(ICON)
Prudential
Municipal
Bond Fund
High Yield Series
Insured Series
Intermediate Series
ANNUAL
REPORT
April 30, 1998
(LOGO)
<PAGE>
Portfolio Managers' Report
Economic developments in the U.S. and
Southeast Asia helped spark a rally in
municipal bonds over the 12 months ended
April 30, 1998. On the home front, a
powerful U.S. economy raced through its
seventh year of expansion, confounding
many Wall Street analysts who expected slower
economic growth. Instead, the
economy expanded more rapidly in the first
three months of 1998 than in the
final quarter of the previous year. Such
strong economic growth often ignites
higher inflation, which erodes the value of
bond returns. In this case,
however, inflation remained subdued,
prompting investors to push municipal
bond prices higher.
All three Prudential Municipal Bond Fund
Series appreciated along with the
market, but their performances differed. The
High Yield Series returned more
than the other two Series because it holds
bonds with longer maturities and
the market rally caused lower-quality bond
yields to fall more in line with
yields on higher-quality bonds. Bonds in the
Insured Series carry the top
credit rating -- Triple-A -- and offer lower
interest rates than lesser-quality
bonds. Because bonds of the Intermediate
Series have shorter maturities and
lower yields, its returns usually trail the
other two Series when interest
rates decline and bond prices rise. (But it
tends to provide more price
protection when interest rates climb.) The
High Yield Series beat the return
on the average comparable fund measured by
Lipper Analytical Services. The
Insured Series also generated returns that
exceeded its competition, while the
Intermediate Series lagged by a modest
margin.
Asian Crisis Boosts Munis.
While U.S. economic conditions were nearly
ideal, the situation in Southeast
Asia was rapidly becoming critical. Then on
October 27, 1997, economic upheaval
erupted in the region, driven by the
imprudent lending practices of Southeast
Asian banks and finance companies.
Frightened investors began selling Asian
stocks and emerging market bonds and bought
U.S. Treasury securities. The rally
in Treasuries spread to the municipal
securities market, driving tax-exempt bond
prices higher and yields lower. By mid-
January, the Bond Buyer Revenue Bond
Index, a widely watched gauge of tax-exempt
yields, reached a record low of
5.25% during the same week that the 30-year
Treasury bond yield sank to its
lowest point since regular sales of the
securities began in 1977. Cash poured
into Treasuries as investors fretted over the
failure of Hong Kong's largest
investment bank. Thus, developments in Asia
indirectly aided municipal bonds
by boosting Treasuries. Bond markets turned
lower in March and April, partially
erasing earlier gains.
We discuss each of the Series' portfolios in
detail on the following pages.
How Investments Compared.
(As of 4/30/98)
(GRAPH)
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 returns 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.
U.S. Taxable Money 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.
Peter J. Allegrini, Fund Manager
Prudential Municipal Bond Fund:
High Yield Series
(PHOTO)
Performance At A Glance.
<TABLE>
<CAPTION>
One Five Ten
Since
Year Years Years
Inception2
<C> <S>
<C> <C> <C> <C>
Cumulative Class A
10.80% 40.26% (40.13) N/A
87.30% (86.64)
Total Class B
10.36 37.49 (37.36) 118.87%
133.28 (131.42)
Returns1 Class C
10.09 N/A N/A
30.10 (29.99)
As of 4/30/98 Class Z
10.91 N/A N/A
15.74 (15.64)
Lipper HY Muni Avg3
10.09 37.34 114.55
***
</TABLE>
<TABLE>
<CAPTION>
One Five Ten
Since
Year Years Years
Inception2
<C> <S>
<C> <C> <C> <C>
Average Class A
8.61% 6.62% (6.60) N/A
7.61% (7.56)
Annual Total Class B
6.52 6.69 (6.67) 8.31% (8.22)
8.40 (8.31)
Returns1 Class C
10.25 N/A N/A
7.56 (7.53)
As of 3/31/98 Class Z
12.18 N/A N/A
10.28 (10.22)
</TABLE>
<TABLE>
<CAPTION>
Taxable Equivalent Yield4
Total Dividends
30-Day At Tax Rates Of
Paid for 12 Mos.
SEC Yield 36% 39.6%
<C> <S> <C>
<C> <C>
Distributions Class A $0.67
4.82% (4.77)1 7.53% (7.45)1
7.98%(7.90)1
and Class B $0.63
4.57 (4.52)1 7.14 (7.06)1 7.57
(7.48)1
Yields Class C $0.61
4.32 (4.27)1 6.75 (6.67)1 7.15
(7.07)1
As of 4/30/98 Class Z $0.68
5.08 (5.03)1 7.94 (7.86)1 8.41
(8.33)1
</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 Investments 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
Series charges a maximum front-end sales load
of 3% for Class A shares and a
six-year declining contingent deferred sales
charge (CDSC) of 5%, 4%, 3%, 2%,
1% and 1% for Class B shares. Class C shares
have a 1% CDSC for one year.
Without waiver of management fees and/or
expense subsidization, the Series'
cumulative and average annual total returns
and 30-day SEC yields would have
been lower, as indicated in parentheses ( ).
Class B shares automatically
convert to Class A shares, on a quarterly
basis, after approximately seven
years. Class Z shares are not subject to a
sales charge or distribution fee.
2Inception dates: 1/22/90 for Class A;
9/17/87 for Class B; 8/1/94 for Class C;
and 9/16/96 for Class Z.
3Lipper returns are for all funds in each
share class for the 1-, 5-, and 10-
year periods.
4Some investors may be subject to the federal
alternative minimum tax and/or
state and local taxes.
Taxable equivalent yields reflect federal
taxes only.
***Lipper Since Inception Averages are Class
A, 83.19%; Class B, 132.41%;
Class C, 31.23%; and Class Z, 14.20% based on
all funds in each share class.
We seek to maximize income eligible for
exclusion from federal income taxes by
investing primarily in noninvestment grade
municipal bonds rated single-B or
better by recognized credit rating agencies
such as Standard & Poor's Corp.
(S&P) or Moody's Investors Service Inc., or
unrated bonds that our analysts
believe are of comparable quality. On April
30, 1998, noninvestment grade
municipal bonds rated BB or below (or unrated
bonds of comparable quality)
comprised approximately 56% of the portfolio
compared with about 52% on October
31, 1997. There can be no assurance that the
Series will achieve its investment
objective.
Portfolio Composition.
Sectors expressed as a percentage of
total investments as of 4/30/98.
(PIE CHART)
<PAGE>
What Went Well.
High Yield Series
The Right Stuff.
The High Yield Series was well- positioned to
benefit from the bond market
rally. As long-term interest rates declined,
municipalities cut borrowing
costs by issuing new bonds with lower
interest rates to prerefund or arrange
for the early retirement of older bonds with
higher interest rates. Proceeds
from the new bonds were used to purchase
direct U.S. government obligations
that back the higher interest rate bonds
until retirement. As a result, the
higher interest rate bonds became AAA-rated
and their prices surged. The High
Yield Series benefited because about 4.5% of
its holdings were prerefunded.
Investing in noncallable bonds and lower
credit quality municipal debt
securities also enhanced the High Yield
Series' returns. As interest rates
fell, noncallable bonds (nearly 30% of our
total investments) appreciated
rapidly because they cannot be retired prior
to maturity.
Five Largest Issuers.
1.7% Chicago, IL
O'Hare Airport
1.7% Village Of Robbins
Cook County, IL
1.6% Clairborne County, MS
1.5% NJ State Transportation
Trust Fund
1.5% City of Cedar Rapids, IA
Expressed as a percentage of net assets as of
4/30/98.
A New Name.
The Trustees of the Prudential Municipal Bond
Fund: High Yield Series have
approved a name change for your Series. As of
July 1, 1998, it will be called
Prudential Municipal Bond Fund: High Income
Series. We believe the new name
better reflects the investment strategy used
by the Series' portfolio manager
in seeking to provide you with a high amount
of income eligible for exclusion
from federal taxes, which is the Series'
investment objective.
And Not So Well.
Waiting For The Air To Clear.
We generally consult with our team of
analysts when purchasing bonds,
particularly if the bonds are rated below
investment grade. Despite this
precaution, a few of our holdings developed
problems, such as the bonds of the
Robbins Solid Waste Incinerator located in
Cook County, Illinois. Region Five
of the U.S. Environmental Protection Agency
recently cited operators of the
incinerator for alleged clean-air violations,
while the Illinois Attorney
General has filed a lawsuit on similar
concerns. Needless to say, this turn of
events caused prices of the bonds to decline.
We decided to keep the bonds,
which comprised 1.70% of the Series' total
investments as of April 30, 1998,
because it appears that difficulties at the
municipal waste burner will likely
be resolved and bond prices could recover.
Credit Quality.
Expressed as a percentage of
total investments as of 4/30/98.
(PIE CHART)
- ---------------------------------------------
- ----------------------------------
1
<PAGE>
Christian Smith, Fund Manager
Prudential Municipal Bond Fund:
Insured Series
(PHOTO)
Performance At A Glance.
<TABLE>
<CAPTION>
One Five Ten
Since
Year Years Years
Inception2
<C> <S>
<C> <C> <C>
<C>
Cumulative Class A
8.67% 31.92% (31.68) N/A
79.25% (78.28)
Total Class B
8.23 29.43 (29.19) 104.94% (102.16)
117.26 (114.12)
Returns1 Class C
7.96 N/A N/A
24.82 (24.59)
As of 4/30/98 Class Z
8.68 N/A N/A
11.79 (11.69)
Lipper INS Muni Avg3
8.46 32.03 110.31
***
</TABLE>
<TABLE>
<CAPTION>
One Five Ten
Since
Year Years Years
Inception2
<C> <S>
<C> <C> <C> <C>
Average Class A
7.19% 5.50% (5.46) N/A
7.13% (7.06)
Annual Total Class B
5.15 5.60 (5.56) 7.64% (7.49)
7.75 (7.61)
Returns1 Class C
8.88 N/A N/A
6.59 (6.54)
As of 3/31/98 Class Z
10.62 N/A N/A
8.27 (8.21)
</TABLE>
<TABLE>
<CAPTION>
Taxable Equivalent Yield4
Total Dividends
30-Day At Tax Rates Of
Paid for 12 Mos.
SEC Yield 36% 39.6%
<C> <S> <C>
<C> <C>
Distributions Class A $0.53
4.52% 7.06% 7.48%
and Class B $0.49
4.25 6.64 7.04
Yields Class C $0.46
4.00 6.25 6.62
As of 4/30/98 Class Z $0.54
4.76 7.44 7.88
</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 Investments 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 Series
charges a maximum front-end sales load of 3%
for Class A shares and a six-year
declining contingent deferred sales charge
(CDSC) of 5%, 4%, 3%, 2%, 1% and 1%
for Class B shares. Class C shares have a 1%
CDSC for one year. Without waiver
of management fees and/or expense
subsidization, the Series' cumulative and
average annual total returns would have been
lower, as indicated in parentheses
( ). Class B shares automatically convert to
Class A shares, on a quarterly
basis, after approximately seven years.
Class Z shares are not subject to a
sales charge or distribution fee.
2Inception dates: 1/22/90 for Class A;
9/17/87 for Class B; 8/1/94 for Class
C; and 9/16/96 for Class Z.
3Lipper returns are for all funds in each
share class for the 1-, 5-, and 10-
year periods.
4Some investors may be subject to the federal
alternative minimum tax and/or
state and local taxes. Taxable equivalent
yields reflect federal taxes only.
***Lipper Since Inception Averages are Class
A, 79.04%; Class B, 128.84%;
Class C, 27.58%; and Class Z, 10.89% based on
all funds in each share class.
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 by other nationally
recognized credit rating agencies.
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. 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 Composition.
Sectors expressed as a percentage of
total investments as of 4/30/98.
(PIE CHART)
- ---------------------------------------------
- ----------------------------------
2
<PAGE>
What Went Well.
Insured Series
Riding the Market Rally.
As municipal bond prices soared in the wake
of Asian economic turmoil, we
grabbed the bull by the horns by purchasing
noncallable bonds, some of which
were zero coupon bonds. Of course, these
bonds usually perform well in a
market rally because noncallable bonds cannot
be retired early and zero coupon
bonds typically trade well below their face
value. This strategy extended the
Series' duration (a measure of its
sensitivity to interest rate changes) to 8.1
years from 7.7 years.
With long-term municipal bond yields
lingering below six percent for most of
the past 12 months, finding attractively
priced bonds proved difficult at
times. Fortunately, we were able to increase
housing bonds to five percent of
the Series' total investments as of April 30,
1998, from two percent a year
earlier, and bonds subject to the alternative
minimum tax (AMT) rose to 16%
from six percent. Housing bonds provide
hefty yields to compensate for the
risk that the bonds can be retired early if
the underlying mortgages are
refinanced, while AMT bonds provide yields
that are generally 10 to 15 basis
points higher than bonds not subject to the
tax. (A basis point is one-
hundredth of a percentage point.) The
additional yield provided by AMT bonds
is attractive because the vast majority of
taxpayers are not subject to the
AMT.
Five Largest Issuers.
5.1% District of Columbia
General Obligation
4.6% Chicago, IL
Board of Education
3.3% Hawaii Electric
2.8% Cleveland, OH
City School District
2.8% South Dakota
Housing Development Authority
Expressed as a percentage of net assets as of
4/30/98.
And Not So Well.
Not Quick Enough.
During the past year, municipal bond prices
peaked in mid-January, then turned
lower in late February as disappointed
investors realized the Federal Reserve
was not poised to lower short-term interest
rates. We took steps to protect
the value of the Series by shortening its
duration in March and April as bond
prices fell further. However, our performance
would have been better had we
reduced duration in February when the market
rally first began to lose
momentum.
Credit Quality.
Expressed as a percentage of
total investments as of 4/30/98.
(PIE CHART)
- ---------------------------------------------
- ----------------------------------
3
<PAGE>
Scott Diamond, Fund Manager
Prudential Municipal Bond Fund:
Intermediate Series
(PHOTO)
Performance At A Glance.
<TABLE>
<CAPTION>
One Five Ten
Since
Year Years Years
Inception2
<C> <S>
<C> <C> <C>
<C>
Cumulative Class A
6.76% 26.90% (26.67) N/A
68.49% (66.46)
Total Class B
6.33 24.26 (24.03) 85.85% (79.32)
96.25 (88.26)
Returns1 Class C
6.07 N/A N/A
18.25 (18.04)
As of 4/30/98 Class Z
6.86 N/A N/A
9.54 (9.44)
Lipper INT Muni Avg3
7.13 30.03 94.15
***
</TABLE>
<TABLE>
<CAPTION>
One Five Ten
Since
Year Years Years
Inception2
<C> <S>
<C> <C> <C> <C>
Average Class A
4.68% 4.55% (4.51) N/A
6.28% (6.12)
Annual Total Class B
2.38 4.58 (4.54) 6.56% (6.18)
6.67 (6.27)
Returns1 Class C
6.12 N/A N/A
4.90 (4.85)
As of 3/31/98 Class Z
8.02 N/A N/A
6.60 (6.54)
</TABLE>
<TABLE>
<CAPTION>
Taxable Equivalent Yield4
Total Dividends
30-Day At Tax Rates Of
Paid for 12 Mos.
SEC Yield 36% 39.6%
<C> <S> <C>
<C> <C>
Distributions Class A $0.43
3.31% 5.17% 5.48%
and Class B $0.39
3.01 4.70 4.98
Yields Class C $0.36
2.76 4.31 4.57
As of 4/30/98 Class Z $0.44
3.51 5.48 5.81
</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 Investments 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
Series charges a maximum front-end sales load
of 3% for Class A shares and a
six-year declining contingent deferred sales
charge (CDSC) of 5%, 4%, 3%, 2%,
1% and 1% for Class B shares. Class C shares
have a 1% CDSC for one year.
Without waiver of management fees and/or
expense subsidization, the Series'
cumulative and average annual total returns
would have been lower, as indicated
in parentheses ( ). Class B shares
automatically convert to Class A shares on
a quarterly basis, after approximately seven
years. Class Z shares are not
subject to a sales charge or distribution
fee.
2Inception dates: 1/22/90 for Class A;
9/17/87 for Class B; 8/1/94 for Class
C; and 9/16/96 for Class Z.
3Lipper returns are for all funds in each
share class for the 1-, 5-, and 10-
year periods.
4Some investors may be subject to the federal
alternative minimum tax and/or
state and local taxes. Taxable equivalent
yields reflect federal taxes only.
***Lipper Since Inception Averages are Class
A, 71.18%; Class B, 109.02%;
Class C, 24.28%; and Class Z, 9.90% based on
all funds in each share class.
The Intermediate Series seeks to provide a
high level of income that is
eligible for exclusion from federal income
taxes and consistent with
preservation of capital. We purchase
primarily investment grade municipal
bonds with three- to 15-year maturities, and
the Series will have a dollar-
weighted average portfolio maturity of more
than three years but less than 10
years. The Series is managed so that the
prices of its shares are less
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 Composition.
Sectors expressed as a percentage of
total investments as of 4/30/98.
(PIE CHART)
- ---------------------------------------------
- ----------------------------------
4
<PAGE>
What Went Well.
Intermediate Series
Everybody Luvs New York.
Improving economic and financial conditions,
among other factors, prompted
Moody's in February to upgrade its rating of
New York City general obligation
bonds by one notch to A-3 from Baa1.
Investors drove up the prices of New York
City general obligation bonds, attracted by
the city's soaring real estate
values and vibrant local economy, which was
powered by a booming Wall Street.
The bonds also rallied because investors
expected fewer to be issued in the
future as the city approaches its debt limit.
Your Series benefited as the
bonds accounted for nearly 2.5% of its total
investments as of April 30.
Five Largest Issuers.
5.4% NJ Economic
Development Authority
4.0% NJ Economic
Development Authority
NJPAC
4.0% Wyoming Community
Development Authority
3.5% Brick Township, NJ
Municipal Utility
Authority
3.5% NY State Environmental
Facilities Corp.
Expressed as a percentage of net assets as of
4/30/98.
And Not So Well.
A Missed Opportunity.
Because we expect long-term interest rates to
decline and bond prices to rise
as U.S. economic growth slows, we increased
our holdings of noncallable bonds
earlier in the year. As you know, noncallable
bonds tend to appreciate rapidly
during a market rally because they cannot be
retired prior to maturity.
Unfortunately, we did not adopt this strategy
last autumn when bond prices
surged after the Asian economic crisis.
Owning more noncallable bonds from
late October through mid- January would have
bolstered the Series' returns.
Looking Ahead.
While the U.S. economy surged ahead during
the first three months of 1998, we
expect economic growth to moderate later in
the year. The U.S. posted a
record trade deficit in March as exports to
key East Asian nations declined,
while imports to the U.S. jumped because of
the strong dollar. The ballooning
trade gap places a drag on the economy that
will likely result in a less
robust expansion, continued subdued
inflation, and steady monetary policy in
the second half of the year. This scenario
bodes well for bonds, but there is
a caveat. If the economy loses steam too
quickly, below investment grade
municipal bonds could suffer as investors
prefer better-quality debt
securities.
Credit Quality.
Expressed as a percentage of
total investments as of 4/30/98.
(PIE CHART)
- ---------------------------------------------
- ----------------------------------
5
<PAGE>
President's Letter
June 9, 1998
(PHOTO)
See You On the Net!
Dear Shareholder:
We are proud to be part of the worldwide web
and we invite you to visit our
two web sites, if you have not already done
so. Yes, we currently offer two
sites -- each with its own distinctive
identity.
http://www.prudential.com
The Prudential web site features information
on personal investing, retirement
planning, commercial and residential real
estate opportunities, as well as
insurance products for life, health, home and
property.
You can look up performance data on your
Prudential mutual funds, learn about
proven investment strategies, or take one of
our many interactive quizzes that
will help guide you in determining long-term
goals -- like how much to save
for your child's college education or for
your retirement.
http://www.prusec.com
The Prudential Securities Virtual Branch
Office is a full-service brokerage
web site specifically designed to provide
investors with the information they
need to make informed financial decisions. It
was rated the No. 1 full-service
brokerage web site of its type by Financial
Net News (February 1998), a
subsidiary of Institutional Investor
magazine, and was also rated among the
top corporate web sites by Fortune magazine
(Winter 1998).
What investors can find here are -- daily
market commentaries, stock quotes,
economic forecasts, product news, and current
market research, in addition to
interactive investing programs. Investors,
through their Prudential Securities
Financial Advisors, may also enroll in
Prudential Online(R) and have access to
their personal account information which
includes balances, security values,
transactions and account activities. They can
also easily E-mail their
Financial Advisor.
Both sites also contain professional
opportunities for people who are
searching for employment or considering a
change of career paths.
We plan to make further enhancements to our
web pages as the year progresses.
So please, the next time you are "web
browsing" or "surfing the net," pay us a
visit. Let us know what you think and what
you'd like to see added in the
future.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds &
Annuities
- ---------------------------------------------
- ----------------------------------
6
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
LONG-TERM INVESTMENTS--98.0%
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Arizona--1.8%
Coconino Cnty. Pol. Ctrl. Corp. Rev.
Tucson Elec. Pwr., Navajo A
B2 7.125% 10/01/32 $
5,000 $ 5,706,500
Tucson Elec. Pwr., Navajo B
B2 7.00 10/01/32
1,700 1,934,175
Pima Cnty. Ind. Dev. Auth.,
Multifam. Mtge. Rev., La Cholla Proj.
NR 8.50 7/01/20
9,680 10,103,694
Tuscon Elec. Pwr. Co., Ser. A
B2 6.10 9/01/25
2,000 2,044,000
- --------------
19,788,369
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Arkansas--0.7%
Northwest Arkansas Reg'l. Arpt. Auth. Rev.
NR 7.625 2/01/27
7,000 8,012,130
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
California--10.4%
Abag Fin. Auth. For Nonprofit Corps. Ref.
Amer. Baptist
Homes., Ser. A
BBB(b) 6.20 10/01/27
3,200 3,353,312
California Hsg. Fin. Agcy. Rev., Home Mtge.,
Ser. G Aa 8.15
8/01/19 795 813,841
Corona Ctfs. of Part., Vista Hosp. Sys. Inc.,
Ser. C NR 8.375
7/01/11 10,000 11,161,600
Delano Ctfs. of Part., Reg'l. Med. Ctr., Ser.
A NR 9.25
1/01/22 6,710 7,811,245
Folsom Spec. Tax Dist. No. 2
NR 7.70 12/01/19
3,130 (c) 3,369,351
Long Beach Harbor Rev. Ref., Ser. A, F.G.I.C.
Aaa 6.00 5/15/19
4,000 4,379,280
Long Beach Redev. Agcy. Hsg.,
Multifam. Hsg. Rev., Pacific Court Apts.
NR 6.95 9/01/23
6,195 (e) 3,407,250
Multifam. Hsg. Rev., Pacific Court Apts.,
Issue B NR 6.80
9/01/13 3,805 (e) 2,092,750
Los Angeles Regl. Arpts. Impvt. Corp., Cont.
Air
Sublease
NR 9.25 8/01/24
10,270 12,303,357
Orange Cnty. Cmnty. Loc. Trans. Auth., Reg.
Linked
Savrs. & Ribs
Aa3 6.20 2/14/11
7,000 7,862,330
Richmond Redev. Agcy. Rev., Multifam. Bridge
Affordable
Hsg.
NR 7.50 9/01/23
10,000 10,041,400
Roseville Joint Union H.S. Dist.,
Ser. B, F.G.I.C.
Aaa Zero 8/01/09
1,740 1,010,296
Ser. B, F.G.I.C.
Aaa Zero 8/01/11
1,890 970,893
Ser. B, F.G.I.C.
Aaa Zero 8/01/14
2,220 948,695
Sacramento City Fin. Auth. Rev., Tax Alloc.,
M.B.I.A. Aaa Zero
11/01/15 5,695 2,256,473
Sacramento Cnty. Spec. Tax Rev., Dist. No. 1
NR 8.25 12/01/20
4,500 (c) 5,025,735
San Joaquin Hills Trans. Corr. Agcy.,
Toll Rd. Rev.
Aaa Zero 1/01/14
8,420 3,801,462
Toll Rd. Rev.
Aaa Zero 1/01/25
10,000 2,497,500
San Luis Obispo Ctfs. of part., Vista Hosp.
Sys., Inc. NR 8.375
7/01/29 4,000 4,381,000
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
California (cont'd.)
Santa Margarita/Dana Point Auth., Impvt.
Dist.,
Ser. A, M.B.I.A.
Aaa 7.25% 8/01/13 $
1,990 (i) $ 2,468,515
Ser. B, M.B.I.A.
Aaa 7.25 8/01/12
3,000 (i) 3,692,280
So. California Pub. Pwr. Auth. Trans., Cap.
Apprec. Aa3 Zero
7/01/14 8,500 3,619,640
So. San Francisco Redev. Agcy., Tax Alloc.,
Gateway
Redev. Proj.
NR 7.60 9/01/18
2,375 2,579,345
So. Tahoe Joint Pwrs. Fin.
NR 8.00 10/01/01
5,795 5,883,548
Turlock Irrigation Dist. Rev., Ser. A,
M.B.I.A. Aaa 6.25
1/01/12 5,000 5,639,700
Victor Valley Union H.S. Dist.,+
Gen. Oblig., M.B.I.A.
Aaa Zero 9/01/12
3,605 1,729,391
Gen. Oblig., M.B.I.A.
Aaa Zero 9/01/14
4,740 2,016,775
Gen. Oblig., M.B.I.A.
Aaa Zero 9/01/16
3,990 1,504,629
- --------------
116,621,593
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Colorado--3.0%
Denver Urban Ren. Auth. Tax,
Inc. Rev.
NR 7.50 9/01/04
3,000 3,201,600
Inc. Rev.
NR 7.75 9/01/16
4,000 4,423,080
Eagle Cnty. Co., Lake Creek Affordable Hsg.,
Ser. A NR 8.00
12/01/23 11,395 11,947,886
San Miguel Cnty., Mountain Vlge. Met. Dist.
NR 8.10 12/01/11
3,200 (c) 3,691,923
Superior Met. Dist. No. 1, Wtr. & Swr.,
Rev.
NR 7.50 12/01/98
855 867,158
Rev.
NR 8.50 12/01/13
8,900 9,951,357
- --------------
34,083,004
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Connecticut--1.0%
Connecticut St. Dev. Auth. Mystic Marinelife
Aquarium
Proj. Rev.
NR 7.00 12/01/27
1,500 1,593,825
Connecticut St. Dev. Auth. Swr., Netco
Waterbury Ltd. NR
9.375 6/01/16 8,000
9,350,720
- --------------
10,944,545
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
District of Columbia--1.6%
Dist. of Columbia Rev., Nat'l. Public Radio
NR 7.625 1/01/18
8,800 9,610,832
Dist. of Columbia, Ser. A
Ba1 5.25 6/01/27
9,000 8,463,960
- --------------
18,074,792
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Florida--4.2%
Crossings At Fleming Island Cmnty. Dev.
Dist., Clay City NR 8.25
5/01/16 7,860 8,649,301
Escambia Cnty. Hlth. Facs. Auth. Rev.,
Baptist Hosp.
Ref., Ser. A
BBB+(b) 8.60 10/01/02
3,375 3,499,031
Florida Hsg. Fin. Agcy., Palm Aire Proj.,
Multifam.
Mtge. Rev.
NR 10.00 1/01/20
9,448 (e) 7,464,403
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 8
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Florida (cont'd.)
No. Springs Impvt. Dist. Wtr. Mgt.,
Ser. A
NR 8.20% 5/01/24 $
1,960 $ 2,159,704
Ser. A
NR 8.30 5/01/24
1,720 1,904,900
Northern Palm Beach Cnty. Impt. Ref., Wtr.
Ctl. & Impt.
Unit Dev.
NR 6.00 8/01/10
3,250 3,216,363
Orlando Util. Comm., Wtr. & Elec. Rev., Ser.
D Aa2 6.75
10/01/17 2,000 2,398,060
Palm Beach Cnty. Hsg. Auth., Banyan Club
Apts. NR 7.75
3/01/23 4,470 4,812,044
Sarasota Hlth. Facs., Kobernick Hsg. Meadow
Park Proj. Aaa 10.00
7/01/22 6,855 (c) 8,335,132
Seminole Cnty. Ind. Dev. Auth. Rev., Fern
Park NR 9.25
4/01/12 4,335 4,361,487
- --------------
46,800,425
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Georgia--3.2%
Atlanta Arpt. Facs. Rev., M.B.I.A.
Aaa Zero 1/01/10
2,000 1,061,840
Atlanta Urban Res. Fin. Auth., Clark Atlanta
Univ. Dorm.
Proj.
NR 9.25 6/01/10
4,440 (c) 4,947,758
Effingham Cnty. Dev. Auth., Ft. Howard Corp.
Baa3 7.90 10/01/05
10,000 10,676,900
Fulton Cnty. Wtr. & Swr. Rev., F.G.I.C.
Aaa 6.375 1/01/14
6,000 (i) 6,874,260
Henry Cnty. Wtr. & Swg. Auth. Rev.,
A.M.B.A.C. Aaa
6.15 2/01/20 3,000
3,393,330
Rockdale Cnty. Dev. Auth., Solid Wste. Disp.
Rev. NR 7.50
1/01/26 8,100 8,769,951
- --------------
35,724,039
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Hawaii--1.1%
Hawaii Cnty. Impvt. Dist. No. 17
NR 9.50 8/01/11
6,565 7,093,614
Hawaii St. Dept. Trans. Spl. Fac. Rev.,
Continental
Airlines, Inc.
Ba2 5.625 11/15/27
5,225 5,127,449
- --------------
12,221,063
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Illinois--9.3%
Chicago Brd. Edl., Lease Ctfs., Ser. A,
M.B.I.A. Aaa 6.00
1/01/20 10,000 11,045,600
Chicago O'Hare Int'l. Arpt.,
Amer. Airlines Proj., Ser. B
Baa2 8.20 12/01/24
1,000 1,204,930
United Airlines, Ser. B
Baa2 8.45 5/01/07
6,000 6,519,000
United Airlines, Ser. B
Baa2 8.50 5/01/18
6,500 7,059,260
United Airlines, Ser. B
Baa2 8.85 5/01/18
2,700 3,026,943
United Airlines, Ser. B
Baa2 8.95 5/01/18
2,320 2,603,388
Chicago Pub. Bldg. Comm. Rev., Ser. A,
M.B.I.A. Aaa 7.00
1/01/20 6,530 (i) 8,115,484
Hennepin Ind. Dev. Rev., Exolon-Esk Co. Proj.
NR 8.875 1/01/18
8,000 8,996,400
Illinois Reg'l. Trans. Auth. Ref., F.G.I.C.
Aaa 6.00 6/01/14
3,530 3,892,037
Illinois St. Hlth. Facs. Auth. Rev.,
Adventist Living Ctr.
NR 11.00 12/01/15
2,245 (e) 202,009
Beacon Hill Proj., Ser. A
NR 9.00 8/15/19
7,135 7,531,064
Midwest Physician Group Ltd. Proj.
BBB-(b) 8.10 11/15/14
3,075 3,726,531
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 9
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Illinois (cont'd.)
Midwest Physician Group Ltd. Proj.
BBB-(b) 5.50% 11/15/19 $
2,000 $ 1,924,060
Midwest Physician Group Ltd. Proj.
BBB-(b) 8.125 11/15/19
3,285 3,985,625
Illinois, Ser. K, A.M.B.A.C.
Aaa 6.25 1/01/13
6,825 7,688,636
Kane And De Kalb Cntys. Sch.,
Dist. No. 301, Cap. Apprec. A.M.B.A.C.
Aaa Zero 12/01/11
3,360 1,666,157
Dist. No. 301, Cap. Apprec. A.M.B.A.C.
Aaa Zero 12/01/13
4,065 1,777,055
Vlge. of Robbins, Cook Cnty. Robbins Res.
Rec. NR 8.375
10/15/16 18,000 18,670,500
Winnebago Cnty. Hsg. Auth., Park Tower
Assoc., Sec. 8 NR
8.125 1/01/11 3,954
4,202,656
- --------------
103,837,335
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Indiana--2.1%
Bluffton Econ. Dev. Rev., Kroger Co. Proj.
Baa3 7.85 8/01/15
7,500 8,483,700
Indianapolis Int'l. Arpt. Auth. Rev., Federal
Express
Corp. Proj.
Baa2 7.10 1/15/17
6,000 6,708,660
Wabash Econ. Dev. Rev. Bonds, Connell Ltd.
NR 8.50 11/24/17
7,250 8,032,130
- --------------
23,224,490
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Iowa--2.6%
City of Cedar Rapids Rev.,
1st Mtge., Cottage Grove Place Proj.
NR 9.00 7/01/18
9,375 11,076,469
1st Mtge., Cottage Grove Place Proj.
NR 9.00 7/01/25
4,435 5,239,908
Iowa St. Fin. Auth., Hlth. Care Facs. Rev.,
Mercy Hlth.
Initiatives Proj.
NR 9.25 7/01/25
10,000 13,348,100
- --------------
29,664,477
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Kentucky--0.8%
Kentucky St. Tpke. Auth. Rev., F.G.I.C.
Aaa Zero 1/01/10
8,250 4,646,895
Owensboro Elec. Lt. & Pwr. Rev.,
Ser. B, A.M.B.A.C.
Aaa Zero 1/01/14
5,000 (i) 2,209,650
Ser. B, A.M.B.A.C.
Aaa Zero 1/01/16
6,650 (i) 2,620,699
- --------------
9,477,244
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Louisiana--3.1%
Hodge Util. Rev., Stone Container Corp.
NR 9.00 3/01/10
7,000 7,560,350
New Orleans Home Mtge. Auth. Rev., Sngl. Fam.
Mtge.,
Ser. A, G.N.M.A.
Aaa 8.60 12/01/19
1,670 (f) 1,721,970
New Orleans Ind. Dev. Rev.
BBB(b) 8.75 10/01/19
3,600 4,224,276
New Orleans, Gen Oblig., Cap. Apprec.,
A.M.B.A.C. Aaa Zero
9/01/18 3,090 1,051,836
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 10
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) 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 $ 10,659,000
Pwr. & Lt. Co., Ser. 1989
Baa3 8.00 12/01/14
3,500 3,774,015
West Feliciana Parish Poll. Ctrl. Rev., Gulf
St. Util.
Co. Proj.
NR 9.00 5/01/15
5,250 5,802,038
- --------------
34,793,485
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Maryland--1.8%
Anne Arundel Cnty. 1st Mtge. Rev., Pleasant
Living Conv. NR 8.50
7/01/13 3,230 3,503,807
Northeast Wste. Disp. Auth.,
Sludge Comp. Fac.
NR 7.25 7/01/07
4,059 4,459,095
Sludge Comp. Fac.
NR 8.50 7/01/07
3,095 3,378,100
Washington Sub. San. Dist.
Ref., Gen. Const.
Aa1 6.00 6/01/18
3,705 4,115,885
Ref., Gen. Const.
Aa1 6.00 6/01/19
3,940 4,372,927
- --------------
19,829,814
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Massachusetts--4.7%
Boston Ind. Dev. Fin. Auth. Ind. Rev., 1st
Mtge.
Springhouse Proj.
NR 9.25 7/01/15
8,000 9,962,560
Mass. Bay Trans. Auth., Gen. Trans. Sys.,
Ser. A,
F.G.I.C.
Aaa 7.00 3/01/21
7,500 (i) 9,303,150
Mass. St. Coll. Bldg. Proj. and Ref. Bonds
A1 7.50 5/01/14
1,750 (i) 2,216,795
Mass. St. Hlth. & Edl. Facs. Auth. Rev.,
Cardinal Cushing Gen. Hosp.
NR 8.875 7/01/18
7,500 7,967,250
St. Josephs Hosp., Ser. C
NR 9.50 10/01/20
5,640 (c) 6,176,815
Mass. St. Ind. Fin. Agcy. Cont. Res., Ser. A
NR 9.50 2/01/00
1,100 1,133,616
Massachusetts St. Indl. Fin. Agcy. Rev.,
Ref., Chestnut Knoll Proj. A
NR 5.50 2/15/18
1,250 1,224,650
Ref., Chestnut Knoll Proj. A
NR 5.625 2/15/25
1,250 1,219,488
Glenmeadow Proj.
NR 7.00 2/15/06
3,700 3,700,000
Massachusetts St. Wtr. Res. Auth., Ser. A,
F.S.A. Aaa 5.50
8/01/14 3,250 3,417,960
Randolph Hsg. Auth., Multifam. Hsg., Liberty
Place Proj.
A, Ser. A
NR 9.00 12/01/21
5,885 5,965,448
- --------------
52,287,732
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Michigan--4.6%
Grand Rapids Dev. Auth.
Cap. Apprec., M.B.I.A.
Aaa Zero 6/01/10
3,000 1,647,690
Cap. Apprec., M.B.I.A.
Aaa Zero 6/01/11
3,160 1,628,601
Cap. Apprec., M.B.I.A.
Aaa Zero 6/01/12
3,000 1,449,720
Gratiot Cnty. Econ. Dev. Corp., Danley Die
Proj. Connell
L.P.
NR 7.625 4/01/07
3,200 3,480,160
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 11
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Michigan (cont'd.)
Holland Sch. Dist., Cap. Apprec., A.M.B.A.C.
Aaa Zero 5/01/17 $
2,950 $ 1,069,729
Lowell Area Sch., F.G.I.C.
Aaa Zero 5/01/14
5,000 2,154,700
Michigan St. Hosp. Fin. Auth. Rev.,
Genesys Regl. Hosp.
Baa2 5.50% 10/01/27
3,250 3,171,187
Saratoga Cmnty. Hosp.
NR 8.75 6/01/10
6,345 (c) 7,313,945
Michigan Strategic Fund, Great Lakes Pulp &
Fiber Proj. NR 8.00
12/01/27 12,291 11,861,008
Michigan Strategic Fund, Solid Wste. Disp.,
Gennese Pwr.
Station
NR 7.50 1/01/21
10,000 10,824,600
Wayne Cnty. Bldg. Auth., Ser. A
Baa2 8.00 3/01/17
3,500 (c) 3,994,830
West Ottawa Sch. Dist.,
F.G.I.C.
Aaa Zero 5/01/15
4,825 1,956,489
F.G.I.C.
Aaa Zero 5/01/18
3,000 1,029,300
- --------------
51,581,959
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Minnesota--0.4%
Minneapolis St. Paul Hsg. Fin. Brd.,
Multifam. Mtge.
Rev., Riverside Plaza, G.N.M.A.
AAA(b) 8.25 12/20/30
4,000 (i) 4,132,440
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Mississipi--1.6%
Claiborne Cnty. Poll. Ctrl. Rev.,
Mid. So. Engy. Sys.
Ba1 9.875 12/01/14
6,100 6,448,066
Mid. So. Engy. Sys., Ser. A
Ba1 9.50 12/01/13
10,350 10,918,422
- --------------
17,366,488
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Missouri--2.0%
Sikeston Elec. Rev. Ref., M.B.I.A.
Aaa 6.00 6/01/15
9,250 10,258,712
St. Louis Cnty. Ind. Dev. Auth. Rev.,
Soemm Proj.
NR 10.25 7/01/08
1,560 1,565,257
Soemm Proj.
NR 10.25 7/01/08
590 591,989
St. Louis Cnty. Reg. Conv. & Sports Comp.,
Ser. C Aaa 7.90
8/15/21 8,820 (c) 10,262,335
- --------------
22,678,293
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Nebraska--0.1%
Nebraska Invest. Fin. Auth., G.N.M.A., Sngl.
Fam. Mtge.
Rev.,
Ser. I, M.B.I.A.
Aaa 8.125 8/15/38
1,615 (i) 1,656,942
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 12
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New Hampshire--1.7%
New Hampshire Higher Edl. & Hlth. Facs. Auth.
Rev.,
Antioch College
NR 7.875% 12/01/22 $
5,335 $ 5,942,817
Havenwood/Heritage Heights
NR 9.75 12/01/19
7,495 (c) 8,372,964
New Hampshire St. Bus. Pollutn. Ref., Pub.
Svc. Co. Ba3 6.00
5/01/21 5,000 5,004,700
- --------------
19,320,481
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New Jersey--6.5%
New Jersey Econ. Dev. Corp. Rev., Ref. Newark
Arpt.
Marriot Hotel
NR 7.00 10/01/14
3,800 4,171,298
New Jersey Hlthcare Facs., Fin. Auth. Rev.
NR 8.00 7/01/27
5,000 5,486,650
New Jersey St. Econ. Dev. Auth. Rev., 1st
Mtge.,
Fellowship Vlge., Proj. A
Aaa 9.25 1/01/25
11,500 (c) 14,690,790
Leisure Park Proj., Ser. A
NR 5.875 12/01/27
4,000 4,031,520
New Jersey St. Edl. Facs. Auth. Rev.,
Felician College
Of Lodi,
Ser. D
NR 7.375 11/01/22
4,000 4,109,840
New Jersey St. Ref., Ser. E
Aa1 6.00 7/15/10
10,000 (i) 11,157,000
New Jersey St. Tpke. Auth. Rev., Ser. C,
M.B.I.A. Aaa 6.50
1/01/16 11,000 (i) 12,757,360
New Jersey St. Trans. Trust Fund Auth.,
Trans. Sys.,
M.B.I.A.
Aaa 6.50 6/15/11
14,500 (i) 16,786,650
- --------------
73,191,108
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New Mexico--0.5%
Farmington Pollutn. Ctrl. Rev.,
Ref., Pub. Svc. Co., Ser. C
Ba1 5.80 4/01/22
1,000 1,004,430
Ref., Pub. Svc. Co., Ser. A
Ba1 5.80 4/01/22
1,500 1,527,090
Ref., Pub. Svc. Co., Ser. B
Ba1 5.80 4/01/22
3,000 3,054,180
- --------------
5,585,700
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New York--4.1%
Met. Trans. Auth. Facs. Rev., Ser. N,
F.G.I.C. Aaa Zero
7/01/13 8,340 (i) 3,827,977
New York City Ind. Dev. Agcy.,
Amer. Airlines Inc.
Baa2 8.00 7/01/20
3,320 3,463,424
Bklyn. Navy Yard Cogen Partners
Baa3 6.20 10/01/22
6,925 7,503,099
Bklyn. Navy Yard Cogen Partners
Baa3 5.75 10/01/36
5,000 4,977,450
Mesorah Pub. Ltd.
NR 10.25 3/01/19
1,861 1,974,837
Visy Paper Inc. Proj.
NR 7.95 1/01/28
6,500 7,532,850
New York City, Ser. I
A3 6.25 4/15/27
3,000 3,208,800
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 13
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New York (cont'd.)
New York St. Dorm. Auth. Rev.,
Colgate Univ., M.B.I.A.
Aaa 6.00% 7/01/21 $
3,350 $ 3,717,863
Memorial Sloan Kettering Cancer Ctr.,
M.B.I.A. Aaa 5.75
7/01/20 5,000 5,365,850
Port Auth. of New York & New Jersey, USAir,
LaGuardia
Arpt.
B3 9.125 12/01/15
4,000 4,480,480
- --------------
46,052,630
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
North Carolina--0.1%
North Carolina Med. Care Comm. Hosp. Rev.,
Ref. Annie
Penn Mem. Hosp.
Baa3 5.375 1/01/22
1,000 973,160
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
North Dakota--1.1%
Mercer Cnty., Antelope Valley Station,
A.M.B.A.C Aaa 7.20
6/30/13 10,000 (i) 12,115,000
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Ohio--4.4%
Cleveland Arpt. Spl. Rev., Ref. Continental
Airlines,
Inc.
Ba2 5.70 12/01/19
4,850 (h) 4,740,778
Cleveland Pub. Pwr. Sys. Rev.,
1st Mtge., M.B.I.A.
Aaa Zero 11/15/12
1,000 472,010
1st Mtge., M.B.I.A.
Aaa Zero 11/15/13
1,500 667,320
1st Mtge., Ser. A, M.B.I.A.
Aaa Zero 11/15/09
3,000 1,710,030
Dayton Spl. Facs. Rev., Ref. Emery Air
Freight, Ser. A BBB(b)
5.625 2/01/18 3,500 (h)
3,498,355
Mahoning Valley San. Dist. Wtr. Rev.
NR 7.75 5/15/19
8,000 8,851,040
Montgomery Cnty. Hlthcare. Facs. Rev.,
Friendship Vlge.
Dayton, Proj. B
NR 9.25 2/01/16
4,500 (c) 4,965,660
Ohio St. Air Quality Dev. Auth. Ref., Amt.
Coll. Poll.
Ctrl., Ser. A
Ba1 6.10 8/01/20
3,000 3,103,380
Ohio St. Solid Wste. Rev.,
Cscltd. Proj.
NR 8.50 8/01/22
5,000 5,267,600
Rep. Eng. Steels Inc.
NR 9.00 6/01/21
2,250 2,408,287
Ohio St. Wtr. Dev. Auth. Poll. Ctrl. Facs.,
1st Mtge.,
Toledo Edison
Ba1 8.00 10/01/23
5,500 6,286,775
Stark Cnty. Hlthcare. Facs. Rev., Rose Lane
Inc. Proj. NR 9.00
12/01/23 6,135 6,985,925
- --------------
48,957,160
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Oklahoma--1.5%
Grand River Dam Auth. Rev., A.M.B.A.C.
Aaa 6.25 6/01/11
12,000 (i) 13,588,080
Tulsa Ind. Dev. Auth., Univ. Tulsa, Ser. A,
M.B.I.A. Aaa 6.00
10/01/16 3,250 (f) 3,567,817
- --------------
17,155,897
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 14
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Pennsylvania--5.0%
Allegheny Cnty. Hosp. Rev., West Penn. Hosp.
Hlth. Ctr. NR 8.50%
1/01/20 $ 2,800 $ 3,007,508
Berks Cnty. Mun. Auth. Rev.,
Adventist Living Ctrs. Proj.
NR 11.00 12/01/15
367 (e) 33,072
Alvernia Coll. Proj.
NR 7.75 11/15/16
5,240 5,848,154
Dauphin Cnty. Gen. Auth. Hosp. Rev., NW Med.
Ctr. Proj. BBB-(b) 8.625
10/15/13 6,570 7,854,961
Lancaster Cnty. Solid Wste. Mgmt., Res. Rec.
Auth. Sys.
Rev., Ser. A
Baa2 8.50 12/15/10
5,965 (c) 6,116,272
Philadelphia Auth., Ind. Dev. Rev.
NR 7.75 12/01/17
5,000 5,617,650
Philadelphia Hosps. & Higher Ed. Facs. Auth.
Rev.,
Grad. Hlth. Sys.
B2 7.00 7/01/05
2,500 2,619,175
Grad. Hlth. Sys.
B2 7.25 7/01/18
2,710 2,869,185
Grad. Hlth. Sys., Ser. A
B2 6.25 7/01/13
2,500 2,515,500
Philadelphia Wtr. & Wstewtr. Auth. Rev.,
M.B.I.A.
Aaa 6.25 8/01/10
2,500 2,807,925
M.B.I.A.
Aaa 6.25 8/01/12
3,000 (i) 3,375,450
Somerset Cnty. Hosp. Auth. Rev.,
Hlthcare 1st Mtge.
NR 8.40 6/01/09
2,305 2,587,316
Hlthcare 1st Mtge.
NR 8.50 6/01/24
8,805 9,894,091
Wilkes Barre Gen. Mun. Auth. Coll. Rev.,
Misericordia
Coll., Ser. A
NR 7.75 12/01/12
1,245 1,361,657
- --------------
56,507,916
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Rhode Island--1.0%
Rhode Island Redev. Agcy., Ser. A
NR 8.00 9/01/24
10,560 11,584,742
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
South Carolina--0.4%
So. Carolina St. Hsg. Fin. & Dev. Auth.,
Homeownership
Mtge.
Aa2 7.75 7/01/22
4,345 (i) 4,573,982
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
South Dakota--0.8%
Education Loans Inc. Student Loan Rev.
A2 5.60 6/01/20
3,300 3,226,641
So. Dakota Econ. Dev. Fin. Auth., Dakota Park
NR 10.25 1/01/19
4,930 5,258,387
- --------------
8,485,028
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Tennessee--1.4%
Knox Cnty. Hlth. & Edl. Facs. Rev., Baptist
Hlth. Hosp. Aaa 8.50
4/15/04 5,225 (c) 5,549,890
Met. Gov't. Nashville & Davidson Cnty. H&E
Facs. Brd.
Rev., Ref.
Blakeford Green Hills
NR 5.65 7/01/24
1,500 1,464,825
Rutherford Cnty. Hlth. & Edl. Facs., Brd. 1st
Mtge. Rev. NR 9.50
12/01/19 7,300 8,525,451
- --------------
15,540,166
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 15
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Texas--3.4%
Beaumont Hsg. Fin. Corp., Sngl. Fam. Mtge.
Rev. A1 9.20%
3/01/12 $ 1,380 $ 1,545,434
Houston Arpt. Sys. Rev.
Ba2 6.125 7/15/27
3,200 3,333,280
Houston Wtr. & Swr. Sys. Rev., Ser. C,
A.M.B.A.C. Aaa Zero
12/01/10 5,000 2,659,250
Keller Ind. Sch. Dist., Cap. Apprec. Ref.,
Ser. A,
P.S.F.G.
Aaa Zero 8/15/17
4,075 1,441,491
New Braunfels Ind. Sch. Dist.,
Cap. Apprec., P.S.F.G.
Aaa Zero 2/01/08
2,365 1,472,189
Cap. Apprec., P.S.F.G.
Aaa Zero 2/01/09
2,365 1,392,086
Cap. Apprec., P.S.F.G.
Aaa Zero 2/01/12
2,365 1,154,948
Nueces Riv. Auth., Ref. Asarco Inc. Proj.
Baa2 5.60 1/01/27
2,500 2,499,775
Round Rock Ind. Sch. Dist., Gen. Oblig.,
M.B.I.A. Aaa Zero
8/15/11 4,385 2,222,099
San Antonio Elec. & Gas Rev.,
F.G.I.C.
Aaa Zero 2/01/09
5,000 2,943,100
F.G.I.C., Ser. B
Aaa Zero 2/01/12
7,500 3,662,625
Tarrant Cnty. Hlth. Facs. Dev. Corp. Rev.,
Foundation
Proj.
NR 10.25 9/01/19
5,000 5,319,550
Texas Mun. Pwr. Agcy. Rev., M.B.I.A.
Aaa Zero 9/01/15
16,300 6,438,989
Tyler Tex. Hlth. Facs. Dev. Corp., Mother
Frances Hosp.,
Ser. A
Baa2 5.625 7/01/13
1,680 1,682,318
- --------------
37,767,134
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Utah--0.5%
Carbon Cnty. Solid Wste. Disp. Rev. Ref.,
Laidlaw
Environmental, Ser. A
NR 7.45 7/01/17
1,500 1,642,950
Tooele Cnty Poll. Ctrl. Rev. Ref., Laidlaw
Environmental, Ser. A
NR 7.55 7/01/27
4,000 4,404,360
- --------------
6,047,310
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Virginia--1.6%
Loudoun Cnty. Ind. Dev. Auth., Rev.
NR 7.125 9/01/15
2,000 2,209,680
Norfolk Redev. & Hsg. Auth., Multifam. Rental
Hsg. Fac.
Rev.
NR 8.00 9/01/26
6,000 6,126,840
Pittsylvania Cnty. Ind. Dev. Auth. Rev.
Multitrade NR 7.55
1/01/19 9,000 9,902,340
- --------------
18,238,860
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Washington--2.5%
Bellevue Conv. Ctr. Auth.,
King City, Oblig. Rev., M.B.I.A.
Aaa Zero 2/01/10
870 482,467
King City, Oblig. Rev., M.B.I.A.
Aaa Zero 2/01/11
1,200 625,092
King City, Oblig. Rev., M.B.I.A.
Aaa Zero 2/01/12
1,300 634,855
King City, Oblig. Rev., M.B.I.A.
Aaa Zero 2/01/14
1,385 600,135
Chelan Cnty. Pub. Util., Dist. No. 1,
Columbia River
Rock, Hydro Elec. Sys. Rev., M.B.I.A.
Aaa Zero 6/01/15
7,585 3,036,655
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 16
<PAGE>
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Washington (cont'd.)
Thurston Cnty. Sch. Dist. 333,
F.G.I.C.
Aaa Zero 12/01/12 $
6,830 $ 3,193,640
F.G.I.C., Ser. B
Aaa Zero 12/01/11
6,415 3,202,175
Washington St. Ref., Ser. R, 97A
Aa1 Zero 7/01/16
7,000 2,639,770
Washington St. Pub. Pwr. Supply Sys. Rev.,
Nuclear Proj. No. 1, Ser. B
Aa1 7.25% 7/01/09
5,000 (i) 5,897,400
Nuclear Proj. No. 3, M.B.I.A.
Aaa Zero 7/01/17
5,000 1,747,450
Nuclear Proj. No. 3, Ser. B, M.B.I.A.
Aaa 7.125 7/01/16
5,000 6,074,800
- --------------
28,134,439
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
West Virginia--1.0%
So. Charleston Ind. Dev. Rev., Union Carbide
Chem. &
Plastics Co.
Baa2 8.00 8/01/20
2,450 2,635,930
Weirton Poll. Ctrl. Rev., Weirton Steel Proj.
B2 8.625 11/01/14
4,000 4,230,120
West Virginia St. Hsg. Dev. Fund Hsg. Fin.,
Ser. A,
F.H.A.
Aaa 7.95 5/01/17
1,160 1,160,128
West Virginia St. Pkwys. Econ. Dev. & Tourism
Auth.,
F.G.I.C.
Aaa 7.423 5/16/19
3,250 (d) 3,542,500
- --------------
11,568,678
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Wisconsin--0.4%
Oconto Falls Cmnty. Dev. Auth. Dev. Rev.,
Oconto Falls
Tissue, Inc. Proj.
NR 7.75 12/01/22
4,000 4,149,840
- --------------
Total long-term investments (cost
$1,016,977,321)
1,098,749,890
- --------------
SHORT-TERM INVESTMENTS--0.7%
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Florida
St. Lucie Cnty. Solid Wst. Disp. Rev., Ser.
93,
F.R.D.D., A.M.T.
VMIG1 4.40 5/01/98
100 100,000
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Louisiana--0.2%
Plaquemines Parish Environmental Rev. Adj.,
Ref. BP.
Exploration & Oil, Ser. 95, F.R.D.D.,
A.M.T. P-1 4.40
5/01/98 1,500 1,500,000
West Baton Rouge Parish Ind. Dist. Pound3
Rev., Dow
Chemical Co. Proj., Ser. 95, F.R.D.D.,
A.M.T. P-1 4.40
5/01/98 700 700,000
- --------------
2,200,000
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Texas--0.3%
Brazos River Harbor Nav. Dist. Rev., Dow
Chemical Co.,
Ser. A, F.R.D.D., A.M.T.
P-1 4.40 5/01/98
2,600 2,600,000
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 17
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Texas (cont'd.)
Brazos River Harbor Nav. Dist., Dow Chemical
Co. Proj.,
Ser. 96, F.R.D.D., A.M.T.
P-1 4.40% 5/01/98 $
400 $ 400,000
Gulf Coast Ind. Dev. Auth. Solid Wste. Rev.,
Citgo
Petroleum, Ser. 95, F.R.D.D., A.M.T.
VMIG1 4.40 5/01/98
400 400,000
- --------------
3,400,000
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Virginia
King George Cnty. Ind. Dev. Auth. Expt. Fac.
Rev.,
F.R.D.D.
A1+(b) 4.40 5/01/98
600 600,000
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Washington--0.2%
Washington St. Hsg. Fin. Comm. Nonprofit Hsg.
Rev.,
Emerald Height Proj., Ser. 90, F.R.D.D.
A-1(b) 4.25 5/01/98
2,000 2,000,000
Ref. Panorama Cty. Proj., Ser. 97,
F.R.D.D. VMIG1
4.25 5/01/98 200
200,000
- --------------
2,200,000
- --------------
Total short-term investments (cost
$8,500,000)
8,500,000
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Total Investments--98.7%
(cost $1,025,477,321; Note 4)
1,107,249,890
Other assets in excess of liabilities--1.3%
13,980,703
- --------------
Net Assets--100%
$1,121,230,593
- --------------
- --------------
</TABLE>
- ---------------
(a) The following abbreviations are used in
portfolio descriptions:
A.M.B.A.C.--American Municipal Bond
Assurance Corporation
A.M.T.--Alternative Minimum Tax
F.G.I.C.--Financial Guaranty Insurance
Company
F.H.A.--Federal Housing Administration
F.R.D.D.--Floating Rate (Daily) Demand
Note (g)
F.S.A.--Financial Security Assurance
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) Standard & Poor's Rating.
(c) Prerefunded issues are secured by
escrowed cash and direct U.S. guaranteed
obligations.
(d) Inverse floating rate bond. The coupon is
inversely indexed to a floating
interest rate. The rate shown is the rate
at year end.
(e) Issuer in default of interest payment.
Non-income producing security.
(f) All or partial principal amount pledged
as initial margin on financial
futures contracts.
(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.
(h) When-issued security.
(i) All or partial amount of principal
segregated as collateral for financial
futures contracts and when-issued
security.
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. 18
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Statement of Assets and Liabilities
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Assets
April 30, 1998
<S>
<C>
Investments, at value (cost
$1,025,477,321)..............................
...................................
$1,107,249,890
Cash.........................................
.............................................
.................. 532,945
Interest
receivable...................................
.............................................
......... 20,820,891
Receivable for investments
sold.........................................
....................................
7,493,133
Receivable for Series shares
sold.........................................
..................................
3,114,900
Due from broker - variation
margin.......................................
...................................
35,062
Other
assets.......................................
.............................................
............ 16,732
- --------------
Total
assets.......................................
.............................................
......... 1,139,263,553
- --------------
Liabilities
Payable for investments
purchased....................................
.......................................
13,292,139
Payable for Series shares
reacquired...................................
.....................................
2,008,464
Dividends
payable......................................
.............................................
........ 1,788,096
Management fee
payable......................................
.............................................
... 410,722
Distribution fee
payable......................................
.............................................
. 323,222
Accrued
expenses.....................................
.............................................
.......... 210,317
- --------------
Total
liabilities..................................
.............................................
......... 18,032,960
- --------------
Net
Assets.......................................
.............................................
.............. $1,121,230,593
- --------------
- --------------
Net assets were comprised of:
Shares of beneficial interest, at
par..........................................
.......................... $
991,547
Paid-in capital in excess of
par..........................................
...............................
1,063,404,578
- --------------
1,064,396,125
Accumulated net realized loss on
investments..................................
...........................
(24,938,101)
Net unrealized appreciation of
investments..................................
.............................
81,772,569
- --------------
Net assets, April 30,
1998.........................................
.........................................
$1,121,230,593
- --------------
- --------------
Class A:
Net asset value and redemption price per
share
($421,515,355 / 37,273,437 shares of
beneficial interest issued and
outstanding)......................
$11.31
Maximum sales charge (3% of offering
price).......................................
....................... .35
- --------------
Maximum offering price to
public.......................................
..................................
$11.66
- --------------
- --------------
Class B:
Net asset value, offering price and
redemption price per share
($669,241,615 / 59,185,536 shares of
beneficial interest issued and
outstanding)......................
$11.31
- --------------
- --------------
Class C:
Net asset value, offering price and
redemption price per share
($20,554,428 / 1,817,829 shares of
beneficial interest issued and
outstanding)........................
$11.31
- --------------
- --------------
Class Z:
Net asset value, offering price and
redemption price per share
($9,919,195 / 877,903 shares of
beneficial interest issued and
outstanding)...........................
$11.30
- --------------
- --------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 19
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
Statement of Operations
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income
April 30, 1998
<S>
<C>
Income
Interest..................................
$ 71,328,838
- --------------
Expenses
Management fee............................
5,323,382
Distribution fee--Class A.................
381,735
Distribution fee--Class B.................
3,345,658
Distribution fee--Class C.................
111,993
Transfer agent's fees and expenses........
450,000
Custodian's fees and expenses.............
152,000
Reports to shareholders...................
81,000
Registration fees.........................
64,000
Insurance expense.........................
29,000
Legal fees and expenses...................
18,000
Audit fee.................................
15,000
Trustees' fees and expenses...............
13,000
Miscellaneous.............................
8,437
- --------------
Total expenses.........................
9,993,205
Less: Management fee waiver...............
(535,931)
Custodian fee credit...................
(4,478)
- --------------
Net expenses...........................
9,452,796
- --------------
Net investment income........................
61,876,042
- --------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions...................
(5,710,322)
Financial futures contract transactions...
(740,523)
- --------------
(6,450,845)
- --------------
Net change in unrealized appreciation of:
Investments...............................
50,351,593
- --------------
Net gain on investments......................
43,900,748
- --------------
Net Increase in Net Assets
Resulting from Operations....................
$105,776,790
- --------------
- --------------
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
Statement of Changes in Net Assets
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Increase (Decrease) Year
Ended April 30,
in Net Assets 1998
1997
<S> <C>
<C>
Operations
Net investment income....... $
61,876,042 $ 63,368,111
Net realized loss on
investment
transactions.............
(6,450,845) (4,271,817)
Net change in unrealized
appreciation of
investments..............
50,351,593 18,105,192
------------
- -- --------------
Net increase in net assets
resulting from
operations...............
105,776,790 77,201,486
------------
- -- --------------
Dividends and distributions
(Note 1):
Dividends from net
investment income
Class A..................
(23,016,599) (18,998,681)
Class B..................
(37,682,645) (43,873,295)
Class C..................
(804,495) (467,478)
Class Z..................
(372,303) (28,657)
------------
- -- --------------
(61,876,042) (63,368,111)
------------
- -- --------------
Distributions in excess of
net investment income
Class A.................. --
(39,610)
Class B.................. --
(82,405)
Class C.................. --
(965)
Class Z.................. --
(28)
------------
- -- --------------
--
(123,008)
------------
- -- --------------
Series share transactions (net of
share conversions) (Note 5):
Net proceeds from shares
subscribed...............
194,658,081 116,459,010
Net asset value of shares
issued in reinvestment of
dividends................
27,600,737 28,109,609
Cost of shares reacquired...
(156,797,816) (175,001,590)
------------
- -- --------------
Net increase (decrease) in
net assets from Series
share transactions.......
65,461,002 (30,432,971)
------------
- -- --------------
Total increase (decrease)......
109,361,750 (16,722,604)
Net Assets
Beginning of year..............
1,011,868,843 1,028,591,447
------------
- -- --------------
End of year....................
$1,121,230,593 $1,011,868,843
------------
- -- --------------
------------
- -- --------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 20
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
LONG-TERM INVESTMENTS--98.3%
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Alabama--0.7%
Huntsville Solid Wste. Disp. Auth., F.G.I.C.
Aaa 7.00% 10/01/08 $
2,000 $ 2,147,080
Jefferson Cnty. Swr. Rev. Wste., Ser. D,
F.G.I.C. Aaa 5.75
2/01/22 1,200 1,249,716
- ------------
3,396,796
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Alaska--2.4%
Alaska St. Engy. Auth. Pwr. Rev., Bradley
Lake Hydro, 1st
Ser., A.M.B.A.C.
Aaa 7.25 7/01/16
2,000 (g) 2,106,600
Anchorage Hosp. Rev., Sisters of Providence,
A.M.B.A.C. Aaa 7.125
10/01/05 5,000 5,512,450
No. Slope Boro., Cap. Apprec., Ser. A,
M.B.I.A. Aaa Zero
6/30/06 5,000 3,375,300
- ------------
10,994,350
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Arizona--1.9%
Maricopa Cnty. Ind. Dev. Auth. Rev.,
Hosp. Facs., John C. Lincoln Hosp., F.S.A.
Aaa 7.00 12/01/00
1,755 1,827,569
Hosp. Facs., John C. Lincoln Hosp., F.S.A.
Aaa 7.50 12/01/13
1,045 (c) 1,149,155
Hosp. Facs., John C. Lincoln Hosp., F.S.A.
Aaa 7.50 12/01/13
1,205 1,315,294
Maricopa Cnty. Unified Sch. Dist. No. 69,
Paradise
Valley, Ser. E, F.G.I.C.
Aaa 6.80 7/01/12
3,700 4,390,013
- ------------
8,682,031
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
California--6.3%
California St. Pub. Wks. Brd.,
Comm. Coll. Proj., Ser. A, A.M.B.A.C.
Aaa 5.625 3/01/16
2,000 2,078,700
Dept. of Corrections, A.M.B.A.C.
Aaa 5.75 1/01/12
2,000 2,127,940
Contra Costa Wtr. Dist. Wtr. Rev., Ser. E,
A.M.B.A.C. Aaa 6.25
10/01/12 1,455 1,648,253
Inland Empire Solid Wste. Fin. Auth.,
Landfill Impvt.
Fin., Proj. B, F.S.A.
Aaa 6.00 8/01/16
2,000 2,117,580
Roseville Joint Union H.S. Dist., Ser. B,
F.G.I.C. Aaa Zero
8/01/13 2,015 915,455
San Diego Cnty. Wtr. Auth. Wtr. Rev., Ctfs.
of Part.,
F.G.I.C
Aaa 7.037 4/26/06
5,800 (d) 6,590,250
San Francisco City & Cnty. Arpt. Comm. Int'l.
Arpt. Rev.,
Ser. 2, F.S.A.
Aaa 4.75 5/01/29
5,755 5,243,265
So. Orange Cnty. Pub. Fin. Auth.,
Foothill Area Proj., F.G.I.C
Aaa 8.00 8/15/08
2,000 (g) 2,537,220
Foothill Area Proj., F.G.I.C.
Aaa 6.50 8/15/10
2,725 (g) 3,151,136
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 21
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
California (cont'd.)
Victor Valley Element. Sch. Dist.,
Cap. Apprec., Ser. A, M.B.I.A.
Aaa Zero 6/01/17 $
3,550 $ 1,279,207
Cap. Apprec., Ser. A, M.B.I.A.
Aaa Zero 6/01/18
3,700 1,258,925
- ------------
28,947,931
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Colorado--1.2%
Denver City & Cnty. Arpt. Rev., Ser. C,
M.B.I.A. Aaa
5.60% 11/15/11 5,000
5,199,300
Jefferson Cnty. Sngl. Fam. Mtge. Rev., Ser.
A, M.B.I.A. Aaa 8.875
10/01/13 435 464,141
- ------------
5,663,441
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Connecticut--1.1%
Connecticut St. Res. Rec. Auth., Mid.
Connecticut. Sys.,
Ser. A, M.B.I.A.
Aaa 5.25 11/15/08
5,000 5,209,200
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
District of Columbia--8.5%
Dist. of Columbia Hosp. Rev. Medlantic
Hlthcare Grp.,
M.B.I.A.
Aaa 5.875 8/15/19
3,500 3,652,110
M.B.I.A.
Aaa 5.75 8/15/26
3,000 (g) 3,093,750
Dist. of Columbia Met. Area Trans. Auth.,
Gross Rev., F.G.I.C.
Aaa 6.00 7/01/09
2,400 2,655,336
Gross Rev., F.G.I.C.
Aaa 6.00 7/01/10
1,500 1,659,960
Dist. of Columbia Ref.,
Ser. B, F.S.A.
Aaa 5.50 6/01/10
7,565 (g) 7,890,673
Ser. B, M.B.I.A.
Aaa 6.00 6/01/18
4,460 4,866,083
Ser. B, M.B.I.A.
Aaa 6.00 6/01/19
3,965 4,319,987
Dist. of Columbia,
Assoc. American Med. Colleges, A.M.B.A.C
Aaa 5.375 2/15/27
4,500 4,483,260
Gen. Oblig., Ser. A, M.B.I.A.
Aaa 6.50 6/01/10
6,000 (g) 6,797,040
- ------------
39,418,199
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Florida--4.2%
Brevard Hlth. Facs. Auth. Rev., Holmes Reg'l.
Med. Ctr.,
M.B.I.A.
Aaa 5.60 10/01/10
6,000 (g) 6,349,800
Dade Cnty. Edl. Facs. Auth. Rev. Ref., Ser.
A, M.B.I.A. Aaa 5.625
4/01/06 3,000 3,200,010
Dade Cnty. Res. Rec., Facs. Rev. Ref.,
A.M.B.A.C. Aaa
5.10 10/01/04 3,355
3,458,468
Orange Cnty. Hlth. Facs. Auth. Rev. Hosp.,
Orlando Reg'l.
Hlthcare, Ser. A, M.B.I.A.
Aaa 6.25 10/01/07
3,160 3,536,862
Palm Beach Cnty. Solid Wste. Auth. Rev. Ref.,
Ser. A,
A.M.B.A.C.
Aaa 6.00 10/01/09
2,500 2,770,550
- ------------
19,315,690
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 22
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Georgia--2.6%
Atlanta Arpt. Facs. Rev., A.M.B.A.C.
Aaa 6.50% 1/01/10 $
2,000 $ 2,295,120
Georgia Mun. Elec. Auth.,
Proj. No. 1, A.M.B.A.C.
Aaa 6.00 1/01/06
5,570 6,050,022
Pwr. Rev., M.B.I.A.
Aaa 6.20 1/01/10
3,495 (e) 3,891,613
- ------------
12,236,755
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Hawaii--3.3%
Hawaii St. Dept. Bud. & Fin. Spec. Purpose
Rev., Hawaiian
Elec. Co. Inc., Ser. A, M.B.I.A.
Aaa 5.65 10/01/27
15,000 15,199,950
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Illinois--11.7%
Arlington Hts. Park Dist. Cap. Apprec., Ser.
E, F.G.I.C. Aaa Zero
12/01/13 4,175 1,825,143
Chicago Bd. Edl.
Cap. Apprec. Chicago Sch. Rfm., Ser. A,
A.M.B.A.C. Aaa Zero
12/01/11 5,000 2,479,400
Cap. Apprec. Chicago Sch. Rfm., Ser. A,
A.M.B.A.C. Aaa Zero
12/01/12 6,000 2,785,680
Cap. Apprec. Chicago Sch. Rfm., Ser. A,
A.M.B.A.C. Aaa Zero
12/01/13 3,500 1,530,060
Cap. Apprec. Chicago Sch. Rfm., Ser. A,
A.M.B.A.C. Aaa Zero
12/01/14 7,195 2,958,728
Cap. Apprec. Chicago Sch. Rfm., Ser. A,
A.M.B.A.C. Aaa Zero
12/01/15 3,245 1,254,030
Chicago Bd. Edl. Sch. Ref., A.M.B.A.C.
Aaa 5.75 12/01/27
10,000 10,394,200
Chicago Midway Arpt. Rev., Ser. B, M.B.I.A.
Aaa 5.75 1/01/22
6,835 7,009,771
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 2,057,660
Chicago Park Dist., A.M.B.A.C.
Aaa 5.30 1/01/15
3,000 3,008,760
Chicago Skyway Toll Brdg. Rev., M.B.I.A.
Aaa 5.50 1/01/23
650 657,794
Chicago Wstewtr. Trans. Rev.
Cap. Apprec. Ref., Ser. A, M.B.I.A.
Aaa Zero 1/01/20
7,275 2,221,494
Cap. Apprec. Ref., Ser. A, M.B.I.A.
Aaa Zero 1/01/21
13,655 3,947,524
Cap. Apprec. Ref., Ser. A, M.B.I.A.
Aaa Zero 1/01/24
13,695 3,349,386
Chicago Wtr. Rev. Cap. Apprec., F.G.I.C.
Aaa Zero 11/01/16
3,055 1,121,490
Onterie Ctr. Hsg. Fin. Corp. Mtge. Rev.,
Ser. A, M.B.I.A.
Aaa 7.00 7/01/12
1,575 1,673,579
Ser. A, M.B.I.A.
Aaa 7.05 7/01/27
5,400 5,741,658
- ------------
54,016,357
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Indiana--2.0%
Marion Cnty. Hosp. Auth. Facs. Rev.,
A.M.B.A.C. Aaa
8.625 10/01/12 8,500 (c)(g)
9,211,705
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 23
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Louisiana--0.5%
New Orleans, Gen. Oblig., Cap. Apprec.,
A.M.B.A.C. Aaa Zero
9/01/09 $ 4,000 $ 2,313,200
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Massachusetts--1.3%
Massachusetts Bay Trans. Auth. Gen. Sys.,
Ser. A,
M.B.I.A.
Aaa 4.50% 3/01/26
4,000 3,474,000
Massachusetts St. Hlth. & Edl. Facs. Auth.
Rev., Baystate
Med. Ctr., Ser. E, F.S.A.
Aaa 6.00 7/01/26
2,475 2,617,610
- ------------
6,091,610
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Michigan--4.1%
Detroit Dwntwn. Dev., Ser. A, A.M.B.A.C.
Aaa 5.75 7/15/15
1,820 1,903,702
Detroit Swr. Disp. Rev., Ser. 1993A, F.G.I.C.
Aaa 7.263 7/01/23
6,500(d)(g) 6,833,125
Michigan St. Hosp. Fin. Auth. Rev., Mid.
Michigan Oblig.,
M.B.I.A.
Aaa 7.50 6/01/15
2,350 (c) 2,550,126
Monroe Cnty. Poll. Ctrl. Rev., Detroit Edison
Co., Proj.
1, Ser. I, A.M.B.A.C.
Aaa 7.30 9/01/19
3,250 3,461,542
Saginaw Hosp. Fin. Auth., St. Luke's Hosp.,
Ser. C,
M.B.I.A.
Aaa 6.50 7/01/11
4,000 4,278,440
- ------------
19,026,935
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Mississipi--0.6%
Harrison Cnty. Wste. Wtr. Mgmt. Dist. Rev.,
Wste. Wtr.
Treatmt., Facs. Auth., F.G.I.C.
Aaa 6.50 2/01/06
2,400 2,576,832
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Missouri--0.3%
Missouri St. Hlth. & Edl. Facs. Rev.,
SSM Hlthcare, Ser. AA, M.B.I.A.
NR 6.25 6/01/16
285 (c) 309,806
SSM Hlthcare, Unref., Ser. AA, M.B.I.A.
Aaa 6.25 6/01/16
1,215 1,304,315
- ------------
1,614,121
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Montana--0.5%
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 2,171,280
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New Jersey--6.3%
East Orange Bd. Edl. Ctfs. Part.
Cap. Apprec., F.S.A.
Aaa Zero 2/01/15
1,425 595,180
Cap. Apprec., F.S.A.
Aaa Zero 2/01/16
1,000 395,770
Cap. Apprec., F.S.A.
Aaa Zero 2/01/17
1,425 533,335
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 24
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New Jersey (cont'd.)
East Orange Bd. Edl. Ctfs. Part.
Cap. Apprec., F.S.A.
Aaa Zero 2/01/18 $
2,845 $ 1,008,496
Cap. Apprec., F.S.A.
Aaa Zero 8/01/18
1,425 492,038
Cap. Apprec., F.S.A.
Aaa Zero 2/01/20
1,845 585,086
Cap. Apprec., F.S.A.
Aaa Zero 8/01/21
2,845 834,837
Cap. Apprec., F.S.A.
Aaa Zero 8/01/23
1,400 368,606
Jersey City Swr. Auth.,
A.M.B.A.C.
Aaa 6.00% 1/01/10
2,585 2,854,615
A.M.B.A.C.
Aaa 6.25 1/01/14
4,255 4,817,809
New Jersey Econ. Dev. Auth.,
Mkt. Trans. Facs. Rev., M.B.I.A.
Aaa 5.875 7/01/11
5,900 6,270,756
Mkt. Trans. Facs. Rev., Sr. Lien, M.B.I.A.
Aaa 5.80 7/01/09
3,340 3,567,454
Natural Gas Facs. Rev., M.B.I.A.
Aaa 5.70 6/01/32
5,000 5,148,900
New Jersey Impvt. Auth. Rev., Util. Sys.,
M.B.I.A. Aaa 5.75
7/01/27 1,500 1,559,595
- ------------
29,032,477
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New York--11.5%
Erie Cnty. Wtr. Auth. Rev., A.M.B.A.C.
Aaa Zero 12/01/17
770 189,682
Islip Res. Rec., Ser. B, A.M.B.A.C.
Aaa 7.20 7/01/10
1,750 2,095,887
Met. Trans. Auth. N.Y. Trans. Facs. Rev.,
F.S.A. Aaa 5.75
7/01/11 5,000 5,291,600
New York City Mun. Wtr. Fin. Auth., Wtr. &
Swr. Sys.
Rev., M.B.I.A.
Aaa 5.75 6/15/26
5,000 5,182,750
New York City,
Cap. Apprec., Ser. G, M.B.I.A.
Aaa Zero 8/01/07
4,000 2,604,800
Cap. Apprec., Ser. G, M.B.I.A.
Aaa Zero 8/01/08
3,325 2,030,212
Ser. D, M.B.I.A.
Aaa 5.25 8/01/21
2,500 2,466,750
Ser. G, M.B.I.A.
Aaa 5.75 2/01/14
3,000 3,134,040
New York St. Dorm. Auth. Rev., Montefiore
Med. Ctr.,
A.M.B.A.C.
Aaa 6.00 8/01/08
3,400 3,738,606
New York St. Envir. Facs. Corp.,
Poll. Ctrl. Rev.
Aaa 5.70 7/15/12
3,375 3,567,442
Poll. Ctrl. Rev.
Aaa 5.75 7/15/13
1,060 1,132,239
Poll. Ctrl. Rev.
Aaa 5.80 7/15/14
3,755 3,998,362
New York St. Thrwy. Auth. Gen. Rev.,
Ser. D
Aa3 5.40 1/01/11
5,370 5,570,730
Ser. D
Aa3 5.50 1/01/12
3,865 4,016,508
Port Auth. New York & New Jersey Cons., Ser.
99, F.G.I.C. Aaa 5.90
11/01/11 7,665 8,114,246
- ------------
53,133,854
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 25
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Ohio--3.9%
Cleveland City Sch. Dist.,
Rev. Antic. Nts., A.M.B.A.C.
Aaa 5.50% 6/01/06 $
6,465 $ 6,836,026
Rev. Antic. Nts., A.M.B.A.C.
Aaa 5.75 6/01/07
5,870 6,325,806
Kent City Sch. Dist., F.G.I.C.
Aaa 5.75 12/01/21
1,000 1,043,820
Lorain Cnty. Hosp. Rev., Catholic Hlthcare
Partners,
M.B.I.A.
Aaa 5.50 9/01/27
4,000 4,046,800
- ------------
18,252,452
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Oklahoma--1.5%
Norman Reg'l. Hosp. Auth., Rev. Ref., Ser. A,
M.B.I.A. Aaa 5.50
9/01/11 4,110 4,267,290
Oklahoma City Arpt. Trust, Jr. Lien, Ser. 24,
A.M.B.A.C. Aaa 5.75
2/01/18 2,620 2,690,399
- ------------
6,957,689
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Pennsylvania--1.3%
Philadelphia Mun. Auth. Rev., Criminal
Justice Ctr., Ser.
A, M.B.I.A.
Aaa 6.90 11/15/03
3,000 3,299,010
Philadelphia, Sch. Dist., Ser. B, A.M.B.A.C.
Aaa 5.375 4/01/27
2,500 2,504,275
- ------------
5,803,285
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Puerto Rico--3.1%
Puerto Rico Comm., M.B.I.A.
Aaa 4.875 7/01/23
3,000 2,823,690
Puerto Rico Gen. Oblig., M.B.I.A.
Aaa 6.25 7/01/13
1,250 1,421,825
Puerto Rico Pub. Bldgs. Auth. Rev., Gov't.
Facs., Ser. A,
A.M.B.A.C.
Aaa 6.25 7/01/13
1,700 1,933,682
Puerto Rico Tel. Auth. Rev.,
Ser. I, M.B.I.A.
Aaa 6.667 1/25/07
4,100 (d) 4,407,500
Ser. I, M.B.I.A.
Aaa 6.915 1/16/15
3,800 (d) 3,952,000
- ------------
14,538,697
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
South Dakota--2.8%
So. Dakota Hsg. Dev. Auth., Homeownership
Mtge., Ser. F Aa1 5.80
5/01/28 12,620 12,960,866
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Tennessee--1.2%
Metro. Gov't. Nashville & Davidson Cnty. Wtr.
& Swr.
Rev., A.M.B.A.C.
Aaa 8.216 1/01/22
5,000 (d) 5,731,250
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Texas--5.4%
Austin Util. Sys. Rev. Comb., Ser. A,
M.B.I.A. Aaa
4.875 11/15/10 5,500
5,466,725
Austin Util. Sys. Rev., M.B.I.A.
Aaa Zero 5/15/03
8,000 6,354,480
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 26
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) 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 $ 1,061,030
Houston Arpt. Sys. Rev.
Aaa 7.20 7/01/13
3,900 4,600,323
Houston Arpt. Sys. Rev., Spec. Facs. People
Mover, Ser.
A, F.S.A.
Aaa 6.00 7/15/05
3,255 3,508,857
Keller Ind. Sch. Dist., P.S.F.G.
Aaa Zero 8/15/15
4,945 1,958,072
Texas Wtr. Res. Fin. Auth. Rev., A.M.B.A.C.
Aaa 7.50 8/15/13
1,985 2,067,298
- ------------
25,016,785
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Virginia--3.7%
Chesapeake Bay Brdg. & Tunn. Comm., Dist.
Rev., F.G.I.C. Aaa 5.875
7/01/10 5,000 5,386,850
Richmond Met. Auth. Expwy. Rev. Ref.,
F.G.I.C. Aaa
5.25 7/15/22 4,265
4,299,675
Virginia Beach Hosp. Facs. Rev.,
1st Mtge., A.M.B.A.C.
Aaa 6.00 2/15/10
1,220 1,352,882
1st Mtge., A.M.B.A.C.
Aaa 6.00 2/15/13
1,455 1,608,925
Virginia Coll. Bldg. Auth. Edl. Facs. Rev.,
M.B.I.A. Aaa 5.25
1/01/26 4,275 4,324,718
- ------------
16,973,050
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Washington--4.4%
Washington St. Hlthcare Facs. Auth. Rev.,
Yakima Valley
Memorial Hosp. Assoc.
AAA(b) 5.25 12/01/20
2,500 2,435,375
Washington St. Pub. Pwr. Supply Sys.,
Nuclear Proj. No. 1, Ser. A, M.B.I.A.
Aaa 5.75 7/01/10
7,000 7,436,940
Nuclear Proj. No. 2, Ser. A, M.B.I.A.
Aaa Zero 7/01/11
5,210 2,622,818
Nuclear Proj. No. 2, Ser. B, F.G.I.C.
Aaa 7.25 7/01/03
3,000 (c) 3,245,040
Nuclear Proj. No. 3, Ser. B, F.G.I.C.
Aaa 7.00 7/01/05
2,000 (c) 2,130,900
Nuclear Proj. No. 3, Ser. B, F.G.I.C.
Aaa Zero 7/01/08
4,500 2,717,955
- ------------
20,589,028
- ------------
Total long-term investments (cost
$434,670,225)
455,075,816
- ------------
SHORT-TERM INVESTMENTS--0.9%
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
District of Columbia--0.1%
Dist. of Columbia, Gen. Oblig., Ser. 92A-4,
F.R.D.D. VMIG1 4.35
5/01/98 500 500,000
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Illinois--0.0%
Will County Solid Wste. Disp. Rev., Daily
BASF Corp.
Proj.,
Ser. 97, F.R.D.D., A.M.T.
P-1 4.25 5/01/98
100 100,000
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 27
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New Mexico--0.6%
Hurley Cnty., Poll. Ctrl. Rev., Ser. 85,
F.R.D.D. P-1 4.25%
5/01/98 $ 2,800 $ 2,800,000
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Texas--0.2%
Gulf Coast Wste. Disp. Auth., Poll. Ctrl.
Rev., Ser. 94,
F.R.D.D., A.M.T.
VMIG1 4.35 5/01/98
600 600,000
- ------------
Total short-term investments (cost
$4,000,000)
4,000,000
- ------------
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Total Investments--99.2%
(cost $438,670,225; Note 4)
459,075,816
Other assets in excess of liabilities--0.8%
3,629,791
- ------------
Net Assets--100%
$462,705,607
- ------------
- ------------
</TABLE>
- ---------------
(a) The following abbreviations are used in
portfolio descriptions:
A.M.B.A.C.--American Municipal Bond
Assurance Corporation
A.M.T.--Alternative Minimum Tax
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
P.S.F.G.--Public School Fund Guaranty
(b) Standard & Poor's rating.
(c) Prerefunded issues are secured by
escrowed cash and direct U.S. guaranteed
obligations.
(d) Inverse floating rate bond. The coupon is
inversely indexed to a floating
interest rate. The rate shown is the rate
at year end.
(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.
(g) All or partial amount of principal
segregated as collateral for financial
futures contracts.
The Fund's current Prospectus contains a
description of Moody's and Standard &
Poor's ratings.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 28
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Statement of Assets and Liabilities
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Assets
April 30, 1998
<S>
<C>
Investments, at value (cost
$438,670,225)................................
...................................
$459,075,816
Cash.........................................
.............................................
.................. 27,338
Interest
receivable...................................
.............................................
......... 6,179,023
Receivable for Series shares
sold.........................................
..................................
73,218
Other
assets.......................................
.............................................
............ 9,084
- --------------
Total
assets.......................................
.............................................
......... 465,364,479
- --------------
Liabilities
Payable for Series shares
reacquired...................................
.....................................
1,103,751
Dividends
payable......................................
.............................................
........ 599,998
Due to broker-variation
margin.......................................
.......................................
405,337
Accrued
expenses.....................................
.............................................
.......... 233,850
Management fee
payable......................................
.............................................
... 200,112
Distribution fee
payable......................................
.............................................
. 115,824
- --------------
Total
liabilities..................................
.............................................
......... 2,658,872
- --------------
Net
Assets.......................................
.............................................
.............. $462,705,607
- --------------
- --------------
Net assets were comprised of:
Shares of beneficial interest, at
par..........................................
.......................... $ 418,602
Paid-in capital in excess of
par..........................................
...............................
439,345,140
- --------------
439,763,742
Accumulated net realized gain on
investments..................................
...........................
2,430,211
Net unrealized appreciation of
investments..................................
.............................
20,511,654
- --------------
Net assets, April 30,
1998.........................................
.........................................
$462,705,607
- --------------
- --------------
Class A:
Net asset value and redemption price per
share
($224,409,371 / 20,312,259 shares of
beneficial interest issued and
outstanding)......................
$11.05
Maximum sales charge (3.0% of offering
price).......................................
..................... .34
- --------------
Maximum offering price to
public.......................................
..................................
$11.39
- --------------
- --------------
Class B:
Net asset value, offering price and
redemption price per share
($236,369,629 / 21,373,644 shares of
beneficial interest issued and
outstanding)......................
$11.06
- --------------
- --------------
Class C:
Net asset value, offering price and
redemption price per share
($1,508,667 / 136,421 shares of
beneficial interest issued and
outstanding)...........................
$11.06
- --------------
- --------------
Class Z:
Net asset value, offering price and
redemption price per share
($417,940 / 37,833 shares of beneficial
interest issued and
outstanding)..............................
$11.05
- --------------
- --------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 29
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Operations
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income
April 30, 1998
<S>
<C>
Income
Interest..................................
$ 26,886,125
- --------------
Expenses
Management fee............................
2,469,913
Distribution fee--Class A.................
222,115
Distribution fee--Class B.................
1,352,766
Distribution fee--Class C.................
8,567
Transfer agent's fees and expenses........
301,000
Custodian's fees and expenses.............
97,000
Reports to shareholders...................
50,000
Registration fees.........................
41,000
Insurance expense.........................
16,000
Audit fee.................................
15,000
Trustees' fees and expenses...............
13,000
Legal fees and expenses...................
11,000
Miscellaneous.............................
5,599
- --------------
Total expenses.........................
4,602,960
Less: Management fee waiver...............
(85,444)
Custodian fee credit...................
(5,707)
- --------------
Net expenses...........................
4,511,809
- --------------
Net investment income........................
22,374,316
- --------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions...................
10,397,180
Financial futures contract transactions...
(2,978,111)
- --------------
7,419,069
- --------------
Net change in unrealized
appreciation on:
Investments...............................
10,580,044
Financial futures contracts...............
297,750
- --------------
10,877,794
- --------------
Net gain on investments......................
18,296,863
- --------------
Net Increase in Net Assets
Resulting from Operations....................
$ 40,671,179
- --------------
- --------------
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Changes in Net Assets
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Increase (Decrease) Year
Ended April 30,
in Net Assets 1998
1997
<S> <C>
<C>
Operations
Net investment income........ $
22,374,316 $ 25,911,892
Net realized gain on
investment transactions...
7,419,069 12,131,022
Net change in unrealized
appreciation
(depreciation) of
investments...............
10,877,794 (7,713,454)
-----------
- -- -------------
Net increase in net assets
resulting from
operations................
40,671,179 30,329,460
-----------
- -- -------------
Dividends and distributions
(Note 1):
Dividends from net investment
income
Class A...................
(10,553,524) (9,267,489)
Class B...................
(11,765,355) (16,602,381)
Class C...................
(46,954) (41,775)
Class Z...................
(8,483) (247)
-----------
- -- -------------
(22,374,316) (25,911,892)
-----------
- -- -------------
Dividends in excess of net
investment income
Class A...................
(80,333) (117,523)
Class B...................
(90,260) (180,111)
Class C...................
(469) (467)
Class Z...................
(60) --
-----------
- -- -------------
(171,122) (298,101)
-----------
- -- -------------
Distributions from net
capital gains
Class A...................
(4,980,680) (2,135,002)
Class B...................
(5,596,092) (3,272,015)
Class C...................
(29,102) (8,473)
Class Z...................
(3,703) (2)
-----------
- -- -------------
(10,609,577) (5,415,492)
-----------
- -- -------------
Series share transactions (net
of share conversions) (Note
5):
Net proceeds from shares
subscribed................
17,849,201 201,450,948
Net asset value of shares
issued in reinvestment of
dividends and
distributions.............
19,222,401 17,841,830
Cost of shares reacquired....
(89,200,577) (294,754,828)
-----------
- -- -------------
Net decrease in net assets
from Series share
transactions..............
(52,128,975) (75,462,050)
-----------
- -- -------------
Total decrease..................
(44,612,811) (76,758,075)
Net Assets
Beginning of year...............
507,318,418 584,076,493
-----------
- -- -------------
End of year..................... $
462,705,607 $ 507,318,418
-----------
- -- -------------
-----------
- -- -------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 30
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
LONG-TERM INVESTMENTS--97.7%
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Alaska--4.8%
Alaska Ind. Dev. & Expt. Auth., Revolving
Loan Fund A2 5.40%
4/01/01 $ 945 $ 967,992
No. Slope Boro., Cap. Apprec., Ser. A,
M.B.I.A. Aaa Zero
6/30/07 1,430 915,886
- ------------
1,883,878
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Colorado--2.6%
Eaglebend Affordable Hsg. Corp., Multifam.
Rev. NR 5.75
7/01/07 1,000 1,019,170
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Connecticut--5.4%
Conn. Spec. Tax Oblig. Rev., Ser. A
AA-(b) 7.00 6/01/03
1,000 (c) 1,086,790
Conn. St. Hlth. & Edl. Facs. Auth. Rev.
Baa2 5.125 7/01/07
1,000 992,350
- ------------
2,079,140
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
District of Columbia--6.6%
Dist. Columbia Hsg. Fin. Agcy. Mtge. Rev.
Amt. Sngl. Fam., Ser. B
AAA(b) 5.25 12/01/08
440 447,128
Amt. Sngl. Fam., Ser. B
AAA(b) 5.30 12/01/09
315 319,309
Dist. of Columbia Ref., Ser. B, M.B.I.A.
Aaa 6.00 6/01/13
1,000 1,090,550
Dist. of Columbia Rev., America Geophysical
Union, Ser.
199
BBB-(b) 5.50 9/01/03
700 709,912
- ------------
2,566,899
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Florida--1.3%
Palm Beach Cnty. Hlth. Facs. Auth. Rev.,
Abbey Delray So.
Proj.
BBB(b) 5.30 10/01/07
500 501,865
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Georgia--2.4%
Burke Cnty. Dev. Auth., Oglethorpe Pwr. Co.,
M.B.I.A. Aaa 7.50
1/01/03 862 927,305
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Illinois--1.2%
Illinois Hlth. Facs. Auth. Rev., Edward
Hosp., Ser. A A2
5.75 2/15/09 450
466,524
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Indiana--2.7%
Univ. Southern Indiana Rev. Student Fee.,
Ser. F, F.G.I.C. Aaa 5.50
10/01/13 1,000 1,045,580
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 31
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Massachusetts--5.1%
Massachusetts Edl. Fing Auth. Ed. Ln. Rev.,
Iss. G., Ser.
A, M.B.I.A.
AAA(b) 5.10% 12/01/13 $
1,000 $ 970,660
Massachusetts St. Hsg. Fin. Agcy. Hsg. Dev.,
Ser. A,
M.B.I.A
Aaa 5.15 6/01/11
1,000 996,190
- ------------
1,966,850
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Michigan--1.4%
Michigan Mun. Bond Auth. Rev., Wayne Cnty.
Proj., M.B.I.A. Aaa 7.40
12/01/02 500 547,675
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Missouri--1.3%
Clayton Sch. Dist., Cap. Apprec., Ser. A,
F.S.A. Aaa Zero
2/01/07 750 494,325
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New Jersey--18.4%
Brick Twnshp., Mun. Util. Auth. Rev.,
F.G.I.C. Aaa
5.50 12/01/03 1,295
1,362,858
New Jersey Econ. Dev. Auth. Rev.,
Mkt. Trans. Facs. Rev., M.B.I.A.
Aaa 5.75 7/01/06
950 1,018,144
Mkt. Trans. Facs. Rev., M.B.I.A.
Aaa 5.80 7/01/07
1,000 1,071,480
Performing Arts Ctr., A.M.B.A.C.
Aaa 6.00 6/15/08
1,410 1,553,862
So. Reg'l. High Sch. Dist., M.B.I.A.
Aaa 5.50 9/01/06
1,010 1,074,438
West Windsor Plainsboro Sch., F.G.I.C.
Aaa 5.25 12/01/05
1,000 1,046,400
- ------------
7,127,182
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New York--8.0%
Met. Trans. Auth. N.Y. Trans. Facs. Rev.,
F.S.A. Aaa 5.75
7/01/11 675 714,366
New York, N.Y., Ser. F
A3 5.50 8/01/07
1,000 1,040,350
New York St. Env. Facs. Corp., Poll. Ctrl.
Rev. Aaa 5.80
1/15/14 1,280 1,362,957
- ------------
3,117,673
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Ohio--1.4%
Ohio St. Bldg. Auth., Admin. Bldg. Fund
Proj., M.B.I.A. Aaa
5.60 10/01/06 500
534,555
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Oklahoma--6.0%
Oklahoma St. Ind. Auth. Rev. Hosp., Deaconess
Hlthcare.,
Ser. A
Baa2 5.50 10/01/12
1,250 1,242,562
Oklahoma St. Ind. Auth. Rev. Hlth. Sys.,
Integris Bapt.,
A.M.B.A.C.
Aaa 6.00 8/15/09
1,000 1,094,810
- ------------
2,337,372
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 32
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Pennsylvania--10.4%
Clarion Cnty. Hosp. Auth. Rev., Ref. Clarion
Hosp. Proj. BBB-(b) 5.60%
7/01/10 $ 685 $ 694,597
Montgomery Cnty. Redev. Auth., Multifam. Hsg.
Rev., Ser. A NR 5.75
7/01/99 780 788,011
Pennsylvania St. Ctfs. of Part., Ser. A,
F.S.A. Aaa 6.25
11/01/06 600 645,768
Pennsylvania St. Higher Edl. Facs. Auth.,
Hlth. Svs. Rev.,
M.B.I.A.
Aaa 5.70 11/15/11
755 812,697
Philadelphia Hosp. Auth. & Higher Edl. Auth.,
Childrens
Seashore House, Ser. A
A-(b) 7.00 8/15/03
1,000 1,088,010
- ------------
4,029,083
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Puerto Rico--2.1%
Puerto Rico Comnwlth., Gen. Oblig., Ser. A,
M.B.I.A. Aaa 6.25
7/01/10 750 806,310
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Rhode Island--2.8%
Rhode Island St., Ref. Cons. Cap. Dev. Loan,
M.B.I.A. Aaa 6.00
8/01/06 1,000 1,092,290
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Texas--4.5%
San Antonio Elec. & Gas Rev., Ser. A,
F.G.I.C. Aaa
Zero 2/01/05 1,000
727,370
Tyler Tex. Hlth. Facs. Dev. Corp., Mother
Francis Hosp.,
Ser. A
Baa2 5.50 7/01/09
1,000 1,004,350
- ------------
1,731,720
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Utah--2.7%
Utah St. Brd. of Regents, Student Loan Rev.,
Ser. F,
A.M.B.A.C.
Aaa 7.00 11/01/01
1,000 1,064,200
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Washington--2.7%
Wash. St. Pub. Pwr. Supp. Sys., Nuclear Proj.
No. 3, Ser.
B
Aa1 7.00 7/01/99
1,000 1,034,100
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Wyoming--3.9%
Wyoming Cmnty. Dev. Auth. Hsg. Rev. Amt.,
Ser. 5 Aa2 5.60
12/01/06 1,450 1,526,401
- ------------
Total long-term investments (cost
$36,635,565)
37,900,097
- ------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 33
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of April 30, 1998
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Moody's
Principal
Rating Interest Maturity Amount
Value
Description (a)
(Unaudited) Rate Date
(000) (Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
SHORT-TERM INVESTMENTS--1.6%
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Texas--1.6%
Brazos River Auth. Poll. Ctrl. Rev., Texas
Util. Elec.
Co., Ser. 95C, F.R.D.D., A.M.T. (cost
$600,000) VMIG1 4.40%
5/01/98 $ 600 $ 600,000
- ------------
Total Investments--99.3% (cost $37,235,565;
Note 4 )
38,500,097
Other assets in excess of liabilities--0.7%
286,268
- ------------
Net Assets--100%
$ 38,786,365
- ------------
- ------------
</TABLE>
- ---------------
(a) The following abbreviations are used in
portfolio descriptions:
A.M.B.A.C.--American Municipal Bond
Assurance Corporation
A.M.T.--Alternative Minimum Tax
F.G.I.C.--Financial Guaranty Insurance
Company
F.R.D.D.--Floating Rate (Daily) Demand
Note (d)
F.S.A.--Financial Security Assurance
M.B.I.A.--Municipal Bond Insurance
Association
(b) Standard & Poor's Rating.
(c) Prerefunded issues are secured by
escrowed cash and direct U.S.
guaranteed obligations.
(d) 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. 34
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Statement of Assets and Liabilities
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Assets
April 30, 1998
<S>
<C>
Investments, at value (cost
$37,235,565).................................
................................... $
38,500,097
Interest
receivable...................................
.............................................
......... 602,522
Receivable for Series shares
sold.........................................
..................................
17,063
Other
assets.......................................
.............................................
............ 852
- --------------
Total
assets.......................................
.............................................
......... 39,120,534
- --------------
Liabilities
Bank
overdraft....................................
.............................................
............. 23,529
Accrued
expenses.....................................
.............................................
.......... 127,453
Payable for Series shares
reacquired...................................
.....................................
115,603
Dividends
payable......................................
.............................................
........ 40,096
Management fee
payable......................................
.............................................
... 15,692
Distribution fee
payable......................................
.............................................
. 11,796
- --------------
Total
liabilities..................................
.............................................
......... 334,169
- --------------
Net
Assets.......................................
.............................................
.............. $ 38,786,365
- --------------
- --------------
Net assets were comprised of:
Shares of beneficial interest, at
par..........................................
.......................... $ 35,867
Paid-in capital in excess of
par..........................................
...............................
37,195,390
- --------------
37,231,257
Accumulated net realized gain on
investments..................................
...........................
290,576
Net unrealized appreciation on
investments..................................
.............................
1,264,532
- --------------
Net assets, April 30,
1998.........................................
.........................................
$ 38,786,365
- --------------
- --------------
Class A:
Net asset value and redemption price per
share
($13,125,685 / 1,213,932 shares of
beneficial interest issued and
outstanding)........................
$10.81
Maximum sales charge (3% of offering
price).......................................
....................... .33
- --------------
Maximum offering price to
public.......................................
..................................
$11.14
- --------------
- --------------
Class B:
Net asset value, offering price and
redemption price per share
($24,017,088 / 2,220,773 shares of
beneficial interest issued and
outstanding)........................
$10.81
- --------------
- --------------
Class C:
Net asset value, offering price and
redemption price per share
($449,061 / 41,523 shares of beneficial
interest issued and
outstanding)..............................
$10.81
- --------------
- --------------
Class Z:
Net asset value, offering price and
redemption price per share
($1,194,531 / 110,471 shares of
beneficial interest issued and
outstanding)...........................
$10.81
- --------------
- --------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 35
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INTERMEDIATE SERIES
Statement of Operations
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income
April 30, 1998
<S>
<C>
Income
Interest..................................
$2,205,779
- --------------
Expenses
Management fee............................
207,968
Distribution fee--Class A.................
13,591
Distribution fee--Class B.................
135,876
Distribution fee--Class C.................
2,856
Reports to shareholders...................
87,000
Custodian's fees and expenses.............
72,000
Registration fees.........................
62,000
Transfer agent's fees and expenses........
38,000
Audit fee.................................
15,000
Trustees' fees and expenses...............
13,000
Legal fees and expenses...................
10,500
Miscellaneous.............................
6,554
- --------------
Total expenses.........................
664,345
Less: Management fee waiver...............
(7,346)
Custodian fee credit...................
(185)
- --------------
Net expenses...........................
656,814
- --------------
Net investment income........................
1,548,965
- --------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions...................
535,746
Financial futures contract transactions...
(196,033)
- --------------
339,713
- --------------
Net change in unrealized
appreciation/depreciation on:
Investments...............................
829,293
Financial futures contracts...............
(12,906)
- --------------
816,387
- --------------
Net gain on investments......................
1,156,100
- --------------
Net Increase in Net Assets
Resulting from Operations....................
$2,705,065
- --------------
- --------------
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
INTERMEDIATE SERIES
Statement of Changes in Net Assets
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Increase (Decrease) Year
Ended April 30,
in Net Assets 1998
1997
<S> <C>
<C>
Operations
Net investment income........... $
1,548,965 $ 1,958,229
Net realized gain on investment
transactions.................
339,713 478,036
Net change in unrealized
appreciation
(depreciation) of
investments..................
816,387 (699,669)
--------
- --- ------------
Net increase in net assets
resulting from operations....
2,705,065 1,736,596
--------
- --- ------------
Dividends and distributions (Note
1):
Dividends from net investment
income
Class A......................
(542,230) (579,475)
Class B......................
(975,783) (1,371,478)
Class C......................
(12,672) (5,456)
Class Z......................
(18,280) (1,820)
--------
- --- ------------
(1,548,965) (1,958,229)
--------
- --- ------------
Distributions in excess of net
investment income
Class A......................
- -- (9,615)
Class B......................
- -- (22,423)
Class C......................
- -- (75)
Class Z......................
- -- (3)
--------
- --- ------------
- -- (32,116)
--------
- --- ------------
Distributions from net capital
gains
Class A......................
(66,647) --
Class B......................
(130,950) --
Class C......................
(2,322) --
Class Z......................
(1,731) --
--------
- --- ------------
(201,650) --
--------
- --- ------------
Series share transactions (net of
share conversions) (Note 5):
Net proceeds from shares
subscribed...................
3,202,633 5,261,896
Net asset value of shares issued
in reinvestment of
dividends....................
1,116,810 1,242,265
Cost of shares reacquired.......
(10,710,780) (15,354,228)
--------
- --- ------------
Net decrease in net assets from
Series share transactions....
(6,391,337) (8,850,067)
--------
- --- ------------
Total decrease.....................
(5,436,887) (9,103,816)
Net Assets
Beginning of year..................
44,223,252 53,327,068
--------
- --- ------------
End of year........................
$38,786,365 $ 44,223,252
--------
- --- ------------
--------
- --- ------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 36
<PAGE>
Notes to Financial Statements
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 16, 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.
- ---------------------------------------------
- ---------------
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 with respect to
securities 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 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 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. The Fund amortizes premiums
and accretes original issue discount
on portfolio securities as adjustments to
interest income. Net investment
income, other than distribution fees, and
realized and unrealized gains or
losses are allocated daily to each class of
shares based upon the relative
proportion of net assets of each class at the
beginning of the day. Expenses are
recorded on the accrual basis which may
require the use of certain estimates by
management.
- ---------------------------------------------
- -----------------------------------
37
<PAGE>
Notes to Financial Statements
PRUDENTIAL MUNICIPAL BOND FUND
- ---------------------------------------------
- -----------------------------------
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 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.
Reclassification of Capital Accounts: The
Fund accounts and reports for
distributions to shareholders in accordance
with Statement of Position 93-2:
Determination, Disclosure, and Financial
Statement Presentation of Income,
Capital Gain, and Return of Capital
Distributions by Investment Companies. For
the fiscal year ended April 30, 1998, the
effect of applying this statement was
to increase undistributed net investment
income and decrease accumulated net
realized gain by $171,122 for the Insured
Series.
Custody Fee Credits: The Fund has an
arrangement with its custodian bank,
whereby uninvested monies earn credits which
reduce the fees charged by the
custodian.
- ---------------------------------------------
- ---------------
Note 2. Agreements
The Fund has a management agreement with
Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement,
PIFM has responsibility for all
investment advisory services and supervises
the subadviser's performance of such
services. PIFM has entered into a subadvisory
agreement with The Prudential
Investment Corporation ('PIC'), doing
business as Prudential Investments ('PI,'
the Subadviser or the investment adviser);
PIC furnishes investment advisory
services in connection with the management of
the Fund. PIFM 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 PIFM 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 assets of each series in excess
of $1 billion. PIFM has agreed to voluntarily
waive a portion of each series'
management fee, which amounted to $535,931,
$85,444 and $7,346 for the High
Yield Series, Insured Series and Intermediate
Series, respectively. Such amounts
represented .05 of 1% of the average daily
net assets or $.005 per share for the
High Yield Series and .02 of 1% of the
average daily net assets or $.002 per
share for the Insured Series and Intermediate
Series. Effective September 1,
1997, PIFM eliminated its management fee
waiver for the Insured Series and
Intermediate Series.
The Fund has a distribution agreement with
Prudential Securities Incorporated
('PSI'), which acts as the distributor of the
Class A, Class B, Class C and
Class Z 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. No
distribution or service fees are paid to PSI
as distributor of the Class Z
shares of the Fund. Effective July 1, 1998,
Prudential Investment Management
Services LLC will become the distributor of
the Fund and will serve the Fund
under the same terms and conditions as under
the arrangement with PSI.
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 year ended April 30, 1998.
PSI has advised the Fund that it received
approximately $529,300 ($493,600-High
Yield Series; $30,400-Insured Series; $5,300-
Intermediate Series) in front-end
sales charges resulting from sales of Class A
shares during the year ended April
30, 1998. 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 year
ended April 30, 1998, it received
approximately $1,320,700 ($866,900-High Yield
Series; $388,200-Insured Series;
$65,600-Intermediate Series) in contingent
deferred sales charges imposed upon
certain redemptions by Class B and C
shareholders.
PSI, PIC and PIFM are indirect, wholly owned
subsidiaries of The Prudential
Insurance Company of America.
The Fund, along with other affiliated
registered investment companies (the
'Funds'), has a credit agreement (the
'Agreement') with an unaffiliated lender.
The maximum commitment under the Agreement is
$200,000,000. Interest on any such
borrowings outstanding will be at market
rates. The purpose of the Agreement is
to serve as an alternative
- ---------------------------------------------
- -----------------------------------
38
<PAGE>
Notes to Financial Statements
PRUDENTIAL MUNICIPAL BOND FUND
- ---------------------------------------------
- -----------------------------------
source of funding for capital share
redemptions. The Fund has not borrowed any
amounts pursuant to the Agreement during the
year ended April 30, 1998. The
Funds pay a commitment fee at an annual rate
of .055 of 1% on the unused portion
of the credit facility. The commitment fee is
accrued and paid quarterly on a
pro rata basis by the Funds. The Agreement
expired on December 30, 1997 and has
been extended through December 29, 1998 under
the same terms.
- ---------------------------------------------
- ---------------
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Services LLC ('PMFS'),
a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During
the year ended April 30, 1998, the
Fund incurred fees of approximately $609,100
($361,000-High Yield Series;
$221,700-Insured Series; $26,400-Intermediate
Series) for the services of PMFS.
As of April 30, 1998, approximately $51,600
($31,100-High Yield Series;
$18,300-Insured Series; $2,200-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 nonaffiliates.
- ---------------------------------------------
- ---------------
Note 4. Portfolio Securities
Purchases and sales of portfolio securities,
excluding short-term investments,
for the year ended April 30, 1998, were as
follows:
<TABLE>
<CAPTION>
Series Purchases
Sales
- -------------------------------- ----------
- -- ------------
<S> <C>
<C>
High Yield......................
$208,053,727 $139,078,918
Insured.........................
404,690,101 456,797,559
Intermediate....................
21,888,177 28,523,204
</TABLE>
At April 30, 1998, the High Yield Series and
the Insured Series sold 100,000 and
284,000 financial futures contracts,
respectively of U.S. Treasury Bonds
expiring in June 1998.
The values of these financial futures
contracts at April 30, 1998 were as
follows:
<TABLE>
<CAPTION>
Financial Futures
Contracts Sold
--------
- ------------------
High
Yield Insured
Series
Series
--------
- --- -----------
<S> <C>
<C>
Value at disposition..............
$12,003,625 $34,421,156
Value at April 30, 1998...........
12,003,625 34,315,093
--------
- --- -----------
Unrealized gain................... $
0 $ 106,063
--------
- --- -----------
--------
- --- -----------
</TABLE>
The federal income tax basis of the Fund's
investments, at April 30, 1998 was
$1,026,195,791-High Yield Series;
$438,671,525-Insured Series; and
$37,235,565-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........... $ 81,054,099
$90,185,030 $9,130,931
Insured.............. 20,404,291
21,977,695 1,573,404
Intermediate......... 1,264,532
1,334,659 70,127
</TABLE>
The High Yield Series has a net capital loss
carryforward as of April 30, 1998
of approximately $17,547,000, of which
$2,024,000 expires in 2002, $5,361,000
expires in 2003, $6,383,000 expires in 2004,
$3,225,000 expires in 2005, and
$554,000 expires in 2006. No capital gains
distribution is expected to be paid
to shareholders until net gains have been
realized in excess of the aggregate of
such amounts. In addition, the High Yield
Series elected to treat net realized
capital losses of approximately $6,709,700
incurred in the six-month period
ended April 30, 1998, as having been incurred
in the following year.
- ---------------------------------------------
- ---------------
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 a limited group of
investors.
- ---------------------------------------------
- -----------------------------------
39
<PAGE>
Notes to Financial Statements
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
--------
- -------------------- -------------------
- --------- ------------------------
Year Ended April 30, 1998 Shares
Amount Shares Amount
Shares Amount
- ---------------------------------- --------
- --- ------------- ----------- ----
- --------- -------- ------------
<S> <C>
<C> <C> <C>
<C> <C>
Shares issued.....................
5,097,999 $ 57,395,615 569,674
$ 6,395,067 51,122 $ 558,941
Shares issued in reinvestment of
dividends and distributions....
962,597 10,829,429 785,872
8,843,968 36,144 393,414
Shares reacquired.................
(6,025,736) (67,587,666) (3,276,382)
(36,775,017) (331,385) (3,600,677)
--------
- --- ------------- ----------- ----
- --------- -------- ------------
Net increase (decrease) in shares
outstanding before
conversion.....................
34,860 637,378 (1,920,836)
(21,535,982) (244,119) (2,648,322)
Shares issued upon conversion from
Class B........................
6,417,324 71,773,373 3,118,260
35,134,908 160,123 1,739,629
--------
- --- ------------- ----------- ----
- --------- -------- ------------
Net increase (decrease) in shares
outstanding....................
6,452,184 $ 72,410,751 1,197,424
$ 13,598,926 (83,996) $ (908,693)
--------
- --- ------------- ----------- ----
- --------- -------- ------------
--------
- --- ------------- ----------- ----
- --------- -------- ------------
Year Ended April 30, 1997
- ----------------------------------
Shares issued.....................
2,690,433 $ 29,194,209 17,268,103
$ 190,281,225 146,988 $ 1,570,573
Shares issued in reinvestment of
dividends and distributions....
816,257 8,853,738 562,530
6,209,882 33,834 360,674
Shares reacquired.................
(5,951,712) (64,552,270) (20,358,917)
(224,259,104) (505,221) (5,381,606)
--------
- --- ------------- ----------- ----
- --------- -------- ------------
Net decrease in shares outstanding
before
conversion.....................
(2,445,022) (26,504,323) (2,528,284)
(27,767,997) (324,399) (3,450,359)
Shares issued upon conversion from
Class B........................
12,411,968 133,842,041 8,887,896
97,509,503 443,554 4,710,903
--------
- --- ------------- ----------- ----
- --------- -------- ------------
Net increase in shares
outstanding....................
9,966,946 $ 107,337,718 6,359,612
$ 69,741,506 119,155 $ 1,260,544
--------
- --- ------------- ----------- ----
- --------- -------- ------------
--------
- --- ------------- ----------- ----
- --------- -------- ------------
<CAPTION>
High Yield Series Insured
Series Intermediate Series
Class B Class B
Class B
--------
- -------------------- -------------------
- --------- ------------------------
Year Ended April 30, 1998 Shares
Amount Shares Amount
Shares Amount
- ---------------------------------- --------
- --- ------------- ----------- ----
- --------- -------- ------------
<S> <C>
<C> <C> <C>
<C> <C>
Shares issued.....................
10,261,223 $ 115,317,304 894,372
$ 10,051,980 113,994 $ 1,243,792
Shares issued in reinvestment of
dividends and distributions....
1,416,916 15,920,018 915,681
10,310,964 63,393 689,975
Shares reacquired.................
(7,485,320) (84,004,151) (4,626,069)
(51,987,346) (627,441) (6,818,594)
--------
- --- ------------- ----------- ----
- --------- -------- ------------
Net increase (decrease) in shares
outstanding before
conversion.....................
4,192,819 47,233,171 (2,816,016)
(31,624,402) (450,054) (4,884,827)
Shares issued upon conversion from
Class A........................
(6,418,319) (71,773,373) (3,114,481)
(35,134,908) (160,109) (1,739,629)
--------
- --- ------------- ----------- ----
- --------- -------- ------------
Net decrease in shares
outstanding....................
(2,225,500) $ (24,540,202) (5,930,497)
$ (66,759,310) (610,163) $ (6,624,456)
--------
- --- ------------- ----------- ----
- --------- -------- ------------
--------
- --- ------------- ----------- ----
- --------- -------- ------------
Year Ended April 30, 1997
- ----------------------------------
Shares issued.....................
7,261,475 $ 78,657,488 991,206
$ 10,920,454 293,960 $ 3,134,459
Shares issued in reinvestment of
dividends and distributions....
1,747,161 18,927,857 1,049,549
11,593,012 82,134 875,459
Shares reacquired.................
(9,901,712) (107,242,000) (6,341,050)
(69,974,266) (909,089) (9,694,638)
--------
- --- ------------- ----------- ----
- --------- -------- ------------
Net decrease in shares outstanding
before conversion..............
(893,076) (9,656,655) (4,300,295)
(47,460,800) (532,995) (5,684,720)
Shares reacquired upon conversion
into Class A...................
(12,411,968) (133,842,041)
(8,879,800) (97,509,503) (443,243)
(4,710,903)
--------
- --- ------------- ----------- ----
- --------- -------- ------------
Net decrease in shares
outstanding....................
(13,305,044) $(143,498,696)
(13,180,095) $(144,970,303) (976,238)
$(10,395,623)
--------
- --- ------------- ----------- ----
- --------- -------- ------------
--------
- --- ------------- ----------- ----
- --------- -------- ------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
40
<PAGE>
Notes to Financial Statements
PRUDENTIAL MUNICIPAL BOND FUND
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
High Yield Series Insured
Series Intermediate Series
Class C Class C
Class C
--------
- -------------------- -------------------
- --------- ------------------------
Year Ended April 30, 1998 Shares
Amount Shares Amount
Shares Amount
- ---------------------------------- --------
- --- ------------- ----------- ----
- --------- -------- ------------
<S> <C>
<C> <C> <C>
<C> <C>
Shares issued.....................
1,210,837 $ 13,633,168 75,353
$ 851,857 31,683 $ 345,224
Shares issued in reinvestment of
dividends and distributions....
45,608 514,159 4,949
55,759 1,355 14,774
Shares reacquired.................
(321,058) (3,613,378) (25,249)
(284,339) (15,800) (171,265)
--------
- --- ------------- ----------- ----
- --------- -------- ------------
Net increase in shares
outstanding....................
935,387 $ 10,533,949 55,053
$ 623,277 17,238 $ 188,733
--------
- --- ------------- ----------- ----
- --------- -------- ------------
--------
- --- ------------- ----------- ----
- --------- -------- ------------
Year Ended April 30, 1997
- ----------------------------------
Shares issued.....................
505,330 $ 5,472,765 21,265
$ 234,063 28,931 $ 311,189
Shares issued in reinvestment of
dividends and distributions....
28,059 304,264 3,510
38,759 436 4,639
Shares reacquired.................
(256,031) (2,781,902) (47,234)
(521,343) (26,221) (277,703)
--------
- --- ------------- ----------- ----
- --------- -------- ------------
Net increase (decrease) in shares
outstanding....................
277,358 $ 2,995,127 (22,459)
$ (248,521) 3,146 $ 38,125
--------
- --- ------------- ----------- ----
- --------- -------- ------------
--------
- --- ------------- ----------- ----
- --------- -------- ------------
<CAPTION>
High Yield Series Insured
Series Intermediate Series
Class Z Class Z
Class Z
--------
- -------------------- -------------------
- --------- ------------------------
Year Ended April 30, 1998 Shares
Amount Shares Amount
Shares Amount
- ---------------------------------- --------
- --- ------------- ----------- ----
- --------- -------- ------------
<S> <C>
<C> <C> <C>
<C> <C>
Shares issued.....................
737,972 $ 8,311,994 49,053
$ 550,297 96,575 $ 1,054,676
Shares issued in reinvestment of
dividends and distributions....
29,882 337,131 1,039
11,710 1,711 18,647
Shares reacquired.................
(141,036) (1,592,621) (13,642)
(153,875) (11,026) (120,244)
--------
- --- ------------- ----------- ----
- --------- -------- ------------
Net increase in shares
outstanding....................
626,818 $ 7,056,504 36,450
$ 408,132 87,260 $ 953,079
--------
- --- ------------- ----------- ----
- --------- -------- ------------
--------
- --- ------------- ----------- ----
- --------- -------- ------------
September 16, 1996(a) Through
April 30, 1997
- ----------------------------------
Shares issued.....................
287,958 $ 3,134,548 1,377
$ 15,206 23,097 $ 245,675
Shares issued in reinvestment of
dividends and distributions....
2,192 23,750 16
177 140 1,493
Shares reacquired.................
(39,065) (425,418) (10)
(115) (27) (281)
--------
- --- ------------- ----------- ----
- --------- -------- ------------
Net increase in shares
outstanding....................
251,085 $ 2,732,880 1,383
$ 15,268 23,210 $ 246,887
--------
- --- ------------- ----------- ----
- --------- -------- ------------
--------
- --- ------------- ----------- ----
- --------- -------- ------------
</TABLE>
- ---------------
(a) Commencement of offering of Class Z
shares.
- ---------------------------------------------
- ---------------
Note 6. Subsequent Event
On June 23, 1998 the Trustees of the Fund
approved a change in the name of the
High Yield Series to the High Income Series
effective July 1, 1998.
- ---------------------------------------------
- -----------------------------------
41
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class A
- ---------------------------------------------
- --------------
Years Ended April 30,
- ---------------------------------------------
- --------------
1998 1997 1996 1995
1994
- -------- -------- -------- ------
- -- -------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.................. $ 10.84 $ 10.70
$ 10.72 $ 10.74 $ 11.14
- -------- -------- -------- ------
- -- -------
Income from investment operations
Net investment
income...............................
.67(b) .70(b) .72(b) .72(b)
.72
Net realized and unrealized gain (loss) on
investment
transactions..........................
.47 .14 (.02) (.02)
(.39)
- -------- -------- -------- ------
- -- -------
Total from investment
operations................. 1.14
.84 .70 .70 .33
- -------- -------- -------- ------
- -- -------
Less distributions
Dividends from net investment
income................ (.67)
(.70) (.72) (.72) (.72)
Distributions from capital
gains.................... --
- -- -- -- (.01)
- -------- -------- -------- ------
- -- -------
Total
distributions..............................
(.67) (.70) (.72) (.72)
(.73)
- -------- -------- -------- ------
- -- -------
Net asset value, end of
year........................ $ 11.31 $
10.84 $ 10.70 $ 10.72 $ 10.74
- -------- -------- -------- ------
- -- -------
- -------- -------- -------- ------
- -- -------
TOTAL
RETURN(a):...................................
. 10.80% 8.03% 6.55%
6.90% 2.88%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)....................... $421,504
$334,062 $223,073 $115,501
$54,491
Average net assets
(000)............................ $381,735
$294,940 $162,329 $ 65,207
$52,982
Ratios to average net assets:
Expenses, including distribution
fees............ .62%(b) 0.64%(b)
0.64%(b) 0.69%(b) 0.69%
Expenses, excluding distribution
fees............ .52%(b) 0.54%(b)
0.54%(b) 0.59%(b) 0.59%
Net investment
income............................
6.03%(b) 6.44%(b) 6.58%(b)
6.83%(b) 6.42%
For Class A, B, C and Z shares:
Portfolio turnover
rate.......................... 13%
26% 35% 39% 36%
</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 year reported and
includes reinvestment of dividends and
distributions.
(b) Net of management fee waiver.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 42
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class B
- ---------------------------------------------
- -------------------
Years Ended April 30,
- ---------------------------------------------
- -------------------
1998 1997 1996 1995
1994
- -------- -------- -------- ------
- ---- ----------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.................. $ 10.84 $ 10.69
$ 10.72 $ 10.74 $ 11.14
- -------- -------- -------- ------
- ---- ----------
Income from investment operations
Net investment
income...............................
.63(b) .66(b) .68(b)
.68(b) .68
Net realized and unrealized gain (loss) on
investment
transactions..........................
.47 .15 (.03) (.02)
(.39)
- -------- -------- -------- ------
- ---- ----------
Total from investment
operations................. 1.10
.81 .65 .66
.29
- -------- -------- -------- ------
- ---- ----------
Less distributions
Dividends from net investment
income................ (.63)
(.66) (.68) (.68)
(.68)
Distributions from capital
gains.................... --
- -- -- --
(.01)
- -------- -------- -------- ------
- ---- ----------
Total
distributions..............................
(.63) (.66) (.68)
(.68) (.69)
- -------- -------- -------- ------
- ---- ----------
Net asset value, end of
year........................ $ 11.31 $
10.84 $ 10.69 $ 10.72 $
10.74
- -------- -------- -------- ------
- ---- ----------
- -------- -------- -------- ------
- ---- ----------
TOTAL
RETURN(a):...................................
. 10.36% 7.71% 6.12%
6.37% 2.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)....................... $669,223
$665,525 $799,048 $ 934,725
$1,099,640
Average net assets
(000)............................ $669,132
$725,305 $900,115 $1,024,132
$1,132,653
Ratios to average net assets:
Expenses, including distribution
fees............ 1.02%(b) 1.04%(b)
1.04%(b) 1.09%(b) 1.09%
Expenses, excluding distribution
fees............ .52%(b) 0.54%(b)
0.54%(b) 0.59%(b) 0.58%
Net investment
income............................
5.63%(b) 6.05%(b) 6.19%(b)
6.37%(b) 6.02%
</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 year reported and
includes reinvestment of dividends and
distributions.
(b) Net of management fee waiver.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 43
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class C Class Z
- ---------------------------------------------
- ------- ----------
August 1,
1994(c) Year
Years Ended April 30, Through
Ended
- -------------------------------------
April 30, April 30,
1998 1997 1996
1995 1998
- --------- --------- --------- ---
- ------- ----------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.................. $ 10.84 $
10.69 $ 10.72 $10.79
$10.83
- --------- --------- ---------
- ----- -----
Income from investment operations
Net investment income
(b)........................... .61
.63 .65 .49
.68
Net realized and unrealized gain (loss) on
investment
transactions..........................
.47 .15 (.03)
(.07) .47
- --------- --------- ---------
- ----- -----
Total from investment
operations................. 1.08
.78 .62 .42
1.15
- --------- --------- ---------
- ----- -----
Less distributions
Dividends from net investment
income................ (.61)
(.63) (.65) (.49)
(.68)
- --------- --------- ---------
- ----- -----
Net asset value, end of
year........................ $ 11.31
$ 10.84 $ 10.69 $10.72
$11.30
- --------- --------- ---------
- ----- -----
- --------- --------- ---------
- ----- -----
TOTAL
RETURN(a):...................................
. 10.09% 7.44% 5.86%
3.91% 10.91%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)....................... $20,554
$ 9,563 $ 6,471 $3,208
$9,919
Average net assets
(000)............................ $14,932
$ 8,060 $ 5,608 $1,385
$6,064
Ratios to average net assets:
Expenses, including distribution fees
(b)........ 1.27% 1.29%
1.29% 1.34%(e) .52%
Expenses, excluding distribution fees
(b)........ .52% 0.54%
0.54% 0.59%(e) .52%
Net investment income
(b)........................ 5.39%
5.80% 5.93% 6.34%(e)
6.14%
<CAPTION>
September 16,
1996(d)
Through
April 30,
1997
- -------------
<S>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.................. $ 10.79
- -----
Income from investment operations
Net investment income
(b)........................... .45
Net realized and unrealized gain (loss) on
investment
transactions..........................
.04
- -----
Total from investment
operations................. .49
- -----
Less distributions
Dividends from net investment
income................ (.45)
- -----
Net asset value, end of
year........................ $ 10.83
- -----
- -----
TOTAL
RETURN(a):...................................
. 4.36%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)....................... $ 2,719
Average net assets
(000)............................ $ 704
Ratios to average net assets:
Expenses, including distribution fees
(b)........ 0.54%(e)
Expenses, excluding distribution fees
(b)........ 0.54%(e)
Net investment income
(b)........................ 6.55%(e)
</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 year 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 waiver.
(c) Commencement of offering of Class C
shares.
(d) Commencement of offering of Class Z
shares.
(e) Annualized.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 44
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class A
- ---------------------------------------------
- -------------
Years Ended April 30,
- ---------------------------------------------
- -------------
1998 1997 1996 1995
1994
- -------- -------- -------- ------
- - -------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.................. $ 10.90 $ 10.94
$ 10.83 $ 10.71 $ 11.44
- -------- -------- -------- ------
- - -------
Income from investment operations
Net investment
income...............................
.53(b) .55(b) .58(b) .58(b)
.58
Net realized and unrealized gain (loss) on
investment
transactions..........................
.40 .08 .11 .12
(.43)
- -------- -------- -------- ------
- - -------
Total from investment
operations................. .93
.63 .69 .70 .15
- -------- -------- -------- ------
- - -------
Less distributions
Dividends from net investment
income................ (.53)
(.55) (.58) (.58) (.58)
Distributions in excess of net investment
income.... --(c) (.01) -
- - -- --
Distributions from capital
gains.................... (.25)
(.11) -- -- (.30)
- -------- -------- -------- ------
- - -------
Total
distributions..............................
(.78) (.67) (.58) (.58)
(.88)
- -------- -------- -------- ------
- - -------
Net asset value, end of
year........................ $ 11.05 $
10.90 $ 10.94 $ 10.83 $ 10.71
- -------- -------- -------- ------
- - -------
- -------- -------- -------- ------
- - -------
TOTAL
RETURN(a):...................................
. 8.67% 5.74% 6.47%
6.73% 1.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)....................... $224,409
$208,411 $139,548 $75,800 $30,669
Average net assets
(000)............................ $222,115
$187,371 $102,456 $39,471 $32,309
Ratios to average net assets:
Expenses, including distribution
fees............ 0.69%(b) 0.68%(b)
0.68%(b) 0.74%(b) 0.71%
Expenses, excluding distribution
fees............ 0.59%(b) 0.58%(b)
0.58%(b) 0.64%(b) 0.61%
Net investment
income............................
4.75%(b) 4.95%(b) 5.20%(b)
5.45%(b) 5.09%
For Class A, B, C and Z shares:
Portfolio turnover
rate.......................... 85%
110% 68% 64% 105%
</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 year reported and
includes reinvestment of dividends and
distributions.
(b) Net of management fee waiver.
(c) Less than $.005 per share.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 45
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class B
- ---------------------------------------------
- ---------------
Years Ended April 30,
- ---------------------------------------------
- ---------------
1998 1997 1996 1995
1994
- -------- -------- -------- ------
- -- --------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.................. $ 10.91 $ 10.95
$ 10.84 $ 10.71 $ 11.44
- -------- -------- -------- ------
- -- --------
Income from investment operations
Net investment
income...............................
.49(b) .50(b) .54(b) .54(b)
.54
Net realized and unrealized gain (loss) on
investment
transactions..........................
.40 .08 .11 .13
(.43)
- -------- -------- -------- ------
- -- --------
Total from investment
operations................. .89
.58 .65 .67 .11
- -------- -------- -------- ------
- -- --------
Less distributions
Dividends from net investment
income................ (.49)
(.50) (.54) (.54) (.54)
Distributions in excess of net investment
income.... --(c) (.01) -
- - -- --
Distributions from capital
gains.................... (.25)
(.11) -- -- (.30)
- -------- -------- -------- ------
- -- --------
Total
distributions..............................
(.74) (.62) (.54) (.54)
(.84)
- -------- -------- -------- ------
- -- --------
Net asset value, end of
year........................ $ 11.06 $
10.91 $ 10.95 $ 10.84 $ 10.71
- -------- -------- -------- ------
- -- --------
- -------- -------- -------- ------
- -- --------
TOTAL
RETURN(a):...................................
. 8.23% 5.32% 6.04%
6.40% 0.63%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)....................... $236,370
$298,005 $443,391 $567,648
$740,447
Average net assets
(000)............................ $270,553
$365,891 $524,452 $660,237
$807,794
Ratios to average net assets:
Expenses, including distribution
fees............ 1.09%(b) 1.08%(b)
1.08%(b) 1.14%(b) 1.11%
Expenses, excluding distribution
fees............ 0.59%(b) 0.58%(b)
0.58%(b) 0.64%(b) 0.61%
Net investment
income............................
4.35%(b) 4.54%(b) 4.80%(b)
4.99%(b) 4.69%
</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 year reported and
includes reinvestment of dividends and
distributions.
(b) Net of management fee waiver.
(c) Less than $.005 per share.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 46
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class C Class Z
- ---------------------------------------------
- ------- ----------
August 1,
1994(c) Year
Years Ended April 30, Through
Ended
- -------------------------------------
April 30, April 30,
1998 1997 1996
1995 1998
- --------- --------- --------- ---
- ------- ----------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.................. $ 10.91 $
10.95 $ 10.84 $10.79
$10.91
- --------- --------- ---------
- ----- -----
Income from investment operations
Net investment
income(b)............................
.46 .48 .51 .39
.54
Net realized and unrealized gain (loss) on
investment
transactions..........................
.40 .08 .11 .05
.39
- --------- --------- ---------
- ----- -----
Total from investment
operations................. .86
.56 .62 .44
.93
- --------- --------- ---------
- ----- -----
Less distributions
Dividends from net investment
income................ (.46)
(.48) (.51) (.39)
(.54)
Distributions in excess of net investment
income.... --(f) (.01)
- -- -- --(f)
Distributions from capital
gains.................... (.25)
(.11) -- --
(.25)
- --------- --------- ---------
- ----- -----
Total
distributions..............................
(.71) (.60) (.51)
(.39) (.79)
- --------- --------- ---------
- ----- -----
Net asset value, end of
year........................ $ 11.06
$ 10.91 $ 10.95 $10.84
$11.05
- --------- --------- ---------
- ----- -----
- --------- --------- ---------
- ----- -----
TOTAL
RETURN(a):...................................
. 7.96% 5.06% 5.78%
4.03% 8.68%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)....................... $ 1,509
$ 888 $ 1,137 $ 525 $
418
Average net assets
(000)............................ $ 1,142
$ 973 $ 827 $ 224 $
173
Ratios to average net assets:
Expenses, including distribution
fees(b)......... 1.34% 1.33%
1.33% 1.39%(e) 0.60%
Expenses, excluding distribution
fees(b)......... 0.59% 0.58%
0.58% 0.64%(e) 0.60%
Net investment
income(b).........................
4.11% 4.29% 4.56%
4.92%(e) 4.92%
<CAPTION>
September 16,
1996(d)
Through
April 30,
1997
- -------------
<S>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.................. $ 11.05
- -----
Income from investment operations
Net investment
income(b)............................
.36
Net realized and unrealized gain (loss) on
investment
transactions..........................
(.02)
- -----
Total from investment
operations................. .34
- -----
Less distributions
Dividends from net investment
income................ (.36)
Distributions in excess of net investment
income.... (.01)
Distributions from capital
gains.................... (.11)
- -----
Total
distributions..............................
(.48)
- -----
Net asset value, end of
year........................ $ 10.91
- -----
- -----
TOTAL
RETURN(a):...................................
. 2.86%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)....................... $ 15
Average net assets
(000)............................ $ 10
Ratios to average net assets:
Expenses, including distribution
fees(b)......... 0.58%(e)
Expenses, excluding distribution
fees(b)......... 0.58%(e)
Net investment
income(b).........................
4.18%(e)
</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 year 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 waiver.
(c) Commencement of offering of Class C
shares.
(d) Commencement of offering of Class Z
shares.
(e) Annualized.
(f) Less than $.005 per share.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 47
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class A
- ---------------------------------------------
- ---------
Years Ended April 30,
- ---------------------------------------------
- ---------
1998 1997 1996 1995
1994
- ------- ------- ------- -------
- ------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.................. $ 10.59 $ 10.65
$ 10.45 $ 10.67 $11.08
- ------- ------- ------- -------
- ------
Income from investment operations
Net investment
income...............................
.43(b) .46(b) .47(b) .51(b)
.53
Net realized and unrealized gain (loss) on
investment
transactions..........................
.28 (.05) .20 (.03)
(.19)
- ------- ------- ------- -------
- ------
Total from investment
operations................. .71
.41 .67 .48 .34
- ------- ------- ------- -------
- ------
Less distributions
Dividends from net investment
income................ (.43) (.46)
(.47) (.51) (.53)
Distributions in excess of net investment
income.... -- (.01) --
(.01) --
Distributions from capital
gains.................... (.06) -
- - -- (.18) (.22)
- ------- ------- ------- -------
- ------
Total
distributions..............................
(.49) (.47) (.47) (.70)
(.75)
- ------- ------- ------- -------
- ------
Net asset value, end of
year........................ $ 10.81 $
10.59 $ 10.65 $ 10.45 $10.67
- ------- ------- ------- -------
- ------
- ------- ------- ------- -------
- ------
TOTAL
RETURN(a):...................................
. 6.76% 3.86% 6.48%
4.52% 2.83%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)....................... $13,126
$13,740 $12,552 $10,507 $5,810
Average net assets
(000)............................ $13,591
$13,487 $12,604 $ 7,742 $4,981
Ratios to average net assets:
Expenses, including distribution
fees............ 1.31%(b) 1.15%(b)
1.16%(b) 1.05%(b) 1.00%
Expenses, excluding distribution
fees............ 1.21%(b) 1.05%(b)
1.06%(b) 0.95%(b) 0.90%
Net investment
income............................
3.99%(b) 4.30%(b) 4.36%(b) 4.75%(b)
4.63%
For Class A, B, C and Z shares:
Portfolio turnover
rate.......................... 54%
46% 35% 30% 55%
</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 year reported and
includes reinvestment of dividends and
distributions.
(b) Net of management fee waiver.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 48
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class B
- ---------------------------------------------
- ----------
Years Ended April 30,
- ---------------------------------------------
- ----------
1998 1997 1996 1995
1994
- ------- ------- ------- -------
- -------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.................. $ 10.59 $ 10.65
$ 10.45 $ 10.68 $ 11.09
- ------- ------- ------- -------
- -------
Income from investment operations
Net investment
income...............................
.39(b) .42(b) .43(b) .45(b)
.48
Net realized and unrealized gain (loss) on
investment
transactions..........................
.28 (.05) .20 (.04)
(.19)
- ------- ------- ------- -------
- -------
Total from investment
operations................. .67
.37 .63 .41 .29
- ------- ------- ------- -------
- -------
Less distributions
Dividends from net investment
income................ (.39) (.42)
(.43) (.45) (.48)
Distributions in excess of net investment
income.... -- (.01) --
(.01) --
Distributions from capital
gains.................... (.06) -
- - -- (.18) (.22)
- ------- ------- ------- -------
- -------
Total
distributions..............................
(.45) (.43) (.43) (.64)
(.70)
- ------- ------- ------- -------
- -------
Net asset value, end of
year........................ $ 10.81 $
10.59 $ 10.65 $ 10.45 $ 10.68
- ------- ------- ------- -------
- -------
- ------- ------- ------- -------
- -------
TOTAL
RETURN(a):...................................
. 6.33% 3.44% 6.05%
3.99% 2.43%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)....................... $24,017
$29,980 $40,550 $51,039 $65,215
Average net assets
(000)............................ $27,175
$35,221 $46,127 $60,174 $59,811
Ratios to average net assets:
Expenses, including distribution
fees............ 1.71%(b) 1.55%(b)
1.56%(b) 1.45%(b) 1.40%
Expenses, excluding distribution
fees............ 1.21%(b) 1.05%(b)
1.06%(b) 0.95%(b) 0.90%
Net investment
income............................
3.59%(b) 3.89%(b) 3.96%(b) 4.35%(b)
4.23%
</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 year reported and
includes reinvestment of dividends and
distributions.
(b) Net of management fee waiver.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 49
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class C Class Z
- ---------------------------------------------
- ------- ----------
August 1,
1994(c) Year
Years Ended April 30, Through
Ended
- -------------------------------------
April 30, April 30,
1998 1997 1996
1995 1998
- --------- --------- --------- ---
- ------- ----------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.................. $ 10.59 $
10.65 $ 10.45 $10.54
$10.59
- --------- --------- ---------
- ----- -----
Income from investment operations
Net investment
income(b)............................
.36 .39 .40 .35
.44
Net realized and unrealized gain (loss) on
investment
transactions..........................
.28 (.05) .20
(.08) .28
- --------- --------- ---------
- ----- -----
Total from investment
operations................. .64
.34 .60 .27
.72
- --------- --------- ---------
- ----- -----
Less distributions
Dividends from net investment
income................ (.36)
(.39) (.40) (.35)
(.44)
Distributions in excess of net investment
income.... -- (.01)
- -- (.01) --
Distributions from capital
gains.................... (.06)
- -- -- --
(.06)
- --------- --------- ---------
- ----- -----
Total
distributions..............................
(.42) (.40) (.40)
(.36) (.50)
- --------- --------- ---------
- ----- -----
Net asset value, end of
year........................ $ 10.81
$ 10.59 $ 10.65 $10.45
$10.81
- --------- --------- ---------
- ----- -----
- --------- --------- ---------
- ----- -----
TOTAL
RETURN(a):...................................
. 6.07% 3.17% 5.79%
2.14% 6.86%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)....................... $ 449
$ 257 $ 225 $ 167
$1,194
Average net assets
(000)............................ $ 381
$ 149 $ 197 $ 28 $
447
Ratios to average net assets:
Expenses, including distribution
fees(b)......... 1.96% 1.80%
1.81% 1.81%(e) 1.21%
Expenses, excluding distribution
fees(b)......... 1.21% 1.05%
1.06% 1.06%(e) 1.21%
Net investment
income(b).........................
3.33% 3.65% 3.71%
4.34%(e) 4.09%
<CAPTION>
September 16,
1996(d)
Through
April 30,
1997
- -------------
<S>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year.................. $ 10.63
- -----
Income from investment operations
Net investment
income(b)............................
.31
Net realized and unrealized gain (loss) on
investment
transactions..........................
(.03)
- -----
Total from investment
operations................. .28
- -----
Less distributions
Dividends from net investment
income................ (.31)
Distributions in excess of net investment
income.... (.01)
Distributions from capital
gains.................... --
- -----
Total
distributions..............................
(.32)
- -----
Net asset value, end of
year........................ $ 10.59
- -----
- -----
TOTAL
RETURN(a):...................................
. 2.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)....................... $ 246
Average net assets
(000)............................ $ 63
Ratios to average net assets:
Expenses, including distribution
fees(b)......... 1.05%(e)
Expenses, excluding distribution
fees(b)......... 1.05%(e)
Net investment
income(b).........................
4.65%(e)
</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 year 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 waiver.
(c) Commencement of offering of Class C
shares.
(d) Commencement of offering of Class Z
shares.
(e) Annualized.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 50
<PAGE>
Report of Independent Accountants
PRUDENTIAL MUNICIPAL BOND FUND
- ---------------------------------------------
- -----------------------------------
To the Shareholders and Trustees of
Prudential Municipal Bond Fund
In our opinion, the accompanying statements
of assets and liabilities, including
the portfolios of investments, and the
related statements of operations and of
changes in net assets and the financial
highlights present fairly, in all
material respects, the financial position of
High Yield Series, Insured Series
and Intermediate Series (constituting
Prudential Municipal Bond Fund, hereafter
referred to as the 'Fund') at April 30, 1998,
the results of each of their
operations for the year then ended and the
changes in each of their net assets
and the financial highlights for each of the
two years in the period then ended,
in conformity with generally accepted
accounting principles. These financial
statements and financial highlights
(hereafter referred to as 'financial
statements') are the responsibility of the
Fund's management; our responsibility
is to express an opinion on these financial
statements based on our audits. We
conducted our audits of these financial
statements in accordance with generally
accepted auditing standards which require
that we plan and perform the audit to
obtain reasonable assurance about whether the
financial statements are free of
material misstatement. An audit includes
examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements, assessing
the accounting principles used and
significant estimates made by management, and
evaluating the overall financial statement
presentation. We believe that our
audits, which included confirmation of
securities at April 30, 1998 by
correspondence with the custodian and brokers
and the application of alternative
auditing procedures where confirmations from
brokers were not received, provide
a reasonable basis for the opinion expressed
above. The accompanying financial
highlights for each of the three years in the
period ended April 30, 1996 were
audited by other independent accountants,
whose opinion dated June 13, 1996 was
unqualified.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
June 18, 1998
Tax Information (Unaudited)
PRUDENTIAL MUNICIPAL BOND FUND
- ---------------------------------------------
- -----------------------------------
As required by the Internal Revenue Code, we
wish to advise you as to the
federal tax status of dividends and
distributions paid by the Fund during its
fiscal year ended April 30, 1998.
During its fiscal year ended April 30, 1998,
the Fund paid aggregate dividends
from net investment income, all of which were
federally tax-exempt interest
dividends, as follows:
<TABLE>
<CAPTION>
Dividends per Share
- ---------------------------------------------
- -
Series
Class A Class B Class C Class
Z
---------------
- --------------- ------- -------
- ------- -------
<S>
<C> <C> <C> <C>
High Yield
Series............. $ .67 $ .63
$ .61 $ .68
Insured
Series................ $ .53 $
.49 $ .46 $ .54
Intermediate
Series........... $ .43 $ .39
$ .36 $ .44
</TABLE>
In addition to the above, the Insured Series
paid dividends and distributions
totalling $.252 per share, comprised of $.004
ordinary income and $.064
short-term capital gains which are taxable as
ordinary income and $.184
long-term capital gains of which $.131 is
taxable as 28% rate gains and $.053 is
taxable as 20% rate gains to Class A, B, C
and Z shareholders.
The Intermediate Series paid $.0550 long-term
capital gains, all of which is
taxable as 28% rate gains to Class A, B, C
and Z shareholders.
Shortly after the close of the calendar year
ending December 31, 1998, you will
be advised again as to the federal tax status
of the dividends and distributions
received in calendar 1998. In addition, you
will be advised at that time as to
the portion of your dividends which may be
subject to the Alternative Minimum
Tax (AMT) as well as information with respect
to state taxability.
- ---------------------------------------------
- -----------------------------------
51
<PAGE>
Comparing A $10,000 Investment.
Prudential Municipal Bond Fund: High Yield
Series
vs. the Lehman Brothers Municipal Bond Index.
Past performance is not indicative of future
results and an investor's shares,
when redeemed, may be worth more or less than
their original investment. The
boxes on top of the graphs are designed to
give you an idea of how much the
Fund's returns can fluctuate from year to
year by measuring the best and worst
calendar years in terms of total annual
return since the inception of each
share class.
These graphs are furnished to you in
accordance with SEC regulations. They
compare a $10,000 investment in the
Prudential Municipal Bond Fund (High Yield
Series, Class A, B, C and Z shares) with a
similar investment in the Lehman
Brothers Municipal Bond Index (the Index) by
portraying the initial account
values at the commencement of operations of
Class A, C, and Z shares and for
10 years for Class B shares, and subsequent
account values at the end of each
fiscal year (April 30) as measured on a
quarterly basis, beginning in 1990 for
Class A shares, 1988 for Class B shares, 1994
for Class C shares and 1996 for
Class Z shares. For the purposes of the
graphs, and unless otherwise indicated,
the accompanying tables, it has been assumed
that the maximum sales charge was
deducted from the initial $10,000 investment
in Class A shares; the maximum
applicable contingent deferred sales charges
were deducted from the value of
the investment in Class B and Class C shares
assuming full redemption on April
30, 1998; all recurring fees -- including
management fees -- were deducted;
and all dividends and distributions were
reinvested. Class B shares will
automatically convert to Class A shares, on a
quarterly basis, approximately
seven years after purchase. This conversion
feature is not reflected in the
graphs. The numbers in ( ) show the Series'
average annual total return
without waiver of management fees and/or
expense subsidization. Class Z shares
are not subject to sales charges or
distribution fees.
The Lehman Brothers Index is a weighted index
comprised of 21,000 municipal
bonds (general obligation bonds, revenue
bonds, insured bonds and prerefunded
bonds) selected by Lehman Brothers as
representative of the long-term,
investment grade municipal bond market. The
Index is unmanaged and includes
the reinvestment of all dividends but does
not reflect the payment of
transaction costs and advisory fees
associated with an investment in
the Fund. The securities which comprise the
Index may differ substantially
from the securities held in the Fund's
portfolio. The Lehman Brothers Index
is not the only benchmark that can be used to
characterize performance of
municipal bond funds and other indexes may
portray different comparative
performance.
- --Prudential Muni Bond Fund: High Yield
Series
//Lehman Bros. Muni Bond Index
Best Year: 1995 16.88%
Worst Year: 1994 -3.02%
Class A (GRAPH)
Average Annual Total
Returns - Class A
With Sales Load
7.49% Since Inception (7.44)
6.35% for 5 Years (6.33)
7.47% for 1 Year
Without Sales Load
7.89% Since Inception (7.84)
7.00% for 5 Years (6.98)
10.80% for 1 Year
Best Year: 1995 16.32%
Worst Year: 1994 -3.41%
Class B (GRAPH)
Average Annual Total
Returns - Class B
With Sales Load
8.29% Since Inception (8.21)
8.15% for 10 Years (8.07)
6.42% for 5 Years (6.40)
5.36% for 1 Year
Without Sales Load
8.29% Since Inception (8.21)
8.15% for 10 Years (8.07)
6.57% for 5 Years (6.56)
10.36% for 1 Year
Best Year: 1995 16.03%
Worst Year: 1996 2.97%
Class C (GRAPH)
Average Annual Total
Returns - Class C
With Sales Load
7.28% Since Inception (7.25)
9.09% for 1 Year
Without Sales Load
7.28% Since Inception (7.25)
10.09% for 1 Year
Average Annual Total
Returns - Class Z
Class Z (GRAPH)
With Sales Load
9.46% Since Inception (9.40)
10.91% for 1 Year
Without Sales Load
9.46% Since Inception (9.40)
10.91% for 1 Year
<PAGE>
Comparing A $10,000 Investment.
Prudential Municipal Bond Fund: Insured
Series
vs. the Lehman Brothers Municipal Bond Index.
Past performance is not indicative of future
results and an investor's shares,
when redeemed, may be worth more or less than
their original investment. The
boxes on top of the graphs are designed to
give you an idea of how much the
Fund's returns can fluctuate from year to
year by measuring the best and worst
calendar years in terms of total annual
return since the inception of each
share class.
These graphs are furnished to you in
accordance with SEC regulations. They
compare a $10,000 investment in the
Prudential Municipal Bond Fund (Insured
Series, Class A, B, C and Z shares) with a
similar investment in the Lehman
Brothers Municipal Bond Index (the Index) by
portraying the initial account
values at the commencement of operations of
Class A, C, and Z shares and for
10 years for Class B shares, and subsequent
account values at the end of each
fiscal year (April 30) as measured on a
quarterly basis, beginning in 1990 for
Class A shares, 1988 for Class B shares, 1994
for Class C shares and 1996 for
Class Z shares. For the purposes of the
graphs, and unless otherwise
indicated, the accompanying tables, it has
been assumed that the maximum sales
charge was deducted from the initial $10,000
investment in Class A shares; the
maximum applicable contingent deferred sales
charges were deducted from the
value of the investment in Class B and Class
C shares assuming full redemption
on April 30, 1998; all recurring fees --
including management fees -- were
deducted; and all dividends and distributions
were reinvested. Class B shares
will automatically convert to Class A shares,
on a quarterly basis,
approximately seven years after purchase.
This conversion feature is not
reflected in the graphs. The numbers in ( )
show the Series' average annual
total return without waiver of management
fees and/or expense subsidization.
Class Z shares are not subject to sales
charges or distribution fees.
The Lehman Brothers Index is a weighted index
comprised of 21,000 municipal
bonds (general obligation bonds, revenue
bonds, insured bonds and prerefunded
bonds) selected by Lehman Brothers as
representative of the long-term,
investment grade municipal bond market. The
Index is unmanaged and includes
the reinvestment of all dividends but does
not reflect the payment of
transaction costs and advisory fees
associated with an investment in the Fund.
The securities which comprise the Index may
differ substantially from the
securities held in the Fund's portfolio. The
Lehman Brothers Index is not the
only benchmark that can be used to
characterize performance of municipal bond
funds and other indexes may portray different
comparative performance.
- --Prudential Muni Bond Fund: Insured Series
//Lehman Bros. Muni Bond Index
Best Year: 1995 16.77%
Worst Year: 1994 -5.03%
Class A (GRAPH)
Average Annual Total
Returns - Class A
With Sales Load
6.92% Since Inception (6.85)
5.06% for 5 Years (5.02)
5.41% for 1 Year
Without Sales Load
7.31% Since Inception (7.24)
5.70% for 5 Years (5.66)
8.67% for 1 Year
Best Year: 1995 16.30%
Worst Year: 1994 -5.67%
Class B (GRAPH)
Average Annual Total
Returns - Class B
With Sales Load
7.57% Since Inception (7.42)
7.44% for 10 Years (7.29)
5.13% for 5 Years (5.09)
3.23% for 1 Year
Without Sales Load
7.57% Since Inception (7.42)
7.44% for 10 Years (7.29)
5.30% for 5 Years (5.26)
8.23% for 1 Year
Best Year: 1995 16.02%
Worst Year: 1996 2.16%
Class C (GRAPH)
Average Annual Total
Returns - Class C
With Sales Load
6.10% Since Inception (6.05)
6.96% for 1 Year
Without Sales Load
6.10% Since Inception (6.05)
7.96% for 1 Year
Class Z (GRAPH)
Average Annual Total
Returns - Class Z
With Sales Load
7.13% Since Inception (7.07)
8.68% for 1 Year
Without Sales Load
7.13% Since Inception (7.07)
8.68% for 1 Year
<PAGE>
Comparing A $10,000 Investment.
Prudential Municipal Bond Fund: Intermediate
Series
vs. the Lehman Brothers Municipal Bond Index.
Past performance is not indicative of future
results and an investor's shares,
when redeemed, may be worth more or less than
their original investment. The
boxes on top of the graphs are designed to
give you an idea of how much the
Fund's returns can fluctuate from year to
year by measuring the best and worst
calendar years in terms of total annual
return since the inception of each
share class.
These graphs are furnished to you in
accordance with SEC regulations. They
compare a $10,000 investment in the
Prudential Municipal Bond Fund
(Intermediate Series, Class A, B, C and Z
shares) with a similar investment in
the Lehman Brothers Municipal Bond Index (the
Index) by portraying the initial
account values at the commencement of
operations of Class A, C, and Z shares
and for 10 years for Class B shares, and
subsequent account values at the end
of each fiscal year (April 30) as measured on
a quarterly basis, beginning in
1990 for Class A shares, 1988 for Class B
shares, 1994 for Class C shares and
1996 for Class Z shares. For the purposes of
the graphs, and unless otherwise
indicated, the accompanying tables, it has
been assumed that the maximum sales
charge was deducted from the initial $10,000
investment in Class A shares; the
maximum applicable contingent deferred sales
charges were deducted from the
value of the investment in Class B and Class
C shares assuming full redemption
on April 30, 1998; all recurring fees --
including management fees -- were
deducted; and all dividends and distributions
were reinvested. Class B shares
will automatically convert to Class A shares,
on a quarterly basis,
approximately seven years after purchase.
This conversion feature is not
reflected in the graphs. The numbers in ( )
show the Series' average annual
total return without waiver of management
fees and/or expense subsidization.
Class Z shares are not subject to sales
charges or distribution fees.
The Lehman Brothers Index is a weighted index
comprised of 21,000 municipal
bonds (general obligation bonds, revenue
bonds, insured bonds and prerefunded
bonds) selected by Lehman Brothers as
representative of the long-term,
investment grade municipal bond market. The
Index is unmanaged and includes
the reinvestment of all dividends but does
not reflect the payment of
transaction costs and advisory fees
associated with an investment in the Fund.
The securities which comprise the Index may
differ substantially from the
securities held in the Fund's portfolio. The
Lehman Brothers Index is not the
only benchmark that can be used to
characterize performance of municipal bond
funds and other indexes may portray different
comparative performance.
- --Prudential Muni Bond Fund: Intermediate
Series
//Lehman Bros. Muni Bond Index
Best Year: 1995 13.23%
Worst Year: 1994 -4.07%
Class A (GRAPH)
Average Annual Total
Returns - Class A
With Sales Load
6.12% Since Inception (5.97)
4.24% for 5 Years (4.21)
3.56% for 1 Year
Without Sales Load
6.51% Since Inception (6.36)
4.88% for 5 Years (4.84)
6.76% for 1 Year
Best Year: 1995 12.79%
Worst Year: 1994 -4.55%
Class B (GRAPH)
Average Annual Total
Returns - Class B
With Sales Load
6.55% Since Inception (6.13)
6.39% for 10 Years (6.01)
4.27% for 5 Years (4.23)
1.33% for 1 Year
Without Sales Load
6.55% Since Inception (6.13)
6.39% for 10 Years (6.01)
4.44% for 5 Years (4.40)
6.33% for 1 Year
Best Year: 1995 12.51%
Worst Year: 1996 1.88%
Class C (GRAPH)
Average Annual Total
Returns - Class C
With Sales Load
4.58% Since Inception (4.53)
5.07% for 1 Year
Without Sales Load
4.58% Since Inception (4.53)
6.07% for 1 Year
Class Z (GRAPH)
Average Annual Total
Returns - Class Z
With Sales Load
5.79% Since Inception (5.73)
6.86% for 1 Year
Without Sales Load
5.79% Since Inception (5.73)
6.86% for 1 Year
<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.
Mendel A. Melzer, CFA
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
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Deborah A. Docs, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
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 LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, NY 10022
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.
This report is not authorized for
distribution to prospective investors unless
preceded or accompanied by a current
prospectus.
74435L103 74435L301
74435L509 MF133E
74435L202 74435L400
74435L608 Cat. #44416EK
74435L707 74435L806
74435L889
74435L871 74435L863
74435L855
