<PAGE>
(ICON)
Prudential
Municipal
Bond Fund
High Income Series
Insured Series
SEMI
ANNUAL
REPORT
Oct. 31, 1999
(LOGO)
<PAGE>
A Message to Our Shareholders December 15, 1999
(PHOTO)
Dear Shareholder,
Prudential Municipal Bond Fund--High Income Series' Class A shares posted a
negative return of 3.70% during our six-month reporting period ended October
31, 1999. This decline was less severe, however, than the negative 4.48%
return posted by the Lipper High Yield Municipal Debt Fund Average. Prudential
Municipal Bond Fund--Insured Series' Class A shares posted a negative return
of 4.95% during our six-month reporting period ended October 31, 1999. The
Fund's return, however, outperformed the Lipper Insured Municipal Debt Fund
Average, which posted a negative return of 5.49%.
The following report takes a closer look at developments in debt securities
markets during the past six months, and explains how the Fund was positioned
accordingly.
One integrated and expanded team
I would like to take this opportunity to tell you about some of the changes
we've made to our Fixed Income Group. Earlier in the year, we combined our
fixed-income areas into one integrated group that will manage money for
Prudential's investors and policyholders. This group now manages approximately
$135 billion in assets, making it one of the three largest fixed-income
money managers in the country. Our expanded depth, breadth, and scale also
allow us to tap the best talent and share investment ideas, proprietary
research, and analytical tools.
To utilize these resources effectively, we recently organized the group into
teams, each specializing in a different sector of the fixed-income market. The
Municipal Bond Sector team, headed by Evan Lamp, will now be responsible for
the day-to-day management of your Prudential Municipal Bond Fund--High Income
Series and Insured Series. Many of the investment professionals who supported
the management of the Fund in the past, including Peter Allegrini and James
Murphy, will work together to share their knowledge and strive to enhance
performance.
Thank you for your continued confidence in Prudential mutual funds. I firmly
believe that the group's combined resources and our new team approach will
make us a powerhouse across all sectors of fixed-income investing.
Sincerely,
John R. Strangfeld
President
Prudential Municipal Bond Fund--High Income Series
Prudential Municipal Bond Fund--Insured Series
<PAGE>
Market Review: High Income Series
(PHOTOS)
Team portfolio managers Evan Lamp (Municipal Bond Team Leader) and
Peter Allegrini
Investment Goals and Style
We seek the maximum amount of income that is eligible for exclusion from
federal income taxes by investing primarily in noninvestment-grade municipal
bonds rated single-B or better by recognized credit-rating agencies such as
Standard & Poor's Ratings Group (S&P) or Moody's Investors Service (Moody's),
or in unrated bonds that our analysts believe are of comparable quality.
There can be no assurance that the Series will achieve its investment
objective.
Good performance, poor market
A strong U.S. economy and global economic recovery were the backdrop to an
environment that was adverse for most sectors of the bond market during our
six-month reporting period. The U.S. economy grew at such a rapid pace that
concerns arose that too much money would be chasing too few goods, and would
ultimately lead to higher inflation, which erodes the fixed value of bond
interest payments. The Federal Reserve raised the Federal funds rate--the rate
banks charge each other for overnight loans--once in June and again in August
1999 to slow the rapidly growing U.S. economy, and to reduce imbalances that
tend to lead to inflation. Also, due in part to the strong economy,
investors felt safer investing their money in growth securities and riskier
debt securities. They sold U.S. Treasury holdings and shifted money to these
investments and cash, causing Treasury prices to fall and their yields, which
move in the opposite direction, to rise. Municipal bonds also suffered as they
were swept up in this investment trend.
In this adverse environment, Prudential Municipal Bond Fund--High Income
Series was still able to post a return that was ahead of its disappointing
competitive benchmark.
Federal Reserve rate hikes and our duration stance
We positioned our Series' duration--the measure of sensitivity that bonds have
to interest-rate changes--shorter than average compared to our competitive
universe. A shorter duration enables the Series to perform well when debt
markets sell off. When the Federal Reserve raised the Federal funds rate
twice during our reporting period, it added to the sell-off experienced by
many bond markets, including the municipal bond market. Our shorter duration
stance helped the Series withstandthe sell-off and subsequent price dip in
municipal bonds.
We stayed away from healthcare
The Series was underexposed, compared to other high-income/high-yield bond
funds, to bonds in the troubled healthcare sector. This positioning favored
the Series since bonds in the healthcare sector continued to perform poorly
throughout our reporting period. Their yield spreads widened and their prices
fell as the sector continues to adjust to new Medicare and HMO legislation and
to increased competition, which are forcing restructuring in the healthcare
and hospital systems.
<PAGE>
High-yield bonds moved ahead
The high-income/high-yield sector--specifically the non-rated portion of this
sector--was one of the better-performing sectors during our reporting period.
Prudential Municipal Bond Fund--High Income Series is structured to invest in
municipal bonds that provide the highest amount of income without incurring
federal income taxes. Therefore, the Series is heavily invested in non-rated
high-yield bonds. Yield spreads on high-yield bonds have tightened in relation
to U.S. Treasuries, and these issues have also provided some healthy price
appreciation. This has helped the Series' return outperform its competitive
benchmark, as well as offset some of the losses experienced in other areas of
our portfolio.
Looking Ahead
Municipal bonds offer good value
With their demand at a low point, but with their supply holding steady,
municipal bonds can be bought cheaply, and offer excellent value in relation
to U.S. Treasuries. The U.S. economy remains strong and is showing only modest
signs of slowing as we move into the new year.
Continued on page 4
Cumulative Total Returns1 As of 10/31/99
<TABLE>
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A -3.70% -2.59% 37.67% (37.41) N/A 89.31% (88.59)
Class B -3.82 -2.86 35.12 (34.86) 85.95% (85.07) 134.66 (132.42)
Class C -3.94 -3.10 33.46 (33.21) N/A 30.39 (30.14)
Class Z -3.49 -2.29 N/A N/A 17.41 (17.30)
Lipper HY Muni
Debt Fd. Avg.3 -4.48 -2.96 35.51 86.73 ***
</TABLE>
Average Annual Total Returns1 As of 9/30/99
<TABLE>
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A -4.73% 5.99% (5.95) N/A 6.62% (6.58)
Class B -7.07 6.08 (6.04) 6.63% (6.58) 7.46 (7.38)
Class C -4.29 5.76 (5.72) N/A 5.34 (5.31)
Class Z -1.59 N/A N/A 5.84 (5.81)
</TABLE>
Distributions and Yields As of 10/31/99
<TABLE>
<CAPTION>
Taxable Equivalent Yield4
Total Dividends 30-Day At Tax Rates Of
Paid for Six Mos. SEC Yield 36% 39.6%
<S> <C> <C> <C> <C>
Class A $0.31 5.37% 8.39% 8.89%
Class B $0.30 5.29 8.27 8.76
Class C $0.28 4.99 7.80 8.26
Class Z $0.32 5.80 9.06 9.60
</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 LLC and Lipper Inc. The
cumulative total returns do not take into account sales charges. The average
annual total returns do take into account applicable sales charges. The Series
charges a maximum front-end sales charge of 3% for Class A shares. Class B
shares are subject to a declining contingent deferred sales charge (CDSC) of
5%, 4%, 3%, 2%, 1%, and 1% for six years. Class B shares will automatically
convert to Class A shares, on a quarterly basis, approximately seven years
after purchase. Class C shares are subject to a front-end sales charge of 1%
and a CDSC of 1% for 18 months. Class C shares bought before November 2, 1998,
have a 1% CDSC if sold within one year. Class Z shares are not subject to a
sales charge or distribution and service (12b-1) fees. Without waiver of
management fees and/or expense subsidization, the Series' cumulative and
average annual total returns would have been lower, as indicated in
parentheses ( ).
2 Inception dates: Class A, 1/22/90; Class B, 9/17/87; Class C, 8/1/94; Class
Z, 9/16/96.
3 Lipper average returns are for all funds in each share class for the six-
month, one-, five-, and ten-year periods in the High Yield Muni Debt Fund
category. The Lipper average is unmanaged. High Yield Muni Debt funds invest
at least 50% of their assets in lower-rated municipal debt issues.
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 returns are 85.03% for Class A, 135.82% for
Class B, 32.17% for Class C, and 14.88% for Class Z, based on all funds in
each share class.
- -------------------------------------------------------------------------------
1
<PAGE>
Market Review: Insured Series
(PHOTOS)
Team portfolio managers Evan Lamp (Municipal Bond Team Leader) and
James Murphy
Investment Goals and Style
We seek the maximum amount of income that is eligible for exclusion from
federal income taxes, consistent with the preservation of capital. The
Insured Series invests primarily in AAA-rated municipal obligations,
municipal obligations, the coupon and principal payments (but not market
value) of which are insured by a municipal bond insurance company rated AAA
by S&P, Moody's, or other nationally recognized credit-rating agencies, or
in U.S. government-backed municipal obligations. The Series may also invest
up to 5% of its total assets in municipal obligations rated A/A or Aa/AA by
Moody's or S&P. There can be no assurance that the Series will achieve its
investment objective.
Our bonds are primarily insured by MBIA Insurance Corp., AMBAC Indemnity
Corp., Financial Guaranty Insurance Co., and Financial Security Assurance Inc.
Adding value in a tough market
A continually growing U.S. economy and global economic recovery were the
backdrop to an environment that was adverse for most sectors of the bond
market during our six-month reporting period. The U.S. economy grew at such a
rapid pace that concerns arose that too much money would be chasing too few
goods, and would ultimately lead to higher inflation, which erodes the fixed
value of bond interest payments. The Federal Reserve raised the Federal
funds rate--the rate banks charge each other for overnight loans--once in
June and again in August 1999 to slow the rapidly growing U.S. economy, and
to reduce imbalances that tend to lead to inflation. Also, in part due to the
strong economy, investors felt safer investing their money in growth
securities and riskier debt securities. They sold U.S. Treasury holdings
and shifted money to these investments and cash, causing Treasury prices to
fall and their yields, which move in the opposite direction, to rise.
Municipal bonds also suffered as they were swept up in this investment trend.
In this adverse environment, Prudential Municipal Bond Fund-- Insured Series
was still able to post a return that was ahead of its disappointing
competitive benchmark.
Interest-rate stance
We maintained a shorter, less aggressive interest-rate stance compared to our
competitive universe during our six-month reporting period. A shorter interest-
rate positioning enables the Series to perform well when debt markets sell off.
The Federal Reserve's rate hikes added to the sell-off experienced by many bond
markets, including the municipal bond market. We were able to anticipate these
moves by the Federal Reserve and our defensive interest-rate stance helped the
Series withstand the sell-off and price dip in municipal bonds.
Some bonds were prerefunded
The Series' performance was bolstered when some of the bonds held in its
portfolio increased in value after being prerefunded. Bonds that are
prerefunded become backed by direct obligations of the U.S. government, which
significantly improves their credit quality, shortens their interest-rate
sensi-tivity and, in most cases, significantly increases their price. The
Series held a relatively large portion of prerefunded bonds in its portfolio,
compared to other funds in its competitive universe, helping to provide a
higher level of distribution income.
- -------------------------------------------------------------------------------
2
<PAGE>
Discount securities
The Series held municipal discount bonds with good OID protection throughout
the reporting period. The Series was underexposed, compared to its competitive
universe, to bonds likely to become subject to market discount taxation as
rates rise. Market discounts beyond a deminimus amount would subject a new
buyer to ordinary income taxation on the market discount upon disposition.
This negative tax consequence causes deep discount bonds to become very
unattractive as rates rise. The Series held, but eventually sold, positions
in some of these discount bonds before they became subject to ordinary income
taxation for new buyers, avoiding the accelerated price declines in these
bonds.
Continued on page 5
Cumulative Total Returns1 As of 10/31/99
<TABLE>
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A -4.95% -4.04% 33.96% (33.70) N/A 82.12% (80.89)
Class B -5.06 -4.30 31.47 (31.22) 78.88% (77.33) 119.69 (114.61)
Class C -5.18 -4.54 29.86 (29.61) N/A 25.74 (25.50)
Class Z -4.83 -3.83 N/A N/A 13.88 (13.77)
Lipper INS Muni
Debt Fd. Avg.3 -5.49 -4.42 32.69 82.22 ***
</TABLE>
Average Annual Total Returns1 As of 9/30/99
<TABLE>
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A -6.32% 5.28% (5.24) N/A 6.18% (6.11)
Class B -8.70 5.39 (5.35) 6.23% (6.13) 6.87 (6.66)
Class C -5.98 5.08 (5.04) N/A 4.59 (4.55)
Class Z -3.31 N/A N/A 4.76 (4.72)
</TABLE>
Distributions and Yields As of 10/31/99
<TABLE>
<CAPTION>
Taxable Equivalent Yield4
Total Dividends 30-Day At Tax Rates Of
Paid for Six Mos. SEC Yield 36% 39.6%
<S> <C> <C> <C> <C>
Class A $0.25 4.32% 6.75% 7.15%
Class B $0.25 4.20 6.56 6.95
Class C $0.23 3.92 6.13 6.49
Class Z $0.25 4.71 7.36 7.80
</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 LLC and Lipper Inc. The
cumulative total returns do not take into account sales charges. The average
annual total returns do take into account applicable sales charges. The Series
charges a maximum front-end sales charge of 3% for Class A shares. Class B
shares are subject to a declining contingent deferred sales charge (CDSC) of
5%, 4%, 3%, 2%, 1%, and 1% for six years. Class B shares will automatically
convert to Class A shares, on a quarterly basis, approximately seven years
after purchase. Class C shares are subject to a front-end sales charge of 1%
and a CDSC of 1% for 18 months. Class C shares bought before November 2, 1998,
have a 1% CDSC if sold within one year. Class Z shares are not subject to a
sales charge or distribution and service (12b-1) fees. Without waiver of
management fees and/or expense subsidization, the Series' cumulative and
average annual total returns would have been lower, as indicated in
parentheses ( ).
2 Inception dates: Class A, 1/22/90; Class B, 9/17/87; Class C, 8/1/94; Class
Z, 9/16/96.
3 Lipper average returns are for all funds in each share class for the six-
month, one-, five-, and ten-year periods in the Insured Muni Debt Fund
category. The Lipper average is unmanaged. Insured Muni Debt funds invest
at least 65% of their assets in municipal debt issues insured as to timely
payment.
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 returns are 80.16% for Class A, 130.24% for
Class B, 27.78% for Class C, and 11.09% for Class Z, based on all funds
in each share class.
- -------------------------------------------------------------------------------
3
<PAGE>
High Income Series Cont'd.
Continued from page 1
Nonetheless, further rises in the Federal funds rate could benefit fixed-
income markets as it would show a commitment to heading off inflation. While
the healthcare sector still needs more time to absorb the changes taking
place, we will try to identify some of the best value in this sector, given
the attractive yield opportunities we can secure from this sector. If these
scenarios unfold, they could significantly benefit the Series by bolstering
returns and providing safety for your investment.
Additional Performance Tracking Tools
You can access comprehensive information about the performance of your
Prudential mutual funds 24 hours a day through our website and automated phone
service. At www.prudential.com/investing, you'll find the daily closing values,
changes from the previous day, and quarterly performance for all of our retail
mutual funds. Other available resources include daily, monthly, and quarterly
market commentary.
Prudential is committed to meeting shareholders' needs. That is why we
continue to upgrade and make improvements to our website. Please send us your
comments about how we can continue to improve our site to meet your needs.
Daily fund values are also a toll-free call away from any touch-tone phone.
Call (800) 225-1852 and follow the voice prompts to obtain mutual fund closing
values and yields. You can even set up a personalized "watch list" to track
specific Prudential mutual funds.
Mutual Fund Automated Service: (800) 225-1852
Main Menu Submenus
1. Account information 1. Account balance
2. Transactions
3. Order forms
2. Prices and yields
3. Transactions
4. Order checks and statements
5. PIN change
Five Largest Issuers
Expressed as a percentage of net assets
as of 10/31/99
Memphis Ctr. City Rev. Fin. Corp. 2.2%
Chicago O'Hare Int'l Airport 1.7
NJ State Trans. Trust Fund Auth. 1.5
Lake Creek Affordable Hsg. Corp. 1.2
Grand River Dam Auth. Rev. 1.2
Portfolio Composition
Expressed as a percentage of total investments
as of 10/31/99
Revenue Bonds 68%
General Obligation Bonds 15
Prerefunded 10
Miscellaneous 5
Cash Equivalents 2
Credit Breakdown
Expressed as a percentage of total investments
as of 10/31/99
BB 23%
Insured 21
B 19
BBB 15
AAA 10
AA 4
A 2
CCC 2
Not Rated 1
Other 1
Cash Equivalents 2
- -------------------------------------------------------------------------------
4
<PAGE>
Insured Series Cont'd.
Continued from page 3
Looking Ahead
Municipal bonds offer good value
With their demand at a low point, but with their supply holding steady,
municipal bonds can be bought cheaply, and offer excellent value in relation
to U.S. Treasuries. The U.S. economy remains strong and is showing only modest
signs of slowing as we move into the new year. Nonetheless, further short-term
rate hikes by the Federal Reserve may lead to longer-term prosperity, and
could ultimately benefit long-term fixed-income markets as they underscore
the Federal Reserve's commitment to maintaining low inflation. Expectations
of sustainable economic growth and low inflation, over the long term, provide
a solid backdrop for good market performance.
Five Largest Issuers
Expressed as a percentage of net assets
as of 10/31/99
Chicago Bd. of Ed. 5.5%
Dist. of Columbia 3.7
Washington St. Pub. Pwr. Supply 3.4
Austin Com. Util. Rev. 3.2
Houston Wtr. & Swr. Rev. Bd. 2.9
Portfolio Composition
Expressed as a percentage of total investments
as of 10/31/99
Revenue Bonds 60%
General Obligation Bonds 27
Prerefunded 8
Miscellaneous 2
Cash Equivalents 3
Credit Breakdown
Expressed as a percentage of total investments
as of 10/31/99
Insured 87%
AAA 7
AA 4
Cash Equivalents 2
- -------------------------------------------------------------------------------
5
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (Unaudited) HIGH INCOME 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--96.8%
- ------------------------------------------------------------------------------------------------------------------------------
Arizona--2.6%
Coconino Cnty. Pol. Ctrl. Corp. Rev.,
Tucson Elec. Pwr., Navajo A, A.M.T. B2 7.125% 10/01/32 $ 5,000 $ 5,150,000
Tucson Elec. Pwr., Navajo B B2 7.00 10/01/32 1,700 1,756,933
Pima Cnty. Ind. Dev. Auth.,
Multifam. Mtge. Rev., La Cholla Proj., A.M.T. NR 8.50 7/01/20 9,515 10,348,609
Tuscon Elec. Pwr. Co., Ser. A, A.M.T. B2 6.10 9/01/25 2,000 1,809,180
Tuscon Elec. Pwr. Co., Ser. B, A.M.T. B2 6.00 9/01/29 10,750 9,652,623
--------------
28,717,345
- ------------------------------------------------------------------------------------------------------------------------------
Arkansas--1.1%
Northwest Arkansas Reg'l. Arpt. Auth.
Rev., A.M.T. NR 7.00 2/01/10 3,000 3,114,480
Rev., A.M.T. NR 7.625 2/01/27 8,400 9,136,512
--------------
12,250,992
- ------------------------------------------------------------------------------------------------------------------------------
California--10.0%
Abag Fin. Auth. For Nonprofit Corps. Ref. Amer. Baptist
Homes., Ser. A BBB(b) 6.20 10/01/27 3,200 3,047,264
Corona Ctfs. of Part., Vista Hosp. Sys. Inc., Ser. C NR 8.375 7/01/11 10,000 9,321,300
Delano Ctfs. of Part., Reg'l. Med. Ctr., Ser. A AAA(b) 9.25 1/01/22 6,620 (c) 7,664,371
Foothill / Eastern Transp. Corridor Agcy. Toll Rd. Rev. Baa3 Zero 1/15/28 11,700 5,955,417
Lincoln Impvt. Bond Act 1915, Pub. Fin. Auth., Twelve
Bridges NR 6.20 9/02/25 4,000 3,797,680
Long Beach Harbor Rev. Ref., Ser. A., F.G.I.C., A.M.T. Aaa 6.00 5/15/19 4,000 4,064,520
Long Beach Redev. Agcy. Hsg.,
Multifam. Hsg. Rev., Pacific Court Apts. NR 6.95 9/01/23 6,195 3,840,900
Multifam. Hsg. Rev., Pacific Court Apts., Issue B NR 6.80 9/01/13 3,805 2,359,100
Los Angeles Regl. Arpts. Impvt. Corp., Cont. Air Sublease,
A.M.T. NR 9.25 8/01/24 10,095 11,403,918
Orange Cnty. Cmnty. Loc. Trans. Auth., Reg. Linked Savrs.
& Ribs Aa3 6.20 2/14/11 7,000 7,479,430
Richmond Redev. Agcy. Rev., Multifam. Bridge Affordable
Hsg. NR 7.50 9/01/23 10,000 10,201,500
Roseville Joint Union H.S. Dist.,
Ser. B, F.G.I.C. Aaa Zero 8/01/09 1,540 928,882
Ser. B, F.G.I.C. Aaa Zero 8/01/11 1,440 760,090
Ser. B, F.G.I.C. Aaa Zero 8/01/14 2,220 953,534
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (Unaudited) HIGH INCOME 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.)
Sacramento City Fin. Auth. Rev., Tax Alloc., M.B.I.A. Aaa Zero 11/01/15 $ 5,695 $ 2,242,007
Sacramento Cnty. Spec. Tax Rev., Dist. No. 1 NR 8.25% 12/01/20 4,500 (c) 4,801,095
San Joaquin Hills Trans. Corr. Agcy.,
Toll Rd. Rev. Aaa Zero 1/01/14 8,420 3,780,917
Toll Rd. Rev. Aaa Zero 1/01/25 10,000 2,214,300
San Luis Obispo Ctfs. of Part., Vista Hosp. Sys., Inc. NR 8.375 7/01/29 4,000 3,611,920
Santa Margarita/Dana Point Auth., Impvt. Dist.,
Ser. A, M.B.I.A. Aaa 7.25 8/01/13 1,990 2,333,315
Ser. B, M.B.I.A. Aaa 7.25 8/01/12 3,000 3,518,700
So. San Francisco Redev. Agcy., Tax Alloc., Gateway Redev.
Proj. NR 7.60 9/01/18 2,375 (c) 2,633,020
Turlock Irrigation Dist. Rev., Ser. A, M.B.I.A. Aaa 6.25 1/01/12 5,000 5,407,650
Vallejo Cert. of Part., Touro Univ. Ba2 7.375 6/01/29 3,500 3,509,100
Victor Valley Union H.S. Dist.,
Gen. Oblig., M.B.I.A. Aaa Zero 9/01/12 3,605 1,789,558
Gen. Oblig., M.B.I.A. Aaa Zero 9/01/14 4,740 2,049,766
Gen. Oblig., M.B.I.A. Aaa Zero 9/01/16 3,990 1,501,277
--------------
111,170,531
- ------------------------------------------------------------------------------------------------------------------------------
Colorado--3.8%
Denver Urban Ren. Auth. Tax,
Inc. Rev. NR 7.50 9/01/04 2,840 2,975,326
Inc. Rev. NR 7.75 9/01/16 4,000 4,373,840
Denver Co. Hlth & Hosp. Rev., Ser. A Baa2 5.375 12/01/28 5,000 4,109,800
E-470 Pub. Hway. Auth. Revenue Cap. Apprec., Sr. Ser. B Aaa Zero 9/01/25 20,800 4,230,096
Lake Creek Affordable Hsg. Corp. Multifamily Rev.,
Ser. A NR 6.25 12/01/23 13,215 12,447,869
Ser. B NR 7.00 12/01/23 1,050 991,778
San Migual Cnty., Mountain Vlge. Met. Dist. NR 8.10 12/01/11 3,200 (c) 3,530,474
Superior Met. Dist. No. 1, Wtr. & Swr. Rev. NR 8.50 12/01/13 8,900 9,562,872
--------------
42,222,055
- ------------------------------------------------------------------------------------------------------------------------------
Connecticut--1.4%
Connecticut St. Dev. Auth. Mystic Marinelife Aquarium
Proj. Rev. NR 7.00 12/01/27 2,000 2,021,280
Connecticut St. Dev. Auth. Pollutn. Ctl. Rev.,
Ref. Connecticut Light & Pwr., A.M.T. Ba1 5.95 9/01/28 6,000 5,382,600
Connecticut St. Dev. Auth. Swr., Netco Waterbury Ltd. NR 9.375 6/01/16 7,300 8,250,533
--------------
15,654,413
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (Unaudited) HIGH INCOME 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--1.0%
Dist. of Columbia Ref., Ser. B., M.B.I.A. Aaa 6.00% 6/01/20 $ 2,000 $ 2,004,580
Dist. of Columbia Rev., Nat'l. Public Radio NR 7.625 1/01/18 8,800 9,242,112
--------------
11,246,692
- ------------------------------------------------------------------------------------------------------------------------------
Florida--4.9%
Bayside Impt. Cmmty. Dev. Dist., Ser. B NR 6.375 5/01/18 1,020 963,482
Crossings At Fleming Island Cmnty. Dev. Dist., Clay City NR 8.25 5/01/16 7,550 8,035,692
Florida Hsg. Fin. Agcy., Palm Aire Proj., Multifam. Mtge.
Rev., A.M.T. NR Zero 1/01/20 9,102 9,102,171
Florida Hsg. Fin. Corp. Rev.,
Cypress Trace Apts., Ser. G, A.M.T. NR 6.60 7/01/38 4,750 4,493,357
Westchase Apts., Ser. B A.M.T. NR 6.61 7/01/38 4,000 3,784,080
Martin Cnty. Ind. Dev. Auth. Rev., Indiantown Cogen.
Proj.,
Ser. A, A.M.T. Baa3 7.875 12/15/25 7,000 7,118,090
No. Springs Impvt. Dist. Wtr. Mgt.,
Ser. A NR 8.20 5/01/24 1,910 (c) 2,140,059
Ser. A NR 8.30 5/01/24 1,680 1,799,230
Northern Palm Beach Cnty. Impt. Ref., Wtr. Ctl. & Impt.
Unit Dev. NR 6.00 8/01/10 2,815 2,683,962
Orlando Util. Comm., Wtr. & Elec. Rev., Ser. D Aa2 6.75 10/01/17 2,000 2,217,740
Palm Beach Cnty. Hsg. Auth., Banyan Club Apts. NR 7.75 3/01/23 4,380 4,647,530
Sarasota Hlth. Facs., Kobernick Hsg. Meadow Park Proj. Aaa 10.00 7/01/22 6,705 (c) 7,679,639
--------------
54,665,032
- ------------------------------------------------------------------------------------------------------------------------------
Georgia--3.8%
Atlanta Arpt. Facs. Rev., M.B.I.A., A.M.T. Aaa Zero 1/01/10 2,000 1,098,960
Atlanta Urban Res. Fin. Auth., Clark Atlanta Univ. Dorm.
Proj. NR 9.25 6/01/10 4,025 (c) 4,235,507
Augusta Hsg. Auth. Emerald Coast Hsg., Ser. A NR 7.50 8/01/34 8,400 8,255,940
Effingham Cnty. Dev. Auth., Ft. Howard Corp. Baa2 7.90 10/01/05 10,000 10,256,600
Fulton Cnty. Wtr. & Swr. Rev., F.G.I.C. Aaa 6.375 1/01/14 6,000 6,523,709
Henry Cnty. Wtr. & Swg. Auth. Rev., A.M.B.A.C. Aaa 6.15 2/01/20 3,000 3,112,920
Rockdale Cnty. Dev. Auth., Solid Wste. Disp. Rev. NR 7.50 1/01/26 8,100 8,297,802
--------------
41,781,438
- ------------------------------------------------------------------------------------------------------------------------------
Hawaii--0.6%
Hawaii Cnty. Impvt. Dist. No. 17 NR 9.50 8/01/11 6,055 6,357,689
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 8
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (Unaudited) HIGH INCOME 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--7.4%
Chicago Brd. of Edl.,
Cap. Apprec. Ref. Schl., Ser. A, F.G.I.C. Aaa Zero 12/01/20 $ 5,745 $ 1,565,800
Lease Ctfs., Ser. A, M.B.I.A. Aaa 6.00% 1/01/20 10,000 10,080,700
Ref. Schl., Ser. A, F.G.I.C. Aaa 5.25 12/01/23 4,775 4,293,536
Chicago O'Hare Int'l. Arpt.,
Amer. Airlines Proj., Ser. B Baa1 8.20 12/01/24 1,000 1,128,960
United Airlines, Ser. B, A.M.T. Baa2 8.45 5/01/07 6,000 6,203,820
United Airlines, Ser. B, A.M.T. Baa2 8.50 5/01/18 6,500 6,725,680
United Airlines, Ser. B Baa2 8.85 5/01/18 2,585 2,745,968
United Airlines, Ser. B, A.M.T. Baa2 8.95 5/01/18 2,225 2,362,305
Chicago Pub. Bldg., Comm. Rev., Ser. A, M.B.I.A. Aaa 7.00 1/01/20 6,530 7,386,671
Hennepin Ind. Dev. Rev., Exolon-Esk Co. Proj. NR 8.875 1/01/18 7,900 8,521,098
Illinois St. Hlth. Facs. Auth. Rev.,
Midwest Physician Group Ltd. Proj. BBB-(b) 8.10 11/15/14 2,935 (c) 3,401,460
Midwest Physician Group Ltd. Proj. BBB-(b) 8.125 11/15/19 3,285 (c) 3,810,534
Illinois, Ser. K, A.M.B.A.C. Aaa 6.25 1/01/13 5,000 5,299,500
Kane & De Kalb Cntys. Sch.,
Dist. No. 301, Cap. Apprec., A.M.B.A.C. Aaa Zero 12/01/11 3,360 1,701,202
Dist. No. 301, Cap. Apprec., A.M.B.A.C. Aaa Zero 12/01/13 4,065 1,789,291
Metropolitan Pier & Exposition Auth. Dedicated St Tax
Rev., F.G.I.C. Aaa Zero 6/15/29 22,575 3,614,032
Vlge. of Robbins, Cook Cnty. Robbins Res. Rec., A.M.T. NR 8.375 10/15/16 14,000 7,455,000
Winnebago Cnty. Hsg. Auth., Park Tower Assoc., Sec. 8 NR 8.125 1/01/11 3,704 3,782,511
--------------
81,868,068
- ------------------------------------------------------------------------------------------------------------------------------
Indiana--2.0%
Bluffton Econ. Dev. Rev., Kroger Co. Proj. Baa3 7.85 8/01/15 7,500 8,043,225
Indianapolis Int'l. Arpt. Auth. Rev., Federal Express
Corp. Proj., A.M.T. Baa2 7.10 1/15/17 6,000 6,390,540
Wabash Econ. Dev. Rev. Bonds, Connell Ltd., A.M.T. NR 8.50 11/24/17 7,250 7,688,987
--------------
22,122,752
- ------------------------------------------------------------------------------------------------------------------------------
Iowa--2.6%
City of Cedar Rapids Rev.,
1st Mtge., Cottage Grove Place Proj. Aaa 9.00 7/01/18 9,375 (c) 11,399,906
1st Mtge., Cottage Grove Place Proj. Aaa 9.00 7/01/25 4,435 (c) 5,392,916
Iowa St. Fin. Auth., Hlth. Care Facs. Rev., Mercy Hlth.
Initiatives Proj. NR 9.25 7/01/25 10,000 12,277,100
--------------
29,069,922
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (Unaudited) HIGH INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Kentucky--0.8%
Kentucky St. Tpke. Auth. Rev., F.G.I.C. Aaa Zero 1/01/10 $ 8,250 $ 4,741,357
Owensboro Elec. Lt. & Pwr. Rev.,
Ser. B, A.M.B.A.C. Aaa Zero 1/01/14 5,000 2,187,200
Ser. B, A.M.B.A.C. Aaa Zero 1/01/16 6,650 2,524,407
--------------
9,452,964
- ------------------------------------------------------------------------------------------------------------------------------
Louisiana--2.1%
Hodge Util. Rev., Stone Container Corp., A.M.T. NR 9.00% 3/01/10 7,000 7,193,830
New Orleans Home Mtge. Auth. Rev., Sngl. Fam. Mtge., Ser.
A, G.N.M.A., A.M.T. Aaa 8.60 12/01/19 1,670 (f) 1,704,335
New Orleans Ind. Dev. Rev. BBB+(b) 8.75 10/01/19 3,600 4,050,072
New Orleans, Gen Oblig., Cap. Apprec., A.M.B.A.C. Aaa Zero 9/01/18 3,090 987,131
St. Charles Parish Poll. Ctrl. Rev., Pwr. & Lt. Co., Ser.
1989 Baa3 8.00 12/01/14 3,500 3,617,005
West Feliciana Parish Poll. Ctrl. Rev., Gulf St. Util. Co.
Proj. NR 9.00 5/01/15 5,250 5,504,153
--------------
23,056,526
- ------------------------------------------------------------------------------------------------------------------------------
Maryland--1.3%
Northeast Wste. Disp. Auth.,
Sludge Comp. Fac. NR 7.25 7/01/07 3,457 3,626,600
Sludge Comp. Fac., A.M.T. NR 8.50 7/01/07 2,880 3,095,885
Washington Sub. San. Dist.
Ref., Gen. Const. Aa1 6.00 6/01/18 3,705 3,801,145
Ref., Gen. Const. Aa1 6.00 6/01/19 3,940 4,045,277
--------------
14,568,907
- ------------------------------------------------------------------------------------------------------------------------------
Massachusetts--3.3%
Boston Ind. Dev. Fin. Auth. Rev.,
First Mtge. Springhouse Proj. Aaa 9.25 7/01/15 7,795 (c) 9,378,320
First Mtge. Springhouse Proj. NR 6.00 7/01/28 4,000 3,470,160
Mass. Bay Trans. Auth., Gen. Trans. Sys., Ser. A, F.G.I.C. Aaa 7.00 3/01/21 7,500 8,493,150
Mass. St. Coll. Bldg. Proj. and Ref. Bonds Aa3 7.50 5/01/14 1,750 2,073,838
Mass. St. Hlth. & Edl. Facs. Auth. Rev., Cardinal Cushing
Gen. Hosp. NR 8.875 7/01/18 7,500 7,715,325
Randolph Hsg. Auth., Multifam. Hsg., Liberty Place Proj.
A, Ser. A NR 9.00 12/01/21 5,810 5,813,390
--------------
36,944,183
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 10
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (Unaudited) HIGH INCOME 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--4.7%
Grand Rapids Dev. Auth.
Cap. Apprec., M.B.I.A. Aaa Zero 6/01/10 $ 3,000 $ 1,681,980
Cap. Apprec., M.B.I.A. Aaa Zero 6/01/11 3,160 1,658,652
Cap. Apprec., M.B.I.A. Aaa Zero 6/01/12 3,000 1,471,350
Gratiot Cnty. Econ. Dev. Corp., Danley Die Proj. Connell
L.P. NR 7.625% 4/01/07 3,200 3,343,776
Holland Sch. Dist., Cap. Apprec., A.M.B.A.C. Aaa Zero 5/01/17 2,950 1,026,895
Lowell Area Sch., F.G.I.C. Aaa Zero 5/01/14 5,000 2,139,050
Michigan St. Hosp. Fin. Auth. Rev., Saratoga Cmnty. Hosp. NR 8.75 6/01/10 5,760 (c) 6,346,253
Michigan St. Strategic Fd. Res. Recovery Ltd. Oblig. Rev.,
Central Wayne Energy Rec. A NR 7.00 7/01/27 6,500 6,330,350
Central Wayne Energy Rec. A, A.M.T. NR 6.90 7/01/19 1,500 1,450,080
Michigan Strategic Fund, Great Lakes Pulp & Fiber Proj. NR 7.756 12/01/27 13,949 9,764,116
Michigan Strategic Fund, Solid Wste. Disp., Gennese Pwr.
Station, A.M.T. NR 7.50 1/01/21 10,000 10,409,900
Wayne Cnty. Bldg. Auth., Ser. A, A.M.T. A3 8.00 3/01/17 3,500 (c) 3,834,285
West Ottawa Sch. Dist.,
F.G.I.C. Aaa Zero 5/01/15 4,825 1,917,745
F.G.I.C. Aaa Zero 5/01/18 3,000 977,910
--------------
52,352,342
- ------------------------------------------------------------------------------------------------------------------------------
Mississippi--1.1%
Mississippi Bus. Fin. Corp. Pollutn. Ctl. Rev., Sys. Engy.
Res., Inc. Ba1 5.875 4/01/22 13,600 11,985,136
- ------------------------------------------------------------------------------------------------------------------------------
Missouri--1.7%
Bridgeton Ind. Dev. Auth. Sr. Hsg. Rev., Sarah Cmnty.
Proj. NR 5.90 5/01/28 4,000 3,435,880
Sikeston Elec. Rev. Ref., M.B.I.A. Aaa 6.00 6/01/15 3,500 3,607,275
St. Louis Cnty. Ind. Dev. Auth. Rev., Soemm Proj., A.M.T. NR 10.25 7/01/08 1,910 1,914,202
St. Louis Cnty. Reg. Conv. & Sports Comp., Ser. C Aaa 7.90 8/15/21 8,820 (c) 9,849,206
--------------
18,806,563
- ------------------------------------------------------------------------------------------------------------------------------
Nebraska--0.2%
Kearney Ind. Dev. Rev., Cap. Apprec., Great Platte Rvr.
Rd. NR Zero 1/01/17 4,000 2,008,920
- ------------------------------------------------------------------------------------------------------------------------------
New Hampshire--0.9%
New Hampshire Higher Edl. & Hlth. Facs. Auth. Rev.,
Antioch College NR 7.875 12/01/22 5,180 5,551,924
New Hampshire St. Bus. Pollutn. Ref., Pub. Svc. Co.,
A.M.T. Ba3 6.00 5/01/21 5,000 4,543,550
--------------
10,095,474
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 11
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (Unaudited) HIGH INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
New Jersey--7.6%
Hudson Cnty. Impvt. Auth. Rev., A.M.T. BBB-(b) 6.125% 1/01/29 $ 3,000 $ 2,795,400
New Jersey Econ. Dev. Auth. Rev.,
Continental Airlines, Inc. Proj. Ba2 6.25 9/15/29 10,000 9,311,900
Development Rev. NR Zero 4/01/12 1,115 487,043
Fellowship Vlge., Proj. A Aaa 9.25 1/01/25 11,500 (c) 13,947,775
Kaplowski Rd., Ser. A NR 6.375 4/01/31 7,000 6,737,290
Ref. Newark Arpt. Marriot Hotel NR 7.00 10/01/14 3,800 3,969,784
New Jersey Hlthcare Facs., Fin. Auth. Rev. NR 8.00 7/01/27 5,000 5,061,100
New Jersey St. Edl. Facs. Auth. Rev., Felician College Of
Lodi,
Ser. D NR 7.375 11/01/22 4,000 4,128,960
New Jersey St. Ref., Ser. E Aa1 6.00 7/15/10 10,000 10,666,700
New Jersey St. Tpke. Auth. Rev., Ser. C, M.B.I.A. Aaa 6.50 1/01/16 11,000 11,959,750
New Jersey St. Trans. Trust Fund Auth., Trans. Sys.,
M.B.I.A. Aaa 6.50 6/15/11 14,500 15,941,880
--------------
85,007,582
- ------------------------------------------------------------------------------------------------------------------------------
New Mexico--0.4%
Farmington Pollutn. Ctrl. Rev.,
Ref., Pub. Svc. Co. A Baa3 5.80 4/01/22 1,500 1,335,660
Ref., Pub. Svc. Co. B Baa3 5.80 4/01/22 3,000 2,671,320
--------------
4,006,980
- ------------------------------------------------------------------------------------------------------------------------------
New York--4.7%
Met. Trans. Auth. Facs. Rev., Ser. N, F.G.I.C. Aaa Zero 7/01/13 8,340 3,852,246
New York City Ind. Dev. Agcy.,
Bklyn. Navy Yard Cogen Partners, A.M.T. Baa3 6.20 10/01/22 9,175 8,939,203
Civic Touro College Proj., Ser. A Ba2 6.35 6/01/29 5,600 5,273,464
Mesorah Pub. Ltd., A.M.T. NR 10.25 3/01/19 1,819 1,874,861
Visy Paper Inc. Proj., A.M.T. NR 7.95 1/01/28 4,000 4,257,680
New York St. Dorm. Auth. Rev.,
Colgate Univ., M.B.I.A. Aaa 6.00 7/01/21 3,350 3,415,090
Comm. College, Ser. A BBB+(b) 5.00 7/01/28 4,275 3,546,369
Memorial Sloan Kettering Cancer Ctr., M.B.I.A. Aaa 5.75 7/01/20 5,000 4,928,250
New York, G.O.,
Prerefunded, Ser. I A3 6.25 4/15/27 1,735 (c) 1,886,292
Unrefunded Balance, Ser. I A3 6.25 4/15/27 1,265 1,275,639
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 12
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (Unaudited) HIGH INCOME 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 (cont'd.)
New York, N.Y.C. Ind. Dev. Agcy. Rev., Ref. LaGuardia
Assoc. L.P. Proj. NR 6.00% 11/01/28 $ 4,000 $ 3,677,680
Port Auth. of New York & New Jersey, USAir LaGuardia
Arpt., A.M.T. Ba2 9.125 12/01/15 4,000 4,225,840
Rockland Cnty. Ind. Dev. Agcy. Rev.,
Dominican Coll. Proj. NR 5.90 5/01/10 2,090 1,981,884
Dominican Coll. Proj. NR 6.25 5/01/28 3,000 2,716,950
--------------
51,851,448
- ------------------------------------------------------------------------------------------------------------------------------
North Dakota--1.0%
Mercer Cnty., Antelope Valley Station, A.M.B.A.C Aaa 7.20 6/30/13 10,000 11,496,800
- ------------------------------------------------------------------------------------------------------------------------------
Ohio--4.0%
Cleveland Pub. Pwr. Sys. Rev.,
1st Mtge., M.B.I.A. Aaa Zero 11/15/12 1,000 480,400
1st Mtge., M.B.I.A. Aaa Zero 11/15/13 1,500 671,985
1st Mtge., Ser. A, M.B.I.A., A.M.T. Aaa Zero 11/15/09 3,000 1,754,940
Franklin Cnty. Hosp. Rev., Senior Doctors Hlth. Corp. Baa3 5.60 12/01/28 10,000 8,393,500
Mahoning Valley San. Dist. Wtr. Rev. NR 7.75 5/15/19 8,000 8,457,120
Ohio St. Air Quality Dev. Auth. Ref., Amt. Coll. Poll.
Ctrl., Ser. A Ba1 6.10 8/01/20 3,000 2,778,840
Ohio St. Solid Wste. Rev.,
Cscltd. Proj., A.M.T. NR 8.50 8/01/22 7,000 6,810,090
Rep. Eng. Steels Inc., A.M.T. NR 9.00 6/01/21 2,250 2,330,168
Ohio St. Wtr. Dev. Auth. Poll. Ctrl. Facs., 1st Mtge.,
Toledo Edison, A.M.T. Ba2 8.00 10/01/23 5,500 5,943,190
Stark Cnty. Hlthcare. Facs. Rev., Rose Lane Inc. Proj. NR 9.00 12/01/23 6,135 (c) 7,051,998
--------------
44,672,231
- ------------------------------------------------------------------------------------------------------------------------------
Oklahoma--1.9%
Grand River Dam Auth. Rev., A.M.B.A.C. Aaa 6.25 6/01/11 12,000 12,923,160
Oklahoma Dev. Fin. Auth. Rev. Ref. Hlthcare., Ser. A Baa2 5.625 8/15/29 4,000 3,293,640
Tulsa Ind. Dev. Auth., Univ. of Tulsa, Ser. A, M.B.I.A. Aaa 6.00 10/01/16 4,250 (f) 4,354,465
--------------
20,571,265
- ------------------------------------------------------------------------------------------------------------------------------
Oregon--0.7%
Klamath Falls Elec. Rev. Ref., Sr. Lien NR 6.00 1/01/25 8,250 7,541,903
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (Unaudited) HIGH INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Pennsylvania--4.2%
Allegheny Cnty. Hosp. Rev., West Penn. Hosp. Hlth. Ctr. NR 8.50% 1/01/20 $ 2,800 $ 2,892,540
Beaver Cnty. Penn. Ind. Dev. Auth. Pollution Ctrl. Rev. Baa3 4.65 6/01/33 4,000 3,858,840
Berks Cnty. Mun. Auth. Rev., Alvernia Coll. Proj. NR 7.75 11/15/16 5,240 5,567,762
Dauphin Cnty. Gen. Auth. Hosp. Rev., NW Med. Ctr. Proj. BBB-(b) 8.625 10/15/13 6,145 6,868,758
Philadelphia Auth., Ind. Dev. Rev. NR 7.75 12/01/17 5,000 5,357,550
Philadelphia Hosps. & Higher Ed. Facs. Auth. Rev.,
Grad. Hlth. Sys. Ca 7.00 7/01/05 2,500 925,000
Grad. Hlth. Sys. Ca 7.25 7/01/18 3,435 1,270,950
Grad. Hlth. Sys., Ser. A. Ca 6.25 7/01/13 3,050 1,128,500
Philadelphia Wtr. & Wstewtr. Auth. Rev.,
M.B.I.A. Aaa 6.25 8/01/10 2,500 2,681,950
M.B.I.A. Aaa 6.25 8/01/12 3,000 3,201,180
Somerset Cnty. Hosp. Auth. Rev.,
Hlthcare 1st Mtge. NR 8.40 6/01/09 2,055 2,196,446
Hlthcare 1st Mtge. NR 8.50 6/01/24 8,805 9,420,029
Wilkes Barre Gen. Mun. Auth. Coll. Rev., Misericordia
Coll., Ser. A NR 7.75 12/01/12 1,245 1,307,711
--------------
46,677,216
- ------------------------------------------------------------------------------------------------------------------------------
Rhode Island--1.0%
Rhode Island Redev. Agcy., Ser. A NR 8.00 9/01/24 10,305 10,861,161
- ------------------------------------------------------------------------------------------------------------------------------
South Carolina--1.0%
So. Carolina Jobs Econ. Dev.,
1st Mtge. Lutheran Homes NR 6.625 5/01/28 5,000 4,639,650
Solid Wste. Recycling Facs. Rev. NR 9.00 12/01/11 2,000 1,985,360
So. Carolina St. Hsg. Fin. & Dev. Auth., Homeownership
Mtge. A.M.T. Aa2 7.75 7/01/22 4,345 4,465,574
--------------
11,090,584
- ------------------------------------------------------------------------------------------------------------------------------
South Dakota--0.7%
Education Lns. Inc. Student Ln. Rev., A.M.T. A2 5.60 6/01/20 3,300 3,002,835
So. Dakota Econ. Dev. Fin. Auth., Dakota Park, A.M.T. NR 10.25 1/01/19 4,855 4,978,366
--------------
7,981,201
- ------------------------------------------------------------------------------------------------------------------------------
Tennessee--2.8%
Memphis Center City Rev. Fin. Corp., Ser. B NR 6.50 9/01/28 26,000 24,385,920
Rutherford Cnty. Hlth. & Edl. Facs. Brd., 1st Mtge. Rev. NR 9.50 12/01/19 7,300 6,957,216
--------------
31,343,136
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 14
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (Unaudited) HIGH INCOME 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--3.4%
Austin Rev., Ref. Sub. Lien, M.B.I.A. Aaa 5.25% 5/15/25 $ 5,000 $ 4,512,900
Beaumont Hsg. Fin. Corp., Sngl. Fam. Mtge. Rev. A 9.20 3/01/12 1,045 1,122,727
Houston Wtr. & Swr. Sys. Rev., Ser. C, A.M.B.A.C. Aaa Zero 12/01/10 5,000 2,716,000
Katy Texas Dev. Auth. Rev., Tax Increment Contract, Ser. B NR 6.00 6/01/18 4,000 3,712,560
Keller Ind. Sch. Dist., Cap. Apprec. Ref., Ser. A,
P.S.F.G. Aaa Zero 8/15/17 4,075 1,379,632
Meadow Parc Dev. Inc. Multifamily Rev. Hsg. Meadow Proj. NR 6.50 12/01/30 5,000 4,666,650
New Braunfels Ind. Sch. Dist.,
Cap. Apprec., P.S.F.G. Aaa Zero 2/01/08 2,365 1,522,090
Cap. Apprec., P.S.F.G. Aaa Zero 2/01/09 2,365 1,433,900
Cap. Apprec., P.S.F.G. Aaa Zero 2/01/12 2,365 1,176,398
Round Rock Ind. Sch. Dist., Gen. Oblig., M.B.I.A. Aaa Zero 8/15/11 4,385 2,265,072
San Antonio Elec. & Gas Rev.,
F.G.I.C. Aaa Zero 2/01/09 5,000 3,045,200
F.G.I.C., Ser. B Aaa Zero 2/01/12 7,500 3,752,925
Texas Mun. Pwr. Agcy. Rev., M.B.I.A. Aaa Zero 9/01/15 17,300 6,699,598
--------------
38,005,652
- ------------------------------------------------------------------------------------------------------------------------------
Utah--0.5%
Carbon Cnty. Solid Wste. Disp. Rev. Ref., Laidlaw
Environmental, Ser. A, A.M.T. NR 7.45 7/01/17 1,500 1,562,580
Tooele Cnty Poll. Ctrl. Rev. Ref., Laidlaw Environmental,
Ser. A, A.M.T. NR 7.55 7/01/27 4,000 4,190,480
--------------
5,753,060
- ------------------------------------------------------------------------------------------------------------------------------
Virginia--1.9%
Loudoun Cnty. Ind. Dev. Auth., Rev. NR 7.125 9/01/15 2,000 2,090,640
Norfolk Redev. & Hsg. Auth., Multifam. Rental Hsg. Fac.
Rev., A.M.T. NR 8.00 9/01/26 6,000 5,934,300
Pittsylvania Cnty. Ind. Dev. Auth. Rev. Multitrade, A.M.T. NR 7.55 1/01/19 9,000 9,454,410
Pocahontas Pkwy. Assoc. Toll Rd. Rev.,
Cap. Apprec., Ser. B Baa3 Zero 8/15/16 7,000 2,229,500
Cap. Apprec., Ser. C Ba1 Zero 8/15/16 3,300 1,027,422
--------------
20,736,272
- ------------------------------------------------------------------------------------------------------------------------------
Washington--2.2%
Bellevue Conv. Ctr. Auth.,
King City, Oblig. Rev., M.B.I.A. Aaa Zero 2/01/10 870 493,281
King City, Oblig. Rev., M.B.I.A. Aaa Zero 2/01/11 1,200 636,756
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 15
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (Unaudited) HIGH INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Washington (cont.d)
Bellevue Conv. Ctr. Auth.,
King City, Oblig. Rev., M.B.I.A. Aaa Zero 2/01/12 $ 1,300 $ 644,332
King City, Oblig. Rev., M.B.I.A. Aaa Zero 2/01/14 1,385 597,932
Thurston Cnty. Sch. Dist. 333,
F.G.I.C. Aaa Zero 12/01/12 6,830 3,239,811
F.G.I.C., Ser. B Aaa Zero 12/01/11 6,415 3,259,461
Washington St. Ref., Ser R-97A Aa1 Zero 7/01/16 7,000 2,570,540
Washington St. Pub. Pwr. Supply Sys. Rev.,
Nuclear Proj. No. 1, Ser. B Aa1 7.25% 7/01/09 5,000 5,600,400
Nuclear Proj. No. 3, M.B.I.A. Aaa Zero 7/01/17 5,000 1,699,600
Nuclear Proj. No. 3, Ser. B, M.B.I.A. Aaa 7.125 7/01/16 5,000 5,666,700
--------------
24,408,813
- ------------------------------------------------------------------------------------------------------------------------------
West Virginia--0.8%
So. Charleston Ind. Dev. Rev., Union Carbide Chem. &
Plastics Co., A.M.T. Baa2 8.00 8/01/20 2,450 2,538,837
Weirton Poll. Ctrl. Rev., Weirton Steel Proj. B2 8.625 11/01/14 3,000 2,855,250
West Virginia St. Pkwys. Econ. Dev. & Tourism Auth.,
F.G.I.C. Aaa 7.525 5/16/19 3,250 (d) 3,152,500
--------------
8,546,587
- ------------------------------------------------------------------------------------------------------------------------------
Wisconsin--0.8%
Oconto Falls Cmnty. Dev. Auth. Dev. Rev., Oconto Falls
Tissue, Inc. Proj., A.M.T. NR 7.75 12/01/22 4,000 3,958,656
Wisconsin St. Health & Edl. Fac.,
Ser. A A-(b) 5.60 2/15/29 3,000 2,565,030
Ser. B A-(b) 5.625 2/15/29 3,000 2,574,540
--------------
9,098,226
--------------
Total long-term investments (cost $1,079,885,611) 1,076,048,061
--------------
SHORT-TERM INVESTMENTS--1.1%
- ------------------------------------------------------------------------------------------------------------------------------
Georgia--0.3%
Burke Cnty. Dev. Auth., Georgia Pwr. Co. VMIG1 3.50 11/01/99 2,700 2,700,000
- ------------------------------------------------------------------------------------------------------------------------------
Texas--0.3%
Brazos River Harbor Nav. Dist. Rev.,
Dow Chemical Co., Ser. 93, F.R.D.D., A.M.T. A1 3.65 11/01/99 1,000 1,000,000
Dow Chemical Co., Ser. 97, F.R.D.D., A.M.T. NR 3.65 11/01/99 1,000 1,000,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 16
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (Unaudited) HIGH INCOME 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.)
Lower Neches Valley Auth. Adjust., Mobil Oil Refining
Corp. Proj. NR 3.60% 11/01/99 $ 1,600 $ 1,600,000
--------------
3,600,000
- ------------------------------------------------------------------------------------------------------------------------------
Washington--0.5%
Washington Hsg. Fin. Comm., Wandering Creek Proj.,
F.R.D.D., Ser. 95 VMIG1 3.70 11/01/99 5,300 5,300,000
--------------
- ------------------------------------------------------------------------------------------------------------------------------
Expiration
OUTSTANDING CALL OPTIONS PURCHASED(h) Date Contracts
---------- ---------
U.S. Treasury Bonds, expiring March 2000 at $98 3/22/00 400 318,750
--------------
Total short-term investments (cost $12,025,375) 11,918,750
--------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investments--97.9%
(cost $1,091,910,986; Note 4) 1,087,966,811
Other assets in excess of liabilities--2.1% 23,557,985
--------------
Net Assets--100% $1,111,524,796
--------------
--------------
</TABLE>
- ---------------
(a) The following abbreviations are used in portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation
A.M.T.--Alternative Minimum Tax
F.G.I.C.--Financial Guaranty Insurance Company
F.R.D.D.--Floating Rate (Daily) Demand Note (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 direct U.S. guaranteed
obligations.
(d) Inverse floating rate bond. The coupon is inversely indexed to a floating
interest rate. The rate shown is the rate at year end.
(e) Issuer in default of interest payment. Non-income producing security.
(f) All or partial principal amount segregated as initial margin on financial
futures contracts.
(g) The maturity date shown is the later of the next date on which the security
can be redeemed at par or the next date on which the rate of interest is
adjusted.
(h) Non-income producing 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. 17
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Statement of Assets and Liabilities (Unaudited) HIGH INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
Assets October 31, 1999
<S> <C>
Investments, at value (cost $1,091,910,986)............................................................... $ 1,087,966,811
Interest receivable....................................................................................... 21,486,225
Receivable for investments sold........................................................................... 10,220,033
Receivable for Series shares sold......................................................................... 1,225,359
Other assets.............................................................................................. 29,218
----------------
Total assets........................................................................................... 1,120,927,646
----------------
Liabilities
Bank overdraft............................................................................................ 128,408
Payable for investments purchased......................................................................... 3,512,189
Payable for Series shares reacquired...................................................................... 2,552,392
Dividends payable......................................................................................... 1,901,117
Management fee payable.................................................................................... 469,733
Due from broker - variation margin........................................................................ 393,750
Distribution fee payable.................................................................................. 369,785
Accrued expenses.......................................................................................... 75,476
----------------
Total liabilities...................................................................................... 9,402,850
----------------
Net Assets................................................................................................ $ 1,111,524,796
----------------
----------------
Net assets were comprised of:
Shares of beneficial interest, at par.................................................................. $ 1,059,245
Paid-in capital in excess of par....................................................................... 1,141,628,323
----------------
1,142,687,568
Accumulated net realized loss on investments........................................................... (26,838,909 )
Net unrealized depreciation of investments............................................................. (4,323,863 )
----------------
Net assets, October 31, 1999.............................................................................. $ 1,111,524,796
----------------
----------------
Class A:
Net asset value and redemption price per share
($506,477,961 / 48,262,075 shares of beneficial interest issued and outstanding).................... $10.49
Maximum sales charge (3% of offering price)............................................................ .32
----------------
Maximum offering price to public....................................................................... $10.81
----------------
----------------
Class B:
Net asset value, offering price and redemption price per share
($562,620,036 / 53,618,469 shares of beneficial interest issued and outstanding).................... $10.49
----------------
----------------
Class C:
Net asset value and redemption price per share
($33,234,961 / 3,167,305 shares of beneficial interest issued and outstanding)...................... $10.49
Sales charge (1% of offering price).................................................................... .11
----------------
Offering price to public............................................................................... $10.60
----------------
----------------
Class Z:
Net asset value, offering price and redemption price per share
($9,191,838 / 876,653 shares of beneficial interest issued and outstanding)......................... $10.49
----------------
----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 18
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH INCOME SERIES
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income October 31, 1999
<S> <C>
Income
Interest................................ $ 38,128,285
----------------
Expenses
Management fee.......................... 2,888,576
Distribution fee--Class A............... 641,727
Distribution fee--Class B............... 1,530,559
Distribution fee--Class C............... 126,895
Transfer agent's fees and expenses...... 200,000
Custodian's fees and expenses........... 72,000
Reports to shareholders................. 31,000
Registration fees....................... 27,000
Legal fees and expenses................. 10,000
Audit fees and expenses................. 8,000
Trustees' fees and expenses............. 8,000
Insurance expense....................... 6,000
Miscellaneous........................... 8,043
----------------
Total expenses....................... 5,557,801
Less: Management fee waiver............. (50,963)
Custodian fee credit................. (3,481)
----------------
Net expenses......................... 5,503,357
----------------
Net investment income...................... 32,624,928
----------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions................. (4,542,804)
Financial futures transactions.......... 1,734,094
Written options......................... 281,675
----------------
(2,527,035)
----------------
Net change in unrealized depreciation of:
Investments............................. (73,531,304)
Financial futures contracts............. (564,063)
----------------
(74,095,367)
----------------
Net loss on investments.................... (76,622,402)
----------------
Net Decrease in Net Assets
Resulting from Operations.................. $(43,997,474)
----------------
----------------
</TABLE>
PRUDENTIAL MUNICIPAL BOND FUND
HIGH INCOME SERIES
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) October 31, April 30,
in Net Assets 1999 1999
<S> <C> <C>
Operations
Net investment income....... $ 32,624,928 $ 65,281,521
Net realized gain (loss) on
investment
transactions............. (2,527,035) 626,227
Net change in unrealized
depreciation of
investments.............. (74,095,367) (12,001,065)
-------------- --------------
Net increase (decrease) in
net assets resulting from
operations............... (43,997,474) 53,906,683
-------------- --------------
Dividends from net investment
income (Note 1)
Class A.................. (14,665,542) (27,230,164)
Class B.................. (16,701,214) (35,903,105)
Class C.................. (882,620) (1,344,435)
Class Z.................. (375,552) (803,817)
-------------- --------------
(32,624,928) (65,281,521)
-------------- --------------
Series share transactions (net of
share conversions) (Note 5):
Net proceeds from shares
subscribed............... 101,474,507 271,203,411
Net asset value of shares
issued in reinvestment of
dividends................ 15,119,938 30,134,516
Cost of shares reacquired... (139,883,467) (199,757,462)
-------------- --------------
Net increase (decrease) in
net assets from Series
share transactions....... (23,289,022) 101,580,465
-------------- --------------
Total increase (decrease)...... (99,911,424) 90,205,627
Net Assets
Beginning of period............ 1,211,436,220 1,121,230,593
-------------- --------------
End of period.................. $1,111,524,796 $1,211,436,220
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 19
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (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--96.6%
- ------------------------------------------------------------------------------------------------------------------------------
Alabama--0.9%
Huntsville Solid Wste. Disp. Auth., F.G.I.C., A.M.T. Aaa 7.00% 10/01/08 $ 2,000 $ 2,086,040
Jefferson Cnty. Swr. Rev. Wste., Ser. D, F.G.I.C. Aaa 5.75 2/01/22 1,200 1,160,424
------------
3,246,464
- ------------------------------------------------------------------------------------------------------------------------------
Alaska--2.4%
Anchorage Hosp. Rev., Sisters of Providence, A.M.B.A.C. Aaa 7.125 10/01/05 5,000 5,336,400
No. Slope Boro., Cap. Apprec., Ser. A, M.B.I.A. Aaa Zero 6/30/06 5,000 3,548,100
------------
8,884,500
- ------------------------------------------------------------------------------------------------------------------------------
Arizona--2.1%
Maricopa Cnty. Ind. Dev. Auth. Rev.,
Hosp. Facs., John C. Lincoln Hosp., F.S.A. Aaa 7.00 12/01/00 1,210 1,230,546
Hosp. Facs., John C. Lincoln Hosp., F.S.A. Aaa 7.50 12/01/13 2,250 (c) 2,370,911
Maricopa Cnty. Unified Sch. Dist. No. 69, Paradise Valley,
Ser. E, F.G.I.C. Aaa 6.80 7/01/12 3,700 4,136,600
------------
7,738,057
- ------------------------------------------------------------------------------------------------------------------------------
California--6.4%
Castaic Lake Wtr. Agcy. Rev. Ctfs. Part.,
A.M.B.A.C. Aaa Zero 8/01/21 10,445 2,796,336
A.M.B.A.C. Aaa Zero 8/01/23 10,445 2,471,600
Contra Costa Wtr. Dist. Wtr. Rev., Ser. E, A.M.B.A.C. Aaa 6.25 10/01/12 1,455 1,578,791
Inland Empire Solid Wste. Fin. Auth., Landfill Impvt. Fin.,
Proj. B, F.S.A. Aaa 6.00 8/01/16 2,000 2,013,300
Roseville Joint Union H.S. Dist., Ser. B, F.G.I.C. Aaa Zero 8/01/13 2,015 928,834
San Diego Cnty. Wtr. Auth. Wtr. Rev., Ctfs. of Part.,
F.G.I.C Aaa 7.595 4/26/06 5,800 (d) 6,322,000
So. Orange Cnty. Pub. Fin. Auth.,
Foothill Area Proj., F.G.I.C Aaa 8.00 8/15/08 2,000 2,420,920
Foothill Area Proj., F.G.I.C. Aaa 6.50 8/15/10 2,725 3,024,069
Victor Valley Element. Sch. Dist.,
Cap. Apprec., Ser. A, M.B.I.A. Aaa Zero 6/01/17 3,550 1,250,736
Cap. Apprec., Ser. A, M.B.I.A. Aaa Zero 6/01/18 3,700 1,217,448
------------
24,024,034
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 20
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (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--1.4%
Denver City & Cnty. Arpt. Rev., Ser. C, M.B.I.A. Aaa 5.60% 11/15/11 $ 5,000 $ 4,987,700
Jefferson Cnty. Sngl. Fam. Mtge. Rev., Ser. A, M.B.I.A. Aaa 8.875 10/01/13 250 260,885
------------
5,248,585
- ------------------------------------------------------------------------------------------------------------------------------
District of Columbia--7.6%
Dist. of Columbia, Assoc. American Med. Colleges, A.M.B.A.C Aaa 5.375 2/15/27 4,500 4,030,155
Dist. of Columbia Hosp. Rev. Medlantic Hlthcare Grp.,
M.B.I.A. Aaa 5.875 8/15/19 3,500 3,531,920
M.B.I.A. Aaa 5.75 8/15/26 3,000 2,915,910
Dist. of Columbia Met. Area Trans. Auth.,
Gross Rev., F.G.I.C. Aaa 6.00 7/01/09 2,400 2,544,288
Gross Rev., F.G.I.C. Aaa 6.00 7/01/10 1,500 1,579,620
Dist. of Columbia Ref.,
Ser. A, M.B.I.A. Aaa 6.50 6/01/10 6,000 (e) 6,474,357
Ser. B, F.S.A. Aaa 5.50 6/01/10 7,565 7,552,593
------------
28,628,843
- ------------------------------------------------------------------------------------------------------------------------------
Florida--4.1%
Brevard Hlth. Facs. Auth. Rev., Holmes Reg'l. Med. Ctr.,
M.B.I.A. Aaa 5.60 10/01/10 6,000 6,114,960
Dade Cnty. Edl. Facs. Auth. Rev. Ref., Univ. Miami, Ser. A,
M.B.I.A. Aaa 5.625 4/01/06 3,000 3,126,870
Orange Cnty. Hlth. Facs. Auth. Rev. Hosp., Preref., Ser. A Aaa 6.25 10/01/07 2,235 (c) 2,424,930
Orange Cnty. Hlth. Facs. Auth. Rev. Unref., Ser. A,
M.B.I.A. Aaa 6.25 10/01/07 925 997,317
Palm Beach Cnty. Solid Wste. Auth. Rev. Ref.,
Ser. A, A.M.B.A.C. Aaa 6.00 10/01/09 2,500 2,665,961
------------
15,330,038
- ------------------------------------------------------------------------------------------------------------------------------
Georgia--3.1%
Atlanta Arpt. Facs. Rev., A.M.B.A.C. Aaa 6.50 1/01/10 2,000 2,176,820
Georgia Mun. Elec. Auth.,
Proj. No. 1, A.M.B.A.C. Aaa 6.00 1/01/06 5,570 5,871,281
Pwr. Rev., M.B.I.A. Aaa 6.20 1/01/10 3,495 3,722,595
------------
11,770,696
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 21
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (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--0.3%
Honolulu Hawaii City & Cnty. Wstewtr. Sys.,
Rev. Cap. Apprec., F.G.I.C. Aaa Zero 7/01/18 $ 1,465 $ 466,793
Rev. Cap. Apprec., F.G.I.C. Aaa Zero 7/01/19 2,305 686,867
------------
1,153,660
- ------------------------------------------------------------------------------------------------------------------------------
Illinois--11.4%
Arlington Hts. Park Dist. Cap. Apprec., Ser. E, A.M.B.A.C. Aaa Zero 12/01/13 4,175 1,837,710
Chicago Bd. Edl.
Cap. Apprec. Chicago Sch. Rfm., Ser. A, A.M.B.A.C. Aaa Zero 12/01/11 5,000 2,531,550
Cap. Apprec. Chicago Sch. Rfm., Ser. A, A.M.B.A.C. Aaa Zero 12/01/12 6,000 2,835,240
Cap. Apprec. Chicago Sch. Rfm., Ser. A, A.M.B.A.C. Aaa Zero 12/01/13 3,500 1,540,595
Cap. Apprec. Chicago Sch. Rfm., Ser. A, A.M.B.A.C. Aaa Zero 12/01/14 7,195 2,944,410
Cap. Apprec. Chicago Sch. Rfm., Ser. A, A.M.B.A.C. Aaa Zero 12/01/15 3,245 1,232,191
Chicago Bd. Edl. Sch. Ref., A.M.B.A.C. Aaa 5.75% 12/01/27 10,000 9,518,800
Chicago Midway Arpt. Rev., Ser. B, M.B.I.A., A.M.T. Aaa 5.75 1/01/22 5,000 4,753,400
Chicago O'Hare Int'l. Arpt. Rev., Pass. Facs. Chrg., Ser.
A, A.M.B.A.C. Aaa 5.625 1/01/15 2,000 1,937,400
Chicago Skyway Toll Brdg. Rev., M.B.I.A. Aaa 5.50 1/01/23 650 601,133
Chicago Wstewtr. Trans. Rev.,
Cap. Apprec. Ref., Ser. A, M.B.I.A. Aaa Zero 1/01/20 7,275 2,098,110
Cap. Apprec. Ref., Ser. A, M.B.I.A. Aaa Zero 1/01/21 8,655 2,342,043
Chicago Wtr. Rev. Cap. Apprec., F.G.I.C. Aaa Zero 11/01/16 3,055 1,088,771
Onterie Ctr. Hsg. Fin. Corp. Mtge. Rev.,
Ser. A, M.B.I.A. Aaa 7.00 7/01/12 1,575 1,646,033
Ser. A, M.B.I.A. Aaa 7.05 7/01/27 5,400 5,652,882
------------
42,560,268
- ------------------------------------------------------------------------------------------------------------------------------
Indiana--1.4%
Trans. Fin. Auth. Hwy., Ser. A Aa2 5.50 12/01/22 5,500 5,197,720
- ------------------------------------------------------------------------------------------------------------------------------
Louisiana--0.6%
New Orleans, Gen. Oblig., Cap. Apprec., A.M.B.A.C. Aaa Zero 9/01/09 4,000 2,358,920
- ------------------------------------------------------------------------------------------------------------------------------
Maryland--0.7%
Baltimore Cons. Pub. Improv. Ref., Ser. C, F.G.I.C. Aaa 5.50 10/15/15 2,620 2,573,547
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 22
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (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--4.1%
Detroit Dwntwn. Dev., Ser. A, A.M.B.A.C. Aaa 5.75% 7/15/15 $ 1,820 $ 1,795,758
Detroit Michigan Sewage Disposal Rev.,
Non-prerefunded Aaa 7.618 7/01/23 1,500 1,381,875
Prerefunded Aaa 7.618 7/01/23 5,000 (c)(d) 5,450,000
Michigan St. Hosp. Fin. Auth. Rev., Mid. Michigan Oblig.,
M.B.I.A. Aaa 7.50 6/01/15 2,350 (c) 2,445,034
Saginaw Hosp. Fin. Auth., St. Luke's Hosp., Ser. C,
M.B.I.A. Aaa 6.50 7/01/11 4,000 4,188,840
------------
15,261,507
- ------------------------------------------------------------------------------------------------------------------------------
Mississippi--0.7%
Harrison Cnty. Wste. Wtr. Mgmt. Dist. Rev., Wstewtr.
Treatmt.,
Facs. Auth., F.G.I.C. Aaa 6.50 2/01/06 2,400 2,506,656
- ------------------------------------------------------------------------------------------------------------------------------
Missouri--0.4%
Missouri St. Hlth. & Edl. Facs. Rev.,
SSM Hlthcare Ref, Ser. AA Aaa 6.25 6/01/16 285 (c) 302,775
SSM Hlthcare, Unref., Ser. AA, M.B.I.A. Aaa 6.25 6/01/16 1,215 1,237,162
------------
1,539,937
- ------------------------------------------------------------------------------------------------------------------------------
Montana--0.6%
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 (e) 2,103,720
- ------------------------------------------------------------------------------------------------------------------------------
New Jersey--6.7%
East Orange Bd. Edl. Ctfs. Part.,
Cap. Apprec., F.S.A. Aaa Zero 2/01/15 975 397,429
Cap. Apprec., F.S.A. Aaa Zero 2/01/16 750 286,433
Cap. Apprec., F.S.A. Aaa Zero 2/01/18 2,645 889,408
Cap. Apprec., F.S.A. Aaa Zero 8/01/18 1,175 383,496
Jersey City Swr. Auth.,
A.M.B.A.C. Aaa 6.00 1/01/10 2,585 2,731,906
A.M.B.A.C. Aaa 6.25 1/01/14 4,255 4,518,384
New Jersey Econ. Dev. Auth. Rev., Natural Gas Facs. Rev.,
M.B.I.A., A.M.T. Aaa 5.70 6/01/32 5,000 4,810,950
New Jersey Econ. Dev. Auth.,
Mkt. Trans. Facs. Rev., M.B.I.A. Aaa 5.875 7/01/11 5,900 6,074,699
Mkt. Trans. Facs. Rev., Sr. Lien, M.B.I.A. Aaa 5.80 7/01/09 3,340 3,451,489
New Jersey Impvt. Auth. Rev., Util. Sys., M.B.I.A. Aaa 5.75 7/01/27 1,500 1,473,360
------------
25,017,554
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 23
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (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--13.6%
Islip Res. Rec., Ser. B, A.M.B.A.C. Aaa 7.20% 7/01/10 $ 1,750 $ 1,983,030
Met. Trans. Auth. N.Y. Trans. Facs. Rev., F.S.A. Aaa 5.75 7/01/11 5,000 5,095,200
New York City Mun. Wtr. Fin. Auth., Wtr. & Swr. Sys. Rev.,
M.B.I.A. Aaa 5.75 6/15/26 5,000 4,828,000
New York City,
Ser. G, M.B.I.A. Aaa 5.75 2/01/14 3,000 3,003,600
Cap. Apprec., Ser. G, M.B.I.A. Aaa Zero 8/01/07 4,000 2,686,280
Cap. Apprec., Ser. G, M.B.I.A. Aaa Zero 8/01/08 1,825 1,155,389
New York St. Dorm. Auth. Rev., Montefiore Med. Ctr.,
A.M.B.A.C. Aaa 6.00 8/01/08 3,400 3,574,386
New York St. Envir. Facs. Corp.,
Poll. Ctrl. Rev. Aaa 5.70 7/15/12 3,375 3,423,263
Poll. Ctrl. Rev. Aaa 5.75 7/15/13 1,060 1,075,126
Poll. Ctrl. Rev. Aaa 5.80 7/15/14 3,755 3,783,876
New York St. Thrwy. Auth. Gen. Rev.,
Ser. D Aa3 5.40 1/01/11 5,370 5,347,285
Ser. D Aa3 5.50 1/01/12 3,865 3,851,124
Port Auth. New York & New Jersey Cons., Ser. 99, F.G.I.C. Aaa 5.90 11/01/11 7,665 7,870,422
Suffolk Cnty. Judicial Facs. Agcy. Serv. Agreement Rev. Aaa 5.75 10/15/12 3,000 3,057,120
------------
50,734,101
- ------------------------------------------------------------------------------------------------------------------------------
Ohio--1.9%
Cleveland City Sch. Dist., Rev. Antic. Nts., A.M.B.A.C. Aaa 5.75 6/01/07 5,870 6,137,379
Lebanon Wtrwks. Sys. Rev. Ref. Impvt., 1st Mtg. Aaa 5.30 12/01/24 1,000 907,350
------------
7,044,729
- ------------------------------------------------------------------------------------------------------------------------------
Oklahoma--1.8%
Norman Reg'l. Hosp. Auth., Rev. Ref., Ser. A, M.B.I.A. Aaa 5.50 9/01/11 4,110 4,091,998
Oklahoma City Arpt. Trust, Jr. Lien, Ser. 24, A.M.B.A.C.,
A.M.T. Aaa 5.75 2/01/18 2,620 2,519,576
------------
6,611,574
- ------------------------------------------------------------------------------------------------------------------------------
Pennsylvania--0.8%
Philadelphia Mun. Auth. Rev., Criminal Justice Ctr., Ser.
A, M.B.I.A. Aaa 6.90 11/15/03 3,000 3,200,520
- ------------------------------------------------------------------------------------------------------------------------------
Puerto Rico--3.1%
Puerto Rico Gen. Oblig., M.B.I.A. Aaa 6.25 7/01/13 1,250 1,341,650
Puerto Rico Pub. Bldgs. Auth. Rev., Gov't. Facs., Ser. A,
A.M.B.A.C. Aaa 6.25 7/01/13 1,700 1,824,644
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 24
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (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>
- ------------------------------------------------------------------------------------------------------------------------------
Puerto Rico (cont'd.)
Puerto Rico Tel. Auth. Rev.,
Ser. I, M.B.I.A., R.I.B.S. Aaa 6.819% 1/25/07 $ 4,100(c)(d) $ 4,315,250
Ser. I, M.B.I.A., R.I.B.S. Aaa 7.27 1/16/15 3,800(c)(d) 4,066,000
------------
11,547,544
- ------------------------------------------------------------------------------------------------------------------------------
South Dakota--1.5%
So. Dakota Hsg. Dev. Auth., Homeownership Mtge., Ser. F,
A.M.T. Aa1 5.80 5/01/28 5,978 5,713,713
- ------------------------------------------------------------------------------------------------------------------------------
Tennessee--1.5%
Met. Gov't. Nashville & Davidson Cnty. Wtr. & Swr. Rev.,
A.M.B.A.C., R.I.B.S. Aaa 8.317 1/01/22 5,000 (c)(d) 5,481,250
- ------------------------------------------------------------------------------------------------------------------------------
Texas--8.7%
Austin Util. Sys. Rev. Comb., Ser. A, M.B.I.A. Aaa 4.875 11/15/10 5,500 5,187,655
Austin Util. Sys. Rev., M.B.I.A. Aaa Zero 5/15/03 8,000 6,750,320
Houston Arpt. Sys. Rev. Aaa 7.20 7/01/13 3,900 4,400,604
Houston Arpt. Sys. Rev., Spec. Facs. People Mover, Ser. A,
F.S.A., A.M.T. Aaa 6.00 7/15/05 3,255 3,399,913
Houston Wtr. Swr. Sys. Rev.,
Ref. Jr. Lien, Ser. D Aaa 6.125 12/01/25 3,000 2,978,550
Ref. Jr. Lien, Ser. D Aaa 6.125 12/01/29 8,045 7,946,931
Keller Ind. Sch. Dist., P.S.F.G. Aaa Zero 8/15/15 4,945 1,920,094
------------
32,584,067
- ------------------------------------------------------------------------------------------------------------------------------
Virginia--3.4%
Chesapeake Bay Brdg. & Tunn. Comm., Dist. Rev., F.G.I.C. Aaa 5.875 7/01/10 5,000 5,191,650
Richmond Met. Auth. Expwy. Rev. Ref., F.G.I.C. Aaa 5.25 7/15/22 5,265 4,808,630
Virginia Beach Hosp. Facs. Rev.,
1st Mtge., A.M.B.A.C. Aaa 6.00 2/15/10 1,220 1,291,943
1st Mtge., A.M.B.A.C. Aaa 6.00 2/15/13 1,455 1,522,832
------------
12,815,055
- ------------------------------------------------------------------------------------------------------------------------------
Washington--5.4%
Washington St. Hlthcare Facs. Auth. Rev., Yakima Valley
Memorial Hosp. Assoc. AAA(b) 5.25 12/01/20 2,500 2,209,100
Washington St. Pub. Pwr. Supply Sys.,
Nuclear Proj. No. 1, Ser. A, M.B.I.A. Aaa 5.75 7/01/10 7,000 7,167,300
Nuclear Proj. No. 2, Ser. A, M.B.I.A. Aaa Zero 7/01/11 5,210 2,765,676
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 25
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Portfolio of Investments as of October 31, 1999 (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>
- ------------------------------------------------------------------------------------------------------------------------------
Washington (cont'd.)
Nuclear Proj. No. 2, Ser. B, F.G.I.C. Aaa 7.25% 7/01/03 $ 3,000 (c) $ 3,123,450
Nuclear Proj. No. 3, Ser. B, F.G.I.C. Aaa 7.00 7/01/05 2,000 (c) 2,050,180
Nuclear Proj. No. 3, Ser. B, F.G.I.C. Aaa Zero 7/01/08 4,500 2,825,280
------------
20,140,986
------------
Total long-term investments (cost $359,657,557) 361,018,245
------------
SHORT-TERM INVESTMENTS--1.7%
- ------------------------------------------------------------------------------------------------------------------------------
Louisiana--0.1%
Lake Charles Harbor & Terminal Dist. Poll. Ctrl. Rev. P1 3.60 11/01/99 300 300,000
- ------------------------------------------------------------------------------------------------------------------------------
Nevada--1.6%
Washoe Cnty. Wtr. Facs. Rev., Sierra Pac. Pwr. Co. Proj.,
F.R.D.D., Ser. 90 P1 3.60 11/01/99 5,900 5,900,000
------------
Total short-term investments (cost $6,200,000) 6,200,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Investments--98.3%
(cost $365,857,557; Note 4) 367,218,245
Other assets in excess of liabilities--1.7% 6,488,575
------------
Net Assets--100% $373,706,820
------------
------------
</TABLE>
- ---------------
(a) The following abbreviations are used in portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation
A.M.T.--Alternative Minimum Tax
F.G.I.C.--Financial Guaranty Insurance Company
F.R.D.D.--Floating Rate (Daily) Damand Note(f)
F.S.A.--Financial Security Assurance
M.B.I.A.--Municipal Bond Insurance Association
P.S.F.G.--Public School Fund Guaranty
R.I.B.S.--Residual Interest Bearing Securities
(b) Standard & Poor's rating.
(c) Prerefunded issues are secured by escrowed cash 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) All or partial principal amount segregated as initial margin for 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.
The Fund's current prospectus contains a description of Moody's and Standard &
Poor's ratings.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 26
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Statement of Assets and Liabilities (Unaudited) INSURED SERIES
- --------------------------------------------------------------------------------
<TABLE>
Assets October 31, 1999
<S> <C>
Investments, at value (cost $365,857,557)................................................................. $ 367,218,245
Receivable for investments sold........................................................................... 13,594,081
Interest receivable....................................................................................... 5,205,239
Receivable for Series shares sold......................................................................... 156,733
Deferred expenses and other assets........................................................................ 12,917
----------------
Total assets........................................................................................... 386,187,215
----------------
Liabilities
Bank overdraft............................................................................................ 7,382
Payable for investments purchased......................................................................... 10,970,399
Payable for Series shares reacquired...................................................................... 549,993
Dividends payable......................................................................................... 527,591
Management fee payable.................................................................................... 160,009
Accrued expenses.......................................................................................... 117,150
Distribution fee payable.................................................................................. 108,496
Due to broker - variation margin.......................................................................... 39,375
----------------
Total liabilities...................................................................................... 12,480,395
----------------
Net Assets................................................................................................ $ 373,706,820
----------------
----------------
Net assets were comprised of:
Shares of beneficial interest, at par.................................................................. $ 359,896
Paid-in capital in excess of par....................................................................... 374,744,771
----------------
375,104,667
Accumulated net realized loss on investments........................................................... (2,745,410 )
Net unrealized appreciation on investments............................................................. 1,347,563
----------------
Net assets, October 31, 1999.............................................................................. $ 373,706,820
----------------
----------------
Class A:
Net asset value and redemption price per share
($241,926,088 / 23,307,524 shares of beneficial interest issued and outstanding).................... $10.38
Maximum sales charge (3% of offering price)............................................................ .32
----------------
Maximum offering price to public....................................................................... $10.70
----------------
----------------
Class B:
Net asset value, offering price and redemption price per share
($127,925,058 / 12,310,959 shares of beneficial interest issued and outstanding).................... $10.39
----------------
----------------
Class C:
Net asset value and redemption price per share
($3,076,396 / 296,058 shares of beneficial interest issued and outstanding)......................... $10.39
Sales charge (1% of offering price).................................................................... .10
----------------
Offering price to public............................................................................... $10.49
----------------
----------------
Class Z:
Net asset value, offering price and redemption price per share
($779,278 / 75,093 shares of beneficial interest issued and outstanding)............................ $10.38
----------------
----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 27
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
INSURED SERIES
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income October 31, 1999
<S> <C>
Income
Interest................................ $ 11,244,945
----------------
Expenses
Management fee.......................... 1,011,605
Distribution fee--Class A............... 309,008
Distribution fee--Class B............... 379,315
Distribution fee--Class C............... 11,364
Transfer agent's fees and expenses...... 113,000
Custodian's fees and expenses........... 58,000
Registration fees....................... 28,000
Reports to shareholders................. 23,000
Legal fees and expenses................. 13,000
Audit fees and expenses................. 8,000
Trustees' fees and expenses............. 8,000
Insurance expense....................... 2,000
Miscellaneous........................... 1,527
----------------
Total expenses....................... 1,965,819
Less: Custodian fee credit.............. (475)
----------------
Net expenses......................... 1,965,344
----------------
Net investment income...................... 9,279,601
----------------
Realized and Unrealized
Gain (Loss) on Investments
Net realized gain (loss) on:
Investment transactions................. (3,017,286)
Financial futures transactions.......... 746,729
----------------
(2,270,557)
----------------
Net change in unrealized appreciation
(depreciation) on:
Investments............................. (27,751,061)
Financial futures contracts............. (46,163)
----------------
(27,797,224)
----------------
Net loss on investments.................... (30,067,781)
----------------
Net Decrease in Net Assets
Resulting from Operations.................. $(20,788,180)
----------------
----------------
</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 1999 1999
<S> <C> <C>
Operations
Net investment income......... $ 9,279,601 $ 20,209,415
Net realized gain (loss) on
investment transactions.... (2,270,557) 1,085,264
Net change in unrealized
appreciation (depreciation)
of investments............. (27,797,224) 8,633,133
------------ -------------
Net increase (decrease) in net
assets resulting from
operations................. (20,788,180) 29,927,812
------------ -------------
Dividends and distributions (Note
1)
Dividends from net investment
income
Class A.................... (5,796,580) (11,087,816)
Class B.................... (3,354,602) (8,878,895)
Class C.................... (63,593) (74,699)
Class Z.................... (64,826) (168,005)
------------ -------------
(9,279,601) (20,209,415)
------------ -------------
Dividends in excess of net
investment income
Class A.................... -- (165,620)
Class B.................... -- (128,222)
Class C.................... -- (1,348)
Class Z.................... -- (2,596)
------------ -------------
-- (297,786)
------------ -------------
Dividends from net capital
gains
Class A.................... -- (2,053,682)
Class B.................... -- (1,589,957)
Class C.................... -- (16,718)
Class Z.................... -- (32,185)
------------ -------------
-- (3,692,542)
------------ -------------
Series share transactions (net of
share conversions) (Note 5):
Net proceeds from shares
subscribed................. 30,688,005 56,402,154
Net asset value of shares
issued in reinvestment of
dividends and
distributions.............. 5,188,355 13,991,834
Cost of shares reacquired..... (65,942,067) (104,987,356)
------------ -------------
Net decrease in net assets
from Series share
transactions............... (30,065,707) (34,593,368)
------------ -------------
Total decrease................... (60,133,488) (28,865,299)
Net Assets
Beginning of period.............. 433,840,308 462,705,607
------------ -------------
End of period.................... $373,706,820 $ 433,840,308
------------ -------------
------------ -------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 28
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
Prudential Municipal Bond Fund (the 'Fund') is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
The Fund was organized as an unincorporated business trust in Massachusetts on
November 3, 1986 and consists of two series: the High Income Series and the
Insured 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 Income Series is to provide the maximum amount of income that is eligible
for exclusion from federal income taxes, (ii) the objective of the Insured
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.
- --------------------------------------------------------------------------------
29
<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'), doing business as Prudential Investments ('PI,'
the Subadviser or the investment adviser); PIC furnishes investment advisory
services in connection with the management of the Fund. PIFM pays for the cost
of the subadviser's services, the compensation of officers of the Fund,
occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears
all other costs and expenses.
The management fee paid PIFM is computed daily and payable monthly at an annual
rate of .50 of 1% of the average daily net assets of each series up to $1
billion and .45 of 1% of the average daily net assets of each series in excess
of $1 billion. PIFM has agreed to voluntarily waive a portion of the High Income
Series management fee, which amounted to $50,963 for the six months ended
October 31, 1999. Such amount represents .05 of 1% of average daily net assets,
or $.005 per share for the six months ended October 31, 1999. The Series is not
required to reimburse PIFM for such waiver. Effective June 1, 1999, PIFM
eliminated its voluntary waiver of a portion of its management fee.
The Fund has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS'). The Fund compensates PIMS 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 it. The distribution fees are accrued daily and payable monthly. No
distribution or service fees were paid to PIMS as distributor of the Class Z
shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS 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. For the six months ended October 31, 1999, such expenses for the
Fund were .25 of 1%, .50 of 1% and .75 of 1% of the average daily net assets of
the Class A, B and C shares, respectively.
PIMS has advised the High Income Series and Insured Series that it received
approximately $169,800 ($103,600-Class A; $66,200-Class C) and $12,400
($10,800-Class A; $1,600-Class C), respectively, in front-end sales charges
during the six months ended October 31, 1999. From these fees, PIMS paid such
sales charges to affiliated broker-dealers which in turn paid commissions to
salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the six months ended October 31, 1999, it
received approximately $456,200 ($442,500-Class B; $13,700-Class C) and $84,800
($84,300-Class B; $500-Class C), respectively, in contingent deferred sales
charges imposed upon certain redemptions by Class B and C shareholders.
PIC, PIMS and PIFM are wholly owned subsidiaries of The Prudential Insurance
Company of America.
As of March 11, 1999, the Fund, along with other affiliated registered
investment companies (the 'Funds'), entered into a syndicated credit agreement
('SCA') with an unaffiliated lender. The maximum commitment under the SCA is $1
billion. The Funds pay a commitment fee at an annual rate of .065 of 1% on the
unused portion of the credit facility, which is accrued and paid quarterly on a
pro rata basis by the Funds. The SCA expires on March 9, 2000. Prior to March
11, 1999, the Funds had a credit agreement with a maximum commitment of
$200,000,000. The commitment fee was .055 of 1% on the unused portion of the
credit facility. The Fund did not borrow any amounts pursuant to either
agreement during the six months ended October 31, 1999. The purpose of the
agreements is to serve as an alternative source of funding for capital share
redemptions.
- ------------------------------------------------------------
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,
1999, the Fund incurred fees of approximately
- --------------------------------------------------------------------------------
30
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
$271,300 ($179,600-High Income Series; $91,700-Insured Series) for the services
of PMFS. As of October 31, 1999, approximately $44,500 ($29,500-High Income
Series; $15,000-Insured Series) of such fees were due to PMFS. Transfer agent
fees and expenses in the Statement of Operations also include certain out of
pocket expenses paid to nonaffiliates.
- ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, excluding short-term investments,
for the six months ended October 31, 1999, were as follows:
<TABLE>
<CAPTION>
Series Purchases Sales
- -------------------------------- ------------ ------------
<S> <C> <C>
High Income..................... $111,438,313 $129,097,029
Insured......................... 24,037,187 58,028,336
</TABLE>
At October 31, 1999, the High Income Series sold 300 U.S. Treasury bond futures
expiring in March 2000 and the Insured Series sold 30 U.S. Treasury bond futures
expiring in December 1999. The values of these financial futures contracts at
October 31, 1999 were as follows:
<TABLE>
<CAPTION>
Financial Futures
Contracts Sold
-------------------------
High Income Insured
Series Series
----------- ----------
<S> <C> <C>
Value at disposition............... $33,698,437 $3,394,687
Value at October 31, 1999.......... 34,078,125 3,407,812
----------- ----------
Unrealized gain.................... $ (379,688) $ (13,125)
----------- ----------
----------- ----------
</TABLE>
The federal income tax basis of the Fund's investments, at October 31, 1999 was
$1,092,612,422 for High Income Series and $365,857,557 for Insured Series and,
accordingly, net unrealized appreciation of investments for federal income tax
purposes was as follows:
<TABLE>
<CAPTION>
Net unrealized Gross Gross
appreciation unrealized unrealized
Series (depreciation) appreciation depreciation
- ------------------- --------------- ----------- -----------
<S> <C> <C> <C>
High Income........ $ (4,645,611) $44,854,239 $49,499,850
Insured............ 1,360,688 9,571,034 8,210,346
</TABLE>
The High Income Series has a net capital loss carryforward as of April 30, 1999
of approximately $20,684,000, of which $2,024,000 expires in 2002, $5,361,000
expires in 2003, $6,383,000 expires in 2004, $3,225,000 expires in 2005,
$554,000 expires in 2006 and 3,137,000 expires in 2007. No capital gains
distribution is expected to be paid to shareholders until net gains have been
realized in excess of the aggregate of such amounts.
In addition, the High Income Series and Insured Series elected to treat net
realized capital losses of approximately $2,765,000 and $600,700, respectively
incurred in the six month period ended April 30, 1999 as having been incurred in
the current fiscal year.
- ------------------------------------------------------------
Note 5. Capital
The High Income Series and Insured 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 front-end sales charge of 1% and a contingent
deferred sales charge of 1% during the first 18 months. 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.
- --------------------------------------------------------------------------------
31
<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 Income Series Insured Series
Class A Class A
----------------------------- ----------------------------
Six Months Ended October 31, 1999 Shares Amount Shares Amount
- ------------------------------------------------------------- ---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares issued................................................ 5,276,194 $ 57,032,761 2,350,317 $ 25,189,706
Shares issued in reinvestment of dividends and
distributions............................................. 673,436 7,292,925 300,418 3,208,786
Shares reacquired............................................ (6,431,771) (69,630,781) (2,574,574) (27,619,663)
---------- ------------- ---------- ------------
Net increase (decrease) in shares outstanding before
conversion................................................ (482,141) (5,305,095) 76,161 778,829
Shares issued upon conversion from Class B................... 2,803,357 30,397,033 749,276 8,011,805
---------- ------------- ---------- ------------
Net increase in shares outstanding........................... 2,321,216 $ 25,091,938 825,437 $ 8,790,634
---------- ------------- ---------- ------------
---------- ------------- ---------- ------------
<CAPTION>
High Income Series Insured Series
Class A Class A
----------------------------- ----------------------------
Year Ended April 30, 1999 Shares Amount Shares Amount
- ------------------------------------------------------------- ---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares issued................................................ 9,922,785 $ 112,624,489 3,150,940 $ 35,684,005
Shares issued in reinvestment of dividends and
distributions............................................. 1,173,562 13,319,273 669,267 7,562,399
Shares reacquired............................................ (7,359,450) (83,429,491) (3,182,291) (35,899,590)
---------- ------------- ---------- ------------
Net increase in shares outstanding before conversion......... 3,736,897 42,514,271 637,916 7,346,814
Shares issued upon conversion from Class B................... 4,930,525 56,076,061 1,531,912 17,371,217
---------- ------------- ---------- ------------
Net increase in shares outstanding........................... 8,667,422 $ 98,590,332 2,169,828 $ 24,718,031
---------- ------------- ---------- ------------
---------- ------------- ---------- ------------
<CAPTION>
High Income Series Insured Series
Class B Class B
----------------------------- ----------------------------
Six Months Ended October 31, 1999 Shares Amount Shares Amount
- ------------------------------------------------------------- ---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares issued................................................ 3,217,737 $ 34,957,412 416,540 $ 4,477,079
Shares issued in reinvestment of dividends and
distributions............................................. 644,342 6,983,064 176,131 1,886,478
Shares reacquired............................................ (5,407,341) (58,599,824) (3,219,613) (34,467,652)
---------- ------------- ---------- ------------
Net decrease in shares outstanding before conversion......... (1,545,262) (16,659,348) (2,626,942) (28,104,095)
Shares reaquired upon conversion to Class A.................. (2,804,503) (30,397,033) (748,576) (8,011,805)
---------- ------------- ---------- ------------
Net decrease in shares outstanding........................... (4,349,765) $ (47,056,381) (3,375,518) $(36,115,900)
---------- ------------- ---------- ------------
---------- ------------- ---------- ------------
<CAPTION>
High Income Series Insured Series
Class B Class B
----------------------------- ----------------------------
Year Ended April 30, 1999 Shares Amount Shares Amount
- ------------------------------------------------------------- ---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares issued................................................ 11,345,964 $ 128,924,744 1,204,352 $ 13,614,748
Shares issued in reinvestment of dividends and
distributions............................................. 1,343,215 15,249,705 547,328 6,190,618
Shares reacquired............................................ (8,975,019) (101,906,384) (5,908,598) (66,872,772)
---------- ------------- ---------- ------------
Net increase (decrease) in shares outstanding before
conversion................................................ 3,714,160 42,268,065 (4,156,918) (47,067,406)
Shares reaquired upon conversion to Class A.................. (4,931,462) (56,076,061) (1,530,249) (17,371,217)
---------- ------------- ---------- ------------
Net decrease in shares outstanding........................... (1,217,302) $ (13,807,996) (5,687,167) $(64,438,623)
---------- ------------- ---------- ------------
---------- ------------- ---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
32
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
High Income Series Insured Series
Class C Class C
----------------------------- ----------------------------
Six Months Ended October 31, 1999 Shares Amount Shares Amount
- ------------------------------------------------------------- ---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares issued................................................ 637,472 $ 6,934,049 62,871 $ 684,964
Shares issued in reinvestment of dividends and
distributions............................................. 51,382 556,649 3,346 35,771
Shares reacquired............................................ (460,413) (4,975,307) (12,163) (130,167)
---------- ------------- ---------- ------------
Net increase in shares outstanding........................... 228,441 $ 2,515,391 54,054 $ 590,568
---------- ------------- ---------- ------------
---------- ------------- ---------- ------------
<CAPTION>
High Income Series Insured Series
Class C Class C
----------------------------- ----------------------------
Year Ended April 30, 1999 Shares Amount Shares Amount
- ------------------------------------------------------------- ---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares issued................................................ 1,518,505 $ 17,214,668 125,361 $ 1,422,776
Shares issued in reinvestment of dividends and
distributions............................................. 76,753 870,798 4,553 51,493
Shares reacquired............................................ (474,223) (5,378,215) (24,331) (273,385)
---------- ------------- ---------- ------------
Net increase in shares outstanding........................... 1,121,035 $ 12,707,251 105,583 $ 1,200,884
---------- ------------- ---------- ------------
---------- ------------- ---------- ------------
<CAPTION>
High Income Series Insured Series
Class Z Class Z
----------------------------- ----------------------------
Six Months Ended October 31, 1999 Shares Amount Shares Amount
- ------------------------------------------------------------- ---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares issued................................................ 233,504 $ 2,550,285 31,122 $ 336,256
Shares issued in reinvestment of dividends and
distributions............................................. 26,466 287,300 5,329 57,320
Shares reacquired............................................ (618,943) (6,677,555) (347,147) (3,724,585)
---------- ------------- ---------- ------------
Net decrease in shares outstanding........................... (358,973) $ (3,839,970) (310,696) $ (3,331,009)
---------- ------------- ---------- ------------
---------- ------------- ---------- ------------
<CAPTION>
High Income Series Insured Series
Class Z Class Z
----------------------------- ----------------------------
Year Ended April 30, 1999 Shares Amount Shares Amount
- ------------------------------------------------------------- ---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares issued................................................ 1,096,115 $ 12,439,510 503,141 $ 5,680,625
Shares issued in reinvestment of dividends and
distributions............................................. 61,271 694,740 16,560 187,324
Shares reacquired............................................ (799,663) (9,043,372) (171,745) (1,941,609)
---------- ------------- ---------- ------------
Net increase (decrease) in shares outstanding................ 357,723 $ 4,090,878 347,956 $ (3,926,340)
---------- ------------- ---------- ------------
---------- ------------- ---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
33
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited) HIGH INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------------------
Six Months
Ended Years Ended April 30,
October 31, ------------------------------------------------------------
1999 1999 1998 1997 1996 1995
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 11.21 $ 11.31 $ 10.84 $ 10.70 $ 10.72 $ 10.74
----------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income(b)............................ .31 .63 .67 .70 .72 .72
Net realized and unrealized gain (loss) on
investment transactions.......................... (.72) (.10) .47 .14 (.02) (.02)
----------- -------- -------- -------- -------- --------
Total from investment operations................. (.41) .53 1.14 .84 .70 .70
----------- -------- -------- -------- -------- --------
Less distributions
Dividends from net investment income................ (.31) (.63) (.67) (.70) (.72) (.72)
----------- -------- -------- -------- -------- --------
Net asset value, end of period...................... $ 10.49 $ 11.21 $ 11.31 $ 10.84 $ 10.70 $ 10.72
----------- -------- -------- -------- -------- --------
----------- -------- -------- -------- -------- --------
TOTAL RETURN(a):.................................... (2.59)% 4.96% 10.80% 8.03% 6.55% 6.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $ 506,478 $514,952 $421,504 $334,062 $223,073 $115,501
Average net assets (000)............................ $ 510,592 $474,901 $381,735 $294,940 $162,329 $ 65,207
Ratios to average net assets:(b)
Expenses, including distribution fees............ .80%(c) .66% .62% 0.64% 0.64% 0.69%
Expenses, excluding distribution fees............ .55%(c) .51% .52% 0.54% 0.54% 0.59%
Net investment income............................ 4.74%(c) 5.73% 6.03% 6.44% 6.58% 6.83%
For Class A, B, C and Z shares:
Portfolio turnover rate.......................... 10% 16% 13% 26% 35% 39%
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Net of management fee waiver.
(c) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 34
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited) HIGH INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------------
Six Months
Ended Years Ended April 30,
October 31, -------------------------------------------------
1999 1999 1998 1997 1996
----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 11.21 $ 11.31 $ 10.84 $ 10.69 $ 10.72
----------- -------- -------- -------- ----------
Income from investment operations
Net investment income(b)............................ .30 .59 .63 .66 .68
Net realized and unrealized gain (loss) on
investment transactions.......................... (.72) (.10) .47 .15 (.03)
----------- -------- -------- -------- ----------
Total from investment operations................. (.42) .49 1.10 .81 .65
----------- -------- -------- -------- ----------
Less distributions
Dividends from net investment income................ (.30) (.59) (.63) (.66) (.68)
----------- -------- -------- -------- ----------
Net asset value, end of period...................... $ 10.49 $ 11.21 $ 11.31 $ 10.84 $ 10.69
----------- -------- -------- -------- ----------
----------- -------- -------- -------- ----------
TOTAL RETURN(a):.................................... (2.86)% 4.59% 10.36% 7.71% 6.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $ 562,620 $649,706 $669,223 $665,525 $ 799,048
Average net assets (000)............................ $ 608,896 $666,885 $669,132 $725,305 $ 900,115
Ratios to average net assets:(b)
Expenses, including distribution fees............ 1.05%(c) 1.01% 1.02% 1.04% 1.04%
Expenses, excluding distribution fees............ .55%(c) .51% .52% 0.54% 0.54%
Net investment income............................ 4.58%(c) 5.38% 5.63% 6.05% 6.19%
<CAPTION>
1995
----------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 10.74
----------
Income from investment operations
Net investment income(b)............................ .68
Net realized and unrealized gain (loss) on
investment transactions.......................... (.02)
----------
Total from investment operations................. .66
----------
Less distributions
Dividends from net investment income................ (.68)
----------
Net asset value, end of period...................... $ 10.72
----------
----------
TOTAL RETURN(a):.................................... 6.37%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $ 934,725
Average net assets (000)............................ $1,024,132
Ratios to average net assets:(b)
Expenses, including distribution fees............ 1.09%
Expenses, excluding distribution fees............ 0.59%
Net investment income............................ 6.37%
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Net of management fee waiver.
(c) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 35
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited) HIGH INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------------------------
August 1,
Six Months 1994(c)
Ended Years Ended April 30, Through
October 31, ------------------------------------------ April 30,
1999 1999 1998 1997 1996 1995
----------- ------- ------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 11.21 $ 11.31 $ 10.84 $ 10.69 $10.72 $ 10.79
----------- ------- ------- ------- ------ ----------
Income from investment operations
Net investment income(b)............................ .28 .57 .61 .63 .65 .49
Net realized and unrealized gain (loss) on
investment transactions.......................... (.72) (.10) .47 .15 (.03) (.07)
----------- ------- ------- ------- ------ ----------
Total from investment operations................. (.44) .47 1.08 .78 .62 .42
----------- ------- ------- ------- ------ ----------
Less distributions
Dividends from net investment income................ (.28) (.57) (.61) (.63) (.65) (.49)
----------- ------- ------- ------- ------ ----------
Net asset value, end of period...................... $ 10.49 $ 11.21 $ 11.31 $ 10.84 $10.69 $ 10.72
----------- ------- ------- ------- ------ ----------
----------- ------- ------- ------- ------ ----------
TOTAL RETURN(a):.................................... (3.10)% 4.33% 10.09% 7.44% 5.86% 3.91%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $33,235 $32,939 $20,554 $ 9,563 $6,471 $ 3,208
Average net assets (000)............................ $33,655 $26,114 $14,932 $ 8,060 $5,608 $ 1,385
Ratios to average net assets:(b)
Expenses, including distribution fees............ 1.30%(d) 1.26% 1.27% 1.29% 1.29% 1.34%(d)
Expenses, excluding distribution fees............ .55%(d) .51% .52% 0.54% 0.54% 0.59%(d)
Net investment income............................ 4.33%(d) 5.15% 5.39% 5.80% 5.93% 6.34%(d)
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Net of management fee waiver.
(c) Commencement of offering of Class C shares.
(d) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 36
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited) HIGH INCOME SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class Z
----------------------------------------------------
September 16,
Six Months Years Ended April 1996(c)
Ended 30, Through
October 31, ------------------ April 30,
1999 1999 1998 1997
----------- ------- ------ -------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 11.20 $ 11.30 $10.83 $ 10.79
----------- ------- ------ -----
Income from investment operations
Net investment income(b)............................ .32 .65 .68 .45
Net realized and unrealized gain (loss) on
investment transactions.......................... (.71) (.10) .47 .04
----------- ------- ------ -----
Total from investment operations................. (.39) .55 1.15 .49
----------- ------- ------ -----
Less distributions
Dividends from net investment income................ (.32) (.65) (.68) (.45)
----------- ------- ------ -----
Net asset value, end of period...................... $ 10.49 $ 11.20 $11.30 $ 10.83
----------- ------- ------ -----
----------- ------- ------ -----
TOTAL RETURN(a):.................................... (2.29)% 5.11% 10.91% 4.36%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $ 9,192 $13,839 $9,919 $ 2,719
Average net assets (000)............................ $12,580 $13,648 $6,064 $ 704
Ratios to average net assets:(b)
Expenses, including distribution fees............ .55%(d) .51% .52% 0.54%(d)
Expenses, excluding distribution fees............ .55%(d) .51% .52% 0.54%(d)
Net investment income............................ 5.17%(d) 5.89% 6.14% 6.55%(d)
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Net of management fee waiver.
(c) Commencement of offering of Class Z shares.
(d) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 37
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited) INSURED SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------------
Six Months
Ended Years Ended April 30,
October 31, -----------------------------------------------------------
1999 1999 1998 1997 1996 1995
----------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 11.18 $ 11.05 $ 10.90 $ 10.94 $ 10.83 $ 10.71
----------- -------- -------- -------- -------- -------
Income from investment operations
Net investment income............................... .25 .53 .53(b) .55(b) .58(b) .58(b)
Net realized and unrealized gain (loss) on
investment transactions.......................... (.80) .23 .40 .08 .11 .12
----------- -------- -------- -------- -------- -------
Total from investment operations................. (.55) .76 .93 .63 .69 .70
----------- -------- -------- -------- -------- -------
Less distributions
Dividends from net investment income................ (.25) (.53) (.53) (.55) (.58) (.58)
Distributions in excess of net investment income.... -- (.01) --(c) (.01) -- --
Distributions from capital gains.................... -- (.09) (.25) (.11) -- --
----------- -------- -------- -------- -------- -------
Total distributions.............................. (.25) (.63) (.78) (.67) (.58) (.58)
----------- -------- -------- -------- -------- -------
Net asset value, end of period...................... $ 10.38 $ 11.18 $ 11.05 $ 10.90 $ 10.94 $ 10.83
----------- -------- -------- -------- -------- -------
----------- -------- -------- -------- -------- -------
TOTAL RETURN(a):.................................... (4.04)% 6.88% 8.67% 5.74% 6.47% 6.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $ 241,926 $251,300 $224,409 $208,411 $139,548 $75,800
Average net assets (000)............................ $ 245,863 $240,652 $222,115 $187,371 $102,456 $39,471
Ratios to average net assets:
Expenses, including distribution fees............ .88%(d) 0.75% 0.69%(b) 0.68%(b) 0.68%(b) 0.74(b)
Expenses, excluding distribution fees............ .63%(d) 0.60% 0.59%(b) 0.58%(b) 0.58%(b) 0.64(b)
Net investment income............................ 4.69%(d) 4.61% 4.75%(b) 4.95%(b) 5.20%(b) 5.45(b)
For Class A, B, C and Z shares:
Portfolio turnover rate.......................... 6% 15% 85% 110% 68% 64%
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Net of management fee waiver.
(c) Less than $.005 per share.
(d) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 38
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited) INSURED SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
----------------------------------------------------------------------------
Six Months
Ended Years Ended April 30,
October 31, ------------------------------------------------------------
1999 1999 1998 1997 1996 1995
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 11.19 $ 11.06 $ 10.91 $ 10.95 $ 10.84 $ 10.71
----------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income............................... .24 .48 .49(b) .50(b) .54(b) .54(b)
Net realized and unrealized gain (loss) on
investment transactions.......................... (.80) .23 .40 .08 .11 .13
----------- -------- -------- -------- -------- --------
Total from investment operations................. (.56) .71 .89 .58 .65 .67
----------- -------- -------- -------- -------- --------
Less distributions
Dividends from net investment income................ (.24) (.48) (.49) (.50) (.54) (.54)
Distributions in excess of net investment income.... -- (.01) --(c) (.01) -- --
Distributions from capital gains.................... -- (.09) (.25) (.11) -- --
----------- -------- -------- -------- -------- --------
Total distributions.............................. (.24) (.58) (.74) (.62) (.54) (.54)
----------- -------- -------- -------- -------- --------
Net asset value, end of period...................... $ 10.39 $ 11.19 $ 11.06 $ 10.91 $ 10.95 $ 10.84
----------- -------- -------- -------- -------- --------
----------- -------- -------- -------- -------- --------
TOTAL RETURN(a):.................................... (4.30)% 6.50% 8.23% 5.32% 6.04% 6.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $ 127,925 $175,520 $236,370 $298,005 $443,391 $567,648
Average net assets (000)............................ $ 150,901 $208,775 $270,553 $365,891 $524,452 $660,237
Ratios to average net assets:
Expenses, including distribution fees............ 1.13%(d) 1.10% 1.09%(b) 1.08%(b) 1.08%(b) 1.14%(b)
Expenses, excluding distribution fees............ .63%(d) 0.60% 0.59%(b) 0.58%(b) 0.58%(b) 0.64%(b)
Net investment income............................ 4.42%(d) 4.25% 4.35%(b) 4.54%(b) 4.80%(b) 4.99%(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 period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Net of management fee waiver.
(c) Less than $.005 per share.
(d) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 39
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited) INSURED SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
----------------------------------------------------------------------
August 1,
Six Months 1994(c)
Ended Years Ended April 30, Through
October 31, --------------------------------------- April 30,
1999 1999 1998 1997 1996 1995
----------- ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 11.19 $11.06 $10.91 $10.95 $10.84 $10.79
----- ------ ------ ------ ------ -----
Income from investment operations
Net investment income............................... .22 .45 .46(b) .48(b) .51(b) .39(b)
Net realized and unrealized gain (loss) on
investment transactions.......................... (.80) .23 .40 .08 .11 .05
----- ------ ------ ------ ------ -----
Total from investment operations................. (.58) .68 .86 .56 .62 .44
----- ------ ------ ------ ------ -----
Less distributions
Dividends from net investment income................ (.22) (.45) (.46) (.48) (.51) (.39)
Distributions in excess of net investment income.... -- (.01) --(e) (.01) -- --
Distributions from capital gains.................... -- (.09) (.25) (.11) -- --
----- ------ ------ ------ ------ -----
Total distributions.............................. (.22) (.55) (.71) (.60) (.51) (.39)
----- ------ ------ ------ ------ -----
Net asset value, end of period...................... $ 10.39 $11.19 $11.06 $10.91 $10.95 $10.84
----- ------ ------ ------ ------ -----
----- ------ ------ ------ ------ -----
TOTAL RETURN(a):.................................... (4.54)% 6.24% 7.96% 5.06% 5.78% 4.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $ 3,076 $2,708 $1,509 $ 888 $1,137 $ 525
Average net assets (000)............................ $ 3,014 $1,856 $1,142 $ 973 $ 827 $ 224
Ratios to average net assets:
Expenses, including distribution fees............ 1.38%(d) 1.35% 1.34%(b) 1.33%(b) 1.33%(b) 1.39%(b)(d)
Expenses, excluding distribution fees............ .63%(d) 0.60% 0.59%(b) 0.58%(b) 0.58%(b) 0.64%(b)(d)
Net investment income............................ 4.20%(d) 4.03% 4.11%(b) 4.29%(b) 4.56%(b) 4.92%(b)(d)
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Net of management fee waiver.
(c) Commencement of offering of Class C shares.
(d) Annualized.
(e) Less than $.005 per share.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 40
<PAGE>
PRUDENTIAL MUNICIPAL BOND FUND
Financial Highlights (Unaudited) INSURED SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class Z
---------------------------------------------------
September 16,
Six Months Years Ended April 1996(c)
Ended 30, Through
October 31, ----------------- April 30,
1999 1999 1998 1997
----------- ------ ------ -------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 11.18 $11.05 $10.91 $ 11.05
----- ------ ------ -----
Income from investment operations
Net investment income............................... .26 .54 .54(b) .36(b)
Net realized and unrealized gain (loss) on
investment transactions.......................... (.80) .23 .39 (.02)
----- ------ ------ -----
Total from investment operations................. (.54) .77 .93 .34
----- ------ ------ -----
Less distributions
Dividends from net investment income................ (.26) (.54) (.54) (.36)
Distributions in excess of net investment income.... -- (.01) --(e) (.01)
Distributions from capital gains.................... -- (.09) (.25) (.11)
----- ------ ------ -----
Total distributions.............................. (.26) (.64) (.79) (.48)
----- ------ ------ -----
Net asset value, end of period...................... $ 10.38 $11.18 $11.05 $ 10.91
----- ------ ------ -----
----- ------ ------ -----
TOTAL RETURN(a):.................................... (3.83)% 7.04% 8.68% 2.86%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..................... $ 779 $4,312 $ 418 $ 15
Average net assets (000)............................ $ 2,665 $3,523 $ 173 $ 10
Ratios to average net assets:
Expenses, including distribution fees............ .63%(d) 0.60% 0.60%(b) 0.58%(b)(d)
Expenses, excluding distribution fees............ .63%(d) 0.60% 0.60%(b) 0.58%(b)(d)
Net investment income............................ 4.84%(d) 4.77% 4.92%(b) 4.18%(b)(d)
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Net of management fee waiver.
(c) Commencement of offering of Class Z shares.
(d) Annualized.
(e) Less than $.005 per share.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 41
<PAGE>
Getting the Most from Your Prudential Mutual Fund
Some mutual fund shareholders won't ever read this--they don't read annual and
semiannual reports. It's quite understandable. These annual and semiannual
reports are prepared to comply with federal regulations, and 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. We hope you'll find it
profitable to spend a few minutes familiarizing yourself with your investment.
Here's what you'll find in the report:
Performance 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 "Performance at a Glance" page where we compare the Fund and the
comparable average calculated by Lipper, Inc., 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 gives you an idea of 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. Please 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 appear 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 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 adviser.
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 broad-based
reference point commonly used by investors to measure how well they are doing.
A definition of the selected index is also provided. Investors cannot invest
directly in an index.
<PAGE>
Getting the Most from Your Prudential Mutual Fund
How many times have you read these reports--or other financial materials--
and stumbled across a word that you don't understand?
Many shareholders have run into the same problem. We'd like to help. So we'll
use this space from time to time to explain some of the words you might have
read, but not understood. And if you have a favorite word that no one can
explain to your satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half of one percent is 50
basis points.
Collateralized Mortgage Obligations (CMOs): Mortgage-backed bonds that
separate mortgage pools into different maturity classes, called tranches.
These instruments are sensitive to changes in interest rates and homeowner
refinancing activity. They are subject to prepayment and maturity extension
risk.
Derivatives: Securities that derive their value from other securities. The
rate of return of these financial instruments rises and falls--sometimes
very suddenly--in response to changes in some specific interest rate,
currency, stock, or other variable.
Discount Rate: The interest rate charged by the Federal Reserve on loans to
member banks.
Federal Funds Rate: The interest rate charged by one bank to another on
overnight loans.
Futures Contract: An agreement to purchase or sell a specific amount of a
commodity or financial instrument at a set price at a specified date in the
future.
Leverage: The use of borrowed assets to enhance return. The expectation is
that the interest rate charged on borrowed funds will be lower than the
return on the investment. While leverage can increase profits, it can also
magnify losses.
Liquidity: The ease with which a financial instrument (or product) can be
bought or sold (converted into cash) in the financial markets.
Price/Earnings Ratio: The price of a share of stock divided by the earnings
per share for a 12-month period.
Option: An agreement to purchase or sell something, such as shares of stock,
by a certain time for a specified price. An option need not be exercised.
Spread: The difference between two values; often used to describe the
difference between "bid" and "asked" prices of a security, or between the
yields of two similar maturity bonds.
Yankee Bond: A bond sold by a foreign company or government in the U.S.
market and denominated in U.S. dollars.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Trustees
Edward D. Beach
Eugene C. Dorsey
Delayne D. Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
Thomas H. O'Brien
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Deborah A. Docs, Secretary
Stephen M. Ungerman, Assistant Treasurer
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 Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
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
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Shereff Friedman Swidler Berlin, LLP
405 Lexington Avenue
New York, NY 10174
Prudential Investments is a unit of The Prudential Insurance Company of
America, 751 Broad Street, Newark, NJ 07102.
The views expressed in this report and information about the Series' portfolio
holdings are for the period covered by this report and are subject to change
thereafter.
The accompanying financial statements as of October 31, 1999, were not
audited and, accordingly, no opinion is expressed on them.x#xThis report is
not authorized for distribution to prospective investors unless preceded or
accompanied by a current prospectus.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
Class NASDAQ Cusip NASDAQ Cusip
A PRHAX 74435L103 PMIAX 74435L301
B PMHYX 74435L202 PMINX 74435L400
C -- 74435L707 -- 74435L806
Z -- 74435L871 -- 74435L863 MF133E2
