(ICON)
Prudential
Municipal
Bond Fund
- - - - - - - - - - - ------------------------
High Yield Series
Insured Series
Intermediate Series
SEMI
ANNUAL
REPORT
Oct. 31, 1996
(LOGO)
<PAGE>
Portfolio
Managers' Report
The last six months have been good to shareholders of the
Prudential Municipal
Bond Fund. Moderating economic growth and controlled
inflation nudged tax-free
municipal interest rates slightly, providing some price
gains as well as
interest income.
Performance varied among the three Series, as might be
expected by their
differing objectives. The High Yield Series performed the
best of the three
because it holds bonds with the highest coupons, lowest
credit quality and
longest maturities. The bonds in the Insured Series hold the
highest quality
credit rating -- Triple A -- so they carry lower interest
rates than lower
quality bonds. The Intermediate Series holds bonds with
shorter maturities and
lower yields, so it will generally trail the other two
Series when interest
rates are falling. (It tends to provide more price
protection when interest
rates rise.)
As the charts on the following pages show, the High Yield
Series and Insured
Series performed competitively with the average comparable
fund measured by
Lipper Analytical Services. The Intermediate Series trailed
its peer group
because it held longer maturities than competing funds when
interest rates
were rising.
Rates Were Volatile. . .
Although tax-free municipal bond interest rates fell over
the past six months,
they did not do so in a straight line. In fact, interest
rates fluctuated quite
a bit, as investors tried to fathom whether economic growth
was slowing down or
picking up. Faster growth tends to raise interest rates and
inflation, which
reduces bond prices, while slow, steady growth can bring
falling interest
rates, raising bond prices.
Economic growth in the U.S. started off slowly in 1996, then
heated up, before
cooling again in the third quarter. In fact, the economic
growth rate more
than doubled from the first to the second quarter, before
dropping in the third
quarter to nearly half the rate of the second. Although jobs
grew sharply, and
wages started to inch up faster, inflation remained
contained. Many investors
had expected inflation to rise because the cost of labor
typically amounts to
about two-thirds of the price of finished goods.
.. . . But Are Lower Now.
As investors disagreed over the potential course of
inflation, interest rates
fluctuated between 5.92% and 6.34% over the six months, as
measured by the
Bond Buyer's Revenue Bond Index, a widely used industry
barometer of bonds
maturing in 30 years. The rate fell to 5.94% on October 31,
down from 6.16% on
April 25.
To protect assets as interest rates changed, we adjusted
each Series' duration,
which measures the sensitivity of a portfolio to changes in
interest rates.
The longer the duration, the more likely the Series' value
will appreciate in
price as interest rates fall, and vice-versa. We were least
successful with
the Intermediate Series, which held a duration that was too
long when interest
rates were rising.
Let's discuss each portfolio in detail.
How Investments Compared.
(As of 10/31/96)
(GRAPH)
U.S. General General U.S.
Growth Bond Muni Debt Taxable
Funds Funds Funds Money Funds
Source: Lipper Analytical Services. Financial markets
change, so a mutual
fund's past performance should never be used to predict
future results. The
risks to each of the investments listed above are different
- - - - - - - - - - - -- we provide
12-month total returns for several Lipper mutual fund
categories to show you
that reaching for higher yields means tolerating more risk.
The greater the
risk, the larger the potential reward or loss. In addition,
we've included
historical 20-year average annual returns. These returns
assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Investors
have received higher
historical total returns from stocks than from most other
investments. Smaller
capitalization stocks offer greater potential for long-term
growth but may be
more volatile than larger capitalization stocks.
General Bond Funds provide more income than stock funds,
which can help smooth
out their total returns year by year. But their prices still
fluctuate
(sometimes significantly) and their returns have been
historically lower than
those of stock funds.
General Municipal Debt Funds invest in bonds issued by state
governments,
state agencies and/or municipalities. This investment
provides income that is
usually exempt from federal and state income taxes.
Money Market Funds attempt to preserve a constant share
value; they don't
fluctuate much in price but, historically, their returns
have been generally
among the lowest of the major investment categories.
<PAGE>
Peter J. Allegrini, Fund Manager
(PHOTO)
Prudential Municipal Bond Fund:
High Yield Series
Performance At A Glance.
<TABLE>
<CAPTION>
Cumulative Total Returns1 As of
10/31/96
Six One Five
Since
Months Year Years
Inception2
<S> <C> <C> <C>
<C>
Class A 5.2% 6.1% 43.4%
64.7%
Class B 5.0 5.6 40.5
106.1
Class C 4.9 5.3 N/A
15.4
Class Z N/A N/A N/A
1.6
Lipper High Yield Muni Avg3 4.6 5.7 40.7
107.1
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns1 As of
9/30/96
One Five
Since
Year Years
Inception2
<S> <C> <C>
<C>
Class A 3.1% (3.0)4 6.7% (6.6)4
7.1% (7.0)4
Class B 0.9 (0.8)4 6.8 (6.7)4
8.2 (8.1)4
Class C 4.6 4.5)4 N/A
6.3 (6.2)4
</TABLE>
<TABLE>
<CAPTION>
Dividends and
Yields
As of 10/31/96
Taxable Equivalent Yield5
Total Dividends 30-Day
At Tax Rates Of
Paid for Six Mos. SEC Yield
36% 39.6%
<S> <C> <C>
<C> <C>
Class A $0.36 5.85% (5.80)4
9.14% (9.09)4 9.69% (9.64)4
Class B $0.33 5.64 (5.59)4
8.81 (8.76)4 9.34 (9.29)4
Class C $0.32 5.39 (5.34)4
8.42 (8.37)4 8.92 (8.87)4
Class Z $0.09 6.15 (6.10)4
9.61 (9.56)4 10.18 (10.13)4
</TABLE>
Past performance is not indicative of future results.
Principal and investment
return will fluctuate so that an investor's shares, when
redeemed, may be worth
more or less than their original cost.
1Source: Prudential Mutual Fund Management and Lipper
Analytical Services. The
cumulative total returns do not take into account sales
charges. The average
annual returns do take into account applicable sales
charges. The Fund charges
a maximum front-end sales load of 3% for Class A shares and
a declining
contingent deferred sales charge (CDSC) 5%, 4%, 3%, 2%, 1%
and 1% for six
years, for Class B shares. Class C shares have a 1% CDSC for
one year. Class B
shares automatically convert to Class A shares on a
quarterly basis, after
approximately seven years. Class Z shares have no service or
12b-1 fee. Class Z
shares have been in existence for less than one year and
average annual total
returns are not available.
2Inception dates: 1/22/90 for Class A; 9/17/87 for Class B;
8/1/94 for Class C;
and 9/12/96 for Class Z.
3The Lipper fund average includes 43 funds for six months,
43 funds for one
year, 20 funds for five years and 17 funds since inception
of the Class B
shares on 9/17/87.
4The numbers in parentheses () show the Series' average
annual returns, 30-day
SEC yield and taxable equivalent yields without waiver of
management fees
and/or expense subsidization.
5Some investors may be subject to the federal alternative
minimum tax and/or
state and local taxes. Taxable equivalent yields reflect
federal taxes only.
We seek to maximize income that is eligible for exclusion
from federal income
taxes by investing in non-investment grade municipal bonds
that are rated B or
better by recognized rating agencies such as Standard &
Poor's Corp. (S&P) or
Moody's Investors Service Inc., or unrated bonds that our
analysts believe to
be of comparable quality. On October 31, 1996, approximately
52% of the
portfolio was comprised of non-investment grade municipal
bonds rated BB or
below (or unrated bonds of comparable quality), a decrease
from 57% on April
30, 1996. There can be no assurance that the Series will
achieve its investment
objective.
Portfolio Breakdown.
Expressed as a percentage of
total investments as of 10/31/96.
(GRAPH)
<PAGE>
High Yield Series
What Went Well.
Quality Helps.
A high yield fund needs quality bonds, too, so our
shareholders can benefit
from rising bond prices when interest rates fall since these
bonds react more
quickly and accurately to changing interest rates. As rates
declined over the
last six months, we were glad we held about a third of
assets in bonds rated
BBB (the lowest investment grade rating) or higher. Many of
these bonds were
not callable (they can't be redeemed by the issuer before
due) and were
purchased below their face value (so they can appreciate
when they mature).
Some were zero coupon bonds, whose prices will appreciate
the most when
interest rates fall.
We Like California.
After Orange County, CA, filed for bankruptcy in 1994, many
investors were
reluctant to buy any municipal bonds issued in California.
We suspected the
situation would not be permanent, so we watched for buying
opportunities,
occasionally adding to our holdings. This year our strategy
has paid off,
because investors like California again. Unemployment there
hit a four-year
low, the state's credit rating was upgraded, and Orange
County emerged from
bankruptcy. Bond prices rose, so we took advantage of the
opportunity and sold
some of our holdings.
And Not So Well.
Risk vs. Reward.
We can offer shareholders high yield potential because we
buy bonds that have
higher credit risks. We choose cautiously, first asking our
strong team of
credit analysts to carefully review bonds before we make a
purchase. For
further protection, we diversify our holdings. But sometimes
it seems that we
can never have enough insulation from credit shocks in the
high yield municipal
bond market. This year our performance suffered because we
held bonds that were
sold to finance environmentally-friendly projects: a paper
de-inking and
recycling facility in Michigan and resource recovery bonds,
particularly a
waste to energy facility in Illinois. The Michigan bonds
were hurt severely
when the price of pulp paper plummeted this year,
threatening the profitability
of the project. The Illinois bonds lost a third of their
value, but then later
recovered after a successful restructuring of the debt. We
did experience a
loss on these bonds.
Five Largest Issuers.
2.0% Chicago, IL
O'Hare Airport
1.9% Washington State
Public Power Supply
1.9% New Jersey
State Economic Development
1.8% Claiborne County, MS
Pollution Control Revenue
1.7% New Jersey
State Transit Trust Fund
Expressed as a percentage of total net assets as of
10/31/96.
Credit Quality.
Expressed as a percentage of
total investments as of 10/31/96.
(PIE CHART)
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- - - - - - - - - - - -------------------
1
<PAGE>
Marie Conti, Fund Manager
(PICTURE)
Prudential Municipal Bond Fund:
Insured Series
Performance At A Glance.
<TABLE>
<CAPTION>
Cumulative Total Returns1 As
of 10/31/96
Six One Five
Since
Months Year Years
Inception2
<S> <C> <C> <C> <C>
Class A 4.5% 4.9% 39.3%
63.0%
Class B 4.3 4.5 36.6
99.0
Class C 4.1 4.2 N/A
14.6
Class Z N/A N/A N/A
1.4
Lipper Insured Muni Avg3 4.5 5.0 39.7
107.6
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns1
As of 9/30/96
One Five
Since
Year Years
Inception2
<S> <C> <C>
<C>
Class A 2.4% (2.3)4 6.2% (6.1)4
6.9% (6.8)4
Class B 0.1 (0.0)4 6.3 (6.2)4
7.8 (7.7)4
Class C 3.9 (3.8)4 N/A
6.0 (5.9)4
</TABLE>
<TABLE>
<CAPTION>
Dividends
and
Yields
Taxable Equivalent Yield5
As of Total Dividends 30-Day
At Tax Rates Of
10/31/96 Paid for Six Mos. SEC Yield
36% 39.6%
<S> <C> <C>
<C> <C>
Class A $0.28 4.61% (4.56)4
7.20% (7.15)4 7.63% (7.58)4
Class B $0.25 4.35 (4.30)4
6.80 (6.75)4 7.20 (7.15)4
Class C $0.24 4.10 (4.05)4
6.41 (6.36)4 6.79 (6.74)4
Class Z $0.07 5.16 (5.11)4
8.06 (8.01)4 8.54 (8.49)4
</TABLE>
Past performance is not indicative of future results.
Principal and investment
return will fluctuate so that an investor's shares, when
redeemed, may be worth
more or less than their original cost.
1Source: Prudential Mutual Fund Management and Lipper
Analytical Services. The
cumulative total returns do not take into account sales
charges. The average
annual total returns do take into account applicable sales
charges. The Fund
charges a maximum front-end sales load of 3% for Class A
shares and a declining
contingent deferred sales charge (CDSC) of 5%, 4%, 3%, 2%,
1% and 1% for six
years, for Class B shares. Class C shares have a 1% CDSC for
one year. Class B
shares automatically convert to Class A shares on a
quarterly basis, after
approximately seven years. Class Z shares have no service or
12b-1 fee. Class Z
shares have been in existence for less than one year and
average annual total
returns are not available.
2Inception dates: 1/22/90 for Class A; 9/17/87 for Class B;
8/1/94 for Class C;
and 9/12/96 for Class Z.
3The Lipper fund average includes 51 funds for six months,
49 funds for one
year, 20 funds for five years and 17 funds since inception
of the Class B
shares on 9/17/87.
4The number in parentheses () show the Series' average
annual returns, 30-day
SEC yield and taxable equivalent yields without waiver of
management fees
and/or expense subsidization.
5Some investors may be subject to the federal alternative
minimum tax and/or
state and local taxes. Taxable equivalent yields reflect
federal taxes only.
The Insured Series invests primarily in AAA-rated municipal
obligations, or
in municipal obligations whose timely coupon and principal
payments (but not
market value) are insured by a municipal bond insurance
company rated AAA by
S & P, Aaa by Moody's, or other nationally recognized
statistical rating
organization. The Series may also invest up to 5% of its
total assets in
municipal obligations rated A/A or Aa/AA by Moody's or S&P,
respectively,
although it held no such securities as of October 31, 1996.
There can be no
assurance that the Series will achieve its investment
objective.
Our bonds are insured by: MBIA Insurance Corp., AMBAC
Indemnity Corp.,
Financial Guaranty Insurance Co. and Financial Security
Assurance Inc.
Portfolio Breakdown.
Expressed as a percentage of
total investments as of 10/31/96.
(CHART)
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - -------------------
2
Insured Series
What Went Well.
Consistency Counts.
The prices of insured bonds can be quite volatile because
they are almost
entirely a function of interest rates, which have fluctuated
quite a bit in
recent years. To protect ourselves from the widest day-to-
day changes, we've
developed a strategy to smooth out some of the extremes in
prices. We tend to
hold about 30% of assets in bonds priced below par or face
value (discount
bonds), because they will appreciate when interest rates
fall. We also
generally hold about half of our assets in bonds with above-
market prices
(premium bonds), which will hold their prices well should
interest rates rise.
The remaining bonds we hold will be priced very close to par
value. This
structure should offer more protection against rising
interest rates while
still providing price appreciation potential should interest
rates continue to
fall.
From Housing
To Hospitals.
The types of bonds we own are important to this strategy,
too. For example,
we've substantially reduced our holdings in housing bonds
(from 12% of net
assets a year ago to 1% now) because they are callable.
These bonds don't
always perform as well as noncallable bonds when interest
rates fall, because
price depends on the call date, and that can't be known with
certainty. When we
sold these bonds, we replaced many of them with hospital
bonds, which tend to
carry higher yields (and better call protection).
We Like California.
After Orange County, CA, filed for bankruptcy in 1994, many
investors were
reluctant to buy any municipal bonds issued in California.
We suspected the
situation would not be permanent, so we watched for buying
opportunities,
occasionally adding to our holdings. This year our strategy
has paid off,
because investors like California again. Unemployment there
hit a four-year
low, the state's credit rating was upgraded, and Orange
County emerged from
bankruptcy. Bond prices have risen, so we took advantage of
the opportunity
and reduced our holdings there.
And Not So Well.
Interest rates have fluctuated quite a bit over the past six
months, so we've
had to frequently adjust our duration, a measure of the
Series' sensitivity to
changes in interest rates. The shorter the duration, the
better the Series is
protected against rising interest rates. In May, our
duration was as high as
9.5 years, because we thought economic growth would remain
slow, and interest
rates would fall. Instead, growth heated up, driving
interest rates high.
Our duration was still fairly higher late in the summer. We
wish we had
shortened our duration more. As of October 31, we had a
comparatively shorter
duration of 8.6 years.
Five Largest
Issuers.
2.6% Austin Texas
Utility Systems
2.5% NJ Economic
Development Authority
Market Transition Facility
2.5% San Jose, CA
Redevelopment
1.9% Grand River Dam, OK
1.9% Miami, FL
Baptist Health Facility
Expressed as a percentage of total net assets as of
10/31/96.
Credit Quality.
Expressed as a percentage of
total investments as of 10/31/96.
(CHART)
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - -----------------
3
<PAGE>
Marie Conti, Fund Manager
(PICTURE)
Prudential Municipal Bond Fund:
Intermediate Series
Performance At A Glance.
<TABLE>
<CAPTION>
Cumulative Total Returns1 As
of 10/31/96
Six One Five
Since
Months Year Years
Inception2
<S> <C> <C> <C>
<C>
Class A 2.6% 3.4%
34.7% 55.9%
Class B 2.5 3.0
32.1 82.8
Class C 2.3 2.7
N/A 10.6
Class Z N/A N/A
N/A 1.1
Lipper Intermediate Muni Avg3 3.3 4.3
35.5 90.1
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns1
As of 9/30/96
One Five
Since
Year Years
Inception2
<S> <C> <C>
<C>
Class A 0.4% (0.3)4 5.5% (5.4)4
6.3% (6.2)4
Class B -1.8 (-1.7)4 5.6 (5.5)4
6.8 (6.7)4
Class C 2.0 (1.9)4 N/A
4.4 (4.3)4
</TABLE>
<TABLE>
<CAPTION>
Dividends
and
Yields
Taxable Equivalent Yield5
As of Total Dividends 30-Day
At Tax Rates Of
10/31/96 Paid for Six Mos. SEC Yield
36% 39.6%
<S> <C> <C>
<C> <C>
Class A $0.23 4.02% (3.97)4
6.28% (6.23)4 6.66% (6.61)4
Class B $0.2 3.75 (3.70)4
5.86 (5.81)4 6.21 (6.16)4
Class C $0.19 3.49 (3.44)4
5.45 (5.40)4 5.78 (5.73)4
Class Z $0.07 5.18 (5.13)4
8.09 (8.04)4 8.58 (8.53)4
</TABLE>
Past performance is not a guarantee of future results.
Principal and investment
return will fluctuate so that an investor's shares, when
redeemed, may be worth
more or less than their original cost.
1Source: Prudential Mutual Fund Management and Lipper
Analytical Services. The
cumulative total returns do not take into account sales
charges. The average
annual returns do take into account applicable sales
charges. The Fund charges
a maximum front-end sales load of 3% for Class A shares and
a declining
contingent deferred sales charge (CDSC) of 5%, 4%, 3%, 2%,
1% and 1% for six
years, for Class B shares. Class C shares have a 1% CDSC for
one year. Class B
shares automatically convert to Class A shares on a
quarterly basis, after
approximately seven years. Class Z shares have no service or
12b-1 fee. Class Z
shares have been in existence for less than one year and
average annual total
returns are not available.
2Inception dates: 1/22/90 for Class A; 9/17/87 for Class B;
8/1/94 for Class C;
and 9/12/96 for Class Z.
3The Lipper fund average includes 141 funds for six months,
134 funds for one
year, 33 funds for five years and 22 funds since inception
of the Class B shares
on 9/17/87.
4The numbers in parentheses () show the Series' average
annual returns, 30-day
SEC yield and taxable equivalent yields without waiver of
management fees and/or
expense subsidization.
5Some investors may be subject to the federal alternative
minimum tax and/or
state and local taxes. Taxable equivalent yields reflect
federal taxes only.
The Intermediate Series seeks to provide a high level of
income that is eligible
for exclusion from federal income taxes, consistent with
preservation of
capital. It invests primarily in investment grade municipal
bonds with
three- to 15-year maturities, and will have a dollar-
weighted average
portfolio maturity of more than three years and less than 10
years. The Series
is structured to be less price sensitive to interest rate
changes than if it
held only longer term bonds. There can be no assurance that
the Series will
achieve its investment objective.
Portfolio Breakdown.
Expressed as a percentage of
total investments as of 10/31/96.
(CHART)
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ---------------
4
<PAGE>
Intermediate
Series
What Went Well.
We Like California.
After Orange County, CA, filed for bankruptcy in 1994, many
investors were
reluctant to buy any municipal bonds issued in California.
We suspected the
situation would not be permanent, so we watched for buying
opportunities,
occasionally adding to our holdings. This year our strategy
has paid off,
because investors like California again. Unemployment there
hit at a four-year
low, the state's credit rating was upgraded and Orange
County emerged from
bankruptcy. Although bond prices have risen mores so for
longer maturities
than the intermediate, we still think there is value
here.More Insurance.As
buyers become more quality conscious, more tax-free
municipal bonds are being
issued with insurance. In the first nine months of 1996, 48%
of all new bonds
issued nationally were insured. As a result, insured bonds
in our fund totaled
65% of assets as of October 31, up from 58% six months
earlier. This benefits
the investor, because payment of both interest and principal
of a bond are
guaranteed by an insurance company. Of course, no insurance
is available to
prevent the price of bonds, and bond funds, from fluctuating
day to day.
And Not So Well.
Too Long, For Too Long.
Interest rates have moved up and down quite a bit over the
past six months, so
we've had to adjust our duration, a measure of the Series'
sensitivity to
changes in interest rates. The shorter the duration, the
better the Series is
protected against rising interest rates. Six months ago, our
duration was
relatively high for an intermediate fund at 6.0 years,
because we thought that
economic growth would continue to be slow, and interest
rates would fall.
Instead, economic growth heated up, driving interest rates
higher. Our duration
was still fairly high late in the summer. We wish we had
shortened our duration
more. As of October 31, we had a shorter duration of 5.4
years.
The Outlook.
We're optimistic that inflation will remain low and economic
growth moderate,
a healthy climate for bond investors. We've been concerned
this year as
pressures for higher wages mounted while employment steadily
rose. This could
lead to higher overall price inflation, forcing the Federal
Reserve to raise
short-term interest rates. But so far, measurable inflation
has not posed a
threat.
As for 1997, Prudential's economists expect slower economic
growth and
benign inflation. That's good for bonds, and for those
invested in bond
funds -- because we believe bond funds are a long-term
investment.
Five Largest
Issuers.
7.2% New Jersey
Economic Development
Authority
6.3% Orange County, CA
Recovery Certificates of
Participation
6.1% Washington State Public
Power
Nuclear Project #2/#3
4.8% Oklahoma
Industrial Development Authority
3.5% Austin, TX
Pollution Control
Revenue
Expressed as a percentage of total net assets as of
10/31/96.
Credit Quality.
Expressed as a percentage of
total investments as of 10/31/96.
(CHART)
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ----------------
5
<PAGE>
President's Letter
December 2, 1996
(PICTURE)
Dear Shareholder:
For many investors, 1996 may well be the second year of back-
to-back,
double-digit stock market returns. In late November, the
Dow Jones Industrial
Average passed 6500 -- only weeks after breaking the 6000
mark in mid-October.
America's economic expansion is entering its sixth year and
there seems little
evidence of an end to the continued modest growth and low
inflation we've
enjoyed for the last several years.
This is good news. For most investors it's meant an increase
in their share
values for college funds, retirement nest eggs or other long-
term financial
goals. However, as you read your year-end account statements
and make plans
for 1997, it's important to remember that there never is a
"sure thing" when
it comes to investment returns. Stock and bond markets go
down just as they go
up. (Did you notice the brief period of decline this past
summer?) No one
likes to see the value of their investments fall but such
periods remind us we
must keep our expectations realistic.
Regardless of the market's direction, a wise investor plans
for tomorrow's needs
today. Your Financial Advisor or Registered Representative
can help you:
- - - - - - - - - - - - Review your portfolio and suggest strategies for 1997,
such as diversifying
across different types of investments. Financial markets
seldom move in
lockstep. By investing in a mix of stock and bond funds
(foreign & domestic)
and money market funds you may be in a better position to
achieve your long-term
goals and to weather periods of uncertainty.
- - - - - - - - - - - - See why annuities have become popular retirement planning
tools. The choices
are broader than ever. Our new Discovery SelectSM Variable
Annuity offers you
many of the keys to successful retirement planning,
including a personalized
asset allocation program and a choice of 21 variable- or
fixed-rate investment
options offering a broad array of investment objectives and
styles.
- - - - - - - - - - - - Explain new retirement savings developments. For example,
Congress has
expanded the contribution limit on spousal IRAs. And don't
forget, it's not
too late for you to make a contribution to your IRA or open
one for 1996. The
IRS deadline is April 15, 1997, but it's best to act
sooner.Why not contact your
Financial Advisor or Registered Representative today? If you
are interested in
Discovery SelectSM call for a prospectus, which contains
more complete
information. Read it carefully before you invest.
Sincerely,
Richard A. Redeker
President
P.S. Your 1997 Prudential IRA contribution may qualify you
for a waiver of
the annual custodial fee. Ask your financial representative
for details.
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------
6
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) HIGH YIELD
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note
1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
LONG-TERM INVESTMENTS--97.7%
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Alabama--0.4%
Ft. Payne Ind. Dev. Brd. Rev., Gametime Inc.
NR 10.25% 8/01/09 $ 4,119 $
4,443,618
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Arizona--1.0%
Ft. Mojave Indian Tribe Wtr. & Swr. Rev.
NR 10.25 9/01/19 3,000(g)
1,500,000
Pima Cnty. Ind. Dev. Auth., Multifam. Mtge. Rev., La
Cholla Proj.
NR 8.50 7/01/20 9,960
8,690,100
- - - - - - - - - - - --------------
10,190,100
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
California--10.4%
California Hsg. Fin. Agcy. Rev., Home Mtge., Ser. G
Aa 8.15 8/01/19 955
995,502
Corona Ctfs. of Part., Vista Hosp. Sys. Inc., Ser. C
NR 8.375 7/01/11 10,000
10,034,100
Delano Ctfs. of Part., Regl. Med. Ctr., Ser. 92A
NR 9.25 1/01/22 6,820
7,647,675
Folsom Spec. Tax Dist. No. 2
NR 7.70 12/01/19 3,130
3,279,207
Long Beach Redev. Agcy. Hsg.,
Multifam. Hsg. Rev., Pacific Court Apts.
NR 6.80 9/01/13 3,805(g)
2,663,500
Multifam. Hsg. Rev., Pacific Court Apts.
NR 6.95 9/01/23 6,195(g)
4,336,500
Los Angeles Regl. Arpts. Impvt. Corp., Cont. Air
Sublease
NR 9.25 8/01/24 10,345
11,710,126
Orange Cnty. Cmnty. Loc. Trans. Auth., Reg. Linked
Savrs. & Ribs
Aa 6.20 2/14/11 7,000
7,323,470
Richmond Redev. Agcy. Rev., Multifam. Bridge Affordable
Hsg.
NR 7.50 9/01/23 10,000
10,032,900
Roseville Joint Union H.S. Dist.,
Ser. B, F.G.I.C.
Aaa Zero 8/01/09 1,740
869,026
Ser. B, F.G.I.C.
Aaa Zero 8/01/11 1,890
832,091
Ser. B, F.G.I.C.
Aaa Zero 8/01/14 2,220
804,661
Sacramento City Fin. Auth. Rev., Tax Alloc. , M.B.I.A.
Aaa Zero 11/01/15 5,695
1,918,987
Sacramento Cnty. Spec. Tax Rev.,
Dist. No. 1, Elliot Ranch
NR 8.20 8/01/21 3,750
3,929,212
Dist. No. 1, Laguna Creek Ranch
NR 8.25 12/01/20 4,500
4,825,620
San Joaquin Hills Trans. Corr. Agcy.,
Toll Rd. Rev.
NR Zero 1/01/11 12,900
4,934,250
Toll Rd. Rev.
NR Zero 1/01/14 8,420
2,879,051
Toll Rd. Rev.
NR Zero 1/01/22 25,000
5,084,250
Toll Rd. Rev.
NR Zero 1/01/25 10,000
1,672,800
Santa Margarita/Dana Point Auth., Impvt. Dist.,
Ser. A, M.B.I.A.
Aaa 7.25 8/01/13 1,990
2,392,736
Ser. B, M.B.I.A.
Aaa 7.25 8/01/12 3,000
3,602,280
So. California Pub. Pwr. Auth. Trans., Cap. Apprec.
Aa Zero 7/01/14 8,500
3,069,095
So. San Francisco Redev. Agcy., Tax Alloc., Gateway
Redev. Proj.
NR 7.60 9/01/18 2,375
2,521,134
So. Tahoe Joint Pwrs. Fin.
NR 8.00 10/01/01 5,795
5,774,718
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
7 -----
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) HIGH YIELD
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note
1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
California (cont'd.)
Victor Valley Union H.S. Dist.,
Gen. Oblig., M.B.I.A.
Aaa Zero 9/01/12 $ 3,605 $
1,482,881
Gen. Oblig., M.B.I.A.
Aaa Zero 9/01/14 4,740
1,709,860
Gen. Oblig., M.B.I.A.
Aaa Zero 9/01/16 3,990
1,271,493
- - - - - - - - - - - --------------
107,597,125
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Colorado--2.7%
Eagle Cnty. Co., Lake Creek Affordable Hsg., Ser. A
NR 8.00% 12/01/23 11,610
12,081,018
San Miguel Cnty., Mountain Vlge. Met. Dist.
NR 8.10 12/01/11 3,200
3,569,024
Superior Met. Dist. No. 1, Wtr. & Swr.,
Rev.
NR 7.50 12/01/98 2,400
2,486,568
Rev.
NR 8.50 12/01/13 8,900
9,720,580
- - - - - - - - - - - --------------
27,857,190
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Connecticut--1.2%
Connecticut St. Dev. Auth. Swr., Netco Waterbury Ltd.
NR 9.375 6/01/16 8,000
8,300,560
Connecticut St. Dev. Auth. Wtr. Facs., Bridgeport
Hydraulic Co. Proj.
A+(c) 6.00 9/01/36 4,000
3,910,760
- - - - - - - - - - - --------------
12,211,320
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
District Of Columbia--1.5%
Dist. of Columbia Rev.,
Ser. A, M.B.I.A.
Aaa 6.50 6/01/10 6,000
6,653,640
Nat'l. Public Radio
NR 7.625 1/01/18 8,800
9,308,376
- - - - - - - - - - - --------------
15,962,016
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Florida--5.5%
Crossings At Fleming Island Cmnty. Dev. Dist., Clay City
NR 8.25 5/01/16 8,000
8,520,640
Escambia Cnty. Hlth. Facs. Auth. Rev.,
Azalea Trace
NR 9.25 1/01/06 2,605
2,758,799
Baptist Hosp. Ref., Ser. A
BBB+(c) 8.60 10/01/02 3,900
4,206,072
Florida Hsg. Fin. Agcy., Palm Aire Proj., Multifam.
Mtge. Rev.
NR 10.00 1/01/20 9,448(g)
6,519,459
No. Springs Impvt. Dist. Wtr. Mgt.,
Ser. A
NR 8.20 5/01/24 1,980
2,102,384
Ser. A
NR 8.30 5/01/24 1,740
1,859,590
Orlando Util. Comm., Wtr. & Elec. Rev., Ser. D
Aa 6.75 10/01/17 2,000
2,335,840
Palm Beach Cnty. Hsg. Auth., Banyan Club Apts.
NR 7.75 3/01/23 4,555
4,862,736
Sarasota Hlth. Facs., Kobernick Hsg. Meadow Park Proj.
Aaa 10.00 7/01/22 6,920(d)
8,692,074
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----8 See Notes to
Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) HIGH YIELD
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note
1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Florida (cont'd.)
Seminole Cnty. Ind. Dev. Auth. Rev., Fern Park
NR 9.25% 4/01/12 $ 6,175 $
6,610,708
Tampa Rev., Aquarium Proj.
NR 7.75 5/01/27 7,500(d)
8,769,825
- - - - - - - - - - - --------------
57,238,127
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Georgia--2.8%
Atlanta Urban Res. Fin. Auth., Clark Atlanta Univ. Dorm.
Proj.
NR 9.25 6/01/10 4,625(d)
5,408,382
Effingham Cnty. Dev. Auth., Ft. Howard Corp.
B1 7.90 10/01/05 10,000
10,425,700
Fulton Cnty. Wtr. & Swr. Rev., F.G.I.C.
Aaa 6.375 1/01/14 6,000
6,663,060
Georgia St.,
Ser. C
Aaa 6.25 8/01/10 3,830
4,217,213
Ser. C
Aaa 6.25 8/01/11 2,040
2,245,224
- - - - - - - - - - - --------------
28,959,579
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Hawaii--0.7%
Hawaii Cnty. Impvt. Dist. No. 17
NR 9.50 8/01/11 6,790
7,166,234
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Idaho--0.3%
Nez Perce Cnty. Poll. Ctrl. Rev., Potlatch Corp. Proj.
A-(c) 6.00 10/01/24 3,000
2,993,760
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Illinois--8.8%
Chicago Brd. Edl., Lease Ctfs., Ser. A, M.B.I.A.
Aaa 6.00 1/01/20 14,000
14,664,580
Chicago O'Hare Int'l. Arpt.,
Amer. Airlines Proj., Ser. B
Baa2 8.20 12/01/24 1,000
1,172,400
United Airlines, Ser. B
Baa2 8.45 5/01/07 6,000
6,622,560
United Airlines, Ser. B
Baa2 8.50 5/01/18 6,500
7,184,580
United Airlines, Ser. B
Baa2 8.85 5/01/18 2,755
3,141,940
United Airlines, Ser. B
Baa2 8.95 5/01/18 2,360
2,690,659
Chicago Pub. Bldg. Comm. Rev., Ser. A
Aaa 7.00 1/01/20 6,530(d)
7,501,795
Hennepin Ind. Dev. Rev.,
Exolon-Esk Co. Proj.
NR 8.875 1/01/18 8,000
8,600,720
Methchem. Corp. Proj., Ser. 89
NR 10.25 1/01/05 4,420(g)
75,140
Illinois, Ser. K, A.M.B.A.C.
Aaa 6.25 1/01/13 6,825
7,390,861
Illinois St. Hlth. Facs. Auth. Rev.,
Adventist Living Ctr.
NR 11.00 12/01/15 2,245(g)
179,564
Beacon Hill Proj., Ser. A
NR 9.00 8/15/19 7,240
7,778,004
Midwest Physician Group Ltd. Proj.
BBB-(c) 8.10 11/15/14 3,135
3,342,851
Midwest Physician Group Ltd. Proj.
BBB-(c) 8.125 11/15/19 3,285
3,508,577
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
9 -----
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) HIGH YIELD
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note
1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Illinois (cont'd.)
Kane And De Kalb Cntys. Sch.,
Dist. No. 301, Cap. Apprec. A.M.B.A.C.
Aaa Zero 12/01/11 $ 3,360 $
1,420,507
Dist. No. 301, Cap. Apprec. A.M.B.A.C.
Aaa Zero 12/01/13 4,065
1,505,432
Vlge. of Robbins, Cook Cnty. Robbins Res. Rec.
NR 8.375% 10/15/16 10,000
10,250,000
Winnebago Cnty. Hsg. Auth., Park Tower Assoc., Sec. 8
NR 8.125 1/01/11 4,204
4,417,808
- - - - - - - - - - - --------------
91,447,978
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Indiana--2.2%
Bluffton Econ. Dev. Rev., Kroger Co. Proj.
Ba1 7.85 8/01/15 7,500
8,213,550
Indianapolis Int'l. Arpt. Auth. Rev., Federal Express
Corp. Proj.
Baa2 7.10 1/15/17 6,000
6,415,740
Wabash Econ. Dev. Rev. Bonds, Connell Ltd.
NR 8.50 11/24/17 7,250
7,824,563
- - - - - - - - - - - --------------
22,453,853
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Iowa--2.5%
City of Cedar Rapids Rev.,
1st Mtge., Cottage Grove Place Proj.
NR 9.00 7/01/18 9,375
9,789,844
1st Mtge., Cottage Grove Place Proj.
NR 9.00 7/01/25 4,435
4,602,731
Iowa St. Fin. Auth., Hlth. Care Facs. Rev., Mercy Hlth.
Initiatives Proj.
NR 9.25 7/01/25 10,000
11,648,800
- - - - - - - - - - - --------------
26,041,375
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Kentucky--0.8%
Kentucky St. Tpke. Auth. Rev., F.G.I.C.
Aaa Zero 1/01/10 8,250
4,012,553
Owensboro Elec. Lt. & Pwr. Rev.,
Ser. B, A.M.B.A.C.
Aaa Zero 1/01/14 5,000
1,858,150
Ser. B, A.M.B.A.C.
Aaa Zero 1/01/16 6,650
2,185,855
- - - - - - - - - - - --------------
8,056,558
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Louisiana--3.6%
Hodge Util. Rev., Stone Container Corp.
NR 9.00 3/01/10 9,000
9,744,480
New Orleans Home Mtge. Auth. Rev., Sngl. Fam. Mtge.,
Ser. A, G.N.M.A.
Aaa 8.60 12/01/19 1,670(e)
1,753,149
New Orleans Ind. Dev. Rev.
BB(c) 8.75 10/01/19 3,600
4,132,476
New Orleans, Gen Oblig., Cap. Apprec., A.M.B.A.C.
Aaa Zero 9/01/18 3,090
870,020
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----10 See Notes to
Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) HIGH YIELD
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note
1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Louisiana (cont'd.)
St. Charles Parish Poll. Ctrl. Rev.,
Pwr. & Lt. Co.
Baa3 8.25% 6/01/14 $ 10,000 $
10,954,700
Pwr. & Lt. Co., Ser. 1989
Baa3 8.00 12/01/14 3,500
3,852,590
West Feliciana Parish Poll. Ctrl. Rev., Gulf St. Util.
Co. Proj.
NR 9.00 5/01/15 5,250
5,860,208
- - - - - - - - - - - --------------
37,167,623
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Maryland--1.1%
Anne Arundel Cnty. 1st Mtge. Rev., Pleasant Living Conv.
NR 8.50 7/01/13 3,325
3,542,122
Northeast Wste. Disp. Auth.,
Sludge Comp. Fac.
NR 7.25 7/01/07 4,330
4,483,239
Sludge Comp. Fac.
NR 8.50 7/01/07 3,200
3,368,384
- - - - - - - - - - - --------------
11,393,745
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Massachusetts--4.5%
Boston Ind. Dev. Fin. Auth. Ind. Rev., 1st Mtge.
Springhouse Proj.
NR 9.25 7/01/15 8,000
8,475,920
Mass. Bay Trans. Auth., Gen. Trans. Sys., Ser. A,
F.G.I.C.
Aaa 7.00 3/01/21 7,500
9,021,300
Mass. St. Coll. Bldg. Proj. and Ref. Bonds
A1 7.50 5/01/14 1,750
2,142,367
Mass. St. Hlth. & Edl. Facs. Auth. Rev.,
Cardinal Cushing Gen. Hosp.
NR 8.875 7/01/18 7,500
8,013,900
St. Josephs Hosp., Ser. C
NR 9.50 10/01/20 5,735(d)
6,549,141
Mass. St. Ind. Fin. Agcy. Cont. Res., Ser. A
NR 9.50 2/01/00 2,200
2,287,780
Mass. St. Ind. Fin. Agcy. Rev., Glenmeadow Proj.
NR 7.00 2/15/06 3,700
3,695,227
Randolph Hsg. Auth., Multifam. Hsg., Liberty Place Proj.
A, Ser. A
NR 9.00 12/01/21 5,985
6,220,270
- - - - - - - - - - - --------------
46,405,905
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Michigan--5.2%
Grand Rapids Dev. Auth.
Cap. Apprec., M.B.I.A.
Aaa Zero 6/01/10 3,000
1,413,060
Cap. Apprec., M.B.I.A.
Aaa Zero 6/01/11 3,160
1,394,255
Cap. Apprec., M.B.I.A.
Aaa Zero 6/01/12 3,000
1,242,000
Gratiot Cnty. Econ. Dev. Corp., Danley Die Proj. Connell
L.P.
NR 7.625 4/01/07 3,200
3,357,920
Holland Sch. Dist., Cap. Apprec., A.M.B.A.C.
Aaa Zero 5/01/17 2,950
906,417
Lowell Area Sch., F.G.I.C.
Aaa Zero 5/01/14 5,000
1,838,350
Meridian Econ. Dev. Corp. Rev., Burcham Hills Retirement
Facs.
NR 9.625 7/01/19 2,820
3,007,756
Michigan St. Hosp. Fin. Auth. Rev., Saratoga Cmnty.
Hosp.
NR 8.75 6/01/10 6,645
7,454,693
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
11 -----
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) HIGH YIELD
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note
1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Michigan (cont'd.)
Michigan Strategic Fund Ltd. Oblig. Rev., Great Lakes
Pulp & Fibre Proj.
NR 10.25% 12/01/16 $ 20,000 $
14,317,000
Michigan Strategic Fund, Solid Wste. Disp., Gennese Pwr.
Station
NR 7.50 1/01/21 10,000
9,957,600
Walled Lake Cons. Sch. Dist., Cnty. of Oakland, M.B.I.A.
Aaa 5.50 5/01/22 2,700
2,603,286
Wayne Cnty. Bldg. Auth., Ser. A
Baa 8.00 3/01/17 3,500(d)
4,088,140
West Ottawa Sch. Dist.,
F.G.I.C.
Aaa Zero 5/01/15 4,825
1,675,433
F.G.I.C.
Aaa Zero 5/01/18 3,215
932,575
- - - - - - - - - - - --------------
54,188,485
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Minnesota--1.1%
Minneapolis St. Paul Hsg. Fin. Brd., Multifam. Mtge.
Rev., Riverside Plaza, G.N.M.A.
AAA(c) 8.25 12/20/30 4,000
4,203,520
So. Minnesota Mun. Pwr. Agcy. Supply Sys.,
Ser. A, M.B.I.A.
Aaa Zero 1/01/19 25,875
7,121,059
Ser. A, M.B.I.A.
Aaa Zero 1/01/20 1,500
388,425
- - - - - - - - - - - --------------
11,713,004
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Mississippi--1.8%
Claiborne Cnty. Poll. Ctrl. Rev.,
Mid. So. Engy. Sys., Ser. A
Ba1 9.50 12/01/13 10,350
11,478,771
Mid. So. Engy. Sys.
Ba1 9.875 12/01/14 6,100
6,792,411
- - - - - - - - - - - --------------
18,271,182
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Missouri--2.1%
Sikeston Elec. Rev. Ref., M.B.I.A.
Aaa 6.00 6/01/15 9,250
9,828,125
St. Louis Cnty. Ind. Dev. Auth. Rev.,
Soemm Proj.
NR 10.25 7/01/08 2,255
2,277,821
St. Louis Cnty. Reg. Conv. & Sports Comp., Ser. C
NR 7.90 8/15/21 9,250
10,160,847
- - - - - - - - - - - --------------
22,266,793
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Nebraska--0.2%
Nebraska Invest. Fin. Auth., G.N.M.A., Sngl. Fam. Mtge.
Rev.,
Ser. I, M.B.I.A.
Aaa 8.125 8/15/38 2,120
2,223,859
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----12 See Notes to
Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) HIGH YIELD
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note
1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
New Hampshire--1.8%
New Hampshire Higher Edl. & Hlth. Facs. Auth. Rev.,
Antioch College
NR 7.875% 12/01/22 $ 5,405 $
5,803,186
Havenwood/Heritage Heights
NR 9.75 12/01/19 7,685(d)
9,012,738
New Hampshire St. Bus. Fin. Auth., Crown Paper Co. Proj.
BB-(c) 7.875 7/01/26 3,550
3,631,224
- - - - - - - - - - - --------------
18,447,148
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
New Jersey--6.2%
New Jersey Econ. Dev. Corp. Rev., Ref. Newark Arpt.
Marriot Hotel
NR 7.00 10/01/14 3,800
3,911,074
New Jersey St. Econ. Dev. Auth. Rev., 1st Mtge.,
Arbor Glen Project, Ser. A
NR 8.75 5/15/26 4,000
4,118,000
Fellowship Vlge., Proj. A
NR 9.25 1/01/25 11,500
12,649,540
Keswick Pines Proj.
NR 7.75 1/01/01 3,095
3,162,192
New Jersey St. Ref., Ser. E
Aa1 6.00 7/15/10 10,000
10,776,300
New Jersey St. Tpke. Auth. Rev., Ser. C, M.B.I.A.
Aaa 6.50 1/01/16 11,000
12,376,100
New Jersey St. Trans. Trust Fund Auth., Trans. Sys.,
M.B.I.A.
Aaa 6.50 6/15/11 15,500
17,408,670
- - - - - - - - - - - --------------
64,401,876
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
New York--5.4%
Met. Trans. Auth. Facs. Rev., Ser. N, F.G.I.C.
Aaa Zero 7/01/13 8,340
3,338,168
New York City Ind. Dev. Agcy.,
Amer. Airlines Inc.
Baa2 8.00 7/01/20 3,320
3,513,589
Mesorah Pub. Ltd.
NR 10.25 3/01/19 1,898
2,084,896
Visy Paper Inc. Proj.
NR 7.95 1/01/28 6,000
6,358,800
New York City Mun. Wtr. Fin. Auth., Wtr. & Swr. Sys.
Rev.
A 5.50 6/15/24 5,400
5,156,460
New York City,
Ser. B
Baa1 7.25 8/15/07 3,500
3,898,510
Ser. B
Baa1 6.50 8/15/11 7,000
7,255,570
Ser. G
Baa1 6.75 2/01/09 5,000
5,330,400
New York Hosp. Rev., Newark Wayne Cmnty. Hosp. Inc.,
Ser. A
NR 7.60 9/01/15 2,425
2,300,404
New York St. Dorm. Auth. Rev., Colgate Univ., M.B.I.A.
Aaa 6.00 7/01/21 3,350
3,560,280
New York St. Engy. Res. & Dev. Auth. Rev., B.U.G. Co.,
Ser. D, M.B.I.A.
Aaa 7.457 7/08/26 2,000(f)
1,810,500
New York St. Thwy. Auth. Svc. Cont. Rev., Loc. Hwy &
Brdg.
Baa1 5.75 4/01/16 7,000
6,831,790
Port Auth. of New York & New Jersey, USAir LaGuardia
Arpt.
B3 9.125 12/01/15 4,000
4,421,920
- - - - - - - - - - - --------------
55,861,287
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
13 -----
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) HIGH YIELD
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note
1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
North Carolina--0.5%
North Carolina Mun. Pwr., Ser. B, M.B.I.A.
Aaa 5.875% 1/01/21 $ 5,500 $
5,461,060
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
North Dakota--1.1%
Mercer Cnty., Antelope Valley Station, A.M.B.A.C
Aaa 7.20 6/30/13 10,000
11,775,600
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Ohio--3.4%
Cleveland Pub. Pwr. Sys. Rev.,
1st Mtge., M.B.I.A.
Aaa Zero 11/15/12 1,000
417,360
1st Mtge., M.B.I.A.
Aaa Zero 11/15/13 1,500
588,240
1st Mtge., Ser. A, M.B.I.A.
Aaa Zero 11/15/09 3,000
1,509,030
Mahoning Valley San. Dist. Wtr. Rev.
NR 7.75 5/15/19 8,000
8,637,280
Montgomery Cnty. Hlthcare. Facs. Rev., Friendship Vlge.
Dayton,
Proj. B
NR 9.25 2/01/16 4,500
4,746,465
Ohio St. Solid Wste. Rev., Rep. Eng. Steels Inc.
NR 9.00 6/01/21 6,500
6,918,405
Ohio St. Wtr. Dev. Auth. Poll. Ctrl. Facs., 1st Mtge.,
Toledo Edison
Ba2 8.00 10/01/23 5,500
5,922,675
Stark Cnty. Hlthcare. Facs. Rev., Rose Lane Inc. Proj.
NR 9.00 12/01/23 6,135
6,628,438
- - - - - - - - - - - --------------
35,367,893
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Oklahoma--1.1%
Grand River Dam Auth. Rev., A.M.B.A.C.
Aaa 6.25 6/01/11 7,500
8,265,300
Tulsa Ind. Dev. Auth., Univ. Tulsa, Ser. A, M.B.I.A.
Aaa 6.00 10/01/16 3,250(e)
3,477,728
- - - - - - - - - - - --------------
11,743,028
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Pennsylvania--4.6%
Allegheny Cnty. Hosp. Rev., West Penn. Hosp. Hlth. Ctr.
NR 8.50 1/01/20 2,800
3,056,956
Berks Cnty. Mun. Auth. Rev.,
Adventist Living Ctrs. Proj.
NR 11.00 12/01/15 367(g)
29,397
Alvernia Coll. Proj.
NR 7.75 11/15/16 5,240
5,625,716
Dauphin Cnty. Gen. Auth. Hosp. Rev., NW Med. Ctr. Proj.
BBB-(c) 8.625 10/15/13 6,605
7,352,224
Lancaster Cnty. Solid Wste. Mgmt., Res. Rec. Auth. Sys.
Rev., Ser. A
A 8.50 12/15/10 5,965
6,309,896
Penn. St. Higher Edl. Facs. Auth. Rev., Med. Coll. of
Pennsylvania, Ser. A
Baa 8.375 3/01/11 5,200(d)
5,758,740
Pennsylvania Econ. Dev. Fin. Auth. Recyc. Rev.
NR 9.25 1/01/22 7,000
6,536,390
Philadelphia Auth., Ind. Dev. Rev.
NR 7.75 12/01/17 5,000
5,349,700
Philadelphia Wtr. & Wstewtr. Auth. Rev.,
M.B.I.A.
Aaa 6.25 8/01/10 2,500
2,734,700
M.B.I.A.
Aaa 6.25 8/01/12 3,000
3,274,590
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----14 See Notes to
Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) HIGH YIELD
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note
1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Pennsylvania (cont'd.)
Wilkes Barre Gen. Mun. Auth. Coll. Rev., Misericordia
Coll., Ser. A
NR 7.75% 12/01/12 $ 1,245 $
1,325,228
- - - - - - - - - - - --------------
47,353,537
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Puerto Rico--1.2%
Puerto Rico Tel. Auth. Rev.,
Ser. I, M.B.I.A.
Aaa 6.829 1/25/07 6,500(f)
6,556,875
Ser. I, M.B.I.A.
Aaa 7.065 1/16/15 6,150(f)
5,890,163
- - - - - - - - - - - --------------
12,447,038
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Rhode Island--1.7%
Rhode Island Hsg. & Mtge. Fin. Corp., Homeownership
Opport.,
Ser. 1A
Aa 8.20 10/01/17 6,000
6,297,000
Rhode Island Redev. Agcy., Ser. A
NR 8.00 9/01/24 10,750
11,323,728
- - - - - - - - - - - --------------
17,620,728
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
South Carolina--0.7%
Piedmont Mun. Pwr. Agcy. So. Carolina Elec. Rev. Ref.
Baa1 6.55 1/01/16 2,500
2,513,575
So. Carolina St. Hsg. Fin. & Dev. Auth., Homeownership
Mtge.
Aa 7.75 7/01/22 4,345
4,572,417
- - - - - - - - - - - --------------
7,085,992
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
South Dakota--0.5%
So. Dakota Econ. Dev. Fin. Auth., Dakota Park
NR 10.25 1/01/19 5,060
4,995,333
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Tennessee--1.4%
Knox Cnty. Hlth. & Edl. Facs. Rev., Baptist Hlth. Hosp.
NR 8.50 4/15/04 6,515
6,914,044
Rutherford Cnty. Hlth. & Edl. Facs., Brd. 1st Mtge. Rev.
NR 9.50 12/01/19 7,300
8,009,122
- - - - - - - - - - - --------------
14,923,166
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Texas--2.8%
Beaumont Hsg. Fin. Corp., Sngl. Fam. Mtge. Rev.
A1 9.20 3/01/12 1,680
1,842,170
Galena Park Ind. Sch. Dist., Cap. Apprec., Ref.,
P.S.F.G.
Aaa Zero 8/15/16 1,335
423,248
Houston Wtr. & Swr. Sys. Rev., Ser. C, A.M.B.A.C.
Aaa Zero 12/01/10 5,000
2,290,750
Keller Ind. Sch. Dist., Cap. Apprec. Ref., Ser. A,
P.S.F.G.
Aaa Zero 8/15/17 4,075
1,219,077
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
15 -----
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) HIGH YIELD
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note
1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Texas (cont'd.)
New Braunfels Ind. Sch. Dist.,
Cap. Apprec.
Aaa Zero 2/01/08 $ 2,365 $
1,288,736
Cap. Apprec.
Aaa Zero 2/01/09 2,365
1,206,576
Cap. Apprec.
Aaa Zero 2/01/12 2,365
997,746
Cap. Apprec.
Aaa Zero 2/01/13 1,365
539,052
Port Corpus Christi Ind. Dev. Corp., Valero Ref. & Mfg.
Co., Ser. A
Baa3 10.25% 6/01/17 1,300
1,377,831
Round Rock Ind. Sch. Dist., Gen. Oblig., M.B.I.A.
Aaa Zero 8/15/11 4,385
1,912,562
San Antonio Elec. & Gas Rev.,
F.G.I.C.
Aaa Zero 2/01/09 5,000
2,550,900
Ser. B, F.G.I.C.
Aaa Zero 2/01/12 7,500
3,164,100
Tarrant Cnty. Hlth. Facs. Dev. Corp. Rev., Foundation
Proj.
NR 10.25 9/01/19 5,000
5,216,400
Texas Mun. Pwr. Agcy. Rev., M.B.I.A.
Aaa Zero 9/01/15 16,300
5,502,554
- - - - - - - - - - - --------------
29,531,702
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Virginia--0.9%
Pittsylvania Cnty. Ind. Dev. Auth. Rev. Multitrade
NR 7.55 1/01/19 9,000
9,390,420
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Washington--2.6%
Bellevue Conv. Ctr. Auth.,
King City, Oblig. Rev., M.B.I.A.
Aaa Zero 2/01/10 870
417,426
King City, Oblig. Rev., M.B.I.A.
Aaa Zero 2/01/11 1,200
539,460
King City, Oblig. Rev., M.B.I.A.
Aaa Zero 2/01/12 1,300
548,444
King City, Oblig. Rev., M.B.I.A.
Aaa Zero 2/01/14 1,385
512,242
Thurston Cnty. Sch. Dist. 333,
Ser. B, F.G.I.C.
Aaa Zero 12/01/11 6,415
2,752,163
F.G.I.C.
Aaa Zero 12/01/12 6,830
2,748,734
Washington St. Pub. Pwr. Supply Sys. Rev.,
Nuclear Proj. No. 1, A.M.B.A.C.
Aaa 6.00 7/01/08 3,550
3,722,885
Nuclear Proj. No. 1, Ser. B
Aa1 7.25 7/01/09 5,000
5,711,400
Nuclear Proj. No. 3, M.B.I.A.
Aaa Zero 7/01/16 10,000
3,132,600
Nuclear Proj. No. 3, M.B.I.A.
Aaa Zero 7/01/17 5,000
1,476,500
Nuclear Proj. No. 3 Ser. B, M.B.I.A.
Aaa 7.125 7/01/16 5,000
5,934,900
- - - - - - - - - - - --------------
27,496,754
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
West Virginia--1.4%
So. Charleston Ind. Dev. Rev., Union Carbide Chem. &
Plastics Co.
Baa2 8.00 8/01/20 2,450
2,632,035
Weirton Poll. Ctrl. Rev., Weirton Steel Proj.
B2 8.625 11/01/14 4,000
4,192,920
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----16 See Notes to
Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) HIGH YIELD
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note
1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
West Virginia (cont'd.)
West Virginia St. Hsg. Dev. Fund Hsg. Fin., Ser. A
Aa1 7.95% 5/01/17 $ 4,875 $
5,136,300
West Virginia St. Pkwys. Econ. Dev. & Tourism Auth.,
F.G.I.C.
Aaa 7.817 5/16/19 3,250(f)
3,181,750
- - - - - - - - - - - --------------
15,143,005
- - - - - - - - - - - --------------
Total long-term investments (cost $978,215,171)
1,015,294,996
- - - - - - - - - - - --------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
OUTSTANDING CALL OPTION PURCHASED(b)
United States Treasury Bond Future, Feb. '97 @$114.00
(cost $509,980)
NR -- 2/22/97 400
750,000
- - - - - - - - - - - --------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Total Investments--97.8%
(cost $978,725,151; Note 4)
1,016,044,996
Other assets in excess of liabilities--2.2%
22,534,264
- - - - - - - - - - - --------------
Net Assets--100%
$1,038,579,260
- - - - - - - - - - - --------------
- - - - - - - - - - - --------------
</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
G.N.M.A.--Government National Mortgage Association
M.B.I.A.--Municipal Bond Insurance Association
P.S.F.G.--Public School Fund Guaranty
(b) Non-income producing security.
(c) Standard & Poor's Rating.
(d) Prerefunded issues are secured by escrowed cash and
direct U.S. guaranteed
obligations.
(e) Portion of or entire principal amount pledged as initial
margin on financial
futures contracts.
(f) Inverse floating rate bond. The coupon is inversely
indexed to a floating
interest rate. The rate shown is the rate at year end.
(g) Issuer in default of interest payment (b).
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.
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
17 -----
<PAGE>
Statement of Assets and Liabilities PRUDENTIAL
MUNICIPAL BOND FUND
(Unaudited) HIGH YIELD
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Assets
October 31, 1996
<S>
<C>
Investments, at value (cost
$978,725,151)...............................................
................... $1,016,044,996
Interest
receivable..................................................
...................................... 20,938,971
Receivable for investments
sold........................................................
.................... 14,534,088
Receivable for Fund shares
sold........................................................
.................... 1,712,190
Due from broker - variation
margin......................................................
................... 152,344
Deferred
expenses....................................................
...................................... 25,647
- - - - - - - - - - - ----------------
Total
assets......................................................
...................................... 1,053,408,236
- - - - - - - - - - - ----------------
Liabilities
Bank
overdraft...................................................
..........................................
2,722,550
Payable for investments
purchased...................................................
....................... 8,064,446
Dividends
payable.....................................................
..................................... 1,884,064
Payable for Fund shares
reacquired..................................................
....................... 1,254,745
Management fee
payable.....................................................
................................ 393,692
Distribution fee
payable.....................................................
.............................. 336,294
Accrued
expenses....................................................
....................................... 173,185
- - - - - - - - - - - ----------------
Total
liabilities.................................................
...................................... 14,828,976
- - - - - - - - - - - ----------------
Net
Assets......................................................
...........................................
$1,038,579,260
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
Net assets were comprised of:
Shares of beneficial interest, at
par.........................................................
.......... $ 953,358
Paid-in capital in excess of
par.........................................................
............... 1,019,504,977
- - - - - - - - - - - ----------------
1,020,458,335
Accumulated net realized loss on
investments.................................................
........... (20,771,576)
Net unrealized appreciation of
investments.................................................
............. 38,892,501
- - - - - - - - - - - ----------------
Net assets, October 31,
1996........................................................
....................... $1,038,579,260
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
Class A:
Net asset value and redemption price per share
($308,597,455 / 28,324,679 shares of beneficial
interest issued and outstanding)....................
$10.90
Maximum sales charge (3% of offering
price)......................................................
....... .34
- - - - - - - - - - - ----------------
Maximum offering price to
public......................................................
.................. $11.24
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
Class B:
Net asset value, offering price and redemption price per
share
($721,412,182 / 66,224,408 shares of beneficial
interest issued and outstanding)....................
$10.89
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
Class C:
Net asset value, offering price and redemption price per
share
($8,451,830 / 775,861 shares of beneficial interest
issued and outstanding).........................
$10.89
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
Class Z:
Net asset value, offering price and redemption price per
share
($117,793 / 10,817 shares of beneficial interest
issued and outstanding)............................
$10.89
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----18 See Notes to
Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
Statement of Operations (Unaudited)
- - - - - - - - - - - ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income October 31,
1996
<S> <C>
Income
Interest................................ $ 37,200,164
--------------
- - - - - - - - - - - --
Expenses
Management fee.......................... 2,586,279
Distribution fee--Class A............... 133,568
Distribution fee--Class B............... 1,906,685
Distribution fee--Class C............... 28,576
Transfer agent's fees and expenses...... 242,000
Reports to shareholders................. 108,000
Custodian's fees and expenses........... 82,000
Registration fees....................... 25,000
Legal fees and expenses................. 18,000
Insurance expense....................... 14,000
Audit fees and expenses................. 10,500
Trustees' fees and expenses............. 8,000
Miscellaneous........................... 3,156
--------------
- - - - - - - - - - - --
Total expenses....................... 5,165,764
Less: Management fee waiver.............
(259,358)
Custodian fee credit.................
(3,209)
--------------
- - - - - - - - - - - --
Net expenses......................... 4,903,197
--------------
- - - - - - - - - - - --
Net investment income...................... 32,296,967
--------------
- - - - - - - - - - - --
Realized and Unrealized
Gain (Loss) on Investments
Net realized loss on:
Investment transactions.................
(5,997,812)
Financial futures contract
transactions.........................
(689,813)
--------------
- - - - - - - - - - - --
(6,687,625)
--------------
- - - - - - - - - - - --
Net change in unrealized appreciation of:
Investments............................. 24,004,062
Financial futures contracts............. 1,572,656
--------------
- - - - - - - - - - - --
25,576,718
--------------
- - - - - - - - - - - --
Net gain on investments.................... 18,889,093
--------------
- - - - - - - - - - - --
Net Increase in Net Assets
Resulting from Operations.................. $ 51,186,060
--------------
- - - - - - - - - - - --
--------------
- - - - - - - - - - - --
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
Statement of Changes in Net Assets (Unaudited)
- - - - - - - - - - - ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
Increase (Decrease) October 31, April
30,
in Net Assets 1996 1996
<S> <C> <C>
Operations
Net investment income....... $ 32,296,967 $
66,724,584
Net realized gain (loss) on
investment
transactions............. (6,687,625)
7,874,332
Net change in unrealized
appreciation
(depreciation) of
investments.............. 25,576,718
(9,899,503)
-------------- ---------
- - - - - - - - - - - -----
Net increase in net assets
resulting from
operations............... 51,186,060
64,699,413
-------------- ---------
- - - - - - - - - - - -----
Dividends and distributions
(Note 1):
Dividends from net
investment income
Class A.................. (8,721,615)
(10,686,945)
Class B.................. (23,351,088)
(55,704,885)
Class C.................. (224,127)
(332,754)
Class Z.................. (137)
- - - - - - - - - - - --
-------------- ---------
- - - - - - - - - - - -----
(32,296,967)
(66,724,584)
-------------- ---------
- - - - - - - - - - - -----
Distributions in excess of
net investment income
Class A.................. --
(21,756)
Class B.................. --
(103,384)
Class C.................. --
(746)
-------------- ---------
- - - - - - - - - - - -----
--
(125,886)
-------------- ---------
- - - - - - - - - - - -----
Series share transactions (net of
share conversions) (Note 5):
Net proceeds from shares
subscribed............... 57,663,474
125,110,592
Net asset value of shares
issued in reinvestment of
dividends................ 14,250,484
30,125,436
Cost of shares reacquired... (80,815,238)
(177,927,248)
-------------- ---------
- - - - - - - - - - - -----
Net decrease in net assets
from Series share
transactions............. (8,901,280)
(22,691,220)
-------------- ---------
- - - - - - - - - - - -----
Total increase (decrease)...... 9,987,813
(24,842,277)
Net Assets
Beginning of period............ 1,028,591,447
1,053,433,724
-------------- ---------
- - - - - - - - - - - -----
End of period.................. $1,038,579,260
$1,028,591,447
-------------- ---------
- - - - - - - - - - - -----
-------------- ---------
- - - - - - - - - - - -----
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
19 -----
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) INSURED
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note 1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
LONG-TERM INVESTMENTS--94.5%
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Alabama--0.4%
Huntsville Solid Wste. Disp. Auth., F.G.I.C.
Aaa 7.00% 10/01/08 $ 2,000 $
2,168,320
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Alaska--1.9%
Alaska St. Engy. Auth. Pwr. Rev., Bradley Lake Hydro, 1st
Ser., A.M.B.A.C.
Aaa 7.25 7/01/16 2,000
2,175,280
Anchorage Hosp. Rev., Sisters of Providence, A.M.B.A.C.
Aaa 7.125 10/01/05 5,000
5,599,050
No. Slope Boro., Cap. Apprec., Ser. A, M.B.I.A.
Aaa Zero 6/30/06 5,000
2,973,250
- - - - - - - - - - - ------------
10,747,580
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Arizona--3.0%
Arizona St. Trans. Brd. Excise Tax Rev., Maricopa Cnty.
Regl.
Area Rd., A.M.B.A.C.
Aaa 5.60 7/01/03 6,950
7,303,964
Maricopa Cnty. Ind. Dev. Auth. Rev.,
Hosp. Fac., John C. Lincoln Hosp., F.S.A.
Aaa 7.00 12/01/00 2,265
2,485,452
Hosp. Fac., John C. Lincoln Hosp., F.S.A.
Aaa 7.50 12/01/13 2,250
2,518,695
Maricopa Cnty. Unified Sch. Dist. No.69, Paradise Valley,
Ser. E, F.G.I.C.
Aaa 6.80 7/01/12 3,700
4,281,085
- - - - - - - - - - - ------------
16,589,196
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Arkansas--0.2%
Jonesboro Res. Hsg. & Hlthcare. Facs., St. Benard's Regl.
Med. Ctr., A.M.B.A.C.
Aaa 5.90 7/01/16 900
914,337
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
California--12.4%
California St. Gen. Oblig.,
M.B.I.A.
Aaa 6.30 9/01/08 6,000
6,655,860
F.G.I.C.
Aaa 6.60 2/01/11 2,010
2,275,340
California St. Pub. Wks. Brd., Dept. of Corrections,
A.M.B.A.C.
Aaa 5.75 1/01/12 2,000
2,051,200
Contra Costa Wtr. Dist. Wtr. Rev., Ser. E, A.M.B.A.C.
Aaa 6.25 10/01/12 1,455
1,595,699
Inland Empire Solid Wste. Fin. Auth., Landfill Impt. Fin.,
Proj. B, F.S.A.
Aaa 6.00 8/01/16 2,000
2,028,420
Los Angeles Dept. Wtr. & Pwr. Elec. Plant Rev., F.G.I.C.
Aaa 4.75 11/15/19 6,400
5,573,568
Oakland Joint Pwrs. Fin. Auth. Lease Rev. Admin. Bldgs.,
A.M.B.A.C.
Aaa 5.75 8/01/21 2,500
2,493,200
Roseville Joint Union H.S. Dist., Ser. B, F.G.I.C.
Aaa Zero 8/01/13 2,015
779,644
San Diego Cnty. Wtr. Auth. Wtr. Rev., Ctfs. of Part.,
F.G.I.C
Aaa 7.296 4/26/06 5,800(f)
6,177,000
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----20 See Notes to
Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) INSURED
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note 1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
California (cont'd.)
San Jose Redev.,
Tax Alloc., M.B.I.A.
Aaa 6.00% 8/01/07 $ 3,050 $
3,300,985
Tax Alloc., M.B.I.A.
Aaa 6.00 8/01/08 5,340
5,770,190
Tax Alloc., M.B.I.A
Aaa 6.00 8/01/09 4,250
4,567,772
Santa Margarita/Dana Point Auth.,
Impvt. Dist., M.B.I.A.
Aaa 7.25 8/01/10 2,180
2,603,683
Impvt. Dist., M.B.I.A.
Aaa 7.25 8/01/11 1,750
2,096,412
So. Orange Cnty. Pub. Fin. Auth.,
Foothill Area Proj., F.G.I.C.
Aaa 8.00 8/15/08 2,500
3,133,625
Foothill Area Proj., F.G.I.C.
Aaa 6.50 8/15/10 2,725
3,058,867
Univ. California Reg. Ref., Multi. Purp. Proj., A.M.B.A.C.
Aaa 4.75 9/01/16 9,075
8,038,272
Victor Valley Element. Sch. Dist.,
Cap. Apprec., Ser. A, M.B.I.A.
Aaa Zero 6/01/17 3,550
1,083,389
Cap. Apprec., Ser. A, M.B.I.A.
Aaa Zero 6/01/18 3,700
1,065,896
Victor Valley Union H.S. Dist.,
Gen. Oblig., 1994 Elec., M.B.I.A.
Aaa Zero 9/01/10 2,635
1,232,311
Gen. Oblig., 1994 Elec., M.B.I.A.
Aaa Zero 9/01/11 3,780
1,656,509
Gen. Oblig., 1994 Elec., M.B.I.A.
Aaa Zero 9/01/13 4,450
1,713,695
- - - - - - - - - - - ------------
68,951,537
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Colorado--1.0%
Denver City And Cnty. Arpt. Rev., Ser. C, M.B.I.A.
Aaa 5.60 11/15/11 5,000
4,930,950
Jefferson Cnty. Sngl. Fam. Mtge. Rev., Ser. A, M.B.I.A.
Aaa 8.875 10/01/13 665
716,338
- - - - - - - - - - - ------------
5,647,288
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
District Of Columbia--4.5%
Dist. of Columbia Hosp. Rev., Medlantic Hlthcare. Grp.,
M.B.I.A.
Aaa 5.875 8/15/19 3,500
3,507,000
M.B.I.A.
Aaa 5.75 8/15/26 3,000
2,957,610
Dist. of Columbia Met. Area Trans. Auth.,
Gross Rev., F.G.I.C.
Aaa 6.00 7/01/09 2,400
2,576,328
Gross Rev., F.G.I.C.
Aaa 6.00 7/01/10 1,500
1,608,615
Dist. of Columbia Ref., Ser. B, F.S.A.
Aaa 5.50 6/01/10 7,565
7,514,617
Dist. of Columbia Rev., Ser. A, M.B.I.A.
Aaa 6.50 6/01/10 6,000
6,653,640
- - - - - - - - - - - ------------
24,817,810
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Florida--5.6%
Brevard Hlth. Facs. Auth. Rev., Holmes Regl. Med. Ctr.,
M.B.I.A.
Aaa 5.60 10/01/10 6,000
6,047,460
Dade Cnty. Res. Rec. Fac. Rev. Ref., A.M.B.A.C.
Aaa 5.10 10/01/04 3,355
3,385,296
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
21 -----
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) INSURED
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note 1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Florida (cont'd.)
So. Miami Hlth. Facs. Auth.,
Baptist Hlth. Sys. Oblig. Grp., M.B.I.A.
Aaa 5.375% 10/01/16 $ 6,555 $
6,355,990
Baptist Hlth. Sys. Oblig. Grp., M.B.I.A.
Aaa 5.50 10/01/20 4,435
4,308,469
Sunrise Util. Sys. Rev. Ser. A., A.M.B.A.C.
Aaa 5.75 10/01/26 5,500
5,512,980
Venice Hlthcare. Rev., Bon Secours Hlth. Sys. Proj.,
M.B.I.A.
Aaa 5.625 8/15/26 5,725
5,655,155
- - - - - - - - - - - ------------
31,265,350
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Georgia--2.2%
Atlanta Arpt. Facs. Rev., A.M.B.A.C.
Aaa 6.50 1/01/10 2,000
2,237,340
Georgia Mun. Elec. Auth. Pwr. Rev., M.B.I.A.
Aaa 6.20 1/01/10 3,495(e)
3,789,419
Mun. Elec. Auth., Proj. 1, A.M.B.A.C.
Aaa 6.00 1/01/06 5,570
5,945,585
- - - - - - - - - - - ------------
11,972,344
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Illinois--3.0%
Chicago O' Hare Int'l. Arpt. Rev., Pass. Facs. Chrg., Ser.
A. A.M.B.A.C.
Aaa 5.625 1/01/15 2,000
1,980,760
Chicago, Ser. K, A.M.B.A.C.
Aaa 6.25 1/01/13 6,800
7,363,788
Onterie Ctr. Hsg. Fin. Corp. Mtge. Rev.,
Ser. A, M.B.I.A.
Aaa 7.00 7/01/12 1,575
1,675,202
Ser. A, M.B.I.A.
Aaa 7.05 7/01/27 5,400
5,710,878
- - - - - - - - - - - ------------
16,730,628
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Indiana--1.7%
Marion Cnty. Hosp. Auth. Facs. Rev., A.M.B.A.C.
Aaa 8.625 10/01/12 8,500(d)
9,652,855
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Louisiana--1.4%
Jefferson Parish Sales Tax Dist., Ser. A, F.G.I.C.
Aaa 6.75 12/01/06 5,000
5,525,500
New Orleans, Gen. Oblig., Cap. Apprec., A.M.B.A.C.
Aaa Zero 9/01/09 4,000
1,976,360
- - - - - - - - - - - ------------
7,501,860
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Maryland--0.3%
Maryland St. Hlth. & Higher Edl. Facs. Auth. Rev., Loyola
College,
Ser. A, M.B.I.A.
Aaa 5.375 10/01/26 1,750
1,698,008
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Massachusetts--1.2%
Mass. Hlth. & Edl. Facs. Auth. Rev., Mass. Gen. Hosp.,
Ser. F, A.M.B.A.C.
Aaa 6.25 7/01/12 1,500
1,628,520
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----22 See Notes to
Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) INSURED
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note 1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Massachusetts (cont'd.)
Mass. Mun. Whsl. Elec. Co., Pwr. Supply Sys. Rev.,
M.B.I.A.
Aaa 4.75% 7/01/10 $ 2,000 $
1,835,400
Mass. St. Wtr. Res. Auth., Ser. B, M.B.I.A.
Aaa 6.25 12/01/13 2,905
3,178,099
- - - - - - - - - - - ------------
6,642,019
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Michigan--5.1%
Detroit Swr. Disp. Rev., Ser. 1993A, F.G.I.C.
Aaa 7.478 7/01/23 6,500(f)
6,071,000
Kent Cnty. Hosp. Auth., Butterworth Hlth. Sys., Ser. A,
M.B.I.A.
Aaa 5.625 1/15/26 3,000
2,942,790
Lincoln Park Sch. Dist., F.G.I.C.
Aaa 5.90 5/01/26 2,250
2,274,345
Michigan St. Hosp. Fin. Auth. Rev.,
Mid. Michigan Oblig., M.B.I.A.
Aaa 7.50 6/01/15 2,350
2,602,696
Sisters Of Mercy, M.B.I.A.
Aaa 5.25 8/15/21 4,500
4,181,850
Monroe Cnty. Poll. Ctrl. Rev., Detroit Edison Co., Proj.
1, Ser. 1, A.M.B.A.C.
Aaa 7.30 9/01/19 3,250
3,566,972
Saginaw Hosp. Fin. Auth., St. Luke's Hosp., Ser. C,
M.B.I.A.
Aaa 6.50 7/01/11 4,000
4,287,680
Three Rivers Cmnty. Schs., M.B.I.A.
Aaa 6.00 5/01/23 2,400
2,447,952
- - - - - - - - - - - ------------
28,375,285
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Mississippi--0.5%
Harrison Cnty. Wste. Wtr. Mgmt. Dist. Rev., Wste. Wtr.
Treatmt, Facs. Auth., F.G.I.C.
Aaa 6.50 2/01/06 2,400
2,614,536
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Missouri--0.3%
Missouri St. Hlth. & Edl. Facs. Auth. Rev., SSM Hlthcare.,
Ser. AA, M.B.I.A.
Aaa 6.25 6/01/16 1,500
1,562,310
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Montana--0.4%
Forsyth Poll. Ctrl. Rev., Puget Sound Pwr. & Lt. Co., 1st.
Mtge.,
Ser. A, A.M.B.A.C.
Aaa 7.05 8/01/21 2,000
2,239,900
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
New Jersey--7.2%
Jersey City Swr. Auth.,
A.M.B.A.C.
Aaa 6.00 1/01/10 2,585
2,752,198
A.M.B.A.C.
Aaa 6.25 1/01/14 4,255
4,621,100
New Jersey Econ. Dev. Auth.,
Mkt. Trans. Facs. Rev., M.B.I.A.
Aaa 5.875 7/01/11 9,990
10,244,545
Mkt. Trans. Facs. Rev., Sr. Lien, M.B.I.A.
Aaa 5.80 7/01/09 3,340
3,428,677
New Jersey St. Ed. Facs. Auth., Montclair St. Univ.,
A.M.B.A.C.
Aaa 5.40 7/01/12 3,330
3,315,115
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
23 -----
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) INSURED
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note 1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
New Jersey (cont'd.)
New Jersey St. Tpke. Auth. Rev., Ser. A, A.M.B.A.C.
Aaa 5.80% 1/01/02 $ 5,000 $
5,258,700
No. Hudson Swr. Auth., F.G.I.C.
AAA(c) 5.25 8/01/16 10,550
10,196,786
- - - - - - - - - - - ------------
39,817,121
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
New Mexico--0.8%
Santa Fe Util. Rev., Ser. A, A.M.B.A.C.
Aaa 8.00 6/01/07 3,695
4,586,825
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
New York--9.4%
Erie Cnty. Wtr. Auth. Rev., A.M.B.A.C.
Aaa Zero 12/01/17 770
170,278
Islip Res. Rec., Ser. B, A.M.B.A.C.
Aaa 7.20 7/01/10 1,750
2,050,422
New York City Edl. Const. Fund Rev., Jr. Sub., A.M.B.A.C.
Aaa 5.50 4/01/26 5,250
5,100,795
New York City Mun. Wtr. Fin. Auth., Wtr. & Swr. Sys. Rev.,
A.M.B.A.C.
Aaa 6.00 6/15/09 6,500
6,939,140
New York City, Ser. D, M.B.I.A.
Aaa 6.20 2/01/07 8,520
9,287,141
New York St. Envir. Facs. Corp.
Poll. Ctrl. Rev.
Aaa 5.70 7/15/12 3,375
3,450,431
Poll. Ctrl. Rev.
Aaa 5.75 7/15/13 1,060
1,083,627
Poll. Ctrl. Rev.
Aaa 5.80 7/15/14 3,755
3,850,490
New York St. Med. Care Facs. Fin. Agcy., Mental Hlth.
Serv., Ser. F, M.B.I.A.
Aaa 5.375 2/15/14 7,000
6,796,160
Port Auth. New York & New Jersey Cons., Ser. 99, F.G.I.C.
Aaa 5.90 11/01/11 7,665
7,860,381
Suffolk Cnty. Ind. Dev. Agcy., Southwest Swr. Sys. Rev.,
F.G.I.C.
Aaa 6.00 2/01/08 5,000
5,394,500
- - - - - - - - - - - ------------
51,983,365
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
North Carolina--1.5%
North Carolina Mun. Pwr. Agcy. Elec. Rev., No. 1 Catawba,
M.B.I.A.
Aaa 6.00 1/01/11 7,500
8,002,350
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Ohio--2.5%
Cleveland Wtr. Rev., 1st. Mtge, Ser. H, M.B.I.A.
Aaa 5.75 1/01/26 5,000
5,015,900
Franklin Cnty. Childern's Hosp. Proj., M.B.I.A.
Aaa 5.875 11/01/25 1,000
1,006,840
Montgomery Cnty. Hosp. Rev., Kettering Med. Ctr., M.B.I.A.
Aaa 5.50 4/01/26 8,230
7,950,592
- - - - - - - - - - - ------------
13,973,332
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Oklahoma--1.9%
Grand Rvr. Dam Auth.,
A.M.B.A.C.
Aaa 5.50 6/01/09 4,000
4,109,600
A.M.B.A.C.
Aaa 6.25 6/01/11 6,000
6,612,240
- - - - - - - - - - - ------------
10,721,840
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----24 See Notes to
Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) INSURED
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note 1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Pennsylvania--4.4%
Chester Cnty. Hlth. & Edl. Fac. Auth., Chester Cnty.
Hosp., M.B.I.A.
Aaa 5.875% 7/01/16 $ 5,870 $
5,936,155
No. Umberland Cnty. Lease Auth. Rev., Correctional Facs.,
M.B.I.A.
Aaa Zero 10/15/10 7,500(d)
3,503,025
Pennsylvania St. Ind. Dev. Auth. Rev., Econ. Dev.,
A.M.B.A.C.
Aaa 6.00 7/01/06 3,000
3,225,120
Philadelphia Mun. Auth. Rev., Criminal Justice Ctr., Ser.
A, M.B.I.A.
Aaa 6.90 11/15/03 3,000
3,356,280
Philadelphia Wtr. & Wastewtr.,
M.B.I.A.
Aaa 5.50 8/01/14 4,610
4,553,020
M.B.I.A.
Aaa 5.60 8/01/18 4,000
3,925,680
- - - - - - - - - - - ------------
24,499,280
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Puerto Rico--3.4%
Puerto Rico Gen. Oblig.,
M.B.I.A.
Aaa 5.50 7/01/01 7,450
7,795,084
M.B.I.A.
Aaa 6.25 7/01/13 1,250
1,370,037
Puerto Rico Pub. Bldgs. Auth. Rev., Gov't. Facs., Ser. A,
A.M.B.A.C.
Aaa 6.25 7/01/13 1,700
1,863,251
Puerto Rico Tel. Auth. Rev.,
Ser. I, M.B.I.A.
Aaa 6.768 1/25/07 4,100(f)
4,135,875
Ser. I, M.B.I.A.
Aaa 7.065 1/16/15 3,800(f)
3,639,450
- - - - - - - - - - - ------------
18,803,697
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Rhode Island--0.5%
Rhode Island St. Hlth. & Edl. Bldg. Corp., Rev., M.B.I.A.
Aaa 5.625 6/01/26 2,500
2,452,200
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
South Carolina--1.8%
So. Carolina Pub. Serv. Auth. Rev.,
Ser. A, A.M.B.A.C.
Aaa 6.25 1/01/03 3,390
3,651,301
Ser. A, M.B.I.A.
Aaa 5.75 1/01/22 2,550
2,543,370
Spartanburg Cnty. Hlth. Services Dist., A.M.B.A.C.
Aaa 5.30 4/15/20 3,750
3,547,875
- - - - - - - - - - - ------------
9,742,546
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Tennessee--0.9%
Metro. Gov't. Nashville & Davidson Cnty. Wtr. & Swr. Rev.,
A.M.B.A.C.
Aaa 8.254 1/01/22 5,000(f)
5,157,500
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Texas--8.6%
Austin Util. Sys. Rev.,
M.B.I.A.
Aaa Zero 5/15/03 8,000
5,803,360
M.B.I.A.
Aaa 5.50 5/15/20 8,800
8,573,224
Austin Comb. Util. Sys. Rev. Ser. A, M.B.I.A.
Aaa 4.875 11/15/10 5,500
5,136,010
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
25 -----
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) INSURED
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note 1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Texas (cont'd.)
Brazos Rvr. Auth. Rev., Houston Lt. & Pwr., Ser. B, 1st
Mtge., F.G.I.C.
Aaa 7.20% 12/01/18 $ 1,000 $
1,086,150
Houston Arpt. Sys. Rev.
Aaa 7.20 7/01/13 3,900(d)
4,467,957
Houston Wtr. & Swr. Sys. Rev., Ser. A, F.G.I.C.
Aaa 5.375 12/01/18 3,000
2,907,510
Keller Ind. Sch. Dist., P.S.F.G.
Aaa Zero 8/15/15 4,945
1,673,635
New Braunfels Ind. Sch. Dist., Gen. Oblig., P.S.F.G.
Aaa Zero 2/01/07 2,000
1,161,820
Round Rock Ind. Sch. Dist., Gen. Oblig., M.B.I.A.
Aaa Zero 8/15/11 4,300
1,875,488
Texas St. Mun. Pwr. Agcy. Rev.,
M.B.I.A.
Aaa Zero 9/01/13 12,300
4,698,108
M.B.I.A.
Aaa Zero 9/01/14 10,000
3,576,200
Texas St. Pub. Fin. Auth. Bldg. Rev., M.B.I.A.
Aaa Zero 2/01/14 6,900
2,551,965
Texas Wtr. Res. Fin. Auth. Rev., A.M.B.A.C.
Aaa 7.50 8/15/13 1,990
2,135,469
Ysleta Ind. Sch. Dist., El Paso Cnty., P.S.F.G.
Aaa Zero 8/15/09 4,065
2,013,354
- - - - - - - - - - - ------------
47,660,250
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Virginia--3.7%
Arlington Cnty., Gen Oblig.,
Aaa 6.00 6/01/11 2,000
2,162,040
Riverside Regl. Jail Auth. Rev., M.B.I.A.
Aaa 6.00 7/01/25 6,750
6,936,705
Upper Occoquan Swr. Auth., Ser. A, M.B.I.A.
Aaa 4.75 7/01/29 10,000
8,624,700
Virginia Beach Hosp. Facs. Rev.,
1st Mtge., A.M.B.A.C.
Aaa 6.00 2/15/10 1,220
1,301,813
1st Mtge., A.M.B.A.C.
Aaa 6.00 2/15/13 1,455
1,540,540
- - - - - - - - - - - ------------
20,565,798
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Washington--2.8%
Clark County Pub. Util. Dist., F.G.I.C.
Aaa 6.00 1/01/08 3,000
3,180,240
Washington St Hlthcare. Facs. Auth. Rev., Yakima Valley
Memorial Hosp. Assoc.
AAA(c) 5.25 12/01/20 2,500
2,316,525
Washington St. Pub. Pwr. Supply Sys.,
Nuclear Proj. No. 2, Ser. A, M.B.I.A.
Aaa Zero 7/01/11 5,210
2,255,670
Nuclear Proj. No. 2, Ser. B, F.G.I.C.
Aaa 7.25 7/01/03 3,000
3,317,040
Nuclear Proj. No. 3, Ser. B, F.G.I.C.
Aaa 7.00 7/01/05 2,000
2,162,700
Nuclear Proj. No. 3, Ser. B, F.G.I.C.
Aaa Zero 7/01/08 4,500
2,370,555
- - - - - - - - - - - ------------
15,602,730
- - - - - - - - - - - ------------
Total long-term investments (cost $502,143,326)
523,659,997
- - - - - - - - - - - ------------
SHORT-TERM INVESTMENTS--4.7%
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Louisiana--0.3%
St. Charles Parish, Shell Oil Co., Ser. 93, F.R.D.D.
VMIG1 3.70 11/01/96 1,500
1,500,000
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----26 See Notes to
Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited) INSURED
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note 1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
New Mexico--1.3%
Farmington Pub. Serv., Ser. 94C, F.R.D.D.
P-1 3.70% 11/01/96 $ 7,400 $
7,400,000
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Texas--3.1%
Brazos Rvr. Auth.,
Tx. Utils. Elec. Co. Ser. 96C, F.R.D.D.
VMIG1 3.70 11/01/96 900
900,000
Tx. Utils. Elec. Co. Ser. 95C, F.R.D.D.
VMIG1 3.70 11/01/96 8,500
8,500,000
Gulf Coast Ind. Dev. Auth.,
CITGO Petroleum., Ser. 94, F.R.D.D.
VMIG1 3.75 11/01/96 1,100
1,100,000
CITGO Petroleum., Ser. 95, F.R.D.D.
VMIG1 3.75 11/01/96 800
800,000
Gulf Coast Wste. Disp. Auth., Amoco Corp., Ser. 93,
F.R.D.D.
VMIG1 3.70 11/01/96 6,000
6,000,000
- - - - - - - - - - - ------------
17,300,000
- - - - - - - - - - - ------------
Total short-term investments (cost $26,200,000)
26,200,000
- - - - - - - - - - - ------------
OUTSTANDING PUT OPTION PURCHASED (b)
United States Treasury Bond Future, Dec. '96 @ $106.00
(cost $37,487)
NR -- 12/16/96 250
3,906
- - - - - - - - - - - ------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Total Investments--99.2%
(cost $528,380,813; Note 4)
549,863,903
Other assets in excess of liabilities--0.8%
4,627,518
- - - - - - - - - - - ------------
Net Assets--100%
$554,491,421
- - - - - - - - - - - ------------
- - - - - - - - - - - ------------
</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.R.D.D.--Floating Rate (Daily) Demand Note(g)
F.S.A.--Financial Security Assurance
M.B.I.A.--Municipal Bond Insurance Association
P.S.F.G.--Public School Fund Guaranty
(b) Non income producing security.
(c) Standard & Poor's rating.
(d) Prerefunded issues are secured by escrowed cash and
direct U.S. guaranteed
obligations.
(e) Principal amount pledged as initial margin on financial
futures contracts.
(f) Inverse floating rate bond. The coupon is inversely
indexed to a floating
interest rate. The rate shown is the rate at year end.
(g) The maturity date shown is 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 ratings.
The Fund's current Prospectus contains a description of
Moody's and Standard &
Poor's ratings.
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
27 -----
<PAGE>
Statement of Assets and Liabilities PRUDENTIAL
MUNICIPAL BOND FUND
(Unaudited) INSURED
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
Assets
October 31, 1996
<S>
<C>
Investments, at value (cost
$528,380,813)...............................................
................... $549,863,903
Cash........................................................
...............................................
60,123
Interest
receivable..................................................
...................................... 7,722,083
Receivable for investments
sold........................................................
.................... 2,935,692
Receivable for Fund shares
sold........................................................
.................... 60,002
Deferred expenses and other
assets......................................................
................... 14,618
- - - - - - - - - - - ----------------
Total
assets......................................................
...................................... 560,656,421
- - - - - - - - - - - ----------------
Liabilities
Payable for investments
purchased...................................................
....................... 4,177,165
Dividends
payable.....................................................
..................................... 754,483
Payable for Fund shares
reacquired..................................................
....................... 496,555
Accrued
expenses....................................................
....................................... 251,234
Management fee
payable.....................................................
................................ 212,841
Distribution fee
payable.....................................................
.............................. 171,159
Due to broker - variation
margin......................................................
..................... 101,563
- - - - - - - - - - - ----------------
Total
liabilities.................................................
...................................... 6,165,000
- - - - - - - - - - - ----------------
Net
Assets......................................................
...........................................
$554,491,421
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
Net assets were comprised of:
Shares of beneficial interest, at
par.........................................................
.......... $ 497,004
Paid-in capital in excess of
par.........................................................
............... 526,703,266
- - - - - - - - - - - ----------------
527,200,270
Accumulated net realized gain on
investments.................................................
........... 7,409,624
Net unrealized appreciation of
investments.................................................
............. 19,881,527
- - - - - - - - - - - ----------------
Net assets, October 31,
1996........................................................
....................... $554,491,421
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
Class A:
Net asset value and redemption price per share
($191,654,273 / 17,188,939 shares of beneficial
interest issued and outstanding)....................
$11.15
Maximum sales charge (3.0% of offering
price)......................................................
..... .34
- - - - - - - - - - - ----------------
Maximum offering price to
public......................................................
.................. $11.49
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
Class B:
Net asset value, offering price and redemption price per
share
($361,942,639 / 32,431,265 shares of beneficial
interest issued and outstanding)....................
$11.16
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
Class C:
Net asset value, offering price and redemption price per
share
($894,307 / 80,134 shares of beneficial interest
issued and outstanding)............................
$11.16
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
Class Z:
Net asset value, offering price and redemption price per
share
($202.46 / 18.151 shares of beneficial interest issued
and outstanding).............................
$11.15
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----28 See Notes to
Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Operations (Unaudited)
- - - - - - - - - - - ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income October 31,
1996
<S> <C>
Income
Interest................................ $ 16,119,618
--------------
- - - - - - - - - - - --
Expenses
Management fee.......................... 1,434,058
Distribution fee--Class A............... 84,468
Distribution fee--Class B............... 1,009,049
Distribution fee--Class C............... 4,005
Transfer agent's fees and expenses...... 174,000
Reports to shareholders................. 103,000
Custodian's fees and expenses........... 57,000
Registration fees....................... 23,000
Audit fees and expenses................. 9,000
Insurance expense....................... 8,000
Trustees' fees and expenses............. 8,000
Legal fees and expenses................. 3,000
Miscellaneous........................... 3,424
--------------
- - - - - - - - - - - --
Total expenses....................... 2,920,004
Less: Management fee waiver.............
(143,406)
Custodian fee credit.................
(1,296)
--------------
- - - - - - - - - - - --
Net expenses......................... 2,775,302
--------------
- - - - - - - - - - - --
Net investment income...................... 13,344,316
--------------
- - - - - - - - - - - --
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain on:
Investment transactions................. 7,646,524
Financial futures contract
transactions......................... 388,688
--------------
- - - - - - - - - - - --
8,035,212
--------------
- - - - - - - - - - - --
Net change in unrealized
appreciation (depreciation) of:
Investments............................. 4,410,776
Financial futures contracts.............
(1,876,563)
--------------
- - - - - - - - - - - --
2,534,213
--------------
- - - - - - - - - - - --
Net gain on investments.................... 10,569,425
--------------
- - - - - - - - - - - --
Net Increase in Net Assets
Resulting from Operations.................. $ 23,913,741
--------------
- - - - - - - - - - - --
--------------
- - - - - - - - - - - --
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Changes in Net Assets (Unaudited)
- - - - - - - - - - - ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
Increase (Decrease) October 31, April
30,
in Net Assets 1996 1996
<S> <C> <C>
Operations
Net investment income........ $ 13,344,316 $
30,538,085
Net realized gain on
investment transactions... 8,035,212
14,627,600
Net change in unrealized
appreciation
(depreciation) of
investments............... 2,534,213
(6,381,895)
------------- ---------
- - - - - - - - - - - ----
Net increase in net assets
resulting from
operations................ 23,913,741
38,783,790
------------- ---------
- - - - - - - - - - - ----
Dividends and distributions
(Note 1):
Dividends from net investment
income
Class A................... (4,170,575)
(5,328,224)
Class B................... (9,150,861)
(25,172,135)
Class C................... (22,879)
(37,726)
Class Z................... (1)
- - - - - - - - - - - --
------------- ---------
- - - - - - - - - - - ----
(13,344,316)
(30,538,085)
------------- ---------
- - - - - - - - - - - ----
Distributions in excess of
net investment income
Class A................... --
(34,680)
Class B................... --
(153,181)
Class C................... --
(265)
------------- ---------
- - - - - - - - - - - ----
--
(188,126)
------------- ---------
- - - - - - - - - - - ----
Series share transactions (net
of
share conversions) (Note 5):
Net proceeds from shares
subscribed................ 13,060,733
50,187,534
Net asset value of shares
issued in reinvestment of
dividends and
distributions............. 7,265,671
17,105,830
Cost of shares reacquired.... (60,480,901)
(135,247,446)
------------- ---------
- - - - - - - - - - - ----
Net decrease in net assets
from Series share
transactions.............. (40,154,497)
(67,954,082)
------------- ---------
- - - - - - - - - - - ----
Total decrease.................. (29,585,072)
(59,896,503)
Net Assets
Beginning of period............. 584,076,493
643,972,996
------------- ---------
- - - - - - - - - - - ----
End of period................... $ 554,491,421 $
584,076,493
------------- ---------
- - - - - - - - - - - ----
------------- ---------
- - - - - - - - - - - ----
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
29 -----
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited)
INTERMEDIATE SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note 1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
LONG-TERM INVESTMENTS--93.4%
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Alaska--4.2%
Alaska Ind. Dev. & Expt. Auth., Revolving Loan Fund
A 5.40% 4/01/01 $ 1,000 $
1,015,630
No. Slope Boro., Gen. Oblig., Ser. C
Baa1 8.35 6/30/98 1,000
1,063,380
- - - - - - - - - - - ------------
2,079,010
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
California--8.6%
Orange Cnty. Rec., Ctfs. of Part., Ser. A, M.B.I.A
Aaa 5.70 7/01/10 3,055
3,117,933
San Jose Merged Area Redev.,
Tax Alloc., M.B.I.A.
Aaa 6.00 8/01/06 500
540,975
Tax Alloc., M.B.I.A.
Aaa 6.00 8/01/08 500
540,280
- - - - - - - - - - - ------------
4,199,188
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Connecticut--2.3%
Connecticut Spec. Tax Oblig. Rev., Ser. A
A1 7.00 6/01/03 1,000(d)
1,110,170
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
District Of Columbia--1.4%
Dist. of Columbia Rev., America Geophysical Union, Ser.
199
BBB-(c) 5.50 9/01/03 700
698,761
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Florida--5.2%
Dade Cnty. Pub. Facs. Rev., Jackson Mem. Hosp., Ser. A,
M.B.I.A.
Aaa 4.75 6/01/08 1,000
946,990
Dade Cnty. Sch. Dist., Gen. Oblig., M.B.I.A.
Aaa 6.00 7/15/06 1,500
1,620,090
- - - - - - - - - - - ------------
2,567,080
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Georgia--2.3%
Burke Cnty. Dev. Auth., Oglethorpe Pwr. Co., M.B.I.A.
Aaa 7.50 1/01/03 1,000
1,105,110
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Illinois--0.9%
Illinois Hlth. Facs. Auth. Rev., Edward Hosp., Ser. A
A 5.75 2/15/09 450
442,958
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Maryland--2.1%
Maryland St. Stadium Auth. Lease Rev., Conv. Ctr.
Expansion, A.M.B.A.C.
Aaa 5.375 12/15/00 1,000
1,034,820
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----30 See Notes to
Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited)
INTERMEDIATE SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note 1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Massachusetts--4.3%
Mass. St. Gen. Oblig., Ser. C
Aaa 6.75% 8/01/06 $ 1,000(d) $
1,112,730
Mass. St. Spec. Oblig. Rev., Ser. A, A.M.B.A.C.
Aaa 5.25 6/01/09 1,000
993,590
- - - - - - - - - - - ------------
2,106,320
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Michigan--5.0%
Battle Creek Wtr. Supp. Sys. Rev. Ref., A.M.B.A.C.
Aaa 4.75 9/01/10 1,000
925,200
Kalamazoo Hosp. Fin. Auth., Borgess. Med. Ctr., Ser A,
A.M.B.A.C.
Aaa 5.00 6/01/04 1,000
1,000,580
Michigan Mun. Bond Auth. Rev., Wayne Cnty. Proj., M.B.I.A.
Aaa 7.40 12/01/02 500(d)
550,990
- - - - - - - - - - - ------------
2,476,770
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Missouri--1.1%
New Madrid Elec. Pwr. Ctr. Plant, A.M.B.A.C.
Aaa 5.35 12/01/00 500
516,615
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
New Jersey--11.4%
New Jersey Econ. Dev. Auth. Rev.,
Mkt. Trans. Fac. Rev., M.B.I.A.
Aaa 5.75 7/01/06 950
994,374
Mkt. Trans. Fac. Rev., M.B.I.A.
Aaa 5.80 7/01/07 1,000
1,041,660
Performing Arts Ctr., A.M.B.A.C.
Aaa 6.00 6/15/08 1,410
1,506,106
So. Reg'l. High Sch. Dist., M.B.I.A.
Aaa 5.50 9/01/06 1,010
1,050,370
West Windsor Plainsboro Sch., F.G.I.C.
Aaa 5.25 12/01/05 1,000
1,026,840
- - - - - - - - - - - ------------
5,619,350
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
New York--5.5%
New York St. Env. Facs. Corp., Poll. Ctrl. Rev.
Aaa 5.80 1/15/14 1,280
1,312,550
New York St. Urban Dev. Corp. Rev.
Baa1 5.25 1/01/11 1,500
1,401,660
- - - - - - - - - - - ------------
2,714,210
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Ohio--1.1%
Ohio St. Bldg. Auth., Admin. Bldg. Fund Proj., M.B.I.A.
Aaa 5.60 10/01/06 500
526,805
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Oklahoma--4.8%
Oklahoma St. Ind. Auth. Rev. Hlth. Sys., Integris Bapt.,
A.M.B.A.C.
Aaa 6.00 8/15/09 2,240
2,360,646
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
31 -----
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited)
INTERMEDIATE SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note 1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Oregon--3.8%
Multnomah Cnty. Sch. Dist. No. 3, Park Rose, F.G.I.C.
Aaa 5.60% 12/01/07 $ 1,000 $
1,035,060
Oregon St. Dept. Trans. Rev., Regl. Lt. Rail Westside
Proj., M.B.I.A.
Aaa 7.00 6/01/03 750
847,567
- - - - - - - - - - - ------------
1,882,627
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Pennsylvania--6.7%
Montgomery Cnty. Redev. Auth., Multifam. Hsg. Rev., Ser. A
NR 5.75 7/01/99 780
783,557
Pennsylvania St. Ctfs. of Part., Ser. A, F.S.A.
Aaa 6.25 11/01/06 600
641,922
Pennsylvania St. Higher Edl. Facs. Auth., Hlth. Svs. Rev.,
M.B.I.A.
Aaa 5.70 11/15/11 755
768,899
Philadelphia Hosp. Auth. & Higher Edl. Auth., Childrens
Seashore House, Ser. A
A-(c) 7.00 8/15/03 1,000
1,095,170
- - - - - - - - - - - ------------
3,289,548
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Puerto Rico--7.4%
Puerto Rico Aqueduct & Swr. Auth. Rev., M.B.I.A.
Aaa 6.00 7/01/07 1,250
1,355,500
Puerto Rico Gen. Oblig., Ser. A, M.B.I.A.
Aaa 6.25 7/01/10 750
798,473
Puerto Rico Hwy. Auth. Rev.,
Ser. Q
Baa1 7.50 7/01/01 330(d)
371,329
Ser. Q
Baa1 7.60 7/01/02 975(d)
1,100,385
- - - - - - - - - - - ------------
3,625,687
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Texas--7.0%
Austin Util. Sys. Rev. Comb., Ser. A, M.B.I.A.
Aaa 4.875 11/15/10 1,830
1,708,891
Gulf Coast Wste. Disp. Auth. Rev., Bayport Area Sys.,
F.S.A.
Aaa 5.50 10/01/10 1,075
1,075,763
San Antonio Elec. & Gas Rev., Ser. A, F.G.I.C.
Aaa Zero 2/01/05 1,000
656,320
- - - - - - - - - - - ------------
3,440,974
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Utah--2.2%
Utah St. Brd. of Regents, Student Loan Rev., Ser. F,
A.M.B.A.C.
Aaa 7.00 11/01/01 1,000(e)
1,089,820
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Washington--6.1%
Washington St. Pub. Pwr. Supp. Sys.,
Nuclear Proj. No. 2, Ser. A
Aa1 4.90 7/01/05 2,000
1,948,640
Nuclear Proj. No. 3, Ser. B
Aa1 7.00 7/01/99 1,000
1,061,050
- - - - - - - - - - - ------------
3,009,690
- - - - - - - - - - - ------------
Total long-term investments (cost $44,627,629)
45,896,159
- - - - - - - - - - - ------------
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----32 See Notes to
Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL
MUNICIPAL BOND FUND
as of October 31, 1996 (Unaudited)
INTERMEDIATE SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a)
Rating Rate Date (000) (Note 1)
<S>
<C> <C> <C> <C> <C>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
SHORT-TERM INVESTMENTS--5.3%
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Pennsylvania--2.0%
Allegheny Cnty. Ind. Dev. Rev., USX Proj.
Baa3 5.30% 12/01/96 $ 1,000 $
999,780
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Texas--2.1%
Brazos River Auth. Poll. Ctrl. Rev., Texas Util. Elec.
Co., Ser. 95C, F.R.D.D.
VMIG1 3.70 11/01/96 600
600,000
Gulf Coast Ind. Dev. Auth., Amoco Corp., Ser. 93, F.R.D.D.
VMIG1 3.70 11/01/96 400
400,000
- - - - - - - - - - - ------------
1,000,000
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Wyoming--1.2%
Green River Poll. Ctrl. Rev., Rhone-Poulenc, Inc., Ser.
92, F.R.D.D.
CPS1 3.60 11/01/96 600
600,000
- - - - - - - - - - - ------------
Total short-term investments (cost $2,600,000)
2,599,780
- - - - - - - - - - - ------------
OUTSTANDING PUT OPTION PURCHASED (b)
United States Treasury Bond Future, Dec. '96 @ $106.00
(cost $2,999)
NR -- 12/16/96 20
313
- - - - - - - - - - - ------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Total Investments--98.7%
(cost $47,230,628; Note 4)
48,496,252
Other assets in excess of liabilities--1.3%
655,847
- - - - - - - - - - - ------------
Net Assets--100%
$ 49,152,099
- - - - - - - - - - - ------------
- - - - - - - - - - - ------------
</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.R.D.D.--Floating Rate (Daily) Demand Note (f)
F.S.A.--Financial Security Assurance
M.B.I.A.--Municipal Bond Insurance Association
(b) Non income producing security.
(c) Standard & Poor's Rating.
(d) Prerefunded issues are secured by escrowed cash and
direct U.S. guaranteed
obligations.
(e) Principal amount pledged as initial margin on financial
futures contracts.
(f) The maturity date shown is 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.
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
33 -----
<PAGE>
Statement of Assets and Liabilities PRUDENTIAL
MUNICIPAL BOND FUND
(Unaudited)
INTERMEDIATE SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
Assets
October 31, 1996
<S>
<C>
Investments, at value (cost
$47,230,628)................................................
................... $ 48,496,252
Cash........................................................
...............................................
68,630
Interest
receivable..................................................
...................................... 869,026
Receivable for Fund shares
sold........................................................
.................... 428
Deferred expenses and other
assets......................................................
................... 1,370
- - - - - - - - - - - ----------------
Total
assets......................................................
...................................... 49,435,706
- - - - - - - - - - - ----------------
Liabilities
Payable for Fund shares
reacquired..................................................
....................... 107,013
Accrued
expenses....................................................
....................................... 68,822
Dividends
payable.....................................................
..................................... 56,442
Management fee
payable.....................................................
................................ 18,876
Distribution fee
payable.....................................................
.............................. 16,204
Due to broker - variation
margin......................................................
..................... 16,250
- - - - - - - - - - - ----------------
Total
liabilities.................................................
...................................... 283,607
- - - - - - - - - - - ----------------
Net
Assets......................................................
........................................... $
49,152,099
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
Net assets were comprised of:
Shares of beneficial interest, at
par.........................................................
.......... $ 45,956
Paid-in capital in excess of
par.........................................................
............... 48,061,725
- - - - - - - - - - - ----------------
48,107,681
Accumulated net realized loss on
investments.................................................
........... (46,831)
Net unrealized appreciation on
investments.................................................
............. 1,091,249
- - - - - - - - - - - ----------------
Net assets, October 31,
1996........................................................
....................... $ 49,152,099
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
Class A:
Net asset value and redemption price per share
($14,074,159 / 1,316,180 shares of beneficial interest
issued and outstanding)......................
$10.69
Maximum sales charge (3% of offering
price)......................................................
....... .33
- - - - - - - - - - - ----------------
Maximum offering price to
public......................................................
.................. $11.02
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
Class B:
Net asset value, offering price and redemption price per
share
($34,987,549 / 3,270,930 shares of beneficial interest
issued and outstanding)......................
$10.70
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
Class C:
Net asset value, offering price and redemption price per
share
($90,189 / 8,432 shares of beneficial interest issued
and outstanding)..............................
$10.70
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
Class Z:
Net asset value, offering price and redemption price per
share
($201.70 / 18.867 shares of beneficial interest issued
and outstanding).............................
$10.69
- - - - - - - - - - - ----------------
- - - - - - - - - - - ----------------
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----34 See Notes to
Financial Statements.
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INTERMEDIATE SERIES
Statement of Operations (Unaudited)
- - - - - - - - - - - ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income October 31,
1996
<S> <C>
Income
Interest................................ $1,385,821
--------------
- - - - - - - - - - - --
Expenses
Management fee.......................... 127,840
Distribution fee--Class A............... 6,498
Distribution fee--Class B............... 95,013
Distribution fee--Class C............... 502
Reports to shareholders................. 44,000
Custodian's fees and expenses........... 41,000
Registration Fees....................... 21,000
Transfer agent's fees and expenses...... 21,000
Trustees' fees and expenses............. 8,000
Audit fees and expenses................. 5,500
Legal fees and expenses................. 3,500
Miscellaneous........................... 3,835
--------------
- - - - - - - - - - - --
Total expenses....................... 377,688
Less: Management fee waiver............. (12,784)
Custodian fee credit................. (957)
--------------
- - - - - - - - - - - --
Net expenses......................... 363,947
--------------
- - - - - - - - - - - --
Net investment income...................... 1,021,874
--------------
- - - - - - - - - - - --
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain on:
Investment transactions................. 228,214
Financial futures contract
transactions......................... 18,456
--------------
- - - - - - - - - - - --
246,670
--------------
- - - - - - - - - - - --
Net change in unrealized appreciation
(depreciation) of:
Investments............................. 116,873
Financial futures contracts............. (173,438)
--------------
- - - - - - - - - - - --
(56,565)
--------------
- - - - - - - - - - - --
Net gain on investments.................... 190,105
--------------
- - - - - - - - - - - --
Net Increase in Net Assets
Resulting from Operations.................. $1,211,979
--------------
- - - - - - - - - - - --
--------------
- - - - - - - - - - - --
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
INTERMEDIATE SERIES
Statement of Changes in Net Assets (Unaudited)
- - - - - - - - - - - ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
Increase (Decrease) October 31, April
30,
in Net Assets 1996 1996
<S> <C> <C>
Operations
Net investment income........... $ 1,021,874 $
2,384,372
Net realized gain on investment
transactions................. 246,670
636,281
Net change in unrealized
appreciation (depreciation)
of investments............... (56,565)
613,155
----------- --------
- - - - - - - - - - - ----
Net increase in net assets
resulting from operations.... 1,211,979
3,633,808
----------- --------
- - - - - - - - - - - ----
Dividends and distribution (Note
1):
Dividends from net investment
income
Class A...................... (279,132)
(549,044)
Class B...................... (740,317)
(1,828,010)
Class C...................... (2,424)
(7,318)
Class Z...................... (1)
- - - - - - - - - - - --
----------- --------
- - - - - - - - - - - ----
(1,021,874)
(2,384,372)
----------- --------
- - - - - - - - - - - ----
Series share transactions (net of
share conversions) (Note 5):
Net proceeds from shares
subscribed................... 2,624,139
5,139,324
Net asset value of shares issued
in reinvestment of
dividends.................... 628,374
1,485,489
Cost of shares reacquired....... (7,617,587)
(16,260,658)
----------- --------
- - - - - - - - - - - ----
Net decrease in net assets from
Series share transactions.... (4,365,074)
(9,635,845)
----------- --------
- - - - - - - - - - - ----
Total decrease..................... (4,174,969)
(8,386,409)
Net Assets
Beginning of period................ 53,327,068
61,713,477
----------- --------
- - - - - - - - - - - ----
End of period...................... $49,152,099 $
53,327,068
----------- --------
- - - - - - - - - - - ----
----------- --------
- - - - - - - - - - - ----
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
35 -----
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL
MUNICIPAL BOND FUND
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
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 Intermediate Series. Investment
operations for Class A,
Class B, Class C and Class Z shares of each series commenced
on January 22,
1990, September 17, 1987, August 1, 1994 and September 13,
1996, 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
Intermediate 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 Policies
Securities Valuation: Municipal securities (including
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. When the contract expires or is closed, the gain or
loss is realized and
is presented in the statement of operations as net realized
gain (loss) on
financial futures contracts.
The Fund invests in financial futures contracts in order to
hedge its existing
portfolio securities, or securities the Fund intends to
purchase, against
fluctuations in value caused by changes in prevailing
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.
Options: The Fund may either purchase or write options in
order to hedge against
adverse market movements or fluctuations in value caused by
changes in
prevailing interest rates or foreign currency exchange rates
with respect to
securities or currencies which the Fund currently owns or
intends to purchase.
When the Fund purchases an option, it pays a premium and an
amount equal to that
premium is recorded as an investment. When the Fund writes
an option, it
receives a premium and an amount equal to that premium is
recorded as a
liability. The investment or liability is adjusted daily to
reflect the current
market value of the option. If an option expires
unexercised, the Fund realizes
a gain or loss to the extent of the premium received or
paid. If an option is
exercised, the premium received or paid is an adjustment to
the proceeds from
the sale or the cost basis of the purchase in determining
whether the Fund has
realized a gain or loss. The difference between the premium
and the amount
received or paid on effecting a closing purchase or sale
transaction is also
treated as a realized gain or loss. Gain or loss on
purchased options is
included in net realized gain (loss) on investment
transactions.
The Fund, as writer of an option, has no control over
whether the underlying
securities or currencies may be sold (called) or purchased
(put). As a result,
the Fund bears the market risk of an unfavorable change in
the price of the
security or currency underlying the written option. The
Fund, as purchaser of an
option, bears the risk of the potential inability of the
counterparties to meet
the terms of their contracts.
Securities Transactions and Net Investment Income:
Securities transactions are
recorded on the trade date. Realized gains and losses on
sales of securities are
calculated on the identified cost basis. Interest income is
recorded on the
accrual basis. 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
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----36
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL
MUNICIPAL BOND FUND
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
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. Expenses are
recorded on the accrual basis which may require the use of
certain estimates by
management.
Federal Income Taxes: For federal income tax purposes, each
series in the Fund
is treated as a separate tax paying entity. It is the intent
of each series to
continue to meet the requirements of the Internal Revenue
Code applicable to
regulated investment companies and to distribute all net
income to shareholders.
For this reason and because substantially all of the Fund's
gross income
consists of tax-exempt interest, no federal income tax
provision is required.
Dividends and Distributions: Dividends from net investment
income are declared
daily and paid monthly. The Fund will distribute at least
annually any net
capital gains. Dividends and distributions are recorded on
the ex-dividend date.
Income distributions and capital gain distributions are
determined in accordance
with income tax regulations which may differ from generally
accepted accounting
principles.
- - - - - - - - - - - ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Mutual
Fund Management, LLC.
(``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 up to $1
billion and .45 of 1% of the average daily net asets of each
series in excess of
$1 billion. PMF has agreed to voluntarily waive a portion of
each Series'
management fee, which amounted to $259,358, $143,406, and
$12,784 for the High
Yield Series, Insured Series, and Intermediate Series,
respectively for the six
months ended October 31, 1996. Such amounts represented .05
of 1% of average
daily net assets, as annualized, for each Series or $.003
per share.
The Fund has a distribution agreement with Prudential
Securities Incorporated
(``PSI''), which acts as the distributor of the Class A,
Class B and Class C
shares of the Fund. The Fund compensates PSI 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
PSI. The distribution fees are accrued daily and payable
monthly.
Pursuant to the Class A, B and C Plans, the Fund compensates
PSI 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, 1996.
PSI has advised the Fund that it received approximately
$224,600 ($133,600-High
Yield Series; $84,500-Insured Series; $6,500-Intermediate
Series) in front-end
sales charges resulting from sales of Class A shares during
the six months ended
October 31, 1996. From these fees, PSI paid such sales
charges to affiliated
broker-dealers 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, 1996, it
received approximately $986,200 ($589,100-High Yield Series;
$350,200-Insured
Series; $46,900-Intermediate Series) in contingent deferred
sales charges
imposed upon certain redemptions by Class B and C
shareholders.
PSI, PIC and PMF are indirect, wholly-owned subsidiaries of
The Prudential
Insurance Company of America.
- - - - - - - - - - - ------------------------------------------------------------
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-
owned subsidiary of
PMF, serves as the Fund's transfer agent. During the six
months ended October
31, 1996, the Fund incurred fees of approximately $438,700
($236,800-High Yield
Series; $181,200-Insured Series; $20,700-Intermediate
Series) for the services
of PMFS. As of October 31, 1996, approximately $65,000
($36,300-High Yield
Series; $25,700-Insured Series; $3,000-Intermediate 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.
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
37 -----
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL
MUNICIPAL BOND FUND
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, excluding short-
term investments,
for the six months ended October 31, 1996, were as follows:
<TABLE>
<CAPTION>
Series Purchases Sales
- - - - - - - - - - - -------------------------------- ------------ ---------
- - - - - - - - - - - ---
<S> <C> <C>
High Yield...................... $136,636,316
$146,048,939
Insured......................... 372,587,017
397,231,774
Intermediate.................... 12,317,701
17,624,882
</TABLE>
At October 31, 1996, the High Yield Series, the Insured
Series and the
Intermediate Series bought 375,250 and 40 financial futures
contracts,
respectively of U.S. Treasury Bonds expiring in December
'96.
The values of these financial futures contracts at October
31, 1996 were as
follows:
<TABLE>
<CAPTION>
Financial Futures
Contracts Bought
-------------------------------
- - - - - - - - - - - ---------
High Yield Insured
Intermediate
Series Series
Series
----------- ----------- ---
- - - - - - - - - - - ---------
<S> <C> <C> <C>
Value at disposition....... $42,375,000 $26,648,437 $
4,345,625
Value at October 31,
1996..................... 40,802,344 28,250,000
4,520,000
----------- ----------- ---
- - - - - - - - - - - ---------
Unrealized gain (loss)..... $ 1,572,656 $(1,601,563) $
(174,375)
----------- ----------- ---
- - - - - - - - - - - ---------
----------- ----------- ---
- - - - - - - - - - - ---------
</TABLE>
The federal income tax basis of the Fund's investments, at
October 31, 1996 was
$978,965,171-High Yield Series; $528,356,645-Insured Series;
and
$47,227,942-Intermediate Series and, accordingly, net
unrealized appreciation of
investments for federal income tax purposes was as follows:
<TABLE>
<CAPTION>
Gross
Gross
Net unrealized unrealized
unrealized
Series appreciation appreciation
depreciation
- - - - - - - - - - - -------------------- -------------- ----------- ---
- - - - - - - - - - - --------
<S> <C> <C> <C>
High Yield.......... $ 37,079,825 $58,563,404
$21,483,404
Insured............. 21,507,258 22,513,721
1,006,463
Intermediate........ 1,268,310 1,547,909
279,599
</TABLE>
The High Yield Series has a net capital loss carryforward as
of April 30, 1996
of approximately $13,768,000, of which $2,024,000 expires in
2002, $5,361,000
expires in 2003 and $6,383,000 expires in 2004. The Insured
Series has a net
capital loss carryforward of $630,700, which expires in
2003. The Intermediate
Series has a net capital loss carryforward of $337,600,
which expires in 2004.
- - - - - - - - - - - ------------------------------------------------------------
Note 5. Capital
Each series offers Class A, Class B, Class C and Class Z
shares. Class A shares
are sold with a front-end sales charge of up to 3.0%. 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
automatically convert to Class A shares on a quarterly basis
approximately seven
years after purchase. A special exchange privilege is also
available for
shareholders who qualify to purchase Class A shares at net
asset value. Class Z
shares are not subject to any sales or redemption charge and
are offered
exclusively for sale to the participants of the PSI 401(K)
Plan, a defined
contribution plan sponsored by PSI.
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----38
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL
MUNICIPAL BOND FUND
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
The Fund has authorized an unlimited number of shares of
beneficial interest of
each class at $.01 par value per share. Transactions in
shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
High Yield Series
Insured Series Intermediate Series
Class A
Class A Class A
Six Months Ended October 31, -------------------------
- - - - - - - - - - - --- ---------------------------- -----------------
- - - - - - - - - - - ---------
1996 Shares Amount
Shares Amount Shares Amount
- - - - - - - - - - - -------------------------------- ----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
<S> <C> <C>
<C> <C> <C> <C>
Shares issued................... 1,476,323 $
15,957,686 571,417 $ 6,256,400 63,571
$ 674,613
Shares issued in reinvestment of
dividends.................... 374,046
4,032,177 193,826 2,135,872 15,433
163,952
Shares reacquired............... (2,386,160)
(25,659,349) (2,109,419) (23,196,437)
(198,735) (2,104,137)
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
Net decrease in shares
outstanding before
conversion................... (535,791)
(5,669,486) (1,344,176) (14,804,165)
(119,731) (1,265,572)
Shares issued upon conversion
from Class B................. 8,006,163
85,814,679 5,777,892 63,012,366 257,138
2,717,284
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
Net increase in shares
outstanding.................. 7,470,372 $
80,145,193 4,433,716 $ 48,208,201 137,407
$ 1,451,712
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
<CAPTION>
Class A
Class A Class A
-------------------------
- - - - - - - - - - - --- ---------------------------- -----------------
- - - - - - - - - - - ---------
Year Ended April 30, 1996 Shares Amount
Shares Amount Shares Amount
- - - - - - - - - - - -------------------------------- ----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
<S> <C> <C>
<C> <C> <C> <C>
Shares issued................... 2,842,337 $
31,224,578 2,115,326 $ 23,453,210 101,764
$ 1,079,376
Shares issued in reinvestment of
dividends and
distributions................ 474,421
5,188,074 266,368 2,962,597 31,524
338,680
Shares reacquired............... (3,287,941)
(36,026,405) (3,699,272) (41,190,146)
(466,658) (4,985,578)
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
Net increase (decrease) in
shares outstanding before
conversion................... 28,817
386,247 (1,317,578) (14,774,339) (333,370)
(3,567,522)
Shares issued upon conversion
from Class B................. 10,054,570
110,522,327 7,072,139 78,989,223
506,425 5,415,903
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
Net increase in shares
outstanding.................. 10,083,387 $
110,908,574 5,754,561 $ 64,214,884
173,055 $ 1,848,381
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
<CAPTION>
Class B
Class B Class B
Six Months Ended October 31, -------------------------
- - - - - - - - - - - --- ---------------------------- -----------------
- - - - - - - - - - - ---------
1996 Shares Amount
Shares Amount Shares Amount
- - - - - - - - - - - -------------------------------- ----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
<S> <C> <C>
<C> <C> <C> <C>
Shares issued................... 3,620,140 $
38,965,115 607,426 $ 6,673,669 180,023
$ 1,912,267
Shares issued in reinvestment of
dividends.................... 935,597
10,076,726 463,998 5,112,949 43,539
462,461
Shares reacquired............... (5,014,246)
(54,225,483) (3,351,797) (36,875,169)
(502,912) (5,341,570)
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
Net decrease in shares
outstanding before
conversion................... (485,509)
(5,183,642) (2,280,373) (25,088,551)
(279,350) (2,966,842)
Shares reacquired upon
conversion into Class A...... (8,006,163)
(85,814,679) (5,772,598) (63,012,366)
(256,895) (2,717,284)
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
Net decrease in shares
outstanding.................. (8,491,672) $
(90,998,321) (8,052,971) $ (88,100,917)
(536,245) $ (5,684,126)
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
<CAPTION>
Class B
Class B Class B
-------------------------
- - - - - - - - - - - --- ---------------------------- -----------------
- - - - - - - - - - - ---------
Year Ended April 30, 1996 Shares Amount
Shares Amount Shares Amount
- - - - - - - - - - - -------------------------------- ----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
<S> <C> <C>
<C> <C> <C> <C>
Shares issued................... 8,170,060 $
89,622,344 2,338,885 $ 26,086,324 371,018
$ 4,000,248
Shares issued in reinvestment of
dividends and
distributions................ 2,260,660
24,711,652 1,268,212 14,112,201 106,165
1,139,952
Shares reacquired............... (12,855,885)
(140,769,139) (8,438,736) (93,993,036)
(1,047,502) (11,264,240)
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
Net decrease in shares
outstanding before
conversion................... (2,425,165)
(26,435,143) (4,831,639) (53,794,511)
(570,319) (6,124,040)
Shares reacquired upon
conversion into Class A...... (10,054,570)
(110,522,327) (7,065,810) (78,989,223)
(506,284) (5,415,903)
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
Net decrease in shares
outstanding.................. (12,479,735)
$(136,957,470) (11,897,449) $(132,783,734)
(1,076,603) $(11,539,943)
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
39 -----
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL
MUNICIPAL BOND FUND
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
High Yield Series
Insured Series Intermediate Series
Class C
Class C Class C
Six Months Ended October 31, -------------------------
- - - - - - - - - - - --- ---------------------------- -----------------
- - - - - - - - - - - ---------
1996 Shares Amount
Shares Amount Shares Amount
- - - - - - - - - - - -------------------------------- ----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
<S> <C> <C>
<C> <C> <C> <C>
Shares issued................... 243,897 $
2,623,494 11,900 $ 130,464 3,470
$ 37,059
Shares issued in reinvestment of
dividends.................... 13,137
141,559 1,528 16,849 185
1,960
Shares reacquired............... (86,257)
(930,406) (37,120) (409,295) (16,362)
(171,880)
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
Net increase (decrease) in
shares outstanding........... 170,777 $
1,834,647 (23,692) $ (261,982) (12,707)
$ (132,861)
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
<CAPTION>
Class C
Class C Class C
-------------------------
- - - - - - - - - - - --- ---------------------------- -----------------
- - - - - - - - - - - ---------
Year Ended April 30, 1996 Shares Amount
Shares Amount Shares Amount
- - - - - - - - - - - -------------------------------- ----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
<S> <C> <C>
<C> <C> <C> <C>
Shares issued................... 389,662 $
4,263,670 58,297 $ 648,000 5,515
$ 59,700
Shares issued in reinvestment of
dividends and
distributions................ 20,619
225,710 2,784 31,032 638
6,857
Shares reacquired............... (104,405)
(1,131,704) (5,738) (64,264)
(1,003) (10,840)
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
Net increase in shares
outstanding.................. 305,876 $
3,357,676 55,343 $ 614,768 5,150
$ 55,717
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
<CAPTION>
Class Z
Class Z Class Z
September 13, 1996(a) Through -------------------------
- - - - - - - - - - - --- ---------------------------- -----------------
- - - - - - - - - - - ---------
October 31, 1996 Shares Amount
Shares Amount Shares Amount
- - - - - - - - - - - -------------------------------- ----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
<S> <C> <C>
<C> <C> <C> <C>
Shares issued................... 10,815 $
117,179 17 $ 200 18
$ 200
Shares issued in reinvestment of
dividends.................... 2
22 1 1 1
1
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
Increase in shares
outstanding.................. 10,817 $
117,201 18 $ 201 19
$ 201
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
----------- ----------
- - - - - - - - - - - --- ----------- ------------- ---------- ---
- - - - - - - - - - - ---------
</TABLE>
- - - - - - - - - - - ---------------
(a) Commencement of offering of Class Z shares.
- - - - - - - - - - - ------------------------------------------------------------
Note 6. Dividends
On December 12, 1996, the Board of Trustees of the Fund
declared the following
dividends per Class A, B, C and Z shares, payable on
December 20, 1996 to
shareholders of record on December 17, 1996.
<TABLE>
<CAPTION>
Special Taxable Long Term
Series Ordinary Income Capital
Gains
- - - - - - - - - - - --------------------------- --------------- -----------
- - - - - - - - - - - --
<S> <C> <C>
High Yield Series.......... $.0013
- - - - - - - - - - - --
Insured Series............. $.0060
$.1090
Intermediate Series........ $.0072
- - - - - - - - - - - --
</TABLE>
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----40
<PAGE>
PRUDENTIAL
MUNICIPAL BOND FUND
Financial Highlights (Unaudited) HIGH YIELD
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Class A
------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - -------
<S> <C>
<C> <C> <C> <C> <C>
Six
Months
Ended Years Ended April 30,
October 31, --------------------------------------------
- - - - - - - - - - - -------------
1996 1996 1995 1994 1993
1992
------
- - - - - - - - - - - ----- -------- -------- ------- -------
- - - - - - - - - - - -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $
10.70 $ 10.72 $ 10.74 $ 11.14 $ 10.68
$ 10.45
------
- - - - - - - - - - - ----- -------- -------- ------- -------
- - - - - - - - - - - -------
Income from investment operations
Net investment income...............................
..36(b) .72(b) .72(b) .72 .77
..77(b)
Net realized and unrealized gain (loss) on
investment transactions..........................
..20 (.02) (.02) (.39) .46
..23
------
- - - - - - - - - - - ----- -------- -------- ------- -------
- - - - - - - - - - - -------
Total from investment operations.................
..56 .70 .70 .33 1.23
1.00
------
- - - - - - - - - - - ----- -------- -------- ------- -------
- - - - - - - - - - - -------
Less distributions
Dividends from net investment income................
(.36) (.72) (.72) (.72) (.77)
(.77)
Distributions from capital gains....................
- - - - - - - - - - - -- -- -- (.01) --
- - - - - - - - - - - --
------
- - - - - - - - - - - ----- -------- -------- ------- -------
- - - - - - - - - - - -------
Total distributions..............................
(.36) (.72) (.72) (.73) (.77)
(.77)
------
- - - - - - - - - - - ----- -------- -------- ------- -------
- - - - - - - - - - - -------
Net asset value, end of period...................... $
10.90 $ 10.70 $ 10.72 $ 10.74 $ 11.14
$ 10.68
------
- - - - - - - - - - - ----- -------- -------- ------- -------
- - - - - - - - - - - -------
------
- - - - - - - - - - - ----- -------- -------- ------- -------
- - - - - - - - - - - -------
TOTAL RETURN(a):....................................
5.23% 6.55% 6.90% 2.88% 11.90%
9.82%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $
308,597 $223,073 $115,501 $54,491 $43,529
$24,725
Average net assets (000)............................ $
264,958 $162,329 $ 65,207 $52,982 $31,658
$19,702
Ratios to average net assets:
Expenses, including distribution fees............
0.65%(b)(c) 0.64%(b) 0.69%(b) 0.69% 0.74%
0.65%(b)
Expenses, excluding distribution fees............
0.55%(b)(c) 0.54%(b) 0.59%(b) 0.59% 0.64%
0.55%(b)
Net investment income............................
6.53%(b)(c) 6.58%(b) 6.83%(b) 6.42% 7.04%
7.25%(b)
Portfolio turnover rate.............................
14% 35% 39% 36% 27%
34%
</TABLE>
- - - - - - - - - - - ---------------
(a) 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.
(b) Net of management fee waivers.
(c) Annualized.
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
41 -----
<PAGE>
PRUDENTIAL
MUNICIPAL BOND FUND
Financial Highlights (Unaudited) HIGH YIELD
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Class B
------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ---
Six
Months
Ended Years Ended April 30,
October 31, --------------------------------------------
- - - - - - - - - - - ---------
1996 1996 1995 1994
1993
------
- - - - - - - - - - - ----- -------- ---------- ---------- -------
- - - - - - - - - - - ---
<S> <C>
<C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $
10.69 $ 10.72 $ 10.74 $ 11.14 $
10.68
------
- - - - - - - - - - - ----- -------- ---------- ---------- -------
- - - - - - - - - - - ---
Income from investment operations
Net investment income...............................
..33(b) .68(b) .68(b) .68
..73
Net realized and unrealized gain (loss) on
investment transactions..........................
..20 (.03) (.02) (.39)
..46
------
- - - - - - - - - - - ----- -------- ---------- ---------- -------
- - - - - - - - - - - ---
Total from investment operations.................
..53 .65 .66 .29
1.19
------
- - - - - - - - - - - ----- -------- ---------- ---------- -------
- - - - - - - - - - - ---
Less distributions
Dividends from net investment income................
(.33) (.68) (.68) (.68)
(.73)
Distributions from capital gains....................
- - - - - - - - - - - -- -- -- (.01) -
- - - - - - - - - - - -
------
- - - - - - - - - - - ----- -------- ---------- ---------- -------
- - - - - - - - - - - ---
Total distributions..............................
(.33) (.68) (.68) (.69)
(.73)
------
- - - - - - - - - - - ----- -------- ---------- ---------- -------
- - - - - - - - - - - ---
Net asset value, end of period...................... $
10.89 $ 10.69 $ 10.72 $ 10.74 $
11.14
------
- - - - - - - - - - - ----- -------- ---------- ---------- -------
- - - - - - - - - - - ---
------
- - - - - - - - - - - ----- -------- ---------- ---------- -------
- - - - - - - - - - - ---
TOTAL RETURN(a):....................................
5.03% 6.12% 6.37% 2.46%
11.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $
721,412 $799,048 $ 934,725 $1,099,640
$1,028,480
Average net assets (000)............................ $
756,456 $900,115 $1,024,132 $1,132,653 $
893,203
Ratios to average net assets:
Expenses, including distribution fees............
1.05%(b)(c) 1.04%(b) 1.09%(b) 1.09%
1.14%
Expenses, excluding distribution fees............
0.55%(b)(c) 0.54%(b) 0.59%(b) 0.58%
0.64%
Net investment income............................
6.12%(b)(c) 6.19%(b) 6.37%(b) 6.02%
6.66%
Portfolio turnover rate.............................
14% 35% 39% 36%
27%
<CAPTION>
<S> <C>
1992
------
- - - - - - - - - - - --
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $
10.45
------
- - - - - - - - - - - --
Income from investment operations
Net investment income...............................
..73)
Net realized and unrealized gain (loss) on
investment transactions..........................
..23
------
- - - - - - - - - - - --
Total from investment operations.................
..96
------
- - - - - - - - - - - --
Less distributions
Dividends from net investment income................
(.73)
Distributions from capital gains....................
- - - - - - - - - - - --
------
- - - - - - - - - - - --
Total distributions..............................
(.73)
------
- - - - - - - - - - - --
Net asset value, end of period...................... $
10.68
------
- - - - - - - - - - - --
------
- - - - - - - - - - - --
TOTAL RETURN(a):....................................
9.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).....................
$803,838
Average net assets (000)............................
$759,779
Ratios to average net assets:
Expenses, including distribution fees............
1.05%(b)
Expenses, excluding distribution fees............
0.55%(b)
Net investment income............................
6.85%(b)
Portfolio turnover rate.............................
34%
</TABLE>
- - - - - - - - - - - ---------------
(a) 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.
(b) Net of management fee waivers.
(c) Annualized.
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----42 See Notes to
Financial Statements.
<PAGE>
PRUDENTIAL
MUNICIPAL BOND FUND
Financial Highlights (Unaudited) HIGH YIELD
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Class C Class Z
----
- - - - - - - - - - - ------------------------------------ -------------
August 1, September 13,
Six
Months Year 1994(c) 1996(d)
Ended Ended Through Through
October 31, April 30, April 30, October 31,
1996 1996 1995 1996
----
- - - - - - - - - - - ------- --------- ---------- -------------
<S> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $
10.69 $ 10.72 $10.79 $ 10.79
- - - - - - - - - - - ----- -----
----
- - - - - - - - - - - ------- ---------
Income from investment operations
Net investment income...............................
..32(b) .65(b) .49(b) .09(b)
Net realized and unrealized gain (loss) on
investment transactions..........................
..20 (.03) (.07) .10
- - - - - - - - - - - ----- -----
----
- - - - - - - - - - - ------- ---------
Total from investment operations.................
..52 .62 .42 .19
- - - - - - - - - - - ----- -----
----
- - - - - - - - - - - ------- ---------
Less distributions
Dividends from net investment income................
(.32) (.65) (.49) (.09)
- - - - - - - - - - - ----- -----
----
- - - - - - - - - - - ------- ---------
Net asset value, end of period...................... $
10.89 $ 10.69 $10.72 $ 10.89
----
- - - - - - - - - - - ------- --------- ----- -----
----
- - - - - - - - - - - ------- --------- ----- -----
TOTAL RETURN(a):....................................
4.90% 5.86% 3.91% 1.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $
8,452 $ 6,471 $3,208 $ 118
Average net assets (000)............................ $
7,558 $ 5,608 $1,385 $ 15
Ratios to average net assets:
Expenses, including distribution fees............
1.30%(b)(e) 1.29%(b) 1.34%(b)(e) .63%(b)(e)
Expenses, excluding distribution fees............
..55%(b)(e) .54%(b) .59%(b)(e) .63%(b)(e)
Net investment income............................
5.88%(b)(e) 5.93%(b) 6.34%(b)(e) 7.53%(b)(e)
Portfolio turnover rate.............................
14% 35% 39% 14%
</TABLE>
- - - - - - - - - - - ---------------
(a) 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.
(b) Net of management fee waivers.
(c) Commencement of offering of Class C shares.
(d) Commencement of offering of Class Z shares.
(e) Annualized.
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
43 -----
<PAGE>
PRUDENTIAL
MUNICIPAL BOND FUND
Financial Highlights (Unaudited) INSURED
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Class A
------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ------
Six
Months
Ended Years Ended April 30,
October 31, --------------------------------------------
- - - - - - - - - - - ------------
1996 1996 1995 1994 1993
1992
------
- - - - - - - - - - - ----- -------- ------- ------- ------- -
- - - - - - - - - - - ------
<S> <C>
<C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $
10.94 $ 10.83 $ 10.71 $ 11.44 $ 10.98
$ 10.76
------
- - - - - - - - - - - ----- -------- ------- ------- ------- -
- - - - - - - - - - - ------
Income from investment operations
Net investment income...............................
..28(b) .58(b) .58(b) .58 .61
..66(b)
Net realized and unrealized gain (loss) on
investment transactions..........................
..21 .11 .12 (.43) .73
..24
------
- - - - - - - - - - - ----- -------- ------- ------- ------- -
- - - - - - - - - - - ------
Total from investment operations.................
..49 .69 .70 .15 1.34
..90
------
- - - - - - - - - - - ----- -------- ------- ------- ------- -
- - - - - - - - - - - ------
Less distributions
Dividends from net investment income................
(.28) (.58) (.58) (.58) (.61)
(.66)
Distributions from capital gains....................
- - - - - - - - - - - -- -- -- (.30) (.27)
(.02)
------
- - - - - - - - - - - ----- -------- ------- ------- ------- -
- - - - - - - - - - - ------
Total distributions..............................
(.28) (.58) (.58) (.88) (.88)
(.68)
------
- - - - - - - - - - - ----- -------- ------- ------- ------- -
- - - - - - - - - - - ------
Net asset value, end of period...................... $
11.15 $ 10.94 $ 10.83 $ 10.71 $ 11.44
$ 10.98
------
- - - - - - - - - - - ----- -------- ------- ------- ------- -
- - - - - - - - - - - ------
------
- - - - - - - - - - - ----- -------- ------- ------- ------- -
- - - - - - - - - - - ------
TOTAL RETURN(a):....................................
4.46% 6.47% 6.73% 1.04% 12.68%
8.59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $
191,654 $139,548 $75,800 $30,669 $30,098
$19,177
Average net assets (000)............................ $
167,559 $102,456 $39,471 $32,309 $24,589
$12,731
Ratios to average net assets:
Expenses, including distribution fees............
0.68%(b)(c) 0.68%(b) 0.74%(b) 0.71% 0.72%
0.62%(b)
Expenses, excluding distribution fees............
0.58%(b)(c) 0.58%(b) 0.64%(b) 0.61% 0.62%
0.52%(b)
Net investment income............................
4.94%(b)(c) 5.20%(b) 5.45%(b) 5.09% 5.46%
6.06%(b)
Portfolio turnover rate.............................
71% 68% 64% 105% 85%
56%
</TABLE>
- - - - - - - - - - - ---------------
(a) 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.
(b) Net of management fee waivers.
(c) Annualized.
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----44 See Notes to
Financial Statements.
<PAGE>
PRUDENTIAL
MUNICIPAL BOND FUND
Financial Highlights (Unaudited) INSURED
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Class B
------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - ----------
Six
Months
Ended Years Ended April 30,
October 31, --------------------------------------------
- - - - - - - - - - - ----------------
1996 1996 1995 1994 1993
------
- - - - - - - - - - - ----- -------- -------- -------- --------
<S> <C>
<C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $
10.95 $ 10.84 $ 10.71 $ 11.44 $ 10.99
------
- - - - - - - - - - - ----- -------- -------- -------- --------
Income from investment operations
Net investment income...............................
..25(b) .54(b) .54(b) .54 .56
Net realized and unrealized gain (loss) on
investment transactions..........................
..21 .11 .13 (.43) .72
------
- - - - - - - - - - - ----- -------- -------- -------- --------
Total from investment operations.................
..46 .65 .67 .11 1.28
------
- - - - - - - - - - - ----- -------- -------- -------- --------
Less distributions
Dividends from net investment income................
(.25) (.54) (.54) (.54) (.56)
Distributions from capital gains....................
- - - - - - - - - - - -- -- -- (.30) (.27)
------
- - - - - - - - - - - ----- -------- -------- -------- --------
Total distributions..............................
(.25) (.54) (.54) (.84) (.83)
------
- - - - - - - - - - - ----- -------- -------- -------- --------
Net asset value, end of period...................... $
11.16 $ 10.95 $ 10.84 $ 10.71 $ 11.44
------
- - - - - - - - - - - ----- -------- -------- -------- --------
------
- - - - - - - - - - - ----- -------- -------- -------- --------
TOTAL RETURN(a):....................................
4.25% 6.04% 6.40% 0.63% 12.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $
361,943 $443,391 $567,648 $740,447 $770,060
Average net assets (000)............................ $
400,329 $524,452 $660,237 $807,794 $705,846
Ratios to average net assets:
Expenses, including distribution fees............
1.08%(b)(c) 1.08%(b) 1.14%(b) 1.11% 1.12%
Expenses, excluding distribution fees............
0.58%(b)(c) 0.58%(b) 0.64%(b) 0.61% 0.62%
Net investment income............................
4.53%(b)(c) 4.80%(b) 4.99%(b) 4.69% 5.06%
Portfolio turnover rate.............................
71% 68% 64% 105% 85%
<CAPTION>
1992
----
- - - - - - - - - - - --
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................$ 10.76
--------
Income from investment operations
Net investment income...............................
..62(b)
Net realized and unrealized gain (loss) on
investment transactions.......................... .25
--------
Total from investment operations................. .87
--------
Less distributions
Dividends from net investment income................
(.62)
Distributions from capital gains....................
(.02)
--------
Total distributions..............................
(.64)
--------
Net asset value, end of period......................$ 10.99
--------
--------
TOTAL RETURN(a):....................................
8.24%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).....................$638,451
Average net assets (000)............................$609,516
Ratios to average net assets:
Expenses, including distribution fees............
1.02%(b)
Expenses, excluding distribution fees............
0.52%(b)
Net investment income............................
5.66%(b)
Portfolio turnover rate.............................
56%
</TABLE>
- - - - - - - - - - - ---------------
(a) 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.
(b) Net of management fee waivers.
(c) Annualized.
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
45 -----
<PAGE>
PRUDENTIAL
MUNICIPAL BOND FUND
Financial Highlights (Unaudited) INSURED
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Class C Class Z
----
- - - - - - - - - - - ------------------------------------ -------------
August 1, September 13,
Six
Months Year 1994(c) 1996(d)
Ended Ended Through Through
October 31, April 30, April 30, October 31,
1996 1996 1995 1996
----
- - - - - - - - - - - ------- --------- ---------- -------------
<S> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $
10.95 $ 10.84 $10.79 $ 11.05
----
- - - - - - - - - - - ------- --------- ----- -----
Income from investment operations
Net investment income...............................
..24(b) .51(b) .39(b) .07(b)
Net realized and unrealized gain (loss) on
investment transactions..........................
..21 .11 .05 .10
----
- - - - - - - - - - - ------- --------- ----- -----
Total from investment operations.................
..45 .62 .44 .17
----
- - - - - - - - - - - ------- --------- ----- -----
Less distributions
Dividends from net investment income................
(.24) (.51) (.39) (.07)
----
- - - - - - - - - - - ------- --------- ----- -----
Net asset value, end of period...................... $
11.16 $ 10.95 $10.84 $ 11.15
----
- - - - - - - - - - - ------- --------- ----- -----
----
- - - - - - - - - - - ------- --------- ----- -----
TOTAL RETURN(a):....................................
4.12% 5.78% 4.03% 1.42%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $
894 $ 1,137 $ 525 $ 202(f)
Average net assets (000)............................ $
1,059 $ 827 $ 224 $ 201(f)
Ratios to average net assets:
Expenses, including distribution fees............
1.33%(b)(e) 1.33% 1.39%(b)(e) .24%(b)(e)
Expenses, excluding distribution fees............
..58%(b)(e) .58% .64%(b)(e) .24%(b)(e)
Net investment income............................
4.28%(b)(e) 4.56% 4.92%(b)(e) 5.33%(b)(e)
Portfolio turnover rate.............................
71% 68% 64% 71%
</TABLE>
- - - - - - - - - - - ---------------
(a) 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.
(b) Net of management fee waivers.
(c) Commencement of offering of Class C shares.
(d) Commencement of offering of Class Z shares.
(e) Annualized.
(f) Figures are actual and not rounded to the nearest
thousand.
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----46 See Notes to
Financial Statements.
<PAGE>
PRUDENTIAL
MUNICIPAL BOND FUND
Financial Highlights (Unaudited)
INTERMEDIATE SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Class A
------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --
Six
Months
Ended Years Ended April 30,
October 31, --------------------------------------------
- - - - - - - - - - - --------
1996 1996 1995 1994 1993
1992
------
- - - - - - - - - - - ----- ------- ------- ------ ------ ----
- - - - - - - - - - - --
<S> <C>
<C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $
10.65 $ 10.45 $ 10.67 $11.08 $10.59
$10.48
------
- - - - - - - - - - - ----- ------- ------- ------ ------ ----
- - - - - - - - - - - --
Income from investment operations
Net investment income...............................
..23(b) .47(b) .51(b) .53 .54(b)
..57(b)
Net realized and unrealized gain (loss) on
investment transactions..........................
..04 .20 (.03) (.19) .60
..26
------
- - - - - - - - - - - ----- ------- ------- ------ ------ ----
- - - - - - - - - - - --
Total from investment operations.................
..27 .67 .48 .34 1.14
..83
------
- - - - - - - - - - - ----- ------- ------- ------ ------ ----
- - - - - - - - - - - --
Less distributions
Dividends from net investment income................
(.23) (.47) (.51) (.53) (.54)
(.57)
Distributions in excess of net investment income....
- - - - - - - - - - - -- -- (.01) -- -- --
Distributions from capital gains....................
- - - - - - - - - - - -- -- (.18) (.22) (.11)
(.15)
------
- - - - - - - - - - - ----- ------- ------- ------ ------ ----
- - - - - - - - - - - --
Total distributions..............................
(.23) (.47) (.70) (.75) (.65)
(.72)
------
- - - - - - - - - - - ----- ------- ------- ------ ------ ----
- - - - - - - - - - - --
Net asset value, end of period...................... $
10.69 $ 10.65 $ 10.45 $10.67 $11.08
$10.59
------
- - - - - - - - - - - ----- ------- ------- ------ ------ ----
- - - - - - - - - - - --
------
- - - - - - - - - - - ----- ------- ------- ------ ------ ----
- - - - - - - - - - - --
TOTAL RETURN(a):....................................
2.56% 6.48% 4.52% 2.83% 11.13%
8.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $
14,074 $12,552 $10,507 $5,810 $3,594
$1,424
Average net assets (000)............................ $
12,891 $12,604 $ 7,742 $4,981 $1,883 $
599
Ratios to average net assets:
Expenses, including distribution fees............
1.12%(b)(c) 1.16%(b) 1.05%(b) 1.00% 1.06%(b)
1.06%(b)
Expenses, excluding distribution fees............
1.02%(b)(c) 1.06%(b) 0.95%(b) 0.90% 0.96%(b)
0.96%(b)
Net investment income............................
4.30%(b)(c) 4.36%(b) 4.75%(b) 4.63% 5.09%(b)
5.41%(b)
Portfolio turnover rate.............................
26% 35% 30% 55% 22%
78%
</TABLE>
- - - - - - - - - - - ---------------
(a) 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.
(b) Net of management fee waivers.
(c) Annualized.
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
47 -----
<PAGE>
PRUDENTIAL
MUNICIPAL BOND FUND
Financial Highlights (Unaudited)
INTERMEDIATE SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Class B
------
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - -----
Six
Months
Ended Years Ended April 30,
October 31, --------------------------------------------
- - - - - - - - - - - -----------
1996 1996 1995 1994 1993
1992
------
- - - - - - - - - - - ----- ------- ------- ------- ------- --
- - - - - - - - - - - -----
<S> <C>
<C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $
10.65 $ 10.45 $ 10.68 $ 11.09 $ 10.60 $
10.48
------
- - - - - - - - - - - ----- ------- ------- ------- ------- --
- - - - - - - - - - - -----
Income from investment operations
Net investment income...............................
..21(b) .43(b) .45(b) .48 .50(b)
..53(b)
Net realized and unrealized gain (loss) on
investment transactions..........................
..05 .20 (.04) (.19) .60
..27
------
- - - - - - - - - - - ----- ------- ------- ------- ------- --
- - - - - - - - - - - -----
Total from investment operations.................
..26 .63 .41 .29 1.10
..80
------
- - - - - - - - - - - ----- ------- ------- ------- ------- --
- - - - - - - - - - - -----
Less distributions
Dividends from net investment income................
(.21) (.43) (.45) (.48) (.50)
(.53)
Distributions in excess of net investment income....
- - - - - - - - - - - -- -- (.01) -- --
- - - - - - - - - - - --
Distributions from capital gains....................
- - - - - - - - - - - -- -- (.18) (.22) (.11)
(.15)
------
- - - - - - - - - - - ----- ------- ------- ------- ------- --
- - - - - - - - - - - -----
Total distributions..............................
(.21) (.43) (.64) (.70) (.61)
(.68)
------
- - - - - - - - - - - ----- ------- ------- ------- ------- --
- - - - - - - - - - - -----
Net asset value, end of period...................... $
10.70 $ 10.65 $ 10.45 $ 10.68 $ 11.09 $
10.60
------
- - - - - - - - - - - ----- ------- ------- ------- ------- --
- - - - - - - - - - - -----
------
- - - - - - - - - - - ----- ------- ------- ------- ------- --
- - - - - - - - - - - -----
TOTAL RETURN(a):....................................
2.45% 6.05% 3.99% 2.43% 10.62%
7.68%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $
34,988 $40,550 $51,039 $65,215 $57,049
$45,401
Average net assets (000)............................ $
37,695 $46,127 $60,174 $59,811 $50,154
$44,439
Ratios to average net assets:
Expenses, including distribution fees............
1.52%(b)(c) 1.56%(b) 1.45%(b) 1.40% 1.46%(b)
1.46%(b)
Expenses, excluding distribution fees............
1.02%(b)(c) 1.06%(b) 0.95%(b) 0.90% 0.96%(b)
0.96%(b)
Net investment income............................
3.90%(b)(c) 3.96%(b) 4.35%(b) 4.23% 4.69%(b)
5.01%(b)
Portfolio turnover rate.............................
26% 35% 30% 55% 22%
78%
</TABLE>
- - - - - - - - - - - ---------------
(a) 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.
(b) Net of management fee waivers.
(c) Annualized.
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
- - - - - - - - - - - -----48 See Notes to
Financial Statements.
<PAGE>
PRUDENTIAL
MUNICIPAL BOND FUND
Financial Highlights (Unaudited) INTERMEDIATE
SERIES
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
<TABLE>
<CAPTION>
Class C Class Z
----
- - - - - - - - - - - ------------------------------------ -------------
August 1, September 13,
Six
Months Year 1994(c) 1996(d)
Ended Ended Through Through
October 31, April 30, April 30, October 31,
1996 1996 1995 1996
----
- - - - - - - - - - - ------- --------- ---------- -------------
<S> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $
10.65 $ 10.45 $10.54 $ 10.63
----
- - - - - - - - - - - ------- --------- ----- -----
Income from investment operations
Net investment income...............................
..19(b) .40(b) .35(b) .07(b)
Net realized and unrealized gain (loss) on
investment transactions..........................
..05 .20 (.08) .06
----
- - - - - - - - - - - ------- --------- ----- -----
Total from investment operations.................
..24 .60 .27 .13
----
- - - - - - - - - - - ------- --------- ----- -----
Less distributions
Dividends from net investment income................
(.19) (.40) (.35) (.07)
Distributions in excess of net investment income....
- - - - - - - - - - - -- -- (.01) --
----
- - - - - - - - - - - ------- --------- ----- -----
Total distributions..............................
(.19) (.40) (.36) (.07)
----
- - - - - - - - - - - ------- --------- ----- -----
Net asset value, end of period...................... $
10.70 $ 10.65 $10.45 $ 10.69
----
- - - - - - - - - - - ------- --------- ----- -----
----
- - - - - - - - - - - ------- --------- ----- -----
TOTAL RETURN(a):....................................
2.31% 5.79% 2.14% 1.07%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $
90 $ 225 $ 167 $ 202(f)
Average net assets (000)............................ $
133 $ 197 $ 28 $ 201(f)
Ratios to average net assets:
Expenses, including distribution fees............
1.77%(b)(e) 1.81%(b) 1.81%(b)(e) .24%(b)(e)
Expenses, excluding distribution fees............
1.02%(b)(e) 1.06%(b) 1.06%(b)(e) .24%(b)(e)
Net investment income............................
3.62%(b)(e) 3.71%(b) 4.34%(b)(e) 5.34%(b)(e)
Portfolio turnover rate.............................
26% 35% 30% 26%
</TABLE>
- - - - - - - - - - - ---------------
(a) 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.
(b) Net of management fee waivers.
(c) Commencement of offering of Class C shares.
(d) Commencement of offering of Class Z shares.
(e) Annualized.
(f) Figures are actual and are not rounded to the nearest
thousand.
- - - - - - - - - - - ------------------------------------------------------------
- - - - - - - - - - - --------------------
See Notes to Financial Statements.
49 -----
<PAGE>
Getting The Most From
Your Prudential Mutual Fund.
Some mutual fund shareholders won't ever read this -- they
don't read annual
and semi-annual reports. It's quite understandable. These
annual and semi-
annual reports are prepared to comply with Federal
regulations. They are often
written in language that is difficult to understand. So when
most people run
into those particularly daunting sections of these reports,
they don't read
them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some changes to our
report to make it
easier to understand and more pleasant to read, in hopes
you'll find it
profitable to spend a few minutes familiarizing yourself
with your investment.
Here's what you'll find in the report:
At A Glance
Since an investment's performance is often a shareholder's
primary concern, we
present performance information in two different formats.
You'll find it first
on the "At A Glance" page where we compare the Fund and the
comparable average
calculated by Lipper Analytical Services, a nationally
recognized mutual fund
rating agency. We report both the cumulative total returns
and the average
annual total returns. The cumulative total return is the
total amount of
income and appreciation the Fund has achieved in various
time periods. The
average annual total return is an annualized representation
of the Fund's
performance -- it generally smoothes out returns and gives
you an idea how
much the Fund has earned in an average year, for a given
time period. Under
the performance box, you'll see legends that explain the
performance
information, whether fees and sales charges have been
included in returns, and
the inception dates for the Fund's share classes.
See the performance comparison charts at the back of the
report for more
performance information. And keep in mind that past perfor-
mance is not
indicative of future results.
Portfolio Manager's Report
The portfolio manager who invests your money for you reports
onsuccessful --
and not-so-successful -- strategies in this section of your
report. Look for
recent purchases and sales here, as well as information
about the sectors the
portfolio manager favors and any changes that are on the
drawing board.
Portfolio Of Investments
This is where the report begins to look technical, but it's
really just a
listing of each security held at the end of the reporting
period, along with
valuations and other information. Please note that sometimes
we discuss a
security in the Portfolio Manager's Report that doesn't
appear in this
listing because it was sold before the close of the
reporting period.
<PAGE>
Statement Of Assets And Liabilities
The balance sheet shows the assets (the value of the Fund's
holdings),
liabilities (how much the Fund owes) and net assets (the
Fund's equity, or
holdings after the Fund pays its debts) as of the end of the
reporting period.
It also shows how we calculate the net asset value per share
for each class of
shares. The net asset value is reduced by payment of your
dividend, capital
gain, or other distribution, but remember that the money or
new shares are
being paid or issued to you. The net asset value fluctuates
daily along with
the value of every security in the portfolio.
Statement Of Operations
This is the income statement, which details income (mostly
interest and
dividends earned) and expenses (including what you pay us to
manage your
money). You'll also see capital gains here -- both realized
and unrealized.
Statement Of Changes In Net Assets
This schedule shows how income and expenses translate into
changes in net
assets. The Fund is required to pay out the bulk of its
income to shareholders
every year, and this statement shows you how we do it --
through dividends
and distributions -- and how that affects the net assets.
This statement also
shows how money from investors flowed into and out of the
Fund.
Notes To Financial Statements
This is the kind of technical material that can intimidate
readers, but it
does contain useful information. The Notes provide a brief
history and
explanation of your Fund's objectives. In addition, they
also outline how
Prudential Mutual Funds prices securities. The Notes also
explain who manages
and distributes the Fund's shares, and more importantly, how
much they are
paid for doing so. Finally, the Notes explain how many
shares are outstanding
and the number issued and redeemed over the period.
Financial Highlights
This information contains many elements from prior pages,
but on a per share
basis. It is designed to help you understand how the Fund
performed and to
compare this year's performance and expenses to those of
prior years.
Independent Auditor's Report
Once a year, an outside auditor looks over our books and
certifies that the
information is fairly presented and complies with generally
accepted
accounting principles.
Tax Information
This is information which we report annually about how much
of your total
return is taxable. Should you have any questions, you may
want to consult a
tax advisor.
Performance Comparison
These charts are included in the annual report and are
required by the
Securities Exchange Commission. Performance is presented
here as a
hypothetical $10,000 investment in the Fund since its
inception or for 10
years (whichever is shorter). To help you put that return in
context, we are
required to include the performance of an unmanaged, broad
based securities
index, as well. The index does not reflect the cost of
buying the securities
it contains or the cost of managing a mutual fund. Of
course, the index
holdings do not mirror those of the fund -- the index is a
broadly based
reference point commonly used by investors to measure how
well they are doing.
A definition of the selected index is also provided.
Investors generally
cannot invest directly in an index.
<PAGE>
Getting The Most From
Your Prudential Mutual Fund.
When you invest through Prudential Mutual Funds, you receive
financial advice
through a Prudential Securities financial advisor or
Prudential/Pruco
Securities registered representative. Your advisor or
representative can
provide you with the following services:
There's No Reward Without Risk; But Is This Risk Worth It?
Your financial advisor or registered representative can help
you match the
reward you seek with the risk you can tolerate. And risk can
be difficult to
gauge --sometimes even the simplest investments bear
surprising risks. The
educated investor knows that markets seldom move in just one
direction --
there are times when a market sector or asset class will
lose value or provide
little in the way of total return. Managing your own
expectations is easier
with help from someone who understands the markets and who
knows you!
Keeping Up With The Joneses.
A financial advisor or registered representative can help
you wade through the
numerous mutual funds available to find the ones that fit
your own individual
investment profile and risk tolerance. While the newspapers
and popular
magazines are full of advice about investing, they are aimed
at generic groups
of people or representative individuals, not at you
personally. Your financial
advisor or registered representative will review your
investment objectives
with you. This means you can make financial decisions based
on the assets and
liabilities in your current portfolio and your risk
tolerance -- not just
based on the current investment fad.
Buy Low, Sell High.
Buying at the top of a market cycle and selling at the
bottom are among the
most common investor mistakes. But sometimes it's difficult
to hold on to an
investment when it's losing value every month. Your
financial advisor or
registered representative can answer questions when you're
confused or worried
about your investment, and remind you that you're investing
for the long haul.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Trustees
Edward D. Beach
Eugene C. Dorsey
Delayne D. Gold
Robert F. Gunia
Harry A. Jacobs, Jr.
Donald D. Lennox
Mendel A. Melzer
Thomas T. Mooney
Thomas H. O'Brien
Richard A. Redeker
Nancy H. Teeters
Louis A. Weil, III
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Deborah Docs, Assistant Secretary
Manager
Prudential Mutual Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributor
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 Auditors
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
The views expressed in this report and information about the
Fund's portfolio
holdings are for the period covered by this report and are
subject to change
thereafter.
The accompanying financial statements as of October 31, 1996
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.
<PAGE>
(LOGO) BULK RATE
Prudential Mutual Funds U.S. POSTAGE
Gateway Center Three PAID
100 Mulberry Street Permit 6807
Newark, NJ 07102-4077 New York, NY
(800) 225-1852
74435L103 74435L301 74435L509 MF133E2
74435L202 74435L400 74435L608 CAT#44416FI
74435L707 74435L806 74435L889
74435L871 74435L863 74435L855
