<PAGE>
SEMIANNUAL REPORT OCTOBER 31, 2000
Prudential
Municipal Bond Fund/
High Income Series & Insured Series
Fund Type Municipal Bond
Objective High Income Series: Maximum amount of
income that is eligible for exclusion from federal
income taxes.
Insured Series: Maximum amount of income that
is eligible for exclusion from federal income taxes
consistent with the preservation of capital.
(GRAPHIC)
This report is not authorized for distribution to
prospective investors unless preceded or
accompanied by a current prospectus.
The views expressed in this report and information
about the Fund's portfolio holdings are for the
period covered by this report and are subject to
change thereafter.
(LOGO)
<PAGE>
Build on the Rock
INVESTMENT GOALS AND STYLE
The Prudential Municipal Bond Fund/High Income
Series seeks 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 Services (S&P) or Moody's Investors
Service (Moody's). We also invest in unrated bonds
that the Series' investment adviser believes are of
comparable quality to the Series' permissible
investments. There can be no assurance that the
Series will achieve its investment objective.
Credit Quality
Expressed as a percentage of
total investments as of 10/31/00
9.1% AAA
8.3 AAA Insured
2.3 AA
6.0 A
13.1 BBB
10.3 BB
0.2 B
0.3 CCC and below
50.4 Not Rated* (Prudential ratings used):
4.1 AAA
5.2 BBB
20.7 BB
18.4 B
2.0 CCC and below
*Unrated bonds are believed to be of comparable
quality to the Series' permissible investments.
Portfolio Composition
Expressed as a percentage of total investments
as of 10/31/00
69.4% Revenue Bonds
13.4 General Obligation Bonds
12.3 Prerefunded
4.9 Miscellaneous
Five Largest Issuers
Expressed as a percentage of
net assets as of 10/31/00
2.5% Memphis Center City
Revenue Fin. Corp.
1.7 Connecticut St. Dev. Authority
Pollution Control Revenue
1.6 Minnesota Agricultural
& Economic Development
1.5 New Hampshire St.
Business Pollution
1.5 Harris County, Texas
Holdings are subject to change.
<PAGE>
Prudential Municipal Bond Fund High Income Series
Performance at a Glance
Cumulative Total Returns1 As of 10/31/00
<TABLE>
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A 2.40% 2.82% 25.44% (25.19) 88.60% (87.85) 94.64% (93.69)
Class B 2.27 2.56 23.30 (23.06) 81.72 (81.01) 140.66 (137.58)
Class C 2.14 2.30 21.78 (21.54) N/A 33.39 (32.99)
Class Z 2.52 2.97 N/A N/A 20.90 (20.66)
Lipper High Yield
Muni Debt Fund Avg.3 2.99 3.10 23.31 82.00 ***
</TABLE>
Average Annual Total Returns1 As of 10/31/00
<TABLE>
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A -0.27% 4.00% (3.96) 6.23% (6.18) 6.08% (6.03)
Class B -2.44 4.11 (4.07) 6.16 (6.11) 6.92 (6.82)
Class C 0.28 3.81 (3.77) N/A 4.55 (4.50)
Class Z 2.97 N/A N/A 4.71 (4.66)
</TABLE>
Dividends and Yields As of 10/31/00
<TABLE>
<CAPTION>
Total Dividends 30-Day Taxable Equivalent Yield4 at Tax Rates of
Paid for Six Months SEC Yield 36% 39.6%
<S> <C> <C> <C> <C>
Class A $0.30 5.52% 8.63% 9.14%
Class B $0.29 5.43 8.48 8.99
Class C $0.27 5.13 8.02 8.49
Class Z $0.31 5.94 9.28 9.83
</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 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 Municipal (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 88.77% for
Class A, 143.24% for Class B, 35.05% for Class C,
and 17.57% for Class Z, based on all funds in each
share class.
1
<PAGE>
(LOGO) December 15, 2000
DEAR SHAREHOLDER,
Municipal bond prices rallied for much of our six-
month reporting period that ended October 31, 2000.
The belief that the Federal Reserve (the Fed) had
completed its latest round of increases of short-
term interest rates led investors to pay higher
prices and accept lower yields for tax-exempt
securities. Heightened volatility in the stock
market, which prompted investors to seek more
stable investments, was among the other factors
fueling solid demand for municipal bonds.
As it turned out, the Lehman Brothers Municipal
Bond Index returned 5.73% for the six-month period
compared with -1.03% for the Standard & Poor's 500
Composite Stock Price Index.
Despite this largely bullish trend in the municipal
securities market, some bonds held by the
Prudential Municipal Bond Fund/High Income Series
experienced credit-quality problems. These
difficulties caused the High Income Series to
underperform its benchmark Lipper Average.
Meanwhile, without considering initial sales
charges, the Insured Series provided a more
favorable relative performance. Timely shifts in
its portfolio enabled the Insured Series' share
classes to outperform their benchmark Lipper
Average.
We discuss the municipal bond market and explain
the Series' investments on the following pages. As
always, we appreciate your continued confidence in
Prudential mutual funds.
Sincerely,
David R. Odenath, Jr., President
Prudential Municipal Bond Fund/High Income Series
Prudential Municipal Bond Fund/Insured Series
2
<PAGE>
Prudential Municipal Bond Fund High Income Series
Semiannual Report October 31, 2000
INVESTMENT ADVISER'S REPORT
As the Series' six-month reporting period began on
May 1, 2000, financial markets were awaiting the
Federal Reserve's next change in monetary policy.
The Fed had already increased short-term interest
rates by a quarter of a percentage point in
February and March 2000 in an effort to slow the
U.S. economic expansion. However, the central bank
was expected to raise rates by half of a percentage
point in mid-May because the economy continued to
grow rapidly, heightening the risk of mounting
inflationary pressures.
Anticipation of this unusually large short-term
rate hike led investors in early May to demand
sharply higher yields on munis and other fixed-
income securities, which caused bond prices to
fall. The half-point rate increase that followed on
May 16 marked the Fed's largest increase in more
than five years. Shortly thereafter, government
reports indicated that the cumulative effect of
repeated rate hikes was beginning to curb economic
growth. As the economic expansion continued to
slow, investors drove municipal bond prices higher
and yields lower because they expected the Fed to
leave short-term rates unchanged for the remainder
of the year.
The Series was well positioned to take advantage of
the rally in municipal bond prices. First, the
Series held as much as 6% of its total investments
in low-coupon bonds that had been purchased at
discount prices. We were able to take profits on
some of these bonds because they perform relatively
well when interest rates decline. Second, by the
end of the six months, the Series held
approximately 48% of its total investments in bonds
that were viewed as BBB credit quality or higher.
(Approximately 22% of its total investments were
considered AAA quality.) This sizable exposure
benefited the Series because higher-quality
bonds also performed well.
3
<PAGE<
Prudential Municipal Bond Fund High Income Series
Semiannual Report October 31, 2000
HURT BY CREDIT-QUALITY PROBLEMS
Despite these strategic advantages, the Series'
share classes underperformed their benchmark Lipper
Average. The Series' relative performance suffered
as credit-quality problems drove the prices of some
of its bonds sharply lower. Most notably, the
Series holds municipal bonds backed by CSC Steel,
Vista Hospital System, and Safety-Kleen, a
hazardous waste disposal company, that failed to
make debt service payments during the six-month
period.
HEALTHCARE, UTILITY SECTORS PERFORM WELL
Although the bonds backed by Vista performed
poorly, the Series holds A-rated hospital bonds
that gained in value. A more favorable regulatory
environment has benefited the financial status of
some hospitals. As a result, investor sentiment
toward the healthcare sector of the tax-exempt
securities market has begun to improve.
Another sector that performed well was municipal
bonds backed by investor-owned utility companies.
The utility industry has improved amid several
developments, such as deregulation and mergers and
acquisitions. In this environment, rating agencies
have upgraded the debt securities of some
utilities. For example, the Series owns municipal
bonds, backed by Cleveland Electric Illuminating
Company located in Ohio, that were upgraded to Baa3
from Ba1 by Moody's. The bonds were issued on
behalf of Cleveland Electric by the Ohio State Air
Quality Development Authority.
4
<PAGE>
www.prudential.com (800) 225-1852
LOOKING AHEAD
Our outlook for the tax-exempt market remains
optimistic based on economic and technical factors.
Municipal bond yields could fall even further and
their prices rise if economic data continues to
indicate that the U.S. economy is losing steam. On
the technical side, the supply of newly issued
tax-exempt securities has declined this year in
the face of strong demand from investors. We
expect this supply/demand imbalance, which has
helped raise the prices of munis, to continue in
the coming months.
In addition, munis rated below investment grade
continue to provide substantially higher yields
than munis rated AAA. We believe these attractive
yields adequately compensate investors for the
added risk of owning lower-rated bonds.
Consequently, we plan to selectively increase the
Series' exposure to below-investment-grade bonds.
Building up this position, however, will take
considerable time as our research analysts evaluate
each potential high-yield acquisition.
5
<PAGE>
Prudential Municipal Bond Fund Insured Series
Performance at a Glance
INVESTMENT GOALS AND STYLE
The Prudential Municipal Bond Fund/Insured Series
seeks 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 or in municipal obligations whose
timely coupon and principal payments (but not
market value) are insured by a municipal bond
insurance company rated AAA/Aaa by Standard &
Poor's Ratings Services, Moody's Investors Service,
or other nationally recognized credit-rating
agencies. The Series may also invest in U.S.
government-backed municipal obligations. In
addition, up to 5% of the Series' total assets can
be held in municipal obligations rated A/A or Aa/AA
by Moody's or S&P. The Series may invest in unrated
municipal obligations that its investment adviser
believes are of comparable quality to the Series'
permissible investments. 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.
Credit Quality
Expressed as a percentage of total investments
as of 10/31/00
9.0% AAA
86.2 AAA Insured
4.2 AA
0.6 Cash Equivalents
Portfolio Composition
Expressed as a percentage of total investments
as of 10/31/00
69.1% Revenue Bonds
18.8 General Obligation Bonds
7.3 Prerefunded
4.2 Miscellaneous
0.6 Cash Equivalents
Ten Largest Issuers
Expressed as a percentage of
net assets as of 10/31/00
4.2% Wash. St. Pub. Power Supply
3.4 Jefferson Cnty. Ala. Wtr. & Swr.
3.0 NJ Eco. Dev. Auth.-Market
Transition Fac.
2.6 New York City Wtr. & Swr.
2.5 Hawaii St. Dept. Budget & Fin.-
Hawaiian Elec.
2.5 Mass. Turnpike
2.5 Port. Auth. NY & NJ
2.4 Chicago IL Gas Supp.-Peoples Gas
2.3 Jersey City NJ Sew.
2.3 NY St. Environmental Fac.
Holdings are subject to change.
6
<PAGE>
www.prudential.com (800) 225-1852
Semiannual Report October 31, 2000
Cumulative Total Returns1 As of 10/31/00
<TABLE>
<CAPTION>
Six One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A 5.66% 8.52% 27.24% (27.00) 89.93% (88.87) 97.63% (95.97)
Class B 5.53 8.24 25.06 (24.83) 82.98 (81.96) 137.79 (128.71)
Class C 5.40 7.97 23.52 (23.29) N/A 35.76 (35.38)
Class Z 5.79 8.79 N/A N/A 23.89 (23.78)
Lipper Insured
Muni Debt Fund Avg.3 5.36 8.01 24.74 88.44 ***
</TABLE>
Average Annual Total Returns1 As of 10/31/00
<TABLE>
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 5.26% 4.30% (4.26) 6.30% (6.24) 6.23% (6.14)
Class B 3.24 4.41 (4.37) 6.23 (6.17) 6.82 (6.51)
Class C 5.89 4.11 (4.07) N/A 4.84 (4.80)
Class Z 8.79 N/A N/A 5.33 (5.31)
</TABLE>
Dividends and Yields As of 10/31/00
<TABLE>
<CAPTION>
Total Dividends 30-Day Taxable Equivalent Yield4 at Tax Rates of
Paid for Six Months SEC Yield 36% 39.6%
<S> <C> <C> <C> <C>
Class A $0.25 4.19% 6.55% 6.94%
Class B $0.24 4.07 6.36 6.74
Class C $0.23 3.78 5.91 6.26
Class Z $0.27 4.57 7.14 7.57
</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 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 Municipal (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 94.69% for
Class A, 148.61% for Class B, 38.20% for Class C,
and 19.97% for Class Z, based on all funds in each
share class.
7
<PAGE>
Prudential Municipal Bond Fund Insured Series
Semiannual Report October 31, 2000
INVESTMENT ADVISER'S REPORT
During our fiscal half-year that began on May 1,
2000, the municipal bond market overcame an early
sell-off to end the period with higher prices. Amid
these changing market conditions, we made shifts in
the Series' portfolio that enabled it to benefit
more fully from the rally in tax-exempt securities.
Consequently, the Series' share classes, without
considering the initial sales charges, outperformed
their benchmark Lipper Average, which is not
subject to sales charges.
Investors initially demanded sharply higher yields
on municipal bonds and other fixed-income
securities, which forced bond prices lower. This
trend toward higher yields emerged because the
Federal Reserve (the Fed) was expected to increase
short-term interest rates by half of a percentage
point in mid-May. Raising rates would drive
borrowing costs higher for consumers and
businesses, which in turn could rein in a rapidly
expanding U.S. economy and curb inflation.
The Fed had previously tightened monetary policy by
a quarter of a percentage point in February and
March 2000. However, the central bank was expected
to act more aggressively because the economy
continued to grow at a brisk pace. The widely
anticipated half-point rate hike occurred on May
16. Shortly thereafter, data began to show that
repeated short-term rate increases were finally
beginning to check economic growth. As the economic
expansion continued to slow, investors pushed
prices of munis higher and yields lower because
they expected the Fed to leave short-term rates
unchanged for the remainder of the year.
A GOOD TIME TO OWN INSURED MUNIS
Besides this improved outlook for monetary policy,
tax-exempt bond prices climbed as turmoil in the
stock market increased investor appetite for munis.
But as investors scrambled to buy tax-exempt
securities, the supply of newly issued bonds
dwindled. Many state
8
<PAGE>
www.prudential.com (800) 225-1852
and local governments had accumulated such hefty
cash reserves during the economic expansion that
their borrowing needs declined. This supply/demand
imbalance was another factor that helped bolster
the prices of munis.
Within the tax-exempt market, higher-quality munis,
such as insured bonds, performed well. For the six
months ended October 31, 2000, insured municipal
bonds returned 6.31% compared with 5.73% for the
tax-exempt market overall, according to the Lehman
Brothers Municipal Bond Index.
PORTFOLIO MOVES BOLSTERED SERIES' RETURNS
The Series was well positioned to benefit from the
rally in tax-exempt securities. We purchased low-
coupon munis at discount prices that performed
relatively well as bond yields fell because they
were more sensitive to changes in the level of
interest rates than higher-coupon munis with
comparable maturities.
In addition, our purchases of long-term zero coupon
bonds also benefited the Series. Zero coupon bonds
do not make periodic interest payments. Instead,
they are issued with deep discount prices, and are
redeemed at face value when the bonds mature. The
difference between their original price and their
face value represents accrued interest. The Series'
zero coupon bonds are noncallable. Because of this
characteristic, as interest rates fell, prices of
the bonds appreciated without the risk of having
the bonds retired prior to maturity.
From time to time, yields on longer-term munis were
unusually higher than yields on shorter-term munis. We
therefore bought 20- to 30-year munis, such as
housing bonds, in order to lock in their attractive
yields. At the same time, we took profits on some
of the Series' 10-year bonds. Their prices had
risen amid strong demand from high-net-worth
investors, many of whom prefer to own bonds with
intermediate maturities.
9
<PAGE>
Prudential Municipal Bond Fund Insured Series
Semiannual Report October 31, 2000
LOOKING AHEAD
Our outlook for the tax-exempt market remains
optimistic based on economic and technical factors.
Bond yields could fall even further and their
prices rise if economic data continues to indicate
that the U.S. economy is losing steam. On the
technical side, the supply of newly issued tax-
exempt securities has declined this year in the
face of strong demand from investors. We expect
this supply/demand imbalance, which has helped lift
the prices of munis, to continue in coming months.
In addition, our focus remains on 20- to 30-year
munis because their yields are still very
attractive relative to yields on shorter-term
bonds.
Prudential Municipal Bond Fund Management Team
<PAGE>
Prudential Municipal Bond Fund
Semiannual Report October 31, 2000
Financial
Statements
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 99.0%
----------------------------------------------------------------------------------------
Arizona 2.4%
Coconino Cnty. Pol. Ctrl. Corp.
Rev.
Tucson Elec. Pwr., Navajo A,
A.M.T. Ba3 7.125% 10/01/32 $ 5,000 $ 5,060,300
Tucson Elec. Pwr., Navajo B Ba3 7.00 10/01/32 1,700 1,723,460
Pima Cnty. Ind. Dev. Auth.,
Multifam. Mtge. Rev., La Cholla
Proj., A.M.T. NR 8.50 7/01/20 9,380 10,130,869
Tuscon Elec. Pwr. Co., Ser. A,
A.M.T. Ba3 6.10 9/01/25 2,000 1,800,000
Tuscon Elec. Pwr. Co., Ser. B,
A.M.T. Ba3 6.00 9/01/29 4,250 3,851,902
--------------
22,566,531
----------------------------------------------------------------------------------------
Arkansas 1.2%
Northwest Arkansas Reg'l. Arpt.
Auth.
Rev., A.M.T. NR 7.00 2/01/10 3,000 3,017,790
Rev., A.M.T. NR 7.625 2/01/27 8,400 8,547,588
--------------
11,565,378
----------------------------------------------------------------------------------------
California 8.9%
Abag Fin. Auth. for Nonprofit
Corp. Amer. Baptist Homes.,
Ser. A BBB(b) 6.20 10/01/27 3,200 2,895,008
Corona Ctfs. of Part., Vista
Hosp. Sys., Inc., Ser. C NR 8.375 7/01/11 10,000(e) 4,001,800
Delano Ctfs. of Part., Reg'l.
Med. Ctr., Ser. A AAA(b) 9.25 1/01/22 6,530(c) 7,290,288
Foothill/Eastern Transp.
Corridor Agcy., Toll Rd. Rev. Baa3 Zero 1/15/28 11,700 6,528,483
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lincoln Impvt. Bond Act 1915,
Pub. Fin. Auth.,Twelve Bridges NR 6.20% 9/02/25 $ 3,975 $ 3,959,617
Long Beach Redev. Agcy. Hsg.,
Multifam. Hsg. Rev., Pacific
Court Apts. NR 6.95 9/01/23 6,195(e) 2,973,600
Multifam. Hsg. Rev., Pacific
Court Apts., Issue B NR 6.80 9/01/13 3,805(e) 1,826,400
Los Angeles Reg'l. Arpts. Impvt.
Corp., Cont. Air Sublease,
A.M.T. NR 9.25 8/01/24 10,085 11,173,071
Orange Cnty. Cmnty. Loc. Trans.
Auth., Reg. Linked Savrs. &
R.I.B.S. Aa2 6.20 2/14/11 7,000 7,781,200
Richmond Redev. Agcy. Rev.,
Multifam. Bridge Affordable
Hsg. NR 7.50 9/01/23 9,870 10,002,949
Roseville Joint Union H.S.
Dist.,
Ser. B, F.G.I.C. Aaa Zero 8/01/11 1,440 854,870
Ser. B, F.G.I.C. Aaa Zero 8/01/14 2,220 1,091,574
Sacramento City Fin. Auth. Rev.,
Tax Alloc., M.B.I.A. Aaa Zero 11/01/15 5,695 2,590,940
San Joaquin Hills Trans. Corr.
Agcy.,
Toll Rd. Rev. Aaa Zero 1/01/14 8,420 4,277,697
Toll Rd. Rev. Aaa Zero 1/01/25 10,000 2,571,100
San Luis Obispo Ctfs. of Part.,
Vista Hosp. Sys., Inc. NR 8.375 7/01/29 4,000(e) 1,600,760
Santa Margarita/Dana Point
Auth., Impvt. Dist.
Rites Pennsylvania 644F NR 14.444 8/01/13 660(g) 1,143,522
Rites Pennsylvania 664E NR 14.444 8/01/12 1,000(g) 1,705,000
Vallejo Ctfs. of Part., Touro
Univ. Ba2 7.375 6/01/29 3,500 3,586,170
Victor Valley Union H.S. Dist.,
Gen. Oblig., M.B.I.A. Aaa Zero 9/01/12 3,605 2,011,914
Gen. Oblig., M.B.I.A. Aaa Zero 9/01/14 4,740 2,330,042
Gen. Oblig., M.B.I.A. Aaa Zero 9/01/16 3,990 1,718,892
--------------
83,914,897
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Colorado 5.0%
Black Hawk Co. Bus. Impvt. Dist. NR 7.75% 12/01/19 $ 5,285 $ 5,547,136
Colorado Springs Hosp. Rev. A3 6.375 12/15/30 5,000 4,989,550
Denver Urban Ren. Auth. Tax,
Inc. Rev. NR 7.50 9/01/04 2,280 2,386,590
Inc. Rev. NR 7.75 9/01/16 4,000 4,254,560
Denver Co. Hlth & Hosp. Rev.,
Ser. A Baa2 5.375 12/01/28 5,000 3,956,100
Lake Creek Affordable Hsg. Corp.
Multifam. Rev.,
Ser. A NR 6.25 12/01/23 12,995 12,110,431
Ser. B NR 7.00 12/01/23 1,035 973,138
San Migual Cnty., Mountain Vlge.
Met. Dist. NR 8.10 12/01/11 2,160(c) 2,331,569
Met. Dist. NR 8.10 12/01/11 1,040 1,104,282
Superior Met. Dist. No. 1, Wtr.
& Swr. Rev. NR 8.50 12/01/13 8,195(c) 9,415,399
--------------
47,068,755
----------------------------------------------------------------------------------------
Connecticut 2.8%
Connecticut St. Dev. Auth. Poll.
Ctl. Rev., Ref. Connecticut
Light & Pwr., A.M.T. Ba1 5.95 9/01/28 17,400 16,173,996
Connecticut St. Dev. Auth. Swr.,
Netco Waterbury Ltd. AAA(b) 9.375 6/01/16 6,950(c) 8,181,818
Connecticut St. Dev. Auth.,
Mystic Marinelife Aquarium
Proj. Rev. NR 7.00 12/01/27 2,000 2,015,840
--------------
26,371,654
----------------------------------------------------------------------------------------
District of Columbia 1.0%
Dist. of Columbia Rev., Nat'l.
Public Radio NR 7.625 1/01/18 8,800 9,056,784
----------------------------------------------------------------------------------------
Florida 7.5%
Arbor Greene Cmnty. Dev. Dist.,
Spec. Assessment, Rev. NR 6.50 5/01/07 2,000 2,006,300
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bayside Impvt. Cmnty. Dev.
Dist., Ser. B NR 6.375% 5/01/18 $ 1,370 $ 1,338,284
Crossings At Fleming Island
Cmnty. Dev. Dist., Clay City NR 8.25 5/01/16 7,375 8,477,046
Florida Hsg. Fin. Corp. Rev.,
Cypress Trace Apts., Ser. G,
A.M.T. NR 6.60 7/01/38 4,750 4,496,303
Westchase Apts., Ser. B, A.M.T. NR 6.61 7/01/38 3,985 3,823,727
Martin Cnty. Ind. Dev. Auth.
Rev., Indiantown Cogen. Proj.,
Ser. A, A.M.T. Baa3 7.875 12/15/25 13,000 13,134,680
No. Springs Impvt. Dist. Wtr.
Mgt.,
Ser. A NR 8.20 5/01/24 1,885(c) 2,079,626
Ser. A NR 8.30 5/01/24 1,660 1,789,563
Oakstead Cmnty Dev. Dist., Cap.
Impvt., Ser. B NR 6.50 5/01/07 5,000 4,968,700
Orange Cnty. Hlth. Facs. Auth.
Rev., Adventist Hlth. Sys.,
Enbelt Obl. Baa1 6.375 11/15/20 4,500 4,444,740
Orlando Util. Comm., Wtr. &
Elec. Rev., Ser. D Aa2 6.75 10/01/17 2,000 2,312,420
Palm Beach Cnty. Hsg. Auth.,
Banyan Club Apts. NR 7.75 3/01/23 4,310 4,537,611
Sarasota Hlth. Facs., Kobernick
Hsg. Meadow Park Proj. Aaa 10.00 7/01/22 6,620(c) 7,278,359
Stoneybrook West Cmnty. Dev.
Dist., Spec. Assessment Rev. NR 6.45 5/01/10 2,500 2,496,500
Tallahassee Florida Hlth. Facs.
Rev., Tallahassee Memorial
Hlthcare Proj. A3 6.375 12/01/30 3,500 3,446,800
Vista Lakes Cmnty. Dev. Dist.
Cap. Impvt., Rev. NR 6.35 5/01/05 3,890 3,897,508
--------------
70,528,167
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Georgia 3.2%
Atlanta Arpt. Facs. Rev.,
M.B.I.A., A.M.T. Aaa Zero 1/01/10 $ 2,000 $ 1,177,660
Augusta Georgia Hsg. Auth.,
Emerald Coast Hsg., Ser. A NR 7.50% 8/01/34 13,310 9,316,734
Effingham Cnty. Dev. Auth., Ft.
Howard Corp. Baa2 7.90 10/01/05 10,000 10,202,100
Henry Cnty. Wtr. & Swr. Auth.
Rev., A.M.B.A.C. Aaa 6.15 2/01/20 1,000 1,094,040
Rockdale Cnty. Dev. Auth., Solid
Wste. Disp. Rev. NR 7.50 1/01/26 8,100 8,282,493
--------------
30,073,027
----------------------------------------------------------------------------------------
Illinois 5.0%
Cary Illinois Spec. Tax,
Spec. Svc. Area Number 1
Cambridge A NR 7.625 3/01/30 4,000 4,052,320
Spec. Svc. Area Number 2
Foxford Hill NR 7.50 3/01/30 5,000 4,912,000
Chicago O'Hare Int'l. Arpt.,
Amer. Airlines Proj., Ser. B Baa1 8.20 12/01/24 1,000 1,113,890
United Airlines, Ser. B Baa2 8.85 5/01/18 2,520 2,637,860
United Airlines, Ser. B, A.M.T. Baa2 8.95 5/01/18 2,175 2,275,028
Hennepin Ind. Dev. Rev.,
Exolon-Esk Co. Proj. NR 8.875 1/01/18 7,800 8,290,152
Illinois Dev. Fin. Auth. Solid
Wste Disp. Rev., Ba1 5.05 1/01/10 4,000 3,507,960
Illinois St. Hlth. Facs. Auth.
Rev.,
Midwest Physician Group Ltd.
Proj. BBB(b) 8.10 11/15/14 2,935(c) 3,315,082
Midwest Physician Group Ltd.
Proj. BBB(b) 8.125 11/15/19 3,285(c) 3,746,280
Kane & De Kalb Cntys. Sch.,
Dist. No. 301, Cap. Apprec.,
A.M.B.A.C. Aaa Zero 12/01/11 3,360 1,904,179
Dist. No. 301, Cap. Apprec.,
A.M.B.A.C. Aaa Zero 12/01/13 4,065 2,032,175
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robbins Illinois Res. Rec. Rev.,
Restructuring Proj. Ser. A NR 8.375% 10/15/16 $ 5,031(e) $ 754,687
Restructuring Proj. Ser. B NR 8.375 10/15/16 1,969(e) 295,313
Restructuring Proj. Ser. C NR 7.25 10/15/09 781 741,683
Restructuring Proj. Ser. C NR 7.25 10/15/24 3,376 3,097,050
Restructuring Proj. Ser. D NR Zero 10/15/09 1,567 732,561
Winnebago Cnty. Hsg. Auth., Park
Tower Assoc., Sec. 8 NR 8.125 1/01/11 3,463 3,549,385
--------------
46,957,605
----------------------------------------------------------------------------------------
Indiana 1.7%
Bluffton Econ. Dev. Rev., Kroger
Co. Proj. Baa3 7.85 8/01/15 7,500 7,943,325
Wabash Econ. Dev. Rev. Bonds,
Connell Ltd., A.M.T. NR 8.50 11/24/17 7,250 7,574,583
--------------
15,517,908
----------------------------------------------------------------------------------------
Iowa 3.0%
City of Cedar Rapids Rev.,
First Mtge., Cottage Grove
Place Proj. Aaa 9.00 7/01/18 9,375(c) 11,218,500
First Mtge., Cottage Grove
Place Proj. Aaa 9.00 7/01/25 4,435(c) 5,307,098
Iowa St. Fin. Auth., Hlthcare.
Facs. Rev., Mercy Hlth.
Initiatives Proj. NR 9.25 7/01/25 10,000 11,927,400
--------------
28,452,998
----------------------------------------------------------------------------------------
Kentucky 0.8%
Kentucky Econ. Dev. Fin. Auth.,
Hlth. Sys., Rev. NR 6.50 10/01/20 2,500 2,426,575
Kentucky Econ. Dev. Fin. Auth.,
Norton Hlthcare, Inc., Ser. A NR 6.625 10/01/28 2,000 1,936,940
Owensboro Elec. Lt. & Pwr. Rev.,
Ser. B, A.M.B.A.C. Aaa Zero 1/01/16 6,650 2,898,935
--------------
7,262,450
</TABLE>
See Notes to Financial Statements 17
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Louisiana 2.0%
Hodge Util. Rev., Stone
Container Corp., A.M.T. NR 9.00% 3/01/10 $ 7,000 $ 7,149,660
New Orleans Gen Oblig., Cap.
Apprec., A.M.B.A.C. Aaa Zero 9/01/18 3,090 1,142,033
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) 1,682,659
New Orleans Ind. Dev. Rev. BBB(b) 8.75 10/01/19 3,600 3,721,644
West Feliciana Parish Poll.
Ctrl. Rev., Gulf St. Util. Co.
Proj. NR 9.00 5/01/15 5,250 5,426,820
--------------
19,122,816
----------------------------------------------------------------------------------------
Maine 0.4%
Maine Health & Higher Edl. Facs.
Auth. Rev.,
Piper Shores, Ser. A NR 7.50 1/01/19 1,000 973,790
Piper Shores, Ser. A NR 7.55 1/01/29 3,000 2,906,880
--------------
3,880,670
----------------------------------------------------------------------------------------
Maryland 1.5%
Anne Arundel Cnty. Spec. Oblig.,
Arundel Mills Proj. NR 7.10 7/01/29 3,000 3,055,710
Maryland St. Hlth. & Higher Edl.
Facs. Auth. Rev. Baa1 6.75 7/01/30 5,000 5,140,600
Northeast Wste. Disp. Auth.,
Sludge Comp. Facs. NR 7.25 7/01/07 3,124 3,232,247
Sludge Comp. Facs., A.M.T. NR 8.50 7/01/07 2,745 2,908,876
--------------
14,337,433
----------------------------------------------------------------------------------------
Massachusetts 3.5%
Boston Ind. Dev. Fin. Auth.
Rev.,
First Mtge. Springhouse Proj. Aaa 9.25 7/01/15 7,570(c) 8,893,614
First Mtge. Springhouse Proj. NR 6.00 7/01/28 4,500 3,696,705
Mass. Bay Trans. Auth., Gen.
Trans. Sys., Ser. A, F.G.I.C. Aaa 7.00 3/01/21 3,000 3,558,720
</TABLE>
18 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mass. St. Coll. Bldg. Proj. &
Ref. Bonds Aa2 7.50% 5/01/14 $ 1,750 $ 2,134,580
Mass. St. Hlth. & Ed. Facs.
Auth. Rev., Cardinal Cushing
Gen. Hosp. NR 8.875 7/01/18 7,500 7,664,025
Mass. St. Tpke. Auth. Met. Hgwy.
Sys. Rev. Aaa Zero 1/01/28 6,000 1,285,200
Randolph Hsg. Auth., Multifam.
Hsg., Liberty Place Proj. A,
Ser. A NR 9.00 12/01/21 5,685 5,707,172
--------------
32,940,016
----------------------------------------------------------------------------------------
Michigan 4.6%
Grand Rapids Dev. Auth.,
Cap. Apprec., M.B.I.A. Aaa Zero 6/01/11 3,160 1,843,007
Cap. Apprec., M.B.I.A. Aaa Zero 6/01/12 3,000 1,645,980
Gratiot Cnty. Econ. Dev. Corp.,
Danley Die Proj. Connell L.P. NR 7.625 4/01/07 3,200 3,303,872
Michigan St. Hosp. Fin. Auth.
Rev., Saratoga Cmnty. Hosp. NR 8.75 6/01/10 5,430(c) 5,777,085
Michigan St. Strategic Fd. Res.
Recovery Ltd. Oblig. Rev.,
Central Wayne Energy Rec. A NR 7.00 7/01/27 6,500 4,892,680
Central Wayne Energy Rec. A,
A.M.T. NR 6.90 7/01/19 1,500 1,152,315
Michigan Strategic Fund, Solid
Wste. Disp., Gennese Pwr.
Station, A.M.T. NR 7.50 1/01/21 10,000 10,274,900
Midland Cnty. Econ. Dev. Corp.,
Poll. Ctrl. Rev. Ba3 6.875 7/23/09 10,000 10,061,000
Wayne Cnty. Bldg. Auth., Ser. A,
A.M.T. A3 8.00 3/01/17 3,500(c) 3,724,490
--------------
42,675,329
</TABLE>
See Notes to Financial Statements 19
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Minnesota 2.2%
Minnesota Agricultural & Econ.
Dev. Rev.,
Fairview Hlthcare. Sys., Ser. A A2 6.375% 11/15/22 $ 15,000 $ 15,249,000
Fairview Hlthcare. Sys., Ser. A A2 6.375 11/15/29 3,000 3,036,630
Southern Minnesota Mun. Pwr.
Agcy. Pwr. Supply Sys. Rev. Aaa Zero 1/01/26 9,880 2,349,168
--------------
20,634,798
----------------------------------------------------------------------------------------
Missouri 1.6%
Bridgeton Ind. Dev. Auth. Sr.
Hsg. Rev., Sarah Cmnty. Proj. NR 5.90 5/01/28 4,000 3,263,280
Missouri St. Hlth. & Edl. Facs.
Auth.,
Hlth. Facs. Rev. A2 6.125 12/01/19 1,250 1,231,962
Hlth. Facs. Rev. A2 6.25 12/01/30 3,375 3,320,831
St. Louis Cnty. Ind. Dev. Auth.
Rev.,
Soemm Proj., A.M.T. NR 10.25 7/01/08 1,285 1,287,301
Soemm Proj., A.M.T. NR 10.25 7/01/08 485 485,868
St. Louis Cnty. Reg. Conv. &
Sports Comp., Ser. C Aaa 7.90 8/15/21 5,000(c) 5,443,150
--------------
15,032,392
----------------------------------------------------------------------------------------
Nebraska 0.2%
Kearney Ind. Dev. Rev., Cap.
Apprec., Great Platte Rvr. Rd. NR Zero 1/01/17 4,000 1,803,320
----------------------------------------------------------------------------------------
Nevada 0.5%
Clark Cnty. Impvt. Dist., No.
121 Southern Highlands Area NR 7.50 12/01/19 5,000 5,089,850
----------------------------------------------------------------------------------------
New Hampshire 2.1%
New Hampshire Higher Edl. &
Hlth. Facs. Auth. Rev., Antioch
College NR 7.875 12/01/22 5,180 5,575,752
New Hampshire St. Bus. Poll.
Ref., Pub. Svc. Co., A.M.T. Ba1 6.00 5/01/21 15,500 14,463,205
--------------
20,038,957
</TABLE>
20 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New Jersey 4.1%
New Jersey Econ. Dev. Auth.
Rev.,
Continental Airlines, Inc.
Proj. Ba2 6.25% 9/15/29 $ 5,000 $ 4,577,500
Development Rev. NR Zero 4/01/12 1,115 513,680
Fellowship Vlge., Proj. A Aaa 9.25 1/01/25 11,500(c) 13,623,360
Kaplowski Rd., Ser. A NR 6.375 4/01/31 7,000 6,701,310
Ref. Newark Arpt. Marriot Hotel NR 7.00 10/01/14 3,800 3,854,416
New Jersey Hlthcare. Facs. Fin.
Auth. Rev. NR 8.00 7/01/27 5,000 4,728,900
New Jersey St. Edl. Facs. Auth.
Rev., Felician College Of Lodi,
Ser. D NR 7.375 11/01/22 4,000 4,225,080
--------------
38,224,246
----------------------------------------------------------------------------------------
New York 3.5%
Met. Trans. Auth. Facs. Rev.,
Ser. N, F.G.I.C. Aaa Zero 7/01/13 2,785 1,455,330
New York City Ind. Dev. Agcy.,
Bklyn. Navy Yard Cogen
Partners, A.M.T. Baa3 6.20 10/01/22 9,175 9,095,177
Visy Paper, Inc. Proj., A.M.T. NR 7.95 1/01/28 4,000 4,214,600
New York City Ind. Dev. Agcy.,
Civic Touro College Proj., Ser.
A Ba2 6.35 6/01/29 5,600 5,367,992
New York City. Ind. Dev. Agcy.
Rev., Ref. Laguardia Assoc.
L.P. Proj. NR 6.00 11/01/28 4,000 3,416,880
Port Auth. of New York & New
Jersey, USAir LaGuardia Arpt.,
A.M.T. Ba2 9.125 12/01/15 4,000 4,110,400
Rockland Cnty. Ind. Dev. Agcy.
Rev.,
Dominican Coll. Proj. NR 5.90 5/01/10 2,090 1,992,188
Dominican Coll. Proj. NR 6.25 5/01/28 3,000 2,625,390
</TABLE>
See Notes to Financial Statements 21
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Suffolk Cnty N.Y. Ind. Dev.
Agcy, Continuing Care Ret.
Cmnty. Rev., First Mtge.,
Jefferson Ferry, Ser. A NR 7.25% 11/01/28 $ 1,000 $ 995,370
--------------
33,273,327
----------------------------------------------------------------------------------------
Ohio 4.8%
Cleveland Pub. Pwr. Sys. Rev.,
First Mtge., M.B.I.A. Aaa Zero 11/15/12 1,000 537,120
First Mtge., M.B.I.A. Aaa Zero 11/15/13 1,500 756,435
Franklin Cnty. Hosp. Rev.,
Senior Doctors Hlth. Corp. Baa3 5.60 12/01/28 6,800 4,447,336
Mahoning Valley San. Dist. Wtr.
Rev. NR 7.75 5/15/19 8,000(c) 8,925,280
Ohio St. Air Quality Dev. Auth.
Ref., Amt. Coll. Poll. Ctrl.,
Ser. A Baa3 6.10 8/01/20 8,000 7,527,440
Ohio St. Solid Wste. Rev.,
Cscltd. Proj., A.M.T. NR 8.50 8/01/22 7,000(e) 1,960,000
Rep. Eng. Steels, Inc., A.M.T. NR 9.00 6/01/21 2,250 445,297
Ohio St. Wtr. Dev. Auth. Poll.
Ctrl. Facs.,
First Mtge., Toledo Edison,
A.M.T. Baa3 8.00 10/01/23 5,500 5,854,640
Rev. Baa3 6.10 8/01/20 3,000 2,816,550
Richland Cnty. Hosp. Facs. Rev.,
Ref. Medcentral Hlth. Sys.,
Ser. A A(b) 6.125 11/15/16 1,000 982,950
Ser. B A(b) 6.375 11/15/30 4,000 3,887,960
Stark Cnty. Hlthcare. Facs.
Rev., Rose Lane, Inc. Proj. NR 9.00 12/01/23 6,135(c) 6,825,924
--------------
44,966,932
----------------------------------------------------------------------------------------
Oregon 0.5%
Klamath Falls Elec. Rev. Ref.,
Sr. Lien NR 6.00 1/01/25 5,250 4,740,173
</TABLE>
22 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pennsylvania 6.6%
Berks Cnty. Mun. Auth. Rev.,
Alvernia Coll. Proj. NR 7.75% 11/15/16 $ 5,240 $ 5,546,121
Carbon Cnty. Ind. Dev. Auth.
Res. Rec. Rev. BBB(b) 6.65 5/01/10 10,500 10,666,110
Dauphin Cnty. Gen. Auth. Hosp.
Rev., NW Med. Ctr. Proj. BBB(b) 8.625 10/15/13 5,900 6,438,788
Delaware Cnty. Ind. Dev. Auth.
Rev.,
Ref. Res. Rec. Facs., Ser. A B2 6.00 1/01/09 6,500 6,100,120
Ref. Res. Rec. Facs., Ser. A B2 6.20 7/01/19 8,150 7,357,901
Delaware Valley Reg'l. Fin.
Auth. Local Government Rev. Aaa 5.50 8/01/28 6,150 6,083,826
Philadelphia Auth. Ind. Dev.
Rev. NR 7.75 12/01/17 5,000 5,267,250
Philadelphia Hosps. & Higher
Edl. Facs. Auth. Rev.,
Grad. Hlth. Sys. Ca 7.00 7/01/05 2,500(e) 862,500
Grad. Hlth. Sys. Ca 7.25 7/01/18 3,435(e) 1,185,075
Grad. Hlth. Sys., Ser. A. Ca 6.25 7/01/13 3,050(e) 1,052,250
Somerset Cnty. Hosp. Auth. Rev.,
Hlthcare First Mtge. NR 8.40 6/01/09 1,915 2,010,731
Hlthcare First Mtge. NR 8.50 6/01/24 8,805 9,252,558
--------------
61,823,230
----------------------------------------------------------------------------------------
Rhode Island 1.1%
Rhode Island Redev. Agcy., Ser.
A NR 8.00 9/01/24 10,180 10,480,514
----------------------------------------------------------------------------------------
South Carolina 0.5%
So. Carolina Jobs Econ. Dev.,
First Mtge. Lutheran Homes NR 6.625 5/01/28 4,000 3,681,640
Solid Wste. Recycling Facs.
Rev. NR 9.00 12/01/11 2,000(e) 1,000,000
--------------
4,681,640
----------------------------------------------------------------------------------------
South Dakota 0.9%
Education Lns., Inc. Student Ln.
Rev., A.M.T. A2 5.60 6/01/20 3,300 3,158,463
</TABLE>
See Notes to Financial Statements 23
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
So. Dakota Econ. Dev. Fin.
Auth., Dakota Park, A.M.T. NR 10.25% 1/01/19 $ 4,775 $ 4,847,532
--------------
8,005,995
----------------------------------------------------------------------------------------
Tennessee 3.6%
Memphis Center City Rev. Fin.
Corp., Ser. B NR 6.50 9/01/28 26,000 23,210,980
Rutherford Cnty. Hlth. & Edl.
Facs. Brd.,First Mtge. Rev. NR 9.50 12/01/19 6,300 6,799,905
Shelby Cnty. Hlth. Edl. & Hsg.,
St. Judes Childrens Research AA(b) 5.375 7/01/29 4,000 3,710,920
--------------
33,721,805
----------------------------------------------------------------------------------------
Texas 5.5%
Austin Hsg. Fin. Corp.,
Multifam. Hsg. Rev., Stony
Creek,
Ser. A NR 7.75 11/01/29 9,390 9,368,497
Beaumont Hsg. Fin. Corp., Sngl.
Fam. Mtge. Rev. A1 9.20 3/01/12 895 990,470
Frisco Independent Sch. Dist. Aaa 5.00 8/15/30 5,000 4,513,850
Harris Cnty., Ref. Toll Road
Sub. Lien Aaa 6.00 8/01/14 13,075 14,054,710
Houston Arpt. Sys.,
Rev. Ba1 6.125 7/15/27 5,650 4,987,650
Spec. Facs. Continental
Airlines, Ser. C Ba1 6.125 7/15/27 5,800 5,120,066
Katy Texas Dev. Auth. Rev., Tax
Increment Contract, Ser. B NR 6.00 6/01/18 4,000 3,848,640
Keller Ind. Sch. Dist., Cap.
Apprec. Ref., Ser. A, P.S.F.G. Aaa Zero 8/15/17 4,075 1,599,111
Meadow Parc Dev., Inc. Multifam.
Rev. Hsg. Meadow Proj. NR 6.50 12/01/30 5,000 4,634,700
New Braunfels Ind. Sch. Dist.,
Cap. Apprec., P.S.F.G. Aaa Zero 2/01/12 2,365 1,314,420
Texas Mun. Pwr. Agcy. Rev.,
M.B.I.A. Aaa Zero 9/01/15 3,300 1,471,404
--------------
51,903,518
</TABLE>
24 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Utah 0.1%
Carbon Cnty. Solid Wste. Disp.
Rev. Ref., Laidlaw
Environmental, Ser. A, A.M.T. NR 7.45% 7/01/17 $ 1,000 $ 969,310
Tooele Cnty. Poll. Ctrl. Rev.
Ref., Laidlaw Environmental,
Ser. A, A.M.T. NR 7.55 7/01/27 4,000(e) 151,200
--------------
1,120,510
----------------------------------------------------------------------------------------
Virginia 2.2%
Loudoun Cnty. Ind. Dev. Auth.
Rev. NR 7.125 9/01/15 2,000 2,059,660
Norfolk Redev. & Hsg. Auth.,
Multifam. Rental Hsg. Facs.
Rev., A.M.T. NR 8.00 9/01/26 5,960 5,857,488
Pittsylvania Cnty. Ind. Dev.
Auth. Rev. Multitrade, A.M.T. NR 7.55 1/01/19 9,000 9,153,360
Pocahontas Pkwy. Assoc. Toll Rd.
Rev.,
Cap. Apprec., Ser. B Baa3 Zero 8/15/16 7,000 2,294,740
Cap. Apprec., Ser. C Ba1 Zero 8/15/16 3,300 1,025,640
--------------
20,390,888
----------------------------------------------------------------------------------------
Washington 1.7%
Bellevue Conv. Ctr. Auth.,
King City, Oblig. Rev.,
M.B.I.A. Aaa Zero 2/01/10 870 546,021
King City, Oblig. Rev.,
M.B.I.A. Aaa Zero 2/01/11 1,200 709,728
King City, Oblig. Rev.,
M.B.I.A. Aaa Zero 2/01/12 1,300 723,307
King City, Oblig. Rev.,
M.B.I.A. Aaa Zero 2/01/14 1,385 680,132
Thurston Cnty. Sch. Dist. 333,
F.G.I.C. Aaa Zero 12/01/12 6,830 3,638,614
F.G.I.C. Ser. B Aaa Zero 12/01/11 6,415 3,635,509
Washington St. Pub. Pwr. Supply
Sys. Rev., Nuclear Proj. No. 1,
Ser. B Aa1 7.25 7/01/09 5,000 5,624,900
--------------
15,558,211
</TABLE>
See Notes to Financial Statements 25
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
West Virginia 1.7%
So. Charleston Ind. Dev. Rev.,
Union Carbide Chem. & Plastics
Co., A.M.T. Baa2 8.00% 8/01/20 $ 2,450 $ 2,502,822
Weirton Poll. Ctrl. Rev.,
Weirton Steel Proj. B2 8.625 11/01/14 2,700 2,661,957
West Virginia St. Hosp. Fin.
Auth. Hosp. Rev., Oak Hill
Hospital, Ser. B A2 6.75 9/01/30 7,000 7,122,850
West Virginia St. Pkwys. Econ.
Dev. & Tourism Auth., F.G.I.C. Aaa 7.038 5/16/19 3,250(g) 3,319,063
--------------
15,606,692
----------------------------------------------------------------------------------------
Wisconsin 1.1%
Oconto Falls Cmnty. Dev. Auth.
Dev. Rev., NR 8.125 12/01/22 1,500 1,466,040
Dev. Rev., Oconto Falls Tissue,
Inc. Proj., A.M.T. NR 7.75 12/01/22 8,800 8,368,008
--------------
9,834,048
--------------
Total long-term investments
(cost $946,764,851) 929,223,464
--------------
SHORT-TERM INVESTMENTS 1.0%
----------------------------------------------------------------------------------------
Nevada 0.3%
Clark Cnty. Poll. Ctrl. Rev.
Ref., So. California Edsion
Co., Ser. A VMIG1 4.70 11/01/00 3,000 3,000,000
----------------------------------------------------------------------------------------
Rhode Island 0.1%
Providence Hsg. Auth. Multi
Hsg., Cathedral Square, Ser. A A-1(b) 4.75 11/01/00 1,300 1,300,000
----------------------------------------------------------------------------------------
Texas 0.6%
Brazos River Harbor Nav. Dist.
Rev., Dow Chemical Co., Ser.
93, F.R.D.D., A.M.T. A1 4.80 11/01/00 400 400,000
</TABLE>
26 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund High Income Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gulf Coast Wste. Disp. Auth.,
Ser. 95 F.R.D.D. VMIG1 4.75% 11/01/00 $ 3,000 $ 3,000,000
Poll. Ctrl. And Solid Wste.
Disp. Rev. A1+(b) 4.75 11/01/00 1,900 1,900,000
--------------
5,300,000
--------------
Total short-term investments
(cost $9,600,000) 9,600,000
--------------
Total Investments 100%
(cost $956,364,851; Note 4) 938,823,464
Liabilities in excess of other
assets (177,545)
--------------
Net Assets 100% $ 938,645,919
--------------
--------------
</TABLE>
------------------------------
(a) The following abbreviations are used in portfolio descriptions:
A.M.B.A.C.--American Municipal Bond Assurance Corporation
A.M.T.--Alternative Minimum Tax
F.G.I.C.--Financial Guaranty Insurance Company
F.R.D.D.--Floating Rate (Daily) Demand Note (d)
G.N.M.A.--Government National Mortgage Association
L.P.--Limited Partnership
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 and direct U.S. guaranteed
obligations.
(d) The maturity date shown is the later of the next date on which the security
can be redeemed at par or the next date on which the rate of interest is
adjusted.
(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) Inverse floating rate bond. The coupon is inversely indexed to a floating
rate. The rate shown is the rate at year end.
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 27
<PAGE>
Prudential Municipal Bond Fund High Income Series
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
October 31, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $956,364,851) $ 938,823,464
Cash 219,835
Interest receivable 20,149,949
Receivable for Series shares sold 293,133
Unrealized appreciation on swaps 48,549
Deferred expenses and other assets 18,812
----------------
Total assets 959,553,742
----------------
LIABILITIES
Payable for investments purchased 16,908,410
Payable for Series shares reacquired 1,870,380
Dividends payable 1,305,554
Management fee payable 402,156
Distribution fee payable 289,635
Due to broker - variation margin 34,375
Accrued expenses 97,313
----------------
Total liabilities 20,907,823
----------------
NET ASSETS $ 938,645,919
----------------
----------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 924,322
Paid-in capital in excess of par 1,002,721,772
----------------
1,003,646,094
Undistributed net investment income 486,989
Accumulated net realized loss on investments (48,141,982)
Net unrealized depreciation of investments, futures
contracts and swaps (17,345,182)
----------------
Net assets, October 31, 2000 $ 938,645,919
----------------
----------------
</TABLE>
28 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund High Income Series
Statement of Assets and Liabilities (Unaudited) Con't.
<TABLE>
<CAPTION>
October 31, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share ($535,892,996
/ 52,771,246 shares of beneficial interest issued and
outstanding) $10.16
Maximum sales charge (3% of offering price) .31
----------------
Maximum offering price to public $10.47
----------------
----------------
Class B:
Net asset value, offering price and redemption price per
share ($367,252,372 / 36,164,395 shares of beneficial
interest issued and outstanding) $10.16
----------------
----------------
Class C:
Net asset value and redemption price per share ($27,882,295
/ 2,745,666 shares of beneficial interest issued and
outstanding) $10.16
Sales charge (1% of offering price) .10
----------------
Offering price to public $10.26
----------------
----------------
Class Z:
Net asset value, offering price and redemption price per
share ($7,618,256 / 750,846 shares of beneficial interest
issued and outstanding) $10.15
----------------
----------------
</TABLE>
See Notes to Financial Statements 29
<PAGE>
Prudential Municipal Bond Fund High Income Series
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
October 31, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest $ 33,099,482
----------------
Expenses
Management fee 2,441,716
Distribution fee--Class A 660,793
Distribution fee--Class B 1,028,539
Distribution fee--Class C 108,636
Transfer agent's fees and expenses 180,000
Custodian's fees and expenses 73,000
Reports to shareholders 53,000
Registration fees 40,000
Legal fees 15,000
Trustees' fees and expenses 13,000
Insurance expense 13,000
Audit fees 7,500
Miscellaneous 9,240
----------------
Total expenses 4,643,424
Less: Custodian fee credit (824)
----------------
Net expenses 4,642,600
----------------
Net investment income 28,456,882
----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Investment transactions (11,285,890)
Financial futures contract transactions 207,560
Purchased option (66,274)
Total return swap 275,697
----------------
(10,868,907)
----------------
Net change in unrealized depreciation of:
Investments 4,107,047
Financial futures contracts 360,265
Total return swap 48,549
----------------
4,515,861
----------------
Net gain on investments (6,353,046)
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 22,103,836
----------------
----------------
</TABLE>
30 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund High Income Series
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
October 31, 2000 April 30, 2000
<S> <C> <C> <C>
-----------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 28,456,882 $ 63,425,376
Net realized gain (loss) on investment
transactions (10,868,907) (12,924,212)
Net change in unrealized depreciation of
investments 4,515,861 (91,632,547)
---------------- --------------
Net increase (decrease) in net assets
resulting from operations 22,103,836 (41,131,383)
---------------- --------------
Dividends from net investment income (Note 1)
Class A (15,476,030) (29,722,571)
Class B (11,521,351) (31,310,165)
Class C (775,390) (1,755,953)
Class Z (234,111) (636,687)
---------------- --------------
(28,006,882) (63,425,376)
---------------- --------------
Series share transactions (net of share
conversions) (Note 5):
Net proceeds from shares sold 25,884,172 195,654,738
Net asset value of shares issued in
reinvestment of dividends 12,991,447 29,467,610
Cost of shares reacquired (93,904,613) (332,423,850)
---------------- --------------
Net increase (decrease) in net assets from
Series share transactions (55,028,994) (107,301,502)
---------------- --------------
Total increase (decrease) (60,932,040) (211,858,261)
NET ASSETS
Beginning of year 999,577,959 1,211,436,220
---------------- --------------
End of year(a) $938,645,919 $ 999,577,959
---------------- --------------
---------------- --------------
---------------
(a) Includes undistributed net investment
income of $ 486,989 $ 36,989
---------------- --------------
---------------- --------------
</TABLE>
See Notes to Financial Statements 31
<PAGE>
Prudential Municipal Bond Fund Insured Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 98.4%
----------------------------------------------------------------------------------------
Alabama 3.3%
Jefferson Cnty. Swr. Rev. Wste.,
Ser. A, F.G.I.C. Aaa 5.375% 2/01/27 $ 7,000 $ 6,745,900
Ser. A, F.G.I.C. Aaa 5.75 2/01/38 4,150 4,159,130
--------------
10,905,030
----------------------------------------------------------------------------------------
Alaska 1.6%
Anchorage Hosp. Rev., Sisters of
Providence, A.M.B.A.C. Aaa 7.125 10/01/05 5,000 5,211,150
----------------------------------------------------------------------------------------
Arizona 3.1%
Maricopa Cnty. Ind. Dev. Auth.
Rev.
Hosp. Facs., John C. Lincoln
Hosp., F.S.A. Aaa 7.00 12/01/00 625 626,231
Hosp. Facs., John C. Lincoln
Hosp., F.S.A. Aaa 7.50 12/01/13 1,045(c) 1,068,460
Hosp. Facs., John C. Lincoln
Hosp., F.S.A. Aaa 7.50 12/01/13 1,205 1,231,583
Maricopa Cnty. Unified Sch.
Dist. No. 69, Paradise Valley,
Ser. E, F.G.I.C. Aaa 6.80 7/01/12 3,700 4,302,989
Tucson Arizona Street & Highway
User Rev., Jr. Lien, Ser. E,
F.G.I.C. Aaa 5.00 7/01/17 3,000 2,923,650
--------------
10,152,913
----------------------------------------------------------------------------------------
California 7.0%
Castaic Lake Wtr. Agcy. Rev.
Ctfs. Part.,
A.M.B.A.C. Aaa Zero 8/01/21 10,445 3,260,616
A.M.B.A.C. Aaa Zero 8/01/23 10,445 2,901,725
</TABLE>
32 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund Insured Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contra Costa Wtr. Dist. Wtr.
Rev., Ser. E, A.M.B.A.C. Aaa 6.25% 10/01/12 $ 1,455 $ 1,677,630
Inland Empire Solid Wste. Fin.
Auth., Landfill Impvt. Fin.,
Proj. B, F.S.A. Aaa 6.00 8/01/16 2,000 2,188,780
Roseville Joint Union H.S.
Dist., Ser. B, F.G.I.C. Aaa Zero 8/01/13 2,015 1,056,323
San Diego Cnty. Wtr. Auth. Wtr.
Ctfs. of Part. Rev., F.G.I.C. Aaa 7.24 4/26/06 5,800(d) 6,423,500
So. Orange Cnty. Pub. Fin.
Auth., Foothill Area Proj.,
F.G.I.C. Aaa 8.00 8/15/08 2,000 2,465,800
Victor Valley Element. Sch.
Dist.,
Cap. Apprec., Ser. A, M.B.I.A. Aaa Zero 6/01/17 3,550 1,443,643
Cap. Apprec., Ser. A, M.B.I.A. Aaa Zero 6/01/18 3,700 1,410,625
--------------
22,828,642
----------------------------------------------------------------------------------------
Colorado 1.6%
Denver City & Cnty. Arpt. Rev.,
Ser. C, M.B.I.A. Aaa 5.60 11/15/11 5,000 5,177,950
Jefferson Cnty. Sngl. Fam. Mtge.
Rev., Ser. A, M.B.I.A. Aaa 8.875 10/01/13 150 155,097
--------------
5,333,047
----------------------------------------------------------------------------------------
District of Columbia 4.1%
Dist. of Columbia Hosp. Rev.
Medlantic Hlthcare Grp.,
M.B.I.A. Aaa 5.875 8/15/19 3,500 3,575,250
M.B.I.A. Aaa 5.75 8/15/26 3,000 3,020,280
Dist. of Columbia Ref.,
Ser. A, M.B.I.A. Aaa 6.50 6/01/10 295(c) 332,424
Ser. A, M.B.I.A. Aaa 6.50 6/01/10 5,705 6,363,813
--------------
13,291,767
----------------------------------------------------------------------------------------
Florida 3.8%
Brevard Hlth. Facs. Auth. Rev.,
Holmes Reg'l. Med. Ctr.,
M.B.I.A. Aaa 5.60 10/01/10 6,000 6,240,060
</TABLE>
See Notes to Financial Statements 33
<PAGE>
Prudential Municipal Bond Fund Insured Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Orange Cnty. Hlth. Facs. Auth.
Rev. Hosp.
Preref. Ser. A, M.B.I.A. Aaa 6.25% 10/01/07 $ 2,235(c) $ 2,444,330
Unref. Ser. A, M.B.I.A. Aaa 6.25 10/01/07 925 1,003,671
Palm Beach Cnty. Solid Wste.
Auth. Rev. Ref.,
Ser. A, A.M.B.A.C. Aaa 6.00 10/01/09 295 322,435
Ser. A, A.M.B.A.C. Aaa 6.00 10/01/09 2,205 2,396,681
--------------
12,407,177
----------------------------------------------------------------------------------------
Georgia 1.9%
Atlanta Arpt. Facs. Rev.,
A.M.B.A.C. Aaa 6.50 1/01/10 2,000 2,248,020
Georgia Mun. Elec. Auth., Pwr.
Rev., M.B.I.A. Aaa 6.20 1/01/10 3,495 3,835,133
--------------
6,083,153
----------------------------------------------------------------------------------------
Hawaii 2.9%
Hawaii St. Dept. Bdg. & Fin.
Spl. Purp. Rev., Hawaiian Elec.
Co., Inc. Projs., Ser. C. Aaa 6.20 11/01/29 8,000 8,278,320
Honolulu Hawaii City & Cnty.
Wstewtr. Sys.,
Rev. Cap. Apprec., F.G.I.C. Aaa Zero 7/01/18 1,465 536,659
Rev. Cap. Apprec., F.G.I.C. Aaa Zero 7/01/19 2,305 791,929
--------------
9,606,908
----------------------------------------------------------------------------------------
Idaho 0.6%
Idaho Hsg. & Fin. Assoc. Sngl.
Fam. Mtg. Rev., Ser. E Aaa 5.55 7/01/31 1,835 1,851,919
----------------------------------------------------------------------------------------
Illinois 8.7%
Arlington Hts. Park Dist., Cap.
Apprec., Ser. E, A.M.B.A.C. Aaa Zero 12/01/13 4,175 2,087,166
Chicago Gas Supply Rev.,
A.M.B.A.C. Aaa 6.10 6/01/25 7,400 7,637,910
Chicago Illinois Ser. A,
F.G.I.C. Aaa 6.75 1/01/35 2,000 2,233,380
</TABLE>
34 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund Insured Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Chicago Midway Arpt. Rev., Ser.
B, M.B.I.A., A.M.T. Aaa 5.75% 1/01/22 $ 5,000 $ 4,999,550
Chicago O' Hare Int'l. Arpt.
Rev., Pass. Facs. Chrg., Ser.
A, A.M.B.A.C. Aaa 5.625 1/01/15 2,000 2,040,560
Chicago Skyway Toll Brdg. Rev.,
M.B.I.A. Aaa 5.50 1/01/23 650 636,902
Chicago Wtr. Rev., Cap. Apprec.,
F.G.I.C. Aaa Zero 11/01/16 3,055 1,266,450
Onterie Ctr. Hsg. Fin. Corp.
Mtge. Rev.,
Ser. A, M.B.I.A. Aaa 7.00 7/01/12 1,575 1,648,978
Ser. A, M.B.I.A. Aaa 7.05 7/01/27 5,400 5,631,444
--------------
28,182,340
----------------------------------------------------------------------------------------
Louisiana 1.1%
New Orleans Fin. Auth. Sngl.
Fam. Mtg. Rev., G.N.M.A. Aaa 6.00 12/01/21 1,125 1,135,114
New Orleans, Gen. Oblig., Cap.
Apprec., A.M.B.A.C. Aaa Zero 9/01/09 4,000 2,581,400
--------------
3,716,514
----------------------------------------------------------------------------------------
Maryland 2.0%
Maryland St. Cmnty. Dev. Admin.
Dept. Hsg. & Cmnty. Dev.,
F.H.A. Aa2 6.20 9/01/20 5,000 5,148,650
Prince Georges County Maryland
Hsg. Auth. Sngl. Fam. Mtge.
Rev., G.N.M.A. AAA(b) 6.15 8/01/19 1,250 1,275,200
--------------
6,423,850
----------------------------------------------------------------------------------------
Massachusetts 2.5%
Massachusetts St. Turnpike Auth.
Met. Hwy. Sys. Rev., M.B.I.A. Aaa Zero 1/01/28 3,500 749,700
Massachusetts St. Turnpike Auth.
Met. Hwy. Sys. Rev., A.M.B.A.C. Aaa 5.00 1/01/39 5,000 4,422,350
</TABLE>
See Notes to Financial Statements 35
<PAGE>
Prudential Municipal Bond Fund Insured Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Massachusetts St. Turnpike Auth.
Met., Cap. Apprec., Ser. A,
M.B.I.A. Aaa Zero 1/01/29 $ 15,000 $ 3,031,650
--------------
8,203,700
----------------------------------------------------------------------------------------
Michigan 3.4%
Detroit Michigan Sewage Disp.,
Rev.,
Non-preref. Aaa 6.756% 7/01/23 1,500(d) 1,471,875
Preref. Aaa 6.756 7/01/23 5,000(c)(d) 5,437,500
Saginaw Hosp. Fin. Auth., St.
Luke's Hosp., Ser. C, M.B.I.A. Aaa 6.50 7/01/11 4,000 4,122,080
--------------
11,031,455
----------------------------------------------------------------------------------------
Minnesota 1.8%
Bass Brook Minnesota Poll. Ctrl.
Rev., M.B.I.A. Aaa 6.00 7/01/22 1,600 1,627,680
Minneapolis & St. Paul
Minnesota Met. Arpts. Comm.,
Ser. A, F.G.I.C. Aaa 5.75 1/01/32 4,285 4,342,205
--------------
5,969,885
----------------------------------------------------------------------------------------
Mississippi 0.8%
Harrison Cnty. Wste. Wtr. Mgmt.
Dist. Rev., Wstewtr. Treatmt.,
Facs. Auth., F.G.I.C. Aaa 6.50 2/01/06 2,400 2,459,088
----------------------------------------------------------------------------------------
Missouri 0.5%
Missouri St. Hlth. & Edl. Facs.
Rev.,
SSM Hlthcare, Preref., Ser. AA Aaa 6.25 6/01/16 285(c) 298,153
SSM Hlthcare, Unref., Ser. AA,
M.B.I.A. Aaa 6.25 6/01/16 1,215 1,249,360
--------------
1,547,513
----------------------------------------------------------------------------------------
Montana 0.6%
Forsyth Poll. Ctrl. Rev., Puget
Sound Pwr. & Lt. Co., First
Mtge., Ser. A, A.M.B.A.C. Aaa 7.05 8/01/21 2,000 2,069,020
</TABLE>
36 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund Insured Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New Jersey 8.4%
East Orange Bd. Edl. Ctfs.
Part.,
Cap. Apprec., F.S.A. Aaa Zero 2/01/15 $ 685 $ 317,039
Cap. Apprec., F.S.A. Aaa Zero 2/01/16 650 282,061
Cap. Apprec., F.S.A. Aaa Zero 2/01/18 2,645 1,006,713
Cap. Apprec., F.S.A. Aaa Zero 8/01/18 85 31,459
Jersey City Swr. Auth.,
A.M.B.A.C. Aaa 6.00% 1/01/10 2,585 2,822,691
A.M.B.A.C. Aaa 6.25 1/01/14 4,255 4,741,389
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 4,967,100
New Jersey Econ. Dev. Auth.,
Mkt. Trans. Facs. Rev.,
M.B.I.A. Aaa 5.875 7/01/11 5,900 6,196,062
Mkt. Trans. Facs. Rev., Sr.
Lien, M.B.I.A. Aaa 5.80 7/01/09 3,340 3,513,880
New Jersey St. Edl. Facs. Auth.,
Princeton Univ., Ser. H Aaa 5.00 7/01/27 3,600 3,366,144
--------------
27,244,538
----------------------------------------------------------------------------------------
New York 14.9%
Islip Res. Rec., Ser. B,
A.M.B.A.C. Aaa 7.20 7/01/10 1,750 2,038,312
Long Island Pwr. Auth. New York
Elec. Sys. Rev.,
Cap. Apprec., F.S.A. Aaa Zero 6/01/25 5,000 1,232,050
Cap. Apprec., F.S.A. Aaa Zero 6/01/26 7,500 1,741,350
Cap. Apprec., F.S.A. Aaa Zero 6/01/28 4,735 977,115
Met. Trans. Auth. N.Y. Trans.
Facs. Rev., F.S.A. Aaa 5.75 7/01/11 5,000 5,281,600
New York City Mun. Wtr. Fin.
Auth. Wtr. & Swr. Rev., Ser. B Aa3 6.00 6/15/33 8,000 8,324,480
New York City,
Ser. G, M.B.I.A. Aaa 5.75 2/01/14 3,000 3,116,670
Cap. Apprec., Ser. G, M.B.I.A. Aaa Zero 8/01/07 3,140 2,279,703
</TABLE>
See Notes to Financial Statements 37
<PAGE>
Prudential Municipal Bond Fund Insured Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New York St. Envir. Facs. Corp.,
Poll. Ctrl. Rev. Aaa 5.70% 7/15/12 $ 2,375 $ 2,492,230
Poll. Ctrl. Rev. Aaa 5.75 7/15/13 1,060 1,110,785
Poll. Ctrl. Rev. Aaa 5.80 7/15/14 3,755 3,930,884
New York St. Local Govt.
Assistance Corp., Ref. Ser. E,
M.B.I.A. Aaa 5.00 4/01/21 5,000 4,754,200
Port Auth. New York & New Jersey
Cons., Ser. 99, F.G.I.C. Aaa 5.90 11/01/11 7,665 8,005,096
Suffolk Cnty. Judicial Facs.
Agcy. Serv. Agreement Rev.,
A.M.B.A.C. Aaa 5.75 10/15/12 3,000 3,195,690
--------------
48,480,165
----------------------------------------------------------------------------------------
Oklahoma 2.1%
Norman Reg'l. Hosp. Auth., Rev.
Ref., Ser. A, M.B.I.A. Aaa 5.50 9/01/11 4,110 4,228,122
Oklahoma City Arpt. Trust, Jr.
Lien, Ser. 24, A.M.B.A.C.,
A.M.T. Aaa 5.75 2/01/18 2,620 2,637,475
--------------
6,865,597
----------------------------------------------------------------------------------------
Pennsylvania 2.8%
Delaware Valley Pennsylvania
Reg. Fin. Auth. Govt. Rev.,
A.M.B.A.C. Aaa 5.50 8/01/28 6,000 5,935,440
Philadelphia Mun. Auth. Rev.,
Criminal Justice Ctr., Ser. A,
M.B.I.A. Aaa 6.90 11/15/03 3,000 3,128,640
--------------
9,064,080
----------------------------------------------------------------------------------------
Puerto Rico 2.6%
Puerto Rico Tel. Auth. Rev.,
Ser. I, M.B.I.A., R.I.B.S. Aaa 6.36 1/25/07 4,100(c)(d) 4,310,125
Ser. I, M.B.I.A., R.I.B.S. Aaa 6.307 1/16/15 3,800(c)(d) 4,028,000
--------------
8,338,125
</TABLE>
38 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund Insured Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tennessee 1.7%
Met. Gov't. Nashville & Davidson
Cnty. Wtr. & Swr. Rev.,
A.M.B.A.C., R.I.B.S Aaa 7.577% 1/01/22 $ 5,000(c)(d) $ 5,368,750
----------------------------------------------------------------------------------------
Texas 7.0%
Austin Util. Sys. Rev. Comb.,
Ser. A, M.B.I.A. Aaa 4.875 11/15/10 3,750 3,748,463
Austin Util. Sys. Rev.,
Preref. Cap. Apprec., Ser. A Aaa Zero 5/15/03 725(c) 643,699
Unref. Bal. Cap. Apprec., Ser.
A Aaa Zero 5/15/03 3,275 2,906,300
Corpus Christi Util. Sys. Rev.,
Ser. A Aaa 6.00 7/15/19 3,255 3,400,726
Ser. A Aaa 6.00 7/15/20 3,450 3,601,800
Harris Cnty. Texas, Ref. Toll
Road Sub. Lien, F.G.I.C. Aaa 6.00 8/01/13 1,795 1,935,225
Houston Arpt. Sys. Rev., Aaa 7.20 7/01/13 3,740 4,263,974
Keller Ind. Sch. Dist., P.S.F.G. Aaa Zero 8/15/15 4,945 2,210,217
--------------
22,710,404
----------------------------------------------------------------------------------------
Vermont 1.2%
Vermont Hsg. Fin. Agcy. Sngl.
Fam., Ser. 13A Aaa 5.45 5/01/26 4,000 4,009,040
----------------------------------------------------------------------------------------
Virginia 0.9%
Virginia Beach Hosp. Facs. Rev.,
First Mtge., A.M.B.A.C. Aaa 6.00 2/15/10 1,220 1,317,185
First Mtge., A.M.B.A.C. Aaa 6.00 2/15/13 1,455 1,570,585
--------------
2,887,770
----------------------------------------------------------------------------------------
Washington 4.9%
Washington St. Hlthcare Facs.
Auth. Rev., Yakima Valley
Memorial Hosp. Assoc., AAA(b) 5.25 12/01/20 2,500 2,359,200
</TABLE>
See Notes to Financial Statements 39
<PAGE>
Prudential Municipal Bond Fund Insured Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Washington St. Pub. Pwr. Supply
Sys.,
Nuclear Proj. No. 1, Ser. A,
M.B.I.A. Aaa 5.75% 7/01/10 $ 7,000 $ 7,371,350
Nuclear Proj. No. 2, Ser. A,
M.B.I.A. Aaa Zero 7/01/11 5,210 3,016,329
Nuclear Proj. No. 3, Ser. B,
F.G.I.C. Aaa Zero 7/01/08 4,500 3,074,715
--------------
15,821,594
----------------------------------------------------------------------------------------
West Virginia 0.6%
West Virginia St. Wtr. Dev.
Auth. Rev. Aaa 5.875 7/01/20 1,015 1,027,302
West Virginia Univ. Rev., Aaa Zero 4/01/29 4,300 828,438
--------------
1,855,740
--------------
Total long-term investments
(cost $305,034,058) 319,920,874
--------------
SHORT-TERM INVESTMENTS 1.1%
----------------------------------------------------------------------------------------
Louisiana 0.7%
Ascension Parish Louisiana Rev., P1 4.75 11/01/00 2,100 2,100,000
Calcasieu Parish Ind. Dev. Brd.,
Ser. 96 F.R.D.D., A.M.T. VMIG1 4.80 11/01/00 100 100,000
--------------
2,200,000
----------------------------------------------------------------------------------------
Ohio 0.3%
Ohio Hsg. Fin. Agcy. Mtg. Rev.,
Ser. A VMIG1 4.53 11/01/00 1,000 1,000,000
</TABLE>
40 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund Insured Series
Portfolio of Investments as of October 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Interest Maturity Amount Value
Description (a) Rating Rate Date (000) (Note 1)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Virginia 0.1%
Campbell Cnty. Ind. Dev. Auth.
Rev., Ser. 90A F.R.D.D., A.M.T. Aa2 4.75% 11/01/00 $ 200 $ 200,000
--------------
Total short-term investments
(cost $3,400,000) 3,400,000
--------------
Total Investments 99.5%
(cost $308,434,058; Note 4) 323,320,874
Other assets in excess of
liabilities 0.5% 1,653,428
--------------
Net Assets 100% $ 324,974,302
--------------
--------------
</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 (e)
F.S.A.--Financial Security Assurance
G.N.M.A.--Government National Mortgage Association
M.B.I.A.--Municipal Bond Insurance Association
P.S.F.G.--Public School Fund Guaranty
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 year end.
(e) 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 41
<PAGE>
Prudential Municipal Bond Fund Insured Series
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
October 31, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $308,434,058) $323,320,874
Cash 36,917
Interest receivable 4,564,013
Receivable for Series shares sold 11,763
Unrealized appreciation on swaps 9,710
Deferred expenses and other assets 9,310
----------------
Total assets 327,952,587
----------------
LIABILITIES
Payable for investments purchased 1,855,210
Payable for Series shares reacquired 398,617
Dividends payable 369,871
Management fee payable 137,559
Accrued expenses 133,059
Distribution fee payable 83,969
----------------
Total liabilities 2,978,285
----------------
NET ASSETS $324,974,302
----------------
----------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 302,693
Paid-in capital in excess of par 315,024,274
----------------
315,326,967
Undistributed net investment income 162,490
Accumulated net realized loss on investments (5,411,681)
Net unrealized appreciation on investments and swaps 14,896,526
----------------
Net assets, October 31, 2000 $324,974,302
----------------
----------------
</TABLE>
42 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund Insured Series
Statement of Assets and Liabilities (Unaudited) Con't.
<TABLE>
<CAPTION>
October 31, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share ($253,060,570
/ 23,576,060 shares of beneficial interest issued and
outstanding) $10.73
Maximum sales charge (3% of offering price) .33
----------------
Maximum offering price to public $11.06
----------------
----------------
Class B:
Net asset value, offering price and redemption price per
share ($67,205,907 / 6,254,893 shares of beneficial
interest issued and outstanding) $10.74
----------------
----------------
Class C:
Net asset value and redemption price per share ($3,131,902 /
291,484 shares of beneficial interest issued and
outstanding) $10.74
Sales charge (1% of offering price) .11
----------------
Offering price to public $10.85
----------------
----------------
Class Z:
Net asset value, offering price and redemption price per
share ($1,575,923 / 146,855 shares of beneficial interest
issued and outstanding) $10.73
----------------
----------------
</TABLE>
See Notes to Financial Statements 43
<PAGE>
Prudential Municipal Bond Fund Insured Series
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
October 31, 2000
<S> <C> <C>
----------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest $ 9,422,462
----------------
Expenses
Management fee 829,360
Distribution fee--Class A 310,147
Distribution fee--Class B 197,044
Distribution fee--Class C 12,400
Transfer agent's fees and expenses 104,000
Custodian's fees and expenses 51,000
Registration fees 25,000
Reports to shareholders 20,000
Legal fees 20,000
Audit fees 8,000
Trustees' fees and expenses 8,000
Insurance expense 2,000
Miscellaneous 2,649
----------------
Total expenses 1,589,600
Less: Custodian fee credit (1,360)
----------------
Net expenses 1,588,240
----------------
Net investment income 7,834,222
----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on:
Investment transactions (800,142)
Purchased option 5,683
Total return swap 85,846
----------------
(708,613)
----------------
Net change in unrealized appreciation on:
Investments 11,130,620
Total return swap 9,710
----------------
11,140,330
----------------
Net gain on investments 10,431,717
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 18,265,939
----------------
----------------
</TABLE>
44 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund Insured Series
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
October 31, 2000 April 30, 2000
<S> <C> <C> <C>
------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 7,834,222 $ 17,793,706
Net realized gain (loss) on investment
transactions (708,613) (4,065,725)
Net change in unrealized appreciation
(depreciation) of investments 11,140,330 (25,388,591)
---------------- --------------
Net increase (decrease) in net assets
resulting from operations 18,265,939 (11,660,610)
---------------- --------------
Dividends and distributions (Note 1)
Dividends from net investment income
Class A (5,938,721) (11,662,405)
Class B (1,786,618) (5,906,384)
Class C (71,052) (128,146)
Class Z (37,831) (96,771)
---------------- --------------
(7,834,222) (17,793,706)
---------------- --------------
Series share transactions (net of share
conversions)
(Note 5):
Net proceeds from shares sold 8,153,500 57,490,106
Net asset value of shares issued in
reinvestment of dividends and
distributions 4,241,780 10,004,943
Cost of shares reacquired (32,908,631) (136,825,105)
---------------- --------------
Net decrease in net assets from Series share
transactions (20,513,351) (69,330,056)
---------------- --------------
Total decrease (10,081,634) (98,784,372)
NET ASSETS
Beginning of year 335,055,936 433,840,308
---------------- --------------
End of year(a) $324,974,302 $ 335,055,936
---------------- --------------
---------------- --------------
---------------
(a) Includes undistributed net investment
income of $ 162,490 $ 162,490
---------------- --------------
---------------- --------------
</TABLE>
See Notes to Financial Statements 45
<PAGE>
Prudential Municipal Bond Fund
Notes to Financial Statements (Unaudited)
Prudential Municipal Bond Fund (the 'Fund') is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Fund was organized as an unincorporated business trust in
Massachusetts on November 3, 1986 and consists of 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.
46
<PAGE>
Prudential Municipal Bond Fund
Notes to Financial Statements (Unaudited) Cont'd.
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.
Inverse Floaters: The Series invests in variable rate securities
commonly called 'inverse floaters'. The interest rates on these securities have
an inverse relationship to the interest rate of other securities or the value of
an index. Changes in interest rate on the other security or index inversely
affect the rate paid on the inverse floater, and the inverse floater's price
will be more volatile than that of a fixed-rate bond. Additionally, some of
these securities contain a 'leverage factor' whereby the interest rate moves
inversely by a 'factor' to the benchmark rate. Certain interest rate movements
and other market factors can substantially affect the liquidity of inverse
floating rate notes.
Total Return Swap Transactions: The Series may enter into total return
swap transactions. In a swap transaction, the Series and another party 'trade'
income streams. The swap is done to preserve a return or spread on a particular
investment or portion of a portfolio or to protect against any increase in the
price of securities the Series anticipates purchasing at a later date.
During the term of the swap, changes in the value of the swap are
recognized as unrealized gains or losses by 'marking-to-market' to reflect the
market value of the swap. When the swap is terminated, the Fund will record a
realized gain or loss equal to the difference between the proceeds from (or cost
of) the closing transaction and the Fund's basis in the contract, if any.
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
47
<PAGE>
Prudential Municipal Bond Fund
Notes to Financial Statements (Unaudited) Cont'd.
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. Gain or loss on written options is presented separately as net
realized gain (loss) on written option transactions.
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. The Series Fund expenses are allocated to the
respective Portfolios on the basis of relative net assets except for Portfolio
specific expenses which are attributable directly at a Portfolio or Class level.
For Portfolios with multiple classes and shares, net investment income,
other than administration and distribution fees, and unrealized and realized
gains or losses are allocated daily to each class of shares based upon the
relative proportion of net assets of each class at the beginning of the day.
Federal Income Taxes: For federal income tax purposes, each series in
the Fund is treated as a separate tax paying entity. It is the intent of each
series to continue to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all net income to
shareholders. For this reason 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
48
<PAGE>
Prudential Municipal Bond Fund
Notes to Financial Statements (Unaudited) Cont'd.
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
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. 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 period ended October 31, 2000, 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 $59,400 ($40,900-Class A; $18,500-Class C) and $22,600
($18,100-Class A; $4,500-Class C), respectively, in front-end sales charges
during the period ended October 31, 2000. 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 High Income Series and Insured Series that for the
year ended April 30, 2000, it received approximately $428,800 ($413,500-Class B;
$15,300-Class C) and $69,400 ($67,900-Class B; $1,500-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.
The Fund, along with other affiliated registered investment companies (the
'Funds'), entered into a syndicated credit agreement ('SCA') with an
unaffiliated
49
<PAGE>
Prudential Municipal Bond Fund
Notes to Financial Statements (Unaudited) Cont'd.
lender. The maximum commitment under the SCA is $1 billion. Interest on any such
borrowings will be at market rates. The Funds pay a commitment fee of .080 of 1%
of the unused portion of the credit facility. The commitment fee is accrued and
paid quarterly on a pro rata basis by the Funds. The expiration date of the SCA
is March 9, 2001. Prior to March 9, 2000, the commitment fee was .065 of 1% of
the unused portion of the credit facility. The Fund did not borrow any amounts
pursuant to the SCA during the period ended October 31, 2000. The purpose of the
agreement 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 period ended October 31, 2000,
the Fund incurred fees of approximately $231,700 ($156,700-High Income Series;
$75,000-Insured Series) for the services of PMFS. As of October 31, 2000,
approximately $36,900 ($25,200-High Income Series; $11,700-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 period ended October 31, 2000, were as follows:
<TABLE>
<CAPTION>
Series Purchases Sales
------------------------------------------------------- ------------ ------------
<S> <C> <C>
High Income $220,553,903 $273,003,926
Insured 82,091,044 101,033,815
</TABLE>
At October 31, 2000, the High Income Series purchased 100 U.S. Treasury
bond futures expiring on December 22, 2000. The values of these financial
futures contracts at October 31, 2000 were as follows:
<TABLE>
<CAPTION>
High Income
Series
-----------
<S> <C>
Value at cost $ 9,808,594
Value at October 31, 2000 9,956,250
-----------
Unrealized appreciation $ 147,656
-----------
-----------
</TABLE>
On September 7, 2000, the Fund entered into a total return swap with
Morgan Stanley Capital Services, Inc. Payments on the swap agreement take place
on termination date. The swap terminated on November 8, 2000. The value of the
swap agreement is based on the Municipal Market Data's 10 year 'AAA' General
Obligation Yield Curve. The payment amount is based on a formula used to
calculate a total return amount. If the calculation of the total return amount
is negative, the Fund receives the absolute value of the total return
calculation. If the calculation of the total return
50
<PAGE>
Prudential Municipal Bond Fund
Notes to Financial Statements (Unaudited) Cont'd.
amount is positive, the Fund pays the value of the total return amount. At
October 31, 2000, the unrealized appreciation on the swap agreement for The High
Income Series and The Insured Series was $48,549 and $9,710 respectively.
The federal income tax basis of the Fund's investments, at October 31,
2000 was $957,064,851 for High Income Series and $308,434,058 for Insured Series
and, accordingly, net unrealized appreciation (depreciation) 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 $ (18,241,387) $41,364,930 $59,606,317
Insured 14,886,816 15,317,761 430,945
</TABLE>
The High Income Series has a net capital loss carryforward as of April 30,
2000 of approximately $26,590,000, 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, $3,137,000 expires in 2007 and $5,906,000
expires in 2008. 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.
The Insured Series has a capital loss carryforward as of April 30, 2000 of
approximately $2,919,000, which expires in 2008. No capital gains distribution
is expected to be paid to shareholders until net gains have been realized in
excess of this amount.
In addition, the High Income Series and Insured Series elected to treat
net realized capital losses of approximately $9,439,586 and $1,784,353,
respectively incurred in the year ended April 30, 2000 as having been incurred
in the current fiscal year.
Note 5. Capital
The High Income Series and Insured Series offer 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.
51
<PAGE>
Prudential Municipal Bond Fund
Notes to Financial Statements (Unaudited) Cont'd.
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, 2000 Shares Amount Shares Amount
--------------------------- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares issued 705,400 $ 7,195,863 313,287 $ 3,320,203
Shares issued in
reinvestment of
dividends and
distributions 754,980 7,692,228 299,055 3,165,325
Shares reacquired (5,010,552) (51,036,619) (2,239,522) (23,636,862)
----------- ------------- ---------- ------------
Net increase (decrease) in
shares outstanding
before conversion (3,550,172) (36,148,528) (1,627,180) (17,151,334)
Shares issued upon
conversion from Class B 7,004,975 71,370,393 2,248,577 23,813,226
----------- ------------- ---------- ------------
Net increase (decrease) in
shares outstanding 3,454,803 $ 35,221,865 621,397 $ 6,661,892
----------- ------------- ---------- ------------
----------- ------------- ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
High Income Series Insured Series
Class A Class A
----------------------------- ---------------------------
Year Ended April 30, 2000 Shares Amount Shares Amount
--------------------------- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares issued 11,155,788 $ 118,089,368 4,272,410 $ 45,211,746
Shares issued in
reinvestment of
dividends and
distributions 1,400,233 14,812,765 614,176 6,469,154
Shares reacquired (15,491,720) (163,745,706) (6,006,710) (63,240,650)
----------- ------------- ---------- ------------
Net increase (decrease) in
shares outstanding
before conversion (2,935,699) (30,843,573) (1,120,124) (11,559,750)
Shares issued upon
conversion from Class B 6,311,283 66,835,489 1,592,700 16,791,582
----------- ------------- ---------- ------------
Net increase (decrease) in
shares outstanding 3,375,584 $ 35,991,916 472,576 $ 5,231,832
----------- ------------- ---------- ------------
----------- ------------- ---------- ------------
</TABLE>
52
<PAGE>
Prudential Municipal Bond Fund
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
High Income Series Insured Series
Class B Class B
Six Months Ended October ----------------------------- ---------------------------
31, 2000 Shares Amount Shares Amount
--------------------------- ----------- ------------- ---------- ------------
Shares issued 1,499,034 $ 15,278,205 332,784 $ 3,522,736
<S> <C> <C> <C> <C>
Shares issued in
reinvestment of
dividends and
distributions 463,485 4,720,143 96,293 1,018,188
Shares reacquired (3,607,989) (36,748,200) (766,075) (8,080,636)
----------- ------------- ---------- ------------
Net increase (decrease) in
shares outstanding
before conversion (1,645,470) (16,749,852) (336,998) (3,539,712)
Shares reacquired upon
conversion to Class A (7,004,975) (71,370,393) (2,245,503) (23,813,226)
----------- ------------- ---------- ------------
Net increase (decrease) in
shares outstanding (8,650,445) $ (88,120,245) (2,582,501) $(27,352,938)
----------- ------------- ---------- ------------
----------- ------------- ---------- ------------
<CAPTION>
High Income Series Insured Series
Class B Class B
----------------------------- ---------------------------
Year Ended April 30, 2000 Shares Amount Shares Amount
--------------------------- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares issued 5,702,990 $ 60,755,141 876,277 $ 9,261,018
Shares issued in
reinvestment of
dividends and
distributions 1,237,118 13,119,382 319,614 3,379,000
Shares reacquired (13,781,073) (145,504,647) (6,454,293) (68,181,046)
----------- ------------- ---------- ------------
Net increase (decrease) in
shares outstanding
before conversion (6,840,965) (71,630,124) (5,258,402) (55,541,028)
Shares reacquired upon
conversion to Class A (6,312,429) (66,835,489) (1,590,681) (16,791,582)
----------- ------------- ---------- ------------
Net increase (decrease) in
shares outstanding (13,153,394) $(138,465,613) (6,849,083) $(72,332,610)
----------- ------------- ---------- ------------
----------- ------------- ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
High Income Series Insured Series
Class C Class C
Six Months Ended October ----------------------------- ---------------------------
31, 2000 Shares Amount Shares Amount
--------------------------- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares issued 199,750 $ 2,038,581 94,912 $ 985,404
Shares issued in
reinvestment of
dividends and
distributions 42,551 433,396 3,728 39,514
Shares reacquired (439,120) (4,465,413) (90,426) (947,659)
----------- ------------- ---------- ------------
Net increase (decrease) in
shares outstanding (196,819) $ (1,993,436) 8,214 $ 77,259
----------- ------------- ---------- ------------
----------- ------------- ---------- ------------
</TABLE>
53
<PAGE>
Prudential Municipal Bond Fund
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
High Income Series Insured Series
Class C Class C
----------------------------- ---------------------------
Year Ended April 30, 2000 Shares Amount Shares Amount
--------------------------- ----------- ------------- ---------- ------------
Shares issued 1,049,114 $ 11,208,188 99,569 $ 1,066,589
<S> <C> <C> <C> <C>
Shares issued in
reinvestment of
dividends and
distributions 101,234 1,072,623 7,094 74,764
Shares reacquired (1,146,727) (12,092,217) (65,397) (684,934)
----------- ------------- ---------- ------------
Net increase (decrease) in
shares outstanding 3,621 $ 188,594 41,266 $ 456,419
----------- ------------- ---------- ------------
----------- ------------- ---------- ------------
<CAPTION>
High Income Series Insured Series
Class Z Class Z
Six Months Ended October ----------------------------- ---------------------------
31, 2000 Shares Amount Shares Amount
--------------------------- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares issued 134,616 $ 1,371,523 30,864 $ 325,157
Shares issued in
reinvestment of
dividends and
distributions 14,313 145,680 1,778 18,753
Shares reacquired (162,440) (1,654,381) (23,229) (243,474)
----------- ------------- ---------- ------------
Net increase (decrease) in
shares outstanding (13,511) $ (137,178) 9,413 $ 100,436
----------- ------------- ---------- ------------
----------- ------------- ---------- ------------
<CAPTION>
High Income Series Insured Series
Class Z Class Z
----------------------------- ---------------------------
Year Ended April 30, 2000 Shares Amount Shares Amount
--------------------------- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares issued 528,208 $ 5,602,041 186,798 $ 1,950,753
Shares issued in
reinvestment of
dividends and
distributions 43,432 462,840 7,710 82,025
Shares reacquired (1,042,909) (11,081,280) (442,855) (4,718,475)
----------- ------------- ---------- ------------
Net increase (decrease) in
shares outstanding (471,269) $ (5,016,399) (248,347) $ (2,685,697)
----------- ------------- ---------- ------------
----------- ------------- ---------- ------------
</TABLE>
54
<PAGE>
Prudential Municipal Bond Fund
Portfolio of Investments as of October 31, 2000 Cont'd.
Financial
Highlights
<PAGE>
Prudential Municipal Bond Fund High Income Series
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Class A
<S> <C> <C>
-----------------
<CAPTION>
Six Months Ended
October 31, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.22
-----------------
Income from investment operations
Net investment income .30
Net realized and unrealized gain (loss) on investment
transactions (.06)
-----------------
Total from investment operations .24
-----------------
Less distributions
Dividends from net investment income (.30)
-----------------
Net asset value, end of period $ 10.16
-----------------
-----------------
TOTAL RETURN(a): 2.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 535,893
Average net assets (000) $ 524,325
Ratios to average net assets:
Expenses, including distribution fees .83%(c)
Expenses, excluding distribution fees .58%(c)
Net investment income 5.86%(c)
For Class A, B, C and Z shares:
Portfolio turnover rate 23%
</TABLE>
------------------------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each 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.
56 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund High Income Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------------------------------------------
Year Ended April 30,
---------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11.21 $ 11.31 $ 10.84 $ 10.70 $ 10.72
---------------- ---------------- ---------------- ---------------- ----------------
0.63 .63(b) .67(b) .70(b) .72(b)
(0.99) (.10) .47 .14 (.02)
---------------- ---------------- ---------------- ---------------- ----------------
(0.36) .53 1.14 .84 .70
---------------- ---------------- ---------------- ---------------- ----------------
(0.63) (.63) (.67) (.70) (.72)
---------------- ---------------- ---------------- ---------------- ----------------
$ 10.22 $ 11.21 $ 11.31 $ 10.84 $ 10.70
---------------- ---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ---------------- ----------------
(3.31)% 4.96% 10.80% 8.03% 6.55%
$503,874 $514,952 $421,504 $334,062 $223,073
$506,888 $474,901 $381,735 $294,940 $162,329
.82% .66%(b) .62%(b) 0.64%(b) 0.64%(b)
.57% .51%(b) .52%(b) 0.54%(b) 0.54%(b)
5.86% 5.73%(b) 6.03%(b) 6.44%(b) 6.58%(b)
27% 16% 13% 26% 35%
</TABLE>
See Notes to Financial Statements 57
<PAGE>
Prudential Municipal Bond Fund High Income Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
<S> <C> <C>
-----------------
<CAPTION>
Six Months Ended
October 31, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.22
-----------------
Income from investment operations
Net investment income .29
Net realized and unrealized gain (loss) on investment
transactions (.06)
-----------------
Total from investment operations (.23)
-----------------
Less distributions
Dividends from net investment income (.29)
-----------------
Net asset value, end of period $ 10.16
-----------------
-----------------
TOTAL RETURN(a): 2.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 367,252
Average net assets (000) $ 408,062
Ratios to average net assets:
Expenses, including distribution fees 1.08%(c)
Expenses, excluding distribution fees .58%(c)
Net investment income 5.60%(c)
</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.
58 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund High Income Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------------------------------------------------
Year Ended April 30,
---------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11.21 $ 11.31 $ 10.84 $ 10.69 $ 10.72
---------------- ---------------- ---------------- ---------------- ----------------
0.60 .59(b) .63(b) .66(b) .68(b)
(0.99) (.10) .47 .15 (.03)
---------------- ---------------- ---------------- ---------------- ----------------
(0.39) .49 1.10 .81 .65
---------------- ---------------- ---------------- ---------------- ----------------
(0.60) (.59) (.63) (.66) (.68)
---------------- ---------------- ---------------- ---------------- ----------------
$ 10.22 $ 11.21 $ 11.31 $ 10.84 $ 10.69
---------------- ---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ---------------- ----------------
(3.55)% 4.59% 10.36% 7.71% 6.12%
$457,841 $649,706 $669,223 $665,525 $799,048
$559,879 $666,885 $669,132 $725,305 $900,115
1.07% 1.01%(b) 1.02%(b) 1.04%(b) 1.04%(b)
.57% .51%(b) .52%(b) 0.54%(b) 0.54%(b)
5.59% 5.38%(b) 5.63%(b) 6.05%(b) 6.19%(b)
</TABLE>
See Notes to Financial Statements 59
<PAGE>
Prudential Municipal Bond Fund High Income Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
-----------------
Six Months Ended
October 31, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.22
--------
Income from investment operations
Net investment income .27
Net realized and unrealized gain (loss) on investment
transactions (.06)
--------
Total from investment operations .21
--------
Less distributions
Dividends from net investment income (.27)
--------
Net asset value, end of period $ 10.16
--------
--------
TOTAL RETURN(a): 2.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $27,882
Average net assets (000) $28,733
Ratios to average net assets:
Expenses, including distribution fees 1.33%(c)
Expenses, excluding distribution fees .58%(c)
Net investment income 5.35%(c)
</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.
60 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund High Income Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
---------------------------------------------------------------------------------------------------------
Year Ended April 30,
---------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11.21 $ 11.31 $ 10.84 $10.69 $10.72
-------- -------- -------- ------- -------
0.57 .57(b) .61(b) .63(b) .65(b)
(0.99) (.10) .47 .15 (.03)
-------- -------- -------- ------- -------
(0.42) .47 1.08 .78 .62
-------- -------- -------- ------- -------
(0.57) (.57) (.61) (.63) (.65)
-------- -------- -------- ------- -------
$ 10.22 $ 11.21 $ 11.31 $10.84 $10.69
-------- -------- -------- ------- -------
-------- -------- -------- ------- -------
(3.79)% 4.33% 10.09% 7.44% 5.86%
$ 30,061 $ 32,939 $ 20,554 $9,563 $6,471
$ 32,762 $ 26,114 $ 14,932 $8,060 $5,608
1.32% 1.26%(b) 1.27%(b) 1.29%(b) 1.29%(b)
.57% .51%(b) .52%(b) 0.54%(b) 0.54%(b)
5.36% 5.15%(b) 5.39%(b) 5.80%(b) 5.93%(b)
</TABLE>
See Notes to Financial Statements 61
<PAGE>
Prudential Municipal Bond Fund High Income Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
-----------------
Six Months Ended
October 31, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.21
-------
Income from investment operations
Net investment income .31
Net realized and unrealized gain (loss) on investment
transactions (.06)
-------
Total from investment operations .25
-------
Less distributions
Dividends from net investment income (.31)
-------
Net asset value, end of period $ 10.15
-------
-------
TOTAL RETURN(a): 2.52%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 7,618
Average net assets (000) $ 7,605
Ratios to average net assets:
Expenses, including distribution fees .58%(d)
Expenses, excluding distribution fees .58%(d)
Net investment income 6.11%(d)
</TABLE>
------------------------------
(a) 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.
62 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund High Income Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
---------------------------------------------------------------
Year Ended April 30, September 16, 1996(c)
------------------------------- Through
2000 1999 1998 April 30, 1997
---------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 11.20 $ 11.30 $ 10.83 $ 10.79
------- ------- ------- -------
.65 .65(b) .68(b) .45(b)
(.99) (.10) .47 .04
------- ------- ------- -------
(.34) .55 1.15 .49
------- ------- ------- -------
(.65) (.65) (.68) (.45)
------- ------- ------- -------
$ 10.21 $ 11.20 $ 11.30 $ 10.83
------- ------- ------- -------
------- ------- ------- -------
(3.07)% 5.11% 10.91% 4.36%
$ 7,802 $13,839 $ 9,919 $ 2,719
$10,493 $13,648 $ 6,064 $ 704
.57% .51%(b) .52%(b) 0.54%(b)(d)
.57% .51%(b) .52%(b) 0.54%(b)(d)
6.07% 5.89%(b) 6.14%(b) 6.55%(b)(d)
</TABLE>
See Notes to Financial Statements 63
<PAGE>
Prudential Municipal Bond Fund Insured Series
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Class A
-----------------
Six Months Ended
October 31, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.40
-----------------
Income from investment operations
Net investment income .25
Net realized and unrealized gain (loss) on investment
transactions .33
-----------------
Total from investment operations .58
-----------------
Less distributions
Dividends from net investment income (.25)
Distributions in excess of net investment income --
Distributions from capital gains --
-----------------
Total distributions (.25)
-----------------
Net asset value, end of period $ 10.73
-----------------
-----------------
TOTAL RETURN(a): 5.66%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 253,061
Average net assets (000) $ 246,095
Ratios to average net assets:
Expenses, including distribution fees 0.89%(d)
Expenses, excluding distribution fees 0.64%(d)
Net investment income 4.79%(d)
For Class A, B, C and Z shares:
Portfolio turnover rate 25%
</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.
64 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund Insured Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------------------------------------------
Year Ended April 30,
---------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11.18 $ 11.05 $ 10.90 $ 10.94 $ 10.83
---------------- ---------------- ---------------- ---------------- ----------------
.51 .53 .53(b) .55(b) .58(b)
(.78) .23 .40 .08 .11
---------------- ---------------- ---------------- ---------------- ----------------
(.27) .76 .93 .63 .69
---------------- ---------------- ---------------- ---------------- ----------------
(.51) (.53) (.53) (.55) (.58)
-- (.01) --(c) (.01) --
-- (.09) (.25) (.11) --
---------------- ---------------- ---------------- ---------------- ----------------
(.51) (.63) (.78) (.67) (.58)
---------------- ---------------- ---------------- ---------------- ----------------
$ 10.40 $ 11.18 $ 11.05 $ 10.90 $ 10.94
---------------- ---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ---------------- ----------------
(2.38)% 6.88% 8.67% 5.74% 6.47%
$238,690 $251,300 $224,409 $208,411 $139,548
$243,756 $240,652 $222,115 $187,371 $102,456
.88% 0.75% 0.69%(b) 0.68%(b) 0.68%(b)
.63% 0.60% 0.59%(b) 0.58%(b) 0.58%(b)
4.78% 4.61% 4.75%(b) 4.95%(b) 5.20%(b)
26% 15% 85% 110% 68%
</TABLE>
See Notes to Financial Statements 65
<PAGE>
Prudential Municipal Bond Fund Insured Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
-----------------
Six Months Ended
October 31, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.41
--------
Income from investment operations
Net investment income .24
Net realized and unrealized gain (loss) on investment
transactions .33
--------
Total from investment operations .57
--------
Less distributions
Dividends from net investment income (.24)
Distributions in excess of net investment income --
Distributions from capital gains --
--------
Total distributions (.24)
--------
Net asset value, end of period $ 10.74
--------
--------
TOTAL RETURN(a): 5.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $67,206
Average net assets (000) $78,175
Ratios to average net assets:
Expenses, including distribution fees 1.14%(d)
Expenses, excluding distribution fees 0.64%(d)
Net investment income 4.53%(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) Less than $.005 per share.
(d) Annualized.
66 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund Insured Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------------------------------------------------
Year Ended April 30,
---------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11.19 $ 11.06 $ 10.91 $ 10.95 $ 10.84
---------------- ---------------- ---------------- ---------------- ----------------
.48 .48 .49(b) .50(b) .54(b)
(.78) .23 .40 .08 .11
---------------- ---------------- ---------------- ---------------- ----------------
(.30) .71 .89 .58 .65
---------------- ---------------- ---------------- ---------------- ----------------
(.48) (.48) (.49) (.50) (.54)
-- (.01) --(c) (.01) --
-- (.09) (.25) (.11) --
---------------- ---------------- ---------------- ---------------- ----------------
(.48) (.58) (.74) (.62) (.54)
---------------- ---------------- ---------------- ---------------- ----------------
$ 10.41 $ 11.19 $ 11.06 $ 10.91 $ 10.95
---------------- ---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ---------------- ----------------
(2.62)% 6.50% 8.23% 5.32% 6.04%
$ 91,989 $175,520 $236,370 $298,005 $443,391
$131,052 $208,775 $270,553 $365,891 $524,452
1.13% 1.10% 1.09%(b) 1.08%(b) 1.08%(b)
.63% 0.60% 0.59%(b) 0.58%(b) 0.58%(b)
4.51% 4.25% 4.35%(b) 4.54%(b) 4.80%(b)
</TABLE>
See Notes to Financial Statements 67
<PAGE>
Prudential Municipal Bond Fund Insured Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
-----------------
Six Months Ended
October 31, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.41
-------
Income from investment operations
Net investment income .23
Net realized and unrealized gain (loss) on investment
transactions .33
-------
Total from investment operations .56
-------
Less distributions
Dividends from net investment income (.23)
Distributions in excess of net investment income --
Distributions from capital gains --
-------
Total distributions (.23)
-------
Net asset value, end of period $ 10.74
-------
-------
TOTAL RETURN(a): 5.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 3,132
Average net assets (000) $ 3,280
Ratios to average net assets:
Expenses, including distribution fees 1.39%(d)
Expenses, excluding distribution fees 0.64%(d)
Net investment income 4.30%(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) Less than $.005 per share.
(d) Annualized.
68 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund Insured Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
---------------------------------------------------------------------------------------------------------
Year Ended April 30,
---------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11.19 $ 11.06 $ 10.91 $10.95 $10.84
-------- -------- -------- ------- -------
.46 .45 .46(b) .48(b) .51(b)
(.78) .23 .40 .08 .11
-------- -------- -------- ------- -------
(.32) .68 .86 .56 .62
-------- -------- -------- ------- -------
(.46) (.45) (.46) (.48) (.51)
-- (.01) --(c) (.01) --
-- (.09) (.25) (.11) --
-------- -------- -------- ------- -------
(.46) (.55) (.71) (.60) (.51)
-------- -------- -------- ------- -------
$ 10.41 $ 11.19 $ 11.06 $10.91 $10.95
-------- -------- -------- ------- -------
-------- -------- -------- ------- -------
(2.86)% 6.24% 7.96% 5.06% 5.78%
$ 2,949 $ 2,708 $ 1,509 $ 888 $1,137
$ 2,988 $ 1,856 $ 1,142 $ 973 $ 827
1.38% 1.35% 1.34%(b) 1.33%(b) 1.33%(b)
.63% 0.60% 0.59%(b) 0.58%(b) 0.58%(b)
4.29% 4.03% 4.11%(b) 4.29%(b) 4.56%(b)
</TABLE>
See Notes to Financial Statements 69
<PAGE>
Prudential Municipal Bond Fund Insured Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
-----------------
Six Months Ended
October 31, 2000
----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.40
-------
Income from investment operations
Net investment income .27
Net realized and unrealized gain (loss) on investment
transactions .33
-------
Total from investment operations .60
-------
Less distributions
Dividends from net investment income (.27)
Distributions in excess of net investment income --
Distributions from capital gains --
-------
Total distributions (.27)
-------
Net asset value, end of period $ 10.73
-------
-------
TOTAL RETURN(a): 5.79%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 1,576
Average net assets (000) $ 1,490
Ratios to average net assets:
Expenses, including distribution fees 0.64%(d)
Expenses, excluding distribution fees 0.64%(d)
Net investment income 5.04%(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.
70 See Notes to Financial Statements
<PAGE>
Prudential Municipal Bond Fund Insured Series
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
------------------------------------------------------------
Year Ended April 30, September 16, 1996(c)
---------------------------- Through
2000 1999 1998 April 30, 1997
------------------------------------------------------------
<S> <C> <C> <C> <C>
$11.18 $11.05 $10.91 $ 11.05
------ ------ ------ -------
.54 .54 .54(b) .36(b)
(.78) .23 .39 (.02)
------ ------ ------ -------
(.24) .77 .93 .34
------ ------ ------ -------
(.54) (.54) (.54) (.36)
-- (.01) --(e) (.01)
-- (.09) (.25) (.11)
------ ------ ------ -------
(.54) (.64) (.79) (.48)
------ ------ ------ -------
$10.40 $11.18 $11.05 $ 10.91
------ ------ ------ -------
------ ------ ------ -------
(2.13)% 7.04% 8.68% 2.86%
$1,429 $4,312 $ 418 $ 15
$1,960 $3,523 $ 173 $ 10
.63% 0.60% 0.60%(b) 0.58%(b)(d)
.63% 0.60% 0.60%(b) 0.58%(b)(d)
4.94% 4.77% 4.92%(b) 4.18%(b)(d)
</TABLE>
See Notes to Financial Statements 71
<PAGE>
Prudential Municipal Bond Fund
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.
<PAGE>
www.prudential.com (800) 225-1852
INVESTMENT ADVISER'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 "Investment Adviser's Report"
section that doesn't appear in this listing because
it was sold before the close of the reporting
period.
STATEMENT OF ASSETS AND LIABILIATIES
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.
<PAGE>
Prudential Municipal Bond Fund
Getting the Most from Your Prudential Mutual Fund
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 ACCOUNTANT'S REPORT
Once a year, an outside auditor looks over our
books and certifies that the financial statements
are fairly presented and comply with generally accepted
accounting principles.
TAX INFORMATION
This is information that 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.
<PAGE>
www.prudential.com (800) 225-1852
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>
Prudential Municipal Bond Fund
Getting the Most from Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds,
you receive financial advice from a Prudential
Securities Financial Advisor or Pruco Securities
registered representative. Your financial
professional can provide you with the following
services:
THERE'S NO REWARD WITHOUT RISK; BUT IS THIS RISK WORTH IT?
Your financial professional can help you match the
reward you seek with the risk you can tolerate.
Risk can be difficult to gauge--sometimes even the
simplest investments bear surprising risks. The
educated investor knows that markets seldom move in
just one direction. There are times when a
market sector or asset class will lose value or
provide little in the way of total return. Managing
your own expectations is easier with help from
someone who understands the markets, and who knows
you!
KEEPING UP WITH THE JONESES
A financial professional can help you wade through
the numerous available mutual funds to find the
ones that fit your individual investment profile
and risk tolerance. While the newspapers and
popular magazines are full of advice about
investing, they are aimed at generic groups of
people or representative individuals--not at you
personally. Your financial professional will review
your investment objectives with you. This means you
can make financial decisions based on the assets
and liabilities in your current portfolio and your
risk tolerance--not just based on the current
investment fad.
BUY LOW, SELL HIGH
Buying at the top of a market cycle and selling at
the bottom are among the most common investor
mistakes. But sometimes it's difficult to hold on
to an investment when it's losing value every
month. Your financial professional can answer
questions when you're confused or worried about
your investment, and should remind you that you're
investing for the long haul.
<PAGE>
www.prudential.com (800) 225-1852
FOR MORE INFORMATION
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
-------------------------
Trustees
Eugene C. Dorsey
Delayne D. Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
Judy A. Rice
Nancy H. Teeters
Louis A. Weil, III
Officers
David R. Odenath, Jr., President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Deborah A. Docs, Secretary
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential 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 8098
Philadelphia, PA 19101
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
------------------------------------------------------
Fund High Income Series Insured Series
Symbols NASDAQ CUSIP NASDAQ CUSIP
Class A PRHAX 74435L103 PMIAX 74435L301
Class B PMHYX 74435L202 PMINX 74435L400
Class C PHICX 74435L707 PMICX 74435L806
Class Z PHIZX 74435L871 PMIZX 74435L863
------------------------------------------------------
The views expressed in this report and information
about the Fund's portfolio holdings are for the
period covered by this report and
are subject to change thereafter.
The accompanying financial statements as
of October 31, 2000, were not audited and,
accordingly, no opinion is expressed on them.
<PAGE>
(LOGO)
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
MF133E2 74435L103 74435L202 74435L707 74435L871
74435L301 74435L400 74435L806 74435L863
(LOGO) Printed on Recycled Paper
