(ICON)
Prudential
Municipal
Bond Fund
- ------------------------
High Yield Series
Insured Series
Intermediate Series
SEMI
ANNUAL
REPORT
Oct. 31, 1997
(LOGO)
<PAGE>
Portfolio Managers'
Report
The tax-exempt municipal bond market rallied
strongly over the last six months,
thanks to falling inflation which pushed bond
yields down to their lowest
levels in two and a half years. In fact,
inflation grew by an annual rate of
1.8% in the first 10 months of 1997, the
slowest rate in a decade. As yields
fell, bond prices rose nicely, providing
investors with healthy gains in
principal in addition to tax-exempt income.
The Prudential Municipal Bond Fund posted
solid gains over the six months ended
October 31, although the performance varied
among the three Series. The High
Yield Series performed better than the other
two because it holds bonds that
have the highest coupons, lowest credit
quality and longest maturities. By
comparison, bonds in the Insured Series carry
the highest credit rating --
Triple A -- and offer lower interest rates
than lesser quality bonds. The
Intermediate Series holds bonds with shorter
maturities and lower yields, so
its returns typically lag the other two
Series when interest rates decline.
(But it tends to provide more price
protection when interest rates climb.) All
three Series beat their respective averages
as measured by Lipper Analytical
Services, with the High Yield and Insured
series doing so by a sizable margin.
Rates On Hold.
As May began, some investors wondered whether
the Federal Reserve would
increase the federal funds rate (what banks
charge each other for overnight
loans) when the central bankers met later in
the month. This key, short-term
interest rate was increased by a quarter
percentage point to 5.5% in March.
Since changes in monetary policy are rarely
made only once, a second rate
increase was considered possible. But
regulators left the rate unchanged
through the end of October, indicating that
they believed inflation was under
control. The ensuing bond market rally gained
momentum, pushing down the Bond
Buyer's Revenue Bond Index, a widely watched
barometer of bond yields, to 5.49%
in July, its lowest level since February
1994. Investors seeking solid returns
purchased municipal bonds, which offered
attractive yields on an after-tax
basis. Then too, concern about very volatile
stock prices in October prompted
some investors to steer funds into U.S.
Treasury securities and municipal
bonds.
We discuss each portfolio in detail on the
following pages.
How Investments Compared.
(As of 10/31/97)
(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.
Money Market Funds attempt to preserve a
constant share value; they don't
fluctuate much in price but, historically,
their returns have been generally
among the lowest of the major investment
categories.
<PAGE>
Peter J. Allegrini, Fund Manager
(PHOTO)
Prudential Municipal Bond Fund:
High Yield Series
Performance At A Glance.
Cumulative Total Returns1 As
of 10/31/97
<TABLE>
<CAPTION>
Six One
Five Ten Since
Months Year
Years Years Inception2
<S> <C> <C>
<C> <C> <C>
Class A 6.90% 9.75%
45.77% N/A 80.72%
Class B 6.69 9.41
42.75 130.63% 125.52
Class C 6.56 9.14
N/A N/A 25.93
Class Z 6.96 9.86
N/A N/A 11.62
Lipper HY
Muni Avg3 6.57 9.28
42.76 124.43 ***
</TABLE>
Average Annual Total Returns1
As of 9/30/97
<TABLE>
<CAPTION>
One Five
Ten Since
Year Years
Years Inception2
<S> <C> <C>
<C> <C>
Class A 6.97% 6.74%
N/A 7.47%
Class B 4.74 6.78
8.47% 8.34
Class C 8.47 N/A
N/A 7.29
Class Z 10.32 N/A
N/A 10.27
</TABLE>
Distributions and Yields
As of 10/31/97
<TABLE>
<CAPTION>
Taxable Equivalent Yield5
Total Dividends 30-Day
At Tax Rates Of
Paid for Six Mos. SEC Yield
36% 39.6%
<S> <C> <C>
<C> <C>
Class A $0.34 5.05%
7.89% 8.36%
Class B $0.31 4.81
7.52 7.96
Class C $0.30 4.56
7.13 7.55
Class Z $0.34 5.31
8.30 8.79
</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.
1 Source: 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
Fund charges a maximum front-end sales load
of 3% for Class A shares and a
declining contingent deferred sales charge
(CDSC) of 5%, 4%, 3%, 2%, 1% and 1%
for six years, for Class B shares. Class C
shares have a 1% CDSC for one year.
Class B shares automatically convert to Class
A shares on a quarterly basis,
after approximately seven years. Class Z
shares are not subject to a sales
charge or a distribution fee.
2 Inception 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.
3 The Lipper fund average includes 50 funds
for six months, 48 funds for one
year, 23 funds for five years and 18 funds
for 10 years.
4 Some 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, 78.07%; Class B, 126.31%;
Class C, 26.79%; and Class Z, 10.51% based on
all funds in each share class.
We seek to maximize income eligible for
exclusion from federal income taxes by
investing in non-investment grade municipal
bonds rated single-B or better by
recognized credit rating agencies such as
Standard & Poor's (S&P) or Moody's
Investors Service, or unrated bonds that our
analysts believe are of comparable
quality. On October 31, 1997, non-investment
grade municipal bonds rated BB or
below (or unrated bonds of comparable
quality) comprised approximately 52% of
the portfolio, down from about 55% on April
30, 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 10/31/97.
(GRAPH)
<PAGE>
High Yield Series
What Went Well.
- ---------------------------------------------
- ----
Mergers Helped Us.
High yield or below investment grade
municipal bonds performed well over the
past six months. As tax-exempt interest rates
edged lower, investors scrambled
to purchase bonds that provided higher
yields, pushing up prices of below
investment grade municipal bonds. In
addition, mergers and acquisitions in the
health care and electric utilities industries
helped bolster the value of some
of our high yield bonds:
- - Health care bonds, including those issued
for hospitals, accounted for 19% of
the Series' total investments as of October
31. Cost cutting and consolidation
continue to benefit the hospital industry.
- - A merger between Ohio Edison and Centerior
Energy was completed early in
November, shortly after the reporting period
ended. However, tax-exempt bonds
of both companies rallied in anticipation of
the merger, which the companies
expect to generate $1 billion in savings as
operations are combined. Your
Series holds Ohio Water Development Authority
bonds issued for Toledo Edison,
a former subsidiary of Centerior Energy that
is now operated by the new holding
company called FirstEnergy Corp. We also
welcomed the news that Moody's
Investors Service upgraded the credit rating
of the bonds issued for Toledo
Edison in August along with certain other tax-
exempt bonds associated with the
merger.
And Not So Well.
- ---------------------------------------------
- ----
Recycling Hurt Us.
While below investment grade municipal bonds
provide attractive returns, they
also carry greater risk than higher quality
bonds. For example, we owned bonds
of Ponderosa Fibres project, whose proceeds
were used to build a wastepaper
recycling and de-inking facility located in
Northampton, Pa. Construction of
the plant fell behind schedule. Even though
the bonds accounted for a small
portion of the High Yield Series' total
investments (about 0.43%), we sold
them in September and took a loss as our
analysts expect Ponderosa Fibres'
difficulties to continue.
Five Largest
Issuers.
2.0% Washington State Public
Power Supply
2.0% Village of Robbins
Cook County Il.
1.9% Chicago, Il.
O'Hare Airport
1.7% Clairborne County, MS
1.6% NJ State Economic
Development Authority
Expressed as a percentage of net assets as of
10/31/97.
Credit Quality.
Expressed as a percentage of
total investments as of 10/31/97.
(GRAPH)
1
<PAGE>
Christian Smith, Fund Manager
(PHOTO)
Prudential Municipal Bond Fund:
Insured Series
Performance At A Glance.
Cumulative Total Returns1 As of
10/31/97
<TABLE>
<CAPTION>
Six One
Five Ten Since
Months Year
Years Years Inception2
<S> <C> <C>
<C> <C> <C>
Class A 6.35% 7.66%
39.95% N/A 75.43%
Class B 6.13 7.23
37.18 116.93% 113.05
Class C 6.00 6.96
N/A N/A 22.55
Class Z 6.31 7.82
N/A N/A 9.36
Lipper INS
Muni Avg3 6.11 7.38
40.20 121.85 ***
</TABLE>
Average Annual Total Returns1
As of 9/30/97
<TABLE>
<CAPTION>
One Five
Ten Since
Year Years
Years Inception2
<S> <C> <C>
<C> <C>
Class A 4.99% 5.86%
N/A 7.10%
Class B 2.81 5.95
8.01% 7.77
Class C 6.54 N/A
N/A 6.50
Class Z 8.44 N/A
N/A 8.51
</TABLE>
Distributions and Yields
As of 10/31/97
<TABLE>
<CAPTION>
Taxable Equivalent Yield5
Total Dividends 30-Day
At Tax Rates Of
Paid for Six Mos. SEC Yield
36% 39.6%
<S> <C> <C>
<C> <C>
Class A $0.26 4.18%
6.53% 6.92%
Class B $0.24 3.91
6.11 6.47
Class C $0.23 3.67
5.73 6.08
Class Z $0.27 4.41
6.89 7.30
</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.
1 Source: 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
Fund charges a maximum front-end sales load
of 3% for Class A shares and a
declining contingent deferred sales charge
(CDSC) of 5%, 4%, 3%, 2%, 1% and 1%
for six years, for Class B shares. Class C
shares have a 1% CDSC for one year.
Class B shares automatically convert to Class
A shares on a quarterly basis,
after approximately seven years. Class Z
shares are not subject to a sales
charge or a distribution fee.
2 Inception 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.
3 The Lipper fund average includes 51 funds
for six months, 49 funds for one
year, 22 funds for five years and 17 funds
for 10 years.
4 Some 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, 74.99%; Class B, 123.56%;
Class C, 24.72%; and Class Z, 8.48% 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, Moody's or another nationally recognized
credit rating agency. The Series
may also invest up to 5% of its total
investments 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.
Portfolio Composition.
Sectors expressed as a percentage of
total investments as of 10/31/97.
(GRAPH)
2
<PAGE>
Insured
Series
What Went Well.
- ---------------------------------------------
- ----
Smooth Sailing.
Economic conditions remained nearly ideal
this summer as the economy barreled
ahead with inflation seemingly under control.
Among key inflationary gauges,
the producer price index continued to
decline, while the consumer price index
inched higher. As a result, the Federal
Reserve voted to leave the federal
funds rate unchanged. Not surprisingly,
municipal bond prices climbed sharply,
peaking in late July. We took advantage of
this trend by lengthening duration
(a measure of the portfolio's sensitivity to
interest rate changes) to as much
as eight years in June, which enabled the
Series to appreciate more rapidly.
We also enhanced the Series' returns by
purchasing insured, triple-A rated
hospital bonds, which typically carry higher
yields than other types of insured
bonds. Looking beyond the insurance company's
promise to pay interest to
bondholders in case of a default, investors
demand more yield because hospital
bonds' underlying security is not considered
as strong as that of public
projects backed by the taxing authority of a
city or state. Hospital bonds
comprised 14% of the Series' total
investments as of October 31. In addition,
we increased bonds subject to the alternative
minimum tax (AMT) to 13% of
total investments from 6% because they also
offer higher yields.
And Not So Well.
- ---------------------------------------------
- ----
Rally Dies Out.
The bond rally of early summer sputtered in
August as prices turned lower (and
yields rose) after reports of unexpected
strength in the U.S. jobs market and
manufacturing sector fueled concern that
another federal funds rate increase
might be necessary to rein in economic
growth. Our performance would have been
even better had we shortened duration in
August to protect the value of the
Series as bond prices declined.
Five Largest
Issuers.
3.7% Washington State Public
Power Supply
3.2% Municipal Electric
Authority of Georgia
3.1% Hawaii Electric
2.9% District of Columbia
General Obligation
2.9% Detroit MI, Sewer
Expressed as a percentage of net assetsas of
10/31/97.
Credit Quality.
Expressed as a percentage of
total investments as of 10/31/97.
(GRAPH)
3
<PAGE>
Scott K. Diamond, Fund Manager
(PHOTO)
Prudential Municipal Bond Fund:
Intermediate Series
Performance At A Glance.
Cumulative Total Returns1
As of 10/31/97
<TABLE>
<CAPTION>
Six One
Five Ten Since
Months Year
Years Years Inception2
<S> <C> <C>
<C> <C> <C>
Class A 5.04% 6.37%
33.72% N/A 65.78%
Class B 4.83 5.85
31.05 96.95% 93.47
Class C 4.70 5.59
N/A N/A 16.73
Class Z 5.09 6.59
N/A N/A 7.72
Lipper INT
Muni Avg3 5.00 6.62
36.61 102.81 ***
</TABLE>
Average Annual Total Returns1 As
of 9/30/97
One Five
Ten Since
Year Years
Years Inception2
[S] [C] [C]
[C] [C]
Class A 3.68% 5.07%
N/A 6.33%
Class B 1.36 5.10
6.84% 6.75
Class C 5.10 N/A
N/A 4.92
Class Z 7.17 N/A
N/A 7.10
Distributions and Yields As
of 10/31/97
Taxable Equivalent Yield5
Total Dividends 30-Day
At Tax Rates Of
Paid for Six Mos. SEC Yield
36% 39.6%
[S] [C] [C]
[C] [C]
Class A $0.22 3.45%
5.39% 5.71%
Class B $0.20 3.16
4.94 5.23
Class C $0.18 2.92
4.56 4.83
Class Z $0.22 3.65
5.70 6.04
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.
1 Source: 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
Fund charges a maximum front-end sales load
of 3% for Class A shares and a
declining contingent deferred sales charge
(CDSC) of 5%, 4%, 3%, 2%, 1% and 1%
for six years, for Class B shares. Class C
shares have a 1% CDSC for one year.
Class B shares automatically convert to Class
A shares on a quarterly basis,
after approximately seven years. Class Z
shares are not subject to a sales
charge or a distribution fee.
2 Inception 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.
3 The Lipper fund average includes 144 funds
for six months, 138 funds for one
year, 42 funds for five years and and 13
funds for 10 years.
4 Some 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, 67.63%; Class B, 104.08%;
Class C, 21.49% and Class Z, 7.68% 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, 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 structured 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 10/31/97.
(GRAPH)
4
<PAGE>
Intermediate
Series
What Went Well.
- ---------------------------------------------
- ----
Yield And More Yield.
Long-term municipal bond yields slid under 6%
in early May and stayed below
that threshold for the remainder of the
reporting period, based on the Bond
Buyer Revenue Bond Index. So finding
attractively priced, investment grade
municipal bonds maturing in three to 15 years
proved challenging. We
persevered, however, and enhanced your
Series' returns by selectively buying
higher yielding triple-B rated bonds, which
rose to 13% of total investments
as of October 31. We also purchased triple-A
rated insured hospital bonds,
which generally yield more than other insured
bonds. Hospital bonds, including
insured and uninsured, accounted for 18.3% of
total investments as of October
31, up from 15.2% at the start of the six-
month period.
And Not So Well.
- ---------------------------------------------
- ----
Rally Dies Out.
The bond rally of early summer sputtered in
August as prices turned lower (and
yields rose) after reports of unexpected
strength in the U.S. jobs market and
manufacturing sector fueled concern that
another federal funds rate increase
might be necessary to rein in economic
growth. Our performance would have been
even better had we shortened duration in
August to protect the value of the
Series as bond prices declined.
The Outlook.
- ---------------------------------------------
- ----
Southeast Asia's economic upheaval spread
through global stock markets in
autumn, prompting investors to seek the
relative safety of U.S. Treasuries and
municipal bonds as the Dow Jones Industrial
Average plunged a record 554 points
on October 27. Should Asian financial turmoil
continue, Treasuries and
tax-exempt bond prices could rise further.
The financial malaise will likely
slow economic growth in several Asian
countries, and to a lesser extent, in
the United States if overseas corporate
profits decline. We believe long-term
interest rates could edge lower and bond
prices climb further if the U.S.
economic growth decelerates.
Five Largest
Issuers.
8.9% NJ Economic
Development Authority
6.0% Oklahoma Industrial
Authority
4.4% Austin, TX, Utilities
4.0% Illinois Health
Facilities Authority
4.0% Dade County, FL,
School District
Expressed as a percentage of net assets as of
10/31/97.
Credit Quality.
Expressed as a percentage of
total investments as of 10/31/97.
(GRAPH)
5
<PAGE>
President's Letter
December 18, 1997
- ---------------------------------------------
- ----------------------------------
It Was Another
Good Year.
Dear Shareholder:
By many measures 1997 was another good year
for investors. The economy
continued its sixth straight year of moderate
growth. Inflation remained
subdued and unemployment fell to record lows.
Thanks to this favorable
environment, the stock market posted its
third year of double-digit returns
while bond values rose as yields declined to
five-year lows.
There were periods of uncertainty, of course.
The financial markets declined
significantly three times during the year.
Yet following each episode the
markets rebounded as investors took advantage
of buying opportunities. That is
very important because it shows that
investors today are not easily swayed by
temporary setbacks -- they choose to stay the
course and are investing for the
long term.
As we begin a new year, here are a few
thoughts to help guide your investment
decisions:
- - Keep your investment expectations
realistic. Seasoned investors know that
financial markets rise and fall -- as will
the value of their holdings. Over
time, however, stocks have been shown to
produce very attractive returns. In
fact, the S&P 500 rose more than 280% from
the time of the last major market
decline (October 31, 1987) through December
31, 1996, according to Lipper
Analytical Services.
- - Don't make rash decisions. If you have an
investment plan, stick to it. (If
you don't have one, see your Prudential
Financial Professional.) While past
performance is not indicative of future
results, many investors have profited
by he long-term growth prospects of stocks
and income producing potential of
bonds.
- - Review your portfolio. Sit down with your
Prudential Securities Financial
Advisor or Pruco Securities Registered
Representative today. Your Prudential
professional can advise you on financial
strategies and explain important new
developments, such as the federal Taxpayer
Relief Act of 1997, which may change
the way you save for college, a retirement
nest egg or other long-term
financial goal.
Thank you for your continued confidence in
Prudential Mutual Funds & Annuities.
In 1998, we'll do everything we can to keep
you informed and earn your trust.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds &
Annuities
6
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) HIGH
YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
LONG-TERM INVESTMENTS--96.9%
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Alabama--0.4%
Ft. Payne Ind. Dev. Brd. Rev., Gametime Inc.
NR 10.25% 8/01/09 $
3,954 (c) $ 4,479,566
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Arizona--1.9%
Coconino Cnty. Pol. Ctrl. Corp. Rev.
Tucson Elec. Pwr., Navajo A
B2 7.125 10/01/32
5,000 5,469,150
Tucson Elec. Pwr., Navajo B
B2 7.00 10/01/32
1,700 1,857,199
Ft. Mojave Indian Tribe Wtr. & Swr. Rev.
NR 10.25 9/01/19
3,000 (e) 900,000
Pima Cnty. Ind. Dev. Auth.,
Multifam. Mtge. Rev., La Cholla Proj.
NR 8.50 7/01/20
9,775 10,104,418
Tuscon Elec. Pwr. Co., Ser. A
B2 6.10 9/01/25
2,000 2,020,360
- --------------
20,351,127
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Arkansas--0.7%
Northwest Arkansas Reg'l. Arpt. Auth. Rev.
NR 7.625 2/01/27
7,000 7,459,690
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
California--11.7%
California Hsg. Fin. Agcy. Rev., Home Mtge.,
Ser. G Aa 8.15
8/01/19 795 819,860
Corona Ctfs. of Part., Vista Hosp. Sys. Inc.,
Ser. C NR 8.375
7/01/11 10,000 10,895,500
Delano Ctfs. of Part., Reg'l. Med. Ctr., Ser.
A NR 9.25
1/01/22 6,735 7,890,187
Folsom Spec. Tax Dist. No. 2
NR 7.70 12/01/19
3,130 3,418,085
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 12,312,703
Orange Cnty. Cmnty. Loc. Trans. Auth., Reg.
Linked
Savrs. & Ribs
Aa3 6.20 2/14/11
7,000 7,799,330
Richmond Redev. Agcy. Rev., Multifam. Bridge
Affordable
Hsg.
NR 7.50 9/01/23
10,000 10,030,400
Riverside Cnty. Asset Leasing Corp. Leasehold
Rev. Aaa Zero
6/01/20 17,905 5,304,535
Roseville Joint Union H.S. Dist.,
Ser. B, F.G.I.C.
Aaa Zero 8/01/09
1,740 977,306
Ser. B, F.G.I.C.
Aaa Zero 8/01/11
1,890 936,816
Ser. B, F.G.I.C.
Aaa Zero 8/01/14
2,220 921,322
Sacramento City Fin. Auth. Rev., Tax Alloc.,
M.B.I.A. Aaa Zero
11/01/15 5,695 2,193,999
Sacramento Cnty. Spec. Tax Rev.,
Dist. No. 1, Elliot Ranch
NR 8.20 8/01/21
3,750 (c) 3,942,975
Dist. No. 1, Laguna Creek Ranch
NR 8.25 12/01/20
4,500 4,863,735
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 7
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) HIGH
YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
California (cont'd.)
San Joaquin Hills Trans. Corr. Agcy.,
Toll Rd. Rev.
NR Zero 1/01/11 $
12,900 $ 6,638,340
Toll Rd. Rev.
NR Zero 1/01/14
8,420 3,637,272
Toll Rd. Rev.
NR Zero 1/01/25
10,000 2,354,000
San Joaquin Hills Trans. Toll Ref., Ser. A
Baa3 5.50% 1/15/28
3,000 2,960,550
San Luis Obispo Ctfs. of part., Vista Hosp.
Sys., Inc. NR 8.375
7/01/29 4,000 4,142,400
Santa Margarita/Dana Point Auth., Impvt.
Dist.,
Ser. A, M.B.I.A.
Aaa 7.25 8/01/13
1,990 2,473,869
Ser. B, M.B.I.A.
Aaa 7.25 8/01/12
3,000 3,715,950
So. California Pub. Pwr. Auth. Trans., Cap.
Apprec. Aa Zero
7/01/14 8,500 3,548,835
So. San Francisco Redev. Agcy., Tax Alloc.,
Gateway
Redev. Proj.
NR 7.60 9/01/18
2,375 2,579,274
So. Tahoe Joint Pwrs. Fin.
NR 8.00 10/01/01
5,795 5,938,484
Turlock Irrigation Dist. Rev., Ser. A
Aaa 6.25 1/01/12
5,000 5,655,850
Victor Valley Union H.S. Dist.,
Gen. Oblig., M.B.I.A.
Aaa Zero 9/01/12
3,605 1,678,596
Gen. Oblig., M.B.I.A.
Aaa Zero 9/01/14
4,740 1,958,568
Gen. Oblig., M.B.I.A.
Aaa Zero 9/01/16
3,990 1,462,694
- --------------
126,551,435
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Colorado--3.3%
Denver Urban Ren. Auth. Tax,
Inc. Rev.
NR 7.50 9/01/04
3,000 3,184,290
Inc. Rev.
NR 7.75 9/01/16
4,000 4,404,280
Eagle Cnty. Co., Lake Creek Affordable Hsg.,
Ser. A NR 8.00
12/01/23 11,505 12,070,816
San Miguel Cnty., Mountain Vlge. Met. Dist.
NR 8.10 12/01/11
3,200 3,615,968
Superior Met. Dist. No. 1, Wtr. & Swr.,
Rev.
NR 7.50 12/01/98
1,600 1,639,568
Rev.
NR 8.50 12/01/13
8,900 9,937,918
- --------------
34,852,840
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Connecticut--1.0%
Connecticut St. Dev. Auth. Mystic Marinelife
Aquarium
Proj. Rev.
NR 7.00 12/01/27
1,500 1,580,640
Connecticut St. Dev. Auth. Swr., Netco
Waterbury Ltd. NR
9.375 6/01/16 8,000
9,347,040
- --------------
10,927,680
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 8
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) HIGH
YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
District Of Columbia--0.9%
Dist. of Columbia Rev., Nat'l. Public Radio
NR 7.625% 1/01/18 $
8,800 $ 9,489,040
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Florida--4.3%
Crossings At Fleming Island Cmnty. Dev.
Dist., Clay City NR 8.25
5/01/16 7,860 8,603,242
Escambia Cnty. Hlth. Facs. Auth. Rev.,
Baptist Hosp.
Ref., Ser. A
BBB+(b) 8.60 10/01/02
3,375 3,562,042
Florida Hsg. Fin. Agcy., Palm Aire Proj.,
Multifam.
Mtge. Rev.
NR 10.00 1/01/20
9,448 (e) 7,417,066
No. Springs Impvt. Dist. Wtr. Mgt.,
Ser. A
NR 8.20 5/01/24
1,960 2,151,963
Ser. A
NR 8.30 5/01/24
1,720 1,897,538
Orlando Util. Comm., Wtr. & Elec. Rev., Ser.
D Aa 6.75
10/01/17 2,000 2,412,440
Palm Beach Cnty. Hsg. Auth., Banyan Club
Apts. NR 7.75
3/01/23 4,500 4,858,245
Sarasota Hlth. Facs., Kobernick Hsg. Meadow
Park Proj. Aaa 10.00
7/01/22 6,855 (c) 8,579,307
Seminole Cnty. Ind. Dev. Auth. Rev., Fern
Park NR 9.25
4/01/12 5,990 6,008,988
- --------------
45,490,831
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Georgia--3.4%
Atlanta Arpt. Facs. Rev.
Aaa Zero 1/01/10
2,000 1,020,080
Atlanta Urban Res. Fin. Auth., Clark Atlanta
Univ. Dorm.
Proj.
NR 9.25 6/01/10
4,440 (c) 5,100,272
Effingham Cnty. Dev. Auth., Ft. Howard Corp.
Baa3 7.90 10/01/05
10,000 10,773,400
Fulton Cnty. Wtr. & Swr. Rev., F.G.I.C.
Aaa 6.375 1/01/14
6,000 6,842,100
Henry Cnty. Wtr. & Swg. Auth. Rev.
Aaa 6.15 2/01/20
3,000 3,398,610
Rockdale Cnty. Dev. Auth., Solid Wste. Disp.
Rev. NR 7.50
1/01/26 8,100 8,732,205
- --------------
35,866,667
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Hawaii--0.7%
Hawaii Cnty. Impvt. Dist. No. 17
NR 9.50 8/01/11
6,565 7,048,841
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Illinois--9.7%
Chicago Brd. Edl., Lease Ctfs., Ser. A,
M.B.I.A. Aaa 6.00
1/01/20 10,000 10,878,200
Chicago O'Hare Int'l. Arpt.,
Amer. Airlines Proj., Ser. B
Baa2 8.20 12/01/24
1,000 1,206,280
United Airlines, Ser. B
Baa2 8.45 5/01/07
6,000 6,594,360
United Airlines, Ser. B
Baa2 8.50 5/01/18
6,500 7,151,430
United Airlines, Ser. B
Baa2 8.85 5/01/18
2,700 3,076,515
United Airlines, Ser. B
Baa2 8.95 5/01/18
2,320 2,635,891
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 9
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) HIGH
YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Illinois (cont'd.)
Chicago Pub. Bldg. Comm. Rev., Ser. A
Aaa 7.00% 1/01/20 $
6,530 $ 7,908,744
Hennepin Ind. Dev. Rev., Exolon-Esk Co. Proj.
NR 8.875 1/01/18
8,000 9,017,280
Illinois Reg'l. Trans. Auth. Ref.
Aaa 6.00 6/01/14
3,530 3,874,175
Illinois St. Hlth. Facs. Auth. Rev.,
Adventist Living Ctr.
NR 11.00 12/01/15
2,245 (e) 202,010
Beacon Hill Proj., Ser. A
NR 9.00 8/15/19
7,135 7,597,562
Midwest Physician Group Ltd. Proj.
BBB-(b) 8.10 11/15/14
3,075 3,481,792
Midwest Physician Group Ltd. Proj.
BBB-(b) 8.125 11/15/19
3,285 3,720,164
Illinois, Ser. K, A.M.B.A.C.
Aaa 6.25 1/01/13
6,825 7,631,032
Kane And De Kalb Cntys. Sch.,
Dist. No. 301, Cap. Apprec. A.M.B.A.C.
Aaa Zero 12/01/11
3,360 1,608,398
Dist. No. 301, Cap. Apprec. A.M.B.A.C.
Aaa Zero 12/01/13
4,065 1,725,349
Vlge. of Robbins, Cook Cnty. Robbins Res.
Rec. NR 8.375
10/15/16 20,000 21,021,600
Winnebago Cnty. Hsg. Auth., Park Tower
Assoc., Sec. 8 NR
8.125 1/01/11 4,041
4,297,324
- --------------
103,628,106
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Indiana--2.2%
Bluffton Econ. Dev. Rev., Kroger Co. Proj.
Baa3 7.85 8/01/15
7,500 8,532,075
Indianapolis Int'l. Arpt. Auth. Rev., Federal
Express
Corp. Proj.
Baa2 7.10 1/15/17
6,000 6,727,200
Wabash Econ. Dev. Rev. Bonds, Connell Ltd.
NR 8.50 11/24/17
7,250 8,070,120
- --------------
23,329,395
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Iowa--2.7%
City of Cedar Rapids Rev.,
1st Mtge., Cottage Grove Place Proj.
NR 9.00 7/01/18
9,375 10,633,500
1st Mtge., Cottage Grove Place Proj.
NR 9.00 7/01/25
4,435 5,020,154
Iowa St. Fin. Auth., Hlth. Care Facs. Rev.,
Mercy Hlth.
Initiatives Proj.
NR 9.25 7/01/25
10,000 13,163,500
- --------------
28,817,154
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Kentucky--0.8%
Kentucky St. Tpke. Auth. Rev., F.G.I.C.
Aaa Zero 1/01/10
8,250 4,497,075
Owensboro Elec. Lt. & Pwr. Rev.,
Ser. B, A.M.B.A.C.
Aaa Zero 1/01/14
5,000 2,146,350
Ser. B, A.M.B.A.C.
Aaa Zero 1/01/16
6,650 2,534,914
- --------------
9,178,339
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 10
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) HIGH
YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Louisiana--3.3%
Hodge Util. Rev., Stone Container Corp.
NR 9.00% 3/01/10 $
7,000 $ 7,584,640
New Orleans Home Mtge. Auth. Rev., Sngl. Fam.
Mtge.,
Ser. A, G.N.M.A.
Aaa 8.60 12/01/19
1,670 (f) 1,734,212
New Orleans Ind. Dev. Rev.
BB+(b) 8.75 10/01/19
3,600 4,198,320
New Orleans, Gen Oblig., Cap. Apprec.,
A.M.B.A.C. Aaa Zero
9/01/18 3,090 1,016,177
St. Charles Parish Poll. Ctrl. Rev.,
Pwr. & Lt. Co.
Baa3 8.25 6/01/14
10,000 10,800,000
Pwr. & Lt. Co., Ser. 1989
Baa3 8.00 12/01/14
3,500 3,816,505
West Feliciana Parish Poll. Ctrl. Rev., Gulf
St. Util.
Co. Proj.
NR 9.00 5/01/15
5,250 5,886,982
- --------------
35,036,836
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Maryland--1.9%
Anne Arundel Cnty. 1st Mtge. Rev., Pleasant
Living Conv. NR 8.50
7/01/13 3,230 3,474,026
Northeast Wste. Disp. Auth.,
Sludge Comp. Fac.
VMIG1 7.25 7/01/07
4,059 4,436,771
Sludge Comp. Fac.
NR 8.50 7/01/07
3,095 3,361,387
Washington Sub. San. Dist.
Ref., Gen. Const.
Aa1 6.00 6/01/18
3,705 4,126,740
Ref., Gen. Const.
Aa1 6.00 6/01/19
3,940 4,400,586
- --------------
19,799,510
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Massachusetts--4.3%
Boston Ind. Dev. Fin. Auth. Ind. Rev., 1st
Mtge.
Springhouse Proj.
NR 9.25 7/01/15
8,000 9,188,320
Mass. Bay Trans. Auth., Gen. Trans. Sys.,
Ser. A,
F.G.I.C.
Aaa 7.00 3/01/21
7,500 9,300,000
Mass. St. Coll. Bldg. Proj. and Ref. Bonds
A1 7.50 5/01/14
1,750 2,205,717
Mass. St. Hlth. & Edl. Facs. Auth. Rev.,
Cardinal Cushing Gen. Hosp.
NR 8.875 7/01/18
7,500 8,068,950
St. Josephs Hosp., Ser. C
NR 9.50 10/01/20
5,640 (c) 6,302,813
Mass. St. Ind. Fin. Agcy. Cont. Res., Ser. A
NR 9.50 2/01/00
1,650 1,701,827
Mass. St. Ind. Fin. Agcy. Rev., Glenmeadow
Proj. NR 7.00
2/15/06 3,700 3,710,656
Randolph Hsg. Auth., Multifam. Hsg., Liberty
Place Proj.
A, Ser. A
NR 9.00 12/01/21
5,920 5,925,269
- --------------
46,403,552
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Michigan--4.3%
Grand Rapids Dev. Auth.
Cap. Apprec., M.B.I.A.
Aaa Zero 6/01/10
3,000 1,591,860
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 11
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) HIGH
YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Michigan (cont'd.)
Cap. Apprec., M.B.I.A.
Aaa Zero 6/01/11 $
3,160 $ 1,573,427
Cap. Apprec., M.B.I.A.
Aaa Zero 6/01/12
3,000 1,408,980
Gratiot Cnty. Econ. Dev. Corp., Danley Die
Proj. Connell
L.P.
NR 7.625% 4/01/07
3,200 3,483,232
Holland Sch. Dist., Cap. Apprec., A.M.B.A.C.
Aaa Zero 5/01/17
2,950 1,037,781
Lowell Area Sch., F.G.I.C.
Aaa Zero 5/01/14
5,000 2,092,350
Michigan St. Hosp. Fin. Auth. Rev., Saratoga
Cmnty.
Hosp.
NR 8.75 6/01/10
6,345 7,169,913
Michigan Strategic Fund Ltd. Oblig. Rev.,
Great Lakes
Pulp & Fibre Proj.
NR 10.25 12/01/16
20,000 (e) 10,400,000
Michigan Strategic Fund, Solid Wste. Disp.,
Gennese Pwr.
Station
NR 7.50 1/01/21
10,000 10,650,700
Wayne Cnty. Bldg. Auth., Ser. A
Baa2 8.00 3/01/17
3,500 (c) 4,060,385
West Ottawa Sch. Dist.,
F.G.I.C.
Aaa Zero 5/01/15
4,825 1,905,489
F.G.I.C.
Aaa Zero 5/01/18
3,000 994,320
- --------------
46,368,437
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
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 4,154,840
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Mississipi--1.7%
Claiborne Cnty. Poll. Ctrl. Rev.,
Mid. So. Engy. Sys.
Ba1 9.875 12/01/14
6,100 6,615,511
Mid. So. Engy. Sys., Ser. A
Ba1 9.50 12/01/13
10,350 11,184,107
- --------------
17,799,618
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Missouri--2.1%
Sikeston Elec. Rev. Ref., M.B.I.A.
Aaa 6.00 6/01/15
9,250 10,174,445
St. Louis Cnty. Ind. Dev. Auth. Rev.,
Soemm Proj.
NR 10.25 7/01/08
1,560 1,564,836
Soemm Proj.
NR 10.25 7/01/08
590 591,829
St. Louis Cnty. Reg. Conv. & Sports Comp.,
Ser. C Aaa 7.90
8/15/21 8,820 (c) 10,411,216
- --------------
22,742,326
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Nebraska--0.2%
Nebraska Invest. Fin. Auth., G.N.M.A., Sngl.
Fam. Mtge.
Rev.,
Ser. I, M.B.I.A.
Aaa 8.125 8/15/38
1,795 1,858,022
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 12
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) HIGH
YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New Hampshire--1.4%
New Hampshire Higher Edl. & Hlth. Facs. Auth.
Rev.,
Antioch College
NR 7.875% 12/01/22 $
5,405 $ 5,937,555
Havenwood/Heritage Heights
NR 9.75 12/01/19
7,595 (c) 8,665,819
- --------------
14,603,374
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New Jersey--6.3%
New Jersey Econ. Dev. Corp. Rev., Ref. Newark
Arpt.
Marriot Hotel
NR 7.00 10/01/14
3,800 4,084,848
New Jersey Hlthcare Facs., Fin. Auth. Rev.
NR 8.00 7/01/27
5,000 5,332,550
New Jersey St. Econ. Dev. Auth. Rev., 1st
Mtge.,
Fellowship Vlge., Proj. A
NR 9.25 1/01/25
11,500 13,875,210
Keswick Pines Proj.
NR 7.75 1/01/01
3,095 3,133,254
New Jersey St. Ref., Ser. E
Aa1 6.00 7/15/10
10,000 11,130,800
New Jersey St. Tpke. Auth. Rev., Ser. C,
M.B.I.A. Aaa 6.50
1/01/16 11,000 12,744,710
New Jersey St. Trans. Trust Fund Auth.,
Trans. Sys.,
M.B.I.A.
Aaa 6.50 6/15/11
14,500 16,785,200
- --------------
67,086,572
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New York--2.9%
Met. Trans. Auth. Facs. Rev., Ser. N,
F.G.I.C. Aaa Zero
7/01/13 8,340 3,771,598
New York City Ind. Dev. Agcy.,
Amer. Airlines Inc.
Baa2 8.00 7/01/20
3,320 3,496,491
Mesorah Pub. Ltd.
NR 10.25 3/01/19
1,886 2,032,033
Visy Paper Inc. Proj.
NR 7.95 1/01/28
6,500 7,417,865
New York City, Ser. I
Baa1 6.25 4/15/27
3,000 3,177,480
New York Hosp. Rev., Newark Wayne Cmnty.
Hosp. Inc.,
Ser. A
NR 7.60 9/01/15
2,365 2,459,222
New York St. Dorm. Auth. Rev., Colgate Univ.,
M.B.I.A. Aaa 6.00
7/01/21 3,350 3,712,168
Port Auth. of New York & New Jersey, USAir
LaGuardia
Arpt.
B3 9.125 12/01/15
4,000 4,534,480
- --------------
30,601,337
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
North Dakota--1.1%
Mercer Cnty., Antelope Valley Station,
A.M.B.A.C Aaa 7.20
6/30/13 10,000 11,995,900
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Ohio--3.8%
Cleveland Pub. Pwr. Sys. Rev.,
1st Mtge., M.B.I.A.
Aaa Zero 11/15/12
1,000 462,070
1st Mtge., M.B.I.A.
Aaa Zero 11/15/13
1,500 653,310
1st Mtge., Ser. A, M.B.I.A.
Aaa Zero 11/15/09
3,000 1,665,210
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 13
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) HIGH
YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Ohio (cont'd.)
Mahoning Valley San. Dist. Wtr. Rev.
NR 7.75% 5/15/19 $
8,000 $ 8,870,240
Montgomery Cnty. Hlthcare. Facs. Rev.,
Friendship Vlge.
Dayton, Proj. B
NR 9.25 2/01/16
4,500 4,787,505
Ohio St. Air Quality Dev. Auth. Ref., Amt.
Coll. Poll.
Ctrl., Ser. A
Ba1 6.10 8/01/20
3,000 3,057,660
Ohio St. Solid Wste. Rev.,
Cscltd. Proj.
NR 8.50 8/01/22
5,000 5,131,950
Rep. Eng. Steels Inc.
NR 9.00 6/01/21
2,250 2,346,345
Ohio St. Wtr. Dev. Auth. Poll. Ctrl. Facs.,
1st Mtge.,
Toledo Edison
Ba2 8.00 10/01/23
5,500 6,249,980
Stark Cnty. Hlthcare. Facs. Rev., Rose Lane
Inc. Proj. NR 9.00
12/01/23 6,135 6,820,218
- --------------
40,044,488
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Oklahoma--1.6%
Grand River Dam Auth. Rev., A.M.B.A.C.
Aaa 6.25 6/01/11
12,000 13,516,080
Tulsa Ind. Dev. Auth., Univ. Tulsa, Ser. A,
M.B.I.A. Aaa 6.00
10/01/16 3,250 (f) 3,560,505
- --------------
17,076,585
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Pennsylvania--4.5%
Allegheny Cnty. Hosp. Rev., West Penn. Hosp.
Hlth. Ctr. NR 8.50
1/01/20 2,800 3,036,264
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 5,675,601
Dauphin Cnty. Gen. Auth. Hosp. Rev., NW Med.
Ctr. Proj. BBB-(b) 8.625
10/15/13 6,570 7,869,217
Lancaster Cnty. Solid Wste. Mgmt., Res. Rec.
Auth. Sys.
Rev., Ser. A
Baa2 8.50 12/15/10
5,965 6,192,147
Philadelphia Auth., Ind. Dev. Rev.
NR 7.75 12/01/17
5,000 5,549,000
Philadelphia Wtr. & Wstewtr. Auth. Rev.,
M.B.I.A.
Aaa 6.25 8/01/10
2,500 2,809,400
M.B.I.A.
Aaa 6.25 8/01/12
3,000 3,367,620
Somerset Cnty. Hosp. Auth. Rev.,
Hlthcare 1st Mtge.
NR 8.40 6/01/09
2,305 2,546,495
Hlthcare 1st Mtge.
NR 8.50 6/01/24
8,805 9,724,154
Wilkes Barre Gen. Mun. Auth. Coll. Rev.,
Misericordia
Coll., Ser. A
NR 7.75 12/01/12
1,245 1,363,325
- --------------
48,166,295
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Rhode Island--1.1%
Rhode Island Hsg. & Mtge. Fin. Corp.,
Homeownership
Opport., Ser. 1A
Aa2 8.20 10/01/17
175 175,481
Rhode Island Redev. Agcy., Ser. A
NR 8.00 9/01/24
10,560 11,560,877
- --------------
11,736,358
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 14
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) HIGH
YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
South Carolina--0.4%
So. Carolina St. Hsg. Fin. & Dev. Auth.,
Homeownership
Mtge.
Aa2 7.75% 7/01/22 $
4,345 $ 4,600,747
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
South Dakota--0.5%
So. Dakota Econ. Dev. Fin. Auth., Dakota Park
NR 10.25 1/01/19
5,000 5,324,750
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Tennessee--1.4%
Knox Cnty. Hlth. & Edl. Facs. Rev., Baptist
Hlth. Hosp. Aaa 8.50
4/15/04 5,905 (c) 6,380,943
Rutherford Cnty. Hlth. & Edl. Facs., Brd. 1st
Mtge. Rev. NR 9.50
12/01/19 7,300 8,394,562
- --------------
14,775,505
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Texas--3.1%
Beaumont Hsg. Fin. Corp., Sngl. Fam. Mtge.
Rev. A 9.20
3/01/12 1,470 1,661,423
Houston Arpt. Sys. Rev.
Ba2 6.125 7/15/27
3,200 3,295,168
Houston Wtr. & Swr. Sys. Rev., Ser. C,
A.M.B.A.C. Aaa Zero
12/01/10 5,000 2,570,700
Keller Ind. Sch. Dist., Cap. Apprec. Ref.,
Ser. A,
P.S.F.G.
Aaa Zero 8/15/17
4,075 1,397,970
New Braunfels Ind. Sch. Dist.,
Cap. Apprec.
Aaa Zero 2/01/08
2,365 1,432,717
Cap. Apprec.
Aaa Zero 2/01/09
2,365 1,349,469
Cap. Apprec.
Aaa Zero 2/01/12
2,365 1,122,287
Cap. Apprec.
Aaa Zero 2/01/13
1,365 610,182
Round Rock Ind. Sch. Dist., Gen. Oblig.,
M.B.I.A. Aaa Zero
8/15/11 4,385 2,146,019
San Antonio Elec. & Gas Rev.,
F.G.I.C.
Aaa Zero 2/01/09
5,000 2,853,000
Ser. B, F.G.I.C.
Aaa Zero 2/01/12
7,500 3,559,050
Tarrant Cnty. Hlth. Facs. Dev. Corp. Rev.,
Foundation
Proj.
NR 10.25 9/01/19
5,000 5,287,600
Texas Mun. Pwr. Agcy. Rev., M.B.I.A.
Aaa Zero 9/01/15
16,300 6,269,632
- --------------
33,555,217
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Utah--0.8%
Carbon Cnty. Solid Wste. Disp. Rev. Ref.,
Laidlaw
Environmental, Ser. A
NR 7.45 7/01/17
1,500 1,633,485
Intermountain Pwr. Agcy., Utah Pwr. Supply
Rev. Aaa 5.75
7/01/19 3,000 3,110,820
Tooele Cnty Poll. Ctrl. Rev. Ref., Laidlaw
Environmental, Ser. A
NR 7.55 7/01/27
4,000 4,379,920
- --------------
9,124,225
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 15
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) HIGH
YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Virginia--1.7%
Loudoun Cnty. Ind. Dev. Auth., Rev.
NR 7.125% 9/01/15 $
2,000 $ 2,182,780
Norfolk Redev. & Hsg. Auth., Multifam. Rental
Hsg. Fac.
Rev.
NR 8.00 9/01/26
6,000 6,120,060
Pittsylvania Cnty. Ind. Dev. Auth. Rev.
Multitrade NR 7.55
1/01/19 9,000 9,850,680
- --------------
18,153,520
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Washington--3.3%
Bellevue Conv. Ctr. Auth.,
King City, Oblig. Rev., M.B.I.A.
Aaa Zero 2/01/10
870 466,659
King City, Oblig. Rev., M.B.I.A.
Aaa Zero 2/01/11
1,200 603,912
King City, Oblig. Rev., M.B.I.A.
Aaa Zero 2/01/12
1,300 616,902
King City, Oblig. Rev., M.B.I.A.
Aaa Zero 2/01/14
1,385 582,656
Chelan Cnty. Pub. Util., Dist. No. 1,
Columbia River
Rock, Hydro Elec. Sys. Rev.
Aaa Zero 6/01/15
7,585 2,982,270
Thurston Cnty. Sch. Dist. 333,
F.G.I.C.
Aaa Zero 12/01/12
6,830 3,102,869
Ser. B, F.G.I.C.
Aaa Zero 12/01/11
6,415 3,091,966
Washington St. Ref., Ser R, 97A
Aa1 Zero 7/01/16
7,000 2,523,990
Washington St. Pub. Pwr. Supply Sys. Rev.,
Nuclear Proj. No. 1, Ser. B
Aa1 7.25 7/01/09
5,000 5,980,000
Nuclear Proj. No. 3
Aaa 6.00 7/01/09
3,530 3,858,502
Nuclear Proj. No. 3, M.B.I.A.
Aaa Zero 7/01/16
10,000 3,612,300
Nuclear Proj. No. 3, M.B.I.A.
Aaa Zero 7/01/17
5,000 1,710,250
Nuclear Proj. No. 3, Ser. B, M.B.I.A.
Aaa 7.125 7/01/16
5,000 6,072,050
- --------------
35,204,326
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
West Virginia--1.1%
So. Charleston Ind. Dev. Rev., Union Carbide
Chem. &
Plastics Co.
Baa2 8.00 8/01/20
2,450 2,650,361
Weirton Poll. Ctrl. Rev., Weirton Steel Proj.
B2 8.625 11/01/14
4,000 4,170,680
West Virginia St. Hsg. Dev. Fund Hsg. Fin.,
Ser. A Aaa 7.95
5/01/17 1,160 1,176,344
West Virginia St. Pkwys. Econ. Dev. & Tourism
Auth.,
F.G.I.C.
Aaa Zero 5/16/19
3,250 (d) 3,428,750
- --------------
11,426,135
- --------------
Total long-term investments (cost
$966,071,987)
1,035,109,186
- --------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 16
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) HIGH
YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
SHORT-TERM INVESTMENTS--1.4%
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
North Carolina--0.5%
Halifax Cnty. Ind. Facs. & Poll. Ctrl.,
Westmoreland
L.G. & E. Partners, Ser. 93, F.R.D.D.
A1+(b) 4.15% 11/03/97 $
5,000 $ 5,000,000
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Texas--0.9%
Brazos River Harbor Nav. Dist. Rev., F.R.D.D.
Dow Chemical Co.
P1 4.30 11/03/97
2,200 2,200,000
Dow Chemical Co., Ser. A
P1 4.30 11/03/97
2,100 2,100,000
West Side Calhoun Cnty. Nav. Dist., Swr. &
Solid Wste.
Disp. Rev., F.R.D.D.
Aa2 4.25 11/02/97
5,200 5,200,000
- --------------
9,500,000
- --------------
Total short-term investments (cost
$14,500,000)
14,500,000
- --------------
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Total Investments--98.3%
(cost $980,571,987; Note 4)
1,049,609,186
Other assets in excess of liabilities--1.7%
17,956,683
- --------------
Net Assets--100%
$1,067,565,869
- --------------
- --------------
</TABLE>
- ---------------
(a) The following abbreviations are used in
portfolio descriptions:
A.M.B.A.C.--American Municipal Bond
Assurance Corporation
F.G.I.C.--Financial Guaranty Insurance
Company
F.R.D.D.--Floating Rate (Daily) Demand
Note (g)
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/or 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
period end.
(e) Issuer in default of interest payment.
Non-income producing security.
(f) 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.
NR--Not Rated by Moody's or Standard &
Poor's.
The Fund's current Prospectus contains a
description of Moody's and Standard &
Poor's ratings.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 17
<PAGE>
Statement of Assets and Liabilities
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited)
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Assets
October 31, 1997
<S>
<C>
Investments, at value (cost
$980,571,987)................................
.................................
$1,049,609,186
Cash.........................................
.............................................
................ 5,345
Interest
receivable...................................
.............................................
....... 19,827,068
Receivable for Series shares
sold.........................................
................................
1,894,917
Receivable for investments
sold.........................................
..................................
60,000
Deferred expenses and other
assets.......................................
.................................
23,190
- ----------------
Total
assets.......................................
.............................................
....... 1,071,419,706
- ----------------
Liabilities
Dividends
payable......................................
.............................................
...... 1,815,814
Payable for Series shares
reacquired...................................
...................................
1,215,509
Management fee
payable......................................
.............................................
. 403,666
Distribution fee
payable......................................
............................................
321,891
Due to broker - variation
margin.......................................
...................................
53,125
Accrued
expenses.....................................
.............................................
........ 43,832
- ----------------
Total
liabilities..................................
.............................................
....... 3,853,837
- ----------------
Net
Assets.......................................
.............................................
............ $1,067,565,869
- ----------------
- ----------------
Net assets were comprised of:
Shares of beneficial interest, at
par..........................................
........................ $ 949,644
Paid-in capital in excess of
par..........................................
.............................
1,015,673,447
- ----------------
1,016,623,091
Accumulated net realized loss on
investments..................................
.........................
(18,041,296)
Net unrealized appreciation of
investments..................................
...........................
68,984,074
- ----------------
Net assets, October 31,
1997.........................................
.....................................
$1,067,565,869
- ----------------
- ----------------
Class A:
Net asset value and redemption price per
share
($382,078,532 / 33,985,479 shares of
beneficial interest issued and
outstanding)....................
$11.24
Maximum sales charge (3% of offering
price).......................................
..................... .35
- ----------------
Maximum offering price to
public.......................................
................................
$11.59
- ----------------
- ----------------
Class B:
Net asset value, offering price and
redemption price per share
($663,906,949 / 59,058,837 shares of
beneficial interest issued and
outstanding)....................
$11.24
- ----------------
- ----------------
Class C:
Net asset value, offering price and
redemption price per share
($15,719,222 / 1,398,327 shares of
beneficial interest issued and
outstanding)......................
$11.24
- ----------------
- ----------------
Class Z:
Net asset value, offering price and
redemption price per share
($5,861,166 / 521,760 shares of
beneficial interest issued and
outstanding).........................
$11.23
- ----------------
- ----------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 18
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
Statement of Operations (Unaudited)
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income
October 31, 1997
<S>
<C>
Income
Interest................................
$ 35,321,046
- ----------------
Expenses
Management fee..........................
2,528,168
Distribution fee--Class A...............
181,482
Distribution fee--Class B...............
1,678,789
Distribution fee--Class C...............
45,917
Transfer agent's fees and expenses......
242,000
Custodian's fees and expenses...........
79,000
Reports to shareholders.................
36,000
Registration fees.......................
31,000
Legal fees and expenses.................
15,000
Insurance expense.......................
11,000
Audit fee...............................
8,000
Trustees' fees and expenses.............
8,000
Miscellaneous...........................
4,935
- ----------------
Total expenses.......................
4,869,291
Less: Management fee waiver.............
(174,190)
Custodian fee credit.................
(172)
- ----------------
Net expenses.........................
4,694,929
- ----------------
Net investment income......................
30,626,117
- ----------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions.................
(21,652)
Financial futures contract
transactions.........................
467,610
- ----------------
445,958
- ----------------
Net change in unrealized
appreciation/depreciation of:
Investments.............................
37,616,224
Financial futures contracts.............
(53,125)
- ----------------
37,563,099
- ----------------
Net gain on investments....................
38,009,057
- ----------------
Net Increase in Net Assets
Resulting from Operations..................
$ 68,635,174
- ----------------
- ----------------
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH YIELD SERIES
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
Year Ended
Increase (Decrease) October 31,
April 30,
in Net Assets 1997
1997
<S> <C>
<C>
Operations
Net investment income....... $
30,626,117 $ 63,368,111
Net realized gain (loss) on
investment
transactions.............
445,958 (4,271,817)
Net change in unrealized
appreciation of
investments..............
37,563,099 18,105,192
------------
- -- --------------
Net increase in net assets
resulting from
operations...............
68,635,174 77,201,486
------------
- -- --------------
Dividends and distributions
(Note 1):
Dividends from net
investment income
Class A..................
(11,052,900) (18,998,681)
Class B..................
(19,107,315) (43,873,295)
Class C..................
(334,239) (467,478)
Class Z..................
(131,663) (28,657)
------------
- -- --------------
(30,626,117) (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...............
88,776,645 116,459,010
Net asset value of shares
issued in reinvestment of
dividends................
13,515,590 28,109,610
Cost of shares reacquired...
(84,604,266) (175,001,590)
------------
- -- --------------
Net increase (decrease) in
net assets from Series
share transactions.......
17,687,969 (30,432,970)
------------
- -- --------------
Total increase (decrease)......
55,697,026 (16,722,604)
Net Assets
Beginning of period............
1,011,868,843 1,028,591,447
------------
- -- --------------
End of period..................
$1,067,565,869 $1,011,868,843
------------
- -- --------------
------------
- -- --------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 19
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) INSURED
SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
LONG-TERM INVESTMENTS--98.5%
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Alabama--0.7%
Huntsville Solid Wste. Disp. Auth., F.G.I.C.
Aaa 7.00% 10/01/08 $
2,000 $ 2,172,000
Jefferson Cnty. Swr. Rev. Wste., Ser. D,
F.G.I.C. Aaa 5.75
2/01/22 1,200 1,241,100
- ------------
3,413,100
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Alaska--2.2%
Alaska St. Engy. Auth. Pwr. Rev., Bradley
Lake Hydro, 1st
Ser., A.M.B.A.C.
Aaa 7.25 7/01/16
2,000 (h) 2,133,360
Anchorage Hosp. Rev., Sisters of Providence,
A.M.B.A.C. Aaa 7.125
10/01/05 5,000 5,544,550
No. Slope Boro., Cap. Apprec., Ser. A,
M.B.I.A. Aaa Zero
6/30/06 5,000 3,281,150
- ------------
10,959,060
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Arizona--1.9%
Maricopa Cnty. Ind. Dev. Auth. Rev.,
Hosp. Facs., John C. Lincoln Hosp., F.S.A.
Aaa 7.00 12/01/00
2,265 2,458,794
Hosp. Facs., John C. Lincoln Hosp., F.S.A.
Aaa 7.50 12/01/13
1,045 (c) 1,165,321
Hosp. Facs., John C. Lincoln Hosp., F.S.A.
Aaa 7.50 12/01/13
1,205 1,331,513
Maricopa Cnty. Unified Sch. Dist. No. 69,
Paradise
Valley, Ser. E, F.G.I.C.
Aaa 6.80 7/01/12
3,700 4,390,346
- ------------
9,345,974
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
California--5.3%
California St. Pub. Wks. Brd.,
Comm. Coll. Proj., Ser. A, A.M.B.A.C.
Aaa 5.625 3/01/16
2,000 2,067,140
Dept. of Corrections, A.M.B.A.C.
Aaa 5.75 1/01/12
2,000 2,124,820
Contra Costa Wtr. Dist. Wtr. Rev., Ser. E,
A.M.B.A.C. Aaa 6.25
10/01/12 1,455 1,652,778
Inland Empire Solid Wste. Fin. Auth.,
Landfill Impvt.
Fin., Proj. B, F.S.A.
Aaa 6.00 8/01/16
2,000 2,093,380
Los Angeles Cnty. Pub. Wks. Fin. Auth., Lease
Rev.,
M.B.I.A.
Aaa 5.20 9/01/09
2,400 2,480,208
Roseville Joint Union H.S. Dist., Ser. B,
F.G.I.C. Aaa Zero
8/01/13 2,015 884,041
San Diego Cnty. Wtr. Auth. Wtr. Rev., Ctfs.
of Part.,
F.G.I.C
Aaa 7.25 4/26/06
5,800 (d) 6,626,500
So. Orange Cnty. Pub. Fin. Auth.,
Foothill Area Proj., F.G.I.C
Aaa 8.00 8/15/08
2,000 (h) 2,565,120
Foothill Area Proj., F.G.I.C.
Aaa 6.50 8/15/10
2,725 (h) 3,160,836
Victor Valley Element. Sch. Dist.,
Cap. Apprec., Ser. A, M.B.I.A.
Aaa Zero 6/01/17
3,550 1,250,417
Cap. Apprec., Ser. A, M.B.I.A.
Aaa Zero 6/01/18
3,700 1,230,694
- ------------
26,135,934
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 20
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) INSURED
SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Colorado--1.2%
Denver City & Cnty. Arpt. Rev., Ser. C,
M.B.I.A. Aaa
5.60% 11/15/11 $ 5,000 $
5,173,900
Jefferson Cnty. Sngl. Fam. Mtge. Rev., Ser.
A, M.B.I.A. Aaa 8.875
10/01/13 500 535,815
- ------------
5,709,715
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
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 5,186,350
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
District Of Columbia--6.0%
Dist. of Columbia Hosp. Rev. Medlantic
Hlthcare Grp.,
M.B.I.A.
Aaa 5.875 8/15/19
3,500 3,616,900
M.B.I.A.
Aaa 5.75 8/15/26
3,000 (h) 3,067,500
Dist. of Columbia Met. Area Trans. Auth.,
Gross Rev., F.G.I.C.
Aaa 6.00 7/01/09
2,400 2,654,808
Gross Rev., F.G.I.C.
Aaa 6.00 7/01/10
1,500 1,657,215
Dist. of Columbia Ref., Ser. B, F.S.A.
Aaa 5.50 6/01/10
7,565 (h) 7,893,170
Dist. of Columbia,
Assoc. American Med. Colleges, A.M.B.A.C
Aaa 5.375 2/15/27
4,000 3,967,560
Gen. Oblig., Ser. A, M.B.I.A.
Aaa 6.50 6/01/10
6,000 6,814,680
- ------------
29,671,833
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Florida--3.9%
Brevard Hlth. Facs. Auth. Rev., Holmes Reg'l.
Med. Ctr.,
M.B.I.A.
Aaa 5.60 10/01/10
6,000 (h) 6,335,220
Dade Cnty. Edl. Facs. Auth. Rev. Ref., Ser.
A, M.B.I.A. Aaa 5.625
4/01/06 3,000 3,223,290
Dade Cnty. Res. Rec., Facs. Rev. Ref.,
A.M.B.A.C. Aaa
5.10 10/01/04 3,355
3,467,325
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 3,571,306
Palm Beach Cnty. Solid Wste. Auth. Rev.,
Ref., Ser. A,
A.M.B.A.C.
Aaa 6.00 10/01/09
2,500 2,781,750
- ------------
19,378,891
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Georgia--3.7%
Atlanta Arpt. Facs. Rev., A.M.B.A.C.
Aaa 6.50 1/01/10
2,000 2,298,440
Georgia Mun. Elec. Auth.,
Proj. No. 1, A.M.B.A.C.
Aaa 6.00 1/01/06
5,570 6,091,519
Proj. No. 1, Sub., Ser. A, A.M.B.A.C.
Aaa 5.00 1/01/26
6,000 5,729,340
Pwr. Rev., M.B.I.A.
Aaa 6.20 1/01/10
3,495 (e) 3,893,849
- ------------
18,013,148
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 21
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) INSURED
SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Hawaii--3.1%
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 $ 15,293,250
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Illinois--7.5%
Chicago Bd. Edl. Sch. Ref., A.M.B.A.C.
Aaa 5.75 12/01/27
10,000 10,334,100
Chicago Midway Arpt. Rev.,
Ser. A, M.B.I.A.
Aaa 5.50 1/01/29
9,145 9,174,538
Ser. B, M.B.I.A.
Aaa 5.75 1/01/22
2,400 2,433,360
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 2,044,120
Chicago Sch. Fin. Auth. Ser. A, M.B.I.A.
Aaa 4.50 6/01/01
5,000 5,037,650
Chicago Skyway Toll Brdg. Rev., M.B.I.A.
Aaa 5.50 1/01/23
650 652,639
Onterie Ctr. Hsg. Fin. Corp. Mtge. Rev.,
Ser. A, M.B.I.A.
Aaa 7.00 7/01/12
1,575 1,678,588
Ser. A, M.B.I.A.
Aaa 7.05 7/01/27
5,400 5,759,208
- ------------
37,114,203
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Indiana--2.9%
Indiana Trans. Fin. Auth. Arpt. Facs., Lease
Rev.,
A.M.B.A.C.
Aaa 5.00 11/01/14
5,005 4,903,999
Marion Cnty. Hosp. Auth. Facs. Rev.,
A.M.B.A.C. Aaa
8.625 10/01/12 8,500 (c)(h)
9,369,040
- ------------
14,273,039
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Louisiana--0.5%
New Orleans, Gen. Oblig., Cap. Apprec.,
A.M.B.A.C. Aaa Zero
9/01/09 4,000 2,242,680
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Maine--0.3%
Maine St. Hsg. Auth. Mtge. Purchase, Ser. D
Aa2 5.05 11/15/16
1,200 1,208,424
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Massachusetts--0.9%
Massachusetts Mun. Whsl. Elec. Co., Pwr.
Supply Sys.
Rev., M.B.I.A.
Aaa 4.75 7/01/10
2,000 1,953,360
Massachusetts St. Hlth. & Edl. Facs. Auth.
Rev., Baystate
Med. Ctr., Ser. E, F.S.A.
Aaa 6.00 7/01/26
2,475 2,614,565
- ------------
4,567,925
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 22
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) INSURED
SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Michigan--6.7%
Detroit Swr. Disp. Rev.,
Ser. 1993A, F.G.I.C.
Aaa 7.496% 7/01/23 $
6,500(d)(h) $ 6,735,625
Ser. A, M.B.I.A.
Aaa 5.25 7/01/15
5,000 4,993,900
Ser. A, M.B.I.A.
Aaa 5.00 7/01/22
2,885 2,762,589
Michigan St. Hosp. Fin. Auth. Rev.,
Mid. Michigan Oblig., M.B.I.A.
Aaa 7.50 6/01/15
2,350 2,563,098
Ref., Med. Group A, A.M.B.A.C
Aaa 5.25 8/15/27
7,000 6,794,270
Sisters Of Mercy, M.B.I.A.
Aaa 5.25 8/15/21
1,150 1,110,532
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 3,493,198
Saginaw Hosp. Fin. Auth., St. Luke's Hosp.,
Ser. C,
M.B.I.A.
Aaa 6.50 7/01/11
4,000 4,322,560
- ------------
32,775,772
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Mississippi--0.5%
Harrison Cnty. Wste. Wtr. Mgmt. Dist. Rev.,
Wste. Wtr.
Treatmt., Facs. Auth., F.G.I.C.
Aaa 6.50 2/01/06
2,400 2,601,696
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Missouri--2.0%
Missouri Mun. Asst. Corp. Rev., Ref.,
M.B.I.A. Aaa
5.125 4/15/15 8,145
8,018,345
Missouri St. Hlth. & Edl. Facs. Auth. Rev.,
SSM Hlthcare,
Ser. AA, M.B.I.A.
Aaa 6.25 6/01/16
1,500 1,594,080
- ------------
9,612,425
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Montana--0.4%
Forsyth Poll. Ctrl. Rev., Puget Sound Pwr. &
Lt. Co., 1st
Mtge.,
Ser. A, A.M.B.A.C.
Aaa 7.05 8/01/21
2,000 2,194,000
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New Jersey--6.6%
Jersey City Swr. Auth.,
A.M.B.A.C.
Aaa 6.00 1/01/10
2,585 2,855,598
A.M.B.A.C.
Aaa 6.25 1/01/14
4,255 4,804,150
New Jersey Econ. Dev. Auth.,
Mkt. Trans. Facs. Rev., M.B.I.A.
Aaa 5.875 7/01/11
5,900 6,284,680
Mkt. Trans. Facs. Rev., Sr. Lien, M.B.I.A.
Aaa 5.80 7/01/09
3,340 3,564,047
Natural Gas Facs. Rev., M.B.I.A.
Aaa 5.70 6/01/32
5,000 5,088,850
St. Barnabas Rev., Ser. A, M.B.I.A.
Aaa 5.00 7/01/07
3,000 3,073,770
New Jersey Impvt. Auth. Rev., Util. Sys.,
M.B.I.A. Aaa 5.75
7/01/27 1,500 1,554,330
New Jersey St. Tpke. Auth. Rev., Ser. A,
A.M.B.A.C. Aaa 5.80
1/01/02 5,000 5,283,000
- ------------
32,508,425
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 23
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) INSURED
SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New York--11.6%
Erie Cnty. Wtr. Auth. Rev., A.M.B.A.C.
Aaa Zero 12/01/17 $
770 $ 182,998
Hempstead Ind. Dev. Agcy. Res., Rec. Rev.,
M.B.I.A. Aaa 5.00%
12/01/09 5,000 4,990,800
Islip Res. Rec., Ser. B, A.M.B.A.C.
Aaa 7.20 7/01/10
1,750 2,104,235
Met. Trans. Auth. N.Y. Trans. Facs. Rev.,
F.S.A. Aaa 5.75
7/01/11 5,000 5,311,000
New York City Mun. Wtr. Fin. Auth., Wtr. &
Swr. Sys.
Rev., M.B.I.A.
Aaa 5.75 6/15/26
5,000 5,152,350
New York City,
Ser. D, M.B.I.A.
Aaa 5.25 8/01/21
2,500 2,443,450
Ser. G, M.B.I.A.
Aaa 5.75 2/01/14
3,000 3,117,450
New York St. Dorm. Auth. Rev., Montefiore
Med. Ctr.,
A.M.B.A.C.
Aaa 6.00 8/01/08
3,400 3,751,254
New York St. Envir. Facs. Corp.,
Poll. Ctrl. Rev.
Aaa 5.70 7/15/12
3,375 3,551,850
Poll. Ctrl. Rev.
Aaa 5.75 7/15/13
1,060 1,128,964
Poll. Ctrl. Rev.
Aaa 5.80 7/15/14
3,755 3,980,187
New York St. Thrwy. Auth. Gen. Rev.,
Ser. D
Aa3 5.40 1/01/11
5,370 5,526,696
Ser. D
Aa3 5.50 1/01/12
3,865 3,998,420
New York St. Urban Dev. Corp. Rev., Corr.
Cap. Facs.,
A.M.B.A.C.
Aaa 5.375 1/01/25
3,735 3,726,746
Port Auth. New York & New Jersey Cons., Ser.
99, F.G.I.C. Aaa 5.90
11/01/11 7,665 8,102,595
- ------------
57,068,995
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Ohio--3.5%
Cleveland City Sch. Dist.,
Rev. Antic. Nts., A.M.B.A.C.
Aaa 5.50 6/01/06
6,465 6,864,085
Rev. Antic. Nts., A.M.B.A.C.
Aaa 5.75 6/01/07
5,870 (g) 6,350,342
Lorain Cnty. Hosp. Rev., Catholic Hlthcare
Partners,
M.B.I.A.
Aaa 5.50 9/01/27
4,000 4,016,960
- ------------
17,231,387
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Oklahoma--1.4%
Norman Reg'l. Hosp. Auth., Rev. Ref., Ser. A,
M.B.I.A. Aaa 5.50
9/01/11 4,110 4,227,998
Oklahoma City Arpt. Trust, Jr. Lien, Ser. 24,
A.M.B.A.C. Aaa 5.75
2/01/18 2,620 2,666,741
- ------------
6,894,739
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 24
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) INSURED
SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Pennsylvania--5.3%
Cranberry Twp. Mun. Auth. Wtr., M.B.I.A.
Aaa 5.125% 12/01/26 $
7,000 $ 6,679,820
Hazelton Area Sch. Dist., Ser. B, F.G.I.C.
Aaa 5.00 3/01/23
2,680 2,515,421
Pennsylvania Hlth. & Welfare Auth. Rev.,
F.G.I.C. Aaa 5.125
7/01/16 5,000 4,879,350
Philadelphia Mun. Auth. Rev., Criminal
Justice Ctr., Ser.
A, M.B.I.A.
Aaa 6.90 11/15/03
3,000 3,339,210
Philadelphia,
Gen. Oblig., M.B.I.A.
Aaa 5.00 5/15/25
6,750 6,411,420
Sch. Dist., Ser. B, A.M.B.A.C.
Aaa 5.375 4/01/27
2,500 2,494,375
- ------------
26,319,596
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Puerto Rico--3.6%
Puerto Rico Gen. Oblig., M.B.I.A.
Aaa 6.25 7/01/13
1,250 1,419,700
Pub. Impvt., Ser. B, A.M.B.A.C.
Aaa 5.50 7/01/03
5,700 6,046,275
Puerto Rico Pub. Bldgs. Auth. Rev., Gov't.
Facs., Ser. A,
A.M.B.A.C.
Aaa 6.25 7/01/13
1,700 1,930,792
Puerto Rico Tel. Auth. Rev.,
Ser. I, M.B.I.A.
Aaa 6.617 1/25/07
4,100(d) 4,443,375
Ser. I, M.B.I.A.
Aaa 6.925 1/16/15
3,800(d) 3,904,500
- ------------
17,744,642
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
South Carolina--0.7%
So. Carolina Pub. Serv. Auth. Rev., Ser. A,
A.M.B.A.C. Aaa 6.25
1/01/03 3,390 3,675,133
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
South Dakota--1.8%
So. Dakota Hsg. Dev. Auth., Homeownership
Mtge., Ser. F Aa1 5.80
5/01/28 8,750 8,845,113
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Tennessee--1.1%
Metro. Gov't. Nashville & Davidson Cnty. Wtr.
& Swr.
Rev., A.M.B.A.C.
Aaa 8.317 1/01/22
5,000 (d) 5,531,250
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Texas--5.6%
Austin Util. Sys. Rev. Comb., Ser. A,
M.B.I.A. Aaa
4.875 11/15/10 5,500
5,445,000
Austin Util. Sys. Rev., M.B.I.A.
Aaa Zero 5/15/03
8,000 6,235,440
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 25
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) INSURED
SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Texas (cont'd.)
Brazos Cnty. Hlth. Facs. Dev. Corp.,
Franciscan Svcs.
Corp. Rev., M.B.I.A.
Aaa 5.375% 1/01/28 $
2,500 $ 2,472,200
Brazos Rvr. Auth. Rev., Houston Lt. & Pwr.,
Ser. B, 1st
Mtge., F.G.I.C.
Aaa 7.20 12/01/18
1,000 1,072,750
Houston Arpt. Sys. Rev.
Aaa 7.20 7/01/13
3,900 4,606,602
Houston Arpt. Sys. Rev., Spec. Facs. People
Mover, Ser.
A, F.S.A.
Aaa 6.00 7/15/05
3,255 3,523,440
Keller Ind. Sch. Dist., P.S.F.G.
Aaa Zero 8/15/15
4,945 1,906,594
Texas Wtr. Res. Fin. Auth. Rev., A.M.B.A.C.
Aaa 7.50 8/15/13
1,985 2,094,473
- ------------
27,356,499
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Virginia--1.7%
Chesapeake Bay Brdg. & Tunn. Comm., Dist.
Rev., F.G.I.C. Aaa 5.875
7/01/10 5,000 5,395,400
Virginia Beach Hosp. Facs. Rev.,
1st Mtge., A.M.B.A.C.
Aaa 6.00 2/15/10
1,220 1,349,954
1st Mtge., A.M.B.A.C.
Aaa 6.00 2/15/13
1,455 1,605,811
- ------------
8,351,165
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Washington--4.8%
Clark Cnty. Pub. Util. Dist., F.G.I.C.
Aaa 6.00 1/01/08
3,000 3,294,300
Washington St. Hlthcare Facs. Auth. Rev.,
Yakima Valley
Memorial Hosp. Assoc.
AAA(b) 5.25 12/01/20
2,500 2,425,075
Washington St. Pub. Pwr. Supply Sys.,
Nuclear Proj. No. 1, Ser. A, M.B.I.A.
Aaa 5.75 7/01/10
7,000 7,411,600
Nuclear Proj. No. 2, Ser. A, M.B.I.A.
Aaa Zero 7/01/11
5,210 2,548,940
Nuclear Proj. No. 2, Ser. B, F.G.I.C.
Aaa 7.25 7/01/03
3,000 (c) 3,286,830
Nuclear Proj. No. 3, Ser. B, F.G.I.C.
Aaa 7.00 7/01/05
2,000 2,143,880
Nuclear Proj. No. 3, Ser. B, F.G.I.C.
Aaa Zero 7/01/08
4,500 2,657,295
- ------------
23,767,920
- ------------
Total long-term investments (cost
$461,704,868)
484,992,283
- ------------
SHORT-TERM INVESTMENTS--1.3%
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Michigan--0.8%
Michigan St. Strategic Fund Poll. Ctrl. Rev.,
Cons. Pwr.
Proj., F.R.D.D.
P1 4.20 11/03/97
3,900 3,900,000
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 26
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited) INSURED
SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Texas--0.5%
Gulf Coast Ind. Dev. Auth., CITGO Petroleum,
Ser. 95,
F.R.D.D.
VMIG1 4.30% 11/03/97 $
2,200 $ 2,200,000
West Side Calhoun Cnty. Nav. Dist., Swr. &
Solid Wste.
Disp. Rev., F.R.D.D.
Aa3 4.25 11/03/97
500 500,000
- ------------
2,700,000
- ------------
Total short-term investments (cost
$6,600,000)
6,600,000
- ------------
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Total Investments--99.8%
(cost $468,304,868; Note 4)
491,592,283
Other assets in excess of liabilities--0.2%
1,094,098
- ------------
Net Assets--100%
$492,686,381
- ------------
- ------------
</TABLE>
- ---------------
(a) The following abbreviations are used in
portfolio descriptions:
A.M.B.A.C.--American Municipal Bond
Assurance Corporation
F.G.I.C.--Financial Guaranty Insurance
Company
F.R.D.D.--Floating Rate (Daily) Demand
Note(f)
F.S.A.--Financial Security Assurance
M.B.I.A.--Municipal Bond Insurance
Association
P.S.F.G.--Public School Fund Guaranty
(b) Standard & Poor's rating.
(c) Prerefunded issues are secured by
escrowed cash and/or 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) When-issued security.
(h) Segregated as collateral for when-issued
security.
The Fund's current Prospectus contains a
description of Moody's and Standard &
Poor's ratings.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 27
<PAGE>
Statement of Assets and Liabilities
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited)
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Assets
October 31, 1997
<S>
<C>
Investments, at value (cost
$468,304,868)................................
.................................
$491,592,283
Cash.........................................
.............................................
................ 46,206
Receivable for investments
sold.........................................
..................................
15,093,508
Interest
receivable...................................
.............................................
....... 7,363,267
Receivable for Series shares
sold.........................................
................................
57,779
Deferred expenses and other
assets.......................................
.................................
12,525
- ----------------
Total
assets.......................................
.............................................
....... 514,165,568
- ----------------
Liabilities
Payable for investments
purchased....................................
.....................................
19,807,324
Dividends
payable......................................
.............................................
...... 658,278
Payable for Series shares
reacquired...................................
...................................
418,012
Accrued
expenses.....................................
.............................................
........ 236,686
Management fee
payable......................................
.............................................
. 215,673
Distribution fee
payable......................................
............................................
130,714
Due to broker - variation
margin.......................................
...................................
12,500
- ----------------
Total
liabilities..................................
.............................................
....... 21,479,187
- ----------------
Net
Assets.......................................
.............................................
............ $492,686,381
- ----------------
- ----------------
Net assets were comprised of:
Shares of beneficial interest, at
par..........................................
........................ $ 435,151
Paid-in capital in excess of
par..........................................
.............................
458,010,723
- ----------------
458,445,874
Accumulated net realized gain on
investments..................................
......................... 11,240,592
Net unrealized appreciation of
investments..................................
...........................
22,999,915
- ----------------
Net assets, October 31,
1997.........................................
.....................................
$492,686,381
- ----------------
- ----------------
Class A:
Net asset value and redemption price per
share
($222,836,103 / 19,691,772 shares of
beneficial interest issued and
outstanding)....................
$11.32
Maximum sales charge (3.0% of offering
price).......................................
................... .35
- ----------------
Maximum offering price to
public.......................................
................................
$11.67
- ----------------
- ----------------
Class B:
Net asset value, offering price and
redemption price per share
($268,730,933 / 23,724,450 shares of
beneficial interest issued and
outstanding)....................
$11.33
- ----------------
- ----------------
Class C:
Net asset value, offering price and
redemption price per share
($959,929 / 84,745 shares of beneficial
interest issued and
outstanding)............................
$11.33
- ----------------
- ----------------
Class Z:
Net asset value, offering price and
redemption price per share
($159,416 / 14,084 shares of beneficial
interest issued and
outstanding)............................
$11.32
- ----------------
- ----------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 28
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Operations (Unaudited)
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income
October 31, 1997
<S>
<C>
Income
Interest................................
$ 13,765,960
- ----------------
Expenses
Management fee..........................
1,268,948
Distribution fee--Class A...............
109,683
Distribution fee--Class B...............
718,033
Distribution fee--Class C...............
3,393
Transfer agent's fees and expenses......
176,000
Custodian's fees and expenses...........
63,000
Registration fees.......................
23,000
Reports to shareholders.................
10,000
Audit fee...............................
8,500
Trustees' fees and expenses.............
8,000
Legal fees and expenses.................
8,000
Insurance expense.......................
5,000
Miscellaneous...........................
5,007
- ----------------
Total expenses.......................
2,406,564
Less: Management fee waiver.............
(85,444)
Custodian fee credit.................
(4,405)
- ----------------
Net expenses.........................
2,316,715
- ----------------
Net investment income......................
11,449,245
- ----------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions.................
7,492,243
Financial futures contract
transactions.........................
(2,043,492)
- ----------------
5,448,751
- ----------------
Net change in unrealized
appreciation/depreciation on:
Investments.............................
13,461,867
Financial futures contracts.............
(95,812)
- ----------------
13,366,055
- ----------------
Net gain on investments....................
18,814,806
- ----------------
Net Increase in Net Assets
Resulting from Operations..................
$ 30,264,051
- ----------------
- ----------------
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Changes in Net Assets
(Unaudited)
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Six Months
Ended
Year Ended
Increase (Decrease) October 31,
April 30,
in Net Assets 1997
1997
<S> <C>
<C>
Operations
Net investment income........ $
11,449,245 $ 25,911,892
Net realized gain on
investment transactions...
5,448,751 12,131,022
Net change in unrealized
appreciation
(depreciation) of
investments...............
13,366,055 (7,713,454)
-----------
- -- -------------
Net increase in net assets
resulting from
operations................
30,264,051 30,329,460
-----------
- -- -------------
Dividends and distributions
(Note 1):
Dividends from net investment
income
Class A...................
(5,197,580) (9,267,489)
Class B...................
(6,230,801) (16,602,381)
Class C...................
(18,527) (41,775)
Class Z...................
(2,337) (247)
-----------
- -- -------------
(11,449,245) (25,911,892)
-----------
- -- -------------
Distributions in excess of
net investment income
Class A...................
- -- (117,523)
Class B...................
- -- (180,111)
Class C...................
- -- (467)
Class Z...................
- -- --
-----------
- -- -------------
- -- (298,101)
-----------
- -- -------------
Distributions from net
capital gains
Class A...................
- -- (2,135,000)
Class B...................
- -- (3,272,015)
Class C...................
- -- (8,473)
Class Z...................
- -- (2)
-----------
- -- -------------
- -- (5,415,492)
-----------
- -- -------------
Series share transactions (net
of
share conversions) (Note 5):
Net proceeds from shares
subscribed................
6,128,061 201,450,948
Net asset value of shares
issued in reinvestment of
dividends and
distributions.............
6,265,580 17,841,830
Cost of shares reacquired....
(45,840,484) (294,754,828)
-----------
- -- -------------
Net decrease in net assets
from Series share
transactions..............
(33,446,843) (75,462,050)
-----------
- -- -------------
Total decrease..................
(14,632,037) (76,758,075)
Net Assets
Beginning of period.............
507,318,418 584,076,493
-----------
- -- -------------
End of period................... $
492,686,381 $ 507,318,418
-----------
- -- -------------
-----------
- -- -------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 29
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited)
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
LONG-TERM INVESTMENTS--97.8%
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Alaska--4.9%
Alaska Ind. Dev. & Expt. Auth., Revolving
Loan Fund A2 5.40%
4/01/01 $ 945 $ 968,908
No. Slope Boro., Gen. Oblig., Ser. C
A3 8.35 6/30/98
1,000 1,028,760
- ------------
1,997,668
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Colorado--2.4%
Eaglebend Affordable Hsg. Corp., Multifam.
Rev. AAA(b) 5.75
7/01/07 1,000 1,005,060
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Connecticut--2.7%
Conn. Spec. Tax Oblig. Rev., Ser. A
AA-(b) 7.00 6/01/03
1,000 (c) 1,099,770
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
District Of Columbia--3.6%
Dist. Columbia Hsg. Fin. Agcy. Mtge. Rev.
Sngl. Fam. Mtge., A.M.T., Ser. B
AAA(b) 5.25 12/01/08
440 442,921
Sngl. Fam. Mtge., A.M.T., Ser. B
AAA(b) 5.30 12/01/09
315 316,991
Dist. of Columbia Rev., America Geophysical
Union, Ser.
199
BBB-(b) 5.50 9/01/03
700 707,238
- ------------
1,467,150
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Florida--4.0%
Dade Cnty. Sch. Dist., Gen. Oblig., M.B.I.A.
Aaa 6.00 7/15/06
1,500 (g) 1,655,925
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Georgia--5.1%
Burke Cnty. Dev. Auth., Oglethorpe Pwr. Co.,
M.B.I.A. Aaa 7.50
1/01/03 1,000 1,107,520
Georgia Mun. Electric Auth. Proj. 1, Sub.,
Ser. B, A.M.B.A.C.
Aaa 5.125 1/01/11
1,000 (f) 1,001,190
- ------------
2,108,710
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Illinois--4.0%
Illinois Hlth. Facs. Auth. Rev.,
Edward Hosp., Ser. A
A2 5.75 2/15/09
450 461,277
Loyola Univ. Hlth. Sys., Ser. A, M.B.I.A.
Aaa 6.00 7/01/10
1,100 1,201,134
- ------------
1,662,411
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 30
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited)
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
- ---------------------------------------------
- ---------------------------------------------
- ---------------------------------------
<S>
<C> <C> <C> <C>
<C>
Maine--2.9%
Maine St. Hsg. Auth. Mtge. Purchase, Ser. D
Aa2 5.05% 11/15/16 $
1,200 $ 1,208,424
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Michigan--3.7%
Battle Creek Wtr. Supp. Sys. Rev. Ref.,
A.M.B.A.C. Aaa
4.75 9/01/10 1,000 (g)
979,240
Michigan Mun. Bond Auth. Rev., Wayne Cnty.
Proj., M.B.I.A. Aaa 7.40
12/01/02 500 559,955
- ------------
1,539,195
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New Jersey--17.4%
Brick Twnshp., Mun. Util. Auth. Rev.,
F.G.I.C. Aaa
5.50 12/01/03 1,295 (g)
1,372,376
New Jersey Econ. Dev. Auth. Rev.,
Mkt. Trans. Facs. Rev., M.B.I.A.
Aaa 5.75 7/01/06
950 1,023,235
Mkt. Trans. Facs. Rev., M.B.I.A.
Aaa 5.80 7/01/07
1,000 1,080,520
Performing Arts Ctr., A.M.B.A.C.
Aaa 6.00 6/15/08
1,410 1,563,056
So. Reg'l. High Sch. Dist., M.B.I.A.
Aaa 5.50 9/01/06
1,010 1,079,084
West Windsor Plainsboro Sch., F.G.I.C.
Aaa 5.25 12/01/05
1,000 1,050,310
- ------------
7,168,581
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
New York--8.7%
Met. Trans. Auth. N.Y. Trans. Facs. Rev.,
F.S.A. Aaa 5.75
7/01/11 675 716,985
New York St. Env. Facs. Corp., Poll. Ctrl.
Rev. Aaa 5.80
1/15/14 1,280 1,356,762
New York St. Urban Dev. Corp. Rev.
Baa1 5.25 1/01/11
1,500 1,490,040
- ------------
3,563,787
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Ohio--1.3%
Ohio St. Bldg. Auth., Admin. Bldg. Fund
Proj., M.B.I.A. Aaa
5.60 10/01/06 500
538,110
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Oklahoma--7.8%
Oklahoma St. Ind. Auth. Rev. Hosp., Deaconess
Hlthcare.,
Ser. A
Baa2 5.50 10/01/12
750 740,205
Oklahoma St. Ind. Auth. Rev. Hlth. Sys.,
Integris Bapt.,
A.M.B.A.C.
Aaa 6.00 8/15/09
2,240 2,460,595
- ------------
3,200,800
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Pennsylvania--9.8%
Clarion Cnty. Hosp. Auth. Rev., Ref. Clarion
Hosp. Proj. BBB-(b) 5.60
7/01/10 685 684,205
Montgomery Cnty. Redev. Auth., Multifam. Hsg.
Rev., Ser. A NR 5.75
7/01/99 780 788,471
Pennsylvania St. Ctfs. of Part., Ser. A,
F.S.A. Aaa 6.25
11/01/06 600 650,850
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 31
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited)
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
- ---------------------------------------------
- ---------------------------------------------
- ---------------------------------------
<S>
<C> <C> <C> <C>
<C>
Pennsylvania (cont'd.)
Pennsylvania St. Higher Edl. Facs. Auth.,
Hlth. Svs. Rev.,
M.B.I.A.
Aaa 5.70% 11/15/11 $
755 $ 807,050
Philadelphia Hosp. Auth. & Higher Edl. Auth.,
Childrens
Seashore House, Ser. A
A-(b) 7.00 8/15/03
1,000 1,108,510
- ------------
4,039,086
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Puerto Rico--2.0%
Puerto Rico, Gen. Oblig., Ser. A, M.B.I.A.
Aaa 6.25 7/01/10
750 810,158
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Rhode Island--2.7%
Rhode Island St., Ref. Cons. Cap. Dev. Loan,
M.B.I.A. Aaa 6.00
8/01/06 1,000 1,099,080
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Texas--6.1%
Austin Util. Sys. Rev. Comb., Ser. A,
M.B.I.A. Aaa
4.875 11/15/10 1,830 (g)
1,811,700
San Antonio Elec. & Gas Rev., Ser. A,
F.G.I.C. Aaa
Zero 2/01/05 1,000
711,520
- ------------
2,523,220
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Utah--2.6%
Utah St. Brd. of Regents, Student Loan Rev.,
Ser. F,
A.M.B.A.C.
Aaa 7.00 11/01/01
1,000 (e) 1,070,210
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Washington--2.5%
Wash. St. Pub. Pwr. Supp. Sys., Nuclear Proj.
No. 3, Ser.
B
Aa1 7.00 7/01/99
1,000 (g) 1,047,170
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Wyoming--3.6%
Wyoming Cmnty. Dev. Auth. Hsg. Rev. Amt.,
Ser. 5 Aa2 5.60
12/01/06 1,450 1,498,923
- ------------
Total long-term investments (cost
$38,660,503)
40,303,438
- ------------
SHORT-TERM INVESTMENTS--3.4%
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Louisiana--2.7%
West Baton Rouge Parish Ind. Dist. Pound3
Rev., Dow
Chemical Co. Proj., F.R.D.D., Ser. 95
P1 4.30 11/03/97
1,100 1,100,000
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 32
<PAGE>
Portfolio of Investments as
of October 31, 1997
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited)
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount
Value
Description (a)
Rating Rate Date (000)
(Note 1)
<S>
<C> <C> <C> <C>
<C>
- ---------------------------------------------
- ---------------------------------------------
- ---------------------------------------
Texas--0.7%
Port Corpus Christi Ind. Dev. Corp., Swg. and
Solid Wste.
Disp. Rev., F.R.D.D.
VMIG1 4.30% 11/03/97 $
200 $ 200,000
West Side Calhoun Cnty. Nav. Dist., Swr. &
Solid Wste.
Disp. Rev., F.R.D.D.
Aa2 4.25 11/03/97
100 100,000
- ------------
300,000
- ------------
Total short-term investments (cost
$1,400,000)
1,400,000
- ------------
- ---------------------------------------------
- ---------------------------------------------
- ------------------------------------
Total Investments--101.2%
(cost $40,060,503; Note 4)
41,703,438
Liabilities in excess of other assets--(1.2%)
(487,515)
- ------------
Net Assets--100%
$ 41,215,923
- ------------
- ------------
</TABLE>
- ---------------
(a) The following abbreviations are used in
portfolio descriptions:
A.M.T.--Alternative Minimum Tax.
A.M.B.A.C.--American Municipal Bond
Assurance Corporation
F.G.I.C.--Financial Guaranty Insurance
Company
F.R.D.D.--Floating Rate (Daily) Demand
Note (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/or 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.
(e) Principal amount pledged as initial
margin on financial futures contracts.
(f) When-issued security.
(g) Segregated as collateral for 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. 33
<PAGE>
Statement of Assets and Liabilities
PRUDENTIAL MUNICIPAL BOND FUND
(Unaudited)
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Assets
October 31, 1997
<S>
<C>
Investments, at value (cost
$40,060,503).................................
................................. $
41,703,438
Cash.........................................
.............................................
................ 8,614
Interest
receivable...................................
.............................................
....... 670,869
Receivable for Series shares
sold.........................................
................................
48,803
Deferred expenses and other
assets.......................................
.................................
1,157
- ----------------
Total
assets.......................................
.............................................
....... 42,432,881
- ----------------
Liabilities
Payable for investments
purchased....................................
.....................................
1,003,035
Payable for Series shares
reacquired...................................
...................................
73,489
Accrued
expenses.....................................
.............................................
........ 63,723
Dividends
payable......................................
.............................................
...... 45,345
Management fee
payable......................................
.............................................
. 17,328
Distribution fee
payable......................................
............................................
13,413
Due to broker - variation
margin.......................................
...................................
625
- ----------------
Total
liabilities..................................
.............................................
....... 1,216,958
- ----------------
Net
Assets.......................................
.............................................
............ $ 41,215,923
- ----------------
- ----------------
Net assets were comprised of:
Shares of beneficial interest, at
par..........................................
........................ $ 37,817
Paid-in capital in excess of
par..........................................
.............................
39,320,371
- ----------------
39,358,188
Accumulated net realized gain on
investments..................................
......................... 247,612
Net unrealized appreciation on
investments..................................
...........................
1,610,123
- ----------------
Net assets, October 31,
1997.........................................
.....................................
$ 41,215,923
- ----------------
- ----------------
Class A:
Net asset value and redemption price per
share
($13,296,257 / 1,220,153 shares of
beneficial interest issued and
outstanding)......................
$10.90
Maximum sales charge (3% of offering
price).......................................
..................... .34
- ----------------
Maximum offering price to
public.......................................
................................
$11.24
- ----------------
- ----------------
Class B:
Net asset value, offering price and
redemption price per share
($27,122,280 / 2,488,370 shares of
beneficial interest issued and
outstanding)......................
$10.90
- ----------------
- ----------------
Class C:
Net asset value, offering price and
redemption price per share
($459,026 / 42,114 shares of beneficial
interest issued and
outstanding)............................
$10.90
- ----------------
- ----------------
Class Z:
Net asset value, offering price and
redemption price per share
($338,360 / 31,045 shares of beneficial
interest issued and
outstanding)............................
$10.90
- ----------------
- ----------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 34
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INTERMEDIATE SERIES
Statement of Operations (Unaudited)
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income
October 31, 1997
<S>
<C>
Income
Interest................................
$1,151,352
- ----------------
Expenses
Management fee..........................
108,679
Distribution fee--Class A...............
7,041
Distribution fee--Class B...............
71,948
Distribution fee--Class C...............
1,161
Custodian's fees and expenses...........
41,000
Reports to shareholders.................
32,000
Registration fees.......................
27,000
Transfer agent's fees and expenses......
21,000
Trustees' fees and expenses.............
8,000
Audit fee...............................
8,000
Legal fees and expenses.................
7,000
Miscellaneous...........................
4,593
- ----------------
Total expenses.......................
337,422
Less: Management fee waiver..........
(7,346)
- ----------------
Net expenses.........................
330,076
- ----------------
Net investment income......................
821,276
- ----------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions.................
224,720
Financial futures contract
transactions.........................
(129,621)
- ----------------
95,099
- ----------------
Net change in unrealized
appreciation/depreciation on:
Investments.............................
1,207,697
Financial futures contracts.............
(45,719)
- ----------------
1,161,978
- ----------------
Net gain on investments....................
1,257,077
- ----------------
Net Increase in Net Assets
Resulting from Operations..................
$2,078,353
- ----------------
- ----------------
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
INTERMEDIATE SERIES
Statement of Changes in Net Assets
(Unaudited)
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Six
Months
Ended
Year Ended
Increase (Decrease) October
31, April 30,
in Net Assets 1997
1997
<S> <C>
<C>
Operations
Net investment income........... $
821,276 $ 1,958,229
Net realized gain on investment
transactions.................
95,099 478,036
Net change in unrealized
appreciation (depreciation)
of investments...............
1,161,978 (699,669)
--------
- --- ------------
Net increase in net assets
resulting from operations....
2,078,353 1,736,596
--------
- --- ------------
Dividends and distributions (Note
1):
Dividends from net investment
income
Class A......................
(284,935) (579,475)
Class B......................
(524,828) (1,371,478)
Class C......................
(5,263) (5,456)
Class Z......................
(6,250) (1,820)
--------
- --- ------------
(821,276) (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)
--------
- --- ------------
Series share transactions (net of
share conversions) (Note 5):
Net proceeds from shares
subscribed...................
1,380,331 5,261,896
Net asset value of shares issued
in reinvestment of
dividends....................
516,120 1,242,265
Cost of shares reacquired.......
(6,160,857) (15,354,228)
--------
- --- ------------
Net decrease in net assets from
Series share transactions....
(4,264,406) (8,850,067)
--------
- --- ------------
Total decrease.....................
(3,007,329) (9,103,816)
Net Assets
Beginning of period................
44,223,252 53,327,068
--------
- --- ------------
End of period......................
$41,215,923 $ 44,223,252
--------
- --- ------------
--------
- --- ------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 35
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL MUNICIPAL BOND FUND
- ---------------------------------------------
- -----------------------------------
Prudential Municipal Bond Fund (the 'Fund')
is registered under the Investment
Company Act of 1940 as a diversified, open-
end management investment company.
The Fund 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.
- ---------------------------------------------
- -----------------------------------
36
<PAGE>
Notes to Financial Statements (Unaudited)
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.
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'); 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 agreed to voluntarily
waive a portion of each Series'
management fee, which amounted to $174,190,
$85,444, and $7,346 for the High
Yield Series, Insured Series, and
Intermediate Series, respectively for the
four
months ended August 31, 1997. Such amounts
represented .05 of 1% of average
daily net assets (annualized) for each Series
or $.002 per share. Effective
September 1, 1997, PIFM eliminated its
management fee waiver.
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.
Pursuant to the Class A, B and C Plans, the
Fund compensates PSI for
distribution-related activities at an annual
rate of up to .30 of 1%, .50 of 1%
and 1%, of the average daily net assets of
the Class A, B and C shares,
respectively. Such expenses under the Plans
were .10 of 1%, .50 of 1% and .75 of
1% of the average daily net assets of the
Class A, B and C shares, respectively,
for the six months ended October 31, 1997.
PSI has advised the Fund that it received
approximately $217,200 ($198,900-High
Yield Series; $15,700-Insured Series; $2,600-
Intermediate Series) in front-end
sales charges resulting from sales of Class A
shares during the six months ended
October 31, 1997. From these fees, PSI paid
such sales charges to affiliated
broker-dealers which in turn paid commissions
to salespersons and incurred other
distribution costs.
PSI has advised the Fund that for the six
months ended October 31, 1997, it
received approximately $729,100 ($485,500-
High Yield Series; $206,700-Insured
Series; $36,900-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'), entered into a credit agreement
(the 'Agreement') on December 31, 1996
with an unaffiliated lender. The maximum
commitment under the Agreement is
$200,000,000. The Agreement expires on
December 30, 1997. Interest on any such
borrowings outstanding will be at market
rates. The purpose of the Agreement is
to serve as an alternative source of funding
for capital share redemptions. The
Fund has not borrowed any amounts pursuant to
the Agreement as of October 31,
1997. 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.
- ---------------------------------------------
- -----------------------------------
37
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL MUNICIPAL BOND FUND
- ---------------------------------------------
- -----------------------------------
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 six months ended October 31,
1997, the Fund incurred fees of approximately
$410,900 ($229,400-High Yield
Series; $161,700-Insured Series; $19,800-
Intermediate Series) for the services
of PMFS. As of October 31, 1997,
approximately $62,800 ($36,000-High Yield
Series; $23,600-Insured Series; $3,200-
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 non-affiliates.
- ---------------------------------------------
- ---------------
Note 4. Portfolio Securities
Purchases and sales of portfolio securities,
excluding short-term investments,
for the six months ended October 31, 1997,
were as follows:
<TABLE>
<CAPTION>
Series Purchases
Sales
- -------------------------------- ----------
- -- ------------
<S> <C>
<C>
High Yield...................... $
63,269,208 $ 48,628,165
Insured.........................
293,026,822 314,465,756
Intermediate....................
9,362,360 13,648,234
</TABLE>
At October 31, 1997, the High Yield Series,
the Insured Series, and the
Intermediate Series sold 200,000, 100,000,
and 10,000 financial futures
contracts, respectively of U.S. Treasury
Bonds expiring in December 1997.
The values of these financial futures
contracts at October 31, 1997 were as
follows:
<TABLE>
<CAPTION>
Financial Futures
Contracts Sold
--------------------
- ----------------------
High Yield
Insured Intermediate
Series
Series Series
----------- -----
- ------ ------------
<S> <C> <C>
<C>
Value at
disposition......... $23,640,625
$11,896,875 $ 1,084,688
Value at October 31,
1997................ 23,693,750
12,184,375 1,117,500
----------- -----
- ------ ------------
Unrealized gain
(loss).............. $ (53,125) $
(287,500) $ (32,812)
----------- -----
- ------ ------------
----------- -----
- ------ ------------
</TABLE>
The federal income tax basis of the Fund's
investments, at October 31, 1997 was
$980,571,987-High Yield Series; $468,306,169-
Insured Series; and
$40,060,503-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.......... $ 69,037,199
$88,286,974 $19,249,775
Insured............. 23,286,114
23,292,214 6,100
Intermediate........ 1,642,935
1,642,935 --
</TABLE>
The High Yield Series has a net capital loss
carryforward as of April 30, 1997
of approximately $16,993,000, of which
$2,024,000 expires in 2002, $5,361,000
expires in 2003, $6,383,000 expires in 2004
and $3,225,000 expires in 2005. 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.
- ---------------------------------------------
- ---------------
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.
- ---------------------------------------------
- -----------------------------------
38
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL MUNICIPAL BOND FUND
- ---------------------------------------------
- -----------------------------------
The Fund has authorized an unlimited number
of shares of beneficial interest of
each class at $.01 par value per share.
Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
High
Yield Series Insured Series
Intermediate Series
Class A Class A
Class A
Six Months Ended October 31, ----------
- ------------------ ---------------------
- ------- --------------------------
1997 Shares
Amount Shares Amount
Shares Amount
- -------------------------------- ----------
- - ------------- ----------- ------
- ------- ---------- ------------
<S> <C>
<C> <C> <C>
<C> <C>
Shares issued...................
2,279,742 $ 25,276,061 119,782
$ 1,344,118 25,655 $ 280,037
Shares issued in reinvestment of
dividends and
distributions................
463,723 5,140,814 247,177
2,769,784 16,577 179,300
Shares reacquired...............
(3,580,104) (39,735,487) (1,752,356)
(19,598,089) (208,144) (2,251,882)
----------
- - ------------- ----------- ------
- ------- ---------- ------------
Net decrease in shares
outstanding before
conversion...................
(836,639) (9,318,612) (1,385,397)
(15,484,187) (165,912) (1,792,545)
Shares issued upon conversion
from Class B.................
4,000,865 44,285,805 1,962,334
21,986,217 88,137 953,367
----------
- - ------------- ----------- ------
- ------- ---------- ------------
Net increase (decrease) in
shares outstanding...........
3,164,226 $ 34,967,193 576,937
$ 6,502,030 (77,775) $
(839,178)
----------
- - ------------- ----------- ------
- ------- ---------- ------------
----------
- - ------------- ----------- ------
- ------- ---------- ------------
<CAPTION>
Year Ended April 30, 1997
- --------------------------------
<S> <C>
<C> <C> <C>
<C> <C>
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>
Class B Class B
Class B
Six Months Ended October 31, ----------
- ------------------ ---------------------
- ------- --------------------------
1997 Shares
Amount Shares Amount
Shares Amount
- -------------------------------- ----------
- - ------------- ----------- ------
- ------- ---------- ------------
<S> <C>
<C> <C> <C>
<C> <C>
Shares issued...................
4,836,589 $ 53,571,901 396,983
$ 4,439,731 58,857 $ 639,771
Shares issued in reinvestment of
dividends and
distributions................
726,034 8,044,957 310,272
3,478,449 30,111 325,662
Shares reacquired...............
(3,913,957) (43,354,261) (2,326,362)
(26,060,984) (343,397) (3,716,735)
----------
- - ------------- ----------- ------
- ------- ---------- ------------
Net increase (decrease) in
shares outstanding
before conversion............
1,648,666 18,262,597 (1,619,107)
(18,142,804) (254,429) (2,751,302)
Shares reacquired upon
conversion into Class A......
(4,000,865) (44,285,805) (1,960,584)
(21,986,217) (88,137) (953,367)
----------
- - ------------- ----------- ------
- ------- ---------- ------------
Net decrease in shares
outstanding..................
(2,352,199) $ (26,023,208) (3,579,691)
$ (40,129,021) (342,566) $
(3,704,669)
----------
- - ------------- ----------- ------
- ------- ---------- ------------
----------
- - ------------- ----------- ------
- ------- ---------- ------------
<CAPTION>
Year Ended April 30, 1997
- --------------------------------
<S> <C>
<C> <C> <C>
<C> <C>
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>
- ---------------------------------------------
- -----------------------------------
39
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL MUNICIPAL BOND FUND
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
High
Yield Series Insured Series
Intermediate Series
Class C Class C
Class C
Six Months Ended October 31, ----------
- ------------------ ---------------------
- ------- --------------------------
1997 Shares
Amount Shares Amount
Shares Amount
- -------------------------------- ----------
- - ------------- ----------- ------
- ------- ---------- ------------
<S> <C>
<C> <C> <C>
<C> <C>
Shares issued...................
592,361 $ 6,590,838 17,802
$ 200,106 31,683 $ 345,224
Shares issued in reinvestment of
dividends and
distributions................
18,573 205,969 1,357
15,222 465 5,031
Shares reacquired...............
(95,049) (1,051,303) (15,782)
(176,534) (14,319) (155,045)
----------
- - ------------- ----------- ------
- ------- ---------- ------------
Net increase in shares
outstanding..................
515,885 $ 5,745,504 3,377
$ 38,794 17,829 $ 195,210
----------
- - ------------- ----------- ------
- ------- ---------- ------------
----------
- - ------------- ----------- ------
- ------- ---------- ------------
<CAPTION>
Year Ended April 30, 1997
- --------------------------------
<S> <C>
<C> <C> <C>
<C> <C>
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>
Class Z Class Z
Class Z
Six Months Ended October 31, ----------
- ------------------ ---------------------
- ------- --------------------------
1997 Shares
Amount Shares Amount
Shares Amount
- -------------------------------- ----------
- - ------------- ----------- ------
- ------- ---------- ------------
<S> <C>
<C> <C> <C>
<C> <C>
Shares issued...................
301,202 $ 3,337,845 12,947
$ 144,106 10,699 $ 115,299
Shares issued in reinvestment of
dividends and
distributions................
11,167 123,850 189
2,125 566 6,127
Shares reacquired...............
(41,694) (463,215) (435)
(4,877) (3,431) (37,195)
----------
- - ------------- ----------- ------
- ------- ---------- ------------
Net increase in shares
outstanding..................
270,675 $ 2,998,480 12,701
$ 141,354 7,834 $ 84,231
----------
- - ------------- ----------- ------
- ------- ---------- ------------
----------
- - ------------- ----------- ------
- ------- ---------- ------------
<CAPTION>
September 16, 1996(a) Through
April 30, 1997
- --------------------------------
<S> <C>
<C> <C> <C>
<C> <C>
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. Dividends
On December 11, 1997, the Board of Trustees
of the Fund declared the following
dividends per Class A, B, C and Z shares,
payable on December 19, 1997 to
shareholders of record on December 16, 1997.
<TABLE>
<CAPTION>
Special Taxable
Ordinary Short-
Term Long-Term
Series Income Capital
Gains Capital Gains
- ---------------- ---------------- --------
- ------ --------------
<S> <C> <C>
<C>
Insured
Series....... $ .004 $
.064 $ .184
Intermediate
Series....... --
- -- $ .055
</TABLE>
- ---------------------------------------------
- -----------------------------------
40
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited)
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class A
- ---------------------------------------------
- ----------------------------
Six Months
Ended Years Ended
April 30,
October 31, -----------------------------
- ----------------------------
1997 1997 1996 1995
1994 1993
- ----------- -------- -------- ---
- ---- ------- -------
<S>
<C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 10.84 $
10.70 $ 10.72 $ 10.74 $ 11.14
$ 10.68
- ----------- -------- -------- ---
- ---- ------- -------
Income from investment operations
Net investment
income...............................
.34(b) .70(b) .72(b) .72(b)
.72 .77
Net realized and unrealized gain (loss) on
investment
transactions..........................
.40 .14 (.02) (.02)
(.39) .46
- ----------- -------- -------- ---
- ---- ------- -------
Total from investment
operations................. .74
.84 .70 .70 .33
1.23
- ----------- -------- -------- ---
- ---- ------- -------
Less distributions
Dividends from net investment
income................ (.34)
(.70) (.72) (.72) (.72)
(.77)
Distributions from capital
gains.................... --
- -- -- -- (.01)
- --
- ----------- -------- -------- ---
- ---- ------- -------
Total
distributions..............................
(.34) (.70) (.72) (.72)
(.73) (.77)
- ----------- -------- -------- ---
- ---- ------- -------
Net asset value, end of
period...................... $ 11.24
$ 10.84 $ 10.70 $ 10.72 $ 10.74
$ 11.14
- ----------- -------- -------- ---
- ---- ------- -------
- ----------- -------- -------- ---
- ---- ------- -------
TOTAL
RETURN(a):...................................
. 6.90% 8.03% 6.55%
6.90% 2.88% 11.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $ 382,079
$334,062 $223,073 $115,501 $54,491
$43,529
Average net assets
(000)............................ $ 360,005
$294,940 $162,329 $65,207 $52,982
$31,658
Ratios to average net assets:
Expenses, including distribution
fees............ 0.63%(b)(c)
0.64%(b) 0.64%(b) 0.69%(b) 0.69%
0.74%
Expenses, excluding distribution
fees............ 0.53%(b)(c)
0.54%(b) 0.54%(b) 0.59%(b) 0.59%
0.64%
Net investment
income............................
6.09%(b)(c) 6.44%(b) 6.58%(b)
6.83%(b) 6.42% 7.04%
For Class A, B, C and Z shares:
Portfolio turnover
rate.......................... 5%
26% 35% 39% 36%
27%
</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
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) Annualized.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 41
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited)
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class B
- ---------------------------------------------
- ------------------------
Six Months
Ended Years Ended
April 30,
October 31, -----------------------------
- ------------------------
1997 1997 1996
1995 1994
- ----------- -------- ---------- -
- --------- ----------
<S>
<C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 10.84 $
10.69 $ 10.72 $ 10.74 $
11.14
- ----------- -------- ---------- -
- --------- ----------
Income from investment operations
Net investment
income...............................
.31(b) .66(b) .68(b)
.68(b) .68
Net realized and unrealized gain (loss) on
investment
transactions..........................
.40 .15 (.03)
(.02) (.39)
- ----------- -------- ---------- -
- --------- ----------
Total from investment
operations................. .71
.81 .65 .66
.29
- ----------- -------- ---------- -
- --------- ----------
Less distributions
Dividends from net investment
income................ (.31)
(.66) (.68) (.68)
(.68)
Distributions from capital
gains.................... --
- -- -- --
(.01)
- ----------- -------- ---------- -
- --------- ----------
Total
distributions..............................
(.31) (.66) (.68)
(.68) (.69)
- ----------- -------- ---------- -
- --------- ----------
Net asset value, end of
period...................... $ 11.24
$ 10.84 $ 10.69 $ 10.72 $
10.74
- ----------- -------- ---------- -
- --------- ----------
- ----------- -------- ---------- -
- --------- ----------
TOTAL
RETURN(a):...................................
. 6.69% 7.71% 6.12%
6.37% 2.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $ 663,907
$665,525 $ 799,048 $ 934,725
$1,099,640
Average net assets
(000)............................ $ 666,042
$725,305 $ 900,115 $1,024,132
$1,132,653
Ratios to average net assets:
Expenses, including distribution
fees............ 1.03%(b)(c)
1.04%(b) 1.04%(b) 1.09%(b)
1.09%
Expenses, excluding distribution
fees............ 0.53%(b)(c)
0.54%(b) 0.54%(b) 0.59%(b)
0.58%
Net investment
income............................
5.69%(b)(c) 6.05%(b) 6.19%(b)
6.37%(b) 6.02%
<CAPTION>
<S>
<C>
1993
- ----------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 10.68
- ----------
Income from investment operations
Net investment
income...............................
.73
Net realized and unrealized gain (loss) on
investment
transactions..........................
.46
- ----------
Total from investment
operations................. 1.19
- ----------
Less distributions
Dividends from net investment
income................ .73
Distributions from capital
gains.................... --
- ----------
Total
distributions..............................
.73
- ----------
Net asset value, end of
period...................... $ 11.14
TOTAL
RETURN(a):...................................
. 11.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $1,028,480
Average net assets
(000)............................ $ 893,203
Ratios to average net assets:
Expenses, including distribution
fees............ 1.14%
Expenses, excluding distribution
fees............ 0.64%
Net investment
income............................
6.66%
</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
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) Annualized.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 42
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited)
HIGH YIELD SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class C Class Z
- ---------------------------------------------
- ------ -----------
August 1,
Six Months Years Ended April
1994(c) Six Months
Ended 30,
Through Ended
October 31, --------------------
April 30, October 31,
1997 1997 1996 1995
1997
- ----------- ------ --------- ----
- ------ -----------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 10.84
$10.69 $ 10.72 $10.79 $
10.83
- ----------- ------ --------- -
- ---- -----
Income from investment operations
Net investment income
(b)........................... .30
.63 .65 .49
.34
Net realized and unrealized gain (loss) on
investment
transactions..........................
.40 .15 (.03) (.07)
.40
- ----------- ------ --------- -
- ---- -----
Total from investment
operations................. .70
.78 .62 .42
.74
- ----------- ------ --------- -
- ---- -----
Less distributions
Dividends from net investment
income................ (.30)
(.63) (.65) (.49)
(.34)
- ----------- ------ --------- -
- ---- -----
Net asset value, end of
period...................... $ 11.24
$10.84 $ 10.69 $10.72 $
11.23
- ----------- ------ --------- -
- ---- -----
- ----------- ------ --------- -
- ---- -----
TOTAL
RETURN(a):...................................
. 6.56% 7.44% 5.86%
3.91% 6.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $15,719
$9,563 $ 6,471 $3,208 $
5,861
Average net assets
(000)............................ $12,145
$8,060 $ 5,608 $1,385 $
4,203
Ratios to average net assets:
Expenses, including distribution
fees(b)......... 1.28%(e) 1.29%
1.29% 1.34%(e) 0.53%(e)
Expenses, excluding distribution
fees(b)......... 0.53%(e) 0.54%
0.54% 0.59%(e) 0.53%(e)
Net investment
income(b).........................
5.46%(e) 5.80% 5.93%
6.34%(e) 6.21%(e)
<CAPTION>
<S>
<C>
September 16,
1996(d)
Through
April 30,
1997
- -------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 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
period...................... $ 10.83
- -----
- -----
TOTAL
RETURN(a):...................................
. 4.36%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(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
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. 43
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited)
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class A
- ---------------------------------------------
- ----------------------------
Six Months
Ended Years Ended
April 30,
October 31, -----------------------------
- ----------------------------
1997 1997 1996 1995
1994 1993
- ----------- -------- -------- ---
- ---- ------- -------
<S>
<C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 10.90 $
10.94 $ 10.83 $ 10.71 $ 11.44
$ 10.98
- ----------- -------- -------- ---
- ---- ------- -------
Income from investment operations
Net investment
income...............................
.26(b) .55(b) .58(b) .58(b)
.58 .61
Net realized and unrealized gain (loss) on
investment
transactions..........................
.42 .08 .11 .12
(.43) .73
- ----------- -------- -------- ---
- ---- ------- -------
Total from investment
operations................. .68
.63 .69 .70 .15
1.34
- ----------- -------- -------- ---
- ---- ------- -------
Less distributions
Dividends from net investment
income................ (.26)
(.55) (.58) (.58) (.58)
(.61)
Distributions in excess of net investment
income.... -- (.01)
- -- -- -- --
Distributions from capital
gains.................... --
(.11) -- -- (.30)
(.27)
- ----------- -------- -------- ---
- ---- ------- -------
Total
distributions..............................
(.26) (.67) (.58) (.58)
(.88) (.88)
- ----------- -------- -------- ---
- ---- ------- -------
Net asset value, end of
period...................... $ 11.32
$ 10.90 $ 10.94 $ 10.83 $ 10.71
$ 11.44
- ----------- -------- -------- ---
- ---- ------- -------
- ----------- -------- -------- ---
- ---- ------- -------
TOTAL
RETURN(a):...................................
. 6.35% 5.74% 6.47%
6.73% 1.04% 12.68%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $ 222,836
$208,411 $139,548 $75,800 $30,669
$30,098
Average net assets
(000)............................ $ 217,578
$187,371 $102,456 $39,471 $32,309
$24,589
Ratios to average net assets:
Expenses, including distribution
fees............ 0.69%(b)(c)
0.68%(b) 0.68%(b) 0.74%(b) 0.71%
0.72%
Expenses, excluding distribution
fees............ 0.59%(b)(c)
0.58%(b) 0.58%(b) 0.64%(b) 0.61%
0.62%
Net investment
income............................
4.74%(b)(c) 4.95%(b) 5.20%(b)
5.45%(b) 5.09% 5.46%
For Class A, B, C and Z shares:
Portfolio turnover
rate.......................... 62%
110% 68% 64% 105%
85%
</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) Annualized.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 44
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited)
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class B
- ---------------------------------------------
- -------------------------------
Six Months
Ended Years Ended
April 30,
October 31, -----------------------------
- -------------------------------
1997 1997 1996 1995
1994 1993
- ----------- -------- -------- ---
- ----- -------- --------
<S>
<C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 10.91 $
10.95 $ 10.84 $ 10.71 $ 11.44
$ 10.99
- ----------- -------- -------- ---
- ----- -------- --------
Income from investment operations
Net investment
income...............................
.24(b) .50(b) .54(b)
.54(b) .54 .56
Net realized and unrealized gain (loss) on
investment
transactions..........................
.42 .08 .11 .13
(.43) .72
- ----------- -------- -------- ---
- ----- -------- --------
Total from investment
operations................. .66
.58 .65 .67 .11
1.28
- ----------- -------- -------- ---
- ----- -------- --------
Less distributions
Dividends from net investment
income................ (.24)
(.50) (.54) (.54) (.54)
(.56)
Distributions in excess of net investment
income.... -- (.01)
- -- -- -- --
Distributions from capital
gains.................... --
(.11) -- -- (.30)
(.27)
- ----------- -------- -------- ---
- ----- -------- --------
Total
distributions..............................
(.24) (.62) (.54) (.54)
(.84) (.83)
- ----------- -------- -------- ---
- ----- -------- --------
Net asset value, end of
period...................... $ 11.33
$ 10.91 $ 10.95 $ 10.84 $
10.71 $ 11.44
- ----------- -------- -------- ---
- ----- -------- --------
- ----------- -------- -------- ---
- ----- -------- --------
TOTAL
RETURN(a):...................................
. 6.13% 5.32% 6.04%
6.40% 0.63% 12.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $ 268,731
$298,005 $443,391 $567,648
$740,447 $770,060
Average net assets
(000)............................ $ 284,872
$365,891 $524,452 $660,237
$807,794 $705,846
Ratios to average net assets:
Expenses, including distribution
fees............ 1.09%(b)(c)
1.08%(b) 1.08%(b) 1.14%(b) 1.11%
1.12%
Expenses, excluding distribution
fees............ 0.59%(b)(c)
0.58%(b) 0.58%(b) 0.64%(b) 0.61%
0.62%
Net investment
income............................
4.34%(b)(c) 4.54%(b) 4.80%(b)
4.99%(b) 4.69% 5.06%
</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) Annualized.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 45
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited)
INSURED SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class C Class
Z
- ---------------------------------------------
- --------- -------------
August 1,
Six Months
1994(c) Six Months
Ended Years Ended April 30,
Through Ended
October 31, -----------------------
April 30, October 31,
1997 1997 1996
1995 1997
- ----------- --------- --------- -
- --------- -------------
<S>
<C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 10.91 $
10.95 $ 10.84 $10.79 $
10.91
- ----------- --------- ---------
- ----- ------
Income from investment operations
Net investment income
(b)........................... .23
.48 .51 .39
.27
Net realized and unrealized gain (loss) on
investment
transactions..........................
.42 .08 .11
.05 .41
- ----------- --------- ---------
- ----- ------
Total from investment
operations................. .65
.56 .62 .44
.68
- ----------- --------- ---------
- ----- ------
Less distributions
Dividends from net investment
income................ (.23)
(.48) (.51) (.39)
(.27)
Distributions in excess net investment
income....... -- (.01)
- -- -- --
Distributions from capital
gains.................... --
(.11) -- --
- --
- ----------- --------- ---------
- ----- ------
Total
distributions..............................
(.23) (.60) (.51)
(.39) (.27)
- ----------- --------- ---------
- ----- ------
Net asset value, end of
period...................... $ 11.33
$ 10.91 $ 10.95 $10.84
$ 11.32
- ----------- --------- ---------
- ----- ------
- ----------- --------- ---------
- ----- ------
TOTAL
RETURN(a):...................................
. 6.00% 5.06% 5.78%
4.03% 6.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $ 960
$ 888 $ 1,137 $ 525
$ 159
Average net assets
(000)............................ $ 898
$ 973 $ 827 $ 224
$ 94
Ratios to average net assets:
Expenses, including distribution
fees(b)......... 1.34%(e) 1.33%
1.33% 1.39%(e) 0.59%(e)
Expenses, excluding distribution
fees(b)......... 0.59%(e) 0.58%
0.58% 0.64%(e) 0.59%(e)
Net investment
income(b).........................
4.09%(e) 4.29% 4.56%
4.92%(e) 4.91%(e)
<CAPTION>
<S>
<C>
September 16,
1996(d)
Through
April 30,
1997
- -------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 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 net investment
income....... (.01)
Distributions from capital
gains.................... (.11)
- -----
Total
distributions..............................
(.48)
- -----
Net asset value, end of
period...................... $ 10.91
- -----
- -----
TOTAL
RETURN(a):...................................
. 2.86%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(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
reinvestment of dividends and
distributions. Total returns for periods
of less than a full year are not
annualized.
(b) Net of management fee waivers.
(c) Commencement of offering of Class C
shares.
(d) Commencement of offering of Class Z
shares.
(e) Annualized.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 46
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited)
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class A
- ---------------------------------------------
- -------------------------
Six Months
Ended Years Ended
April 30,
October 31, -----------------------------
- -------------------------
1997 1997 1996 1995
1994 1993
- ----------- -------- ------- ----
- --- ------ ------
<S>
<C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 10.59 $
10.65 $ 10.45 $ 10.67 $11.08
$10.59
- ----------- -------- ------- ----
- --- ------ ------
Income from investment operations
Net investment
income...............................
.22(b) .46(b) .47(b) .51(b)
.53 .54(b)
Net realized and unrealized gain (loss) on
investment
transactions..........................
.31 (.05) .20 (.03)
(.19) .60
- ----------- -------- ------- ----
- --- ------ ------
Total from investment
operations................. .53
.41 .67 .48 .34
1.14
- ----------- -------- ------- ----
- --- ------ ------
Less distributions
Dividends from net investment
income................ (.22)
(.46) (.47) (.51) (.53)
(.54)
Distributions in excess of net investment
income.... -- (.01)
- -- (.01) -- --
Distributions from capital
gains.................... --
- -- -- (.18) (.22)
(.11)
- ----------- -------- ------- ----
- --- ------ ------
Total
distributions..............................
(.22) (.47) (.47) (.70)
(.75) (.65)
- ----------- -------- ------- ----
- --- ------ ------
Net asset value, end of
period...................... $ 10.90
$ 10.59 $ 10.65 $ 10.45 $10.67
$11.08
- ----------- -------- ------- ----
- --- ------ ------
- ----------- -------- ------- ----
- --- ------ ------
TOTAL
RETURN(a):...................................
. 5.04% 3.86% 6.48%
4.52% 2.83% 11.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $ 13,296 $
13,740 $12,552 $10,507 $5,810
$3,594
Average net assets
(000)............................ $ 13,966
$ 13,487 $12,604 $ 7,742 $4,981
$1,883
Ratios to average net assets:
Expenses, including distribution
fees............ 1.25%(b)(c)
1.15%(b) 1.16%(b) 1.05%(b) 1.00%
1.06%(b)
Expenses, excluding distribution
fees............ 1.15%(b)(c)
1.05%(b) 1.06%(b) 0.95%(b) 0.90%
0.96%(b)
Net investment
income............................
4.05%(b)(c) 4.30%(b) 4.36%(b)
4.75%(b) 4.63% 5.09%(b)
For Class A, B, C and Z shares:
Portfolio turnover
rate.......................... 22%
46% 35% 30% 55%
22%
</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
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) Annualized.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 47
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited)
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class B
- ---------------------------------------------
- ---------------------------
Six Months
Ended Years Ended
April 30,
October 31, -----------------------------
- ---------------------------
1997 1997 1996 1995
1994 1993
- ----------- -------- ------- ----
- --- ------- -------
<S>
<C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 10.59 $
10.65 $ 10.45 $ 10.68 $ 11.09
$ 10.60
- ----------- -------- ------- ----
- --- ------- -------
Income from investment operations
Net investment
income...............................
.20(b) .42(b) .43(b) .45(b)
.48 .50(b)
Net realized and unrealized gain (loss) on
investment
transactions..........................
.31 (.05) .20 (.04)
(.19) .60
- ----------- -------- ------- ----
- --- ------- -------
Total from investment
operations................. .51
.37 .63 .41 .29
1.10
- ----------- -------- ------- ----
- --- ------- -------
Less distributions
Dividends from net investment
income................ (.20)
(.42) (.43) (.45) (.48)
(.50)
Distributions in excess of net investment
income.... -- (.01)
- -- (.01) -- --
Distributions from capital
gains.................... --
- -- -- (.18) (.22)
(.11)
- ----------- -------- ------- ----
- --- ------- -------
Total
distributions..............................
(.20) (.43) (.43) (.64)
(.70) (.61)
- ----------- -------- ------- ----
- --- ------- -------
Net asset value, end of
period...................... $ 10.90
$ 10.59 $ 10.65 $ 10.45 $ 10.68
$ 11.09
- ----------- -------- ------- ----
- --- ------- -------
- ----------- -------- ------- ----
- --- ------- -------
TOTAL
RETURN(a):...................................
. 4.83% 3.44% 6.05%
3.99% 2.43% 10.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $ 27,122 $
29,980 $40,550 $51,039 $65,215
$57,049
Average net assets
(000)............................ $ 28,545
$ 35,221 $46,127 $60,174 $59,811
$50,154
Ratios to average net assets:
Expenses, including distribution
fees............ 1.65%(b)(c)
1.55%(b) 1.56%(b) 1.45%(b) 1.40%
1.46%(b)
Expenses, excluding distribution
fees............ 1.15%(b)(c)
1.05%(b) 1.06%(b) 0.95%(b) 0.90%
0.96%(b)
Net investment
income............................
3.65%(b)(c) 3.89%(b) 3.96%(b)
4.35%(b) 4.23% 4.69%(b)
</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
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) Annualized.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 48
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited)
INTERMEDIATE SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class C Class Z
- ---------------------------------------------
- ------- -----------
August 1,
Six Months
1994(c) Six Months
Ended Years Ended April 30,
Through Ended
October 31, ---------------------
April 30, October 31,
1997 1997 1996
1995 1997
- ----------- ------- --------- ---
- ------- -----------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 10.59 $
10.65 $ 10.45 $10.54 $
10.59
- ----------- ------- ---------
- ----- -----------
Income from investment operations
Net investment income
(b)........................... .18
.39 .40 .35
.22
Net realized and unrealized gain (loss) on
investment
transactions..........................
.31 (.05) .20 (.08)
.31
- ----------- ------- ---------
- ----- -----------
Total from investment
operations................. .49
.34 .60 .27
.53
- ----------- ------- ---------
- ----- -----------
Less distributions
Dividends from net investment
income................ (.18)
(.39) (.40) (.35)
(.22)
Distributions in excess of net investment
income.... -- (.01)
- -- (.01) --
- ----------- ------- ---------
- ----- -----------
Total
distributions..............................
(.18) (.40) (.40) (.36)
(.22)
- ----------- ------- ---------
- ----- -----------
Net asset value, end of
period...................... $ 10.90
$ 10.59 $ 10.65 $10.45 $
10.90
- ----------- ------- ---------
- ----- -----------
- ----------- ------- ---------
- ----- -----------
TOTAL
RETURN(a):...................................
. 4.70% 3.17% 5.79%
2.14% 5.09%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)..................... $ 459 $
257 $ 225 $ 167 $
338
Average net assets
(000)............................ $ 307
$ 149 $ 197 $ 28 $
299
Ratios to average net assets:
Expenses, including distribution
fees(b)......... 1.90%(e) 1.80%
1.81% 1.81%(e) 1.15%(e)
Expenses, excluding distribution
fees(b)......... 1.15%(e) 1.05%
1.06% 1.06%(e) 1.15%(e)
Net investment
income(b).........................
3.40%(e) 3.65% 3.71%
4.34%(e) 4.15%(e)
<CAPTION>
<S>
<C>
September 16,
1996(d)
Through
April 30,
1997
- -------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................ $ 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)
- -----
Total
distributions..............................
(.32)
- -----
Net asset value, end of
period...................... $ 10.59
- -----
- -----
TOTAL
RETURN(a):...................................
. 2.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(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
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. 49
<PAGE>
Getting The Most From Your Prudential Mutual
Fund.
Some mutual fund shareholders won't ever read
this -- they don't read annual
and semi-annual reports. It's quite
understandable. These annual and
semi-annual reports are prepared to comply
with Federal regulations. They are
often written in language that is difficult
to understand. So when most people
run into those particularly daunting sections
of these reports, they don't read
them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some
changes to our report to make it
easier to understand and more pleasant to
read, in hopes you'll find it
profitable to spend a few minutes
familiarizing yourself with your investment.
Here's what you'll find in the report:
At A Glance
Since an investment's performance is often a
shareholder's primary concern, we
present performance information in two
different formats. You'll find it first
on the "At A Glance" page where we compare
the Fund and the comparable average
calculated by Lipper Analytical Services, a
nationally recognized mutual fund
rating agency. We report both the cumulative
total returns and the average
annual total returns. The cumulative total
return is the total amount of income
and appreciation the Fund has achieved in
various time periods. The average
annual total return is an annualized
representation of the Fund's
performance -- it generally smoothes out
returns and gives you an idea how
much the Fund has earned in an average year,
for a given time period. Under
the performance box, you'll see legends that
explain the performance
information, whether fees and sales charges
have been included in returns, and
the inception dates for the Fund's share
classes.
See the performance comparison charts at the
back of the report for more
performance information. And keep in mind
that past performance is not
indicative of future results.
Portfolio Manager's Report
The portfolio manager who invests your money
for you reports on successful --
and not-so-successful -- strategies in this
section of your report. Look for
recent purchases and sales here, as well as
information about the sectors the
portfolio manager favors and any changes that
are on the drawing board.
Portfolio Of Investments
This is where the report begins to look
technical, but it's really just a
listing of each security held at the end of
the reporting period, along with
valuations and other information. Please note
that sometimes we discuss a
security in the Portfolio Manager's Report
that doesn't appear in this listing
because it was sold before the close of the
reporting period.
<PAGE>
Statement Of Assets And Liabilities
The balance sheet shows the assets (the value
of the Fund's holdings),
liabilities (how much the Fund owes) and net
assets (the Fund's equity, or
holdings after the Fund pays its debts) as of
the end of the reporting period.
It also shows how we calculate the net asset
value per share for each class of
shares. The net asset value is reduced by
payment of your dividend, capital
gain, or other distribution, but remember
that the money or new shares are
being paid or issued to you. The net asset
value fluctuates daily along with
the value of every security in the portfolio.
Statement Of Operations
This is the income statement, which details
income (mostly interest and
dividends earned) and expenses (including
what you pay us to manage your
money). You'll also see capital gains here --
both realized and unrealized.
Statement Of Changes In Net Assets
This schedule shows how income and expenses
translate into changes in net
assets. The Fund is required to pay out the
bulk of its income to shareholders
every year, and this statement shows you how
we do it -- through dividends and
distributions -- and how that affects the net
assets. This statement also
shows how money from investors flowed into
and out of the Fund.
Notes To Financial Statements
This is the kind of technical material that
can intimidate readers, but it does
contain useful information. The Notes provide
a brief history and explanation
of your Fund's objectives. In addition, they
also outline how Prudential Mutual
Funds prices securities. The Notes also
explain who manages and distributes the
Fund's shares, and more importantly, how much
they are paid for doing so.
Finally, the Notes explain how many shares
are outstanding and the number
issued and redeemed over the period.
Financial Highlights
This information contains many elements from
prior pages, but on a per share
basis. It is designed to help you understand
how the Fund performed and to
compare this year's performance and expenses
to those of prior years.
Independent Auditor's Report
Once a year, an outside auditor looks over
our books and certifies that the
information is fairly presented and complies
with generally accepted accounting
principles.
Tax Information
This is information which we report annually
about how much of your total
return is taxable. Should you have any
questions, you may want to consult a
tax advisor.
Performance Comparison
These charts are included in the annual
report and are required by the
Securities Exchange Commission. Performance
is presented here as a hypothetical
$10,000 investment in the Fund since its
inception or for 10 years (whichever
is shorter). To help you put that return in
context, we are required to include
the performance of an unmanaged, broad based
securities index, as well. The
index does not reflect the cost of buying the
securities it contains or the
cost of managing a mutual fund. Of course,
the index holdings do not mirror
those of the fund -- the index is a broadly
based reference point commonly
used by investors to measure how well they
are doing. A definition of the
selected index is also provided. Investors
generally cannot invest directly in
an index.
<PAGE>
Getting The Most From Your Prudential Mutual
Fund.
- ---------------------------------------------
- ----------------------------------
Change Your Mind.
You can exchange your shares in most
Prudential Mutual Funds for shares in
most other Prudential Mutual Funds, without
charges. This may be most helpful
if your investment needs change.
- ---------------------------------------------
- ----------------------------------
Reinvest Dividends Free Of Charge.
Reinvest your dividends and/or capital gains
distributions automatically --
without charge.
- ---------------------------------------------
- ----------------------------------
Invest For Retirement.
There is no minimum investment for an IRA.
Plus, you defer taxes on your
investment earnings by investing in an IRA.
If you'd like, you can contribute up to
$2,000 a year in an IRA. And if you
are married and not covered by a retirement
plan at work, you and your spouse
may each contribute $2,000 a year to an IRA
for a total of $4,000.
- ---------------------------------------------
- ----------------------------------
Change Your Job.
You can take your pension with you. Use a
rollover IRA to manage your
company-sponsored retirement plan while
retaining the special tax-deferred
advantages.
- ---------------------------------------------
- ----------------------------------
Invest In Your Children.
There's no fee to open a custodial account
for a child's education or other
needs.
- ---------------------------------------------
- ----------------------------------
Take Income.
Would you like to receive monthly or
quarterly checks in any amount from your
fund account? Just let us know. We'll take
care of it. Of course, there are
minimum amounts. And shares redeemed may be
subject to tax, and Class B and C
shares may be subject to contingent deferred
sales charges. We'll gladly answer
your questions.
- ---------------------------------------------
- ----------------------------------
Keep Informed.
We want to keep you up-to-date. Of course,
you receive account activity
statements every quarter. But you also
receive annual and semi-annual fund
reports, as well as other important updates
on events that affect your
investments, including tax information.
This material is only authorized for
distribution when preceded or accompanied
by a current prospectus. Read the prospectus
carefully before you invest or
send money.
<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 Dedrick Gold
Robert F. Gunia
Harry A. Jacobs, Jr.
Donald D. Lennox
Mendel A. Melzer
Thomas T. Mooney
Thomas H. O'Brien
Richard A. Redeker
Nancy H. Teeters
Louis A. Weil, III
Officers
Richard A. Redeker, President
Thomas A. Early, 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.
The accompanying financial statements as of
October 31, 1997 were not audited
and, accordingly, no opinion is expressed on
them.
This report is not authorized for
distribution to prospective investors unless
preceded or accompanied by a current
prospectus.
<PAGE>
(LOGO)
BULK RATE
Prudential Mutual Funds U.S.
POSTAGE
Gateway Center Three
PAID
100 Mulberry Street
Permit 6807
Newark, NJ 07102-4077 New
York, NY
(800) 225-1852
74435L103 74435L301 74435L509 MF133E2
74435L202 74435L400 74435L608 CAT#44416FI
74435L707 74435L806 74435L889
74435L871 74435L863 74435L855
