/15/18...... 6,955,056
St. Josephs Hosp.,
NR 5,740 9.50%, 10/1/20, Ser.
C#.................. 6,730,150
Valley Regl. Hlth.
Sys.,
Baa 3,950 8.00%, 7/1/18, Ser.
B#.................. 4,478,668
Mass. St. Hsg. Fin.
Agcy.
Rev., Residential
Hsg.,
BBB+* 335 8.10%, 8/1/23, Ser.
B................... 341,368
Mass. St. Ind. Fin.
Agcy. & Hlth. Care
Fac. Rev.,
Hampden Nursing
Home Proj. A,
NR 3,810 9.75%, 10/1/17........ 3,960,609
Mass. St. Ind. Fin.
Agcy. Rev.,
Berkshire Retirement
Facs.,
NR 2,000 9.875%, 7/1/18#....... 2,237,500
Continental Res.,
NR 3,300 9.50%, 2/1/00, Ser.
A................... 3,506,976
</TABLE>
-14- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
Massachusetts (cont'd)
Mass. St. Ind. Fin.
Agcy. Rev.,
Merrimack College,
BBB-* $ 3,140 7.125%, 7/1/12........ $ 3,067,215
Randolph Hsg. Auth.,
Multifamily Hsg.,
Liberty Place Proj.
A,
NR 6,075 9.00%, 12/1/21, Ser.
A................... 6,196,500
--------------
47,086,552
--------------
Michigan--4.8%
Gratiot Cnty. Econ.
Dev. Corp. Ltd.,
Oblig. Econ. Dev.
Rev., Danley Die
Proj.
Connell L.P.,
NR 3,200 7.625%, 4/1/07........ 3,175,680
Greater Detroit Res.
Rec. Auth. Rev.,
BBB-* 6,490 9.25%, 12/13/08, Ser.
C................... 6,850,000
BBB-* 8,500 9.25%, 12/13/08, Ser.
H................... 8,971,495
Holland Sch. Dist.,
Sch. Dist. Cap.
Apprec.,
Aaa 2,950 Zero Coupon, 5/1/17,
A.M.B.A.C........... 624,604
Lowell Area Sch.,
Aaa 5,000 Zero Coupon, 5/1/14,
F.G.I.C............. 1,321,900
Meridian Econ. Dev.
Corp. Rev.,
Burcham Hills
Retirement Fac.,
NR 2,875 9.625%, 7/1/19........ 3,112,130
Michigan St. Hosp.
Fin.
Auth. Rev., Saratoga
Cmnty. Hosp.,
NR 7,100 8.75%, 6/1/10, Ser.
A................... 7,397,987
Michigan Stragitic
Fund,
Gennese Pwr.
Station,
NR 6,000 7.50%, 1/1/21......... 5,579,520
Monroe Cnty. Poll.
Ctrl. Rev.,
Detroit Edison Co.
Proj.,
Baa1 $ 8,000 7.75%, 12/1/19, Ser.
A................... $ 8,400,400
Romulus Michigan
Cmnty.
Sch., F.G.I.C.,
Aaa 5,000 Zero Coupon, 5/1/21... 789,050
Wayne Cnty. Bldg.
Auth.,
Baa 3,500 8.00%, 3/1/17, Ser.
A#.................. 3,977,645
West Ottawa Pub. Sch.
Dist., F.G.I.C.,
Aaa 4,825 Zero Coupon, 5/1/15... 1,186,805
--------------
51,387,216
--------------
Minnesota--0.9%
Minneapolis St. Paul
Hsg. Fin. Brd.,
Multifamily Rev.,
Riverside Plz.,
AAA* 4,000 8.25%, 12/20/30,
G.N.M.A.(D)......... 4,205,040
Southern Minnesota
Mun. Pwr. Agcy. Pwr.
Supply Sys., Ser. A,
M.B.I.A.,
Aaa 25,875 Zero Coupon, 1/1/19... 5,176,811
Aaa 1,500 Zero Coupon, 1/1/20... 280,095
--------------
9,661,946
--------------
Mississippi--2.3%
Claiborne Cnty., Poll.
Ctrl. Rev.,
Middle So. Energy
Sys.,
NR 10,350 9.50%, 12/1/13, Ser.
A................... 11,668,383
NR 6,100 9.875%, 12/1/14, Ser.
C................... 6,960,344
Mississippi Hosp.
Equip. & Facs. Auth.
Rev.,
Methodist Hosp. &
Rehab. Ctr.,
NR 5,000 9.375%, 5/1/12#....... 5,778,500
--------------
24,407,227
--------------
</TABLE>
-15- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
Missouri--0.6%
St. Louis Cnty. Ind.
Dev. Auth. Rev.,
Conv. & Sports
Complex,
NR $ 4,250 7.90%, 8/15/21, Ser.
C................... $ 4,415,537
Soemm Proj.,
NR 2,435 10.25%, 7/1/08........ 2,566,904
--------------
6,982,441
--------------
Montana--0.7%
Montana Brd. Inv. Res.
Rec. Rev.,
Yellowstone Energy
L.P. Proj.,
NR 8,000 7.00%, 12/31/19....... 7,273,360
--------------
Nebraska--0.3%
Nebraska Invest. Fin.
Auth., G.N.M.A.,
Sngl. Fam. Mtge.
Rev.,
Aaa 2,945 8.125%, 8/15/38, Ser.
I, M.B.I.A.......... 3,039,476
--------------
New Hampshire--3.1%
New Hampshire Higher
Edl. & Hlth. Facs.
Auth.,
Antioch College,
NR 5,530 7.875%, 12/1/22....... 5,587,235
Havenwood/Heritage
Heights,
NR 7,840 9.75%, 12/1/19........ 8,438,349
New Hampshire St. Ind.
Dev. Auth.,
Poll. Ctrl. Rev.,
Ba1 4,125 8.00%, 12/1/14, Ser.
A................... 4,260,589
Baa3 2,750 7.50%, 5/1/21, Proj.
B................... 2,755,885
Baa3 12,000 7.65%, 5/1/21, Proj.
A................... 12,146,400
--------------
33,188,458
--------------
New Jersey--2.9%
Camden Cnty. Poll.
Ctrl.
Fin. Auth., Solid
Waste Res. Rec.
Rev.,
Baa1 $ 2,500 7.50%, 12/1/09, Ser.
B................... $ 2,423,075
Howell Twnshp. Mun.
Utils. Auth. Rev.,
NR 1,750 8.60%, 1/1/14......... 1,975,592
Hudson Cnty. Impvt.
Auth.,
Solid Waste Sys.,
BBB-* 10,000 7.10%, 1/1/20......... 9,614,100
New Jersey St. Econ.
Dev. Auth., 1st
Mtge.
Keswick Pines Proj.,
NR 10,845 7.75%, 1/1/01......... 10,538,846
New Jersey St. Econ.
Dist. Heating &
Cool.,
Trigen Trenton
Proj.,
BBB-* 5,640 6.20%, 12/1/10........ 5,306,225
Union Cnty. Utils.
Auth.,
Solid Waste Rev.,
A-* 1,000 7.20%, 6/15/14, Ser.
A................... 989,510
--------------
30,847,348
--------------
New Mexico--0.6%
Farmington New Mexico
Poll. Ctrl. Rev.,
San Juan Proj.,
Ba2 7,500 6.40%, 8/15/23, Ser.
A................... 6,491,625
--------------
New York--6.7%
Met. Trans. Auth.
Facs. Rev.,
F.G.I.C.,
Aaa 8,340 Zero Coupon, 7/1/13,
Ser. N.............. 2,376,400
Nassau Cnty. Ind. Dev.
Agcy. Rev.,
S&S Incinerator Jt.
Venture Proj.,
NR 8,000 9.00%, 1/1/07(D)(D)... 4,640,000
</TABLE>
-16- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
New York (cont'd)
New York City Ind.
Dev. Agcy.,
American Airlines
Inc.,
Baa2 $ 3,320 8.00%, 7/1/20......... $ 3,398,651
Mesorah Publications
Ltd.,
NR 1,959 10.25%, 3/1/19........ 2,133,076
New York City, Gen.
Oblig.,
Baa1 6,000 7.50%, 2/1/04, Ser.
B................... 6,434,220
New York Hosp. Rev.,
Newark Wayne Cmnty.
Hosp., Inc.,
NR 5,380 7.60%, 9/1/15, Ser.
A................... 5,290,853
New York St. Dorm.
Auth.
Rev., City Univ.,
Baa1 7,000 5.75%, 7/1/13, Ser.
A................... 6,036,170
New York St. Energy
Resh. & Dev. Auth.
Rev.,
Brooklyn Union Gas
Co.,
Aaa 2,000 7.539%, 7/8/26, Ser. D
M.B.I.A.@........... 1,355,000
New York St. Med. Care
Facs. Fin. Auth.
Rev.,
Mental Hlth. Svcs.,
Baa1 7,510 5.375%, 2/15/14....... 6,118,397
Baa1 15,000 5.25%, 2/15/19........ 11,565,300
Aaa 6,250 5.25%, 2/15/21,
F.S.A............... 4,999,375
New York St. Mtge.
Agcy. Rev.,
Homeowner Mtge.,
Aa 3,505 8.125%, 4/1/20, Ser.
GG.................. 3,696,128
New York St. Urban
Dev. Corp. Rev.,
Correctional Facs.,
Baa1 2,000 5.50%, 1/1/14......... 1,669,140
Baa1 10,000 5.50%, 1/1/15......... 8,268,800
Port Auth. of New York
&
New Jersey Spec.
Oblig.,
U.S. Air, LaGuardia
Arpt.,
NR $ 4,000 9.125%, 12/1/15....... $ 4,372,080
--------------
72,353,590
--------------
Ohio--1.9%
Mahoning Valley Ohio
San. Dist. Wtr.
Rev.,
NR 8,000 7.75%, 5/15/19........ 7,785,760
Montgomery Cnty. Hlth.
Care Facs. Rev.,
Friendship Vlg.
Dayton, Proj. B,
NR 4,500 9.25%, 2/1/16......... 4,562,595
Ohio Hsg. Fin. Agcy.,
Sngl. Fam. Mtge.
Rev., G.N.M.A.,
AAA* 1,370 8.25%, 12/15/19, Ser.
B................... 1,421,937
Ohio St Wtr. Dev.
Auth. Poll. Ctrl.
Facs.,
Toledo Edison,
Ba2 7,000 8.00%, 10/1/23........ 6,860,350
--------------
20,630,642
--------------
Oklahoma--1.1%
Tulsa Mun. Arpt. Trust
Rev.,
American Airlines,
Inc.,
Baa2 13,000 7.375%, 12/1/20....... 12,208,300
--------------
Pennsylvania--5.6%
Allegheny Cnty. Hosp.
Dev. Auth. Rev.,
West Penn. Hosp.
Hlth. Proj.,
NR 2,800 8.50%, 1/1/20......... 3,035,592
Berks Cnty. Ind. Dev.
Auth. Rev.,
Lutheran Home Proj.,
NR 3,500 6.875%, 1/1/23........ 3,180,205
Berks Cnty. Mun. Auth.
Rev.,
Adventist Living Ctrs.
Proj.,
NR 367 11.00%,
12/1/15(D)(D)....... 80,842
</TABLE>
-17- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
Pennsylvania (cont'd)
Berks Cnty. Mun. Auth.
Rev.,
Alvernia Coll. Proj.,
NR $ 5,240 7.75%, 11/15/16....... $ 5,413,077
Bucks Cnty. Ind. Dev.
Auth. Rev.,
Mill Run Care,
NR 4,000 10.00%,
7/1/19(D)(D)........ 2,320,000
Chartiers Valley Ind.
&
Coml. Dev. Auth.
Rev.,
Friendship Village/
South Hills,
NR 3,750 9.50%, 8/15/18........ 4,043,138
Doylestown Hosp. Auth.
Rev., Pine Run,
NR 1,180 7.20%, 7/1/23......... 1,096,621
Lancaster Cnty. Solid
Waste Mgmt.,
Res. Rec. Auth. Sys.
Rev.,
A 5,965 8.50%, 12/15/10, Ser.
A................... 5,938,038
North Umberland Cnty.
Ind. Dev. Auth.
Rev.,
Roaring Creek Wtr.,
NR 6,000 6.375%, 10/15/23...... 5,089,020
Pennsylvania Hsg. Fin.
Agcy.,
Sngl. Fam. Mtge.
Rev.,
Aa 3,460 8.15%, 10/1/21, Ser.
27.................. 3,632,204
Aa 1,050 8.059%, 4/1/25@....... 807,188
Pennsylvania St.
Higher Edl.
Facs. Auth. Rev.,
Med. Coll. of
Pennsylvania,
Baa1 5,200 8.375%, 3/1/11, Ser.
A................... 5,458,804
Philadelphia Gas Wks.
Rev.,
Aaa 4,800 7.70%, 6/15/21, Ser.
13#................. 5,408,928
Philadelphia Wtr. &
Waste
Auth. Rev.,
M.B.I.A.,
Aaa 5,005 5.00%, 6/15/18........ 3,894,340
Aaa 2,200 5.00%, 6/15/19........ 1,703,746
Shenango Valley Hosp.
Auth. Rev.,
Osteopathic Hosp.
Med. Ctr.,
BBB+* $ 4,900 7.875%, 4/1/10........ $ 5,060,328
Wilkes Barre Gen. Mun.
Auth. Coll. Rev.,
Misericordia Coll.,
NR 1,245 7.75%, 12/1/12, Ser.
A................... 1,276,349
NR 2,660 7.75%, 12/1/12,
Ser.B............... 2,726,979
--------------
60,165,399
--------------
Puerto Rico--2.0%
Puerto Rico Aqueduct &
Swr. Auth. Rev.,
Baa 3,500 7.875%, 7/1/17, Ser.
A................... 3,824,135
Puerto Rico Elec. Pwr.
Auth.,
Pwr. Rev. Refunding
Bonds,
Baa1 7,375 6.125%, 7/1/09, Ser.
S................... 7,135,460
Puerto Rico Tel. Auth.
Rev.,
M.B.I.A., Ser. I,
Aaa 6,500 7.073%, 1/25/07@...... 5,419,375
Aaa 6,150 7.137%, 1/16/15@...... 4,604,813
--------------
20,983,783
--------------
Rhode Island--2.3%
Providence Rhode
Island
Redev. Agcy., Cert.
of Part.,
NR 11,000 8.00%, 9/1/24, Ser.
A................... 10,682,650
Rhode Island
Depositors Econ.
Protn. Corp.,
Sub. Gen. Oblig.,
NR 7,000 10.00%, 7/1/07, Ser.
B................... 7,647,500
Rhode Island Hsg. &
Mtge. Fin. Corp.,
Homeownership
Opportunity,
A1 6,000 8.20%, 10/1/17, Ser.
1A.................. 6,145,740
--------------
24,475,890
--------------
</TABLE>
-18- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
South Carolina--0.9%
Lee Cnty. Ind. Dev.
Rev.,
Mid American
Waste System,
NR $ 5,450 7.00%, 9/15/13........ $ 4,903,474
So. Carolina St. Hsg.
Fin. & Dev. Auth.,
Homeownership Mtge.,
Aa 4,345 7.75%, 7/1/22......... 4,438,461
--------------
9,341,935
--------------
South Dakota--0.6%
So. Dakota Econ. Dev.
Fin. Auth.,
Dakota Park,
NR 5,165 10.25%, 1/1/19........ 4,751,800
Lomar Dev. Co. Proj.,
NR 1,300 10.25%, 8/1/08........ 1,382,095
--------------
6,133,895
--------------
Tennessee--0.7%
Knox Cnty. Hlth. &
Edl. Facs. Rev.,
Baptist Hlth. Hosp.,
NR 7,525 8.50%, 4/15/04........ 7,928,190
--------------
Texas--3.0%
Beaumont Hsg. Fin.
Corp.,
Sngl. Fam. Mtge.
Rev.,
A 2,120 9.20%, 3/1/12......... 2,295,875
Bell Cnty. Hlth. Facs.
Dev. Corp.,
Adventist
Living Tech., Inc.,
NR 5,540 10.50%, 6/15/18, Ser.
A................... 5,318,400
Harris Cnty. Texas
Cultural Ed. Facs.
Fin.
Corp. Rev. Space
Ctr., Houston Proj.,
NR 7,000 9.25%, 8/15/15........ 6,580,000
Port Corpus Christi
Ind.
Dev. Corp., Valero
Refining & Mfg. Co.,
Baa3 1,300 10.25%, 6/1/17, Ser.
A................... 1,451,190
Retama Dev. Corp.,
Spec. Fac.,
Retama Park
Racetrack,
NR $ 7,500 8.75%, 12/15/18....... $ 7,312,500
Tarrant Cnty. Hlth.
Facs.
Dev. Corp., Rev.,
3927 Fndtn. Proj.,
NR 5,000 10.25%, 9/1/19........ 5,329,650
Texas Mun. Pwr.
Agcy. Rev.,
M.B.I.A.,
Aaa 15,000 Zero Coupon, 9/1/15... 3,606,300
--------------
31,893,915
--------------
U. S. Virgin Islands--0.7%
Virgin Islands Terr.,
Hugo Ins. Claims
Fund Proj.,
NR 2,195 7.75%, 10/1/06, Ser.
91.................. 2,325,142
Virgin Islands Wtr. &
Pwr.
Auth., Wtr. Sys.
Rev.,
NR 4,600 8.50%, 1/1/10, Ser.
A................... 4,968,000
--------------
7,293,142
--------------
Utah--0.3%
Intermountain Pwr.
Agcy.,
Pwr. Sup. Rev.,
Aa 4,500 7.621%, 7/1/21@....... 2,964,375
--------------
Virginia--2.0%
Pittsylvania Cnty.
Virginia Ind. Dev.
Auth. Rev.
Multitrade,
NR 5,500 7.45%, 1/1/09......... 5,377,020
NR 12,000 7.55%, 1/1/19, Ser.
A................... 11,498,040
West Point Ind. Dev.,
Chesapeake Corp.,
Baa3 5,150 6.375%, 3/1/19........ 4,670,123
--------------
21,545,183
--------------
</TABLE>
-19- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
Washington--1.6%
Washington St. Pub.
Pwr. Sup. Sys. Rev.,
Nuclear Proj. No. 2,
Aa $ 5,000 5.375%, 7/1/11........ $ 4,181,250
Nuclear Proj. No. 3,
Aa 10,000 Zero Coupon, 7/1/16,
Ser. C.............. 2,110,600
Aa 5,000 7.125%, 7/1/16, Ser.
B(D)................ 5,170,600
Aa 5,000 Zero Coupon, 7/1/17,
Ser C............... 975,800
Washington St. Pub.
Pwr. Supply Sys.
Rev.,
Nuclear Proj. No. 1,
Aa 5,000 7.25%, 7/1/09, Ser.
B(D)................ 5,321,250
--------------
17,759,500
--------------
West Virginia--1.6%
So. Charleston Ind.
Dev. Rev.,
Union Carbide Chem.
& Plastics Co.,
Baa2 2,450 8.00%, 8/1/20......... 2,558,633
Weirton Poll. Ctrl.
Rev.,
Weirton Steel Proj.,
B2 4,000 8.625%, 11/1/14....... 4,011,040
West Virginia St. Hsg.
Dev.
Auth., Fund Hsg.
Fin.,
A1 8,030 7.95%, 5/1/17, Ser.
A................... 8,347,105
West Virginia St.
Pkwys. Econ. Dev. &
Tourism Auth.,
Aaa 3,250 7.829%, 5/16/19,
F.G.I.C.@........... 2,437,500
--------------
17,354,278
--------------
Wyoming--0.8%
Sweetwater Cnty.
Wyoming Solid Waste
Disp. Rev.
Proj. Ser. B,
Baa3 9,500 6.90%, 9/1/24......... 8,887,060
--------------
Total long-term
investments
(cost
$1,059,016,397)..... 1,038,135,401
--------------
SHORT-TERM INVESTMENTS--2.7%
Arizona--0.9%
Coconino Cnty. Arizona
Poll. Ctrl. Corp.
Rev.
Arizona Pub. Svc.
Navajo Proj. A, Ser.
94A
P1 $ 9,200 3.65%, 11/1/94,
F.R.D.D............. $ 9,200,000
--------------
Florida--0.2%
Pinellas Cnty. Hlth.
Facs.
Auth. Rev., Ser. 85,
Pooled Hosp. Loan
Prog.,
VMIG1 2,685 3.70%, 11/1/94,
F.R.D.D............. 2,685,000
--------------
Iowa--0.3%
Iowa Fin. Auth. Solid
Waste Disp. Rev.
Cedar River Paper
Co. Proj. Ser. 93A
A1+* 3,500 3.80%, 11/1/94,
F.R.D.D............. 3,500,000
--------------
New York--0.3%
Port Auth. of New York
&
New Jersey,
Spec. Oblig. Rev.,
F.R.D.D.,
VMIG1 2,800 3.50%, 11/1/94,
Ser.1............... 2,800,000
--------------
Texas--1.0%
Brazos River Harbor
Nav. Dist. Harbor
Rev.,
Dow Chemical Co.
Proj., F.R.D.D.,
A1 11,200 3.65%, 11/1/94, Ser.
93.................. 11,200,000
--------------
Total short-term
investments
(cost
$29,385,000)........ 29,385,000
--------------
Total Investments--99.4%
(cost $1,088,401,397;
Note 4)............. 1,067,520,401
Other assets in excess
of
liabilities--0.6%... 5,938,605
--------------
Net Assets--100%...... $1,073,459,006
--------------
--------------
</TABLE>
-20- See Notes to Financial Statements.
<PAGE>
(a) The following abbreviations are used in portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation
F.G.I.C.--Financial Guaranty Insurance Company
F.R.D.D.--Floating Rate (Daily) Demand Note**
F.S.A.--Financial Securities Assurance
G.N.M.A.--Government National Mortgage Association
M.B.I.A.--Municipal Bond Insurance Association
# Prerefunded issues are secured by escrowed cash and direct U.S. guaranteed
obligations.
(D) Pledged as initial margin on financial futures contract.
(D)(D) Issuer in default, non-income producing security.
@ Inverse floating rate bond. The coupon is inversely indexed to a floating
interest rate. The rate shown is the rate at period end.
* Standard & Poor's Rating.
** For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be the later of the next date on which the
security can be redeemed at par or the next date on which the rate of
interest is adjusted.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Prospectus contains a description of Moody's and Standard &
Poor's ratings.
-21- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets October 31, 1994
-----------------
<S> <C>
Investments, at value (cost $1,088,401,397)............................................ $ 1,067,520,401
Accrued interest receivable............................................................ 24,086,898
Receivable for investments sold........................................................ 11,845,855
Receivable for Fund shares sold........................................................ 1,382,649
Due from broker-variation margin....................................................... 27,250
Deferred expenses...................................................................... 18,812
-----------------
Total assets....................................................................... 1,104,881,865
-----------------
Liabilities
Bank overdraft......................................................................... 89,263
Payable for investments purchased...................................................... 22,726,923
Payable for Fund shares reacquired..................................................... 5,104,237
Dividends payable...................................................................... 2,421,979
Management fee payable................................................................. 466,512
Distribution fee payable............................................................... 449,779
Accrued expenses....................................................................... 164,166
-----------------
Total liabilities.................................................................. 31,422,859
-----------------
Net Assets............................................................................. $ 1,073,459,006
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at par................................................ $ 1,032,420
Paid-in capital in excess of par..................................................... 1,101,204,188
-----------------
1,102,236,608
Undistributed net investment income.................................................. 324,000
Accumulated net realized loss on investments......................................... (8,300,981)
Net unrealized depreciation on investments........................................... (20,800,621)
-----------------
Net assets, October 31, 1994......................................................... $ 1,073,459,006
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($48,745,056 / 4,687,858 shares of beneficial interest issued and outstanding)..... $10.40
Maximum sales charge (3.0% of offering price)........................................ .32
-----------------
Maximum offering price to public..................................................... $10.72
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per share
($1,023,381,639 / 98,426,120 shares of beneficial interest issued and
outstanding)....................................................................... $10.40
-----------------
-----------------
Class C:
Net asset value, offering price and redemption price per share
($1,332,311 / 128,096 shares of beneficial interest issued and outstanding)........ $10.40
-----------------
-----------------
</TABLE>
See Notes to Financial Statements.
-22-
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
October 31,
Net Investment Income 1994
------------
<S> <C>
Income
Interest............................ $ 41,857,306
------------
Expenses
Management fee...................... 2,864,595
Distribution fee--Class A........... 26,421
Distribution fee--Class B........... 2,731,562
Distribution fee--Class C........... 1,394
Transfer agent's fees and
expenses............................ 262,000
Custodian's fees and expenses....... 124,000
Reports to shareholders............. 108,000
Registration fees................... 51,000
Insurance expense................... 19,000
Legal fees.......................... 15,000
Audit fee........................... 9,000
Trustees' fees...................... 7,500
Miscellaneous....................... 3,720
------------
Total expenses...................... 6,223,192
------------
Net investment income................. 35,634,114
------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions............. (4,453,555)
Financial futures contracts......... 2,249,634
------------
(2,203,921)
------------
Net change in unrealized depreciation of:
Investments......................... (32,134,744)
Financial futures contracts......... (1,022,750)
------------
(33,157,494)
------------
Net loss on investments............... (35,361,415)
------------
Net Increase in Net Assets
Resulting from Operations............. $ 272,699
------------
------------
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) October 31, April 30,
in Net Assets 1994 1994
------------- ---------------
<S> <C> <C>
Operations
Net investment
income............. $ 35,634,114 $ 71,607,244
Net realized loss on
investment
transactions....... (2,203,921) (5,680,677)
Net change in
unrealized
appreciation/depreciation
of investments..... (33,157,494) (39,373,092)
-------------- --------------
Net increase in net
assets
resulting from
operations......... 272,699 26,553,475
-------------- --------------
Dividends and distributions (Note 1)
Dividends to
shareholders from
net investment
income
Class A............ (1,743,115) (3,401,705)
Class B............ (33,879,272) (68,205,539)
Class C............ (11,727) --
-------------- --------------
(35,634,114) (71,607,244)
-------------- --------------
Distributions to
shareholders from
net realized gains
Class A............ -- (35,027)
Class B............ -- (724,132)
Class C............ -- --
-------------- --------------
-- (759,159)
-------------- --------------
Fund share transactions (Note 5)
Net proceeds from
shares
issued............. 63,547,862 307,757,433
Net asset value of
shares
issued to
shareholders in
reinvestment of
dividends and
distributions...... 15,834,613 32,076,014
Cost of shares
reacquired......... (124,692,465) (211,899,598)
-------------- --------------
Increase (decrease)
in net assets from
Fund share
transactions....... (45,309,990) 127,933,849
-------------- --------------
Total increase
(decrease)........... (80,671,405) 82,120,921
-------------- --------------
Net Assets
Beginning of period.... 1,154,130,411 1,072,009,490
-------------- --------------
End of period.......... $1,073,459,006 $1,154,130,411
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-23-
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND Portfolio of Investments
INSURED SERIES October 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--87.3%
Alabama--1.2%
Huntsville Solid Waste
Disp. Auth.,
Aaa $ 2,000 7.00%, 10/1/08,
F.G.I.C.............. $ 2,095,060
Mobile Wtr. & Swr.
Rev.,
Aaa 4,840 5.00%, 1/1/13,
A.M.B.A.C............ 3,938,356
Univ. Alabama Rev.,
Birmingham Hosp.,
Aaa 2,500 5.00%, 10/1/14,
M.B.I.A.............. 1,998,775
------------
8,032,191
------------
Alaska--1.1%
Alaska St. Energy Auth.
Pwr.
Rev., Bradley Lake
Hydro,
A.M.B.A.C.,
Aaa 2,000 7.25%, 7/1/16, 1st
Ser.................. 2,053,840
Anchorage Hosp. Rev.,
Sisters of Providence,
Aaa 5,000 7.125%, 10/1/05,
A.M.B.A.C............ 5,362,650
------------
7,416,490
------------
Arizona--3.9%
Maricopa Cnty. Ind.
Dev. Auth. Rev.,
Hosp. Fac., John C.
Lincoln Hosp.,
F.S.A.,
Aaa 2,740 7.00%, 12/1/00......... 2,922,429
Aaa 2,250 7.50%, 12/1/13......... 2,398,388
Maricopa Cnty. Unified
Sch. Dist., No. 69,
Paradise Valley,
F.G.I.C.,
Aaa 3,700 6.80%, 7/1/12, Ser.
E.................... 3,799,456
Pima Cnty. Ind. Dev. Auth. Rev.,
Tucson Elec. Pwr. Co.,
Aaa $ 14,000 7.25%, 7/15/10,
F.S.A................ $ 14,344,960
Tucson, Gen. Oblig.,
Aaa 3,140 7.625%, 7/1/14,
F.G.I.C.............. 3,532,374
------------
26,997,607
------------
California--6.2%
California St. Gen.
Oblig.,
Aaa 6,000 6.30%, 9/1/08,
M.B.I.A.............. 6,060,060
California St. Hlth.
Facs. Fin. Auth.
Rev.,
Catholic Hlth. Facs.,
Aaa 5,000 5.00%, 7/1/14,
A.M.B.A.C............ 3,975,900
Culver City Redev. Fin.
Auth.
Rev. Ref. Tax Alloc.,
Aaa 9,225 5.50%, 11/1/14,
A.M.B.A.C............ 8,014,495
Sacramento Mun. Util.
Dist.,
Elec. Rev., M.B.I.A.,
Aaa 3,250 5.75%, 8/15/13, Ser.
A.................... 2,928,673
San Diego Cnty. Wtr.
Auth.
Wtr. Rev., Cert. of
Part.,
Aaa 11,600 5.559%, 4/26/06,
F.G.I.C.............. 10,905,740
Santa Margarita/Dana
Point
Auth., Impt. Dist.,
Aaa 2,180 7.25%, 8/1/10,
M.B.I.A.............. 2,364,188
So. Orange Cnty. Pub.
Fin. Auth.,
Foothill Area Proj., F.G.I.C.,
Aaa 2,500(D) 8.00%, 8/15/08......... 2,897,700
Aaa 2,725 6.50%, 8/15/10......... 2,735,355
West & Central Basin
Fin. Auth. Rev.,
Central Basin Proj.,
Aaa 3,840 5.00%, 8/1/13,
F.G.I.C.............. 3,085,171
------------
42,967,282
------------
Colorado--0.2%
Jefferson Cnty. Sngl.
Fam.
Mtge. Rev., M.B.I.A.,
Aaa 1,055 8.875%, 10/1/13, Ser.
A.................... 1,098,519
------------
</TABLE>
-24- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
Delaware--1.1%
Delaware Econ. Dev.
Auth.
Rev., Delmarva
Pwr. & Lt., M.B.I.A.,
Aaa $ 5,000 7.60%, 3/1/20, Ser.
A.................... $ 5,307,550
Wilmington, Gen.
Oblig., F.G.I.C.,
Aaa 2,500 5.10%, 7/1/10, Ser.
B.................... 2,117,350
------------
7,424,900
------------
District Of Columbia--1.5%
Dist. of Columbia Met.
Area Transit Auth.
Gross Rev., F.G.I.C.,
Aaa 2,400 6.00%, 7/1/09.......... 2,324,712
Aaa 1,500 6.00%, 7/1/10.......... 1,442,430
Aaa 5,000 5.25%, 7/1/14.......... 4,165,450
Dist. of Columbia, Gen. Oblig.,
Aaa 2,500 6.75%, 6/1/08, Ser. A,
M.B.I.A.............. 2,560,800
------------
10,493,392
------------
Florida--2.1%
Gulf Breeze Local
Gov't.
Loan Proj., F.G.I.C.,
Aaa 1,500 8.00%, 12/1/15, Ser.
85B.................. 1,634,880
Orlando & Orange Cnty.
Expwy. Auth. Rev.,
F.G.I.C.,
Aaa 5,000 6.50%, 7/1/10.......... 5,043,450
Aaa 2,550 6.50%, 7/1/11.......... 2,565,172
Univ. Cmnty. Hosp.
Inc.,
Hosp. Rev.,
Aaa 5,000 7.375%, 9/1/07,
F.S.A................ 5,540,000
------------
14,783,502
------------
Georgia--1.4%
Atlanta Wtr. & Swr.
Rev.,
Aa 4,410 6.00%, 1/1/11.......... 4,211,991
De Kalb Cnty. Hsg.
Auth.,
Sngl. Fam. Mtge.
Rev.,
AAA* 3,075 7.70%, 2/1/24,
G.N.M.A.............. 3,115,375
Fulton Cnty. Hosp. Auth. Rev.,
Northside Hosp.,
Aaa $ 2,790 5.375%, 10/1/12,
M.B.I.A.............. $ 2,391,783
------------
9,719,149
------------
Guam--0.4%
Guam Gov't. Ltd. Oblig.
Hwy. Rev. C.G.I.C.,
Aaa* 3,000 6.30%, 5/1/12, Ser.
A.................... 2,928,570
------------
Hawaii--1.2%
Hawaii Arpts. Sys.
Rev.,
F.G.I.C., 2nd Ser. 90,
Aaa 7,750 7.50%, 7/1/20.......... 8,055,040
------------
Illinois--2.2%
Chicago Residential
Mtge. Rev., M.B.I.A.,
Ser. B,
Aaa 9,000 Zero Coupon, 10/1/09... 3,133,350
Chicago Sch. Fin.
Auth., M.B.I.A.,
Aaa 5,000 5.00%, 6/1/08, Ser.
A.................... 4,209,400
Onterie Ctr. Hsg. Fin.
Corp. Mtge. Rev.,
Ser. A, M.B.I.A.,
Aaa 1,575 7.00%, 7/1/12.......... 1,581,001
Aaa 6,400 7.05%, 7/1/27.......... 6,390,912
------------
15,314,663
------------
Indiana--3.1%
Indianapolis Arpt. Auth. Rev.,
Aaa 2,450 9.00%, 7/1/15,
M.B.I.A.............. 2,624,905
Lake Cent. Multi Dist.
Sch. Bldg., First
Mtge.,
Aaa 3,000 6.50%, 1/15/14,
M.B.I.A.............. 2,919,510
Marion Cnty. Hosp.
Auth. Facs. Rev.,
Aaa 8,500 8.625%, 10/1/12,
A.M.B.A.C............ 9,558,335
Rockport Poll. Ctrl.
Rev.,
Ind. & Mich. Elec. Co.,
B.I.G.,
Aaa 6,000 9.25%, 8/1/14, Ser.
A(D)................. 6,317,220
------------
21,419,970
------------
</TABLE>
-25- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
Kansas--0.7%
Olathe Hlth. Facs. Rev.
Auth., Lutheran Good
Samaritan Proj.,
Aaa $ 2,000 6.00%, 5/1/19,
A.M.B.A.C............ $ 1,859,720
Sedgwick Cnty. Mtge.
Loan Rev.,
A.M.B.A.C.,
Aaa 2,630 7.80%, 6/1/22, Ser.
B.................... 2,664,085
------------
4,523,805
------------
Kentucky--3.5%
Kentucky Hsg. Corp.
Rev., F.H.A.,
Aaa 2,695 7.45%, 1/1/23, Ser.
D.................... 2,706,508
Kentucky St. Ppty. &
Bldgs. Ref. Proj. No.
55,
Aaa 19,100 6.25%, 9/1/07,
M.B.I.A.............. 19,265,979
Louisville & Jefferson Cnty.
Regl. Arpt. Auth., M.B.I.A.,
Aaa 2,000 8.375%, 7/1/07, Ser
A.................... 2,164,240
------------
24,136,727
------------
Louisiana--1.3%
Jefferson Parish Sales
Tax Dist., F.G.I.C.,
Aaa 5,000 6.75%, 12/1/06, Ser.
A.................... 5,195,050
New Orleans, Gen.
Oblig.,
Cap. Apprec.,
Aaa 11,000 Zero Coupon, 9/1/09,
A.M.B.A.C............ 4,073,740
------------
9,268,790
------------
Massachusetts--1.3%
Mass. Bay Trans. Auth.,
Gen. Trans.,
M.B.I.A.,
Aaa 4,000 5.50%, 3/1/09, Ser.
A.................... 3,637,000
Mass. St. Hlth. & Edl.
Facs. Auth. Rev.,
Fallon Hlthcare,
C.G.I.C.,
Aaa 3,000 6.875%, 6/1/11, Ser.
A.................... 3,066,990
Mass. St. Hsg. Fin.
Agcy.,
Hsg. Rev., B.I.G.,
Aaa $ 1,500 7.75%, 12/1/19, Ser.
A.................... $ 1,571,250
Mass. St. Mun.
Wholesale
Elec. Co., M.B.I.A.,
Aaa 1,000 5.00%, 7/1/13, Ser.
B.................... 805,670
------------
9,080,910
------------
Michigan--5.1%
Michigan St. Bldg.
Auth. Rev.,
A.M.B.A.C.
Aaa 8,050 5.20%, 10/1/09, Ser.
I.................... 6,948,358
Aaa 8,735 6.00%, 10/1/09, Ser.
II................... 8,442,290
Michigan St. Hosp. Fin.
Auth. Rev.,
Mid Michigan,
Aaa 2,350 7.50%, 6/1/15,
M.B.I.A.............. 2,470,203
Michigan St. Hsg. Dev.
Auth., F.G.I.C.,
Aaa 1,500 7.70%, 7/1/18, Ser.
A.................... 1,582,500
Monroe Cnty. Poll. Ctrl. Rev.,
Detroit Edison Co. Proj.,
A.M.B.A.C.,
Aaa 3,250 7.30%, 9/1/19, Ser.
I,................... 3,371,062
Detroit Edison Co., Proj. 1,
Aaa 8,000 7.65%, 9/1/20,
F.G.I.C.............. 8,466,800
Saginaw Hosp. Fin.
Auth. Hosp. Rev.,
St. Luke's Hosp., M.B.I.A.,
Aaa 4,000 6.50%, 7/1/11, Ser.
C.................... 3,999,520
------------
35,280,733
------------
Minnesota--1.2%
St. Louis Park Hlth.
Facs.,
Hlthsys. Oblig. Group,
Aaa 10,000 5.20%, 7/1/16,
A.M.B.A.C.,.......... 8,217,700
------------
</TABLE>
-26- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
Mississippi--2.5%
Harrison Cnty.
Wastewater Mgmt.
Dist. Rev.,
Aaa $ 2,400 6.50%, 2/1/06,
F.G.I.C.............. $ 2,448,792
Mississippi Hosp.
Equip. & Facs. Auth.
Rev.,
Baptist Med. Ctr.,
Aaa 2,000 7.40%, 5/1/07,
M.B.I.A.............. 2,142,040
Mississippi Hsg. Fin.
Corp.,
Sngl. Fam. Mtge. Rev.,
F.G.I.C.,
Aaa 2,285 7.80%, 10/15/16, Ser.
A.................... 2,309,084
Mississippi St. Hwy.
Ref. Bd.,
Aaa 10,000 6.20%, 2/1/08.......... 10,007,600
------------
16,907,516
------------
Missouri--1.6%
Missouri St. Hlth. &
Edl.
Facs. Auth. Rev.,
M.B.I.A.,
SSM Healthcare,
Aaa 3,750 6.25%, 6/1/16, Ser.
AA................... 3,589,350
St. Lukes Hlth. Sys.,
Aaa 3,000 5.10%, 11/15/13........ 2,454,120
Sikeston Elec. Auth.
Rev., M.B.I.A.,
Aaa 5,000 6.25%, 6/1/12, Ser.
A.................... 4,879,900
------------
10,923,370
------------
Montana--1.5%
Forsyth Poll. Ctrl.
Rev.,
Puget Sound Pwr. & Lt.
Co., A.M.B.A.C.,
Aaa 2,000 7.05%, 8/1/21, Ser.
A.................... 2,036,260
Washington Wtr. Pwr. Proj.,
Aaa 8,000(D) 7.125%, 12/1/13,
M.B.I.A.............. 8,299,680
------------
10,335,940
------------
Nebraska--0.9%
Nebraska Invest. Fin.
Auth., G.N.M.A.,
Sngl. Fam. Mtge. Rev.,
Aaa 1,980 8.00%, 7/15/17, Ser. B,
F.G.I.C.............. 2,032,035
Nebraska Invest. Fin.
Auth.,
Aaa $ 4,265 8.125%, 8/15/38, Ser.
I, M.B.I.A........... $ 4,401,821
------------
6,433,856
------------
New Jersey--3.8%
Garfield Sch. Dist.,
Cert. of Part.,
Wtr. Impvt. Dist. No.
31,
Aaa 3,150(D) 7.65%, 6/1/08,
B.I.G................ 3,400,457
New Jersey Econ. Dev. Auth.,
Mkt. Trans. Fac. Rev.,
Sr. Lien M.B.I.A.,
Aaa 5,275 5.80%, 7/1/08.......... 5,016,419
Aaa 3,800 5.80%, 7/1/09.......... 3,577,738
New Jersey Hlth. Care
Facs.
Fin. Auth. Rev.,
Allegany Hlth. Our Lady
of Lourdes, M.B.I.A.,
Aaa 1,500 5.125%, 7/1/13......... 1,246,005
Hackensack Med. Ctr.,
F.G.I.C.,
Aaa 2,000 6.625%, 7/1/11......... 2,014,800
Aaa 5,000 6.625%, 7/1/17......... 4,967,400
Irvington Gen. Hosp.,
Aaa 2,500 9.625%, 8/1/25,
M.B.I.A.............. 2,639,075
New Jersey St. Hsg. &
Mtge. Fin. Agcy.
Rev.,
M.B.I.A.,
Aaa 3,600 7.90%, 10/1/22, Ser.
B.................... 3,678,444
------------
26,540,338
------------
New Mexico--0.8%
Socorro Hosp. Sys.
Rev.,
Cmnty. Hlth. Svcs.,
M.B.I.A.,
Aaa 5,315(D) 9.25%, 8/1/12, Ser.
A.................... 5,596,004
------------
New York--9.0%
Erie Cnty. Wtr. Auth.
Rev., A.M.B.A.C.,
Aaa 770 Zero Coupon, 12/1/17... 144,729
Islip Res. Rec.,
A.M.B.A.C.,
Aaa 1,750 7.20%, 7/1/10, Ser.
B.................... 1,867,303
</TABLE>
-27- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
New York (cont'd)
Met. Trans. Auth. Facs.
Rev., F.G.I.C.,
Aaa $ 1,500 6.375%, 7/1/10, Ser.
J.................... $ 1,494,675
Aaa 9,000 6.00%, 7/1/24,
M.B.I.A.............. 8,159,580
New York City Mun. Wtr.
Fin. Auth.,
Wtr. & Swr. Sys.
Rev.,
Aaa 21,250 6.75%, 6/15/16,
F.G.I.C.............. 21,175,837
New York St. Dorm. Auth. Rev.
Univ. Edl. Facs.
Aaa 5,000 5.50%, 5/15/09,
A.M.B.A.C............ 4,516,400
New York St. Energy
Res.
& Dev. Auth.,
Poll. Ctrl. Rev.,
Aaa 4,000 7.375%, 10/1/14,
F.G.I.C.............. 4,210,200
New York St. Hsg. Fin.
Agcy. Rev.,
Multifamily Hsg.,
A.M.B.A.C.,
Aaa 2,955 7.45%, 11/1/28, Ser.
A.................... 3,080,647
New York St. Pwr.
Auth., M.B.I.A.,
Aaa 7,155 7.875%, 1/1/13, Ser.
V.................... 7,651,271
New York St. Thrwy.
Auth. Gen. Rev.,
M.B.I.A.,
Aaa 10,420 5.00%, 1/1/14, Ser.
B.................... 8,416,234
Port Auth. New York &
New Jersey F.G.I.C.,
Aaa 1,500 7.00%, 9/1/24, Ser.
65................... 1,535,760
------------
62,252,636
------------
North Carolina--1.0%
North Carolina Mun.
Pwr. Agcy. Elec.
Rev.,
No. 1 Catawba,
M.B.I.A.,
Aaa 7,500 6.00%, 1/1/11.......... 7,027,425
------------
Ohio--1.3%
Cleveland Arpt. Sys.
Rev., M.B.I.A.,
Aaa $ 1,500 7.40%, 1/1/20, Ser.
90A.................. $ 1,569,255
Cleveland Waterworks
Rev.,
Aaa 2,500 6.25%, 1/1/15.......... 2,405,575
Hamilton Elec. Rev.,
Ser. A, F.G.I.C.,
Aaa 5,085 6.00%, 10/15/12........ 4,853,785
------------
8,828,615
------------
Oklahoma--2.0%
Oklahoma St. Tpke.
Auth. Rev., M.B.I.A.,
Aaa 14,250 6.25%, 1/1/22, Ser.
C.................... 13,743,697
------------
Pennsylvania--5.1%
Allegheny Cnty. Arpt.
Rev.,
Pittsburgh Int'l.
Arpt., M.B.I.A.,
Aaa 4,800(D) 8.25%, 1/1/16, Ser.
C.................... 5,191,488
North Umberland Cnty.
Lease Auth. Rev.,
Correctional Facs.,
M.B.I.A.,
Aaa 7,500 Zero Coupon,
10/15/10............. 2,690,250
Pennsylvania St. Cert. of Part.,
A.M.B.A.C.,
Aaa 8,740 5.00%, 7/1/15, Ser.
A.................... 6,924,265
Philadelphia Arpt. Sys.
Rev.,
Aaa 6,750 9.00%, 6/15/15,
A.M.B.A.C............ 7,133,670
Philadelphia Mun. Auth. Rev.,
Criminal Justice Ctr., M.B.I.A.,
Aaa 3,000 6.90%, 11/15/03, Ser.
A.................... 3,228,510
Philadelphia Wtr. &
Waste Auth. Rev.,
M.B.I.A.,
Aaa 5,000 5.625%, 6/15/08........ 4,612,100
Pittsburgh Gen. Oblig., F.G.I.C.,
Aaa 5,000 7.00%, 3/1/06, Ser.
B.................... 5,192,050
------------
34,972,333
------------
</TABLE>
-28- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
Puerto Rico--2.1%
Puerto Rico Tel. Auth.
Rev.,
M.B.I.A., Ser. I,
Aaa $ 8,200 5.25%, 1/25/07......... $ 7,518,908
Aaa 7,600 5.45%, 1/16/15......... 6,647,188
------------
14,166,096
------------
Rhode Island--1.0%
Rhode Island Hsg. &
Mtge. Fin. Corp.,
M.B.I.A.,
Aaa 6,500 7.875%, 10/1/22........ 6,650,345
------------
South Carolina--0.4%
Berkeley Cnty. Wtr. & Swr. Rev.,
Aaa 2,500 6.50%, 6/1/06,
M.B.I.A.............. 2,550,825
------------
Tennessee--1.8%
Knox Cnty. Hlth. Edl.
Hosp. Facs. Rev.,
Aaa 4,840 5.75%, 1/1/14, Ser. C,
M.B.I.A.............. 4,313,553
Tennessee Hsg. Dev.
Agcy.,
Aaa 7,950 7.65%, 7/1/20,
B.I.G................ 8,031,090
------------
12,344,643
------------
Texas--9.5%
Austin Util. Sys. Rev.,
Aaa 3,250 7.25%, 11/15/03,
Ser. B, F.G.I.C...... 3,485,137
Aaa 5,000 6.50%, 5/15/11,
A.M.B.A.C............ 4,920,300
Brazos River Auth.
Rev.,
Houston Lt. & Pwr.,
Aaa 5,000 6.70%, 3/1/17, Ser. A,
A.M.B.A.C............ 4,965,000
Aaa 1,000 7.20%, 12/1/18, Ser. B,
F.G.I.C.............. 1,024,920
Corpus Christi Hsg. Fin. Corp.,
Sngl. Fam. Mtge., M.B.I.A.,
Aaa 2,510 7.70%, 7/1/11, Ser.
A.................... 2,644,913
Harris Cnty. Toll Rd., F.G.I.C.,
Aaa 10,290(D) 8.00%, 8/15/11, Ser.
A.................... 11,955,848
Houston Arpt. Sys.
Rev.,
Aaa 3,900 7.20%, 7/1/13.......... 4,277,169
Keller Texas Ind. Sch. Dist.,
Aaa $ 7,000 5.50%, 8/15/13......... $ 6,135,780
Matagorda Cnty.
Navigation
Poll. Ctrl. Rev.,
Dist. No. 1,
Aaa 2,300 7.50%, 12/15/14,
A.M.B.A.C............ 2,434,941
Port Arthur Nav. Dist.,
Gen. Oblig. Bonds,
Aaa 3,200 6.00%, 3/1/15,
A.M.B.A.C............ 2,936,256
Texas St. Mun. Pwr.
Agcy. Rev.,
Aaa 1,300 5.25%, 9/1/09,
M.B.I.A.............. 1,139,840
Aaa 7,000 Zero Coupon, 9/1/14,
M.B.I.A.............. 1,809,080
Aaa 5,000 5.00%, 9/1/14,
F.G.I.C.............. 3,980,950
Aaa 3,960 6.75%, 9/1/12, Ser. A,
A.M.B.A.C............ 3,972,514
Aaa 9,000 Zero Coupon, 9/1/13,
M.B.I.A.............. 2,503,800
Texas St. Pub. Fin.
Auth. Bldg. Rev.,
M.B.I.A.,
Aaa 6,900 Zero Coupon, 2/1/14.... 1,855,617
Willis Indpt. Sch.
Dist.,
Aaa 3,650 6.50%, 2/15/16......... 3,579,445
Wtr. Res. Fin. Auth.
Rev.,
Aaa 2,000 7.50%, 8/15/13,
A.M.B.A.C............ 2,066,080
------------
65,687,590
------------
Utah--1.1%
Intermountain Pwr.
Agcy. Pwr. Supply
Rev., M.B.I.A.,
Aaa 9,250 5.00%, 7/1/12, Ser.
A.................... 7,526,633
------------
Virginia--0.5%
Southeastern Pub. Svc.
Auth. Rev.,
Regl. Waste Sys.,
Aaa 3,000 7.00%, 7/1/13,
B.I.G................ 3,242,430
------------
</TABLE>
-29- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
Washington--2.7%
Washington Hlth. Care
Facs. Auth.,
Fred Hutchinson Cancer Ctr.,
Aaa $ 2,500 7.30%, 1/1/12.......... $ 2,573,925
Tacoma Multicare Med. Ctr.,
Aaa 5,000 7.875%, 8/15/11,
F.G.I.C.............. 5,354,750
Washington St. Pub.
Pwr. Supply Sys.,
Nuclear Proj. No. 1,
Aaa 5,000 7.00%, 7/1/04, Ser.
A,................... 5,301,750
Nuclear Proj. No. 2,
Aaa 3,000 7.25%, 7/1/03, Ser. B,
F.G.I.C.............. 3,243,300
Nuclear Proj. No. 3,
F.G.I.C.,
Aaa 2,000 7.00%, 7/1/05, Ser.
B.................... 2,111,440
------------
18,585,165
------------
Total long-term
investments
(cost $611,082,517).... 601,475,397
------------
SHORT-TERM INVESTMENTS--10.1%
California--1.3%
California St.,
Rev. Ant. Wts.,
MIG1 9,000 5.75%, 4/25/95, Ser.
C.................... 9,089,749
------------
Florida--0.7%
Broward Cnty. Hsg. Fin.
Auth.,
Welleby Apts., Ser.
84,
MIG1 800 3.25%, 11/2/94,
F.R.W.D.............. 800,000
Manatee Cnty. Hsg. Fin.
Auth.,
Sngl. Fam. Mtge.
Rev.,
MIG1 3,700 3.46%, 11/15/94, Ser.
94................... 3,700,000
------------
4,500,000
------------
Kansas--0.2%
Butler Cnty.
Texaco Ref. & Mktg.,
F.R.D.D.,
VMIG1 1,400 3.65%, 11/1/94, Ser.
94A.................. 1,400,000
------------
Kentucky--2.6%
Davies Cnty.,
Scott Paper Co.
Proj., F.R.D.D.,
NR $ 2,000 3.60%, 11/1/94, Ser.
93A.................. $ 2,000,000
NR 13,700 3.65%, 11/1/94, Ser.
93B.................. 13,700,000
P1 2,300 3.65%, 11/1/94, Ser.
94B.................. 2,300,000
------------
18,000,000
------------
Louisiana--1.6%
West Baton Rouge Ind.
Dist. Rev.,
Dow Chemical Co. Proj.,
F.R.D.D.,
P1 11,000 3.65%, 11/1/96, Ser.
93................... 11,000,000
------------
Maryland--0.8%
Maryland St. Energy
Fin. Auth.,
Baltimore Proj.,
F.R.D.D.,
VMIG1 5,400 3.80%, 11/1/94, Ser.
91................... 5,400,000
------------
Mississippi--0.3%
Jackson Cnty. Poll.
Ctrl. Rev.,
Chevron U.S.A,
F.R.D.D.,
P1 1,900 3.40%, 11/1/94, Ser.
93................... 1,900,000
------------
New Mexico--0.3%
Hurley New Mexico Poll.
Ctrl. Rev., F.R.D.D.,
Kennecott Santa Fe Corp.,
P1 2,100 3.25%, 11/3/94, Ser.
85................... 2,100,000
------------
North Carolina--0.6%
Cleveland Cnty., Ind.
Fac. Poll. Ctrl.
Rev.,
Metals America Inc.,
F.R.W.D.,
P1 4,115 4.10%, 11/2/94, Ser.
90................... 4,115,000
------------
Pennsylvania--0.3%
Schuylkill Cnty. Ind.
Dev. Auth., F.R.D.D.,
Westwood Energy
Proj.,
P1 2,200 3.65%, 11/1/94, Ser.
85................... 2,200,000
------------
</TABLE>
-30- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
Utah--1.1%
Salt Lake Cnty. Poll.
Ctrl. Rev.,
BP Service Station,
F.R.D.D.,
P1 $ 7,900 3.70%, 11/1/94......... $ 7,900,000
------------
Virginia--0.3%
King George Cnty. Ind. Dev. Auth.,
Birchwood Power Proj.,
NR 2,000 3.60%, 11/1/94, Ser.
94................... 2,000,000
------------
Total short-term
investments
(cost $69,641,379)... 69,604,749
------------
Total Investments--97.4%
(cost $680,723,896;
Note 4).............. 671,080,146
Other assets in excess
of
liabilities--2.6%.... 17,770,461
------------
Net Assets--100%....... $688,850,607
------------
------------
</TABLE>
(a) The following abbreviations are used in portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation
B.I.G.--Bond Investors Guaranty Insurance Company
C.G.I.C.--Capital Guaranty Insurance Corporation
F.G.I.C.--Financial Guaranty Insurance Company
F.R.D.D.--Floating Rate (Daily) Demand Note**
F.R.W.D.--Floating Rate (Weekly) Demand Note**
F.H.A.--Federal Housing Administration
F.S.A.--Financial Security Assurance
G.N.M.A.--Government National Mortgage Association
M.B.I.A.--Municipal Bond Insurance Association
(D) Portion of or entire principal amount pledged as initial margin on
financial futures contracts.
* Standard & Poor's rating.
** For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be the later of the next date on which the
security can be redeemed at par or the next date on which the rate of
interest is adjusted.
NR--Not rated by Moody's or Standard & Poor's.
The Fund's current Prospectus contains a description of Moody's and Standard &
Poor's ratings.
-31- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets October 31, 1994
-----------------
<S> <C>
Investments, at value (cost $680,723,896).............................................. $ 671,080,146
Cash................................................................................... 31,313
Interest receivable.................................................................... 11,502,692
Receivable for investments sold........................................................ 10,348,011
Receivable for Fund shares sold........................................................ 213,112
Due from broker-variation margin....................................................... 55,510
Deferred expenses...................................................................... 14,390
-----------------
Total assets....................................................................... 693,245,174
-----------------
Liabilities
Payable for Fund shares reacquired..................................................... 2,631,647
Dividends payable...................................................................... 1,044,444
Management fee payable................................................................. 301,025
Distribution fee payable............................................................... 291,216
Accrued expenses....................................................................... 126,235
-----------------
Total liabilities.................................................................. 4,394,567
-----------------
Net Assets............................................................................. $ 688,850,607
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at par................................................ $ 666,452
Paid-in capital in excess of par..................................................... 709,380,945
-----------------
710,047,397
Accumulated net realized losses...................................................... (11,709,009)
Net unrealized depreciation.......................................................... (9,487,781)
-----------------
Net assets, October 31, 1994......................................................... $ 688,850,607
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($26,899,856 / 2,604,221 shares of beneficial interest issued and outstanding)..... $10.33
Maximum sales charge (3.0% of offering price)........................................ .32
-----------------
Maximum offering price to public..................................................... $10.65
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per share
($661,782,887 / 64,024,768 shares of beneficial interest issued and outstanding)... $10.34
-----------------
-----------------
Class C:
Net asset value, offering price and redemption price per share
($167,864 / 16,242 shares of beneficial interest issued and outstanding)........... $10.34
-----------------
-----------------
</TABLE>
See Notes to Financial Statements.
-32-
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
ended
October 31,
Net Investment Income 1994
------------
<S> <C>
Income
Interest........................... $ 22,553,917
------------
Expenses
Management fee..................... 1,883,402
Distribution fee--Class A.......... 15,233
Distribution fee--Class B.......... 1,807,125
Distribution fee--Class C.......... 172
Transfer agent's fees and
expenses........................... 260,000
Custodian's fees and expenses...... 94,000
Reports to shareholders............ 76,000
Registration fees.................. 43,000
Legal fees......................... 13,000
Insurance expense.................. 10,000
Audit fee.......................... 8,000
Trustees' fees..................... 7,500
Miscellaneous...................... 11,018
------------
Total expenses..................... 4,228,450
------------
Net investment income................ 18,325,467
------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions............ (10,081,618)
Financial futures contracts........ 3,267,929
------------
(6,813,689)
------------
Net change in unrealized depreciation of:
Investments........................ (17,676,520)
Financial futures contracts........ (1,176,219)
------------
(18,852,739)
------------
Net loss on investments.............. (25,666,428)
------------
Net Decrease in Net Assets
Resulting from Operations............ $ (7,340,961)
------------
------------
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) October 31, April 30,
in Net Assets 1994 1994
------------ -------------
<S> <C> <C>
Operations
Net investment income... $ 18,325,467 $ 39,499,561
Net realized gain (loss)
on
investment
transactions.......... (6,813,689) 8,935,788
Net change in unrealized
appreciation/depreciation
of investments........ (18,852,739) (42,237,908)
------------ -------------
Net increase/decrease in
net assets resulting
from operations....... (7,340,961) 6,197,441
------------ -------------
Dividends and
distributions (Note 1)
Dividends to
shareholders
from net investment
income
Class A............... (799,551) (1,643,190)
Class B............... (17,524,815) (37,856,371)
Class C............... (1,101) --
------------ -------------
(18,325,467) (39,499,561)
------------ -------------
Distributions to
shareholders from net
realized gains
Class A............... -- (834,417)
Class B............... -- (20,909,142)
Class C............... -- --
------------ -------------
-- (21,743,559)
------------ -------------
Fund share transactions
(Note 5)
Net proceeds from shares
issued.................. 23,706,416 189,769,487
Net asset value of
shares
issued to shareholders
in
reinvestment of
dividends and
distributions......... 10,072,823 35,730,676
Cost of shares
reacquired.............. (90,378,483) (199,496,131)
------------ -------------
Increase/decrease in net
assets from Fund share
transactions.......... (56,599,244) 26,004,032
------------ -------------
Total (decrease).......... (82,265,672) (29,041,647)
Net Assets
Beginning of period....... 771,116,279 800,157,926
------------ -------------
End of period............. $688,850,607 $ 771,116,279
------------ -------------
------------ -------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-33-
<PAGE>
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND Portfolio of Investments
MODIFIED TERM SERIES October 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
LONG-TERM INVESTMENTS--95.5%
Alabama--1.9%
Univ. So. Alabama Hosp.
& Auxiliary Rev.,
A.M.B.A.C.,
Aaa $ 1,250 7.00%, 5/15/04#......... $ 1,337,825
-----------
Alaska--4.2%
Alaska Ind. Dev. & Expt.
Auth., Revolving Loan
Fund,
A 1,005 5.40%, 4/1/01........... 953,222
Alaska St. Housing
Finance Corporation
Collateral Mortgage
Obligation,
Aaa 1,000 5.70%, 12/1/11.......... 907,550
No. Slope Boro., Gen.
Oblig.,
Baa1 1,000 8.35%, 6/30/98, Ser.
C..................... 1,114,270
-----------
2,975,042
-----------
Arizona--1.8%
Univ. Arizona Rev.,
A1 1,515 4.60%, 6/1/05........... 1,297,098
-----------
California--12.7%
California St. Pub. Wks.
Brd.,
Lease Rev.,
A.M.B.A.C.,
Aaa 1,000 5.25%, 12/1/06.......... 911,970
Aaa 1,000 6.25%, 12/1/08, Ser.
A..................... 991,600
Los Angeles, Gen.
Oblig.,
Aaa 750 5.90%, 9/1/09,
M.B.I.A............... 712,260
Oxnard Fin. Auth. Lease
Rev., F.S.A.,
Aaa 2,000 5.375%, 6/1/08.......... 1,807,160
San Diego Open Space
Park
Facilities District
Number 1,
Aaa 1,480 5.75%, 1/1/08........... 1,415,383
San Jose Redev.,
Tax Allocation,
M.B.I.A.,
Aaa 500 6.00%, 8/1/08........... 487,160
San Jose Redev.,
M.B.I.A.,
Aaa $ 500 6.00%, 8/1/06........... $ 496,610
Statewide Cmntys. Dev.
Corp.,
Aaa 1,500 4.80%, 10/1/08.......... 1,246,935
Cedars Sinai Med. Ctr.,
Aa 1,000 4.80%, 11/1/04.......... 883,820
-----------
8,952,898
-----------
Colorado--5.1%
Colorado Student Oblig.
Bond Auth.,
Student Loan Rev.,
A 1,480 7.25%, 9/1/05, Ser.
A3.................... 1,509,348
Denver City & County
Arpt. Rev.,
Baa 1,250 7.30%, 11/15/03, Ser.
A..................... 1,232,900
Jefferson Cnty. Sch.
Dst. R-001,
Baa1 1,000 4.50%, 12/15/03......... 873,940
-----------
3,616,188
-----------
Connecticut--1.5%
Connecticut Spec. Tax
Oblig. Rev.,
A1 1,000 7.00%, 6/1/03, Ser. A... 1,075,090
-----------
District Of Columbia--0.9%
Dist. Columbia Rev.,
America Geophysical
Union,
BBB-* 700 5.50%, 9/1/03, Ser.
199................... 645,918
-----------
Florida--2.8%
Dade Cnty. Pub. Facs.
Rev.,
Jackson Mem. Hosp.,
M.B.I.A.,
Aaa 1,000 4.75%, 6/1/08, Ser. A... 828,480
Jacksonville Excise
Taxes Revenue
Refunding
Aaa 1,105 6.25%, 10/1/05,
A.M.B.A.C............. 1,136,990
-----------
1,965,470
-----------
</TABLE>
-34- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
Guam--1.3%
Guam Pwr. Auth. Rev.,
BBB* $ 1,000 5.25%, 10/1/05, Ser.
A..................... $ 893,920
-----------
Hawaii--1.5%
Hawaii Cnty., Gen.
Oblig., F.G.I.C.,
Aaa 1,000 7.20%, 6/1/05, Ser.
A#.................... 1,087,590
-----------
Illinois--0.6%
Illinois Hlth. Facs.
Auth. Rev.,
Edward Hosp.,
A 450 5.75%, 2/15/09, Ser.
A..................... 404,888
-----------
Indiana--2.0%
Indiana Univ. Stud. Fee,
A1 500 6.90%, 8/1/03, Ser. G... 530,040
Indianapolis Gas Util.
Rev., F.G.I.C.,
Aaa 1,000 5.00%, 6/1/06, Ser. B... 890,310
-----------
1,420,350
-----------
Maryland--4.5%
Maryland St. Stadium
Auth.
Lease Revenue
Convention Center
Expansion,
Aaa 1,000 5.375%, 12/15/00,
A.M.B.A.C............. 986,870
Northeast Maryland Waste
Disp. Auth.,
Mont. Co. Res. Rec.,
A 1,250 5.90%, 7/1/05........... 1,195,512
Washington Suburban San.
Dist.,
Aa1 1,000 5.90%, 6/1/04........... 1,011,610
-----------
3,193,992
-----------
Massachusetts--1.5%
Mass. Gen. Oblig.,
Aaa 1,000 6.75%, 8/1/06, Ser.
C#.................... 1,078,150
-----------
Michigan--2.0%
Michigan Mun. Bond Auth.
Rev., Wayne Cnty.
Proj.,
Aaa 500 7.40%, 12/1/02,
M.B.I.A............... 551,060
Michigan St. Hosp. Fin.
Auth. Rev., Sisters Of
Mercy,
Aaa $ 1,000 4.70%, 8/15/03,
M.B.I.A............... $ 885,730
-----------
1,436,790
-----------
Minnesota--1.5%
Minneapolis-St. Paul
Hsg.,
Redev. Auth., Hlth.
Care Sys. Rev.,
M.B.I.A.,
Aaa 1,000 7.20%, 8/15/00, Ser.
A..................... 1,081,130
-----------
Missouri--1.9%
Missouri St. Regl. Conv.
& Sports Complex
Auth.,
A1 1,000 5.10%, 8/15/06, Ser.
A..................... 859,900
New Madrid Elec. Pwr.
Place Rev. Refunding,
Aaa 500 5.35%, 12/1/00,
A.M.B.A.C............. 490,325
-----------
1,350,225
-----------
New Jersey--2.7%
New Jersey Economic
Development Auth.
Market
Transition Facility
Revenue,
Aaa 950 5.75%, 7/1/06,
M.B.I.A............... 916,266
Aaa 1,000 5.80%, 7/1/07,
M.B.I.A............... 960,890
-----------
1,877,156
-----------
New York--8.2%
Metropolitan
Transportation Auth.
Transport Facilities
Revenue,
Aaa 1,150 4.30%, 7/1/01,
M.B.I.A............... 1,033,229
Nassau Cnty. Swr. Gen.
Oblig., F.G.I.C.,
Aaa 1,075 4.75%, 5/1/06, Ser. B... 928,080
</TABLE>
-35- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
New York (cont'd)
New York City, Gen.
Oblig.,
Baa1 $ 1,000 7.50%, 2/1/01, Ser. B... $ 1,069,040
Baa1 1,000 7.00%, 2/1/07........... 1,010,690
New York St. Dorm. Auth.
Rev.,
St. Univ. Edl. Facs.,
Baa1 2,000 5.50%, 5/15/08, Ser.
A..................... 1,785,220
-----------
5,826,259
-----------
North Carolina--1.4%
No. Carolina Mun. Pwr.
Agcy. Elec. Rev.,
No. 1 Catawba,
A 1,000 5.90%, 1/1/03........... 993,510
-----------
Ohio--0.7%
Ohio St. Building
Authority,
Administration Bldg.
Project,
Aaa 500 5.60%, 10/1/06,
M.B.I.A............... 479,410
-----------
Oregon--1.2%
Oregon St.,
Dept. Trans. Rev.,
Aaa 750 7.00%, 6/1/03,
M.B.I.A............... 808,028
-----------
Pennsylvania--8.1%
Allegheny Cnty.
Industrial Development
Rev., USX Project,
Baa3 1,000 5.30%, 12/1/96.......... 985,570
Montgomery Cnty. Redev.
Auth.,
Multifamily Hsg. Rev.,
NR 780 5.75%, 7/1/99, Ser. A... 768,167
Pennsylvania Hsg. Fin.
Agcy.,
Sngl. Fam. Mtge. Rev.,
AAA* 1,000 6.20%, 7/1/25........... 1,022,080
Pennsylvania St. Gen.
Oblig., F.S.A.,
Aaa 1,000 6.25%, 11/1/06, Ser.
A..................... 1,006,130
Philadelphia Hosp. Auth.
& Higher Ed. Auth.,
Childrens Seashore
House,
A-* 1,000 7.00%, 8/15/03, Ser.
A..................... 1,018,890
Philadelphia Sch. Dist.,
Gen. Oblig., M.B.I.A.,
Aaa $ 1,000 5.75%, 7/1/07, Ser. A... $ 949,040
-----------
5,749,877
-----------
Puerto Rico--7.7%
Puerto Rico Elec. Pwr.
Auth. Rev.,
Baa1 1,500 6.00%, 7/1/04, Ser. S... 1,481,475
Puerto Rico Hsg.
Bank & Fin. Agcy.,
Baa 1,000 5.125%, 12/1/05......... 887,430
Puerto Rico Hwy. &
Trans. Auth. Rev.,
Baa1 750 4.90%, 7/1/01, Ser. X... 720,007
Baa1 330 7.50%, 7/1/01, Ser. Q... 362,525
Baa1 975 7.60%, 7/1/02, Ser. Q... 1,075,308
Puerto Rico Ind. Poll.
Auth. Rev.,
A2 1,000 4.00%, 9/1/13, Ser. A... 948,620
-----------
5,475,365
-----------
Texas--10.9%
Carrollton Farmers
Indpt. Sch. Dist.,
Aa 1,300 8.375%, 2/15/99......... 1,448,759
Dallas Ft. Worth Int'l.
Arpt.,
NR 1,000 5.875%, 11/1/06,
Ser. A................ 1,023,240
Harris Cnty., Toll Rd.,
Aa 500 7.20%, 8/1/98........... 534,315
Aaa 1,500 5.125%, 8/15/08,
A.M.B.A.C............. 1,294,110
Aa 1,000 6.50%, 8/15/08, Ser.
A..................... 1,029,280
Plano Ind., Sch. Dist.,
F.G.I.C.,
Aaa 1,000 8.625%, 2/15/03, Ser.
B#.................... 1,155,480
San Antonio Elec. & Gas
Rev., F.G.I.C.,
Aaa 1,000 Zero Coupon, 2/1/05,
Ser. A................ 532,150
Texas Gen. Oblig.,
Veterans Hsg. Asst.,
Aa 750 6.05%, 12/1/12,
F.H.A................. 716,640
-----------
7,733,974
-----------
</TABLE>
-36- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description(a) (Note 1)
<C> <C> <S> <C>
Utah--1.5%
Utah St. Brd. of
Regents,
Student Loan Rev.,
A.M.B.A.C.,
Aaa $ 1,000(D) 7.00%, 11/1/01, Ser.
F..................... $ 1,061,230
-----------
Washington--3.9%
Washington St. Pub. Pwr.
Supp. Sys.,
Nuclear Proj. No. 2,
Aa 2,000 4.90%, 7/1/05, Ser. A... 1,718,920
Nuclear Proj. No. 3,
Aa 1,000 7.00%, 7/1/99, Ser. B... 1,052,920
-----------
2,771,840
-----------
West Virginia--1.5%
West Virginia School
Building Auth. Rev.
Capital Improvement,
NR 1,000 6.25%, 7/1/01,
M.B.I.A............... 1,032,290
-----------
Total long-term
investments
(cost $69,320,168).... 67,621,503
-----------
SHORT-TERM INVESTMENTS--5.1%
Florida--0.3%
Hillsborough Cnty. Poll.
Ctrl. Rev.,
Tampa Elec. Co.,
F.R.D.D.,
VMIG1 200 3.60%, 11/1/94, Ser.
93.................... 200,000
-----------
Illinois--2.6%
Chicago O'Hare Int'l.
Arpt.,
American Airlines
Inc., F.R.D.D.,
P2 1,800 4.00%, 11/1/94, Ser.
84B................... 1,800,000
-----------
Kentucky--1.8%
Davies Cnty. Solid Wst.
Disp. Fac. Rev.,
F.R.D.D.,
Scott Paper Co. Proj.,
A1* 1,300 3.65%, 11/1/94, Ser.
93B................... 1,300,000
-----------
Texas--0.4%
Gulf Coast Waste
Disposal Authority
Texas Pollution
Control Rev.,
F.R.D.D.,
VMIG1 $ 300 3.60%, 11/1/94, Ser.
94.................... $ 300,000
-----------
Total short-term
investments
(cost $3,600,000)..... 3,600,000
-----------
Total Investments--100.6%
(cost $72,920,168; Note
4).................... 71,221,503
Liabilities in excess of
other
assets--(0.6%)........ (398,078)
-----------
Net Assets--100%........ $70,823,425
-----------
-----------
</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.H.A.--Federal Housing Administration
F.R.D.D.--Floating Rate (Daily) Demand Note**
F.S.A.--Financial Security Assurance
M.B.I.A.--Municipal Bond Insurance Association
# Prerefunded issues are secured by escrowed cash and direct U.S. guaranteed
obligations.
(D) Pledged as initial margin on financial futures contract.
* Standard & Poor's Rating.
** For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be the later of the next date on which the
security can be redeemed at par or the next date on which the rate of
interest is adjusted.
NR--Not rated by Moody's or Standard & Poor's.
The Fund's current Prospectus contains a description of Moody's and Standard &
Poor's ratings.
-37- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets October 31, 1994
-----------------
<S> <C>
Investments, at value (cost $72,920,168)............................................... $71,221,503
Interest receivable.................................................................... 1,282,624
Receivable for Fund shares sold........................................................ 12,234
Due from broker-variation margin....................................................... 3,750
Deferred expenses and other assets..................................................... 1,164
-----------------
Total assets....................................................................... 72,521,275
-----------------
Liabilities
Bank overdraft......................................................................... 98,791
Payable for investments purchased...................................................... 1,027,960
Payable for Fund shares reacquired..................................................... 402,585
Dividends payable...................................................................... 90,789
Management fee payable................................................................. 30,645
Distribution fee payable............................................................... 27,737
Accrued expenses....................................................................... 19,343
-----------------
Total liabilities.................................................................. 1,697,850
-----------------
Net Assets............................................................................. $70,823,425
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at par................................................ $ 69,304
Paid-in capital in excess of par..................................................... 72,409,784
-----------------
72,479,088
Accumulated net realized capital losses.............................................. (115,248)
Net unrealized depreciation on investments........................................... (1,540,415)
-----------------
Net assets, October 31, 1994......................................................... $70,823,425
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($8,625,459 / 844,352 shares of beneficial interest issued and outstanding)........ $10.22
Maximum sales charge (3.0% of offering price)........................................ .32
-----------------
Maximum offering price to public..................................................... $10.54
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per share
($62,197,773 / 6,086,012 shares of beneficial interest issued and outstanding)..... $10.22
-----------------
-----------------
Class C:
Net asset value, offering price and redemption price per share
($193 / 19 shares of beneficial interest issued and outstanding)................... $10.22
-----------------
-----------------
</TABLE>
See Notes to Financial Statements.
-38-
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Year Ended
October 31,
Net Investment Income 1994
----------
<S> <C>
Income
Interest............................. $2,035,026
----------
Expenses
Management fee....................... 181,057
Distribution fee--Class A............ 3,352
Distribution fee--Class B............ 164,299
Distribution fee--Class C............ 2
Custodian's fees and expenses........ 49,000
Reports to shareholders.............. 33,000
Transfer agent's fees and expenses... 18,800
Registration fees.................... 14,000
Legal fees........................... 8,900
Trustees' fees....................... 7,500
Audit fees........................... 6,000
Insurance expense.................... 1,000
Miscellaneous........................ 2,859
----------
Total expenses....................... 489,769
----------
Net investment income.................. 1,545,257
----------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions.............. (109,585)
Financial futures contracts.......... 225,606
----------
116,021
----------
Net change in unrealized appreciation
of:
Investments.......................... (1,983,907)
Financial futures contracts.......... (62,468)
----------
(2,046,375)
----------
Net loss on investments................ (1,930,354)
----------
Net Decrease in Net Assets
Resulting from Operations.............. $ (385,097)
----------
----------
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) October 31, April 30,
in Net Assets 1994 1994
------------ ----------
<S> <C> <C>
Operations
Net investment income..... $ 1,545,257 $ 2,760,661
Net realized gain on
investment
transactions............ 116,021 2,063,495
Net change in unrealized
appreciation/depreciation
of investments.......... (2,046,375) (3,673,322)
----------- -----------
Net increase in net assets
resulting from
operations.............. (385,097) 1,150,834
----------- -----------
Dividends and distributions
(Note 1)
Dividends to shareholders
from net investment
income
Class A................. (155,618) (230,644)
Class B................. (1,389,618) (2,530,017)
Class C................. (21) --
----------- -----------
(1,545,257) (2,760,661)
----------- -----------
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)
----------- -----------
Fund share transactions
(Note 5)
Net proceeds from shares
issued.................... 9,258,214 28,144,358
Net asset value of shares
issued to shareholders
in
reinvestment of
dividends and
distributions........... 1,850,090 2,666,224
Cost of shares
reacquired................ (8,137,165) (17,514,873)
----------- -----------
Increase in net assets
from Fund share
transactions.............. 2,971,139 13,295,709
----------- -----------
Total increase (decrease)... (201,708) 10,382,332
----------- -----------
Net Assets
Beginning of period......... 71,025,133 60,642,801
----------- -----------
End of period............... $70,823,425 $71,025,133
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-39-
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Notes to Financial Statements
(Unaudited)
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.
-40-
<PAGE>
<PAGE>
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
Reclassification of Capital Accounts: Effective May 1, 1993, the Fund began
accounting and reporting for distributions to shareholders in accordance with
Statement of Position 93-2: Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital Distributions by
Investment Companies. The undistributed net investment income in the High Yield
Series results from the treatment of legal workout expenditures for tax purposes
which is different from book purposes. Net investment income, net realized gains
and net assets were not affected by this change.
Note 2. Agreements The Fund has 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.
PMF has agreed that, in any fiscal year, it will reimburse the Fund for
expenses (including the fees of PMF but excluding interest, taxes, brokerage
commissions, distribution fees, litigation and indemnification expenses and
other extraordinary expenses) in excess of the most restrictive expense
limitation imposed by state securities commissions. The most restrictive expense
limitation is presently believed to be 2.5% of a series' average daily net
assets during the year up to $30 million, 2.0% of the next $70 million of
average daily net assets and 1.5% of the average daily net assets in excess of
$100 million. Such expense reimbursement, if any, will be estimated and accrued
daily and payable monthly. No reimbursement was required for the six months
ended October 31, 1994.
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as the distributor of the Class A
shares of the Fund, and with 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 six months ended October 31, 1994.
PMFD has advised the Fund that it received approximately $147,200
($85,400-High Yield Series; $24,500-Insured Series; $37,300-Modified Term
Series) in front-end sales charges resulting from sales of Class A shares during
the six months ended October 31, 1994. From these fees, PMFD paid such sales
charges to dealers (PSI and Prusec) which in turn paid commissions to
salespersons and incurred other distribution costs.
PSI has advised the Fund that for the six months ended October 31, 1994, it
received approximately $1,961,900 ($1,114,100-High Yield Series;
$753,300-Insured Series; $94,500-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
-41-
<PAGE>
<PAGE>
transfer agent. During the six months ended October 31, 1994, the Fund incurred
fees of approximately $404,000 ($209,000--High Yield Series; $179,000--Insured
Series; $16,000--Modified Term Series) for the services of PMFS. As of October
31, 1994, approximately $64,100 ($34,800--High Yield Series; $26,200--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.
Note 4. Portfolio Purchases and sales of port
Securities folio securities, excluding
short-term investments, for the six months ended
October 31, 1994, were as follows:
<TABLE>
<CAPTION>
Series Purchases Sales
- --------------------------- ------------ ------------
<S> <C> <C>
High Yield................. $146,554,224 $200,775,158
Insured.................... 215,859,136 321,405,511
Modified Term.............. 13,529,721 10,563,349
</TABLE>
At October 31, 1994, the High Yield Series and the Insured Series sold 218
and 205 financial futures contracts, respectively, of U.S. Treasury Bonds
expiring in December, 1994. The Modified Term Series sold 90 financial futures
contracts on the Municipal Bond Index expiring in December, 1994. The Insured
Series also bought 278 financial futures contracts on the Municipal Bond Index
expiring in December 1994.
The values of these financial futures contracts at October 31, 1994 were as
follows:
<TABLE>
<CAPTION>
Finnacial Futures
Contracts Bought/Sold
----------------------------------------
<S> <C> <C> <C>
High Yield Insured Modified
Series Series Series
----------- ----------- ----------
Value at
disposi-
tion......... $18,678,500 $41,049,156 $8,618,250
Value at Octo-
ber 31,
1994......... 18,598,125 40,893,187 8,460,000
----------- ----------- ----------
Unrealized gain
(loss)....... $ 80,375 $ 155,969 $ 158,250
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
The federal income tax basis of the Fund's investments, at October 31, 1994
was $1,088,446,397-High Yield Series; $680,725,196-Insured Series; and
$72,920,168-Modified Term Series and, accordingly, net unrealized appreciation
of investments for federal income tax purposes was as follows:
<TABLE>
<CAPTION>
Net Gross Gross
unrealized unrealized unrealized
Series (depreciation) appreciation depreciation
- ------------ ------------ ----------- ------------
<S> <C> <C> <C>
High
Yield..... $(20,925,996) $28,185,216 $(49,111,212)
Insured..... (9,645,050) 9,792,187 (19,437,237)
Modified.... (1,698,665) 1,331,082 (3,029,747)
</TABLE>
The High Yield Series has a net capital loss carryforward as of October 31,
1993 of approximately $2,024,000 expiring in the year 2002. In addition, the
High Yield Series and the Insured Series elected to treat net realized capital
losses of approximately $2,447,000 and $3,562,000 incurred in the six month
period ended April 30, 1994 as having been incurred in the following year.
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. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately seven years after purchase commencing in or about February 1995.
-42-
<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 for the six months ended October 31, 1994 and the fiscal year ended
April 30, 1994 were as follows:
<TABLE>
<CAPTION>
High Yield Series Insured Series
Modified Term Series
Class A Class A
Class A
Six Months Ended October 31, ---------------------------- ----------------------------
- -------------------------
1994 Shares Amount Shares Amount
Shares Amount
- ----------------------------- ----------- ------------- ----------- -------------
- ---------- -----------
<S> <C> <C> <C> <C> <C>
<C>
Shares issued................ 450,443 $ 4,809,048 111,259 $ 1,186,703
355,128 $ 3,733,069
Shares issued in reinvestment
of dividends and
distributions.............. 73,820 789,103 45,221 482,766
14,969 157,311
Shares reacquired............ (912,108) (9,746,736) (416,771) (4,409,764)
(70,045) (737,421)
----------- ------------- ----------- -------------
- ---------- -----------
Increase/decrease in shares
outstanding................ (387,845) $ (4,148,585) (260,291) $ (2,740,295)
300,052 $ 3,152,959
----------- ------------- ----------- -------------
- ---------- -----------
----------- ------------- ----------- -------------
- ---------- -----------
<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............... 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
Six Months Ended October 31, ---------------------------- ----------------------------
- -------------------------
1994 Shares Amount Shares Amount
Shares Amount
- ----------------------------- ----------- ------------- ----------- -------------
- ---------- -----------
<S> <C> <C> <C> <C> <C>
<C>
Shares issued................ 5,387,753 $ 57,378,162 2,086,898 $ 22,347,416
521,314 $ 5,524,945
Shares issued in reinvestment
of dividends and
distributions.............. 1,406,456 15,037,255 897,776 9,589,277
160,726 1,692,779
Shares reacquired............ (10,771,114) (114,945,729) (8,065,783) (85,968,719)
(702,582) (7,399,744)
----------- ------------- ----------- -------------
- ---------- -----------
Decrease in shares
outstanding................ (3,976,905) $ (42,530,312) (5,081,109) $ (54,032,026)
(20,542) $ (182,020)
----------- ------------- ----------- -------------
- ---------- -----------
----------- ------------- ----------- -------------
- ---------- -----------
<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 $10,819,911
----------- ------------- ----------- -------------
- ---------- -----------
----------- ------------- ----------- -------------
- ---------- -----------
<CAPTION>
Class C Class C
Class C
August 1, 1994* through ---------------------------- ----------------------------
- -------------------------
October 31, 1994 Shares Amount Shares Amount
Shares Amount
- ----------------------------- ----------- ------------- ----------- -------------
- ---------- -----------
<S> <C> <C> <C> <C> <C>
<C>
Shares issued................ 127,315 $ 1,360,652 16,167 $ 172,297
19 $ 200
Shares issued in reinvestment
of dividends and
distributions.............. 781 8,255 75 780
-- --
Shares reacquired............ -- -- -- --
-- --
----------- ------------- ----------- -------------
- ---------- -----------
Increase in shares
outstanding................ 128,096 $ 1,368,907 16,242 $ 173,077
19 $ 200
----------- ------------- ----------- -------------
- ---------- -----------
----------- ------------- ----------- -------------
- ---------- -----------
- ---------------
* Commencement of offering of Class C shares.
</TABLE>
-43-
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A
Class B
-----------------------------------------------------------------
- ------------------------
January 22,
Years
Six Months 1990@ Six
Months Ended
Ended Years Ended April 30, Through Ended
April 30,
PER SHARE OPERATING October 31, ------------------------------------- April 30, October
31, ----------
PERFORMANCE: 1994 1994 1993 1992 1991 1990 1994
1994
----------- ------- ------- ------- ------- -----------
- ----------- ----------
<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 $ 10.58 $
10.74 $ 11.14
----------- ------- ------- ------- ------- -----
- ----------- ----------
Income from investment
operations
Net investment income....... .35 .72 .77 .77D .79D .23D
.33 .68
Net realized and unrealized
gain (loss) on investment
transactions............... (.34) (.39) .46 .23 .12 (.25)
(.34) (.39)
----------- ------- ------- ------- ------- -----
- ----------- ----------
Total from investment
operations............... .01 .33 1.23 1.00 .91 (.02)
(.01) .29
----------- ------- ------- ------- ------- -----
- ----------- ----------
Less distributions
Dividends from net
investment income.......... (.35) (.72) (.77) (.77) (.79) (.23)
(.33) (.68)
Distributions from capital
gains...................... -- (.01) -- -- -- --
-- (.01)
----------- ------- ------- ------- ------- -----
- ----------- ----------
Total distributions........ (.35) (.73) (.77) (.77) (.79) (.23)
(.33) (.69)
----------- ------- ------- ------- ------- -----
- ----------- ----------
Net asset value, end of
period..................... $ 10.40 $ 10.74 $ 11.14 $ 10.68 $ 10.45 $ 10.33 $
10.40 $ 10.74
----------- ------- ------- ------- ------- -----
- ----------- ----------
----------- ------- ------- ------- ------- -----
- ----------- ----------
TOTAL RETURN#: 0.09% 2.88% 11.90% 9.82% 9.14% (1.49)%
(0.11)% 2.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)...................... $48,745 $54,491 $43,529 $24,725 $15,089 $3,905
$1,023,382 $1,099,640
Average net assets (000).... $52,411 $52,982 $31,658 $19,702 $11,594 $1,914
$1,083,718 $1,132,653
Ratios to average net
assets:##
Expenses, including
distribution fees........ 0.70%* 0.69% 0.74% 0.65%D 0.60%D 0.60%*D
1.10%* 1.09%
Expenses, excluding
distribution fees........ 0.60%* 0.59% 0.64% 0.55%D 0.50%D 0.50%*D
0.60%* 0.59%
Net investment income...... 6.60%* 6.42% 7.04% 7.25%D 7.62%D 8.17%*D
6.20%* 6.02%
Portfolio turnover rate..... 13% 36% 27% 34% 29% 44%
13% 36%
<CAPTION>
Class C
-----------
August 1,
1994@@
Through
PER SHARE OPERATING October 31,
PERFORMANCE: 1993 1992 1991 1990 1994
---------- -------- -------- -------- -----------
<S> <C> <S> <C> <C> <C>
Net asset value, beginning
of period.................. $ 10.68 $ 10.45 $ 10.34 $ 10.56 $ 10.79
---------- -------- -------- -------- -----------
Income from investment
operations
Net investment income....... .73 .73D .75D .79D .14
Net realized and unrealized
gain (loss) on investment
transactions............... .46 .23 .11 (.17) (.39)
---------- -------- -------- -------- -----------
Total from investment
operations............... 1.19 .96 .86 .62 (.25)
---------- -------- -------- -------- -----------
Less distributions
Dividends from net
investment income.......... (.73) (.73) (.75) (.79) (.14)
Distributions from capital
gains...................... -- -- -- (.05) --
---------- -------- -------- -------- -----------
Total distributions........ (.73) (.73) (.75) (.84) (.14)
---------- -------- -------- -------- -----------
Net asset value, end of
period..................... $ 11.14 $ 10.68 $ 10.45 $ 10.34 $ 10.40
---------- -------- -------- -------- -----------
---------- -------- -------- -------- -----------
TOTAL RETURN#: 11.47% 9.40% 8.59% 6.04% (2.31)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)...................... $1,028,480 $803,838 $701,483 $622,970 $1,332
Average net assets (000).... $893,203 $759,779 $667,751 $549,485 $754
Ratios to average net
assets:##
Expenses, including
distribution fees........ 1.14% 1.05%D 1.00%D 0.83%D 1.35%*
Expenses, excluding
distribution fees........ .64% 0.55%D 0.50%D 0.33%D 0.60%*
Net investment income...... 6.66% 6.85%D 7.22%D 7.24%D 6.31%*
Portfolio turnover rate..... 27% 34% 29% 44% 13%
- ---------------
@ Commencement of offering of Class A shares.
@@ 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.
</TABLE>
See Notes to Financial Statements.
-44-
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A
Class B
----------------------------------------------------------------
- ----------------------
Years
January 22,
Ended
Six Months 1990@ Six
Months April
Ended Years Ended April 30, Through
Ended 30,
PER SHARE OPERATING October 31, ------------------------------------ April 30,
October 31, --------
PERFORMANCE: 1994 1994 1993 1992 1991 1990
1994 1994
----------- ------- ------- ------- ------ -----------
- ----------- --------
<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 $ 10.51 $
10.71 $ 11.44
----------- ------- ------- ------- ------ -----------
- ----------- --------
Income from investment
operations
Net investment income........... .28 .58 .61 .66D .67D .18D
.26 .54
Net realized and unrealized
gain (loss) on investment
transactions................... (.38) (.43) .73 .24 .54 (.26)
(.37) (.43)
----------- ------- ------- ------- ------ -----------
- ----------- --------
Total from investment
operations................... (.10) .15 1.34 .90 1.21 (.08)
(.11) .11
----------- ------- ------- ------- ------ -----------
- ----------- --------
Less distributions
Dividends from net investment
income......................... (.28) (.58) (.61) (.66) (.67) (.18)
(.26) (.54)
Distributions from capital
gains.......................... -- (.30) (.27) (.02) (.03) --
-- (.30)
----------- ------- ------- ------- ------ -----------
- ----------- --------
Total distributions............ (.28) (.88) (.88) (.68) (.70) (.18)
(.26) (.84)
----------- ------- ------- ------- ------ -----------
- ----------- --------
Net asset value, end of
period......................... $ 10.33 $ 10.71 $ 11.44 $ 10.98 $10.76 $ 10.25 $
10.34 $ 10.71
----------- ------- ------- ------- ------ -----------
- ----------- --------
----------- ------- ------- ------- ------ -----------
- ----------- --------
TOTAL RETURN#: (0.98)% 1.04% 12.68% 8.59% 11.86% (3.37)%
(1.08)% 0.63%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).......................... $26,900 $30,669 $30,098 $19,177 $7,630 $ 2,700 $
661,783 $740,447
Average net assets (000)........ $30,217 $32,309 $24,589 $12,731 $5,164 $ 1,280 $
716,957 $807,794
Ratios to average net assets:##
Expenses, including
distribution fees............ 0.74%* 0.71% 0.72% 0.62%D 0.61%D 0.62%*D
1.14%* 1.11%
Expenses, excluding
distribution fees............ 0.64%* 0.61% 0.62% 0.52%D 0.51%D 0.52%*D
0.64%* 0.61%
Net investment income.......... 5.25%* 5.09% 5.46% 6.06%D 6.38%D 6.64%*D
4.85%* 4.69%
Portfolio turnover rate......... 31% 105% 85% 56% 51% 82%
31% 105%
<CAPTION>
Class C
-----------
August 1,
1994@@
Through
PER SHARE OPERATING October 31,
PERFORMANCE: 1993 1992 1991 1990 1994
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 10.99 $ 10.76 $ 10.25 $ 10.54 $ 10.79
-------- -------- -------- -------- -----
Income from investment
operations
Net investment income........... .56 .62D .63D .67D .13
Net realized and unrealized
gain (loss) on investment
transactions................... .72 .25 .54 (.22) (.45)
-------- -------- -------- -------- -----
Total from investment
operations................... 1.28 .87 1.17 .45 (.32)
-------- -------- -------- -------- -----
Less distributions
Dividends from net investment
income......................... (.56) (.62) (.63) (.67) (.13)
Distributions from capital
gains.......................... (.27) (.02) (.03) (.07) --
-------- -------- -------- -------- -----
Total distributions............ (.83) (.64) (.66) (.74) (.13)
-------- -------- -------- -------- -----
Net asset value, end of
period......................... $ 11.44 $ 10.99 $ 10.76 $ 10.25 $ 10.34
-------- -------- -------- -------- -----
-------- -------- -------- -------- -----
TOTAL RETURN#: 12.14% 8.24% 11.43% 4.36% (3.17)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).......................... $770,060 $638,451 $578,412 $497,139 $ 168
Average net assets (000)........ $705,846 $609,516 $537,275 $446,904 $ 91
Ratios to average net assets:##
Expenses, including
distribution fees............ 1.12% 1.02%D 1.01%D 0.85%D 1.39%*
Expenses, excluding
distribution fees............ 0.62% 0.52%D 0.51%D 0.35%D .64%*
Net investment income.......... 5.06% 5.66%D 5.98%D 6.07%D 4.80%*
Portfolio turnover rate......... 85% 56% 51% 82% 31%
- ---------------
@ Commencement of offering of Class A shares.
@@ 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.
</TABLE>
See Notes to Financial Statements.
-45-
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
MODIFIED TERM SERIES
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A
Class B
-------------------------------------------------------------
---------------------
Years
January 22,
Ended
Six Months 1990@
Six Months April
Ended Years Ended April 30, Through
Ended 30,
PER SHARE OPERATING October 31, --------------------------------- April 30,
October 31, -------
PERFORMANCE: 1994 1994 1993 1992 1991 1990
1994 1994
----------- ------ ------ ------ ------ -----------
----------- -------
<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 $ 10.21
$ 10.68 $ 11.09
----- ------ ------ ------ ------ -------
-------- -------
Income from investment operations
Net investment income................... .25 .53 .54D .57D .59D .18D
.24 .48
Net realized and unrealized gain (loss)
on investment transactions............. (.26) (.19) .60 .26 .50 (.23)
(.27) (.19)
----- ------ ------ ------ ------ ------
------ -----
Total from investment operations....... (.01) .34 1.14 .83 1.09 (.05)
(.03) .29
----- ------ ------ ------ ------ ------
------ -----
Less distributions
Dividends from net investment income.... (.25) (.53) (.54) (.57) (.59) (.18)
(.24) (.48)
Distributions from capital gains........ (.19) (.22) (.11) (.15) -- --
(.19) (.22)
----- ------ ------ ------ ------ ------
------- -----
Total distributions.................... (.44) (.75) (.65) (.72) (.59) (.18)
(.43) (.70)
----- ------ ------ ------ ------ ------
------- -----
Net asset value, end of period.......... $ 10.22 $10.67 $11.08 $10.59 $10.48 $ 9.98
$ 10.22 $ 10.68
----- ------ ------ ------ ------ -----
------- -------
----- ------ ------ ------ ------ -----
------- -------
TOTAL RETURN#: (0.23)% 2.83% 11.13% 8.14% 11.20% (2.49)%
(0.41)% 2.43%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $8,625 $5,810 $3,594 $1,424 $397 $164
$62,198 $65,215
Average net assets (000)................ $6,648 $4,981 $1,883 $599 $305 $80
$65,184 $59,811
Ratios to average net assets:##
Expenses, including distribution
fees................................. 1.00%* 1.00% 1.06%D 1.06%D 0.92%D 0.63%*D
1.40%* 1.40%D
Expenses, excluding distribution
fees................................. 0.90%* 0.90% 0.96%D 0.96%D 0.82%D 0.53%*D
0.90%* 0.90%
Net investment income.................. 4.64%* 4.63% 5.09%D 5.41%D 5.92%D 6.26%*D
4.23%* 4.23%
Portfolio turnover rate................. 15% 55% 22% 78% 128% 91%
15% 55%
<CAPTION>
Class C
-----------
August 1,
1994@@
Through
PER SHARE OPERATING October 31,
PERFORMANCE: 1993 1992 1991 1990 1994
------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 10.60 $ 10.48 $ 9.98 $ 10.17 $ 10.54
------- ------- ------- ------- -----
Income from investment operations
Net investment income................... .50D .53D .56D .62D .11
Net realized and unrealized gain (loss)
on investment transactions............. .60 .27 .50 (.16) (.32)
------- ------- ------- ------- -----
Total from investment operations....... 1.10 .80 1.06 .46 (.21)
------- ------- ------- ------- -----
Less distributions
Dividends from net investment income.... (.50) (.53) (.56) (.62) (.11)
Distributions from capital gains........ (.11) (.15) -- (.03) --
------- ------- ------- ------- -----
Total distributions.................... (.61) (.68) (.56) (.65) (.11)
------- ------- ------- ------- -----
Net asset value, end of period.......... $ 11.09 $ 10.60 $ 10.48 $ 9.98 $ 10.22
------- ------- ------- ------- -----
------- ------- ------- ------- -----
TOTAL RETURN#: 10.62% 7.68% 10.82% 4.61% (2.00)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $57,049 $45,440 $45,401 $47,838 --
Average net assets (000)................ $50,154 $44,439 $46,521 $46,246 $1
Ratios to average net assets:##
Expenses, including distribution
fees................................. 1.46%D 1.46%D 1.32%D 0.83%D 2.30%*
Expenses, excluding distribution
fees................................. 0.96%D 0.96%D 0.82%D 0.33%D 1.55%*
Net investment income.................. 4.69%D 5.01%D 5.52%D 6.03%D 8.07%*
Portfolio turnover rate................. 22% 78% 128% 91% 15%
</TABLE>
- ---------------
@ Commencement of offering of Class A shares.
@@ 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.
-46-
<PAGE>
Trustees
Edward D. Beach
Donald D. Lennox
Douglas H. McCorkindale
Lawrence C. McQuade
Thomas T. Mooney
Richard A. Redeker
Louis A. Weil, III
Officers
Lawrence C. McQuade, President
Robert F. Gunia, Vice President
Susan C. Cote, 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
The accompanying financial statements as of October 30, 1994,were not audited
and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
74435L103 74435L301 74435L509 MF 157E
74435L202 74435L400 74435L608 CAT. #4445665
74435L707 74435L806 74435L889
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