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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811- 4023
Exact name of registrant as specified in charter: Dryden Municipal Series
Fund
Address of principal executive offices: Gateway Center 3
100 Mulberry Street
Newark, New Jersey 07102
Name and address of agent for service: Deborah A. Docs
Gateway Center 3
100 Mulberry Street
Newark, New Jersey 07102
Registrant's telephone number, including area code: 973-367-7521
Date of fiscal year end: August 31, 2003
Date of reporting period: August 31, 2003
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Item 1 -- Reports to Stockholders
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Dryden
Municipal Series Fund/
Florida Series
Formerly known as Prudential Municipal Series Fund/
Florida Series
AUGUST 31, 2003 ANNUAL REPORT
(GRAPHIC)
FUND TYPE
Municipal bond
OBJECTIVE
Maximize current income that is exempt from
federal income taxes consistent with the
preservation of capital and to invest in
securities that will enable its shares to be
exempt from the Florida intangibles tax
- ------------------------------------------------
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 Series'portfolio holdings
are for the period covered by this report and
are subject to change thereafter.
JennisonDryden is a service mark of The Prudential
Insurance Company of America.
JennisonDrydenMutualFunds
Dear Shareholder, October 10, 2003
There have been welcome signs that the U.S.
economy is growing again. Many corporate
executives and investment research analysts are
expecting profits to rise as well. However,
jobs are not being created as quickly as in
past recoveries, reminding us that the
resumption of growth doesn't mean a return to
an earlier time. The economic picture continues
to change, providing new opportunities and
challenges. Regardless of the direction of
financial markets, it is important to remember
that a wise investor plans today for tomorrow's
needs. A broadly diversified investment
portfolio will increase your chances of
participating in positive changes and is also
your best long-term defense against unexpected
downturns.
Whether you are investing for your retirement,
your children's education, or some other
purpose, JennisonDryden mutual funds offer the
experience, resources, and professional
discipline of three leading asset management
firms that can make a difference for you.
JennisonDryden funds are managed by Prudential
Investment Management's public equity and
fixed-income asset management businesses. The
equity funds are managed by Jennison Associates
and Quantitative Management. Prudential Fixed
Income manages the JennisonDryden fixed income
and money market funds.
We recommend that you develop a diversified
personal asset allocation strategy in
consultation with a financial professional who
knows you, who understands your reasons for
investing, the time you have to reach your
goals, and the amount of risk you are
comfortable assuming. JennisonDryden mutual
funds offer a wide range of investment choices,
and your financial professional can help you
choose the appropriate funds to implement your
strategy.
Sincerely,
Judy A. Rice, President
Dryden Municipal Series Fund/Florida Series
Dryden Municipal Series Fund/Florida Series 1
Your Series' Performance
Series Objective
The investment objective of the Dryden
Municipal Series Fund/Florida Series
(the Series) is to maximize current income that
is exempt from federal income taxes consistent
with the preservation of capital and to invest
in securities that will enable its shares to be
exempt from the Florida intangibles tax. There
can be no assurance that the Series will
achieve its investment objective.
Cumulative Total Returns1 as of 8/31/03
One Year Five Years Ten Years Since Inception2
Class A 2.32% 23.49% 63.69% (58.38) 123.47% (109.63)
Class B 2.16 22.02 N/A 61.79 (58.56)
Class C 1.91 20.51 54.47 (49.47) 59.31 (53.85)
Class Z 2.68 25.20 N/A 41.85 (41.58)
Lehman Brothers Muni Bond Index3 3.14 29.57 76.44 ***
Lipper FL Muni Debt Funds Avg.4 2.34 21.35 61.09 ****
Average Annual Total Returns1 as of 9/30/03
One Year Five Years Ten Years Since Inception2
Class A 0.25% 4.05% 4.92% (4.92) 6.51% (6.24)
Class B -1.87 4.25 N/A 5.73 (5.49)
Class C 0.83 3.95 4.52 (4.30) 4.88 (4.63)
Class Z 3.71 4.93 N/A 5.72 (5.69)
Lehman Brothers Muni Bond Index3 3.89 5.67 6.03 ***
Lipper FL Muni Debt Funds Avg.4 2.77 4.21 4.97 ****
Distributions and Yields1 as of 8/31/03
Taxable Equivalent 30-Day Yield5
Total Distributions 30-Day at Tax Rates of
Paid for 12 Months SEC Yield 33% 35%
Class A $0.44 2.96% 4.42% 4.55%
Class B 0.41 2.80 4.18 4.31
Class C 0.39 2.53 3.78 3.89
Class Z 0.47 3.30 4.93 5.08
Past performance is not indicative of future
results. Principal value and investment return
will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than
their original cost. 1Source: Prudential
Investments LLC and Lipper Inc. The cumulative
total returns do not take into account
applicable sales charges. If reflected, the
applicable sales charges would reduce the
cumulative total returns performance quoted.
The average annual total returns do take into
account applicable sales charges. Without the
contractual distribution and service (12b-1)
fee waiver of 0.05% and 0.25% for Class A and
Class C shares respectively, the returns for
these classes would have been lower. The
Distributor's 12b-1 fee waiver of 0.25% for
Class C shares continued through August 31,
2003. The Series charges a maximum front-end
sales charge of 3% for Class A shares and a
12b-1 fee of up to 0.30% annually. Class A
shares may not be subject to a front-end sales
charge, but may be subject to a 1% contingent
deferred sales charge (CDSC) for the first
year. Class B shares are subject to a declining
CDSC of 5%, 4%, 3%, 2%, 1%, and 1% respectively
for the first six years after purchase and a
12b-1 fee of 0.50% annually. Approximately
seven years after purchase, Class B shares will
automatically convert to Class A shares on a
quarterly basis. Class C shares are subject to
a front-end sales charge of 1%, a CDSC of 1%
for shares redeemed within 18 months of
purchase, and a 12b-1 fee of up to 1% annually.
Class Z shares are not subject to a sales
charge or 12b-1 fee. The returns in the tables
do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or
following the redemption of fund shares.
Without waiver of fees and/or expense
subsidization, the Series' returns would have
been lower, as indicated in paren-
2 Visit our website at www.jennisondryden.com
theses. 2Inception dates: Class A, 12/28/90;
Class B, 8/1/94; Class C, 7/26/93; and Class Z,
12/6/96. 3The Lehman Brothers Municipal (Muni)
Bond Index is an unmanaged index of over 39,000
long-term investment-grade municipal bonds. It
gives a broad look at how long-term investment-
grade municipal bonds have performed. 4The
Lipper Florida (FL) Muni Debt Funds Average
(Lipper Average) represents returns based on an
average return of all funds in the Lipper FL
Muni Debt Funds category for the periods noted.
Funds in the Lipper Average limit their assets
to those securities that are exempt from
taxation in Florida. Investors cannot invest
directly in an index. 5Taxable equivalent
yields reflect federal and applicable state tax
rates. The returns for the Lehman Brothers Muni
Bond Index would be lower if they included the
effects of sales charges, operating expenses of
a mutual fund, or taxes. Returns for the Lipper
Average reflect the deduction of operating
expenses, but not sales charges or taxes.
***Lehman Brothers Muni Bond Index Closest
Month-End to Inception cumulative total returns
as of 8/31/03 are 135.72% for Class A, 76.80%
for Class B, 80.11% for Class C, and 47.28% for
Class Z. Lehman Brothers Muni Bond Index
Closest Month-End to Inception average annual
total returns as of 9/30/03 are 7.20% for Class
A, 6.75% for Class B, 6.26% for Class C, and
6.28% for Class Z. ****Lipper Average Closest
Month-End to Inception cumulative total returns
as of 8/31/03 are 116.84% for Class A, 63.91%
for Class B, 64.99% for Class C, and 37.16% for
Class Z. Lipper Average Closest Month-End to
Inception average annual total returns as of
9/30/03 are 6.47% for Class A, 5.82% for Class
B, 5.29% for Class C, and 5.10% for Class Z.
Five Largest Issuers expressed as a percentage
of total investments as of 8/31/03
Orlando Utils. Cmnty. Wtr. & Elec. Rev. 5.8%
Florida St. Brd. of Ed. Lottery Rev. 5.5
Broward Cnty. Florida Sch. Brd. Certs. 5.0
Osceola Cnty. Infrastructure Sales Surtax 4.0
Florida St. Dept. Environ. Protection Preservation Rev. 3.9
Issuers are subject to change.
Portfolio Composition expressed as a percentage
of net assets as of 8/31/03
Special Tax/Assessment District 23.4%
Transportation 10.2
Lease-Backed Certificate of Participation 7.6
Power 7.4
General Obligation 7.1
Healthcare 6.6
Water & Sewer 4.0
Housing 3.6
Solid Waste/Resource Recovery 3.3
Corporate-Backed IDB & PCR 2.1
Tobacco 0.4
Other Muni 13.3
Other 11.1
Cash & Equivalents -0.1
Portfolio Composition is subject to change.
Credit Quality expressed as a percentage of net
assets as of 8/31/03
Aaa 63.5%
Aa 15.3
A 6.2
Baa 4.2
NR 10.9
Cash & Equivalents -0.1
Source: Moody's rating, defaulting to S&P when
not rated.
Credit Quality is subject to change.
Dryden Municipal Series Fund/Florida Series 3
Investment Adviser's Report
Market Overview and Performance Summary
The municipal bond market repeatedly rallied,
then sold off, which resulted in a 3.14% return
for the fiscal year ended August 31, 2003,
based on the Lehman Brothers Municipal Bond
Index (the Index). The market's volatility
largely reflected uncertainty about the
prospects for economic growth in the United
States. The outlook was cloudy because
investors did not know how much the Federal
Reserve (the Fed) would cut short-term interest
rates in an effort to stimulate the sluggish
economy. There was also concern that U.S.
involvement in a war in Iraq might harm the
U.S. economy.
Our investment strategy aimed to provide the
Series with the flexibility to readily respond
to changing conditions in the municipal bond
market. However, for the 12 months ended August
31, 2003, the Series' Class A shares trailed
their benchmark, the Index. This occurred
because the Series held bonds that declined in
value due to credit quality problems discussed
later in the report. The Index also does not
reflect the operating expenses of mutual funds.
Compared to its peer group, which does take
into account operating expenses, the Series'
Class A shares performed roughly in line with
the Lipper Florida Municipal Debt Funds Average
for the 12 months ended August 31, 2003.
Early in our reporting period, municipal bonds
gained in value to such an extent that we
believed a correction in the market was
virtually inevitable. When the equity market
began to recover in October 2002, demand for
municipal bonds faded temporarily and their
prices plunged. The tax-exempt market was also
pressured by a large amount of newly issued bonds
at that time.
The sell-off in municipal bonds soon turned
into a rally. Investors paid higher prices (and
accepted lower yields) for tax-exempt bonds
because the Fed was expected to cut short-term
rates with the goal of boosting economic
growth. In November 2002, it reduced its target
for the federal funds rate by half a percentage
point to 1.25%.
Concern about the economy occurred before and
continued after the war in Iraq began in March
2003. Consequently, there was speculation in
the financial markets that the Fed would
aggressively reduce rates again or buy U.S.
Treasury securities, which would also exert
downward pressure on the general level of
interest rates. This factor helped the
municipal bond rally remain on track for the
most part until mid-June 2003. At that time,
however, the municipal bond market began to
sell off along with Treasurys. Economic data
suggested that the Fed might not cut rates
sharply when it met in late June. Indeed, it
only lowered its target for the federal funds
rate by a quarter of a percentage point to 1%.
For the rest of the reporting period, municipal
4 Visit our website at www.jennisondryden.com
bond prices slid in July and stabilized in
August. Municipal bond prices were hurt by
signs of stronger economic growth, even though
the job market remained weak.
Credit Quality and Interest-Rate Sensitivity
Florida's revenues have been flat in this
economic climate, but Florida benefited from
not relying upon a personal income tax. Its
primary source of revenue is the sales tax,
which has suffered minimally. While fiscal
pressures exist, we expect Florida to continue
to demonstrate sound financial practices. Given
the fiscal challenges facing Florida and the
frequent changes in the level of interest
rates, we continued to work toward achieving
the right balance in the Series with regard to
two important overlapping characteristics. The
first was credit quality, which involves the
Series' exposure to high-quality bonds versus
low-quality bonds. The second was interest-rate
sensitivity, which involves the Series'
exposure to bonds with good potential for price
appreciation versus bonds that behave
defensively during a sell-off in the fixed
income market.
From the perspective of credit quality, bonds
rated Aaa (both insured and uninsured)
accounted for roughly 63% of the Series' net
assets as of August 31, 2003. We emphasized
Aaa-rated bonds because they tend to perform
better than lower-quality bonds under
challenging economic conditions. However, as
accelerating economic growth increases demand
for riskier assets, lower-quality bonds tend to
outperform Aaa-rated municipal bonds. The
Series had some exposure to bonds of below-
investment-grade quality.
Some lower-quality bonds performed poorly
during the reporting period. The Series held
Tallahassee Health Facilities bonds for the
Tallahassee Memorial Hospital that declined in
value and detracted from the Series' returns.
Moody's Investors Service (Moody's) downgraded
these bonds from Baa1 to Baa2 with a negative
outlook. Moody's cited such factors as negative
utilization trends, competitive pressures, and
increases in malpractice insurance and pension
costs.
In the volatile interest-rate climate, we
maintained a barbell strategy that essentially
focused on two types of bonds. One side of our
barbell primarily emphasized Aaa-rated, insured
zero coupon bonds, which are so named because
they pay no interest and are sold at discount
prices to make up for their lack of periodic
interest payments. Zero coupon bonds are the
most interest-rate-sensitive of all bonds,
which enables them to perform better than other
types of debt securities when interest rates
decline and bond prices move higher. The other
side of our barbell emphasized intermediate-
term bonds whose higher coupon rates provided
the Series with considerable interest income.
These bonds are considered to have defensive
characteristics, as their prices
Dryden Municipal Series Fund/Florida Series 5
tend to hold up relatively well when the
municipal bond market sells off. The bonds are
also attractive to investors because they
provide solid income.
Periodically readjusting our coupon barbell
strategy was one way to change the Series'
duration, which measures its sensitivity to
fluctuations in the level of interest rates. In
general, when we determined that there was a
trend toward higher interest rates, we aimed to
shorten the Series' duration to help protect
its value as rising interest rates pushed
municipal bond prices lower. On the other hand,
we aimed to lengthen the Series' duration to
help it benefit more fully when falling
interest rates drove municipal bond prices
higher. In general, we employed this tactic
periodically once we determined that the
decline in interest rates was indeed a trend
rather than a temporary development.
Florida Series Management Team
6 Visit our website at www.jennisondryden.com
Financial Statements
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AUGUST 31, 2003 ANNUAL REPORT
Dryden Municipal Series Fund
Florida Series
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Portfolio of Investments
as of August 31, 2003
<Table>
<Caption>
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MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
LONG-TERM INVESTMENTS 96.5%
Arbor Greene Cmnty. Dev.
Dist.,
Florida Assmt. Rev. NR 5.75% 5/01/06 $ 101 $ 100,966
Florida Assmt. Rev. NR 6.50 5/01/07 140 140,603
Florida Assmt. Rev. NR 6.30 5/01/19 315 317,876
Bayside Impvt. Cmnty. Dev.
Dist., Florida Cap.
Impvt. Rev., Ser. A NR 6.30 5/01/18 995 996,502
Broward Cnty. Florida Apt.
Sys. Rev., Pass. Facs.,
Conv. Lien, Ser. H1,
A.M.T., A.M.B.A.C. Aaa 5.25 10/01/10 1,730 1,839,474
Broward Cnty. Florida Sch.
Brd. Certs., M.B.I.A. Aaa 5.25 7/01/15 3,750 4,058,175
Broward Cnty. Res. Recov.
Rev. Rfdg., Wheelabrator,
Ser. A A3 5.50 12/01/08 1,000 1,101,750
Collier Cnty. Sch. Brd.,
C.O.P., F.S.A. Aaa 5.375 2/15/21 1,000 1,044,530
Cuyahoga Cnty. Rev.,
Rfdg., Ser. A A1 6.00 1/01/17 1,000 1,076,890
Dade Cnty. Aviation Dept.
Rev., Ser. B, A.M.T.,
M.B.I.A. Aaa 6.00 10/01/24 1,500(b) 1,596,735
Dade Cnty. Hlth. Facs.
Auth. Rev., Baptist Hosp.
of Miami Proj., Ser. A,
E.T.M., M.B.I.A. Aaa 6.75 5/01/08 430(d) 481,419
Escambia Cnty. Hlth. Facs.
Auth.
Rev., Ascension Hlth.
Credit, Ser. A Aa2 5.25 11/15/14 1,250 1,313,750
Florida Hsg. Fin. Corp.
Rev.,
Cypress Trace Apts., Ser.
G, A.M.T. NR 6.60 7/01/38 789 726,835
Westchase Apts., Ser. B,
A.M.T. NR 6.61 7/01/38 1,430 1,311,324
Florida St. Brd. Ed. Cap.
Outlay, Pub. Ed., Ser. C,
F.G.I.C., G.O. Aaa 5.50 6/01/16 1,000 1,088,310
Florida St. Brd. Ed.
Lottery Rev.,
Ser. A, F.G.I.C. Aaa 5.75 7/01/19 1,500 1,632,210
Ser. C, F.G.I.C. Aaa 5.00 7/01/16 2,700 2,803,680
Florida St. Dept. Environ.
Protection Preservation
Rev., Florida Forever,
Ser. A, M.B.I.A. Aaa 5.25 7/01/17 2,950 3,131,808
Florida St. Mun. Pwr.
Agcy. Rev., Rfdg.,
Stanton II Proj.,
A.M.B.A.C. Aaa 5.50 10/01/17 1,120 1,216,678
</Table>
See Notes to Financial Statements.
8 Visit our website at www.jennisondryden.com
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<Table>
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MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
Greyhawk Landing Cmnty.
Dev. Dist. Rev., Spec.
Assmt. Rev., Ser. B NR 6.25% 5/01/09 $ 1,390 $ 1,394,448
Highlands Cnty. Florida
Hlth. Facs. Auth. Rev.,
Hosp. Adventist/Sunbelt,
Ser. A A3 6.00 11/15/31 1,000 1,040,950
Hillsborough Cnty. Florida
Aviation Auth. Rev.,
Tampa Intl. Arpt., Ser.
A, A.M.T., M.B.I.A Aaa 5.50 10/01/15 2,000 2,120,680
Hillsborough Cnty. Florida
Ind. Dev. Auth. Hosp.
Rev., Tampa Gen. Hosp.
Proj., Ser. A Baa1 5.00 10/01/18 1,000 957,730
Hillsborough Cnty. Florida
Ind. Dev. Auth.,
Cigarette Tax Alloc., H
Lee Moffitt Cancer Proj.,
Ser. B, A.M.B.A.C. Aaa 5.50 9/01/16 1,840 2,009,170
Indigo Cmnty. Dev. Dist.
Cap. Impvt. Rev., Ser. B NR 6.40 5/01/06 1,300 1,295,450
Jacksonville Elec. Auth.
Rev., Elec. Sys., Ser. A Aa2 6.00 10/01/30 1,000 1,068,320
St. Johns Rvr. Pwr. Park
Issue 2, Ser. 7, C.A.B.S. Aa2 Zero 10/01/10 3,000 2,284,140
Jacksonville Sales Tax
Rev.,
A.M.B.A.C. Aaa 5.50 10/01/18 1,000 1,074,150
F.G.I.C. Aaa 5.375 10/01/18 1,000 1,066,950
Jacksonville Swr. & Solid
Wste. Disp. Facs. Rev.,
Anheuser Busch Proj.,
A.M.T. A1 5.875 2/01/36 1,000 1,026,190
Jacksonville Wtr. & Swr.
Dev. Rev., United Wtr.
Proj., A.M.T., A.M.B.A.C. Aaa 6.35 8/01/25 1,500 1,630,635
Lakeland Elec. & Wtr. Rev. AA-(c) 5.625 10/01/36 2,000(b) 2,262,120
Lexington Oaks Cmnty. Dev.
Dist. Rev., Ser. B NR 6.70 5/01/07 55 55,172
Maryland St. Hlth. &
Higher Ed. Facs., Auth.
Rev. Baa1 6.75 7/01/30 500 544,290
Massachusetts St. Wtr.
Res. Auth. Rev., Ser. A,
F.S.A. AAA(c) 6.50 7/15/19 1,000 1,197,050
Miami Dade Cnty. Florida
Sch. Brd., Ser. A, F.S.A. Aaa 6.00 10/01/17 1,000 1,128,380
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - Florida Series 9
<Page>
Portfolio of Investments
as of August 31, 2003 Cont'd.
<Table>
<Caption>
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MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
Miami Homeland
Defense/Neighborhood,
M.B.I.A., G.O. Aaa 5.50% 1/01/20 $ 2,000 $ 2,121,940
Miami Spec. Oblig., Admn.
Bldg. Acquis. Proj.,
F.G.I.C. Aaa 6.00 2/01/16 1,000(b) 1,107,360
Miramar Wste. Wtr. Impvt.
Assmt. Rev., F.G.I.C. Aaa 6.75 10/01/16 1,590(b) 1,703,924
North Carolina Mun. Pwr.
Agcy. No. 1 Catawba Elec.
Rev., Ser. A, M.B.I.A. Aaa 5.125 1/01/17 1,440 1,498,594
Oakstead Cmnty. Dev. Dist.
Cap. Impvt., Ser. B NR 6.50 5/01/07 470 471,156
Okaloosa Cnty. Cap. Impvt.
Rev., M.B.I.A., C.A.B.S. Aaa Zero 12/01/06 450 420,089
Orange Cnty. Tourist Dev.
Tax Rev.,
A.M.B.A.C. Aaa 5.25 10/01/16 1,425 1,515,259
M.B.I.A. Aaa 5.00 10/01/17 740 761,882
Orlando Util. Cmnty., Wtr.
&
Elec. Rev.,
Ser. C Aa2 5.25 10/01/21 2,000 2,067,060
Ser. D, E.T.M. Aa2 6.75 10/01/17 2,200 2,638,196
Osceola Cnty.,
Infrastructure Sales
Surtax, A.M.B.A.C. Aaa 5.375 10/01/17 2,995 3,211,688
Palm Beach Cnty. Florida
Public Impvt. Rev.,
Convention Ctr. Proj.,
F.G.I.C. Aaa 5.50 11/01/14 1,055 1,154,318
Pasco Cnty. Sales Tax
Rev.,
Half-Cent, A.M.B.A.C. Aaa 5.00 12/01/15 1,180 1,254,895
Half-Cent, A.M.B.A.C. Aaa 5.00 12/01/16 1,240 1,308,138
Pembroke Pines Pub. Impvt.
Rev., A.M.B.A.C. Aaa 5.50 10/01/16 1,360 1,483,991
Pensacola Hlth. Facs.
Auth. Rev., Daughters of
Charity, M.B.I.A. Aaa 5.25 1/01/11 1,600(b) 1,637,136
Puerto Rico Comnwlth. Hwy.
& Trans. Auth. Rev., Ser.
E, F.S.A. Aaa 5.50 7/01/16 1,695 1,904,671
Puerto Rico Comnwlth.,
Ref., M.B.I.A., IBC BNY,
G.O. NR 10.303 7/01/12 1,500(f) 1,925,880
Puerto Rico Pub. Fin.
Corp. Comnwlth. Approp.,
Ser. E Baa3 5.70 8/01/25 500 518,225
</Table>
See Notes to Financial Statements.
10 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
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MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
Tallahassee Florida Hlth.
Facs. Rev., Tallahassee
Mem. Hlth. Care Proj. Baa2 6.25% 12/01/20 $ 500 $ 498,475
Texas St. Tpke. Auth. Sys.
Rev., First Tier, Ser. A,
A.M.B.A.C., C.A.B.S. Aaa Zero 8/15/24 3,000 926,250
Tobacco Settlement Fin.
Corp., Asset Bkd. Baa2 6.00 6/01/37 500 372,465
Utah St. Hsg. Fin. Agcy.
Sngl. Fam.
Mtge., Ser. F, Class II,
A.M.T. Aa2 6.125 1/01/27 875 902,729
Virgin Islands Pub. Fin.
Auth. Rev., Gross Rcpts.
Taxes Ln., Ser. A BBB-(c) 6.50 10/01/24 500 548,425
Vista Lakes Cmnty. Dev.
Dist. Cap. Impvt., Rev. NR 6.35 5/01/05 135 135,207
---------------
Total long-term
investments
(cost $77,764,346) 80,223,293
---------------
SHORT-TERM INVESTMENTS 1.1%
Brazos River Hbr. Nav.
Dist., Merey Sweeny LP
Proj., Ser. A, F.R.D.D.,
A.M.T. VMIG1 0.92 9/02/03 100 100,000
Delaware St. Econ. Dev.
Auth. Rev., Delmarva Pwr.
& Lt., F.R.D.D., A.M.T. VMIG1 0.92 9/02/03 600 600,000
Mun. Secs. Trust Cert.,
Ser. 2001-160, Trust
Cert., Class A, F.G.I.C.,
F.R.D.D. A-1(c) 0.90 9/02/03 200 200,000
---------------
Total short-term
investments
(cost $900,000) 900,000
---------------
TOTAL INVESTMENTS 97.6%
(COST $78,664,346; NOTE
5) 81,123,293
Other assets in excess of
liabilities 2.4% 1,999,712
---------------
NET ASSETS 100% $ 83,123,005
---------------
---------------
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - Florida Series 11
<Page>
Portfolio of Investments
as of August 31, 2003 Cont'd.
(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.
C.A.B.S--Capital Appreciation Bonds.
C.O.P.--Certificate of Participation.
E.T.M.--Escrowed to Maturity.
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.O.--General Obligation.
M.B.I.A.--Municipal Bond Insurance Association.
(b) All or partial prerefunded issues are secured by escrowed cash and/or direct
U.S. guaranteed obligations.
(c) Standard & Poor's Rating.
(d) Partial principal amount pledged as collateral for financial futures
contracts.
(e) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be 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.
(f) Inverse floating rate bond. The coupon is inversely indexed to a floating
interest rate. The rate shown is rate at year end.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information contains a description of
Moody's and Standard & Poor's ratings.
See Notes to Financial Statements.
12 Visit our website at www.jennisondryden.com
<Page>
This Page Intentionally Left Blank
<Page>
Statement of Assets and Liabilities
as of August 31, 2003
<Table>
<Caption>
ASSETS
-----------------------------------------------------------------------------------
Investments, at value (cost $78,664,346) $81,123,293
Cash 97,969
Interest receivable 1,205,717
Receivable for investments sold 1,020,000
Receivable for Series shares sold 68,716
Due from broker-variation margin 3,975
Other assets 1,644
-----------
TOTAL ASSETS 83,521,314
-----------
LIABILITIES
-----------------------------------------------------------------------------------
Payable for Series shares reacquired 196,898
Accrued expenses 85,241
Dividends payable 47,457
Management fee payable 35,449
Distribution fee payable 23,466
Deferred trustees' fees 9,798
-----------
TOTAL LIABILITIES 398,309
-----------
NET ASSETS $83,123,005
-----------
-----------
-----------------------------------------------------------------------------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 79,203
Paid-in capital in excess of par 78,277,481
-----------
78,356,684
Undistributed net investment income 59,244
Accumulated net realized gain on investments 2,274,206
Net unrealized appreciation on investments 2,432,871
-----------
NET ASSETS, AUGUST 31, 2003 $83,123,005
-----------
-----------
</Table>
See Notes to Financial Statements.
14 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS A
-----------------------------------------------------------------------------------
Net asset value and redemption price per share
($59,497,793 / 5,669,306 shares of beneficial interest issued and
outstanding) $10.49
Maximum sales charge (3% of offering price) .32
------
Maximum offering price to public $10.81
------
------
CLASS B
-----------------------------------------------------------------------------------
Net asset value, offering price and redemption price per share
($16,635,264 / 1,585,030 shares of beneficial interest issued and
outstanding) $10.50
------
------
CLASS C
-----------------------------------------------------------------------------------
Net asset value and redemption price per share
($5,692,680 / 542,362 shares of beneficial interest issued and outstanding) $10.50
Sales charge (1% of offering price) .11
------
Offering price to public $10.61
------
------
CLASS Z
-----------------------------------------------------------------------------------
Net asset value, offering price and redemption price per share
($1,297,268 / 123,567 shares of beneficial interest issued and outstanding) $10.50
------
------
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - Florida Series 15
<Page>
Statement of Operations
Year Ended August 31, 2003
<Table>
<Caption>
NET INVESTMENT INCOME
-----------------------------------------------------------------------------------
Income
Interest $ 4,535,499
-----------
Expenses
Management fee 452,694
Distribution fee--Class A 158,224
Distribution fee--Class B 98,182
Distribution fee--Class C 45,341
Custodian's fees and expenses 108,000
Reports to shareholders 49,000
Legal fees and expenses 34,000
Registration fees 33,000
Transfer agent's fees and expenses 26,000
Audit fee 13,000
Trustees' fees 8,000
Miscellaneous 16,609
-----------
TOTAL EXPENSES 1,042,050
-----------
NET INVESTMENT INCOME 3,493,449
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
-----------------------------------------------------------------------------------
Net realized gain (loss) on:
Investment transactions 2,397,741
Financial futures transactions (95,657)
Written options transactions 524
-----------
2,302,608
-----------
Net change in unrealized appreciation (depreciation) on:
Investments (3,614,469)
Financial futures contracts 15,969
-----------
(3,598,500)
-----------
Net loss on investments (1,295,892)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,197,557
-----------
-----------
</Table>
See Notes to Financial Statements.
16 Visit our website at www.jennisondryden.com
<Page>
Statement of Changes in Net Assets
<Table>
<Caption>
-----------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------
2003 2002
INCREASE (DECREASE) IN NET ASSETS
-----------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 3,493,449 $ 4,385,843
Net realized gain on investment transactions 2,302,608 597,354
Net change in unrealized appreciation
(depreciation) on investments (3,598,500) (894,614)
--------------- -----------------
Net increase in net assets resulting from
operations 2,197,557 4,088,583
--------------- -----------------
DIVIDENDS AND DISTRIBUTIONS (NOTE 1):
Dividends from net investment income
Class A (2,476,198) (3,030,460)
Class B (722,585) (1,041,529)
Class C (206,275) (243,711)
Class Z (64,548) (49,934)
--------------- -----------------
(3,469,606) (4,365,634)
--------------- -----------------
Distributions from net realized gains
Class A (102,866) --
Class B (34,657) --
Class C (9,964) --
Class Z (2,191) --
--------------- -----------------
(149,678) --
--------------- -----------------
SERIES SHARE TRANSACTIONS (NET OF SHARE
CONVERSIONS) (NOTE 6):
Net proceeds from shares sold 18,136,282 9,308,461
Net asset value of shares issued in reinvestment
of dividends and distributions 1,576,929 1,813,805
Cost of shares reacquired (28,764,561) (17,156,523)
--------------- -----------------
Net decrease in net assets from Series share
transactions (9,051,350) (6,034,257)
--------------- -----------------
Total decrease (10,473,077) (6,311,308)
NET ASSETS
-----------------------------------------------------------------------------------
Beginning of year 93,596,082 99,907,390
--------------- -----------------
End of year $ 83,123,005 $ 93,596,082
--------------- -----------------
--------------- -----------------
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - Florida Series 17
<Page>
Notes to Financial Statements
Dryden Municipal Series Fund (the 'Fund'), formerly known as Prudential
Municipal Series Fund, is registered under the Investment Company Act of 1940,
as an open-end management investment company. The Fund was organized as a
Massachusetts business trust on May 18, 1984 and consists of six series. These
financial statements relate only to Florida Series (the 'Series'). The financial
statements of the other series are not present herein. The assets of each are
invested in separate, independently managed portfolios. The Series commenced
investment operations on December 28, 1990. The Series is non-diversified and
seeks to achieve its investment objective of providing the maximum amount of
income that is exempt from federal income taxes with the minimum of risk, and
investing in securities which will enable its shares to be exempt from the
Florida intangibles tax by investing in primarily 'investment grade' tax-exempt
securities whose ratings are within the four highest ratings categories by a
nationally recognized statistical rating organization or, if not rated, are of
comparable quality. The ability of the issuers of the securities held by the
Series to meet their obligations may be affected by economic developments in a
specific state, industry or region.
NOTE 1. ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Series, in the preparation of its financial statements.
Securities Valuations: The Series values municipal securities (including
commitments to purchase such securities on a 'when-issued' basis) on the basis
of prices provided by a pricing service which uses information with respect to
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.
Securities, including options, futures contracts and options thereon, for which
the primary market is on a national securities exchange, commodities exchange or
board of trade are valued at the last sale price on such exchange or board of
trade, on the date of valuation or, if there was no sale on such day, at the
average of readily available closing bid and asked prices on such day or at the
bid price in the absence of an asked price.
Securities, including options, that are actively traded in the over-the-counter
market, including listed securities for which the primary market is believed to
be
18 Visit our website at www.jennisondryden.com
<Page>
over-the-counter, are valued at the average of the most recently quoted bid and
asked prices provided by a principal market maker or dealer.
Short-term securities which mature in sixty days or less are valued at amortized
cost, which approximates market value. The amortized cost method involves
valuing a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of the difference between the principal amount
due at maturity and cost. Short-term securities which mature in more than sixty
days are valued at current market quotations.
Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities at a set price
for delivery on a future date. Upon entering into a financial futures contract,
the Series 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 Series 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
transactions.
The Series invests in financial futures contracts in order to hedge its existing
portfolio securities, or securities the Series intends to purchase, against
fluctuations in value caused by changes in prevailing interest rates or market
conditions. Should interest rates move unexpectedly, the Series 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.
Interest Rate Swaps: The Series may enter into interest rate swaps. In a simple
interest rate swap, one investor pays a floating rate of interest on a notional
principal amount and receives a fixed rate of interest on the same notional
principal amount for a specified period of time. Alternatively, an investor may
pay a fixed rate and receive a floating rate. Interest rate swaps were conceived
as asset/liability management tools. In more complex swaps, the notional
principal amount may decline (or amortize) over time.
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 Series will record a realized
gain(loss) equal to the difference between the proceeds from (or cost of) the
closing transaction and the Series' basis in the contract, if any.
Dryden Municipal Series Fund - Florida Series 19
<Page>
The Series is exposed to credit loss in the event of non-performance by the
other party to the interest rate swap. However, the Series does not anticipate
non-performance by any counterparty.
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 rates 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.
Options: The Series 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 Series currently
owns or intends to purchase. The Series' principal reason for writing options is
to realize, through receipt of premiums, a greater current return than would be
realized on the underlying security alone. When the Series purchases an option,
it pays a premium and an amount equal to that premium is recorded as an asset.
When the Series writes an option, it receives a premium and an amount equal to
that premium is recorded as a liability. The asset or liability is adjusted
daily to reflect the current market value of the option. If an option expires
unexercised, the Series 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
recorded as an adjustment to the proceeds from the sale or the cost of the
purchase in determining whether the Series has realized a gain or loss. The
difference between the premium and the amount received or paid on effecting a
closing purchase or sale transaction is also treated as a realized gain or loss.
Gain or loss on purchased options is included in net realized gain (loss) on
investment transactions. Gain or loss on written options is presented separately
as net realized gain (loss) on written option transactions.
The Series, as writer of an option, may have no control over whether the
underlying securities may be sold (called) or purchased (put). As a result, the
Series bears the market risk of an unfavorable change in the price of the
security underlying the written option. The Series, as purchaser of an option,
bears the risk of the potential inability of the counterparties to meet the
terms of their contracts.
Written options, future contracts and swap contracts involve elements of both
market and credit risk in excess of the amounts reflected in the Statement of
Assets and Liabilities.
20 Visit our website at www.jennisondryden.com
<Page>
Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains (losses) on sales of securities are
calculated on the identified cost basis. Interest income, including amortization
of premium and accretion of discount on debt securities, as required, is
recorded on the accrual basis. Expenses are recorded on the accrual basis which
may require, the use of certain estimates by management.
Net investment income or loss (other than distribution fees, which are charged
directly to the respective class) and unrealized and realized gains (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 taxpaying entity. It is the Series' policy to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable net income and capital gains, if
any, to its shareholders. Therefore, no federal income tax provision is
required.
Dividends and Distributions: The Series declares daily dividends from net
investment income. Payment of dividends is made monthly. Distributions of net
capital gains, if any, are made annually. Dividends and distributions to
shareholders, which are determined in accordance with federal income tax
regulations and which may differ from generally accepted accounting principles,
are recorded on the exdividend date. Permanent book/tax differences relating to
income and gains are reclassified to paid in capital when they arise.
Custody Fee Credits: The Fund has an arrangement with its custodian bank,
whereby uninvested cash earns credits which reduce the fees charged by the
custodian. The Series could have invested a portion of the cash utilized in
connection with the expense offset arrangements in an income producing asset if
it had not entered into such arrangement.
NOTE 2. AGREEMENTS
The Fund has a management agreement with Prudential Investments LLC ('PI').
Pursuant to this agreement, PI has responsibility for all investment advisory
services and supervises the subadvisor's performance of such services. PI has
entered into a subadvisory agreement with Prudential Investment Management, Inc.
('PIM'). The subadvisory agreement provides that PIM furnishes investment
advisory services in connection with the management of the Series. In connection
therewith, PIM is obligated to keep certain books and records of the Series. PI
pays for the services of
Dryden Municipal Series Fund - Florida Series 21
<Page>
PIM, the compensation of officers of the Series, occupancy and certain clerical
and bookkeeping costs of the Series. The Series bears all other costs and
expenses.
The management fee paid to PI is computed daily and payable monthly, at an
annual rate of .50 of 1% of the average daily net assets of the Series.
The Series has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS'), which acts as the distributor of the Series. The Series
compensates PIMS for distributing and servicing the Series' 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 Series.
Pursuant to the Class A, B and C Plans, the Series compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, .50 of 1%
and up to 1% of the average daily net assets of the Class A, B and C shares,
respectively. PIMS has contractually agreed to limit such fees to .25 of 1%, and
..75 of 1% of the average daily net assets of the Class A and Class C shares,
respectively.
PIMS has advised the Series that they have received approximately $22,800 and
$5,100 in front-end sales charges resulting from sales of Class A and C shares,
respectively during the year ended August 31, 2003. 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 Series that for the year ended August 31, 2003, they
received approximately $29,500 and $4,100 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PI, PIM and PIMS are indirect, wholly-owned subsidiaries of Prudential
Financial, Inc. ('Prudential').
The Series, along with other affiliated registered investment companies (the
'Funds'), is a party to a syndicated credit agreement ('SCA') with a group of
banks. For the year ended August 31, 2003, the SCA provides for a commitment of
$800 million and allows the Funds to increase the commitment to $1 billion, if
necessary. Interest on any borrowings under the SCA will be incurred at market
rates. The Funds pay a commitment fee of .08 of 1% of the unused portion of the
SCA. The commitment fee is accrued and paid quarterly and is allocated to the
Funds pro rata, based on net assets. The purpose of the SCA is to serve as an
alternative source of funding to facilitate capital share redemptions. The
expiration date of the SCA was May 2, 2003. On May 2, 2003, the SCA was renewed
under
22 Visit our website at www.jennisondryden.com
<Page>
the same terms and conditions ('May 2003 renewal'). The expiration date of the
May 2003 renewal is April 30, 2004. The Series did not borrow any amounts
pursuant to the SCA during the year ended August 31, 2003.
NOTE 3. OTHER TRANSACTIONS WITH AFFILIATES
Prudential Mutual Fund Services LLC ('PMFS') an affiliate of PI and an indirect,
wholly-owned subsidiary of Prudential, serves as the Fund's transfer agent.
During the year ended August 31, 2003, the Series incurred fees of approximately
$20,300 for the services of PMFS. As of August 31, 2003, approximately $1,600 of
such fees were due to PMFS. Transfer agent fees and expenses in the Statement of
Operations include certain out-of-pocket expenses paid to nonaffiliates, where
applicable.
The Series pays networking fees to affiliated and unaffiliated broker/dealers.
These networking fees are payments made to broker/dealers that clear mutual fund
transactions through a national clearing system. The Series incurred
approximately $4,000 in total networking fees, of which the amount relating to
the services of Wachovia Securities LLC ('Wachovia') and Prudential Securities
Inc. ('PSI'), affiliates of PI, were approximately $3,600 for the year ended
August 31, 2003. Prior to July 1, 2003, PSI was an indirect, wholly-owned
subsidiary of Prudential. As of August 31, 2003, approximately $300 of such fees
were due to Wachovia. These amounts are included in transfer agent's fees and
expenses in the Statement of Operations.
NOTE 4. PORTFOLIO SECURITIES
Purchases and sales of portfolio securities of the Series, excluding short-term
investments, for the year ended August 31, 2003 were $50,814,585 and $59,295,877
respectively.
During the year ended August 31, 2003, the Series entered into financial futures
contracts. Details of outstanding contracts at August 31, 2003 are as follows:
<Table>
<Caption>
VALUE AT VALUE AT UNREALIZED
NUMBER OF EXPIRATION AUGUST 31, TRADE APPRECIATION
CONTRACTS TYPE DATE 2003 DATE (DEPRECIATION)
- --------- ------------------- ----------------- ---------- ---------- ----------------
Long Position:
16 U.S. Treasury 10 Yr
Notes Sept. 2003 $1,784,500 $1,782,593 $ 1,907
28 U.S. Treasury Bond
Futures Sept. 2003 3,007,375 2,990,808 16,567
Short Position:
(75) U.S. Treasury 5 Yr
Notes Sept. 2003 (8,361,328) (8,316,778) (44,550)
-------
$(26,076)
-------
-------
</Table>
Dryden Municipal Series Fund - Florida Series 23
<Page>
Transactions in options written during the year ended August 31, 2003, were as
follows:
<Table>
<Caption>
CONTRACTS PREMIUMS
---------- ---------
Balance as of August 31, 2002 -- --
Options written 25 $ 24,139
Options terminated (25) (24,139 )
--
---------
Balance as of August 31, 2003 -- --
--
--
---------
---------
</Table>
NOTE 5. DISTRIBUTIONS AND TAX INFORMATION
Distributions to shareholders, which are determined in accordance with federal
income tax regulations and which may differ from generally accepted accounting
principles, are recorded on the ex-dividend date. In order to present
undistributed net investment income (loss) and accumulated net realized gains
(losses) on the Statement of Assets and Liabilities that more closely represent
their tax character, certain adjustments have been made to paid-in-capital in
excess of par, undistributed net investment income (loss) and accumulated net
realized gain (loss) on investments.
For the year ended August 31, 2003, the adjustments were to increase
undistributed net investment income by $35,401, decrease accumulated net
realized gain by $29,140 and decrease paid-in capital by $6,261 primarily due to
the difference in the treatment of accreting market discount between financial
and tax reporting. Net investment income, net realized losses and net assets
were not affected by this change.
Tax character of distributions paid during the year ended August 31, 2003 were:
<Table>
<Caption>
TAX-EXEMPT LONG-TERM TOTAL
INCOME ORDINARY INCOME CAPITAL GAINS DISTRIBUTIONS
- ------------------ ------------------ ------------------ ------------------
$3,469,606 $17,204 $132,474 $3,619,284
</Table>
Tax character of distributions paid during the year ended August 31, 2002 were:
<Table>
<Caption>
TAX-EXEMPT LONG-TERM TOTAL
INCOME ORDINARY INCOME CAPITAL GAINS DISTRIBUTIONS
- ------------------ ------------------ ------------------ ------------------
$4,365,634 -- -- $4,365,634
</Table>
For federal income tax purposes, the Series utilized approximately $19,000 of
its capital loss carryforward to offset net taxable gains realized in the fiscal
year ended August 31, 2003. The Series had no remaining capital loss
carryforward as of August 31, 2003.
24 Visit our website at www.jennisondryden.com
<Page>
As of August 31, 2003, the components of distributable earnings on a tax basis
were $70,069 (includes a timing difference of $47,457 for dividends payable),
$488,405 and $1,699,370 of tax exempt income, ordinary income and long-term
capital gains, respectively.
The United States federal income tax basis of the Series' investments and the
net unrealized appreciation (depreciation) as of August 31, 2003 were as
follows:
<Table>
<Caption>
NET
TAX BASIS UNREALIZED
OF INVESTMENTS APPRECIATION DEPRECIATION APPRECIATION
- ------------------ ------------------ ------------------ ------------------
$78,567,360 $3,149,827 $593,894 $2,555,933
</Table>
The difference between book and tax basis was primarily attributable to the
difference in the treatment of accretion of market discount.
NOTE 6. CAPITAL
The Series offers Class A, Class B, Class C and Class Z shares. Class A shares
are sold with a front-end sales charge of up to 3%. 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% during the first 18 months. Class B shares will automatically
convert to Class A shares on a quarterly basis approximately seven years after
purchase. Special exchange privileges are 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.
The Series 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>
CLASS A SHARES AMOUNT
- ------------------------------------------------------------- ---------- ------------
Year ended August 31, 2003:
Shares sold 717,155 $ 7,741,133
Shares issued in reinvestment of dividends 103,737 1,109,555
Shares reacquired (1,428,054) (15,377,187)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion (607,162) (6,526,499)
Shares issued upon conversion from Class B 336,317 3,632,607
---------- ------------
Net increase (decrease) in shares outstanding (270,845) $ (2,893,892)
---------- ------------
---------- ------------
</Table>
Dryden Municipal Series Fund - Florida Series 25
<Page>
<Table>
<Caption>
CLASS A SHARES AMOUNT
- ------------------------------------------------------------- ---------- ------------
Year ended August 31, 2002:
Shares sold 296,664 $ 3,126,262
Shares issued in reinvestment of dividends 118,677 1,248,994
Shares reacquired (970,126) (10,210,301)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion (554,785) (5,835,045)
Shares issued upon conversion from Class B 168,920 1,771,182
---------- ------------
Net increase (decrease) in shares outstanding (385,865) $ (4,063,863)
---------- ------------
---------- ------------
<Caption>
CLASS B
- -------------------------------------------------------------
Year ended August 31, 2003:
Shares sold 205,498 $ 2,196,149
Shares issued in reinvestment of dividends 26,856 287,080
Shares reacquired (463,322) (4,953,523)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion (230,968) (2,470,294)
Shares reacquired upon conversion into Class A (336,317) (3,632,607)
---------- ------------
Net increase (decrease) in shares outstanding (567,285) $ (6,102,901)
---------- ------------
---------- ------------
Year ended August 31, 2002:
Shares sold 428,578 $ 4,500,204
Shares issued in reinvestment of dividends 36,603 385,279
Shares reacquired (530,579) (5,582,330)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion (65,398) (696,847)
Shares issued upon conversion into Class A (168,920) (1,771,182)
---------- ------------
Net increase (decrease) in shares outstanding (234,318) $ (2,468,029)
---------- ------------
---------- ------------
<Caption>
CLASS C
- -------------------------------------------------------------
Year ended August 31, 2003:
Shares sold 62,877 $ 675,473
Shares issued in reinvestment of dividends 13,107 140,212
Shares reacquired (80,922) (873,079)
---------- ------------
Net increase (decrease) in shares outstanding (4,938) $ (57,394)
---------- ------------
---------- ------------
Year ended August 31, 2002:
Shares sold 79,657 $ 838,958
Shares issued in reinvestment of dividends 13,244 139,398
Shares reacquired (93,035) (976,979)
---------- ------------
Net increase (decrease) in shares outstanding (134) $ 1,377
---------- ------------
---------- ------------
</Table>
26 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS Z SHARES AMOUNT
- ------------------------------------------------------------- ---------- ------------
Year ended August 31, 2003:
Shares sold 703,002 $ 7,523,527
Shares issued in reinvestment of dividends 3,740 40,082
Shares reacquired (703,865) (7,560,772)
---------- ------------
Net increase (decrease) in shares outstanding 2,877 $ 2,837
---------- ------------
---------- ------------
Year ended August 31, 2002:
Shares sold 80,083 $ 843,037
Shares issued in reinvestment of dividends 3,815 40,134
Shares reacquired (36,796) (386,913)
---------- ------------
Net increase (decrease) in shares outstanding 47,102 $ 496,258
---------- ------------
---------- ------------
</Table>
Dryden Municipal Series Fund - Florida Series 27
<Page>
Financial Highlights
<Table>
<Caption>
CLASS A
-----------------
YEAR ENDED
AUGUST 31, 2003
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 10.68
------
Income from investment operations
Net investment income .42
Net realized and unrealized gain (loss) on investment
transactions (.17)
------
Total from investment operations .25
------
LESS DISTRIBUTIONS
Dividends from net investment income (.42)
Distributions in excess of net investment income --
Distributions from net realized gains (.02)
------
Total distributions (.44)
------
Net asset value, end of year $ 10.49
------
------
TOTAL RETURN(A): 2.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $59,498
Average net assets (000) $63,290
Ratios to average net assets:
Expenses, including distribution fees and service (12b-1)
fees(c) 1.07%
Expenses, excluding distribution fees and service (12b-1)
fees .82%
Net investment income 3.94%
For Class A, B, C and Z shares:
Portfolio turnover rate 60%
</Table>
- ------------------------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions.
(b) Less than $.005 per share.
(c) The distributor of the Series has contractually agreed to limit its
distribution and service (12b-1) fees to .25 of 1% of the average daily net
assets of Class A shares.
(d) Effective September 1, 2001, the Series has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on debt securities. The effect of this change for
the year ended August 31, 2002 was to increase net investment income and
decrease net realized and unrealized gains per share by less than $0.005 and
increase the ratio of net investment income from 4.69% to 4.71%. Per share
amounts and ratios for the years ended prior to August 31, 2002 have not
been restated to reflect this change in presentation.
See Notes to Financial Statements.
28 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS A
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
2002(D) 2001 2000 1999
-----------------------------------------------------------------------------------
$ 10.70 $ 10.23 $ 10.18 $ 10.74
------ ------ ------ ------
.49 .51 .51 .50
(.02) .47 .05 (.56)
------ ------ ------ ------
.47 .98 .56 (.06)
------ ------ ------ ------
(.49) (.51) (.51) (.50)
-- --(b) -- --(b)
-- -- -- --(b)
------ ------ ------ ------
(.49) (.51) (.51) (.50)
------ ------ ------ ------
$ 10.68 $ 10.70 $ 10.23 $ 10.18
------ ------ ------ ------
------ ------ ------ ------
4.49% 9.91% 5.73% (.61)%
$ 63,463 $ 67,712 $ 68,701 $ 77,398
$ 64,601 $ 68,365 $ 71,083 $ 84,810
1.01% .98% .98% .89%
.76% .73% .73% .69%
4.71% 4.89% 5.06% 4.72%
41% 36% 41% 13%
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - Florida Series 29
<Page>
Financial Highlights
Cont'd.
<Table>
<Caption>
CLASS B
-----------------
YEAR ENDED
AUGUST 31, 2003
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 10.68
------
Income from investment operations
Net investment income .40
Net realized and unrealized gain (loss) on investment
transactions (.17)
------
Total from investment operations .23
------
LESS DISTRIBUTIONS
Dividends from net investment income (.39)
Distributions in excess of net investment income --
Distributions from net realized gains (.02)
------
Total distributions (.41)
------
Net asset value, end of year $ 10.50
------
------
TOTAL RETURN(A): 2.16%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $16,635
Average net assets (000) $19,636
Ratios to average net assets:
Expenses, including distribution fees and service (12b-1)
fees 1.32%
Expenses, excluding distribution fees and service (12b-1)
fees .82%
Net investment income 3.70%
</Table>
- ------------------------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions.
(b) Less than $.005 per share.
(c) Effective September 1, 2001, the Series has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on debt securities. The effect of this change for
the year ended August 31, 2002 was to increase net investment income and
decrease net realized and unrealized gains per share by less than $.005 and
increase the ratio of net investment income from 4.45% to 4.47%. Per share
amounts and ratios for the years ended prior to August 31, 2002 have not
been restated to reflect this change in presentation.
See Notes to Financial Statements.
30 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS B
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
2002(C) 2001 2000 1999
-----------------------------------------------------------------------------------
$ 10.71 $ 10.23 $ 10.18 $ 10.74
------ ------ ------ ------
.47 .48 .48 .47
(.03) .48 .05 (.56)
------ ------ ------ ------
.44 .96 .53 (.09)
------ ------ ------ ------
(.47) (.48) (.48) (.47)
-- --(b) -- --(b)
-- -- -- --(b)
------ ------ ------ ------
(.47) (.48) (.48) (.47)
------ ------ ------ ------
$ 10.68 $ 10.71 $ 10.23 $ 10.18
------ ------ ------ ------
------ ------ ------ ------
4.24% 9.64% 5.46% (.91)%
$ 22,996 $ 25,551 $ 22,875 $ 24,626
$ 23,430 $ 24,655 $ 23,191 $ 24,665
1.26% 1.23% 1.23% 1.19%
.76% .73% .73% .69%
4.47% 4.64% 4.81% 4.43%
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - Florida Series 31
<Page>
Financial Highlights
Cont'd.
<Table>
<Caption>
CLASS C
-----------------
YEAR ENDED
AUGUST 31, 2003
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 10.68
-----
Income from investment operations
Net investment income .38
Net realized and unrealized gain (loss) on investment
transactions (.17)
-----
Total from investment operations .21
-----
LESS DISTRIBUTIONS
Dividends from net investment income (.37)
Distributions in excess of net investment income --
Distributions from net realized gains (.02)
-----
Total distributions (.39)
-----
Net asset value, end of year $ 10.50
-----
-----
TOTAL RETURN(A): 1.91%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 5,693
Average net assets (000) $ 6,045
Ratios to average net assets:
Expenses, including distribution fees and service (12b-1)
fees(c) 1.57%
Expenses, excluding distribution fees and service (12b-1)
fees .82%
Net investment income 3.44%
</Table>
- ------------------------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions.
(b) Less than $.005 per share.
(c) The distributor of the Series has contractually agreed to limit its
distribution and service (12b-1) fees to .75 of 1% of the average daily net
assets of Class C shares.
(d) Effective September 1, 2001, the Series has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on debt securities. The effect of this change for
the year ended August 31, 2002 was to increase net investment income and
decrease net realized and unrealized gains per share by less than $0.005 and
increase the ratio of net investment income from 4.20% to 4.22%. Per share
amounts and ratios for the years ended prior to August 31, 2002 have not
been restated to reflect this change in presentation.
See Notes to Financial Statements.
32 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS C
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
2002(D) 2001 2000 1999
-----------------------------------------------------------------------------------
$10.70 $10.23 $10.18 $10.74
----- ----- ----- -----
.44 .46 .46 .44
(.02) .47 .05 (.56)
----- ----- ----- -----
.42 .93 .51 (.12)
----- ----- ----- -----
(.44) (.46) (.46) (.44)
-- --(b) -- --(b)
-- -- -- --(b)
----- ----- ----- -----
(.44) (.46) (.46) (.44)
----- ----- ----- -----
$10.68 $10.70 $10.23 $10.18
----- ----- ----- ----- ---
----- ----- ----- ----- ---
3.99% 9.37% 5.20% (1.16)%
$5,848 $5,857 $5,456 $6,833
$5,806 $5,756 $5,885 $7,420
1.51% 1.48% 1.48% 1.44%
.76% .73% .73% .69%
4.22% 4.39% 4.56% 4.17%
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - Florida Series 33
<Page>
Financial Highlights
Cont'd.
<Table>
<Caption>
CLASS Z
-----------------
YEAR ENDED
AUGUST 31, 2003
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 10.68
-----
Income from investment operations
Net investment income .46
Net realized and unrealized gain (loss) on investment
transactions (.17)
-----
Total from investment operations .29
-----
LESS DISTRIBUTIONS
Dividends from net investment income (.45)
Distributions in excess of net investment income --
Distributions from net realized gains (.02)
-----
Total distributions (.47)
-----
Net asset value, end of year $ 10.50
-----
-----
TOTAL RETURN(A): 2.68%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 1,297
Average net assets (000) $ 1,567
Ratios to average net assets:
Expenses, including distribution fees and service (12b-1)
fees .82%
Expenses, excluding distribution fees and service (12b-1)
fees .82%
Net investment income 4.14%
</Table>
- ------------------------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions.
(b) Less than $.005 per share.
(c) Effective September 1, 2001, the Series has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on debt securities. The effect of this change for
the year ended August 31, 2002 was to increase net investment income and
decrease net realized and unrealized gains per share by less than $.005 and
increase the ratio of net investment income from 4.93% to 4.96%. Per share
amounts and ratios for the years ended prior to August 31, 2002 have not
been restated to reflect this change in presentation.
See Notes to Financial Statements.
34 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS Z
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
2002(C) 2001 2000 1999
-----------------------------------------------------------------------------------
$10.70 $10.22 $10.17 $10.73
----- ----- ----- -----
.52 .53 .53 .52
(.02) .48 .05 (.56)
----- ----- ----- -----
.50 1.01 .58 (.04)
----- ----- ----- -----
(.52) (.53) (.53) (.52)
-- --(b) -- --(b)
-- -- -- --(b)
----- ----- ----- -----
(.52) (.53) (.53) (.52)
----- ----- ----- -----
$10.68 $10.70 $10.22 $10.17
----- ----- ----- -----
----- ----- ----- -----
4.85% 10.18% 5.99% (.42)%
$1,289 $788 $463 $377
$1,012 $579 $307 $413
.76% .73% .73% .69%
.76% .73% .73% .69%
4.96% 5.13% 5.31% 4.93%
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - Florida Series 35
<Page>
Report of Independent Auditors
To the Shareholders and Trustees of
Dryden Municipal Series Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dryden Municipal Series Fund
(formerly, Prudential Municipal Series Fund), Florida Series, (one of the
portfolios constituting Dryden Municipal Series Fund, hereafter referred to as
the 'Fund') at August 31, 2003, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as 'financial statements') are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 2003 by
correspondence with the custodian and broker, provide a reasonable basis for our
opinion.
PricewaterhouseCoopers LLP
New York, New York
October 22, 2003
36 Visit our website at www.jennisondryden.com
<Page>
Federal Income Tax Information
(Unaudited)
We are required by the Internal Revenue Code to advise you within 60 days of the
Series' fiscal year end (August 31, 2003) as to the federal tax status of
dividends paid by the Series during such fiscal year. Accordingly, we are
advising you that in the fiscal year ended August 31, 2003, dividends paid from
net investment income of $.42 per Class A share, $.39 per Class B share, $.37
per Class C share and $.45 per Class Z share were all federally tax-exempt
interest dividends, distributions paid from ordinary income of $.002 per Class
A, B, C and Z shares and distributions paid from long-term capital gains of $.02
per Class A, B, C and Z shares.
We wish to advise you that the corporate dividends received deduction for the
Series is zero. Only funds that invest in U.S. equity securities are entitled to
pass-through a corporate dividends received deduction.
Dryden Municipal Series Fund - Florida Series 37
<Page>
Supplemental Proxy Information
(Unaudited)
A meeting of the Fund's shareholders was held on July 17, 2003. The meeting was
held for the following purposes:
(1) To approve the election of ten (10) trustees to the Board of Trustees, as
follows:
- David E.A. Carson
- Robert E. La Blanc
- Robert F. Gunia
- Douglas H. McCorkindale
- Stephen P. Munn
- Richard A. Redeker
- Judy A. Rice
- Robin B. Smith
- Stephen Stoneburn
- Clay T. Whitehead
(2) To approve a proposal to permit the manager to enter into, or make material
changes to, subadvisory agreements without shareholder approval.
(3) To permit an amendment to the management contract between PI and
the Fund.
(4b) To approve changes to fundamental investment restrictions and policies,
relating to: issuing senior securities, borrowing money or pledging assets.
(4c) To approve changes to fundamental investment restrictions and policies,
relating to: buying and selling real estate.
(4d) To approve changes to fundamental investment restrictions and policies,
relating to: buying and selling commodities and commodity contracts.
(4f) To approve changes to fundamental investment restrictions and policies,
relating to: making loans.
(4g) To approve changes to fundamental investment restrictions and policies,
relating to: other investment restrictions, including investing in
securities of other investment companies.
38 Visit our website at www.jennisondryden.com
<Page>
The results of the proxy solicitation on the preceding matters were:
<Table>
<Caption>
VOTES VOTES VOTES
MATTER FOR AGAINST WITHHELD ABSTENTIONS
--------------------- ------------- ---------- -------- -----------
(1) David E.A. Carson 4,728,785 -- 156,442 --
Robert E. La Blanc 4,718,923 -- 166,304 --
Robert F. Gunia 4,739,960 -- 145,267 --
Douglas H.
McCorkindale 4,732,806 -- 152,421 --
Stephen P. Munn 4,736,098 -- 149,129 --
Richard A. Redeker 4,739,960 -- 145,267 --
Judy A. Rice 4,735,939 -- 149,288 --
Robin B. Smith 4,732,228 -- 152,999 --
Stephen Stoneburn 4,739,960 -- 145,267 --
Clay T. Whitehead 4,732,806 -- 152,421 --
(2) Permit the manager to
enter into, or make
material changes to,
Subadvisory
Agreements without
shareholder
approval. 3,663,573 360,958 -- 155,200
(3) Permit an Amendment
to the Management
Contract between PI
and the Company. 4,416,263 315,503 -- 153,461
(4b) Issuing Senior
Securities,
Borrowing Money or
Pledging Assets 3,702,895 318,423 -- 158,413
(4c) Buying and Selling
Real Estate 3,716,126 305,854 -- 157,751
(4d) Buying and Selling
Commodities and
Commodity Contracts 3,709,500 316,180 -- 154,051
(4f) Making Loans 3,702,634 326,337 -- 151,360
(4g) Other Investment
Restrictions 3,728,922 293,395 -- 157,414
</Table>
One or more matters in addition to the above referenced proposals were submitted
for shareholder approval, and the shareholder meeting relating to those matters
was adjourned until August 21, 2003, and a date following the close of the
reporting period.
Dryden Municipal Series Fund - Florida Series 39
<Page>
Management of the Fund
(Unaudited)
Information pertaining to the Trustees of the Fund is set forth below. Trustees
who are not deemed to be 'interested persons' of the Fund, as defined in the
1940 Act are referred to as 'Independent Trustees.' Trustees who are deemed to
be 'interested persons' of the Fund are referred to as 'Interested Trustees.'
'Fund Complex'D consists of the Fund and any other investment companies managed
by PI.
INDEPENDENT TRUSTEES(2)
DAVID E.A. CARSON (69), Trustee since 2003(3)
Oversees 99 portfolios in Fund complex
Principal occupations (last 5 years): Director (January 2000 to May 2000),
Chairman (January 1999 to December 1999), Chairman and Chief Executive Officer
(January 1998 to December 1998) and President, Chairman and Chief Executive
Officer (1983-1997) of People's Bank.
Other Directorships held:(4) Director of United Illuminating and UIL Holdings
(utility company), since 1993.
ROBERT E. LA BLANC (69), Trustee since 2003(3)
Oversees 119 portfolios in Fund complex
Principal occupations (last 5 years): President (since 1981) of Robert E. La
Blanc Associates, Inc. (telecommunications); formerly General Partner at Salomon
Brothers and Vice-Chairman of Continental Telecom; Trustee of Manhattan
College.
Other Directorships held:(4) Director of Storage Technology Corporation (since
1979) (technology), Chartered Semiconductor Manufacturing, Ltd. (since 1998);
Titan Corporation (electronics) (since 1995), Computer Associates International,
Inc. (since 2002) (software company); FiberNet Telecom Group, Inc. (since 2003)
(telecom company); Director (since April 1999) of the High Yield Plus Fund,
Inc.
DOUGLAS H. MCCORKINDALE (64), Trustee since 2003(3)
Oversees 101 portfolios in Fund complex
Principal occupations (last 5 years): Chairman (since February 2001), Chief
Executive Officer (since June 2000) and President (since September 1997) of
Gannett Co. Inc. (publishing and media); formerly Vice Chairman (March 1984-May
2000) of Gannett Co., Inc.
Other Directorships held:(4) Director of Gannett Co. Inc., Director of
Continental Airlines, Inc. (since May 1993); Director of Lockheed Martin Corp.
(aerospace and defense) (since May 2001); Director of The High Yield Plus
Fund, Inc. (since 1996).
STEPHEN P. MUNN (61), Trustee since 1999(3)
Oversees 107 portfolios in Fund complex
Principal occupations (last 5 years): Chairman of the Board (since 1994) and
formerly Chief Executive Officer (1988-2001) and President of Carlisle Companies
Incorporated.
Other Directorships held:(4) Chairman of the Board (since January 1994) and
Director (since 1988) of Carlisle Companies Incorporated (manufacturer of
industrial products); Director of Gannet Co. Inc. (publishing and media).
40 Visit our website at www.jennisondryden.com
<Page>
RICHARD A. REDEKER (60), Trustee since 1993(3)
Oversees 102 portfolios in Fund complex
Principal occupations (last 5 years): Management Consultant; formerly employee
of Prudential Investments (October 1996-December 1998); Director of Invesmart,
Inc. (since 2001) and Director of Penn Tank Lines, Inc. (since 1999).
Other Directorships held:(4) None.
ROBIN B. SMITH (64), Trustee since 2003(3)
Oversees 109 portfolios in Fund complex
Principal occupations (last 5 years): Chairman of the Board (since January 2003)
of Publishers Clearing House (direct marketing), formerly Chairman and Chief
Executive Officer (August 1996-January 2003) of Publishers Clearing House.
Other Directorships held:(4) Director of BellSouth Corporation (since 1992).
STEPHEN STONEBURN (60), Trustee since 2003(3)
Oversees 107 portfolios in Fund complex
Principal occupations (last 5 years): President and Chief Executive Officer
(since June 1996) of Quadrant Media Corp. (a publishing company); formerly
President (June 1995-June 1996) of Argus Integrated Media, Inc.; Senior Vice
President and Managing Director (January 1993-1995) of Cowles Business Media and
Senior Vice President of Fairchild Publications, Inc. (1975-1989).
Other Directorships held:(4) None
CLAY T. WHITEHEAD (64), Trustee since 2003(3)
Oversees 106 portfolios in Fund complex
Principal occupations (last 5 years): President (since 1983) of National
Exchange Inc. (new business development firm).
Other Directorships held:(4) Director (since 2000) of the High Yield Plus Fund,
Inc.
INTERESTED TRUSTEES(1)
JUDY A. RICE (55), President since 2003 and Trustee since 2000(3)
Oversees 109 portfolios in Fund complex
Principal occupations (last 5 years): President, Chief Executive Officer, Chief
Operating Officer and Officer-in-Charge (since 2003) of PI; Director,
Officer-in-Charge, President, Chief Executive Officer and Chief Operating
Officer (since May 2003) of American Skandia Advisory Services, Inc. and
American Skandia Investment Services, Inc.; Director, Officer-in-Charge,
President, Chief Executive Officer (since May 2003) of American Skandia Fund
Services, Inc.; formerly various positions to Senior Vice President (1992-1999)
of Prudential Securities; and various positions to Managing Director (1975-1992)
of Salomon Smith Barney; Member of Board of Governors of the Money Management
Institute.
Other Directorships held:(4) None
Dryden Municipal Series Fund - Florida Series 41
<Page>
ROBERT F. GUNIA (56), Vice President and Trustee since 1996(3)
Oversees 189 portfolios in Fund complex
Principal occupations (last 5 years): Chief Administrative Officer (since June
1999) of PI; Executive Vice President and Treasurer (since January 1996) of PI;
President (since April 1999) of Prudential Investment Management Services LLC
(PIMS); Corporate Vice President (since September 1997) of The Prudential
Insurance Company of America (Prudential); Director, Executive Vice President
and Chief Administrative Officer (since May 2003) of American Skandia Investment
Services, Inc., American Skandia Advisory Services, Inc. and American Skandia
Fund Services, Inc.; formerly Senior Vice President (March 1987-May 1999) of
Prudential Securities.
Other Directorships held:(4) Vice President and Director (since May 1989) and
Treasurer (since 1999) of The Asia Pacific Fund, Inc.
Information pertaining to the Officers of the Trust is set forth below.
OFFICERS(2)
MARGUERITE E.H. MORRISON (47), Chief Legal Officer since 2003 and Assistant
Secretary since 2002(3)
Principal occupations (last 5 years): Vice President and Chief Legal
Officer--Mutual Funds and Unit Investment Trusts (since August 2000) of
Prudential; Senior Vice President and Secretary (since April 2003) of PI; Senior
Vice President and Secretary (since May 2003) of American Skandia Investment
Services, Inc., American Skandia Advisory Services, Inc. and American Skandia
Fund Services, Inc.; Vice President and Assistant Secretary of PIMS (since
October 2001), previously Senior Vice President and Assistant Secretary
(February 2001-April 2003) of PI, Vice President and Associate General Counsel
(December 1996-February 2001) of PI.
DEBORAH A. DOCS (45), Secretary since 1998; Assistant Secretary 1985-1998(3)
Principal occupations (last 5 years): Vice President and Corporate Counsel
(since January 2001) of Prudential; Vice President and Assistant Secretary
(since December 1996) of PI, Vice President and Assistant Secretary (since May
2003) of American Skandia Investment Services, Inc.
MARYANNE RYAN (39), Anti-Money Laundering Compliance Officer since 2002(3)
Principal occupations (last 5 years): Vice President, Prudential (since November
1998), First Vice President, Prudential Securities (March 1997-May 1998);
Anti-Money Laundering Compliance Officer (since 2003) of American Skandia
Investment Services, Inc., American Skandia Advisory Services, Inc. and American
Skandia Marketing, Inc.
GRACE C. TORRES (44), Treasurer and Principal Financial and Accounting Officer
since 1996(3)
Principal occupations (last 5 years): Senior Vice President (since January 2000)
of PI, Senior Vice President and Assistant Treasurer (since May 2003) of
American Skandia Investment Services, Inc. and American Skandia Advisory
Services, Inc.; formerly First Vice President (December 1996-January 2000) of PI
and First Vice President (March 1993-1999) of Prudential Securities.
42 Visit our website at www.jennisondryden.com
<Page>
<Table>
1 'Interested' Trustee, as defined in the 1940 Act, by reason of employment with the
Manager, (Prudential Investments LLC or PI), the Subadviser (Prudential Investment
Management, Inc. or PIM) or the Distributor (Prudential Investment Management
Services LLC or PIMS).
2 Unless otherwise noted, the address of the Trustees and Officers is c/o:
Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, NJ
07102.
3 There is no set term of office for Trustees and Officers. The Independent Trustees
have adopted a retirement policy, which calls for the retirement of Trustees on
December 31 of the year in which they reach the age of 75. The table shows the
individuals length of service as Trustee and/or Officer.
4 This includes only directorships of companies requested to register, or file
reports with the SEC under the Securities and Exchange Act of 1934 (that is,
'public companies') or other investment companies registered under the 1940 Act.
D The Fund Complex consists of all investment companies managed by PI. The Funds for
which PI serves as manager include JennisonDryden Mutual Funds, Strategic Partners
Funds, American Skandia Advisor Funds, Inc., The Prudential Variable Contract
Accounts 2, 10, 11, The Target Portfolio Trust, The Prudential Series Fund, Inc.,
American Skandia Trust, and Prudential's Gibraltar Fund.
</Table>
Additional information about the Fund's Trustees is included in the Fund's
Statement of Additional Information which is available without charge, upon
request, by calling (800) 521-7466 or (732) 482-7555 (Calling from outside the
U.S.)
Dryden Municipal Series Fund - Florida Series 43
Growth of a $10,000 Investment
(CHART)
Average Annual Total Returns (with Sales Charge) as of 8/31/03
One Year Five Years Ten Years Since Inception
Class A -0.75% 3.68% 4.73% (4.39) 6.29% (5.76)
Class B -2.75 3.89 N/A 5.44 (5.20)
Class C -0.08 3.59 4.34 (4.00) 4.61 (4.25)
Class Z 2.68 4.60 N/A 5.33 (5.30)
Average Annual Total Returns (without Sales Charge) as of 8/31/03
One Year Five Years Ten Years Since Inception
Class A 2.32% 4.31% 5.05% (4.71) 6.55% (6.01)
Class B 2.16 4.06 N/A 5.44 (5.20)
Class C 1.91 3.80 4.44 (4.10) 4.72 (4.36)
Class Z 2.68 4.60 N/A 5.33 (5.30)
Past performance is not indicative of future
results. Principal value and investment return
will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than
their original cost. Source: Prudential
Investments LLC and Lipper Inc. Inception
dates: Class A, 12/28/90; Class B, 8/1/94;
Class C, 7/26/93; and Class Z, 12/6/96.
The graph compares a $10,000 investment in the
Dryden Municipal Series Fund/Florida Series
(Class A shares) with a similar investment in
the Lehman Brothers Municipal Bond Index by
portraying the initial account values at the
beginning of the ten-year period of Class A
shares (August 31, 1993) and the account values
at the end of the current fiscal year (August
31, 2003) as measured on a quarterly basis. For
purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the
maximum applicable front-end sales charge was
deducted from the initial $10,000 investment in
Class A shares; (b) all recurring fees
(including management fees) were deducted; and
(c) all dividends and distributions were
reinvested. The line graph provides information
for Class A shares only. As indicated in
the tables, performance for Class B, Class C,
and Class Z shares will vary due to the
differing charges and expenses applicable to
each share class (as indicated in the following
paragraphs). Without a distribution and service
(12b-1) fee waiver of 0.05% for Class A shares,
the returns for Class A shares shown in the
graph and in the tables would have been lower.
The returns on investment in the graph and in
the tables do not reflect the deduction of
taxes that a shareholder would pay on fund
distributions or following the redemption of
fund shares.
Visit our website at www.jennisondryden.com
The Lehman Brothers Municipal Bond Index is an
unmanaged index of over 39,000 long-term
investment-grade municipal bonds. It gives a
broad look at how long-term investment-grade
municipal bonds have performed. The Lehman Brothers
Municipal Bond Index's total returns include the
reinvestment of all dividends, but do not include
the effects of sales charges, operating expenses of
a mutual fund, or taxes. These returns would be
lower if they included the effects of sales
charges, operating expenses, or taxes. The
securities that comprise the Lehman Brothers
Municipal Bond Index may differ substantially
from the securities in the Series. The Lehman
Brothers Municipal Bond Index is not the only
index that may be used to characterize
performance of municipal bond funds. Other
indexes may portray different comparative
performance. Investors cannot invest directly
in an index.
The Series charges a maximum front-end sales
charge of 3% for Class A shares and a 12b-1 fee
of up to 0.30% annually. Class A shares may not
be subject to a front-end sales charge, but may
be subject to a 1% contingent deferred sales charge
(CDSC) for the first year. Class B shares are subject
to a declining CDSC of 5%, 4%, 3%, 2%, 1%, and
1% respectively for the first six years after
purchase and a 12b-1 fee of 0.50% annually.
Approximately seven years after purchase, Class
B shares will automatically convert to Class A
shares on a quarterly basis. Class C shares are
subject to a front-end sales charge of 1%, a
CDSC of 1% for shares redeemed within 18 months
of purchase, and a 12b-1 fee of up to 1%
annually. Class Z shares are not subject to a
sales charge or 12b-1 fee. Without waiver of
fees and/or expense subsidization, the Series'
returns in the tables would have been lower, as
indicated in parentheses.
Dryden Municipal Series Fund/Florida Series
MAIL TELEPHONE WEBSITE
Gateway Center Three (800) 225-1852 www.jennisondryden.com
100 Mulberry Street
Newark, NJ 07102-4077
Trustees
David E.A. Carson - Robert F. Gunia - Robert E. La Blanc -
Douglas H. McCorkindale - Stephen P. Munn - Richard A. Redeker -
Judy A. Rice - Robin B. Smith - Stephen D. Stoneburn - Clay T. Whitehead
Officers
Judy A. Rice, President - Robert F. Gunia, Vice President -
Grace C. Torres, Treasurer and Principal Financial and Accounting Officer -
Marguerite E.H. Morrison, Chief Legal Officer and Assistant Secretary -
Deborah A. Docs, Secretary - Maryanne Ryan, Anti-Money Laundering Compliance
Officer
- -------------------------------------------------------------------------------
Manager Prudential Investments LLC Gateway Center Three
100 Mulberry Street
Newark, NJ 07102
- -------------------------------------------------------------------------------
Investment Adviser Prudential Investment Gateway Center Two
Management, Inc. 100 Mulberry Street
Newark, NJ 07102
- -------------------------------------------------------------------------------
Distributor Prudential Investment Gateway Center Three
Management Services LLC 14th Floor
100 Mulberry Street
Newark, NJ 07102
- -------------------------------------------------------------------------------
Custodian State Street Bank One Heritage Drive
and Trust Company North Quincy, MA 02171
- -------------------------------------------------------------------------------
Transfer Agent Prudential Mutual Fund PO Box 8098
Services LLC Philadelphia, PA 19101
- -------------------------------------------------------------------------------
Independent Auditors PricewaterhouseCoopers LLP 1177 Avenue of the
Americas
New York, NY 10036
- -------------------------------------------------------------------------------
Legal Counsel Shearman & Sterling LLP 599 Lexington Avenue
New York, NY 10022
- -------------------------------------------------------------------------------
Dryden Municipal Series Fund/Florida Series
Share Class A B C Z
Nasdaq PFLAX PFABX PFLCX PFLZX
CUSIP 262468101 262468200 262468309 262468408
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY
FEDERAL GOVERNMENT AGENCY
MAY LOSE VALUE
ARE NOT A DEPOSIT OF OR GUARANTEED BY
ANY BANK OR ANY BANK AFFILIATE
MF148E IFS-A084962
<Page>
Dryden
Municipal Series Fund/
New Jersey Series
Formerly known as Prudential Municipal Series Fund/
New Jersey Series
AUGUST 31, 2003 ANNUAL REPORT
(GRAPHIC)
FUND TYPE
Municipal bond
OBJECTIVE
Maximize current income that is exempt from New
Jersey State income tax and federal income tax,
consistent with the preservation of capital
- ----------------------------------------------------
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 Series'
portfolio holdings are for the period covered
by this report and are subject to change thereafter.
JennisonDryden is a service mark of The Prudential
Insurance Company of America.
JennisonDrydenMutualFunds
Dear Shareholder, October 10, 2003
There have been welcome signs that the U.S.
economy is growing again. Many corporate
executives and investment research analysts are
expecting profits to rise as well. However,
jobs are not being created as quickly as in
past recoveries, reminding us that the
resumption of growth doesn't mean a return to
an earlier time. The economic picture continues
to change, providing new opportunities and
challenges. Regardless of the direction of
financial markets, it is important to remember
that a wise investor plans today for tomorrow's
needs. A broadly diversified investment
portfolio will increase your chances of
participating in positive changes and is also
your best long-term defense against unexpected
downturns.
Whether you are investing for your retirement,
your children's education, or some other
purpose, JennisonDryden mutual funds offer the
experience, resources, and professional
discipline of three leading asset management
firms that can make a difference for you.
JennisonDryden funds are managed by Prudential
Investment Management's public equity and
fixed-income asset management businesses. The
equity funds are managed by Jennison Associates
and Quantitative Management. Prudential Fixed
Income manages the JennisonDryden fixed income
and money market funds.
We recommend that you develop a diversified
personal asset allocation strategy in
consultation with a financial professional who
knows you, who understands your reasons for
investing, the time you have to reach your
goals, and the amount of risk you are
comfortable assuming. JennisonDryden mutual
funds offer a wide range of investment choices,
and your financial professional can help you
choose the appropriate funds to implement your
strategy.
Sincerely,
Judy A. Rice, President
Dryden Municipal Series Fund/New Jersey Series
Dryden Municipal Series Fund/New Jersey Series 1
Your Series' Performance
Series Objective
The investment objective of the Dryden
Municipal Series Fund/New Jersey Series (the
Series) is to maximize current income that is
exempt from New Jersey State income tax and
federal income tax, consistent with the
preservation of capital. There can be no
assurance that the Series will achieve its
investment objective.
Cumulative Total Returns1 as of 8/31/03
One Year Five Years Ten Years Since Inception2
Class A 2.57% 25.38% 63.07% (61.89) 137.12% (131.31)
Class B 2.31 23.77 57.80 (56.66) 167.00 (153.43)
Class C 2.05 22.25 N/A 57.17 (56.45)
Class Z 2.84 27.69 N/A 44.77 (44.64)
Lehman Brothers Muni Bond Index3 3.14 29.57 76.44 ***
Lipper NJ Muni Debt Funds Avg.4 1.84 21.20 59.09 ****
Average Annual Total Returns1 as of 9/30/03
One Year Five Years Ten Years Since Inception2
Class A 0.22% 4.28% 4.85% (4.77) 6.49% (6.31)
Class B -1.79 4.50 4.83 (4.76) 6.70 (6.35)
Class C 0.89 4.20 N/A 5.27 (5.21)
Class Z 3.59 5.30 N/A 6.01 (6.00)
Lehman Brothers Muni Bond Index3 3.89 5.67 6.03 ***
Lipper NJ Muni Debt Funds Avg.4 2.93 4.23 4.89 ****
Distributions and Yields1 as of 8/31/03
Taxable Equivalent 30-Day Yield5
Total Distributions 30-Day at Tax Rates of
Paid for 12 Months SEC Yield 33% 35%
Class A $0.52 2.96% 4.72% 4.86%
Class B 0.49 2.81 4.48 4.62
Class C 0.47 2.53 4.03 4.16
Class Z 0.55 3.31 5.28 5.44
Past performance is not indicative of future
results. Principal value and investment return
will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than
their original cost. 1Source: Prudential
Investments LLC and Lipper Inc. The cumulative
total returns do not take into account
applicable sales charges. If reflected, the
applicable sales charges would reduce the
cumulative total returns performance quoted.
The average annual total returns do take into
account applicable sales charges. Without the
contractual distribution and service (12b-1)
fee waiver of 0.05% and 0.25% for Class A and
Class C shares respectively, the returns for
these classes would have been lower. The
Distributor's 12b-1 fee waiver of 0.25% for
Class C shares continued through August 31,
2003. The Series charges a maximum front-end
sales charge of 3% for Class A shares and a
12b-1 fee of up to 0.30% annually. In some
circumstances, Class A shares may not be
subject to a front-end sales charge, but may be
subject to a 1% contingent deferred sales
charge (CDSC) for the first year. Class B
shares are subject to a declining CDSC of 5%,
4%, 3%, 2%, 1%, and 1% respectively for the
first six years after purchase and a 12b-1 fee
of 0.50% annually. Approximately seven years
after purchase, Class B shares will
automatically convert to Class A shares on a
quarterly basis. Class C shares are subject to
a front-end sales charge of 1%, a CDSC of 1%
for shares redeemed within 18 months of
purchase, and a 12b-1 fee of up to 1% annually.
Class Z shares are not subject to a sales
charge or 12b-1 fee. The returns in the tables
do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or
following the redemption of fund shares.
Without waiver of fees and/or expense
subsidization, the Series' returns would have
been lower, as indicated in parentheses.
2Inception dates: Class A, 1/22/90; Class B,
3/4/88; Class C, 8/1/94; and Class Z, 12/6/96.
2 Visit our website at www.jennisondryden.com
3The Lehman Brothers Municipal (Muni) Bond
Index is an unmanaged index of over 39,000
long-term investment-grade municipal bonds. It
gives a broad look at how long-term investment-
grade municipal bonds have performed. 4The
Lipper New Jersey (NJ) Muni Debt Funds Average
(Lipper Average) represents returns based on an
average return of all funds in the Lipper NJ
Muni Debt Funds category for the periods noted.
Funds in the Lipper Average limit their assets
to those securities that are exempt from
taxation in New Jersey. Investors cannot invest
directly in an index. 5Taxable equivalent
yields reflect federal and applicable state tax
rates. The returns for the Lehman Brothers Muni
Bond Index would be lower if they included the
effects of sales charges, operating expenses of
a mutual fund, or taxes. Returns for the Lipper
Average reflect the deduction of operating
expenses, but not sales charges or taxes.
***Lehman Brothers Muni Bond Index Closest
Month-End to Inception cumulative total returns
as of 8/31/03 are 154.09% for Class A, 194.91%
for Class B, 76.80% for Class C, and 47.28% for
Class Z. Lehman Brothers Muni Bond Index
Closest Month-End to Inception average annual
total returns as of 9/30/03 are 7.29% for Class A,
7.39% for Class B, 6.75% for Class C, and 6.28%
for Class Z. ****Lipper Average Closest Month-End to
Inception cumulative total returns as of 8/31/03
are 138.67% for Class A, 177.11% for Class B,
60.99% for Class C, and 36.01% for Class Z.
Lipper Average Closest Month-End to Inception
average annual total returns as of 9/30/03 are
6.77% for Class A, 6.96% for Class B, 5.63% for
Class C, and 5.01% for Class Z.
Five Largest Issuers expressed as a percentage
of total investments as of 8/31/03
New Jersey State Transportation Trust Fund Authority* 8.9%
Jersey City General Obligation 6.9
New Jersey Health Care Facilities Finance Authority* 6.6
New Jersey Economic Development Authority-School Facilities 5.8
New Jersey Economic Development Authority-Kapkowski Road Landfill* 5.7
*Some issuers are prerefunded issues, which
means they are secured by escrowed cash and/or
direct U.S. guaranteed obligations. For
details, see the Portfolio of Investments.
Issuers are subject to change.
Portfolio Composition expressed as a percentage
of net assets as of 8/31/03
Transportation 24.6%
General Obligation 16.0
Healthcare 13.4
Corporate-Backed IDB & PCR 8.0
Lease-Backed Certificate of Participation 4.8
Education 4.4
Solid Waste/Resource Recovery 2.7
Special Tax/Assessment District 1.7
Water & Sewer 1.6
Power 1.3
Tobacco 0.5
Other Muni 17.1
Other 4.0
Cash & Equivalents -0.1
Portfolio Composition is subject to change.
Credit Quality expressed as a percentage of net assets as of 8/31/03
Aaa 66.3%
Aa 5.3
A 8.6
Baa 8.3
Ba 0.7
NR 10.9
Cash -0.1
Source: Moody's rating, defaulting to S&P when
not rated. Credit Quality is subject to change.
Dryden Municipal Series Fund/New Jersey Series 3
Investment Adviser's Report
Market Overview and Performance Summary
The municipal bond market repeatedly rallied,
then sold off, which resulted in a 3.14% return
for the fiscal year ended August 31, 2003,
according to the Lehman Brothers Municipal Bond
Index (the Index). The market's volatility
largely reflected uncertainty about the
prospects for economic growth in the United
States. The outlook was cloudy because
investors did not know how much the Federal
Reserve (the Fed) would cut short-term interest
rates in an effort to stimulate the sluggish
economy. There was also concern that U.S.
involvement in a war in Iraq might harm the
U.S. economy.
Our investment strategy aimed to provide the
Series with the flexibility to readily respond
to changing conditions in the municipal bond
market. However, for the 12 months ended August
31, 2003, the Series' performance trailed its
benchmark, the Index. This occurred because the
Series invests in the New Jersey municipal bond
sector, which underperformed the broader
municipal bond market as measured by
the Index. The Index also does not reflect the
operating expenses of mutual funds. Compared to
its peer group, which does take into account
operating expenses, the Series' returns
exceeded the Lipper New Jersey Municipal Debt
Funds Average for the 12 months ended August 31, 2003.
Early in our reporting period, municipal bonds
gained in value to such an extent
that we believed a correction in the market was
virtually inevitable. When the equity market
began to recover in October 2002, demand for
municipal bonds faded temporarily and their
prices plunged. The tax-exempt market was also
pressured by a large amount of newly issued bonds
at that time.
The sell-off in municipal bonds soon turned
into a rally. Investors paid higher prices (and
accepted lower yields) for tax-exempt bonds
because the Fed was expected to cut short-term
rates with the goal of boosting economic
growth. In November 2002, it reduced its target
for the federal funds rate by half a percentage
point to 1.25%.
Concern about the economy occurred before and
continued after the war in Iraq began in March
2003. Consequently, there was speculation in
the financial markets that the Fed would
aggressively reduce rates again or purchase
U.S. Treasury securities, which would also
exert downward pressure on the general level of
interest rates. This factor helped the
municipal bond rally remain on track for the
most part until mid-June 2003. At that time,
however, the municipal bond market began to
sell off along with Treasurys. Economic data
suggested that the Fed might not cut rates
sharply when it met in late June. Indeed, it
only lowered its target for the federal funds
4 Visit our website at www.jennisondryden.com
rate by a quarter of a percentage point to 1%.
During the remainder of the reporting period,
municipal bond prices slid in July and
stabilized in August. Municipal bond prices
were hurt by data showing stronger economic
growth, even though the job market remained
weak.
Credit Quality and Interest-Rate Sensitivity
New Jersey's debt burden has risen in recent
years. Nevertheless, we believe that the
state's credit remains sound, with further
improvement in store as economic growth picks
up. During the reporting period, New Jersey
general obligation bonds remained rated AA with
a stable outlook by Standard & Poor's Ratings
Group, and Aa2 with a negative outlook by
Moody's Investors Service.
Given the fiscal challenges facing New Jersey
and the frequent changes in the level of
interest rates, we continued to work toward
achieving the right balance in the Series with
regard to two important overlapping
characteristics. The first was credit quality,
which involves the Series' exposure to high-
quality bonds versus low-quality bonds. The
second was interest-rate sensitivity, which
involves the Series' exposure to bonds with
good potential for price appreciation versus
bonds that behave defensively during a sell-off
in the fixed income market.
From the perspective of credit quality, bonds
rated Aaa (both insured and uninsured)
accounted for roughly 66% of the Series' net
assets as of August 31, 2003. We emphasized
Aaa-rated bonds because they tend to perform
better than lower-quality bonds under
challenging economic conditions. However, as
accelerating economic growth increases demand
for riskier assets, lower-quality bonds tend to
outperform Aaa-rated municipal bonds. The
Series had some exposure to bonds of below-
investment-grade quality, which provided
considerable interest income.
In the volatile interest-rate environment, we
maintained a barbell strategy that essentially
focused on two types of bonds. One side of our
barbell primarily emphasized Aaa-rated, insured
zero coupon bonds, which are so named because
they pay no interest and are sold at discount
prices to make up for their lack of periodic
interest payments. Zero coupon bonds are the
most interest-rate-sensitive of all bonds,
which enables them to perform better than other
types of debt securities when interest rates
decline and bond prices move higher. The other
side of our barbell emphasized intermediate-
term bonds whose higher coupon rates provided
the Series with considerable interest income.
These bonds are considered to have defensive
characteristics as their prices tend to hold up
relatively well when the municipal bond market
sells off. The bonds are also attractive to
investors because they provide solid income.
Dryden Municipal Series Fund/New Jersey Series 5
Periodically readjusting our coupon barbell
strategy was one way to change the Series'
duration, which measures its sensitivity to
fluctuations in the level of interest rates. In
general, when we determined that there was a
trend toward higher interest rates, we aimed to
shorten the Series' duration to help protect
its value as rising interest rates pushed
municipal bond prices lower. On the other hand,
we aimed to lengthen the Series' duration to
help it benefit more fully when falling
interest rates drove municipal bond prices
higher. In general, we employed this tactic
periodically once we determined that the
decline in interest rates was indeed a trend
rather than a temporary development.
New Jersey Series Management Team
6 Visit our website at www.jennisondryden.com
Financial Statements
-----------------------------------------------------------
AUGUST 31, 2003 ANNUAL REPORT
Dryden Municipal Series Fund
New Jersey Series
<Page>
Portfolio of Investments
as of August 31, 2003
<Table>
<Caption>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
LONG-TERM INVESTMENTS 96.9%
MUNICIPAL BONDS
-----------------------------------------------------------------------------------
Bergen Cnty., Util. Auth.,
Wtr. Poll. Ctrl. Rev.,
Ser. B, F.G.I.C. Aaa 5.75% 12/15/05 $ 1,000 $ 1,095,570
Cape May Cnty. Ind. Poll.
Ctrl., Fin. Auth. Rev.,
Atlantic City Elec. Co.,
Ser. A, M.B.I.A. Aaa 6.80 3/01/21 2,615 3,235,304
Clearview Reg. High Sch.
Dist., F.G.I.C. Aaa 5.375 8/01/15 1,205 1,319,053
Delaware River Port Auth.,
Penn. & NJ Port Dist.
Proj., Ser. B, F.S.A. Aaa 5.625 1/01/26 5,000 5,278,450
Essex Cnty. Impvt. Auth.,
Lease-Cogen Facs. Proj.
Rev., F.G.I.C. Aaa 5.25 1/01/19 1,110 1,160,993
Gloucester Cnty. Impvt.
Auth., Solid Wste. Recov.
Rev. Wste. Mgmt. Proj.,
Ser. A BBB(d) 6.85 12/01/29 3,000 3,357,870
Hudson Cnty. Impvt. Auth.,
Solid Wste. Sys. Rev.,
Ser. A AAA(d) 6.10 7/01/20 1,500(e) 1,593,600
Jackson Twnshp. Sch.
Dist.,
G.O., F.G.I.C. Aaa 6.60 6/01/04 1,020 1,063,095
G.O., F.G.I.C. Aaa 6.60 6/01/05 940 1,024,186
G.O., F.G.I.C. Aaa 6.60 6/01/10 1,600 1,898,432
G.O., F.G.I.C. Aaa 6.60 6/01/11 1,600 1,910,000
Jersey City,
G.O., Ser. A, F.S.A. Aaa 9.25 5/15/04 4,310 4,557,523
G.O., Ser. A, Rfdg. &
Gen. Impvt., A.M.B.A.C. Aaa 5.25 3/01/13 4,170 4,560,854
G.O., Ser. A, Rfdg. &
Gen. Impvt., A.M.B.A.C. Aaa 5.25 3/01/14 2,695 2,938,170
Middle Twnshp. Sch. Dist.,
F.G.I.C. Aaa 7.00 7/15/05 1,200(f) 1,322,532
Millburn Twnshp. Sch.
Dist.,
Brd. of Ed., G.O. Aa1 5.35 7/15/13 1,140 1,258,150
Brd. of Ed., G.O. Aa1 5.35 7/15/14 1,135 1,250,066
New Jersey Bldg. Auth. St.
Rev., Rfdg., Ser. B,
A.M.B.A.C. Aaa 5.25 12/15/09 4,000 4,474,320
</Table>
See Notes to Financial Statements.
8 Visit our website at www.jennisondryden.com
<Page>
<Table>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
New Jersey Econ. Dev.
Auth. Rev.,
Sch. Facs. Constrs., Ser.
A, A.M.B.A.C. Aaa 5.125% 6/15/14 $ 3,000 $ 3,188,790
Sch. Facs. Constrs., Ser.
A, A.M.B.A.C. Aaa 5.25 6/15/18 4,500 4,741,740
Sch. Facs. Constrs., Ser.
A, A.M.B.A.C. Aaa 5.25 6/15/19 2,000 2,091,920
New Jersey Econ. Dev.
Auth. St. Contract,
C.A.B.S., Rfdg., Econ.
Fund, Ser. A, M.B.I.A. Aaa Zero 3/15/20 2,000 848,540
C.A.B.S., Rfdg., Econ.
Fund,
Ser. A, M.B.I.A. Aaa Zero 9/15/20 1,000 413,420
New Jersey Econ. Dev.
Auth.,
Masonic Charity Fdn.
Proj. A+(d) 5.875 6/01/18 250 272,888
Masonic Charity Fdn.
Proj. A+(d) 6.00 6/01/25 1,150 1,243,368
New Jersey Econ. Dev.
Auth., Dist. Heating &
Cooling Rev.,
Trigen-Trenton Proj.,
Ser. A BBB-(d) 6.20 12/01/10 600 594,762
New Jersey Econ. Dev.
Auth., Econ. Dev. Rev.,
Kapkowski Rd. Landfill,
Rfdg. Baa3 6.50 4/01/28 2,000 2,161,400
Kapkowski Rd. Landfill,
Ser. A Aaa 6.375 4/01/31 5,800(e) 6,956,462
Kapkowski Rd. Landfill,
Ser. A, C.A.B.S., E.T.M. Aaa Zero 4/01/08 1,020 886,910
Nat'l. Assoc. of
Accountants NR 7.65 7/01/09 760 760,266
New Jersey Econ. Dev.
Auth., Natural Gas Facs.
Rev.,
NUI Corp. Proj., Ser. A,
M.B.I.A., A.M.T. Aaa 5.70 6/01/32 1,500 1,561,335
New Jersey Econ. Dev.
Auth., Rev.,
First Mtge. - Franciscan
Oaks NR 5.70 10/01/17 2,040 1,831,675
First Mtge. - Keswick
Pines NR 5.75 1/01/24 1,750 1,633,677
First Mtge. - The
Evergreens NR 5.875 10/01/12 1,200 1,192,596
First Mtge. - The
Evergreens NR 6.00 10/01/17 1,425 1,400,091
First Mtge. - The
Evergreens NR 6.00 10/01/22 1,400 1,332,632
Trans. Proj. Sublease,
Ser. A, F.S.A. Aaa 6.00 5/01/16 1,350 1,526,648
New Jersey Econ. Dev.
Auth., Wtr. Facs. Rev.,
R.I.T.E.S., PA-98,
F.G.I.C., A.M.T. NR 10.519(c) 11/01/29 5,000 5,657,100
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New Jersey Series 9
<Page>
Portfolio of Investments
as of August 31, 2003 Cont'd.
<Table>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
New Jersey Hlth. Care
Facs. Fin.
Auth. Rev., Atlantic City
Med. Ctr. A3 6.25% 7/01/17 $ 1,750 $ 1,881,302
Englewood Hosp. & Med.
Ctr. NR 6.75 7/01/24 1,230(e) 1,310,590
Jersey Shore Med. Ctr.,
A.M.B.A.C. AAA(d) 6.00 7/01/09 835(e) 886,194
Jersey Shore Med. Ctr.,
A.M.B.A.C. Aaa 6.00 7/01/09 630 666,137
Jersey Shore Med. Ctr.,
A.M.B.A.C. AAA(d) 6.25 7/01/21 850(e) 903,881
Jersey Shore Med. Ctr.,
A.M.B.A.C. Aaa 6.25 7/01/21 650(f) 685,633
Pascack Valley Hosp.
Assoc. BB+(d) 5.125 7/01/28 1,500 1,205,115
Somerset Med. Ctr. Baa2 5.50 7/01/33 1,500 1,424,160
South Jersey Hosp. Baa1 6.00 7/01/26 1,000 1,012,900
South Jersey Hosp. Baa1 6.00 7/01/32 1,000 1,008,770
St. Joseph's Hosp. & Med.
Ctr., Ser. A, CONNIE LEE AAA(d) 5.70 7/01/11 4,375 4,656,137
St. Peters Univ. Hosp.,
Ser. A Baa1 6.875 7/01/30 1,750 1,846,198
New Jersey St. Ed. Facs.
Auth. Rev., Coll. of New
Jersey, Ser. C, F.G.I.C. Aaa 5.375 7/01/17 1,000 1,071,460
Felician College of Lodi,
Ser. D NR 7.375 11/01/22 1,210 1,122,916
Princeton Theological,
Ser. B Aaa 5.90 7/01/26 2,500(e) 2,803,150
New Jersey St. Hwy. Auth.,
Garden St. Pkwy.,
Gen. Rev. A1 5.75 1/01/14 2,500(e) 2,857,150
Gen. Rev. A1 5.625 1/01/30 1,650(e) 1,874,037
Gen. Rev., E.T.M. A1 6.20 1/01/10 3,035 3,442,783
New Jersey St. Tpke.
Auth., Tpke. Rev.,
Ser. A, M.B.I.A. Aaa 5.75 1/01/18 7,500 8,256,525
Ser. C, M.B.I.A., E.T.M. Aaa 6.50 1/01/09 1,000 1,173,580
New Jersey St. Trans.
Trust Fund Auth. Rev,
R.I.T.E.S., PA-646,
M.B.I.A. NR 17.168(c) 12/15/08 2,475 3,819,346
Trans. Sys., Ser. B,
M.B.I.A. Aaa 6.50 6/15/10 1,540 1,806,143
Trans. Sys., Ser. B,
M.B.I.A. Aaa 5.75 6/15/14 1,315(e) 1,443,554
Trans. Sys., Ser. B,
M.B.I.A. Aaa 5.75 6/15/14 2,185 2,367,972
Trans. Sys., Ser. B,
M.B.I.A. Aaa 6.00 12/15/19 2,000(e) 2,335,180
Trans. Sys., Ser. C Aa3 5.50 6/15/14 3,350 3,659,942
</Table>
See Notes to Financial Statements.
10 Visit our website at www.jennisondryden.com
<Page>
<Table>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
North Brunswick Twnshp.,
Brd. of Ed., G.O. Aa3 6.80% 6/15/06 $ 350 $ 396,599
Brd. of Ed., G.O. Aa3 6.80 6/15/07 350 406,333
Port Auth. of New York &
New Jersey, Cons. Ser.
127, A.M.B.A.C., A.M.T. Aaa 5.50 12/15/15 3,000 3,215,640
Ser. 96, F.G.I.C., A.M.T. Aaa 6.60 10/01/23 2,750 2,918,300
Puerto Rico Comnwlth. Hwy.
& Trans. Rev., Ser. E,
F.S.A. Aaa 5.50 7/01/16 2,000 2,247,400
Puerto Rico Elec. Pwr.
Auth., Rfdg., Ser. JJ,
M.B.I.A. Aaa 5.25 7/01/15 2,000 2,207,980
Ser. X, M.B.I.A. Aaa 6.00 7/01/12 3,295(e) 3,639,130
Puerto Rico Pub. Fin.
Corp., Comnwlth. Approp.,
Ser. A, M.B.I.A. Aaa 5.50 8/01/17 1,500 1,640,850
Rutgers - The St. Univ. of
New Jersey, Ser. A Aa3 6.40 5/01/13 2,000 2,334,300
Sparta Twnshp. Sch. Dist.,
G.O., M.B.I.A. Aaa 5.75 9/01/14 1,000(e) 1,113,290
Sussex Cnty. Mun. Utils.
Auth., Solid Wste. Rev.,
F.G.I.C. Aaa 5.00 12/01/13 2,000 2,156,480
Tobacco Settlement Fin.
Corp., Rev. Baa2 6.25 6/01/43 1,250 947,588
Union City Sch. Impvt.,
G.O., F.S.A. Aaa 6.375 11/01/08 1,545 1,811,281
Union Cnty. Impvt. Auth.
Rev., Plainfield Brd. of
Ed. Proj.,
F.G.I.C. AAA(d) 6.25 8/01/14 1,175(e) 1,358,359
F.G.I.C. AAA(d) 6.25 8/01/15 1,250(e) 1,445,063
F.G.I.C. AAA(d) 6.25 8/01/16 1,330(e) 1,537,546
F.G.I.C. AAA(d) 6.25 8/01/17 1,415(e) 1,635,811
Virgin Islands Pub. Fin.
Auth. Rev., Ser. A BBB-(d) 6.50 10/01/24 750 822,638
---------------
Total long-term
investments
(cost $161,241,078) 170,949,731
---------------
SHORT-TERM INVESTMENTS 2.0%
-----------------------------------------------------------------------------------
Mun. Secs. Trust Cert.,
G.O.,
Ser. 2001-174 Cert. Class
A, F.R.D.D. A-1(d) 0.85 9/02/03 1,500 1,500,000
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New Jersey Series 11
<Page>
Portfolio of Investments
as of August 31, 2003 Cont'd.
<Table>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
New Jersey Econ. Dev.
Auth. Rev., Encap. Golf
Holdings LLC,
Ser. A, F.R.W.D., A.M.T. VMIG1 0.85% 9/04/03 $ 2,000 $ 2,000,000
---------------
Total short-term
investments
(cost $3,500,000) 3,500,000
---------------
TOTAL INVESTMENTS 98.9%
(COST $164,741,078; NOTE
5) 174,449,731
Other assets in excess of
liabilities 1.1% 1,900,975
---------------
NET ASSETS 100% $ 176,350,706
---------------
---------------
</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.
C.A.B.S.--Capital Appreciation Bonds.
CONNIE LEE--College Construction Loan Insurance Association.
E.T.M.--Escrowed to Maturity.
F.G.I.C.--Financial Guaranty Insurance Company.
F.R.D.D.--Floating Rate (Daily) Demand Note(b).
F.R.W.D.--Floating Rate (Weekly) Demand Note(b).
F.S.A.--Financial Security Assurance.
G.O.--General Obligation.
M.B.I.A.--Municipal Bond Insurance Corporation.
R.I.T.E.S.--Residual Interest Tax Exempt Securities Receipts.
(b) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes are considered to be the later of the next date on which the
security can be redeemed at par, or next date on which the rate of interest
is adjusted.
(c) Inverse floating rate bond. The coupon is inversely indexed to a floating
interest rate. The rate shown is the rate at year end.
(d) Standard & Poor's Rating.
(e) All or partial prerefunded issues are secured by escrowed cash and/or direct
U.S. guaranteed obligations.
(f) Partial principal amount pledged as collateral for financial futures
contracts.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information contains a description of
Moody's and Standard & Poor's ratings.
See Notes to Financial Statements.
12 Visit our website at www.jennisondryden.com
<Page>
This Page Intentionally Left Blank
<Page>
Statement of Assets and Liabilities
as of August 31, 2003
ASSETS
------------------------------------------------------------------------------
Investments, at value (cost $164,741,078) $174,449,731
Cash 86,801
Interest receivable 2,436,914
Receivable for Series shares sold 26,806
Due from broker-variation margin 9,915
Prepaid expenses 3,580
------------
TOTAL ASSETS 177,013,747
------------
LIABILITIES
------------------------------------------------------------------------------
Payable for Series shares reacquired 296,353
Dividends payable 119,181
Accrued expenses 115,807
Management fee payable 75,069
Distribution fee payable 46,440
Deferred trustees' fees 10,191
------------
TOTAL LIABILITIES 663,041
------------
NET ASSETS $176,350,706
------------
------------
------------------------------------------------------------------------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 160,019
Paid-in capital in excess of par 165,003,073
------------
165,163,092
Accumulated net investment loss (37,437)
Accumulated net realized gain on investments 1,569,502
Net unrealized appreciation on investments 9,655,549
------------
NET ASSETS, AUGUST 31, 2003 $176,350,706
------------
------------
See Notes to Financial Statements.
14 Visit our website at www.jennisondryden.com
<Page>
<Table>
CLASS A
-----------------------------------------------------------------------------------
Net asset value and redemption price per share
($134,271,246 / 12,186,591 shares of beneficial interest issued and
outstanding) $11.02
Maximum sales charge (3% of offering price) .34
------
Maximum offering price to public $11.36
------
------
CLASS B
-----------------------------------------------------------------------------------
Net asset value, offering price and redemption price per share
($33,216,642 / 3,013,003 shares of beneficial interest issued and
outstanding) $11.02
------
------
CLASS C
-----------------------------------------------------------------------------------
Net asset value and redemption price per share
($5,865,156 / 532,197 shares of beneficial interest issued and outstanding) $11.02
Sales charge (1% of offering price) .11
------
Offering price to public $11.13
------
------
CLASS Z
-----------------------------------------------------------------------------------
Net asset value, offering price and redemption price per share
($2,997,662 / 270,137 shares of beneficial interest issued and outstanding) $11.10
------
------
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New Jersey Series 15
<Page>
Statement of Operations
Year Ended August 31, 2003
<Table>
NET INVESTMENT INCOME
-----------------------------------------------------------------------------------
Income
Interest $ 9,458,038
-----------
Expenses
Management fee 918,875
Distribution fee--Class A 348,430
Distribution fee--Class B 179,627
Distribution fee--Class C 45,109
Custodian's fees and expenses 124,000
Transfer agent's fees and expenses 70,000
Reports to shareholders 56,000
Legal fees and expenses 48,000
Registration fees 25,000
Audit fee 13,000
Trustees' fees 11,000
Miscellaneous expenses 9,654
-----------
TOTAL EXPENSES 1,848,695
Less: custodian fee credit (Note 1) (73)
-----------
NET EXPENSES 1,848,622
-----------
NET INVESTMENT INCOME 7,609,416
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
-----------------------------------------------------------------------------------
Net realized gain (loss) on:
Investment transactions 1,650,017
Written option transactions 12,034
Financial futures transactions (234,399)
-----------
1,427,652
-----------
Net change in unrealized appreciation (depreciation) on:
Investments (4,398,130)
Financial futures contracts 11,435
-----------
(4,386,695)
-----------
Net loss on investments (2,959,043)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,650,373
-----------
-----------
</Table>
See Notes to Financial Statements.
16 Visit our website at www.jennisondryden.com
<Page>
Statement of Changes in Net Assets
<Table>
<Caption>
-----------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------
2003 2002
INCREASE (DECREASE) IN NET ASSETS
-----------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 7,609,416 $ 8,447,929
Net realized gain on investment transactions 1,427,652 1,013,564
Net change in unrealized appreciation
(depreciation) on investments (4,386,695) (307,446)
--------------- -----------------
Net increase in net assets resulting from
operations 4,650,373 9,154,047
--------------- -----------------
DIVIDENDS AND DISTRIBUTIONS (NOTE 1)
Dividends from net investment income
Class A (5,837,798) (6,620,866)
Class B (1,416,222) (1,633,173)
Class C (221,597) (176,892)
Class Z (108,256) (30,147)
--------------- -----------------
(7,583,873) (8,461,078)
--------------- -----------------
Distributions from net realized gains
Class A (552,564) (290,862)
Class B (147,238) (74,147)
Class C (23,661) (7,540)
Class Z (5,835) (917)
--------------- -----------------
(729,298) (373,466)
--------------- -----------------
SERIES SHARE TRANSACTIONS (NET OF SHARE
CONVERSIONS) (NOTE 6)
Net proceeds from shares sold 19,643,365 17,942,628
Net asset value of shares issued in reinvestment
of dividends and distributions 4,809,055 5,019,673
Cost of shares reacquired (28,562,205) (20,656,328)
--------------- -----------------
Net increase (decrease) in net assets from Series
share transactions (4,109,785) 2,305,973
--------------- -----------------
Total increase (decrease) (7,772,583) 2,625,476
NET ASSETS
-----------------------------------------------------------------------------------
Beginning of year 184,123,289 181,497,813
--------------- -----------------
End of year $ 176,350,706 $ 184,123,289
--------------- -----------------
--------------- -----------------
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New Jersey Series 17
<Page>
Notes to Financial Statements
Dryden Municipal Series Fund (the 'Fund'), formerly known as Prudential
Municipal Series Fund is registered under the Investment Company Act of 1940, as
an open-end management investment company. The Fund was organized as a
Massachusetts business trust on May 18, 1984, and consists of six series. These
financial statements relate only to New Jersey Series (the 'Series'). The
financial statements of the other series are not presented herein. The assets of
each series are invested in separate, independently managed portfolios. The
Series commenced investment operations in March 1988. The Series is diversified
and seeks to achieve its investment objective of obtaining the maximum amount of
income exempt from federal and New Jersey state income taxes with the minimum of
risk by investing in 'investment grade' tax-exempt securities whose ratings are
within the four highest ratings categories by a nationally recognized
statistical rating organization or, if not rated, are of comparable quality. The
ability of the issuers of the securities held by the Series to meet their
obligations may be affected by economic or political developments in a specific
state, industry or region.
NOTE 1. ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund, and the Series, in the preparation of its financial statements.
Securities Valuations: The Series values municipal securities (including
commitments to purchase such securities on a 'when-issued' basis) on the basis
of prices provided by a pricing service which uses information with respect to
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.
Securities, including options, futures contracts and options thereon, for which
the primary market is on a national securities exchange, commodities exchange or
board of trade are valued at the last sale price on such exchange or board of
trade, on the date of valuation or, if there was no sale on such day, at the
average of readily available closing bid and asked prices on such day or at the
bid price in the absence of an asked price.
Securities, including options, that are actively traded in the over-the-counter
market, including listed securities for which the primary market is believed to
be over-the-counter, are valued at the average of the most recently quoted bid
and asked prices provided by a principal market maker or dealer.
18 Visit our website at www.jennisondryden.com
<Page>
Short-term securities which mature in sixty days or less are valued at amortized
cost, which approximates market value. The amortized cost method involves
valuing a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of the difference between the principal amount
due at maturity and cost. Short-term securities which mature in more than sixty
days are valued at current market quotations.
Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities at a set price
for delivery on a future date. Upon entering into a financial futures contract,
the Series 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 Series 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 or loss on financial futures
transactions.
The Series invests in financial futures contracts in order to hedge its existing
portfolio securities, or securities the Series intends to purchase, against
fluctuations in value caused by changes in prevailing interest rates or market
conditions. Should interest rates move unexpectedly, the Series may not achieve
the anticipated benefits of the financial futures contracts and may realize a
loss. The use of futures transactions involves the risk of imperfect correlation
in movements in the price of futures contracts, interest rates and the
underlying hedged assets.
Options: The Series 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 Series currently
owns or intends to purchase. The Series' principal reason for writing options is
to realize, through receipt of premiums, a greater current return than would be
realized on the underlying security alone. When the Series purchases an option,
it pays a premium and an amount equal to that premium is recorded as an asset.
When the Series writes an option, it receives a premium and an amount equal to
that premium is recorded as a liability. The asset or liability is adjusted
daily to reflect the current market value of the option. If an option expires
unexercised, the Series 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
recorded as an adjustment to the proceeds from the sale or the cost of the
purchase in determining whether the Series has realized a gain or loss. The
difference between the premium and the amount received or paid on effecting a
closing purchase or sale transaction is also treated as a realized gain or loss.
Gain or loss on purchased options is included in net realized gain or loss
Dryden Municipal Series Fund - New Jersey Series 19
<Page>
on investment transactions. Gain or loss on written options is presented
separately as net realized gain or loss on written option transactions.
The Series, as writer of an option, may have no control over whether the
underlying securities may be sold (called) or purchased (put). As a result, the
Series bears the market risk of an unfavorable change in the price of the
security underlying the written option. The Series, as purchaser of an option,
bears the risk of the potential inability of the counterparties to meet the
terms of their contracts.
Interest Rate Swaps: The Series may enter into interest rate swaps. In a simple
interest rate swap, one investor pays a floating rate of interest on a notional
principal amount and receives a fixed rate of interest on the same notional
principal amount for a specified period of time. Alternatively, an investor may
pay a fixed rate and receive a floating rate. Interest rate swaps were conceived
as asset/liability management tools. In more complex swaps, the notional
principal amount may decline (or amortize) over time.
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 Series will record a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transaction and the Series' basis in the contract, if any.
The Series is exposed to credit loss in the event of non-performance by the
other party to the interest rate swap. However, the Series does not anticipate
non-performance by any counterparty.
Written options, future contracts and swap contracts involve elements of both
market and credit risk in excess of the amounts reflected on the Statement of
Assets and Liabilities.
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 rates 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.
Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains or losses on sales of securities are
20 Visit our website at www.jennisondryden.com
<Page>
calculated on the identified cost basis. Interest income, including amortization
of premium and accretion of discount on debt securities, as required, is
recorded on the accrual basis. Expenses are recorded on the accrual basis which
may require the use of certain estimates by management.
Net investment income or loss (other than distribution fees, which are charged
directly to the respective class) 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.
Federal Income Taxes: For federal income tax purposes, each series in the Fund
is treated as a separate taxpaying entity. It is the Series' policy to continue
to meet the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable net income and capital
gains, if any, to its shareholders. Therefore, no federal income tax provision
is required.
Dividends and Distributions: The Series declares daily dividends from net
investment income. Payment of dividends is made monthly. Distributions of net
capital gains, if any, are made annually. Dividends and distributions to
shareholders, which are determined in accordance with federal income tax
regulations and which may differ from generally accepted accounting principles,
are recorded on the ex-dividend date. Permanent book/tax differences relating to
income and gains are reclassified to paid-in capital when they arise.
Custody Fee Credits: The Fund has an arrangement with its custodian bank,
whereby uninvested cash earns credits which reduce the fees charged by the
custodian. The Series could have invested a portion of the cash utilized in
connection with the expense offset arrangements in an income producing asset if
it had not entered into such arrangements.
NOTE 2. AGREEMENTS
The Fund has a management agreement with Prudential Investments LLC ('PI').
Pursuant to this agreement, PI has responsibility for all investment advisory
services and supervises the subadviser's performance of such services. PI has
entered into a subadvisory agreement with Prudential Investment Management, Inc.
('PIM'). The subadvisory agreement provides that PIM furnishes investment
advisory services in connection with the management of the Series. In connection
therewith, PIM is obligated to keep certain books and records of the Series. PI
pays for the services of PIM, the compensation of officers of the Series,
occupancy and certain clerical and bookkeeping costs of the Series. The Series
bears all other costs and expenses.
Dryden Municipal Series Fund - New Jersey Series 21
<Page>
The management fee paid to PI is computed daily and payable monthly, at an
annual rate of .50 of 1% of the average daily net assets of the Series.
The Series has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS') which acts as distributor of the Series. The Series
compensates PIMS for distributing and servicing the Series' 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 PIMS. The distribution fees are
accrued daily and payable monthly. No distribution or service fees are paid to
PIMS as distributor of the Class Z shares of the Series.
Pursuant to the Class A, B and C Plans, the Series compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, .50% of 1%
and up to 1% of the average daily net assets of the Class A, B and C shares,
respectively. PIMS contractually agreed to limit such fees to .25 of 1% and .75
of 1% of the Class A shares and Class C shares, respectively.
PIMS advised the Series that it has received approximately $58,900 and $9,300 in
front-end sales charges resulting from sales of Class A and Class C shares,
respectively, during the year ended August 31, 2003. 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 Series that during the year ended August 31, 2003, it
received approximately $45,200 and $1,800 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PI, PIMS and PIM are indirect, wholly-owned subsidiaries of Prudential
Financial, Inc. ('Prudential').
The Series, along with other affiliated registered investment companies (the
'Funds'), is a party to a syndicated credit agreement ('SCA') with a group of
banks. For the year ended August 31, 2003, the SCA provides for a commitment of
$800 million and allows the Funds to increase the commitment to $1 billion, if
necessary. Interest on any borrowings under the SCA will be incurred at market
rates. The Funds pay a commitment fee of .08 of 1% of the unused portion of the
SCA. The commitment fee is accrued and paid quarterly and is allocated to the
Funds pro rata based on net assets. The purpose of the SCA is to serve as an
alternative source of funding for capital share redemptions. The expiration date
of the SCA was May 2, 2003. On May 2, 2003, the SCA was renewed under the same
terms and conditions ('May 2003 renewal'). The expiration date of the May 2003
renewal is April 30, 2004. The Series did not borrow any amounts pursuant to the
SCA during the year ended August 31, 2003.
22 Visit our website at www.jennisondryden.com
<Page>
NOTE 3. OTHER TRANSACTIONS WITH AFFILIATES
Prudential Mutual Fund Services LLC ('PMFS'), an affiliate of PI and an
indirect, wholly-owned subsidiary of Prudential, serves as the Fund's transfer
agent. During the year ended August 31, 2003, the Series incurred fees of
approximately $51,300 for the services of PMFS. As of August 31, 2003,
approximately $4,200 of such fees were due to PMFS. Transfer agent fees and
expenses in the Statement of Operations include certain out-of-pocket expenses
paid to nonaffiliates, where applicable.
The Series pays networking fees to affiliated and unaffiliated broker/dealers.
These networking fees are payments made to broker/dealers that clear mutual fund
transactions through a national clearing system. The Series incurred
approximately $9,200 in total networking fees of which the amount relating to
the services of Wachovia Securities LLC ('Wachovia') and Prudential Securities,
Inc. ('PSI'), affiliates of PI, were approximately $8,600 for the year ended
August 31, 2003. Prior to July 1, 2003, PSI was an indirect, wholly-owned
subsidiary of Prudential. As of August 31, 2003, approximately $700 of such fees
were due to Wachovia. These amounts are included in transfer agent's fees and
expenses in the Statement of Operations.
NOTE 4. PORTFOLIO SECURITIES
Purchases and sales of portfolio securities of the Series, excluding short-term
investments, for the year ended August 31, 2003, were $72,947,201 and
$71,896,932, respectively.
During the year ended August 31, 2003, the Series entered into financial futures
contracts. Details of contracts outstanding at August 31, 2003 were as follows:
<Table>
<Caption>
VALUE AT VALUE AT UNREALIZED
NUMBER OF EXPIRATION AUGUST 31, TRADE APPRECIATION
CONTRACTS TYPE DATE 2003 DATE (DEPRECIATION)
- --------- ------------------- ----------------- ------------ ------------ ----------------
Long Positions:
U.S. Treasury 10 Yr
33 Notes Sep 2003 $ 3,680,531 $ 3,676,904 $ 3,627
46 U.S. Treasury Bonds Sep 2003 4,940,688 4,909,085 31,603
Short Position:
U.S. Treasury 5 Yr
148 Notes Sep 2003 (16,499,688) (16,411,354) (88,334)
-------
$(53,104)
-------
-------
</Table>
Dryden Municipal Series Fund - New Jersey Series 23
<Page>
Transactions in options written during the year ended August 31, 2003, were as
follows:
CONTRACTS PREMIUMS
---------- ---------
Balance as of August 31, 2002 -- --
Options written 22 $ 15,742
Options terminated (22) (15,742)
-- ---------
Balance as of August 31, 2003 -- --
-- ---------
-- ---------
NOTE 5. DISTRIBUTIONS AND TAX INFORMATION
In order to present undistributed net investment income or loss and accumulated
net realized gains or losses on the Statement of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in-capital in excess of par, undistributed net investment income (loss)
and accumulated net realized gain (loss) on investments.
For the year ended August 31, 2003, the adjustments were to decrease
undistributed net investment income by $62,980, increase accumulated net
realized gain by $25,543 and increase paid-in capital by $37,437 primarily due
to the difference in the treatment of accreting market discount between
financial and tax reporting. Net investment income, net realized gains and net
assets were not affected by this change.
Tax character of distributions paid during the year ended August 31, 2003 were:
<Table>
<Caption>
TAX-EXEMPT LONG-TERM TOTAL
INCOME ORDINARY INCOME CAPITAL GAINS DISTRIBUTIONS
- ------------------ ------------------ ------------------ ------------------
$7,583,873 $10,446 $718,852 $8,313,171
</Table>
Tax character of distributions paid during the year ended August 31, 2002 were:
<Table>
<Caption>
TAX-EXEMPT LONG-TERM TOTAL
INCOME ORDINARY INCOME CAPITAL GAINS DISTRIBUTIONS
- ------------------ ------------------ ------------------ ------------------
$8,429,294 $405,250 -- $8,834,544
</Table>
As of August 31, 2003, the components of distributable earnings on a tax basis
were $81,744 (includes a timing difference of $119,181 for dividends payable)
and $1,471,694 of tax-exempt income and long-term capital gains, respectively.
24 Visit our website at www.jennisondryden.com
<Page>
The United States federal income tax basis of the Series' investments and the
net unrealized appreciation as of August 31, 2003 were as follows:
<Table>
<Caption>
TAX BASIS NET UNREALIZED
OF INVESTMENTS APPRECIATION DEPRECIATION APPRECIATION
- ------------------ ------------------ ------------------ ------------------
$164,696,374 $10,485,259 $731,902 $9,753,357
</Table>
The difference between book and tax basis was primarily attributable to the
difference in the treatment of accretion of market discount and deferred losses
on wash sales.
NOTE 6. CAPITAL
The Series offers Class A, Class B, Class C and Class Z shares. Class A shares
are sold with a front-end sales charge of up to 3%. Certain investors who
purchase $1 million or more of Class A shares are subject to a 1% contingent
deferred sales charge during the first 12 months. 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 will automatically convert to Class A shares on a
quarterly basis approximately seven years after purchase. Special exchange
privileges are 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.
The Series 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>
CLASS A SHARES AMOUNT
- ------------------------------------------------------------- ---------- ------------
Year ended August 31, 2003:
Shares sold 842,096 $ 9,551,086
Shares issued in reinvestment of dividends and distributions 325,312 3,649,211
Shares reacquired (1,870,865) (21,125,741)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion (703,457) (7,925,444)
Shares issued upon conversion from Class B 428,977 4,884,211
---------- ------------
Net increase (decrease) in shares outstanding (274,480) $ (3,041,233)
---------- ------------
---------- ------------
Year ended August 31, 2002:
Shares sold 697,343 $ 7,681,399
Shares issued in reinvestment of dividends and distributions 352,078 3,877,424
Shares reacquired (1,546,658) (17,071,058)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion (497,237) (5,512,235)
Shares issued upon conversion from Class B 442,339 4,862,235
---------- ------------
Net increase (decrease) in shares outstanding (54,898) $ (650,000)
---------- ------------
---------- ------------
</Table>
Dryden Municipal Series Fund - New Jersey Series 25
<Page>
<Table>
<Caption>
CLASS B SHARES AMOUNT
- ------------------------------------------------------------- ---------- ------------
Year ended August 31, 2003:
Shares sold 476,802 $ 5,360,213
Shares issued in reinvestment of dividends and distributions 81,589 915,329
Shares reacquired (420,686) (4,747,136)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion 137,705 1,528,406
Shares reacquired upon conversion into Class A (428,874) (4,884,211)
---------- ------------
Net increase (decrease) in shares outstanding (291,169) $ (3,355,805)
---------- ------------
---------- ------------
Year ended August 31, 2002:
Shares sold 592,645 $ 6,548,409
Shares issued in reinvestment of dividends and distributions 90,282 994,751
Shares reacquired (284,209) (3,138,720)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion 398,718 4,404,440
Shares reacquired upon conversion into Class A (442,233) (4,862,235)
---------- ------------
Net increase (decrease) in shares outstanding (43,515) $ (457,795)
---------- ------------
---------- ------------
<Caption>
CLASS C
- -------------------------------------------------------------
Year ended August 31, 2003:
Shares sold 110,696 $ 1,251,580
Shares issued in reinvestment of dividends and distributions 14,718 165,064
Shares reacquired (90,758) (1,019,547)
---------- ------------
Net increase (decrease) in shares outstanding 34,656 $ 397,097
---------- ------------
---------- ------------
Year ended August 31, 2002:
Shares sold 236,734 $ 2,617,649
Shares issued in reinvestment of dividends and distributions 11,218 123,673
Shares reacquired (13,473) (148,908)
---------- ------------
Net increase (decrease) in shares outstanding 234,479 $ 2,592,414
---------- ------------
---------- ------------
<Caption>
CLASS Z
- -------------------------------------------------------------
Year ended August 31, 2003:
Shares sold 306,808 $ 3,480,486
Shares issued in reinvestment of dividends and distributions 7,015 79,451
Shares reacquired (144,944) (1,669,781)
---------- ------------
Net increase (decrease) in shares outstanding 168,879 $ 1,890,156
---------- ------------
---------- ------------
Year ended August 31, 2002:
Shares sold 98,460 $ 1,095,171
Shares issued in reinvestment of dividends and distributions 2,144 23,825
Shares reacquired (26,951) (297,642)
---------- ------------
Net increase (decrease) in shares outstanding 73,653 $ 821,354
---------- ------------
---------- ------------
</Table>
26 Visit our website at www.jennisondryden.com
<Page>
Financial Highlights
-----------------------------------------------------------
AUGUST 31, 2003 ANNUAL REPORT
Dryden Municipal Series Fund
New Jersey Series
<Page>
Financial Highlights
<Table>
<Caption>
CLASS A
-----------------
YEAR ENDED
AUGUST 31, 2003
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 11.25
-------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .47
Net realized and unrealized gain (loss) on investment
transactions (.18)
-------
Total from investment operations .29
-------
LESS DISTRIBUTIONS
Dividends from net investment income (.47)
Distributions in excess of net investment income --
Tax return of capital distributions --
Distributions from net realized gains on investment
transactions (.05)
-------
Total distributions (.52)
-------
Net asset value, end of year $ 11.02
-------
-------
TOTAL RETURN(A): 2.57%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 134,271
Average net assets (000) $ 139,372
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees(c) .94%
Expenses, excluding distribution and service (12b-1) fees .69%
Net investment income 4.20%
For Class A, B, C and Z shares:
Portfolio turnover rate 42%
</Table>
- ------------------------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported, and includes reinvestment of dividends and
distributions.
(b) Less than $.005 per share.
(c) The distributor of the Series contractually agreed to limit its distribution
and service (12b-1) fees to .25 of 1% of the average daily net assets of the
Class A shares.
(d) Effective September 1, 2001, the Series has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on debt securities. The effect of this change for
the year ended August 31, 2002 was to increase net investment income and
decrease net realized and unrealized gains per share by less than $0.005 and
increase the ratio of net investment income from 4.80% to 4.81%. Per share
amounts and ratios for the years ended prior to August 31, 2002 have not
been restated to reflect this change in presentation.
See Notes to Financial Statements.
28 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS A
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
2002(D) 2001 2000 1999
-----------------------------------------------------------------------------------
$ 11.23 $ 10.65 $ 10.67 $ 11.31
------- ------- ------- -------
.53 .52 .52 .52
.04 .58 .03 (.55)
------- ------- ------- -------
.57 1.10 .55 (.03)
------- ------- ------- -------
(.53) (.52) (.52) (.52)
-- -- -- --(b)
-- -- --(b) --
(.02) -- (.05) (.09)
------- ------- ------- -------
(.55) (.52) (.57) (.61)
------- ------- ------- -------
$ 11.25 $ 11.23 $ 10.65 $ 10.67
------- ------- ------- -------
------- ------- ------- -------
5.24% 10.67% 5.39% (.40)%
$140,190 $140,608 $122,664 $123,692
$137,516 $132,389 $122,573 $125,547
.91% .95% .92% .84%
.66% .70% .67% .64%
4.81% 4.77% 4.95% 4.66%
25% 22% 28% 15%
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New Jersey Series 29
<Page>
Financial Highlights
Cont'd.
<Table>
<Caption>
CLASS B
-----------------
YEAR ENDED
AUGUST 31, 2003
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 11.25
------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .44
Net realized and unrealized gain (loss) on investment
transactions (.18)
------
Total from investment operations .26
------
LESS DISTRIBUTIONS
Dividends from net investment income (.44)
Distributions in excess of net investment income --
Tax return of capital distributions --
Distributions from net realized gains on investment
transactions (.05)
------
Total distributions (.49)
------
Net asset value, end of year $ 11.02
------
------
TOTAL RETURN(A): 2.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $33,217
Average net assets (000) $35,925
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees 1.19%
Expenses, excluding distribution and service (12b-1) fees .69%
Net investment income 3.96%
</Table>
- ------------------------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported, and includes reinvestment of dividends and
distributions.
(b) Less than $.005 per share.
(c) Effective September 1, 2001, the Series has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on debt securities. The effect of this change for
the year ended August 31, 2002 was to increase net investment income and
decrease net realized and unrealized gains per share by less than $0.005 and
increase the ratio of net investment income from 4.55% to 4.56%. Per share
amounts and ratios for the years ended prior to August 31, 2002 have not
been restated to reflect this change in presentation.
See Notes to Financial Statements.
30 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS B
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
2002(C) 2001 2000 1999
-----------------------------------------------------------------------------------
$ 11.24 $ 10.66 $ 10.67 $ 11.31
------ ------ ------ ------
.50 .49 .49 .49
.03 .58 .04 (.55)
------ ------ ------ ------
.53 1.07 .53 (.06)
------ ------ ------ ------
(.50) (.49) (.49) (.49)
-- -- -- --(b)
-- -- --(b) --
(.02) -- (.05) (.09)
------ ------ ------ ------
(.52) (.49) (.54) (.58)
------ ------ ------ ------
$ 11.25 $ 11.24 $ 10.66 $ 10.67
------ ------ ------ ------
------ ------ ------ ------
4.98% 10.29% 5.23% (.71)%
$ 37,188 $ 37,621 $ 49,995 $ 79,598
$ 35,743 $ 40,214 $ 61,647 $ 96,542
1.16% 1.20% 1.17% 1.14%
.66% .70% .67% .64%
4.56% 4.52% 4.69% 4.35%
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New Jersey Series 31
<Page>
Financial Highlights
Cont'd.
<Table>
<Caption>
CLASS C
-----------------
YEAR ENDED
AUGUST 31, 2003
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 11.25
-----
INCOME FROM INVESTMENT OPERATIONS
Net investment income .42
Net realized and unrealized gain (loss) on investment
transactions (.18)
-----
Total from investment operations .24
-----
LESS DISTRIBUTIONS
Dividends from net investment income (.42)
Distributions in excess of net investment income --
Tax return of capital distributions --
Distributions from net realized gains on investment
transactions (.05)
-----
Total distributions (.47)
-----
Net asset value, end of year $ 11.02
-----
-----
TOTAL RETURN(A): 2.05%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 5,865
Average net assets (000) $ 6,015
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees(c) 1.44%
Expenses, excluding distribution and service (12b-1) fees .69%
Net investment income 3.70%
</Table>
- ------------------------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported, and includes reinvestment of dividends and
distributions.
(b) Less than $.005 per share.
(c) The distributor of the Series contractually agreed to limit its distribution
and service (12b-1) fees to .75 of 1% of the average daily net assets of the
Class C shares.
(d) Effective September 1, 2001, the Series has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on debt securities. The effect of this change for
the year ended August 31, 2002 was to increase net investment income and
decrease net realized and unrealized gains per share by less than $0.005 and
increase the ratio of net investment income from 4.30% to 4.31%. Per share
amounts and ratios for the years ended prior to August 31, 2002 have not
been restated to reflect this change in presentation.
See Notes to Financial Statements.
32 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS C
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
2002(D) 2001 2000 1999
-----------------------------------------------------------------------------------
$11.24 $10.66 $10.67 $11.31
----- ----- ----- -----
.47 .47 .47 .46
.03 .58 .04 (.55)
----- ----- ----- -----
.50 1.05 .51 (.09)
----- ----- ----- -----
(.47) (.47) (.47) (.46)
-- -- -- --(b)
-- -- --(b) --
(.02) -- (.05) (.09)
----- ----- ----- -----
(.49) (.47) (.52) (.55)
----- ----- ----- -----
$11.25 $11.24 $10.66 $10.67
----- ----- ----- -----
----- ----- ----- -----
4.73% 10.02% 4.96% (.95)%
$5,598 $2,956 $2,385 $1,825
$4,101 $2,390 $2,077 $1,622
1.41% 1.45% 1.42% 1.39%
.66% .70% .67% .64%
4.31% 4.27% 4.45% 4.13%
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New Jersey Series 33
<Page>
Financial Highlights
Cont'd.
<Table>
<Caption>
CLASS Z
-----------------
YEAR ENDED
AUGUST 31, 2003
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 11.33
-----
INCOME FROM INVESTMENT OPERATIONS
Net investment income .50
Net realized and unrealized gain (loss) on investment
transactions (.18)
-----
Total from investment operations .32
-----
LESS DISTRIBUTIONS
Dividends from net investment income (.50)
Distributions in excess of net investment income --
Tax return of capital distributions --
Distributions from net realized gains on investment
transactions (.05)
-----
Total distributions (.55)
-----
Net asset value, end of year $ 11.10
-----
-----
TOTAL RETURN(A): 2.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 2,998
Average net assets (000) $ 2,463
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees .69%
Expenses, excluding distribution and service (12b-1) fees .69%
Net investment income 4.41%
</Table>
- ------------------------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported, and includes reinvestment of dividends and
distributions.
(b) Less than $.005 per share.
(c) Effective September 1, 2001, the Series has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on debt securities. The effect of this change for
the year ended August 31, 2002 was to increase net investment income and
decrease net realized and unrealized gains per share by less than $0.005 and
increase the ratio of net investment income from 5.03% to 5.04%. Per share
amounts and ratios for the years ended prior to August 31, 2002 have not
been restated to reflect this change in presentation.
See Notes to Financial Statements.
34 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS Z
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
2002(C) 2001 2000 1999
-----------------------------------------------------------------------------------
$11.31 $10.73 $10.75 $11.32
----- ----- ----- -----
.56 .55 .55 .54
.04 .58 .03 (.48)
----- ----- ----- -----
.60 1.13 .58 .06
----- ----- ----- -----
(.56) (.55) (.55) (.54)
-- -- -- --(b)
-- -- --(b) --
(.02) -- (.05) (.09)
----- ----- ----- -----
(.58) (.55) (.60) (.63)
----- ----- ----- -----
$11.33 $11.31 $10.73 $10.75
----- ----- ----- -----
----- ----- ----- -----
5.58% 10.80% 5.66% .45%
$1,147 $312 $111 $62
$598 $194 $72 $77
.66% .70% .67% .64%
.66% .70% .67% .64%
5.04% 5.03% 5.22% 4.86%
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New Jersey Series 35
<Page>
Report of Independent Auditors
To the Shareholders and Trustees of
Dryden Municipal Series Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dryden Municipal Series Fund
(formerly, Prudential Municipal Series Fund), New Jersey Series (one of the
portfolios constituting Dryden Municipal Series Fund, hereafter referred to as
the 'Fund') at August 31, 2003, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as 'financial statements') are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 2003 by
correspondence with the custodian and broker, provide a reasonable basis for our
opinion.
PricewaterhouseCoopers LLP
New York, New York
October 22, 2003
36 Visit our website at www.jennisondryden.com
<Page>
Federal Income Tax Information
(Unaudited)
We are required by the Internal Revenue Code to advise you within 60 days of the
Fund's fiscal year end (August 31, 2003) as to the federal tax status of
dividends paid by the Fund during such fiscal year. Accordingly, we are advising
you that in the fiscal year ended August 31, 2003, dividends paid from net
investment income totalling $.47 per Class A share, $.44 per Class B share, $.42
per Class C shares and $.51 per Class Z were all federally tax-exempt interest
dividends. The Fund also paid dividends from short-term capital gain of $.0007
per Class A, B, C and Z shares which are taxable as ordinary income. In
addition, the Fund paid long-term capital gain distributions of $.0443 per Class
A, B, C and Z share. Further, we wish to advise you that 0% of the ordinary
income dividend paid in the fiscal year ended August 31, 2003 qualified for the
corporate dividends received deduction available to corporate taxpayers. Only
funds that invest in U.S. equity securities are entitled to pass-through a
corporate dividends received deduction.
In January 2004, you will be advised on IRS Form 1099 DIV or substitute Form
1099, as to the federal tax status of the distributions received by you in
calendar year 2003. The amounts that will be reported on such form 1099 DIV will
be the amounts to use on your federal income tax return and will differ from the
amounts which we must report for the Fund's fiscal year ended August 31, 2003.
Dryden Municipal Series Fund - New Jersey Series 37
<Page>
Supplemental Proxy Information
(Unaudited)
A meeting of the Fund's shareholders was held on July 17, 2003. The meeting was
held for the following purposes:
(1) To approve the election of ten (10) trustees to the Board of Trustees, as
follows:
- David E.A. Carson
- Robert E. La Blanc
- Robert F. Gunia
- Douglas H. McCorkindale
- Stephen P. Munn
- Richard A. Redeker
- Judy A. Rice
- Robin B. Smith
- Stephen Stoneburn
- Clay T. Whitehead
(3) To permit an amendment to the management contract between PI and
the Fund.
The results of the proxy solicitation on the preceding matters were:
<Table>
<Caption>
VOTES VOTES VOTES
MATTER FOR AGAINST WITHHELD ABSTENTIONS
--------------------- ------------- ---------- -------- -----------
(1) David E.A. Carson 14,622,187 -- 370,255 --
Robert E. La Blanc 14,625,190 -- 367,252 --
Robert F. Gunia 14,643,689 -- 348,753 --
Douglas H.
McCorkindale 14,631,945 -- 360,497 --
Stephen P. Munn 14,641,955 -- 350,487 --
Richard A. Redeker 14,642,549 -- 349,893 --
Judy A. Rice 14,643,415 -- 349,027 --
Robin B. Smith 14,622,235 -- 370,207 --
Stephen Stoneburn 14,634,599 -- 357,843 --
Clay T. Whitehead 14,643,764 -- 348,678 --
(3) Permit an Amendment
to the Management
Contract Between PI
and the Company 13,871,977 870,098 -- 250,367
</Table>
One or more matters in addition to the above referenced proposals were submitted
for shareholder approval, and the shareholder meeting relating to those matters
was adjourned until August 21, 2003, and a date following the close of the
reporting period.
38 Visit our website at www.jennisondryden.com
<Page>
A meeting of the Fund's shareholders was held on August 21, 2003. The meeting
was held for the following purposes:
(2) To approve a proposal to permit the manager to enter into, or make material
changes to, subadvisory agreements without shareholder approval.
(4a) To approve changes to fundamental investment restrictions and policies,
relating to: fund diversification.
(4b) To approve changes to fundamental investment restrictions and policies,
relating to: issuing senior securities, borrowing money or pledging assets.
(4c) To approve changes to fundamental investment restrictions and policies,
relating to: buying and selling real estate.
(4d) To approve changes to fundamental investment restrictions and policies,
relating to: buying and selling commodities and commodity contracts.
(4f) To approve changes to fundamental investment restrictions and policies,
relating to: making loans.
(4g) To approve changes to fundamental investment restrictions and policies,
relating to: other investment restrictions, including investing in
securities of other investment companies.
The results of the proxy solicitation on the preceding matters were:
<Table>
<Caption>
VOTES VOTES VOTES
MATTER FOR AGAINST WITHHELD ABSTENTIONS
--------------------- ------------- ---------- ---------- -----------
(2) Permit the Manager to
Enter Into, or Make
Material Changes to
Agreements Without
Shareholder Approval 7,583,402 1,296,722 -- 297,535
(4a) Fund Diversification 7,902,948 940,024 -- 334,686
(4b) Issuing Senior
Securities,
Borrowing Money or
Pledging Assets 7,755,857 1,118,144 -- 303,658
(4c) Buying and Selling
Real Estate 7,808,487 1,052,158 -- 317,014
(4d) Buying and Selling
Commodities and
Commodity Contracts 7,785,566 1,078,630 -- 313,463
(4f) Making Loans 7,708,002 1,121,770 -- 347,887
(4g) Other Investment
Restrictions 7,758,434 1,033,971 -- 385,254
</Table>
One or more matters in addition to the above referenced proposals were submitted
for shareholder approval, and the shareholder meeting relating to those matters
was adjourned until August 21, 2003, and a date following the close of the
reporting period.
Dryden Municipal Series Fund - New Jersey Series 39
<Page>
Management of the Fund
(Unaudited)
Information pertaining to the Trustees of the Fund is set forth below. Trustees
who are not deemed to be 'interested persons' of the Fund, as defined in the
1940 Act are referred to as 'Independent Trustees.' Trustees who are deemed to
be 'interested persons' of the Fund are referred to as 'Interested Trustees.'
'Fund Complex'(D) consists of the Fund and any other investment companies
managed by PI.
INDEPENDENT TRUSTEES(2)
DAVID E.A. CARSON (69), Trustee since 20033
Oversees 99 portfolios in Fund complex
Principal occupations (last 5 years): Director (January 2000 to May 2000),
Chairman (January 1999 to December 1999), Chairman and Chief Executive Officer
(January 1998 to December 1998) and President, Chairman and Chief Executive
Officer (1983-1997) of People's Bank.
Other Directorships held:(4) Director of United Illuminating and UIL Holdings
(utility company), since 1993.
ROBERT E. LA BLANC (69), Trustee since 2003(3)
Oversees 119 portfolios in Fund complex
Principal occupations (last 5 years): President (since 1981) of Robert E. La
Blanc Associates, Inc. (telecommunications); formerly General Partner at Salomon
Brothers and Vice-Chairman of Continental Telecom; Trustee of Manhattan
College.
Other Directorships held:(4) Director of Storage Technology Corporation (since
1979) (technology), Chartered Semiconductor Manufacturing, Ltd. (since 1998);
Titan Corporation (electronics) (since 1995), Computer Associates International,
Inc. (since 2002) (software company); FiberNet Telecom Group, Inc. (since 2003)
(telecom company); Director (since April 1999) of the High Yield Plus Fund,
Inc.
DOUGLAS H. MCCORKINDALE (64), Trustee since 2003(3)
Oversees 101 portfolios in Fund complex
Principal occupations (last 5 years): Chairman (since February 2001), Chief
Executive Officer (since June 2000) and President (since September 1997) of
Gannett Co. Inc. (publishing and media); formerly Vice Chairman (March 1984-May
2000) of Gannett Co., Inc.
Other Directorships held:(4) Director of Gannett Co. Inc., Director of
Continental Airlines, Inc. (since May 1993); Director of Lockheed Martin Corp.
(aerospace and defense) (since May 2001); Director of The High Yield Plus Fund,
Inc. (since 1996).
STEPHEN P. MUNN (61), Trustee since 1999(3)
Oversees 107 portfolios in Fund complex
Principal occupations (last 5 years): Chairman of the Board (since 1994) and
formerly Chief Executive Officer (1988-2001) and President of Carlisle Companies
Incorporated.
Other Directorships held:(4) Chairman of the Board (since January 1994) and
Director (since 1988) of Carlisle Companies Incorporated (manufacturer of
industrial products); Director of Gannet Co. Inc. (publishing and media).
40 Visit our website at www.jennisondryden.com
<Page>
RICHARD A. REDEKER (60), Trustee since 1993(3)
Oversees 102 portfolios in Fund complex
Principal occupations (last 5 years): Management Consultant; formerly employee
of Prudential Investments (October 1996-December 1998); Director of Invesmart,
Inc. (since 2001) and Director of Penn Tank Lines, Inc. (since 1999).
Other Directorships held:(4) None.
ROBIN B. SMITH (64), Trustee since 2003(3)
Oversees 109 portfolios in Fund complex
Principal occupations (last 5 years): Chairman of the Board (since January 2003)
of Publishers Clearing House (direct marketing), formerly Chairman and Chief
Executive Officer (August 1996-January 2003) of Publishers Clearing House.
Other Directorships held:(4) Director of BellSouth Corporation (since 1992).
STEPHEN STONEBURN (60), Trustee since 2003(3)
Oversees 107 portfolios in Fund complex
Principal occupations (last 5 years): President and Chief Executive Officer
(since June 1996) of Quadrant Media Corp. (a publishing company); formerly
President (June 1995-June 1996) of Argus Integrated Media, Inc.; Senior Vice
President and Managing Director (January 1993-1995) of Cowles Business Media and
Senior Vice President of Fairchild Publications, Inc. (1975-1989).
Other Directorships held:(4) None
CLAY T. WHITEHEAD (64), Trustee since 2003(3)
Oversees 106 portfolios in Fund complex
Principal occupations (last 5 years): President (since 1983) of National
Exchange Inc. (new business development firm).
Other Directorships held:(4) Director (since 2000) of the High Yield Plus Fund,
Inc.
INTERESTED TRUSTEES(1)
JUDY A. RICE (55), President since 2003 and Trustee since 2000(3)
Oversees 109 portfolios in Fund complex
Principal occupations (last 5 years): President, Chief Executive Officer, Chief
Operating Officer and Officer-in-Charge (since 2003) of PI; Director,
Officer-in-Charge, President, Chief Executive Officer and Chief Operating
Officer (since May 2003) of American Skandia Advisory Services, Inc. and
American Skandia Investment Services, Inc.; Director, Officer-in-Charge,
President, Chief Executive Officer (since May 2003) of American Skandia Fund
Services, Inc.; formerly various positions to Senior Vice President (1992-1999)
of Prudential Securities; and various positions to Managing Director (1975-1992)
of Salomon Smith Barney; Member of Board of Governors of the Money Management
Institute.
Other Directorships held:(4) None
Dryden Municipal Series Fund - New Jersey Series 41
<Page>
ROBERT F. GUNIA (56), Vice President and Trustee since 1996(3)
Oversees 189 portfolios in Fund complex
Principal occupations (last 5 years): Chief Administrative Officer (since June
1999) of PI; Executive Vice President and Treasurer (since January 1996) of PI;
President (since April 1999) of Prudential Investment Management Services LLC
(PIMS); Corporate Vice President (since September 1997) of The Prudential
Insurance Company of America (Prudential); Director, Executive Vice President
and Chief Administrative Officer (since May 2003) of American Skandia Investment
Services, Inc., American Skandia Advisory Services, Inc. and American Skandia
Fund Services, Inc.; formerly Senior Vice President (March 1987-May 1999) of
Prudential Securities.
Other Directorships held:(4) Vice President and Director (since May 1989) and
Treasurer (since 1999) of The Asia Pacific Fund, Inc.
Information pertaining to the Officers of the Trust is set forth below.
OFFICERS(2)
MARGUERITE E.H. MORRISON (47), Chief Legal Officer since 2003 and Assistant
Secretary since 2002(3)
Principal occupations (last 5 years): Vice President and Chief Legal
Officer--Mutual Funds and Unit Investment Trusts (since August 2000) of
Prudential; Senior Vice President and Secretary (since April 2003) of PI; Senior
Vice President and Secretary (since May 2003) of American Skandia Investment
Services, Inc., American Skandia Advisory Services, Inc. and American Skandia
Fund Services, Inc.; Vice President and Assistant Secretary of PIMS (since
October 2001), previously Senior Vice President and Assistant Secretary
(February 2001-April 2003) of PI, Vice President and Associate General Counsel
(December 1996-February 2001) of PI.
DEBORAH A. DOCS (45), Secretary since 1998; Assistant Secretary 1985-1998(3)
Principal occupations (last 5 years): Vice President and Corporate Counsel
(since January 2001) of Prudential; Vice President and Assistant Secretary
(since December 1996) of PI, Vice President and Assistant Secretary (since May
2003) of American Skandia Investment Services, Inc.
MARYANNE RYAN (39), Anti-Money Laundering Compliance Officer since 2002(3)
Principal occupations (last 5 years): Vice President, Prudential (since November
1998), First Vice President, Prudential Securities (March 1997-May 1998);
Anti-Money Laundering Compliance Officer (since 2003) of American Skandia
Investment Services, Inc., American Skandia Advisory Services, Inc. and American
Skandia Marketing, Inc.
GRACE C. TORRES (44), Treasurer and Principal Financial and Accounting Officer
since 1996(3)
Principal occupations (last 5 years): Senior Vice President (since January 2000)
of PI, Senior Vice President and Assistant Treasurer (since May 2003) of
American Skandia Investment Services, Inc. and American Skandia Advisory
Services, Inc.; formerly First Vice President (December 1996-January 2000) of PI
and First Vice President (March 1993-1999) of Prudential Securities.
42 Visit our website at www.jennisondryden.com
<Page>
<Table>
1 'Interested' Trustee, as defined in the 1940 Act, by reason of employment with the
Manager, (Prudential Investments LLC or PI), the Subadviser (Prudential Investment
Management, Inc. or PIM) or the Distributor (Prudential Investment Management
Services LLC or PIMS).
2 Unless otherwise noted, the address of the Trustees and Officers is c/o:
Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, NJ
07102.
3 There is no set term of office for Trustees and Officers. The Independent Trustees
have adopted a retirement policy, which calls for the retirement of Trustees on
December 31 of the year in which they reach the age of 75. The table shows the
individuals length of service as Trustee and/or Officer.
4 This includes only directorships of companies requested to register, or file
reports with the SEC under the Securities and Exchange Act of 1934 (that is,
'public companies') or other investment companies registered under the 1940 Act.
D The Fund Complex consists of all investment companies managed by PI. The Funds for
which PI serves as manager include JennisonDryden Mutual Funds, Strategic Partners
Funds, American Skandia Advisor Funds, Inc., The Prudential Variable Contract
Accounts 2, 10, 11, The Target Portfolio Trust, The Prudential Series Fund, Inc.,
American Skandia Trust, and Prudential's Gibraltar Fund.
</Table>
Additional information about the Fund's Trustees is included in the Fund's
Statement of Additional Information which is available without charge, upon
request, by calling (800) 521-7466 or (732) 482-7555 (Calling from outside the
U.S.)
Dryden Municipal Series Fund - New Jersey Series 43
Growth of a $10,000 Investment
GRAPH)
Average Annual Total Returns (with Sales Charge) as of 8/31/03
One Year Five Years Ten Years Since Inception
Class A -0.51% 3.99% 4.69% (4.62) 6.31% (6.12)
Class B -2.59 4.19 4.67 (4.59) 6.54 (6.19)
Class C 0.06 3.89 N/A 4.99 (4.93)
Class Z 2.84 5.01 N/A 5.65 (5.63)
Average Annual Total Returns (without Sales Charge) as of 8/31/03
One Year Five Years Ten Years Since Inception
Class A 2.57% 4.63% 5.01% (4.94) 6.55% (6.36)
Class B 2.31 4.36 4.67 (4.59) 6.54 (6.19)
Class C 2.05 4.10 N/A 5.10 (5.05)
Class Z 2.84 5.01 N/A 5.65 (5.63)
Past performance is not indicative of future
results. Principal value and investment return
will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than
their original cost. Source: Prudential
Investments LLC and Lipper Inc. Inception
dates: Class A, 1/22/90; Class B, 3/4/88; Class
C, 8/1/94; and Class Z, 12/6/96.
The graph compares a $10,000 investment in the
Dryden Municipal Series Fund/New Jersey Series
(Class A shares) with a similar investment in the
Lehman Brothers Municipal Bond Index by portraying
the initial account values at the beginning of the
ten-year period of Class A shares (August 31,
1993) and the account values at the end of the
current fiscal year (August 31, 2003) as
measured on a quarterly basis. For purposes of
the graph, and unless otherwise indicated, it
has been assumed that (a) the maximum
applicable front-end sales charge was deducted
from the initial $10,000 investment in Class A
shares; (b) all recurring fees (including
management fees) were deducted; and (c) all
dividends and distributions were reinvested.
The line graph provides information for Class A
shares only. As indicated in the tables,
performance for Class B, Class C, and Class Z
shares will vary due to the differing charges
and expenses applicable to each share class (as
indicated in the following paragraphs). Without
a distribution and service (12b-1) fee waiver of
0.05% for Class A shares, the returns for Class A
shares shown in the graph and in the tables would
have been lower. The returns on investment in the
graph and in the tables do not reflect the deduction
of taxes that a shareholder would pay on fund
distributions or following the redemption of
fund shares.
Visit our website at www.jennisondryden.com
The Lehman Brothers Municipal Bond Index is an
unmanaged index of over 39,000 long-term
investment-grade municipal bonds. It gives a
broad look at how long-term investment-grade
municipal bonds have performed. The Lehman Brothers
Municipal Bond Index's total returns include the
reinvestment of all dividends, but do not include
the effects of sales charges, operating expenses of
a mutual fund, or taxes. These returns would be
lower if they included the effects of sales
charges, operating expenses, or taxes. The
securities that comprise the Lehman Brothers
Municipal Bond Index may differ substantially
from the securities in the Series. The Lehman
Brothers Municipal Bond Index is not the only
index that may be used to characterize
performance of municipal bond funds. Other
indexes may portray different comparative
performance. Investors cannot invest directly
in an index.
The Series charges a maximum front-end sales
charge of 3% for Class A shares and a 12b-1 fee
of up to 0.30% annually. Class A shares may not
be subject to a front-end sales charge, but may
be subject to a 1% contingent deferred sales
charge (CDSC) for the first year. Class B shares
are subject to a declining CDSC of 5%, 4%, 3%, 2%,
1%, and 1% respectively for the first six years
after purchase and a 12b-1 fee of 0.50% annually.
Approximately seven years after purchase, Class
B shares will automatically convert to Class A
shares on a quarterly basis. Class C shares are
subject to a front-end sales charge of 1%, a
CDSC of 1% for shares redeemed within 18 months
of purchase, and a 12b-1 fee of up to 1%
annually. Class Z shares are not subject to a
sales charge or 12b-1 fee. Without waiver of
fees and/or expense subsidization, the Series'
returns in the tables would have been lower, as
indicated in parentheses.
Dryden Municipal Series Fund/New Jersey Series
MAIL TELEPHONE WEBSITE
Gateway Center Three (800) 225-1852 www.jennisondryden.com
100 Mulberry Street
Newark, NJ 07102-4077
Trustees
David E.A. Carson - Robert F. Gunia - Robert E. La Blanc -
Douglas H. McCorkindale - Stephen P. Munn - Richard A. Redeker -
Judy A. Rice - Robin B. Smith - Stephen D. Stoneburn - Clay T. Whitehead
Officers
Judy A. Rice, President - Robert F. Gunia, Vice President - Grace C. Torres,
Treasurer and Principal Financial and Accounting Officer - Marguerite E.H.
Morrison, Chief Legal Officer and Assistant Secretary - Deborah A. Docs,
Secretary - Maryanne Ryan, Anti-Money Laundering Compliance Officer
Manager Prudential Investments LLC Gateway Center Three
100 Mulberry Street
Newark, NJ 07102
- -------------------------------------------------------------------------------
Investment Adviser Prudential Investment Gateway Center Two
Management, Inc. 100 Mulberry Street
Newark, NJ 07102
- -------------------------------------------------------------------------------
Distributor Prudential Investment Gateway Center Three
Management Services LLC 14th Floor
100 Mulberry Street
Newark, NJ 07102
- -------------------------------------------------------------------------------
Custodian State Street Bank One Heritage Drive
and Trust Company North Quincy, MA 02171
- -------------------------------------------------------------------------------
Transfer Agent Prudential Mutual Fund PO Box 8098
Services LLC Philadelphia, PA 19101
- -------------------------------------------------------------------------------
Independent AUditors PricewaterhouseCoopers LLP 1177 Avenue of the Americas
New York, NY 10036
- -------------------------------------------------------------------------------
Legal Counsel Shearman & Sterling LLP 599 Lexington Avenue
New York, NY 10022
- -------------------------------------------------------------------------------
Dryden Municipal Series Fund/New Jersey Series
Share Class A B C Z
Nasdaq PRNJX PBNJX PCNJX PZNJX
CUSIP 262468804 262468887 262468879 262468861
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY
FEDERAL GOVERNMENT AGENCY
MAY LOSE VALUE
ARE NOT A DEPOSIT OF OR GUARANTEED BY
ANY BANK OR ANY BANK AFFILIATE
MF138E IFS-A084963
<Page>
Dryden
Municipal Series Fund/
New Jersey Money Market Series
Formerly known as Prudential Municipal Series Fund/
New Jersey Money Market Series
AUGUST 31, 2003 ANNUAL REPORT
(GRAPHIC)
FUND TYPE
Money market
OBJECTIVE
The highest level of current income
that is exempt from New Jersey State and
federal income taxes, consistent with liquidity
and the preservation of capital
- -----------------------------------------------------
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 Series'
portfolio holdings are for the period covered
by this report and are subject
to change thereafter.
JennisonDryden is a service mark of
The Prudential Insurance Company
of America.
JennisonDrydenMutualFunds
Dear Shareholder, October 10, 2003
There have been welcome signs that the U.S.
economy is growing again. Many corporate
executives and investment research analysts are
expecting profits to rise as well. However,
jobs are not being created as quickly as in
past recoveries, reminding us that the
resumption of growth doesn't mean a return to
an earlier time. The economic picture continues
to change, providing new opportunities and
challenges. Regardless of the direction of
financial markets, it is important to remember
that a wise investor plans today for tomorrow's
needs. A broadly diversified investment
portfolio will increase your chances of
participating in positive changes and is also
your best long-term defense against unexpected
downturns.
Whether you are investing for your retirement,
your children's education, or some other
purpose, JennisonDryden mutual funds offer the
experience, resources, and professional
discipline of three leading asset management
firms that can make a difference for you.
JennisonDryden funds are managed by Prudential
Investment Management's public equity and
fixed-income asset management businesses. The
equity funds are managed by Jennison Associates
and Quantitative Management. Prudential Fixed
Income manages the JennisonDryden fixed income
and money market funds.
We recommend that you develop a diversified
personal asset allocation strategy in
consultation with a financial professional who
knows you, who understands your reasons for
investing, the time you have to reach your
goals, and the amount of risk you are
comfortable assuming. JennisonDryden mutual
funds offer a wide range of investment choices,
and your financial professional can help you
choose the appropriate funds to implement your
strategy.
Sincerely,
Judy A. Rice, President
Dryden Municipal Series Fund/New Jersey Money Market Series
Dryden Municipal Series Fund/New Jersey Money Market Series 1
Your Fund's Performance
Fund Objective
The Dryden Municipal Series Fund/New Jersey
Money Market Series (the Series) seeks to
provide the highest level of current income
that is exempt from New Jersey State and
federal income taxes, consistent with liquidity
and the preservation of capital. There can be
no assurance that the Series will achieve its
investment objective.
Fund Facts as of 8/31/03
7-Day Net Asset Taxable Equivalent Yield* Weighted Avg. Net Assets
Current Yield Value (NAV) @28% @33% @35% Maturity (WAM) (Millions)
New Jersey Money
Market Series 0.17% $1.00 0.25% 0.27% 0.28% 58 Days $176
- --------------------------------------------------------------------------------------------------------
iMoneyNet, Inc.
State Specific Retail
New Jersey Avg.** 0.28% N/A 0.42% 0.45% 0.46% 50 Days N/A
- --------------------------------------------------------------------------------------------------------
Note: Yields will fluctuate from time to time,
and past performance is not indicative of
future results. An investment in the Series is
not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government
agency. Although the Series seeks to preserve
the value of your investment at $1.00 per
share, it is possible to lose money by
investing in the Series.
*Some investors may be subject to the federal
alternative minimum tax and/or state and local
taxes. Taxable equivalent yields reflect
federal and applicable state tax rates.
**iMoneyNet, Inc. reports a 7-day current yield
and WAM on Mondays. This is the data of all
funds in the iMoneyNet, Inc. State Specific
Retail New Jersey Average category as of August
25, 2003, the closest date to the end of our
reporting period.
2 Visit our website at www.jennisondryden.com
State Specific Money Market Fund Yield Comparison
(CHART)
Weighted Average Maturity Comparison
(CHART)
Past performance is not indicative of future
results. The graphs portray weekly 7-day
current yields and weekly WAMs for the Dryden
Municipal Series Fund/New Jersey Money Market
Series and the iMoneyNet, Inc. State Specific
Retail New Jersey Average every Monday from
August 26, 2002 to August 25, 2003, the closest
dates to the beginning and end of our reporting
period. The data portrayed at the end of the
reporting period in the graph may not match the
data portrayed in the Fund Facts table as of August
31, 2003.
Dryden Municipal Series Fund/New Jersey Money Market Series 3
Investment Adviser's Report
Falling Rates Affected Money Market Funds
The investment environment remained challenging
during the New Jersey Money Market Series'
fiscal year that began September 1, 2002.
Municipal money market yields fell to very low
levels, complicating the search for high-
quality debt securities that provided
attractive yields. Furthermore, the state of
New Jersey continued to face tough economic
times. Under these market conditions, we
employed what we believed to be a conservative
approach to security selection and interest-
rate risk that aimed to enhance the Series' yield
and maintain its net asset value (NAV) at
$1.00 per share throughout the 12-month
reporting period.
The trend toward lower municipal money market
yields reflected anticipation that
the Federal Reserve (the Fed) might reduce
short-term interest rates. The rate cuts in
November 2002 and June 2003 lowered the target
for the federal funds rate by three-quarters of
a percentage point to 1%, its lowest level in
many years. By cutting borrowing costs, the Fed
hoped to stimulate growth in the United States
despite a lingering sense of economic
uncertainty caused at times by, among other
things, a volatile stock market and
geopolitical concerns.
Timely Purchases Benefited the Series
As part of our conservative investment
strategy, the Series held high-quality fixed-
and floating-rate debt securities of municipal
entities such as cities, counties, and school
districts. The Series' shorter-term securities
provided the Series with some flexibility as
their proceeds could be readily reinvested if
attractive investment opportunities emerged. We
also tried to take advantage of times when
yields temporarily edged higher by locking in
yields on longer-term municipal money market
securities. For example, when stronger-than-
expected economic data led to a brief upturn in
yields in October 2002, we purchased debt
securities that matured in September and
October 2003. By investing in longer-term
municipal money market securities, we helped
the Series ride out the "January effect," a
seasonal decline in yields that typically
occurs in the first week of January as
increased demand for municipal money market
securities temporarily outstrips the supply.
Taking Care of Shareholder Liquidity Needs
Once the January effect was over, we continued
to invest in longer- and shorter-term municipal
money market securities. We bought notes that
mature in December 2003 and February 2004, as
well as debt securities that matured in April
2003. Proceeds from the securities that came
due in April helped meet our shareholder
liquidity needs that often increase during tax
season. We also took advantage of attractive
investment opportunities that emerged during
tax time as other portfolio managers
4 Visit our website at www.jennisondryden.com
sold securities to provide shareholders with
cash to pay their taxes. Among our
purchases were so-called "put" bonds that pay
fixed interest rates for one year, after which
investors will receive par and accrued interest
for the bonds when they deliver them back for
payment.
An Emphasis on Adjustable-Rate Securities
After tax season, we invested primarily in
securities whose interest rates reset either on
a daily or weekly basis. These bonds have a
demand feature that allows investors, at their
discretion, to turn the bonds in for cash that
must be paid within one to five days.
Consequently, they provided the Series with
sufficient liquidity to cope with the volatile
asset flows that can often occur during the
period. Holding a combination of longer- and
shorter-term municipal money market securities
enabled the Series to ride out the "July
effect," another seasonal decline in yields
that typically occurs in the first week of July
for the same reasons as the January effect.
Economy Continued to Challenge New Jersey
We remained very selective when buying
municipal money market securities of issuers in
New Jersey because the Garden State's debt
burden has increased in recent years.
Nevertheless, we believe that New Jersey's
credit remains sound, with further improvement
in store as economic growth picks up.
New Jersey Money Market Series Management Team
Dryden Municipal Series Fund/New Jersey Money Market Series 5
Portfolio of Investments
as of August 31, 2003
<Table>
<Caption>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
Allendale Brd. Ed. Temp.
Nts. NR 1.20% 9/03/04 $ 2,391 $ 2,393,343
Allendale, G.O., Gen.,
Impvt., M.B.I.A. Aaa 2.50 7/15/04 200 202,587
Chatham Twnshp. NR 1.02 2/20/04 3,015 3,015,456
Delaware River Port Auth.
Pennsylvania & New Jersey
Rev.,
Ser. B4, F.R.W.D. VMIG1 0.87 9/03/03 4,000 4,000,000
Ser. K, F.R.W.D. VMIG1 0.87 9/03/03 3,000 3,000,000
Mun. Secs. Trust Rcpts.
Ser. SGA-89, F.R.D.D.,
F.S.A. A-1+(c) 0.90 9/02/03 2,000 2,000,000
Dover Twnshp., G.O., Ser.
B, B.A.N. NR 1.75 12/26/03 625 626,215
Freehold Twnshp., G.O.,
B.A.N.,
Ser. 2002 NR 2.50 10/22/03 4,925 4,930,410
Galloway Twnshp., B.A.N. NR 1.90 3/05/04 923 925,910
Hudson Cnty. Impvt. Auth.
Rev., Essential Purp.
Pooled Govt., F.R.W.D.,
Ser. 86 A-1+(c) 0.80 9/04/03 7,300 7,300,000
Irvington Twnshp.,
G.O., B.A.N. NR 2.40 10/30/03 2,208 2,209,038
G.O., B.A.N. MIG1 1.88 3/19/04 828 831,000
Jersey City, G.O., B.A.N. MIG1 2.50 9/12/03 10,000 10,002,817
Marlboro Twnshp. Mun.
Util. Auth. Proj. Nts.,
G.O. NR 2.13 12/11/03 1,300 1,302,923
Middlesex Cnty. Impvt
Auth. Rev., Gtd. Proj.
Nts., Series 2003,
Woodridge
Cmnty. Ctr., G.O. NR 2.00 2/26/04 5,700 5,720,570
New Jersey Hlth. Care
Facs. Fin. Auth. Rev.,
Comp. Prog., Ser. A2,
F.R.W.D. VMIG1 0.80 9/04/03 1,900 1,900,000
Meridian Hlth. Sys., Ser.
B, F.R.W.D. VMIG1 0.80 9/04/03 5,000 5,000,000
Ser. 833, F.R.W.D. NR 0.86 9/04/03 4,000 4,000,000
New Jersey St. Econ. Dev.
Auth.,
AFL Qual. Inc. Proj.,
F.R.W.D., A.M.T. A-1(c) 0.85 9/03/03 2,800 2,800,000
AIRIS Newark LLC Proj.,
F.R.W.D., A.M.B.A.C.,
A.M.T., Ser. 1998 VMIG1 0.85 9/04/03 3,600 3,600,000
Alpha Assocs. & Avallone,
Ser. 9B, F.R.W.D. A-1(c) 0.85 9/03/03 2,140 2,140,000
</Table>
See Notes to Financial Statements.
6 Visit our website at www.jennisondryden.com
<Page>
<Table>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
Commerce Ctr. Proj., Mfg.
Facs. Rev., Ser. 89,
F.R.W.D. A-1(c) 0.80% 9/04/03 $ 5,700 $ 5,700,000
Encap Golf Holdings LLC,
Ser. A, F.R.W.D., A.M.T. VMIG1 0.85 9/04/03 5,000 5,000,000
Kent Place Proj., Ser. L,
F.R.W.D. VMIG1 0.80 9/04/03 1,295 1,295,000
Keswick Pines Proj., 1st
Mtge., Ser. 1993 Aaa 8.75 1/02/04 1,000 1,049,205
Michael Shalit Proj.,
Ser. 93, F.R.D.D. Aa2 0.90 9/02/03 135 135,000
Oak Hill Academy Proj.,
Ser. 2002, F.R.W.D. NR 0.90 9/04/03 2,270 2,270,000
Office Court Assoc.
Proj., Ser. 89, F.R.W.D.,
A.M.T. A-1 0.85 9/03/03 2,300 2,300,000
Peddie Sch. Proj., Ser.
B, F.R.W.D. A-1(c) 0.80 9/04/03 3,000 3,000,000
Putters, Ser. 219,
F.R.W.D. A-1+(c) 0.80 9/04/03 4,000 4,000,000
Republic Svcs., Inc.
Proj.,
Ser. 2001, F.R.W.D.,
A.M.T. A-1+ 0.85 9/03/03 2,000 2,000,000
Rev., El Dorado
Terminals,
Ser. B, F.R.D.D. VMIG1 0.80 9/02/03 2,200 2,200,000
SPL Facs. Rev., Port
Newark Container LLC,
Ser. 2003, F.R.W.D.,
A.M.T. VMIG1 0.89 9/03/03 9,200 9,200,000
Sr. Care Bayshore Hlth.,
Ser. A, F.R.W.D. VMIG1 0.80 9/04/03 1,585 1,585,000
Wtr. Facs. Rev., Utd.
Wtr. Proj. Inc., Ser. C,
F.R.D.D.,
A.M.B.A.C., A.M.T. VMIG1 0.93 9/02/03 800 800,000
New Jersey St. Hsg. &
Mtge.
Fin. Agcy. Rev., Home
Buyer,
Ser. EE, M.B.I.A., A.M.T. MIG1 1.10 4/01/04 3,000 3,000,000
New Jersey St. Mun. Trust
Certs., ZTC-37, Cl. A,
F.R.W.D. VMIG1 0.93 9/04/03 4,800 4,800,000
New Jersey St. Tpke. Auth.
Rev., Ser. EEE, F.R.W.D.,
M.B.I.A. VMIG1 0.87 9/03/03 3,400 3,400,000
New Jersey St. Trans.
Trust
Fd. Auth.,
Ser. A5, F.R.W.D. VMIG1 0.87 9/03/03 2,275 2,275,000
Putters, Ser. 332,
A.M.B.A.C., F.R.W.D. A-1(c) 0.80 9/04/03 3,390 3,390,000
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New Jersey Money Market Series 7
<Page>
Portfolio of Investments
as of August 31, 2003 Cont'd.
<Table>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
North Plainfield Brd. of
Ed., Temp. Nts., G.O. NR 2.00% 9/11/03 $ 9,250 $ 9,251,191
Passaic Cnty., G.O.,
B.A.N. MIG1 1.75 6/11/04 4,000 4,021,472
Port Auth. of New York &
New Jersey, Ser. 93-2,
F.R.W.D. NR 0.83 9/04/03 7,000 7,000,000
Port Auth. of New York &
New Jersey,
Putters, Ser. 153,
F.R.W.D., A.M.T. VMIG1 0.85 9/04/03 4,000 4,000,000
SPL Oblig. Rev.,
Versatile Structure
Oblig., Ser. 4, F.R.D.D.,
A.M.T. VMIG1 0.90 9/02/03 700 700,000
Puerto Rico Elec. Pwr.
Auth.
Rev., Mun. Secs. Trust
Rcpts.,
Ser. SGA 43, F.R.W.D. A-1+(c) 0.78 9/03/03 2,700 2,700,000
Puerto Rico Pub. Fin.
Corp., Putters, Ser. 363,
A.M.B.A.C. A-1+(c) 1.00 7/29/04 5,000 5,000,000
Somerset Cnty., G.O., Ser.
2002 Aaa 3.63 10/15/03 1,370 1,373,385
Somerville, G.O., B.A.N. NR 1.75 8/10/04 2,700 2,716,311
Sussex Cnty., B.A.N. NR 1.50 9/05/03 8,000 8,000,477
Union Twnshp., B.A.N. Aa3 1.90 1/15/04 5,800 5,817,032
Washington Twnshp. Morris
Cnty., B.A.N. NR 1.75 7/30/04 2,250 2,264,821
---------------
TOTAL INVESTMENTS 101.4%
(COST $178,144,163(D)) 178,144,163
Liabilities in excess of
other assets (1.4%) (2,430,553)
---------------
NET ASSETS 100% $ 175,713,610
---------------
---------------
</Table>
See Notes to Financial Statements.
8 Visit our website at www.jennisondryden.com
<Page>
(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.
B.A.N.--Bond Anticipation Note.
F.R.D.D.--Floating Rate (Daily) Demand Note (b).
F.R.W.D.--Floating Rate (Weekly) Demand Note (b).
F.S.A.--Financial Security Assurance.
G.O.--General Obligation.
M.B.I.A.--Municipal Bond Insurance Association.
(b) For purposes of amortized cost valuation, the maturity date of Floating
Rate Demand Notes is considered to be 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.
(c) Standard & Poor's Rating.
(d) Federal income tax basis is the same as for financial reporting purposes.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information contains a description
of Moody's and Standard & Poor's ratings.
See Notes to Financial Statements.
Dryden Municipal Series Fund - New Jersey Money Market Series 9
<Page>
Statement of Assets and Liabilities
as of August 31, 2003
<Table>
ASSETS
-----------------------------------------------------------------------------------
Investments, at amortized cost which approximates market value $178,144,163
Cash 23,678
Receivable for Series shares sold 1,079,566
Interest receivable 925,639
Prepaid expenses and other assets 3,296
------------
TOTAL ASSETS 180,176,342
------------
LIABILITIES
-----------------------------------------------------------------------------------
Payable for investments purchased 2,393,343
Payable for Series shares reacquired 1,915,270
Management fee payable 78,775
Accrued expenses 40,280
Distribution fee payable 19,694
Deferred trustees' fees 10,525
Dividends payable 4,845
------------
TOTAL LIABILITIES 4,462,732
------------
NET ASSETS $175,713,610
------------
------------
-----------------------------------------------------------------------------------
Net assets were comprised of:
Shares of beneficial interest, at $.01 par value $ 1,757,136
Paid-in capital in excess of par 173,956,474
------------
NET ASSETS, AUGUST 31, 2003 $175,713,610
------------
------------
Net asset value, offering price and redemption price per share
($175,713,610 / 175,713,610 shares of beneficial interest issued and
outstanding; unlimited number of shares authorized) $1.00
-----
-----
</Table>
See Notes to Financial Statements.
10 Visit our website at www.jennisondryden.com
<Page>
Statement of Operations
Year Ended August 31, 2003
NET INVESTMENT INCOME
-----------------------------------------------------------------------------
Income
Interest $2,570,919
----------
Expenses
Management fee 997,722
Distribution fee 249,430
Custodian's fees and expenses 92,000
Reports to shareholders 49,000
Transfer agent's fees and expenses 47,000
Legal fees and expenses 42,000
Registration fees 20,000
Trustees' fees 13,000
Audit fee 13,000
Miscellaneous 4,372
----------
TOTAL EXPENSES 1,527,524
Less: Custodian fee credit (Note 1) (347)
----------
NET EXPENSES 1,527,177
----------
NET INVESTMENT INCOME 1,043,742
Net realized gain on investment transactions 22,410
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,066,152
----------
----------
See Notes to Financial Statements.
Dryden Municipal Series Fund - New Jersey Money Market Series 11
<Page>
Statement of Changes in Net Assets
<Table>
<Caption>
-----------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------
2003 2002
INCREASE (DECREASE) IN NET ASSETS
-----------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 1,043,742 $ 2,400,298
Net realized gain on investment transactions 22,410 11,927
--------------- -----------------
Net increase in net assets resulting from
operations 1,066,152 2,412,225
--------------- -----------------
DIVIDENDS AND DISTRIBUTIONS PAID TO SHAREHOLDERS
(NOTE 1) (1,066,152) (2,412,225)
--------------- -----------------
SERIES SHARE TRANSACTIONS (AT $1 PER SHARE)
Net proceeds from shares sold 620,002,026 577,611,941
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions 1,050,580 2,401,800
Cost of shares reacquired (662,702,129) (571,201,014)
--------------- -----------------
Net increase (decrease) in net assets from Series
share transactions (41,649,523) 8,812,727
--------------- -----------------
Total increase (decrease) (41,649,523) 8,812,727
NET ASSETS
-----------------------------------------------------------------------------------
Beginning of year 217,363,133 208,550,406
--------------- -----------------
End of year $ 175,713,610 $ 217,363,133
--------------- -----------------
--------------- -----------------
</Table>
See Notes to Financial Statements.
12 Visit our website at www.jennisondryden.com
<Page>
Notes to Financial Statements
Dryden Municipal Series Fund (the 'Fund'), formerly known as Prudential
Municipal Series Fund is registered under the Investment Company Act of 1940 as
an open-end management investment company. The Fund was organized as a
Massachusetts business trust on May 18, 1984 and consists of six series. These
financial statements relate to only New Jersey Money Market Series (the
'Series'). The financial statements of the other series are not presented
herein. The assets of each series are invested in separate, independently
managed portfolios. The Series commenced investment operations on December 3,
1990. The Series is nondiversified and seeks to achieve its investment objective
of providing the highest level of income that is exempt from New Jersey state
and federal income taxes with a minimum of risk by investing in 'investment
grade' tax-exempt securities maturing within 13 months or less and whose ratings
are within the two highest ratings categories by a nationally recognized
statistical rating organization, or if not rated, are of comparable quality. The
ability of the issuers of the securities held by the Series to meet their
obligations may be affected by economic developments in a specific state,
industry or region.
NOTE 1. ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund, and the Series, in the preparation of its financial statements.
Securities Valuations: Portfolio securities of the Series are valued at
amortized cost, which approximates market value. The amortized cost involves
valuing a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of any discount or premium. If the amortized
cost method is determined not to represent fair value, the fair value shall be
determined by or under the direction of the Board of Trustees.
Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains (losses) on sales of securities are
calculated on the identified cost basis. The Series amortizes premiums and
accretes discounts on purchases of portfolio securities as adjustments to
interest income. Interest income is recorded on the accrual basis. Expenses are
recorded on the accrual basis which may require the use of certain estimates by
management.
Federal Income Taxes: For federal income tax purposes, each series in the Fund
is treated as a separate taxpaying entity. It is the Series' policy to continue
to meet the requirements of the Internal Revenue Code applicable to regulated
investment
Dryden Municipal Series Fund - New Jersey Money Market Series 13
<Page>
companies and to distribute all of its net income to shareholders. For this
reason, no federal income tax provision is required.
Dividends and distributions: The Series declares daily dividends from net
investment income and net realized short-term gains. Payment of dividends is
made monthly. 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 cash earns credits which reduce the fees charged by the
custodian. The Series could have invested a portion of the cash utilized in
connection with the expense offset arrangements in an income producing asset if
it had not entered into such arrangements.
NOTE 2. AGREEMENTS
The Fund has a management agreement with Prudential Investments LLC ('PI').
Pursuant to a subadvisory agreement between PI and Prudential Investment
Management, Inc. ('PIM'), PIM furnishes investment advisory services in
connection with the management of the Fund. Under the subadvisory agreement,
PIM, subject to the supervision of PI, is responsible for managing the assets of
each Series in accordance with its investment objective and policies. PI pays
for the services of PIM, the cost of compensation of officers of the Series,
occupancy and certain clerical and bookkeeping costs of the Series. The Series
bears all other costs and expenses.
The management fee paid to PI is computed daily and payable monthly, at an
annual rate of .50 of 1% of the average daily net assets of the Series.
The Series has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS'), which acts as the distributor of the Series. The Series
compensates PIMS for distributing and servicing the Series' shares pursuant to a
plan of distribution regardless of expenses actually incurred by PIMS. The
Series pays PIMS for distributing and servicing the Series shares pursuant to
the plan of distribution at an annual rate of .125 of 1% of the Series' average
daily net assets. The distribution fee is accrued daily and payable monthly.
PI, PIM and PIMS are indirect, wholly-owned subsidiaries of Prudential
Financial, Inc. ('Prudential').
14 Visit our website at www.jennisondryden.com
<Page>
NOTE 3. OTHER TRANSACTIONS WITH AFFILIATES
Prudential Mutual Fund Services LLC ('PMFS'), an affiliate of PI and an indirect
wholly-owned subsidiary of Prudential, serves as the Series transfer agent.
During the year ended August 31, 2003, the Series incurred fees of approximately
$44,900 for the services of PMFS. As of August 31, 2003, approximately $3,700 of
such fees were due to PMFS. Transfer agent fees and expenses in the Statement of
Operations include certain out-of-pocket expenses paid to non-affiliates, where
applicable.
NOTE 4. DISTRIBUTIONS AND TAX INFORMATION
For the years ended August 31, 2003 and August 31, 2002, the tax character of
the dividends paid, as reflected in the Statement of Changes in Net Assets, of
$1,066,152 and $2,412,225, respectively, were tax-exempt income.
As of August 31, 2003, the accumulated undistributed earnings on a tax basis was
$4,845 of tax-exempt income (includes a timing difference of $4,845 for
dividends payable).
NOTE 5. CAPITAL
The Series offers Class A shares. The Series may also offer Class S shares.
There are no Class S shares currently issued and outstanding.
Dryden Municipal Series Fund - New Jersey Money Market Series 15
<Page>
Financial Highlights
YEAR ENDED
AUGUST 31, 2003
- ------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 1.00
Net investment income and net realized gains .01
Dividends and distributions (.01)
-------
Net asset value, end of year $ 1.00
-------
-------
TOTAL RETURN(A): .54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 175,714
Average net assets (000) $ 199,544
Ratios to average net assets:
Expenses, including distribution fee and service (12b-1)
fees .77%
Expenses, excluding distribution fee and service (12b-1)
fees .64%
Net investment income .52%
- ------------------------------
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each year reported and includes reinvestment
of dividends and distributions.
See Notes to Financial Statements.
16 Visit our website at www.jennisondryden.com
<Page>
YEAR ENDED AUGUST 31,
------------------------------------------------------------------------------
2002 2001 2000 1999
------------------------------------------------------------------------------
$ 1.00 $ 1.00 $ 1.00 $ 1.00
.01 .03 .03 .03
(.01) (.03) (.03) (.03)
------- ------- ------- -------
$ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
------- ------- ------- -------
1.10% 2.95% 3.12% 2.52%
$217,363 $208,550 $195,460 $207,004
$223,219 $212,370 $204,697 $209,479
.74% .73% .72% .72%
.62% .60% .59% .59%
1.08% 2.87% 3.07% 2.49%
See Notes to Financial Statements.
Dryden Municipal Series Fund - New Jersey Money Market Series 17
<Page>
Report of Independent Auditors
To the Shareholders and Trustees of
Dryden Municipal Series Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dryden Municipal Series Fund
(formerly, Prudential Municipal Series Fund), New Jersey Money Market Series
(one of the portfolios constituting Dryden Municipal Series Fund, hereafter
referred to as the 'Fund') at August 31, 2003, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as 'financial statements') are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 2003 by correspondence with the custodian and broker, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
October 22, 2003
18 Visit our website at www.jennisondryden.com
<Page>
Federal Income Tax Information
(Unaudited)
We are required by the Internal Revenue Code to advise you within 60 days of the
Series' fiscal year end (August 31, 2003) as to the federal tax status of
dividends paid by the Series during such fiscal year. Accordingly, we are
advising you that in the fiscal year ended August 31, 2003, dividends paid from
net investment income of $.01 per share were federally tax-exempt interest
dividends.
Dryden Municipal Series Fund - New Jersey Money Market Series 19
<Page>
Supplemental Proxy Information
(Unaudited)
A meeting of the Fund's shareholders was held on July 17, 2003. The meeting was
held for the following purposes:
(1) To approve the election of ten (10) trustees to the Board of Trustees, as
follows:
- David E.A. Carson
- Robert E. La Blanc
- Robert F. Gunia
- Douglas H. McCorkindale
- Stephen P. Munn
- Richard A. Redeker
- Judy A. Rice
- Robin B. Smith
- Stephen Stoneburn
- Clay T. Whitehead
(3) To permit an amendment to the management contract between PI and
the Fund.
The results of the proxy solicitation on the preceding matters were:
<Table>
<Caption>
VOTES VOTES VOTES
MATTER FOR AGAINST WITHHELD ABSTENTIONS
--------------------- ------------- ---------- ---------- -----------
(1) David E.A. Carson 161,004,592 -- 711,469 --
Robert E. La Blanc 161,009,560 -- 706,501 --
Robert F. Gunia 161,054,257 -- 661,804 --
Douglas H.
McCorkindale 160,844,747 -- 871,314 --
Stephen P. Munn 160,976,971 -- 739,090 --
Richard A. Redeker 160,861,823 -- 854,238 --
Judy A. Rice 161,054,257 -- 661,804 --
Robin B. Smith 160,785,689 -- 930,372 --
Stephen Stoneburn 161,004,592 -- 711,469 --
Clay T. Whitehead 160,054,257 -- 661,804 --
(3) Permit an amendment
to the management
contract between PI
and the Company 158,736,433 2,068,571 -- 911,047
</Table>
One or more matters in addition to the above referenced proposals were submitted
for shareholder approval, and the shareholder meeting relating to those matters
was adjourned until August 21, 2003, and a date following the close of the
reporting period.
20 Visit our website at www.jennisondryden.com
<Page>
A meeting of the Fund's shareholders was held on August 21, 2003. The meeting
was held for the following purposes:
(2) To approve a proposal to permit the manager to enter into, or make material
changes to, subadvisory agreements without shareholder approval.
(4b) To approve changes to fundamental investment restrictions and policies,
relating to: issuing senior securities, borrowing money or pledging assets.
(4c) To approve changes to fundamental investment restrictions and policies,
relating to: buying and selling real estate.
(4d) To approve changes to fundamental investment restrictions and policies,
relating to: buying and selling commodities and commodity contracts.
(4f) To approve changes to fundamental investment restrictions and policies,
relating to: making loans.
(4g) To approve changes to fundamental investment restrictions and policies,
relating to: other investment restrictions, including investing in
securities of other investment companies.
Dryden Municipal Series Fund - New Jersey Money Market Series 21
<Page>
Supplemental Proxy Information
(Unaudited) Cont'd.
The results of the proxy solicitation on the preceding matters were:
<Table>
<Caption>
VOTES VOTES VOTES
MATTER FOR AGAINST WITHHELD ABSTENTIONS
--------------------- ------------- ---------- ---------- -----------
(2) Permit the Manager to
Enter Into, or Make
Material Changes to
Subadvisory
Agreements without
Shareholder Approval 56,281,936 5,101,917 -- 698,319
(4b) Issuing Senior
Securities,
Borrowing Money or
Pledging Assets 55,924,654 4,928,718 -- 1,228,800
(4c) Buying and Selling
Real Estate 56,363,987 4,605,372 -- 1,112,813
(4d) Buying and Selling
Commodities and
Commodity Contracts 56,401,095 4,869,556 -- 811,521
(4f) Making Loans 56,190,380 4,856,955 -- 1,034,837
(4g) Other Investment
Restrictions 56,065,375 4,704,025 -- 1,312,772
</Table>
One or more matters in addition to the above referenced proposals were submitted
for shareholder approval, and the shareholder meeting relating to those matters
was adjourned until August 21, 2003, and a date following the close of the
reporting period.
22 Visit our website at www.jennisondryden.com
<Page>
Management of the Fund
(Unaudited)
Information pertaining to the Trustees of the Fund is set forth below. Trustees
who are not deemed to be 'interested persons' of the Fund, as defined in the
1940 Act are referred to as 'Independent Trustees.' Trustees who are deemed to
be 'interested persons' of the Fund are referred to as 'Interested Trustees.'
'Fund Complex'(D) consists of the Fund and any other investment companies
managed by PI.
INDEPENDENT TRUSTEES(2)
DAVID E.A. CARSON (69), Trustee since 2003(3)
Oversees 99 portfolios in Fund complex
Principal occupations (last 5 years): Director (January 2000 to May 2000),
Chairman (January 1999 to December 1999), Chairman and Chief Executive Officer
(January 1998 to December 1998) and President, Chairman and Chief Executive
Officer (1983-1997) of People's Bank.
Other Directorships held:(4) Director of United Illuminating and UIL Holdings
(utility company), since 1993.
ROBERT E. LA BLANC (69), Trustee since 2003(3)
Oversees 119 portfolios in Fund complex
Principal occupations (last 5 years): President (since 1981) of Robert E. La
Blanc Associates, Inc. (telecommunications); formerly General Partner at Salomon
Brothers and Vice-Chairman of Continental Telecom; Trustee of Manhattan
College.
Other Directorships held:(4) Director of Storage Technology Corporation (since
1979) (technology), Chartered Semiconductor Manufacturing, Ltd. (since 1998);
Titan Corporation (electronics) (since 1995), Computer Associates International,
Inc. (since 2002) (software company); FiberNet Telecom Group, Inc. (since 2003)
(telecom company); Director (since April 1999) of the High Yield Plus Fund,
Inc.
DOUGLAS H. MCCORKINDALE (64), Trustee since 2003(3)
Oversees 101 portfolios in Fund complex
Principal occupations (last 5 years): Chairman (since February 2001), Chief
Executive Officer (since June 2000) and President (since September 1997) of
Gannett Co. Inc. (publishing and media); formerly Vice Chairman (March 1984-May
2000) of Gannett Co., Inc.
Other Directorships held:(4) Director of Gannett Co. Inc., Director of
Continental Airlines, Inc. (since May 1993); Director of Lockheed Martin Corp.
(aerospace and defense) (since May 2001); Director of The High Yield Plus Fund,
Inc. (since 1996).
STEPHEN P. MUNN (61), Trustee since 1999(3)
Oversees 107 portfolios in Fund complex
Principal occupations (last 5 years): Chairman of the Board (since 1994) and
formerly Chief Executive Officer (1988-2001) and President of Carlisle Companies
Incorporated.
Other Directorships held:(4) Chairman of the Board (since January 1994) and
Director (since 1988) of Carlisle Companies Incorporated (manufacturer of
industrial products); Director of Gannet Co. Inc. (publishing and media).
Dryden Municipal Series Fund - New Jersey Money Market Series 23
<Page>
RICHARD A. REDEKER (60), Trustee since 1993(3)
Oversees 102 portfolios in Fund complex
Principal occupations (last 5 years): Management Consultant; formerly employee
of Prudential Investments (October 1996-December 1998); Director of Invesmart,
Inc. (since 2001) and Director of Penn Tank Lines, Inc. (since 1999).
Other Directorships held:(4) None.
ROBIN B. SMITH (64), Trustee since 2003(3)
Oversees 109 portfolios in Fund complex
Principal occupations (last 5 years): Chairman of the Board (since January 2003)
of Publishers Clearing House (direct marketing), formerly Chairman and Chief
Executive Officer (August 1996-January 2003) of Publishers Clearing House.
Other Directorships held:(4) Director of BellSouth Corporation (since 1992).
STEPHEN STONEBURN (60), Trustee since 2003(3)
Oversees 107 portfolios in Fund complex
Principal occupations (last 5 years): President and Chief Executive Officer
(since June 1996) of Quadrant Media Corp. (a publishing company); formerly
President (June 1995-June 1996) of Argus Integrated Media, Inc.; Senior Vice
President and Managing Director (January 1993-1995) of Cowles Business Media and
Senior Vice President of Fairchild Publications, Inc. (1975-1989).
Other Directorships held:(4) None
CLAY T. WHITEHEAD (64), Trustee since 2003(3)
Oversees 106 portfolios in Fund complex
Principal occupations (last 5 years): President (since 1983) of National
Exchange Inc. (new business development firm).
Other Directorships held:(4) Director (since 2000) of the High Yield Plus Fund,
Inc.
INTERESTED TRUSTEES(1)
JUDY A. RICE (55), President since 2003 and Trustee since 2000(3)
Oversees 109 portfolios in Fund complex
Principal occupations (last 5 years): President, Chief Executive Officer, Chief
Operating Officer and Officer-in-Charge (since 2003) of PI; Director,
Officer-in-Charge, President, Chief Executive Officer and Chief Operating
Officer (since May 2003) of American Skandia Advisory Services, Inc. and
American Skandia Investment Services, Inc.; Director, Officer-in-Charge,
President, Chief Executive Officer (since May 2003) of American Skandia Fund
Services, Inc.; formerly various positions to Senior Vice President (1992-1999)
of Prudential Securities; and various positions to Managing Director (1975-1992)
of Salomon Smith Barney; Member of Board of Governors of the Money Management
Institute.
Other Directorships held:(4) None
24 Visit our website at www.jennisondryden.com
<Page>
ROBERT F. GUNIA (56), Vice President and Trustee since 1996(3)
Oversees 189 portfolios in Fund complex
Principal occupations (last 5 years): Chief Administrative Officer (since June
1999) of PI; Executive Vice President and Treasurer (since January 1996) of PI;
President (since April 1999) of Prudential Investment Management Services LLC
(PIMS); Corporate Vice President (since September 1997) of The Prudential
Insurance Company of America (Prudential); Director, Executive Vice President
and Chief Administrative Officer (since May 2003) of American Skandia Investment
Services, Inc., American Skandia Advisory Services, Inc. and American Skandia
Fund Services, Inc.; formerly Senior Vice President (March 1987-May 1999) of
Prudential Securities.
Other Directorships held:(4) Vice President and Director (since May 1989) and
Treasurer (since 1999) of The Asia Pacific Fund, Inc.
Information pertaining to the Officers of the Trust is set forth below.
OFFICERS(2)
MARGUERITE E.H. MORRISON (47), Chief Legal Officer since 2003 and Assistant
Secretary since 2002(3)
Principal occupations (last 5 years): Vice President and Chief Legal
Officer--Mutual Funds and Unit Investment Trust (since August 2000) of
Prudential; Senior Vice President and Secretary (since April 2003) of PI; Senior
Vice President and Secretary (since May 2003) of American Skandia Investment
Services, Inc., American Skandia Advisory Services, Inc. and American Skandia
Fund Services, Inc.; Vice President and Assistant Secretary of PIMS (since
October 2001), previously Senior Vice President and Assistant Secretary
(February 2001-April 2003) of PI, Vice President and Associate General Counsel
(December 1996-February 2001) of PI.
DEBORAH A. DOCS (45), Secretary since 1998; Assistant Secretary 1985-1998(3)
Principal occupations (last 5 years): Vice President and Corporate Counsel
(since January 2001) of Prudential; Vice President and Assistant Secretary
(since December 1996) of PI, Vice President and Assistant Secretary (since May
2003) of American Skandia Investment Services, Inc.
MARYANNE RYAN (39), Anti-Money Laundering Compliance Officer since 2002(3)
Principal occupations (last 5 years): Vice President, Prudential (since November
1998), First Vice President, Prudential Securities (March 1997-May 1998);
Anti-Money Laundering Compliance Officer (since 2003) of American Skandia
Investment Services, Inc., American Skandia Advisory Services, Inc. and American
Skandia Marketing, Inc.
GRACE C. TORRES (44), Treasurer and Principal Financial and Accounting Officer
since 1996(3)
Principal occupations (last 5 years): Senior Vice President (since January 2000)
of PI, Senior Vice President and Assistant Treasurer (since May 2003) of
American Skandia Investment Services, Inc. and American Skandia Advisory
Services, Inc.; formerly First Vice President (December 1996-January 2000) of PI
and First Vice President (March 1993-1999) of Prudential Securities.
Dryden Municipal Series Fund - New Jersey Money Market Series 25
<Page>
<Table>
1 'Interested' Trustee, as defined in the 1940 Act, by reason of employment with the
Manager, (Prudential Investments LLC or PI), the Subadviser (Prudential Investment
Management, Inc. or PIM) or the Distributor (Prudential Investment Management
Services LLC or PIMS).
2 Unless otherwise noted, the address of the Trustees and Officers is c/o:
Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, NJ
07102.
3 There is no set term of office for Trustees and Officers. The Independent Trustees
have adopted a retirement policy, which calls for the retirement of Trustees on
December 31 of the year in which they reach the age of 75. The table shows the
individuals length of service as Trustee and/or Officer.
4 This includes only directorships of companies requested to register, or file
reports with the SEC under the Securities and Exchange Act of 1934 (that is,
'public companies') or other investment companies registered under the 1940 Act.
D The Fund Complex consists of all investment companies managed by PI. The Funds for
which PI serves as manager include JennisonDryden Mutual Funds, Strategic Partners
Funds, American Skandia Advisor Funds, Inc., The Prudential Variable Contract
Accounts 2, 10, 11, The Target Portfolio Trust, The Prudential Series Fund, Inc.,
American Skandia Trust, and Prudential's Gibraltar Fund.
</Table>
Additional information about the Fund's Trustees is included in the Fund's
Statement of Additional Information which is available without charge, upon
request, by calling (800) 521-7466 or (732) 482-7555 (Calling from outside the
U.S.)
26 Visit our website at www.jennisondryden.com
MAIL TELEPHONE WEBSITE
Gateway Center Three (800) 225-1852 www.jennisondryden.com
100 Mulberry Street
Newark, NJ 07102-4077
Trustees
David E.A. Carson - Robert F. Gunia - Robert E. La Blanc -
Douglas H. McCorkindale - Stephen P. Munn - Richard A. Redeker -
Judy A. Rice - Robin B. Smith - Stephen D. Stoneburn - Clay T. Whitehead
Officers
Judy A. Rice, President - Robert F. Gunia, Vice President -
Grace C. Torres, Treasurer and Principal Financial and Accounting Officer -
Marguerite E.H. Morrison, Chief Legal Officer and Assistant Secretary -
Deborah A. Docs, Secretary - Maryanne Ryan, Anti-Money Laundering Compliance
Officer
- -------------------------------------------------------------------------------
Manager Prudential Investments LLC Gateway Center Three
100 Mulberry Street
Newark, NJ 07102
- -------------------------------------------------------------------------------
Investment Adviser Prudential Investment Gateway Center Two
Management, Inc. 100 Mulberry Street
Newark, NJ 07102
- -------------------------------------------------------------------------------
Distributor Prudential Investment Gateway Center Three
Management Services LLC 14th Floor
100 Mulberry Street
Newark, NJ 07102
- -------------------------------------------------------------------------------
Custodian State Street Bank One Heritage Drive
and Trust Company North Quincy, MA 02171
- -------------------------------------------------------------------------------
Transfer Agent Prudential Mutual Fund PO Box 8098
Services LLC Philadelphia, PA 19101
- -------------------------------------------------------------------------------
Independent Auditors PricewaterhouseCoopers LLP 1177 Avenue of the Americas
New York, NY 10036
- -------------------------------------------------------------------------------
Legal Counsel Shearman & Sterling LLP 599 Lexington Avenue
New York, NY 10022
- -------------------------------------------------------------------------------
Dryden Municipal Series Fund/New Jersey Money Market Series
Nasdaq PNJXX
CUSIP 262468606
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY
FEDERAL GOVERNMENT AGENCY
MAY LOSE VALUE
ARE NOT A DEPOSIT OF OR GUARANTEED BY
ANY BANK OR ANY BANK AFFILIATE
JennisonDrydenMutualFunds
Dryden Municipal Series Fund/New Jersey Money Market Series
Nasdaq PNJXX
CUSIP 262468606
MF147E IFS-A084718
<Page>
Dryden
Municipal Series Fund/
New York Series
Formerly known as Prudential Municipal Series Fund/
New York Series
AUGUST 31, 2003 ANNUAL REPORT
(GRAPHIC)
FUND TYPE
Municipal bond
OBJECTIVE
Maximize current income that is exempt from New
York State, New York City, and federal income
taxes, consistent with the preservation of
capital
- ----------------------------------------------------
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 Series' portfolio holdings are for the
period covered by this report and are subject
to change thereafter.
JennisonDryden is a service mark of
The Prudential Insurance Company
of America.
JennisonDrydenMutualFunds
Dear Shareholder, October 10, 2003
There have been welcome signs that the U.S.
economy is growing again. Many corporate
executives and investment research analysts are
expecting profits to rise as well. However,
jobs are not being created as quickly as in
past recoveries, reminding us that the
resumption of growth doesn't mean a return to
an earlier time. The economic picture continues
to change, providing new opportunities and
challenges. Regardless of the direction of
financial markets, it is important to remember
that a wise investor plans today for tomorrow's
needs. A broadly diversified investment
portfolio will increase your chances of
participating in positive changes and is also
your best long-term defense against unexpected
downturns.
Whether you are investing for your retirement,
your children's education, or some other
purpose, JennisonDryden mutual funds offer the
experience, resources, and professional
discipline of three leading asset management
firms that can make a difference for you.
JennisonDryden funds are managed by Prudential
Investment Management's public equity and
fixed-income asset management businesses. The
equity funds are managed by Jennison Associates
and Quantitative Management. Prudential Fixed
Income manages the JennisonDryden fixed income
and money market funds.
We recommend that you develop a diversified
personal asset allocation strategy in
consultation with a financial professional who
knows you, who understands your reasons for
investing, the time you have to reach your
goals, and the amount of risk you are
comfortable assuming. JennisonDryden mutual
funds offer a wide range of investment choices,
and your financial professional can help you
choose the appropriate funds to implement your
strategy.
Sincerely,
Judy A. Rice, President
Dryden Municipal Series Fund/New York Series
Dryden Municipal Series Fund/New York Series 1
Your Series' Performance
Series Objective
The investment objective of the Dryden
Municipal Series Fund/New York Series (the
Series) is to maximize current income that is
exempt from New York State, New York City, and
federal income taxes, consistent with the
preservation of capital. There can be no
assurance that the Series will achieve its
investment objective.
Cumulative Total Returns1 as of 8/31/03
One Year Five Years Ten Years Since Inception2
Class A 2.31% 24.56% 64.15% (63.88) 138.08% (137.68)
Class B 2.05 23.05 58.97 (58.70) 270.51 (269.27)
Class C 1.80 21.54 N/A 58.37 (58.11)
Class Z 2.56 26.15 N/A 44.15 (44.03)
Lehman Brothers Muni Bond Index3 3.14 29.57 76.44 ***
Lipper NY Muni Debt Funds Avg.4 2.21 22.52 61.56 ****
Average Annual Total Returns1 as of 9/30/03
One Year Five Years Ten Years Since Inception2
Class A -0.47% 4.12% 4.94% (4.92) 6.52% (6.51)
Class B -2.54 4.32 4.92 (4.91) 7.28 (7.26)
Class C 0.11 4.02 N/A 5.35 (5.33)
Class Z 2.86 5.02 N/A 5.95 (5.94)
Lehman Brothers Muni Bond Index3 3.89 5.67 6.03 ***
Lipper NY Muni Debt Funds Avg.4 2.75 4.45 5.07 ****
Distributions and Yields1 as of 8/31/03
Taxable Equivalent 30-Day Yield5
Total Distributions 30-Day at Tax Rates of
Paid for 12 Months SEC Yield 33% 35%
Class A $0.59 2.86% 4.58% 4.72%
Class B 0.56 2.70 4.33 4.46
Class C 0.53 2.42 3.88 4.00
Class Z 0.63 3.19 5.11 5.27
Past performance is not indicative of future
results. Principal value and investment return
will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than
their original cost. 1Source: Prudential
Investments LLC and Lipper Inc. The cumulative
total returns do not take into account
applicable sales charges. If reflected, the
applicable sales charges would reduce the
cumulative total returns performance quoted.
The average annual total returns do take into
account applicable sales charges. Without the
contractual distribution and service (12b-1)
fee waiver of 0.05% and 0.25% for Class A and
Class C shares respectively, the returns for
these classes would have been lower. The
Distributor's 12b-1 fee waiver of 0.25% for
Class C shares continued through August 31,
2003. The Series charges a maximum front-end
sales charge of 3% for Class A shares and a
12b-1 fee of up to 0.30% annually. In some
circumstances, Class A shares may not be
subject to a front-end sales charge, but may be
subject to a 1% contingent deferred sales
charge (CDSC) for the first year. Class B
shares are subject to a declining CDSC of 5%,
4%, 3%, 2%, 1%, and 1% respectively for the
first six years after purchase and a 12b-1 fee
of 0.50% annually. Approximately seven years
after purchase, Class B shares will
automatically convert to Class A shares on a
quarterly basis. Class C shares are subject to
a front-end sales charge of 1%, a CDSC of 1%
for shares redeemed within 18 months of
purchase, and a 12b-1 fee of up to 1% annually.
Class Z shares are not subject to a sales
charge or 12b-1 fee. The returns in the tables
do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or
following the redemption of fund shares.
Without waiver of fees and/or expense
subsidization, the Series' returns would have
been lower, as indicated in parentheses.
2Inception dates: Class A, 1/22/90; Class B,
9/13/84; Class C, 8/1/94; and Class Z, 12/6/96.
2 Visit our website at www.jennisondryden.com
3The Lehman Brothers Municipal (Muni) Bond
Index is an unmanaged index of over 39,000
long-term investment-grade municipal bonds. It
gives a broad look at how long-term investment-
grade municipal bonds have performed. 4The
Lipper New York (NY) Muni Debt Funds Average
(Lipper Average) represents returns based on an
average return of all funds in the Lipper NY
Muni Debt Funds category for the periods noted.
Funds in the Lipper Average limit their assets
to those securities that are exempt from
taxation in New York. Investors cannot invest
directly in an index. The returns for the
Lehman Brothers Muni Bond Index would be lower
if they included the effects of sales charges,
operating expenses of a mutual fund, or taxes.
Returns for the Lipper Average reflect the
deduction of operating expenses, but not sales
charges or taxes. 5Taxable equivalent yields
reflect federal and applicable state tax rates.
***Lehman Brothers Muni Bond Index Closest
Month-End to Inception cumulative total returns
as of 8/31/03 are 154.09% for Class A, 366.48%
for Class B, 76.80% for Class C, and 47.28% for
Class Z. Lehman Brothers Muni Bond Index
Closest Month-End to Inception average annual
total returns as of 9/30/03 are 7.29% for Class
A, 8.57% for Class B, 6.75% for Class C, and
6.28% for Class Z. ****Lipper Average Closest
Month-End to Inception cumulative total returns
as of 8/31/03 are 135.51% for Class A, 315.77%
for Class B, 64.31% for Class C, and 38.77% for
Class Z. Lipper Average Closest Month-End to
Inception average annual total returns as of
9/30/03 are 6.66% for Class A, 7.90% for Class
B, 5.87% for Class C, and 5.32% for Class Z.
Five Largest Issuers expressed as a percentage of total
investments as of 8/31/03
Metropolitan Transportation Authority NY Service Contract 7.7%
New York State Urban Development Corp. Revenue 6.6
New York City General Obligation* 6.4
New York State Local Government Assistance Corp. 6.3
New York State Thruway Authority* 6.1
*Some issues are prerefunded, which means they are secured by escrowed
cash and/or direct U.S. guaranteed obligations. For details, see the
Portfolio of Investments. Issuers are subject to change.
Portfolio Composition expressed as a percentage
of net assets as of 8/31/03
Lease-Backed Certificate of Participation 23.8%
Special Tax/Assessment District 12.2
General Obligation 11.9
Transportation 7.1
Power 4.2
Healthcare 3.6
Education 2.7
Corporate-Backed IDB & PCR 2.2
Tobacco 2.0
Housing 1.3
Solid Waste/Resource Recovery 1.0
Water & Sewer 0.5
Other Muni 26.1
Other 1.6
Cash & Equivalents -0.2
Portfolio Composition is subject to change.
Credit Quality expressed as a percentage of net
assets as of 8/31/03
Aaa 43.0%
Aa 13.5
A 32.2
Baa 5.1
NR 6.4
Cash & Equivalents -0.2
Source: Moody's rating, defaulting to S&P when
not rated. Credit Quality is subject to change.
Dryden Municipal Series Fund/New York Series 3
Investment Adviser's Report
Market Overview and Performance Summary
The municipal bond market repeatedly rallied,
then sold off, which resulted in a 3.14% return
for the fiscal year ended August 31, 2003,
according to the Lehman Brothers Municipal Bond
Index (the Index). The market's volatility
largely reflected uncertainty about the
prospects for economic growth in the United
States. The outlook was cloudy because
investors did not know how much the Federal
Reserve (the Fed) would cut short-term interest
rates in an effort to stimulate the sluggish
economy. There was also concern that U.S.
involvement in a war in Iraq might harm the
U.S. economy.
Our investment strategy aimed to provide the
Series with the flexibility to readily respond
to changing conditions in the municipal bond
market. However, for the 12 months ended August
31, 2003, the Series' Class A shares trailed
their benchmark, the Index. This occurred
because the Series holds certain bonds that
declined in value due to credit quality
problems discussed later in this report. The
Index also does not reflect the operating
expenses of mutual funds. Compared to their
peer group, which does take into account
operating expenses, the Series' Class A shares
posted a return that exceeded the Lipper New
York Municipal Debt Funds Average for the 12
months ended August 31, 2003.
Early in our reporting period, municipal bonds
gained in value to such an extent that we
believed a correction in the market was
virtually inevitable. When the equity market
began to recover in October 2002, demand for
municipal bonds faded temporarily and their
prices plunged. The tax-exempt market was also
pressured by a large amount of newly issued bonds
at that time.
The sell-off in municipal bonds soon turned
into a rally. Investors paid higher prices (and
accepted lower yields) for tax-exempt bonds
because the Fed was expected to cut short-term
rates with the goal of boosting economic
growth. In November 2002, it reduced its target
for the federal funds rate by half a percentage
point to 1.25%.
Concern about the economy occurred before and
continued after the war in Iraq began in March
2003. Consequently, there was speculation in
the financial markets that the Fed would
aggressively reduce rates again or purchase
U.S. Treasury securities, which would also
exert downward pressure on the general level of
interest rates. This factor helped the
municipal bond rally remain on track for the
most part until mid-June 2003. At that time,
however, the municipal bond market began to
sell off along with Treasurys. Economic data
suggested that the Fed might not cut rates
sharply when it met in late June. Indeed, it
only lowered its target for the federal funds
rate by a quarter of a percentage point to 1%.
During the remainder of the reporting
4 Visit our website at www.jennisondryden.com
period, municipal bond prices slid in July and
stabilized in August. Municipal bond prices
were hurt by data showing stronger economic
growth, even though the job market remained
weak.
Credit Quality and Interest-Rate Sensitivity
Given the frequent changes in the level of
interest rates and the fiscal challenges facing
New York State and New York City, we continued
to work toward achieving the right balance in
the Series with regard to two important
overlapping characteristics. The first was
credit quality, which involves the Series'
exposure to high-quality bonds versus low-
quality bonds. The second was interest-rate
sensitivity, which involves the Series'
exposure to bonds with good potential for price
appreciation versus bonds that behave
defensively during a sell-off in the fixed
income market.
From the perspective of credit quality, bonds
rated Aaa (both insured and uninsured)
accounted for 43% of the Series' net assets as
of August 31, 2003. We emphasized Aaa-rated
bonds because they tend to perform better than
lower-quality bonds under challenging economic
conditions. However, as accelerating economic
growth increases demand for riskier assets,
lower-quality bonds tend to outperform Aaa-
rated municipal bonds. The Series had some
exposure to bonds of below-investment-
grade quality.
Some lower-quality bonds did not perform well.
The Series holds bonds of the New York City
Industrial Development Agency whose proceeds
were used to refinance an earlier bond issue
that funded construction of the Crowne Plaza-
LaGuardia Hotel in New York City. A weak
operating environment in the travel and leisure
sector, due partly to the September 11
terrorist attacks in the United States, as well
as the scheduled amortization of other debt
left the limited partnership that leases the
hotel with inadequate cash to pay scheduled
debt service on the bonds. Therefore the bonds
experienced a payment default and declined in
value. This detracted from the
Series' returns.
The Series also held bonds of Scotia, New York
Housing Authority for Coburg Village, a rental
retirement center located in Saratoga County.
The bonds defaulted as Coburg Village continues
to suffer from a low occupancy rate that has
resulted in inadequate cash flow to make timely
interest and principal payments on the
securities. Consequently, the bonds declined in
value, which detracted from the Series'
returns.
In the volatile interest-rate environment, we
maintained a barbell strategy that essentially
focused on two types of bonds. One side of our
barbell primarily emphasized Aaa-rated, insured
zero coupon bonds, which are so named because
Dryden Municipal Series Fund/New York Series 5
they pay no interest and are sold at discount
prices to make up for their lack of periodic
interest payments. Zero coupon bonds are the
most interest-rate-sensitive of all bonds,
which enables them to perform better than other
types of debt securities when interest rates
decline and bond prices move higher. The other
side of our barbell emphasized intermediate-
term bonds whose higher coupon rates provided
the Series with considerable interest income.
These bonds are considered to have defensive
characteristics as their prices tend to hold up
relatively well when the municipal
bond market sells off. The bonds are also
attractive to investors because they provide
solid income.
Periodically readjusting our coupon barbell
strategy was one way to change the Series'
duration, which measures its sensitivity to
fluctuations in the level of interest rates. In
general, when we determined that there was a
trend toward higher interest rates, we aimed to
shorten the Series' duration to help protect
its value as rising interest rates pushed
municipal bond prices lower. On the other hand,
we aimed to lengthen the Series' duration to
help it benefit more fully when falling
interest rates drove municipal bond prices
higher. In general, we employed this tactic
periodically once we determined that the
decline in interest rates was indeed a trend
rather than a temporary development.
Empire State, Big Apple Remain Under Pressure
New York State continues to face difficult
economic times. New York State's reliance on
the personal income tax and the importance of
the financial services industry (with its
generally high levels of compensation but
current distressed status) remains an
inhibiting factor. However, despite the state's
heavy debt burden and use of bond issuance to
pay a portion of its budget deficit, New York
State general obligation bonds maintained their
rating of A2 with a stable outlook by Moody's
Investors Service (Moody's). Standard & Poor's
Ratings Group (S&P) rates the bonds AA with a
negative outlook.
New York City continues to struggle as a result
of the terrorist attacks on September 11, 2001,
and the sluggish regional and national
economies. To balance its current budget, New
York City has enacted spending reductions and
revenue increases. Despite its problems, we
believe that continuous sound financial
management is a hallmark of New York City,
which has been able to maintain its general
obligation bond ratings at A2 with a negative
outlook by Moody's, and single-A with a stable
outlook by S&P. The Series has a considerable
exposure to New York City general obligation
bonds with above-market coupon rates because
the Series stands to benefit if more of these
bonds are refunded.
New York Series Management Team
6 Visit our website at www.jennisondryden.com
Portfolio of Investments
as of August 31, 2003
<Table>
<Caption>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
LONG-TERM INVESTMENTS 97.5%
MUNICIPAL BONDS
-----------------------------------------------------------------------------------
Brookhaven Ind. Dev. Agcy.
Civic Fac. Rev., Mem.
Hosp. Med. Ctr., Inc.,
Ser. A NR 8.125% 11/15/20 $ 1,500 $ 1,565,655
City of Buffalo, Sch.,
G.O., Ser. E, F.S.A. Aaa 6.00 12/01/16 1,100(e) 1,297,054
City of Elmira, Wtr.
Impvt.,
Ser. 96 B, A.M.B.A.C. Aaa 5.95 3/01/16 5,395 5,861,991
Dutchess Cnty. Ind. Dev.
Agcy. Civic Fac. Rev.,
Bard Coll. A3 5.75 8/01/30 3,500 3,644,270
Islip Res. Rec., Rev.,
Ser. B, A.M.B.A.C.,
A.M.T. Aaa 7.20 7/01/10 1,745 2,094,942
Jefferson Cnty. Ind. Dev.
Agcy., Solid Wste. Disp.
Rev., A.M.T. Baa2 7.20 12/01/20 1,500 1,534,605
Long Island Pwr. Auth.
Elec. Sys. Rev.,
Ser. C Baa1 5.00 9/01/24 1,000 972,130
Ser. C Baa1 5.00 9/01/27 2,000 1,923,500
Metro. Trans. Auth. Facs.
Rev.,
C.A.B.S., Ser. N,
F.G.I.C., E.T.M. Aaa Zero 7/01/12 5,575 3,940,298
Commuter Facs., Ser. A,
F.G.I.C. Aaa 5.60 7/01/09 500(c) 567,040
Commuter Facs., Ser. A,
F.G.I.C. Aaa 5.70 7/01/10 1,000(c) 1,138,600
Trans. Facs. Rev., Ser.
A, F.S.A. Aaa 5.60 7/01/09 2,900(c) 3,288,832
Metro. Trans. Auth., New
York Svc. Contract,
C.A.B.S., Ser. 7,
M.B.I.A., E.T.M. Aaa Zero 7/01/08 4,500 3,939,120
Ser. A, M.B.I.A. Aaa 5.50 7/01/20 3,000 3,198,570
Ser. B, M.B.I.A. Aaa 5.50 7/01/23 5,000 5,256,700
Trans. Facs. Rev., Ser.
O, E.T.M. A3 5.75 7/01/13 2,975 3,364,636
Nassau Cnty. New York
Interim Fin. Auth., Sales
Tax Secured, Ser. A-1,
A.M.B.A.C. Aaa 5.375 11/15/16 1,000 1,079,110
New York City Ind. Dev.
Agcy.,
Civic. Fac. Rev., United
States Tennis Assoc.,
Nat'l. Tennis Ctr. Proj.,
F.S.A. Aaa 6.375 11/15/14 1,000 1,074,230
LaGuardia Assoc., Ltd.
Partnership Proj. NR 6.00 11/01/28 2,000 1,149,560
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New York Series 7
<Page>
Portfolio of Investments
as of August 31, 2003 Cont'd.
<Table>
<Caption>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
New York City Mun. Fin.
Auth.,
Wtr. & Swr. Sys. Rev.,
Ser. B Aaa 6.00% 6/15/33 $ 1,615(c) $ 1,885,076
Wtr. & Swr. Sys. Rev.,
Ser. B Aa2 6.00 6/15/33 985 1,122,014
New York City Trans.
Auth., Triborough Bridge
& Tunnel Auth.,
A.M.B.A.C. Aaa 5.75 1/01/20 4,760 5,188,495
New York City Trans. Fin.
Auth. Rev., Future Tax
Sec.,
Ser. A Aa2 5.50 11/01/26 2,650 2,903,393
Ser. B Aa2 5.50 2/01/17 1,920 2,068,858
Ser. B Aa2 5.25 2/01/29 2,500 2,680,700
Ser. B Aaa 6.00 11/15/29 1,000(c) 1,165,710
New York City, G.O.,
Ser. A A2 6.00 5/15/30 1,000 1,065,100
Ser. F A2 8.20 11/15/03 240 243,218
Ser. G A2 5.875 10/15/14 2,500 2,687,000
Ser. I Aaa 6.10 4/15/10 565(c) 645,671
Ser. I A2 6.10 4/15/10 1,435 1,579,906
Ser. I Aaa 6.25 4/15/27 4,305(c) 4,940,418
Ser. I A2 6.25 4/15/27 1,695 1,869,026
New York St. Dorm.
Auth. Rev.,
City Univ. Sys. Cons.,
F.S.A. Aaa 5.50 7/01/29 2,500(c) 2,859,150
City Univ. Sys. Cons.,
Ser. B A3 6.00 7/01/14 6,500 7,398,820
City Univ. Sys. Cons.,
Ser. D, E.T.M. A3 7.00 7/01/09 1,880 2,135,417
Coll. & Univ. Ed.,
M.B.I.A., A.M.T.,
C.A.B.S. Aaa Zero 7/01/04 2,045 2,022,893
Mental Hlth. Svcs. Facs.
Impvt., Ser. B A3 6.50 8/15/11 3,000 3,504,330
Ser. B A3 5.25 11/15/23 3,000 3,195,180
St. Personal Income-Tax
Ed., Ser. A AA(d) 5.375 3/15/22 2,000 2,074,780
St. Univ. Edl. Facs.,
Ser. A A3 5.25 5/15/15 8,600 9,295,568
New York St. Engy. Res. &
Dev. Auth. Rev., Brooklyn
Union Gas Co., Ser. B,
M.B.I.A., A.M.T. Aaa 6.75 2/01/24 1,825(e) 1,860,022
New York St. Environ.
Facs. Corp.,
New York City Mun. Wtr.
Proj., Ser. K Aaa 5.25 6/15/22 6,000 6,200,100
Poll. Ctrl. Rev., Ser. E Aaa 6.50 6/15/14 35 35,139
</Table>
See Notes to Financial Statements.
8 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
New York St. Hsg. Fin.
Agcy. Rev.,
Econ. Dev. & Hsg., Ser. A AA(d) 5.25% 9/15/14 $ 1,965 $ 2,113,024
Econ. Dev. & Hsg., Ser. A AA(d) 5.25 3/15/15 1,770 1,891,882
Multi-Fam. Hsg., Sec.
Mtge.,
Ser. A, A.M.T. Aa1 7.05 8/15/24 1,000 1,011,020
St. Univ. Constr., Ser.
A, E.T.M. Aaa 8.00 5/01/11 3,600 4,510,872
New York St. Local Gov't.
Assist. Corp.,
C.A.B.S., Ser. C A1 Zero 4/01/14 8,882 5,590,686
Ser. E A1 6.00 4/01/14 5,385 6,151,986
New York St. Med. Care
Facs. Fin. Agcy. Rev.,
New York Hosp.,
Ser. A, A.M.B.A.C.,
F.H.A. Aaa 6.50 8/15/29 3,000(c) 3,285,060
New York St. Mtge. Agcy.
Rev., Homeowner Mtge.,
Ser. 70 Aa1 5.375 10/01/17 1,500 1,546,995
New York St. Pwr. Auth.,
Ser. A Aa2 5.25 11/15/16 3,000 3,202,920
Ser. A Aa2 5.00 11/15/19 2,500 2,564,775
New York St. Thrwy. Auth.,
Hwy. & Bridge Trust Fund,
Ser. A, F.S.A. Aaa 6.00 4/01/16 2,200(c) 2,559,744
Hwy. & Bridge Trust Fund,
Ser. B, F.G.I.C. Aaa 6.00 4/01/14 2,220(c) 2,329,535
St. Pers. Income Tax
Rev., Trans., Ser. A A1 5.50 3/15/20 1,000 1,060,800
Svc. Contract Rev., Local
Hwy. & Bridge A3 5.50 4/01/15 6,000 6,521,220
New York St. Urban Dev.
Corp. Rev.,
Correctional Cap. Facs.,
A.M.B.A.C. Aaa Zero 1/01/08 8,000 7,063,520
St. Facs. A3 5.75 4/01/12 5,750 6,460,930
Otsego Cnty. Ind. Dev.
Agcy., Civic Facs. Rev.,
Hartwick Coll. Proj.,
Ser. A Aaa 5.50 7/01/19 2,520(c) 2,868,944
Puerto Rico Comnwlth.,
Pub. Impvt. Rfdg.,
M.B.I.A. Aaa 7.00 7/01/10 1,250 1,515,662
Rites P.A. 625,
A.M.B.A.C., T.C.R.S. NR 12.78 7/01/10 3,250(f) 4,631,445
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New York Series 9
<Page>
Portfolio of Investments
as of August 31, 2003 Cont'd.
<Table>
<Caption>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
Puerto Rico Comnwlth.
Hwy. & Trans. Auth. Rev.,
Ser. AA, M.B.I.A. Aaa 5.50% 7/01/19 $ 2,000 $ 2,219,860
Ser. E, F.S.A. Aaa 5.50 7/01/16 2,000 2,247,400
Puerto Rico Pub. Fin.
Corp., Comnwlth. Approp.,
Ser. E Baa3 5.70 8/01/25 2,000 2,072,900
Scotia Hsg. Auth. Rev.,
Coburg Vlge., Inc. Proj.,
Ser. A NR 6.20 7/01/38 4,000(g) 2,309,600
Tobacco Settlement Fin.
Corp., Asset Bkd., Ser
A-1 Callable, A.M.B.A.C. AAA(d) 5.25 6/01/22 4,000 4,082,320
Virgin Islands Pub. Fin.
Auth. Rev., Ser. A BBB-(d) 6.50 10/01/24 1,000 1,096,850
Watervliet Hsg. Auth. Sen.
Res., Beltrone Living.
Ctr. Proj., Ser. A NR 6.125 6/01/38 4,000 3,408,880
---------------
Total long-term
investments (cost
$190,431,934) 201,835,657
---------------
SHORT-TERM INVESTMENTS 1.5%
-----------------------------------------------------------------------------------
New York St. Local Govt.
Assist. Corp., Mun. Secs.
Trust Rcpts., Ser. SGA
59, F.R.D.D. A-1+(d) 0.85 9/02/03 1,250 1,250,000
Port Auth. of New York &
New Jersey, Spec. Oblig.
Rev.,Versatile Structure
Oblig., Ser. 4, F.R.D.D.,
A.M.T. VMIG1 0.90 9/02/03 550 550,000
Puerto Rico Comnwlth.,
Ser. A107, F.R.W.D. A-(d) 0.85 9/03/03 1,235 1,235,000
---------------
Total short-term
investments
(cost $3,035,000) 3,035,000
---------------
TOTAL INVESTMENTS 99.0%
(COST $193,466,934;
NOTE 5) 204,870,657
Other assets in excess of
liabilities 1.0% 2,042,270
---------------
NET ASSETS 100% $ 206,912,927
---------------
---------------
</Table>
See Notes to Financial Statements.
10 Visit our website at www.jennisondryden.com
<Page>
(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.
C.A.B.S.--Capital Appreciation Bonds.
E.T.M.--Escrowed to Maturity.
F.G.I.C.--Financial Guaranty Insurance Company.
F.H.A.--Federal Housing Administration.
F.R.D.D.--Floating Rate (Daily) Demand Note (b).
F.R.W.D.--Floating Rate (Weekly) Demand Note (b).
F.S.A.--Financial Security Assurance.
G.O.--General Obligation.
M.B.I.A.--Municipal Bond Insurance Corporation.
T.C.R.S.--Transferable Custodial Receipts.
(b) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes is considered to be 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.
(c) Prerefunded issues are secured by escrowed cash and/or direct U.S guaranteed
obligations.
(d) Standard & Poor's Rating.
(e) Pledged as initial margin for financial futures contracts.
(f) Inverse floating rate bond. The coupon is inversely indexed to a floating
interest rate. The rate shown is the rate at year end.
(g) Issuer in default on interest payments, non-income producing security.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information contains a description of
Moody's and Standard & Poor's ratings.
See Notes to Financial Statements.
Dryden Municipal Series Fund - New York Series 11
<Page>
Statement of Assets and Liabilities
as of August 31, 2003
<Table>
ASSETS
-----------------------------------------------------------------------------------
Investments, at value (cost $193,466,934) $204,870,657
Cash 37,717
Receivable for investments sold 5,286,818
Interest receivable 2,555,425
Receivable for Series shares sold 64,593
Due from broker-variation margin 9,256
Other assets 4,005
------------
TOTAL ASSETS 212,828,471
------------
LIABILITIES
-----------------------------------------------------------------------------------
Payable for investments purchased 5,310,931
Payable for Series shares reacquired 191,914
Dividends payable 131,840
Accrued expenses 130,566
Management fee payable 88,354
Distribution fee payable 51,324
Deferred trustees' fees 10,615
------------
TOTAL LIABILITIES 5,915,544
------------
NET ASSETS $206,912,927
------------
------------
-----------------------------------------------------------------------------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 173,857
Paid-in capital in excess of par 190,066,148
------------
190,240,005
Accumulated net investment loss (70,096)
Accumulated net realized gain on investments 5,396,035
Net unrealized appreciation on investments 11,346,983
------------
NET ASSETS, AUGUST 31, 2003 $206,912,927
------------
------------
</Table>
See Notes to Financial Statements.
12 Visit our website at www.jennisondryden.com
<Page>
<Table>
CLASS A
-----------------------------------------------------------------------------------
Net asset value and redemption price per share
($171,573,312 / 14,417,917 shares of beneficial interest
issued and outstanding) $11.90
Maximum sales charge (3% of offering price) .37
------
Maximum offering price to public $12.27
------
------
CLASS B
-----------------------------------------------------------------------------------
Net asset value, offering price and redemption price per share
($29,456,372 / 2,473,802 shares of beneficial interest issued and
outstanding) $11.91
------
------
CLASS C
-----------------------------------------------------------------------------------
Net asset value and redemption price per share
($3,288,794 / 276,240 shares of beneficial interest issued and outstanding) $11.91
Sales charge (1% of offering price) .12
------
Offering price to public $12.03
------
------
CLASS Z
-----------------------------------------------------------------------------------
Net asset value, offering price and redemption price per share
($2,594,449 / 217,746 shares of beneficial interest issued and outstanding) $11.92
------
------
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New York Series 13
<Page>
Statement of Operations
Year Ended August 31, 2003
<Table>
NET INVESTMENT INCOME
-----------------------------------------------------------------------------------
Income
Interest $10,653,013
-----------
Expenses
Management fee 1,098,573
Distribution fee--Class A 448,896
Distribution fee--Class B 169,124
Distribution fee--Class C 26,274
Custodian's fees and expenses 106,000
Transfer agent's fees and expenses 92,000
Reports to shareholders 49,000
Registration fees 33,000
Legal fees and expenses 27,000
Audit fee 13,000
Trustees' fees 12,000
Miscellaneous 8,893
-----------
TOTAL EXPENSES 2,083,760
-----------
NET INVESTMENT INCOME 8,569,253
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
-----------------------------------------------------------------------------------
Net realized gain (loss) on:
Investment transactions 5,474,478
Financial futures transactions (201,122)
Options written 13,676
-----------
5,287,032
-----------
Net change in unrealized appreciation (depreciation) on:
Investments (8,890,645)
Financial futures contracts 7,799
-----------
(8,882,846)
-----------
Net loss on investments (3,595,814)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,973,439
-----------
-----------
</Table>
See Notes to Financial Statements.
14 Visit our website at www.jennisondryden.com
<Page>
Statement of Changes in Net Assets
<Table>
<Caption>
-----------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------
2003 2002
INCREASE (DECREASE) IN NET ASSETS
-----------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 8,569,253 $ 9,720,247
Net realized gain on investment transactions 5,287,032 2,441,810
Net change in unrealized appreciation
(depreciation) on investments (8,882,846) (2,051,632)
--------------- -----------------
Net increase in net assets resulting from
operations 4,973,439 10,110,425
--------------- -----------------
DIVIDENDS AND DISTRIBUTIONS (NOTE 1):
Dividends from net investment income
Class A (6,981,339) (7,994,598)
Class B (1,230,525) (1,488,977)
Class C (118,783) (116,486)
Class Z (116,951) (110,375)
--------------- -----------------
(8,447,598) (9,710,436)
--------------- -----------------
Distributions from net realized gains
Class A (1,825,242) (777,709)
Class B (364,257) (155,152)
Class C (37,637) (12,210)
Class Z (27,200) (8,739)
--------------- -----------------
(2,254,336) (953,810)
--------------- -----------------
SERIES SHARE TRANSACTIONS (NET OF SHARE
CONVERSIONS) (NOTE 6):
Net proceeds from shares sold 12,827,321 15,946,664
Net asset value of shares issued in reinvestment
of dividends and distributions 6,507,736 6,310,087
Cost of shares reacquired (31,056,991) (32,387,089)
--------------- -----------------
Net decrease in net assets from Series share
transactions (11,721,934) (10,130,338)
--------------- -----------------
Total decrease (17,450,429) (10,684,159)
NET ASSETS
-----------------------------------------------------------------------------------
Beginning of year 224,363,356 235,047,515
--------------- -----------------
End of year $ 206,912,927 $ 224,363,356
--------------- -----------------
--------------- -----------------
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New York Series 15
<Page>
Notes to Financial Statements
Dryden Municipal Series Fund (the 'Fund'), formerly known as Prudential
Municipal Series Fund is registered under the Investment Company Act of 1940 as
an open-end management investment company. The Fund was organized as a
Massachusetts business trust on May 18, 1984 and consists of six series. These
financial statements relate only to New York Series (the 'Series'). The
financial statements of the other series are not presented herein. The assets of
each series are invested in separate, independently managed portfolios. The
Series commenced investment operations in September 1984. The Series is
diversified and its investment objective is to maximize current income that is
exempt from New York State, New York City and federal income taxes consistent
with the preservation of capital, and in conjunction therewith, the Series may
invest in debt securities with the potential for capital gain. The Series seeks
to achieve the objective by investing primarily in New York State, municipal and
local government obligations and obligations of other qualifying issuers. The
ability of the issuers of the securities held by the Series to meet their
obligations may be affected by economic developments in a specific state,
industry or region.
NOTE 1. ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund, and the Series, in the preparation of its financial statements.
Securities Valuations: The Series values municipal securities (including
commitments to purchase such securities on a 'when-issued' basis) on the basis
of prices provided by a pricing service which uses information with respect to
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.
Securities, including options, futures contracts and options thereon, for which
the primary market is on a national securities exchange, commodities exchange or
board of trade are valued at the last sale price on such exchange or board of
trade, on the date of valuation or, if there was no sale on such day, at the
average of readily available closing bid and asked prices on such day or at the
bid price in the absence of an asked price.
Securities, including options, that are actively traded in the over-the-counter
market, including listed securities for which the primary market is believed to
be
16 Visit our website at www.jennisondryden.com
<Page>
over-the-counter, are valued at the average of the most recently quoted bid and
asked prices provided by a principal market maker or dealer.
Short-term securities which mature in sixty days or less are valued at amortized
cost, which approximates market value. The amortized cost method involves
valuing a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of the difference between the principal amount
due at maturity and cost. Short-term securities which mature in more than sixty
days are valued at current market quotations.
Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities at a set price
for delivery on a future date. Upon entering into a financial futures contract,
the Series 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 Series 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 (loss). When
the contract expires or is closed, the gain (loss) is realized and is presented
in the Statement of Operations as net realized gain (loss) on financial futures
transactions.
The Series invests in financial futures contracts in order to hedge its existing
portfolio securities, or securities the Series intends to purchase, against
fluctuations in value caused by changes in prevailing interest rates or market
conditions. Should interest rates move unexpectedly, the Series may not achieve
the anticipated benefits of the financial futures contracts and may realize a
loss. The use of futures transactions involves the risk of imperfect correlation
in movements in the price of futures contracts, interest rates and the
underlying hedged assets.
Options: The Series 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 Series currently
owns or intends to purchase. The Series' principal reason for writing options is
to realize, through receipt of premiums, a greater current return than would be
realized on the underlying security alone. When the Series purchases an option,
it pays a premium and an amount equal to that premium is recorded as an asset.
When the Series writes an option, it receives a premium and an amount equal to
that premium is recorded as a liability. The asset or liability is adjusted
daily to reflect the current market value of the option. If an option expires
unexercised, the Series 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
recorded as an adjustment to the proceeds from the sale or the cost of the
purchase in determining whether the Series has realized a
Dryden Municipal Series Fund - New York Series 17
<Page>
gain or loss. The difference between the premium and the amount received or paid
on effecting a closing purchase or sale transaction is also treated as a
realized gain or loss. Gain or loss on purchased options is included in net
realized gain (loss) on investment transactions. Gain or loss on written options
is presented separately as net realized gain (loss) on written option
transactions.
The Series, as writer of an option, may have no control over whether the
underlying securities may be sold (called) or purchased (put). As a result, the
Series bears the market risk of an unfavorable change in the price of the
security underlying the written option. The Series, as purchaser of an option,
bears the risk of the potential inability of the counterparties to meet the
terms of their contracts.
Interest Rate Swaps: The Series may enter into interest rate swaps. In a simple
interest rate swap, one investor pays a floating rate of interest on a notional
principal amount and receives a fixed rate of interest on the same notional
principal amount for a specified period of time. Alternatively, an investor may
pay a fixed rate and receive a floating rate. Interest rate swaps were conceived
as asset/liability management tools. In more complex swaps, the notional
principal amount may decline (or amortize) over time.
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 Series will record a realized
gain(loss) equal to the difference between the proceeds from (or cost of) the
closing transaction and the Series' basis in the contract, if any.
The Series is exposed to credit loss in the event of non-performance by the
other party to the interest rate swap. However, the Series does not anticipate
non-performance by any counterparty.
Written options, future contracts and swap contracts involve elements of both
market and credit risk in excess of the amounts reflected on the Statement of
Assets and Liabilities.
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 rates 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.
18 Visit our website at www.jennisondryden.com
<Page>
Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains (losses) on sales of securities are
calculated on the identified cost basis. Interest income, including amortization
of premium and accretion of discount on debt securities, as required, is
recorded on the accrual basis. Expenses are recorded on the accrual basis which
may require the use of certain estimates by management.
Net investment income (loss) (other than distribution fees, which are charged
directly to the respective class) and unrealized and realized gains (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 taxpaying entity. It is the Series' policy to continue
to meet the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its net income and capital gains,
if any, to its shareholders. Therefore, no federal taxable income tax provision
is required.
Dividends and Distributions: The Series declares daily dividends from net
investment income. Payment of dividends is made monthly. Distributions of net
capital gains, if any, are made annually. Dividends and distributions to
shareholders, which are determined in accordance with federal income tax
regulations and which may differ from generally accepted accounting principles,
are recorded on the ex-dividend date. Permanent book/tax differences relating to
income and gains are reclassified to paid-in capital when they arise.
Custody Fee Credits: The Fund has an arrangement with its custodian bank,
whereby uninvested cash earns credits which reduce the fees charged by the
custodian. The Series could have invested a portion of the cash utilized in
connection with the expense offset arrangements in an income producing asset if
it had not entered into such arrangements.
NOTE 2. AGREEMENTS
The Fund has a management agreement with Prudential Investments LLC ('PI').
Pursuant to this agreement, PI has responsibility for all investment advisory
services and supervises the subadviser's performance of such services. PI has
entered into a subadvisory agreement with Prudential Investment Management, Inc.
('PIM'). The subadvisory agreement provides that PIM furnishes investment
advisory services in connection with the management of the Series. In connection
therewith, PIM is obligated to keep certain books and records of the Series. PI
pays for the services of
Dryden Municipal Series Fund - New York Series 19
<Page>
PIM, the compensation of officers of the Series, occupancy and certain clerical
and bookkeeping costs of the Series. The Series bears all other costs and
expenses.
The management fee paid to PI is computed daily and payable monthly, at an
annual rate of .50 of 1% of the average daily net assets of the Series.
The Series has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS'), which acts as the distributor of the Series. The Series
compensates PIMS for distributing and servicing the Series' Class A, Class B and
Class C shares, pursuant to a plan of distribution, (the 'Class A, B and C
Plans'), regardless of expenses actually incurred by PIMS. The distribution fees
are accrued daily and payable monthly. No distribution or service fees are paid
to PIMS as distributor of the Class Z shares of the Series.
Pursuant to the Class A, B and C Plans, the Series compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, .50 of 1%
and up to 1% of the average daily net assets of the Class A, B and C shares,
respectively. PIMS contractually agreed to limit such fees to .25 of 1% and .75
of 1% of the Class A shares and Class C shares, respectively.
PIMS has advised the Series that it received approximately $45,900 and $6,700 in
front-end sales charges resulting from sales of Class A and Class C shares,
respectively during the year ended August 31, 2003. From these fees, PIMS paid
such sales charges to dealers, which in turn paid commissions to salespersons
and incurred other distribution costs.
PIMS has advised the Series that for the year ended August 31, 2003, it received
approximately $52,300 and $2,700 in contingent deferred sales charges imposed
upon certain redemptions by Class B and C shareholders, respectively.
PI, PIM and PIMS are indirect, wholly-owned subsidiaries of Prudential
Financial, Inc. ('Prudential').
The Series, along with other affiliated registered investment companies (the
'Funds'), is a party to a syndicated credit agreement ('SCA') with a group of
banks. For the year ended August 31, 2003, the SCA provides for a commitment of
$800 million and allows the Funds to increase the commitment to $1 billion, if
necessary. Interest on any borrowings under the SCA will be incurred at market
rates. The Funds pay a commitment fee of .08 of 1% of the unused portion of the
SCA. The commitment fee is accrued and paid quarterly and is allocated to the
Funds pro rata, based on net assets. The purpose of the SCA is to serve as an
alternative source of funding to facilitate capital share redemptions. The
expiration date of the SCA was May 2, 2003. On May 2, 2003, the SCA was renewed
under
20 Visit our website at www.jennisondryden.com
<Page>
the same terms and conditions ('May 2003 renewal'). The expiration date of the
May 2003 renewal is April 30, 2004. The Series did not borrow any amounts
pursuant to the SCA during the year ended August 31, 2003.
NOTE 3. OTHER TRANSACTIONS WITH AFFILIATES
Prudential Mutual Fund Services LLC ('PMFS'), an affiliate of PI and an
indirect, wholly-owned subsidiary of Prudential, serves as the Fund's transfer
agent. During the year ended August 31, 2003, the Series incurred fees of
approximately $68,900 for the services of PMFS. As of August 31, 2003,
approximately $5,500 of such fees were due to PMFS. Transfer agent fees and
expenses in the Statement of Operations include certain out-of-pocket expenses
paid to nonaffiliates, where applicable.
The Series pays networking fees to affiliated and unaffiliated broker/dealers.
These networking fees are payments made to broker/dealers that clear mutual fund
transactions through a national clearing system. The Series incurred
approximately $9,100 in total networking fees, of which the amount relating to
the services of Wachovia Securities LLC ('Wachovia') and Prudential Securities,
Inc. ('PSI'), affiliates of PI, were approximately $8,600 for the year ended
August 31, 2003. Prior to July 1, 2003, PSI was an indirect, wholly-owned
subsidiary of Prudential. As of August 31, 2003, approximately $700 of such fees
were due to Wachovia. These amounts are included in transfer agent's fees and
expenses in the Statement of Operations.
NOTE 4. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments
for the year ended August 31, 2003, aggregated $81,890,130 and $89,432,560
respectively.
During the year ending August 31, 2003, the Series entered into financial
futures contracts. Details of outstanding contracts at August 31, 2003 are as
follows:
<Table>
<Caption>
VALUE AT VALUE AT UNREALIZED
NUMBER OF EXPIRATION AUGUST 31, TRADE APPRECIATION/
CONTRACTS TYPE DATE 2003 DATE (DEPRECIATION)
- --------- ------------------- ----------------- ------------ ------------ ----------------
Long Position:
U.S. Treasury
39 10 Yr Notes Sep 03 $ 4,349,719 $ 4,345,254 $ 4,465
63 U.S. Treasury Bonds Sep 03 6,766,594 6,726,389 40,205
--------
44,670
--------
</Table>
Dryden Municipal Series Fund - New York Series 21
<Page>
<Table>
<Caption>
VALUE AT VALUE AT UNREALIZED
NUMBER OF EXPIRATION AUGUST 31, TRADE APPRECIATION/
CONTRACTS TYPE DATE 2003 DATE (DEPRECIATION)
- --------- ------------------- ----------------- ------------ ------------ ----------------
Short Positions:
U.S. Treasury 5 Yr
(170) Notes Sep 03 $(18,952,344) $(18,850,934) $ (101,410)
--------
$ (56,740)
--------
--------
</Table>
Transactions in options written during the year ended August 31, 2003 were as
follows:
<Table>
<Caption>
CONTRACTS PREMIUM
--------- --------
Written options outstanding as of August 31, 2002 -- $ --
Options written 25 17,889
Options terminated (25) (17,889)
--- --------
Written options as of August 31, 2003 -- $ --
--- --------
--- --------
</Table>
NOTE 5. DISTRIBUTIONS AND TAX INFORMATION
In order to present undistributed net investment income (loss) and accumulated
net realized gains (losses) on the Statement of Assets and Liabilities that more
closely represent their tax character, certain adjustments have been made to
paid-in-capital in excess of par, undistributed net investment income (loss) and
accumulated net realized gain (loss) on investments.
For the year ended August 31, 2003, the adjustments were to decrease
undistributed net investment income by $191,751, increase accumulated net
realized gain by $121,655 and increase paid-in capital in excess of par by
$70,096 primarily due to the difference in the treatment of accreting market
discount between financial and tax reporting. Net investment income, net
realized gains and net assets were not affected by this change.
The tax character of total distributions paid, as reflected in the Statement of
Changes in Net Assets, are as follows:
<Table>
<Caption>
YEAR LONG-TERM
ENDED TAX EXEMPT ORDINARY CAPITAL TOTAL
AUGUST 31, INCOME INCOME GAINS DISTRIBUTIONS
- ---------- ------------ ------------ ------------ ------------
2003 $8,447,598 $ -- $2,254,336 $10,701,934
2002 $9,710,436 $639,280 $ 314,530 $10,664,246
</Table>
As of August 31, 2003, the accumulated undistributed earnings on a tax basis
were $61,744 of tax-exempt income (includes a timing difference of $131,840 for
22 Visit our website at www.jennisondryden.com
<Page>
dividends payable), $266,931 of ordinary income and $4,763,705 of long-term
capital gains.
The United States federal income tax basis of the Series' investments and the
net unrealized appreciation as of August 31, 2003 were as follows:
<Table>
<Caption>
TOTAL NET
UNREALIZED
TAX BASIS APPRECIATION DEPRECIATION APPRECIATION
- ------------------ ------------------ ------------------ ------------------
$193,158,275 $15,457,209 $(3,744,827) $11,712,382
</Table>
The difference between book basis and tax basis is primarily attributable to the
difference in the treatment of market discount for book and tax purposes.
NOTE 6. CAPITAL
The Series offers Class A, Class B, Class C and Class Z shares. Class A shares
are sold with a front-end sales charge of up to 3%. 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. Special exchange privileges are
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.
The Series 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>
CLASS A SHARES AMOUNT
- ------------------------------------------------------------- ---------- ------------
Year ended August 31, 2003
Shares sold 486,607 $ 5,923,412
Shares issued in reinvestment of dividends and distributions 441,595 5,342,907
Shares reacquired (1,883,674) (22,889,663)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion (955,472) (11,623,344)
Shares issued upon conversion from Class B 480,744 5,928,403
---------- ------------
Net increase (decrease) in shares outstanding (474,728) $ (5,694,941)
---------- ------------
---------- ------------
</Table>
Dryden Municipal Series Fund - New York Series 23
<Page>
<Table>
<Caption>
CLASS A SHARES AMOUNT
- ------------------------------------------------------------- ---------- ------------
Year ended August 31, 2002:
Shares sold 472,676 $ 5,677,797
Shares issued in reinvestment of dividends and distributions 435,138 5,197,555
Shares reacquired (2,172,178) (25,946,314)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion (1,264,364) (15,070,962)
Shares issued upon conversion from Class B 495,186 5,912,038
---------- ------------
Net increase (decrease) in shares outstanding (769,178) $ (9,158,924)
---------- ------------
---------- ------------
<Caption>
CLASS B
- -------------------------------------------------------------
Year ended August 31, 2003
Shares sold 369,021 $ 4,504,517
Shares issued in reinvestment of dividends and distributions 79,333 960,518
Shares reacquired (425,816) (5,178,267)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion 22,538 286,768
Shares reacquired upon conversion into Class A (480,355) (5,928,403)
---------- ------------
Net increase (decrease) in shares outstanding (457,817) $ (5,641,635)
---------- ------------
---------- ------------
Year ended August 31, 2002:
Shares sold 555,468 $ 6,686,950
Shares issued in reinvestment of dividends and distributions 78,477 937,885
Shares reacquired (378,795) (4,549,639)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion 255,150 3,075,196
Shares reacquired upon conversion into Class A (494,960) (5,912,038)
---------- ------------
Net increase (decrease) in shares outstanding (239,810) $ (2,836,842)
---------- ------------
---------- ------------
<Caption>
CLASS C
- -------------------------------------------------------------
Year ended August 31, 2003
Shares sold 66,803 $ 816,081
Shares issued in reinvestment of dividends and distributions 9,151 110,704
Shares reacquired (82,174) (1,001,598)
---------- ------------
Net increase (decrease) in shares outstanding (6,220) $ (74,813)
---------- ------------
---------- ------------
Year ended August 31, 2002:
Shares sold 89,312 $ 1,074,007
Shares issued in reinvestment of dividends and distributions 7,130 85,224
Shares reacquired (39,872) (478,086)
---------- ------------
Net increase (decrease) in shares outstanding 56,570 $ 681,145
---------- ------------
---------- ------------
</Table>
24 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS Z SHARES AMOUNT
- ------------------------------------------------------------- ---------- ------------
Year ended August 31, 2003
Shares sold 129,684 $ 1,583,311
Shares issued in reinvestment of dividends and distributions 7,720 93,607
Shares reacquired (163,487) (1,987,463)
---------- ------------
Net increase (decrease) in shares outstanding (26,083) $ (310,545)
---------- ------------
---------- ------------
Year ended August 31, 2002:
Shares sold 209,067 $ 2,507,910
Shares issued in reinvestment of dividends and distributions 7,474 89,423
Shares reacquired (117,551) (1,413,050)
---------- ------------
Net increase (decrease) in shares outstanding 98,990 $ 1,184,283
---------- ------------
---------- ------------
</Table>
Dryden Municipal Series Fund - New York Series 25
<Page>
Financial Highlights
<Table>
<Caption>
CLASS A
-----------------
YEAR ENDED
AUGUST 31, 2003
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 12.22
-------
Income from investment operations
Net investment income .48
Net realized and unrealized gain (loss) on investment
transactions (.21)
-------
Total from investment operations .27
-------
LESS DISTRIBUTIONS
Dividends from net investment income (.47)
Distributions from net realized gains (.12)
Distributions in excess of net realized gains --
-------
Total distributions (.59)
-------
Net asset value, end of year $ 11.90
-------
-------
TOTAL RETURN(A): 2.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 171,573
Average net assets (000) $ 179,559
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees(c) .91%
Expenses, excluding distribution and service (12b-1) fees .66%
Net investment income 3.94%
For Class A, B, C and Z shares:
Portfolio turnover rate 39%
</Table>
- ------------------------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions.
(b) Effective September 1, 2001 the Series has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on debt securities. The effect of this change for
the year ended August 31, 2002 was to increase net investment income and
decrease net realized and unrealized gains per share by less than $0.005 and
increase the ratio of net investment income from 4.38% to 4.39%. Per share
amounts and ratios for the years ended prior to August 31, 2002 have not
been restated to reflect this change in presentation.
(c) The distributor of the Series has contractually agreed to limit its
distribution and Service (12b-1) fees to .25 of 1% of the average daily net
assets of Class A shares.
See Notes to Financial Statements.
26 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS A
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
2002(B) 2001 2000 1999
-----------------------------------------------------------------------------------
$ 12.24 $ 11.60 $ 11.50 $ 12.30
------- ------- ------- -------
.53 .56 .58 .57
.03 .64 .10 (.69)
------- ------- ------- -------
.56 1.20 .68 (.12)
------- ------- ------- -------
(.53) (.56) (.58) (.57)
(.05) -- -- (.09)
-- -- -- (.02)
------- ------- ------- -------
(.58) (.56) (.58) (.68)
------- ------- ------- -------
$ 12.22 $ 12.24 $ 11.60 $ 11.50
------- ------- ------- -------
------- ------- ------- -------
4.76% 10.65% 6.17% (1.07)%
$182,062 $191,678 $182,602 $175,307
$182,312 $189,204 $178,303 $181,951
.91% .89% .90% .84%
.66% .64% .65% .64%
4.39% 4.77% 5.10% 4.76%
23% 27% 32% 11%
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New York Series 27
<Page>
Financial Highlights
Cont'd.
<Table>
<Caption>
CLASS B
-----------------
YEAR ENDED
AUGUST 31, 2003
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 12.23
------
Income from investment operations
Net investment income .45
Net realized and unrealized gain (loss) on investment
transactions (.21)
------
Total from investment operations .24
------
LESS DISTRIBUTIONS
Dividends from net investment income (.44)
Distributions from net realized gains (.12)
Distributions in excess of net realized gains --
------
Total distributions (.56)
------
Net asset value, end of year $ 11.91
------
------
TOTAL RETURN(A): 2.05%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $29,456
Average net assets (000) $33,825
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees 1.16%
Expenses, excluding distribution and service (12b-1) fees .66%
Net investment income 3.69%
</Table>
- ------------------------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions.
(b) Effective September 1, 2001 the Series has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on debt securities. The effect of this change for
the year ended August 31, 2002 was to increase net investment income and
decrease net realized and unrealized gains per share by less than $0.005 and
increase the ratio of net investment income from 4.13% to 4.15%. Per share
amounts and ratios for the years ended prior to August 31, 2002 have not
been restated to reflect this change in presentation.
See Notes to Financial Statements.
28 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS B
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
2002(B) 2001 2000 1999
-----------------------------------------------------------------------------------
$ 12.24 $ 11.61 $ 11.50 $ 12.30
------ ------ ------ ------
.50 .53 .55 .54
.04 .63 .11 (.69)
------ ------ ------ ------
.54 1.16 .66 (.15)
------ ------ ------ ------
(.50) (.53) (.55) (.54)
(.05) -- -- (.09)
-- -- -- (.02)
------ ------ ------ ------
(.55) (.53) (.55) (.65)
------ ------ ------ ------
$ 12.23 $ 12.24 $ 11.61 $ 11.50
------ ------ ------ ------
------ ------ ------ ------
4.59% 10.28% 5.99% (1.37)%
$ 35,863 $ 38,829 $ 51,051 $ 76,929
$ 35,927 $ 42,212 $ 59,879 $ 88,626
1.16% 1.14% 1.15% 1.13%
.66% .64% .65% .63%
4.15% 4.53% 4.85% 4.45%
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New York Series 29
<Page>
Financial Highlights
Cont'd.
<Table>
<Caption>
CLASS C
-----------------
YEAR ENDED
AUGUST 31, 2003
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 12.23
-----
Income from investment operations
Net investment income .42
Net realized and unrealized gain (loss) on investment
transactions (.21)
-----
Total from investment operations .21
-----
LESS DISTRIBUTIONS
Dividends from net investment income (.41)
Distributions from net realized gains (.12)
Distributions in excess of net realized gains --
-----
Total distributions (.53)
-----
Net asset value, end of year $ 11.91
-----
-----
TOTAL RETURN(A): 1.80%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 3,289
Average net assets (000) $ 3,503
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees(c) 1.41%
Expenses, excluding distribution and service (12b-1) fees .66%
Net investment income 3.45%
</Table>
- ------------------------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions.
(b) Effective September 1, 2001 the Series has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on debt securities. The effect of this change for
the year ended August 31, 2002 was to increase net investment income and
decrease net realized and unrealized gains per share by less than $0.005 and
increase the ratio of net investment income from 3.88% to 3.89%. Per share
amounts and ratios for the years ended prior to August 31, 2002 have not
been restated to reflect this change in presentation.
(c) The distributor of the Series has contractually agreed to limit its
distribution and Service (12b-1) fees to .75 of 1% of the average daily net
assets of Class C shares.
See Notes to Financial Statements.
30 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS C
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
2002(B) 2001 2000 1999
-----------------------------------------------------------------------------------
$12.24 $11.61 $11.50 $12.30
----- ----- ----- -----
.47 .50 .52 .51
.04 .63 .11 (.69)
----- ----- ----- -----
.51 1.13 .63 (.18)
----- ----- ----- -----
(.47) (.50) (.52) (.51)
(.05) -- -- (.09)
-- -- -- (.02)
----- ----- ----- -----
(.52) (.50) (.52) (.62)
----- ----- ----- -----
$12.23 $12.24 $11.61 $11.50
----- ----- ----- -----
----- ----- ----- -----
4.34% 10.01% 5.73% (1.62)%
$3,455 $2,766 $1,884 $1,830
$2,992 $2,171 $1,812 $1,566
1.41% 1.39% 1.40% 1.39%
.66% .64% .65% .64%
3.89% 4.26% 4.60% 4.23%
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New York Series 31
<Page>
Financial Highlights
Cont'd.
<Table>
<Caption>
CLASS Z
-----------------
YEAR ENDED
AUGUST 31, 2003
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 12.24
-----
Income from investment operations
Net investment income .52
Net realized and unrealized gain (loss) on investment
transactions (.21)
-----
Total from investment operations .31
-----
LESS DISTRIBUTIONS
Dividends from net investment income (.51)
Distributions from net realized gains (.12)
Distributions in excess of net realized gains --
-----
Total distributions (.63)
-----
Net asset value, end of year $ 11.92
-----
-----
TOTAL RETURN(A): 2.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 2,595
Average net assets (000) $ 2,828
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees .66%
Expenses, excluding distribution and service (12b-1) fees .66%
Net investment income 4.19%
</Table>
- ------------------------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions.
(b) Effective September 1, 2001 the Series has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on debt securities. The effect of this change for
the year ended August 31, 2002 was to increase net investment income and
decrease net realized and unrealized gains per share by less than $0.005.
There was no effect of this change to the ratio of net investment income.
Per share amounts and ratios for the years ended prior to August 31, 2002
have not been restated to reflect this change in presentation.
See Notes to Financial Statements.
32 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS Z
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
2002(B) 2001 2000 1999
-----------------------------------------------------------------------------------
$12.25 $11.62 $11.51 $12.31
----- ----- ----- -----
.56 .59 .61 .60
.04 .63 .11 (.69)
----- ----- ----- -----
.60 1.22 .72 (.09)
----- ----- ----- -----
(.56) (.59) (.61) (.60)
(.05) -- -- (.09)
-- -- -- (.02)
----- ----- ----- -----
(.61) (.59) (.61) (.71)
----- ----- ----- -----
$12.24 $12.25 $11.62 $11.51
----- ----- ----- -----
----- ----- ----- -----
5.10% 10.82% 6.53% (0.87)%
$2,984 $1,775 $400 $464
$2,385 $1,008 $330 $496
.66% .64% .65% .63%
.66% .64% .65% .63%
4.62% 4.98% 5.35% 4.96%
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New York Series 33
<Page>
Report of Independent Auditors
To the Shareholders and Trustees of
Dryden Municipal Series Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dryden Municipal Series Fund
(formerly, Prudential Municipal Series Fund), New York Series (one of the
portfolios constituting Dryden Municipal Series Fund, hereafter referred to as
the 'Fund') at August 31, 2003, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as 'financial statements') are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
October 22, 2003
34 Visit our website at www.jennisondryden.com
<Page>
Federal Income Tax Information
(Unaudited)
We are required by the Internal Revenue Code to advise you within 60 days of the
Series' fiscal year end (August 31, 2003) as to the federal income tax status of
dividends paid during such fiscal year. Accordingly, we are advising you that
during its fiscal year ended August 31, 2003, dividends paid from net investment
income of $.47 per Class A share, $.44 per Class B share, $.41 per Class C share
and $.51 per Class Z shares were all federally tax-exempt interest dividends. In
addition, the Series paid to Class A, B, C and Z shares a long-term capital gain
distribution of $.12, which is taxable as such.
We wish to advise you that the corporate dividends received deduction for the
Series is zero. Only funds that invest in U.S. equity securities are entitled to
pass-through a corporate dividends received deduction.
In January 2004, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV
as to the federal tax status of the distributions received by you in calendar
2003.
Dryden Municipal Series Fund - New York Series 35
<Page>
Supplemental Proxy Information
(Unaudited)
A meeting of the Fund's shareholders was held on July 17, 2003. The meeting was
held for the following purposes:
(1) To approve the election of ten (10) trustees to the Board of Trustees, as
follows:
- David E.A. Carson
- Robert E. La Blanc
- Robert F. Gunia
- Douglas H. McCorkindale
- Stephen P. Munn
- Richard A. Redeker
- Judy A. Rice
- Robin B. Smith
- Stephen Stoneburn
- Clay T. Whitehead
(2) To approve a proposal to permit the manager to enter into, or make material
changes to, subadvisory agreements without shareholder approval.
(3) To permit an amendment to the management contract between PI and
the Fund.
(4a) To approve changes to fundamental investment restrictions or policies,
relating to: fund diversification.
(4b) To approve changes to fundamental investment restrictions and policies,
relating to: issuing senior securities, borrowing money or pledging assets.
(4c) To approve changes to fundamental investment restrictions and policies,
relating to: buying and selling real estate.
(4d) To approve changes to fundamental investment restrictions and policies,
relating to: buying and selling commodities and commodity contracts.
(4f) To approve changes to fundamental investment restrictions and policies,
relating to: making loans.
(4g) To approve changes to fundamental investment restrictions and policies,
relating to: other investment restrictions, including investing in
securities of other investment companies.
36 Visit our website at www.jennisondryden.com
<Page>
The results of the proxy solicitation on the preceding matters were:
<Table>
<Caption>
VOTES VOTES VOTES
MATTER FOR AGAINST WITHHELD ABSTENTIONS
--------------------- ------------- ---------- -------- -----------
(1) David E.A. Carson 9,282,460 -- 719,208 --
Robert E. La Blanc 9,283,937 -- 717,731 --
Robert F. Gunia 9,269,350 -- 732,318 --
Douglas H.
McCorkindale 9,268,973 -- 732,695 --
Stephen P. Munn 9,273,972 -- 727,696 --
Richard A. Redeker 9,282,017 -- 719,651 --
Judy A. Rice 9,136,847 -- 864,821 --
Robin B. Smith 9,137,673 -- 863,935 --
Stephen Stoneburn 9,283,937 -- 717,731 --
Clay T. Whitehead 9,280,163 -- 721,505 --
(2) Permit the manager to
enter into, or make
changes to,
Subadvisory
Agreements without
shareholder
approval. 7,008,464 1,018,851 -- 811,145
(3) Permit an Amendment
to the Management
Contract between PI
and the Company. 8,437,333 750,677 -- 813,658
(4a) Fund Diversification 7,505,304 537,463 -- 795,694
(4b) Issuing Senior
Securities,
Borrowing Money or
Pledging Assets 7,186,763 788,271 -- 863,427
(4c) Buying and Selling
Real Estate 7,403,617 601,752 -- 833,092
(4d) Buying and Selling
Commodities and
Commodity Contracts 7,372,544 624,890 -- 841,027
(4f) Making Loans 7,167,795 828,631 -- 842,035
(4g) Other Investment
Restrictions 7,254,885 750,734 -- 832,841
</Table>
One or more matters in addition to the above referenced proposals were submitted
for shareholder approval, and the shareholder meeting relating to those matters
was adjourned until August 21, 2003, and a date following the close of the
reporting period.
Dryden Municipal Series Fund - New York Series 37
<Page>
Management of the Fund
(Unaudited)
Information pertaining to the Trustees of the Fund is set forth below. Trustees
who are not deemed to be 'interested persons' of the Fund as defined in the 1940
Act are referred to as 'Independent Trustees.' Trustees who are deemed to be
'interested persons' of the Fund are referred to as 'Interested Trustees.' 'Fund
Complex'(D) consists of the Fund and any other investment companies managed
by PI.
INDEPENDENT TRUSTEES(2)
DAVID E.A. CARSON (69), Trustee since 2003(3)
Oversees 99 portfolios in Fund complex
Principal occupations (last 5 years): Director (January 2000 to May 2000),
Chairman (January 1999 to December 1999), Chairman and Chief Executive Officer
(January 1998 to December 1998) and President, Chairman and Chief Executive
Officer (1983-1997) of People's Bank.
Other Directorships held:(4) Director of United Illuminating and UIL Holdings
(utility company), since 1993.
ROBERT E. LA BLANC (69), Trustee since 2003(3)
Oversees 119 portfolios in Fund complex
Principal occupations (last 5 years): President (since 1981) of Robert E. La
Blanc Associates, Inc. (telecommunications); formerly General Partner at Salomon
Brothers and Vice-Chairman of Continental Telecom; Trustee of Manhattan
College.
Other Directorships held:(4) Director of Storage Technology Corporation (since
1979) (technology), Chartered Semiconductor Manufacturing, Ltd. (since 1998);
Titan Corporation (electronics) (since 1995), Computer Associates International,
Inc. (since 2002) (software company); FiberNet Telecom Group, Inc. (since 2003)
(telecom company); Director (since April 1999) of the High Yield Plus Fund,
Inc.
DOUGLAS H. MCCORKINDALE (64), Trustee since 2003(3)
Oversees 101 portfolios in Fund complex
Principal occupations (last 5 years): Chairman (since February 2001), Chief
Executive Officer (since June 2000) and President (since September 1997) of
Gannett Co. Inc. (publishing and media); formerly Vice Chairman (March 1984-May
2000) of Gannett Co., Inc.
Other Directorships held:(4) Director of Gannett Co. Inc., Director of
Continental Airlines, Inc. (since May 1993); Director of Lockheed Martin Corp.
(aerospace and defense) (since May 2001); Director of The High Yield Plus
Fund, Inc. (since 1996).
STEPHEN P. MUNN (61), Trustee since 1999(3)
Oversees 107 portfolios in Fund complex
Principal occupations (last 5 years): Chairman of the Board (since 1994) and
formerly Chief Executive Officer (1988-2001) and President of Carlisle Companies
Incorporated.
Other Directorships held:(4) Chairman of the Board (since January 1994) and
Director (since 1988) of Carlisle Companies Incorporated (manufacturer of
industrial products); Director of Gannet Co. Inc. (publishing and media).
38 Visit our website at www.jennisondryden.com
<Page>
RICHARD A. REDEKER (60), Trustee since 1993(3)
Oversees 102 portfolios in Fund complex
Principal occupations (last 5 years): Management Consultant; formerly employee
of Prudential Investments (October 1996-December 1998); Director of Invesmart,
Inc. (since 2001) and Director of Penn Tank Lines, Inc. (since 1999).
Other Directorships held:(4) None.
ROBIN B. SMITH (64), Trustee since 2003(3)
Oversees 109 portfolios in Fund complex
Principal occupations (last 5 years): Chairman of the Board (since January 2003)
of Publishers Clearing House (direct marketing), formerly Chairman and Chief
Executive Officer (August 1996-January 2003) of Publishers Clearing House.
Other Directorships held:(4) Director of BellSouth Corporation (since 1992).
STEPHEN STONEBURN (60), Trustee since 2003(3)
Oversees 107 portfolios in Fund complex
Principal occupations (last 5 years): President and Chief Executive Officer
(since June 1996) of Quadrant Media Corp. (a publishing company); formerly
President (June 1995-June 1996) of Argus Integrated Media, Inc.; Senior Vice
President and Managing Director (January 1993-1995) of Cowles Business Media and
Senior Vice President of Fairchild Publications, Inc. (1975-1989).
Other Directorships held:(4) None
CLAY T. WHITEHEAD (64), Trustee since 2003(3)
Oversees 106 portfolios in Fund complex
Principal occupations (last 5 years): President (since 1983) of National
Exchange Inc. (new business development firm).
Other Directorships held:(4) Director (since 2000) of the High Yield Plus Fund,
Inc.
INTERESTED TRUSTEES(1)
JUDY A. RICE (55), President since 2003 and Trustee since 2000(3)
Oversees 109 portfolios in Fund complex
Principal occupations (last 5 years): President, Chief Executive Officer, Chief
Operating Officer and Officer-in-Charge (since 2003) of PI; Director,
Officer-in-Charge, President, Chief Executive Officer and Chief Operating
Officer (since May 2003) of American Skandia Advisory Services, Inc. and
American Skandia Investment Services, Inc.; Director, Officer-in-Charge,
President, Chief Executive Officer (since May 2003) of American Skandia Fund
Services, Inc.; formerly various positions to Senior Vice President (1992-1999)
of Prudential Securities; and various positions to Managing Director (1975-1992)
of Salomon Smith Barney; Member of Board of Governors of the Money Management
Institute.
Other Directorships held:(4) None
Dryden Municipal Series Fund - New York Series 39
<Page>
ROBERT F. GUNIA (56), Vice President and Trustee since 1996(3)
Oversees 189 portfolios in Fund complex
Principal occupations (last 5 years): Chief Administrative Officer (since June
1999) of PI; Executive Vice President and Treasurer (since January 1996) of PI;
President (since April 1999) of Prudential Investment Management Services LLC
(PIMS); Corporate Vice President (since September 1997) of The Prudential
Insurance Company of America (Prudential); Director, Executive Vice President
and Chief Administrative Officer (since May 2003) of American Skandia Investment
Services, Inc., American Skandia Advisory Services, Inc. and American Skandia
Fund Services, Inc.; formerly Senior Vice President (March 1987-May 1999) of
Prudential Securities.
Other Directorships held:(4) Vice President and Director (since May 1989) and
Treasurer (since 1999) of The Asia Pacific Fund, Inc.
Information pertaining to the Officers of the Trust is set forth below.
OFFICERS(2)
MARGUERITE E.H. MORRISON (47), Chief Legal Officer since 2003 and Assistant
Secretary since 2002(3)
Principal occupations (last 5 years): Vice President and Chief Legal
Officer--Mutual Funds and Unit Investment Trusts (since August 2000) of
Prudential; Senior Vice President and Secretary (since April 2003) of PI; Senior
Vice President and Secretary (since May 2003) of American Skandia Investment
Services, Inc., American Skandia Advisory Services, Inc. and American Skandia
Fund Services, Inc.; Vice President and Assistant Secretary of PIMS (since
October 2001), previously Senior Vice President and Assistant Secretary
(February 2001-April 2003) of PI, Vice President and Associate General Counsel
(December 1996-February 2001) of PI.
DEBORAH A. DOCS (45), Secretary since 1998; Assistant Secretary 1985-1998(3)
Principal occupations (last 5 years): Vice President and Corporate Counsel
(since January 2001) of Prudential; Vice President and Assistant Secretary
(since December 1996) of PI, Vice President and Assistant Secretary (since May
2003) of American Skandia Investment Services, Inc.
MARYANNE RYAN (39), Anti-Money Laundering Compliance Officer since 2002(3)
Principal occupations (last 5 years): Vice President, Prudential (since November
1998), First Vice President, Prudential Securities (March 1997-May 1998);
Anti-Money Laundering Compliance Officer (since 2003) of American Skandia
Investment Services, Inc., American Skandia Advisory Services, Inc. and American
Skandia Marketing, Inc.
GRACE C. TORRES (44), Treasurer and Principal Financial and Accounting Officer
since 1996(3)
Principal occupations (last 5 years): Senior Vice President (since January 2000)
of PI, Senior Vice President and Assistant Treasurer (since May 2003) of
American Skandia Investment Services, Inc. and American Skandia Advisory
Services, Inc.; formerly First Vice President (December 1996-January 2000) of PI
and First Vice President (March 1993-1999) of Prudential Securities.
40 Visit our website at www.jennisondryden.com
<Page>
<Table>
1 'Interested' Trustee, as defined in the 1940 Act, by reason of employment with the
Manager, (Prudential Investments LLC or PI), the Subadviser (Prudential Investment
Management, Inc. or PIM) or the Distributor (Prudential Investment Management
Services LLC or PIMS).
2 Unless otherwise noted, the address of the Trustees and Officers is c/o:
Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, NJ
07102.
3 There is no set term of office for Trustees and Officers. The Independent Trustees
have adopted a retirement policy, which calls for the retirement of Trustees on
December 31 of the year in which they reach the age of 75. The table shows the
individuals length of service as Trustee and/or Officer.
4 This includes only directorships of companies requested to register, or file
reports with the SEC under the Securities and Exchange Act of 1934 (that is,
'public companies') or other investment companies registered under the 1940 Act.
D The Fund Complex consists of all investment companies managed by PI. The Funds for
which PI serves as manager include JennisonDryden Mutual Funds, Strategic Partners
Funds, American Skandia Advisor Funds, Inc., The Prudential Variable Contract
Accounts 2, 10, 11, The Target Portfolio Trust, The Prudential Series Fund, Inc.,
American Skandia Trust, and Prudential's Gibraltar Fund.
</Table>
Additional information about the Fund's Trustees is included in the Fund's
Statement of Additional Information which is available without charge, upon
request, by calling (800) 521-7466 or (732) 482-7555 (Calling from outside the
U.S.)
Dryden Municipal Series Fund - New York Series 41
Growth of a $10,000 Investment
(CHART)
Average Annual Total Returns (with Sales Charge) as of 8/31/03
One Year Five Years Ten Years Since Inception
Class A -0.76% 3.86% 4.76% (4.74) 6.34% (6.33)
Class B -2.82 4.07 4.74 (4.73) 7.15 (7.13)
Class C -0.19 3.77 N/A 5.08 (5.06)
Class Z 2.56 4.76 N/A 5.58 (5.57)
Average Annual Total Returns (without Sales Charge) as of 8/31/03
One Year Five Years Ten Years Since Inception
Class A 2.31% 4.49% 5.08% (5.06) 6.58% (6.57)
Class B 2.05 4.24 4.74 (4.73) 7.15 (7.13)
Class C 1.80 3.98 N/A 5.19 (5.17)
Class Z 2.56 4.76 N/A 5.58 (5.57)
Past performance is not indicative of future
results. Principal value and investment return
will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than
their original cost. Source: Prudential
Investments LLC and Lipper Inc. Inception
dates: Class A, 1/22/90; Class B, 9/13/84;
Class C, 8/1/94; and Class Z, 12/6/96.
The graph compares a $10,000 investment in the
Dryden Municipal Series Fund/New York Series
(Class A shares) with a similar investment in
the Lehman Brothers Municipal Bond Index by
portraying the initial account values at the
beginning of the ten-year period of Class A
shares (August 31, 1993) and the account values
at the end of the current fiscal year (August
31, 2003) as measured on a quarterly basis. For
purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the
maximum applicable front-end sales charge was
deducted from the initial $10,000 investment in
Class A shares; (b) all recurring fees
(including management fees) were deducted; and
(c) all dividends and distributions were
reinvested. The line graph provides information
for Class A shares only. As indicated in the
tables, performance for Class B, Class C, and
Class Z shares will vary due to the differing
charges and expenses applicable to each share
class (as indicated in the following
paragraphs). Without a distribution and service
(12b-1) fee waiver of 0.05% for Class A shares,
the returns for Class A shares shown in the
graph and in the tables would have been lower.
The returns on investment in the graph and in
the tables do not reflect the deduction of
taxes that a shareholder would pay on fund
distributions or following the redemption of
fund shares.
Visit our website at www.jennisondryden.com
The Lehman Brothers Municipal Bond Index is an
unmanaged index of over 39,000 long-term
investment-grade municipal bonds. It gives a
broad look at how long-term investment-grade
municipal bonds have performed. The Lehman
Brothers Municipal Bond Index's total returns
include the reinvestment of all dividends, but
do not include the effects of sales charges,
operating expenses of a mutual fund, or taxes.
These returns would be lower if they included
the effects of sales charges, operating
expenses, or taxes. The securities that
comprise the Lehman Brothers Municipal Bond
Index may differ substantially from the
securities in the Series. The Lehman Brothers
Municipal Bond Index is not the only index
that may be used to characterize performance of
municipal bond funds. Other indexes may portray
different comparative performance. Investors
cannot invest directly in an index.
The Series charges a maximum front-end sales
charge of 3% for Class A shares and a 12b-1 fee
of up to 0.30% annually. Class A shares may not
be subject to a front-end sales charge, but may
be subject to a 1% contingent deferred sales
charge (CDSC) for the first year. Class B shares
are subject to a declining CDSC of 5%, 4%, 3%, 2%,
1%, and 1% respectively for the first six years
after purchase and a 12b-1 fee of 0.50% annually.
Approximately seven years after purchase, Class
B shares will automatically convert to Class A
shares on a quarterly basis. Class C shares are
subject to a front-end sales charge of 1%, a
CDSC of 1% for shares redeemed within 18 months
of purchase, and a 12b-1 fee of up to 1%
annually. Class Z shares are not subject to a
sales charge or 12b-1 fee. Without waiver of
fees and/or expense subsidization, the Series'
returns in the tables would have been lower, as
indicated in parentheses.
Dryden Municipal Series Fund/New York Series
MAIL TELEPHONE WEBSITE
Gateway Center Three (800) 225-1852 www.jennisondryden.com
100 Mulberry Street
Newark, NJ 07102-4077
Trustees
David E.A. Carson - Robert F. Gunia - Robert E. La Blanc -
Douglas H. McCorkindale - Stephen P. Munn - Richard A. Redeker -
Judy A. Rice - Robin B. Smith - Stephen D. Stoneburn - Clay T. Whitehead
Officers
Judy A. Rice, President - Robert F. Gunia, Vice President -
Grace C. Torres, Treasurer and Principal Financial and Accounting Officer -
Marguerite E.H. Morrison, Chief Legal Officer and Assistant Secretary -
Deborah A. Docs, Secretary - Maryanne Ryan, Anti-Money Laundering Compliance
Officer
- -------------------------------------------------------------------------------
Manager Prudential Investments LLC Gateway Center Three
100 Mulberry Street
Newark, NJ 07102
- -------------------------------------------------------------------------------
Investment Adviser Prudential Investment Gateway Center Two
Management, Inc. 100 Mulberry Street
Newark, NJ 07102
- -------------------------------------------------------------------------------
Distributor Prudential Investment Gateway Center Three
Management Services LLC 14th Floor
100 Mulberry Street
Newark, NJ 07102
- -------------------------------------------------------------------------------
Custodian State Street Bank One Heritage Drive
and Trust Company North Quincy, MA 02171
- -------------------------------------------------------------------------------
Transfer Agent Prudential Mutual Fund PO Box 8098
Services LLC Philadelphia, PA 19101
- -------------------------------------------------------------------------------
Independent Auditors PricewaterhouseCoopers LLP 1177 Avenue of the
Americas
New York, NY 10036
- -------------------------------------------------------------------------------
Legal Counsel Shearman & Sterling LLP 599 Lexington Avenue
New York, NY 10022
- -------------------------------------------------------------------------------
Dryden Municipal Series Fund/New York Series
Share Class A B C Z
Nasdaq PMNYX PBNYX PCNYX PNYZX
CUSIP 262468812 262468796 262468788 262468770
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY
FEDERAL GOVERNMENT AGENCY
MAY LOSE VALUE
ARE NOT A DEPOSIT OF OR GUARANTEED BY
ANY BANK OR ANY BANK AFFILIATE
JennisonDrydenMutualFunds
Dryden Municipal Series Fund/New York Series
Share Class A B C Z
Nasdaq PMNYX PBNYX PCNYX PNYZX
CUSIP 262468812 262468796 262468788 262468770
MF122E IFS-A084965
<Page>
Dryden
Municipal Series Fund/
New York Money Market Series
Formerly known as Prudential Municipal Series Fund/
New York Money Market Series
AUGUST 31, 2003 ANNUAL REPORT
(GRAPHIC)
FUND TYPE
Money market
OBJECTIVE
The highest level of current income
that is exempt from New York State, New York
City, and federal income taxes, consistent with
liquidity and the preservation of capital
- -----------------------------------------------------
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 Series'
portfolio holdings are for the period covered
by this report and are subject
to change thereafter.
JennisonDryden is a service mark of
The Prudential Insurance Company
of America.
JennisonDrydenMutualFunds
Dear Shareholder, October 10, 2003
There have been welcome signs that the U.S.
economy is growing again. Many corporate
executives and investment research analysts are
expecting profits to rise as well. However,
jobs are not being created as quickly as in
past recoveries, reminding us that the
resumption of growth doesn't mean a return to
an earlier time. The economic picture continues
to change, providing new opportunities and
challenges. Regardless of the direction of
financial markets, it is important to remember
that a wise investor plans today for tomorrow's
needs. A broadly diversified investment
portfolio will increase your chances of
participating in positive changes and is also
your best long-term defense against unexpected
downturns.
Whether you are investing for your retirement,
your children's education, or some other
purpose, JennisonDryden mutual funds offer the
experience, resources, and professional
discipline of three leading asset management
firms that can make a difference for you.
JennisonDryden funds are managed by Prudential
Investment Management's public equity and
fixed-income asset management businesses. The
equity funds are managed by Jennison Associates
and Quantitative Management. Prudential Fixed
Income manages the JennisonDryden fixed income
and money market funds.
We recommend that you develop a diversified
personal asset allocation strategy in
consultation with a financial professional who
knows you, who understands your reasons for
investing, the time you have to reach your
goals, and the amount of risk you are
comfortable assuming. JennisonDryden mutual
funds offer a wide range of investment choices,
and your financial professional can help you
choose the appropriate funds to implement your
strategy.
Sincerely,
Judy A. Rice, President
Dryden Municipal Series Fund/New York Money Market Series
Dryden Municipal Series Fund/New York Money Market Series 1
Your Fund's Performance
Fund Objective
The Dryden Municipal Series Fund/New York Money
Market Series (the Series) seeks to provide the
highest level of current income that is exempt
from New York State, New York City, and federal
income taxes, consistent with liquidity and the
preservation of capital. There can be no
assurance that the Series will achieve its
investment objective.
Fund Facts as of 8/31/03
7-Day Net Asset Taxable Equivalent Yield* Weighted Avg. Net Assets
Current Yield Value (NAV) @28% @33% @35% Maturity (WAM) (Millions)
New York Money
Market Series 0.26% $1.00 0.39% 0.42% 0.43% 32 Days $392
- --------------------------------------------------------------------------------------------------------
iMoneyNet, Inc.
State Specific Retail
New York Avg.** 0.28% N/A 0.42% 0.45% 0.46% 50 Days N/A
- --------------------------------------------------------------------------------------------------------
Note: Yields will fluctuate from time to time,
and past performance is not indicative of
future results. An investment in the Series is
not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other
government agency. Although the Series seeks to
preserve the value of your investment at $1.00
per share, it is possible to lose money by
investing in the Series.
*Some investors may be subject to the federal
alternative minimum tax and/or state and local
taxes. Taxable equivalent yields reflect
federal and applicable state tax rates.
**iMoneyNet, Inc. Money Fund Report Average(TM)
reports a 7-day current yield and WAM on
Mondays. This is the data of all funds in the
iMoneyNet, Inc. State Specific Retail New York
Average category as of August 25, 2003, the
closest date to the end of our reporting
period.
2 Visit our website at www.jennisondryden.com
State Specific Money Market Fund Yield Comparison
(CHART)
Weighted Average Maturity Comparison
(CHART)
Past performance is not indicative of future
results. The graphs portray weekly 7-day
current yields and weekly WAMs for the Dryden
Municipal Series Fund/New York Money Market
Series and the iMoneyNet, Inc. State Specific
Retail New York Average every Monday from
August 26, 2002 to August 25, 2003, the closest
dates to the beginning and end of our reporting
period. The data portrayed at the end of the
reporting period in the graph may not match the
data portrayed in the Fund Facts table as of
August 31, 2003.
Dryden Municipal Series Fund/New York Money Market Series 3
Investment Adviser's Report
Falling Rates Affected Money Market Funds
The investment environment remained challenging
during the New York Money Market Series' fiscal
year that began September 1, 2002. Municipal
money market yields fell to very low levels,
complicating the search for high-quality debt
securities that provided attractive yields.
Furthermore, New York State and New York City
continued to face tough economic times. Under
these market conditions, we employed what we
believed to be a conservative approach to
security selection and interest-rate risk that
aimed to enhance the Series' yield and maintain
its net asset value (NAV) at $1 per share
throughout the 12-month reporting period.
The trend toward lower municipal money market
yields reflected anticipation that
the Federal Reserve (the Fed) would reduce
short-term interest rates. The rate cuts in
November 2002 and June 2003 lowered the target
for the federal funds rate by three-quarters of
a percentage point to 1%, its lowest level in
many years. By cutting borrowing costs, the Fed
hoped to stimulate growth in the United States
despite a lingering sense of economic
uncertainty caused at times by, among other
things, a volatile stock market and
geopolitical concerns.
Timely Purchases Benefited the Series
As part of our conservative investment
strategy, the Series held high-quality fixed-
and floating-rate debt securities of various
municipal entities such as cities, counties,
and school districts. The Series' holdings were
diversified with respect to maturity sectors.
For example, when stronger-than-expected
economic data led to a brief upturn in yields
in October 2002, we took advantage of the
situation by locking in yields on tax-exempt
commercial paper that matured in February 2003
and bonds that will mature in November 2003. In
addition, we bought so-called "put" bonds that
pay fixed interest rates for one year, after
which investors will receive par and accrued
interest for the bonds when they deliver them
back for payment. By purchasing securities that
matured after early January 2003, we helped the
Series to ride out the "January effect," a
seasonal decline in yields that typically
occurs in the first week of January as
increased demand for municipal money market
securities temporarily outstrips the supply.
Investing in a Flat-Yield-Curve Environment
In early 2003, once the January effect was
over, we were reluctant to invest in one-year
securities because of the comparatively flat
slope of the money market yield curve. (The
money market yield curve resembles a line graph
that depicts yields on securities that mature
from one day through 13 months.) Instead, we
focused on the short end of the yield curve by
investing in securities whose interest rates
were reset on a daily or weekly basis. By tax
time, we purchased pre-refunded bonds (the
bonds
4 Visit our website at www.jennisondryden.com
were backed by U.S. government securities),
bond anticipation notes, and tax-exempt
commercial paper that matured in mid-July and
August 2003. Our purchases helped the Series
ride out the "July effect," another seasonal
decline in yields that typically occurs in the
first week of July for the same reasons as the
January effect.
Finding Attractive Value in "Put" Bonds
Prior to the short-term rate cut in late June,
we shifted our emphasis back to the one-year
maturity sector by investing in more annual
"put" bonds. Overall, we targeted high-quality
securities that yielded 1% or better. We were
rightly concerned that the general level of
municipal short-term yields might soon slide
well below 1% due to speculation in the
financial markets that the Fed might ease
monetary policy by as much as half a percentage
point in June. (It actually cut short-term
rates by a quarter of a percentage point at
that time.) After the change in monetary
policy, we invested primarily in securities
whose rates reset on a daily or weekly basis
and tax-exempt commercial paper that matured in
one to three months. In our opinion, it was no
longer advantageous to lock in yields in the
one-year maturity sector because we believed
the Fed might be finished easing monetary
policy for this interest-rate cycle.
Empire State, Big Apple Remain Under Pressure
We remained very selective when purchasing
municipal money market securities of issuers in
New York State as difficult economic conditions
continued. Reliance on personal income tax and
the importance of the financial services
industry (with its generally high levels of
compensation, but currently distressed status)
remains an inhibiting factor. However, despite
the Empire State's heavy debt burden and use of
bond issuance to pay a portion of its budget
deficit, its long-term general obligation bonds
are still rated A2 with a stable outlook by
Moody's Investors Service (Moody's). They are
rated AA with a negative outlook by Standard &
Poor's Ratings Group (S&P).
New York City continues to struggle as a result
of the terrorist attacks on September 11, 2001
and the sluggish regional and national
economies. To balance its current budget, New
York City has enacted spending reductions and
revenue increases. New York City has been able
to maintain its long-term general obligation
bond ratings at A2 with a negative outlook by
Moody's and single-A with a stable outlook by
S&P.
New York Money Market Series Management Team
Dryden Municipal Series Fund/New York Money Market Series 5
Portfolio of Investments
as of August 31, 2003
<Table>
<Caption>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
Battery Park City Auth.
Hsg. Rev.,
Ser. MT1, F.R.W.D. VMIG1 1.18% 9/04/03 $ 2,820 $ 2,820,000
Ser. MT2, F.R.W.D. VMIG1 1.18 9/04/03 7,360 7,360,000
Binghamton, G.O., B.A.N. NR 2.25 9/25/03 5,118 5,120,218
Chemung Cnty. Ind. Dev.
Agcy. Rev., Hathorn
Redev. Proj.,
Ser. B, F.R.W.D., A.M.T. VMIG1 0.85 9/04/03 4,000 4,000,000
Columbia Cnty. Ind. Dev.
Agcy. Rev., Rual Mfg. Co.
Inc. Proj., Ser. A,
F.R.W.D. A-1(d) 0.85 9/03/03 4,570 4,570,000
Dutchess Cnty. Ind. Dev.
Agcy. Civic Fac. Rev.,
Trinity Pawling Sch.
Corp., F.R.W.D. VMIG1 0.85 9/04/03 3,500 3,500,000
East Farmingdale Volunteer
Fire Co. Inc. Rev.,
F.R.W.D. A-1+(d) 0.84 9/04/03 5,750 5,750,000
East Rochester Hsg. Auth.
Rev., Daniels Creek at
Baytown,
Ser. 01, F.R.W.D., A.M.T. VMIG1 0.90 9/04/03 3,750 3,750,000
Erie Cnty. Ind. Dev. Agcy.
Rev., Colad Group Inc.,
Ser. A, F.R.W.D., A.M.T. A-1+(d) 0.90 9/03/03 600 600,000
Glens Falls Ind. Dev.
Agcy. Rev., Namic Proj.,
F.R.W.D. A-1(d) 0.85 9/03/03 1,210 1,210,000
Goshen NY Central Sch.
Dist., G.O., Ser. A,
F.G.I.C. Aaa(e) 5.38 6/15/04 325 335,948
Hempstead Ind. Dev. Agcy.
Rev., Lynbrook Hsg. LLC.
Proj., F.R.W.D., A.M.T. NR 0.89 9/04/03 15,500 15,500,000
Irvington, B.A.N. NR 2.00 10/16/03 1,607 1,607,475
Jefferson Cnty. NY Ind.
Dev. Agcy. Rev., Fisher
Gauge Ltd. Fac.,
F.R.W.D., A.M.T. A-1(d) 0.90 9/03/03 1,725 1,725,000
Metro. Trans. Auth.
Dedicated
Tax Fund, Ser. A A-1(d) 3.50 11/17/03 8,275 8,305,758
Metro. Trans. Auth.,
Commuter Fac. Rev.,
Ser. A52, F.R.W.D.,
F.G.I.C. VMIG1 0.86 9/03/03 3,975 3,975,000
Ser. F, F.R.W.D. VMIG1 0.86 9/03/03 1,000 1,000,000
Ser. H., F.R.W.D., F.S.A. VMIG1 0.88 9/04/03 5,490 5,490,000
</Table>
See Notes to Financial Statements.
6 Visit our website at www.jennisondryden.com
<Page>
<Table>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
Monroe Cnty. Ind. Dev.
Agcy.
Cmnty. Coll., Genessee
Valley, F.R.W.D. VMIG1 1.05% 9/04/03 $ 2,500 $ 2,500,000
Cmnty. Coll., Ser. 02A,
F.R.W.D. VMIG1 0.90 9/04/03 1,910 1,910,000
Rev., Jada Precision
Proj., F.R.W.D. A-1(d) 0.85 9/03/03 4,185 4,185,000
Mun. Secs. Trust Cert.
Rev.,
Class A Ser. 7000,
F.R.W.D., A.M.B.A.C. VMIG1 0.83 9/04/03 4,995 4,995,000
Class A, Ser. 2001-109,
F.R.D.D. VMIG1 0.85 9/02/03 6,100 6,100,000
Class A, Ser. 2000-89,
F.R.D.D., A.M.T. VMIG1 0.92 9/02/03 480 480,000
Nassau Cnty. Interim Fin.
Auth. Rev.,
Mun. Secs. Trust,
SGA108., F.R.W.D. A-1+(d) 0.85 9/03/03 7,500 7,500,000
Sales Tax Secured, Ser.
B, F.R.W.D., F.S.A. VMIG1 0.80 9/03/03 10,000 10,000,000
New York City Hsg. Dev.
Corp. Mtge. Rev.,
Multi-Fam. 90 Washington
St., Ser. A, F.R.W.D. A-1(d) 0.79 9/03/03 11,000 11,000,000
New York City Ind. Dev.
Agcy. Civic Fac. Rev.,
Hewitt Sch. Proj.,
F.R.W.D. VMIG1 0.85 9/04/03 1,550 1,550,000
Vlge. Cmnty. Sch. Proj.,
F.R.W.D. VMIG1 0.95 9/04/03 1,300 1,300,000
New York City Ind. Dev.
Agcy. Rev., Ser. G,
A.M.T., A.N.N.O.T. Aa3(e) 1.85 10/31/03 1,330 1,330,000
New York City Ind. Dev.,
USA Wste. Svcs. NYC
Proj., F.R.W.D., A.M.T. A-1+(d) 0.85 9/04/03 3,000 3,000,000
New York City Transitional
Fin. Auth. Rev.,
Cert. Ser. E, F.R.W.D. VMIG1 0.88 9/04/03 4,970 4,970,000
Future Tax Secured, Ser.
C, F.R.D.D. VMIG1 0.82 9/02/03 3,100 3,100,000
NYC Recov., Ser. 3,
Subser. 3-F, F.R.D.D. VMIG1 0.77 9/02/03 3,300 3,300,000
NYC Recov., Ser. 3,
Subser. 3-H, F.R.D.D. VMIG1 0.82 9/02/03 3,700 3,700,000
New York City Tricultural,
Res.,
M.S.T.R., Ser. SGA91,
F.R.D.D. A-1+(d) 0.85 9/02/03 6,385 6,385,000
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New York Money Market Series 7
<Page>
Portfolio of Investments
as of August 31, 2003 Cont'd.
<Table>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
New York City,
G.O., 1993 Ser. B,
F.G.I.C., F.R.D.D. VMIG1 0.85% 9/02/03 $ 2,250 $ 2,250,000
G.O., F.G.I.C., F.R.D.D. VMIG1 0.85 9/02/03 2,800 2,800,000
G.O., Ser. H., Subser.
H-2, F.R.D.D., M.B.I.A. VMIG1 0.80 9/02/03 1,400 1,400,000
G.O., Subser. A-4,
F.R.D.D. VMIG1 0.80 9/02/03 1,000 1,000,000
G.O., Subser. A-6,
F.R.D.D., F.S.A. VMIG1 0.80 9/02/03 500 500,000
G.O., Subser. E-4,
F.R.D.D. VMIG1 0.85 9/02/03 2,500 2,500,000
G.O., Trust Rcpts., Ser.
17, F.R.W.D., F.G.I.C.,
T.C.R.S. VMIG1 0.83 9/04/03 6,600 6,600,000
New York St Job Dev.
Auth.,
St. Gtd. Spec. Purp.,
Ser. A-1 Through A-25,
F.R.D.D. VMIG1 0.80 9/02/03 900 900,000
New York St. Dorm. Auth.
Rev.,
Cert. Ser. 310, F.R.W.D.,
M.B.I.A. VMIG1 0.85 9/04/03 6,745 6,745,000
Cert. Ser. 341, F.R.W.D.,
M.B.I.A. VMIG1 0.85 9/04/03 4,495 4,495,000
Ser. 00G, F.R.W.D. VMIG1 0.86 9/03/03 10,000 10,000,000
Ser. 00X, M.B.I.A.,
F.R.W.D. VMIG1 0.86 9/03/03 2,065 2,065,000
Ser. A30, F.R.W.D.,
A.M.B.A.C. VMIG1 0.86 9/03/03 1,385 1,385,000
Mental Hlth Svcs.,
Subser. D-2H, F.R.W.D. A-1+(d) 0.85 9/04/03 2,500 2,500,000
Mental Hlth. Svcs.,
Subser. D-2F, F.R.W.D. A-1+(d) 0.89 9/04/03 13,000 13,000,000
Ser. SGA 132, F.R.W.D. A-1+(d) 0.83 9/03/03 1,805 1,805,000
New York St. Engy. Res. &
Dev. Auth.,
Elec. Facs. Rev., Long
Island Ltg. Co., Ser. A,
F.R.W.D. VMIG1 0.87 9/03/03 1,400 1,400,000
Poll. Ctrl. Rev., Elec. &
Gas, A.N.N.O.T., Ser. 85A A-1+(d) 1.10 3/15/04 1,500 1,500,000
Poll. Ctrl. Rev., Elec. &
Gas,
Ser. 85B, A.N.N.O.T. Aa3(e) 1.50 10/15/03 19,250 19,250,126
Poll. Ctrl. Rev., Elec. &
Gas,
Ser. 85D, A.N.N.O.T. A-1(d) 1.80 12/01/03 4,000 4,002,713
New York St. Environ. Fac.
Corp.,
Clean Wtr. Drinking, Ser.
97-A, T.E.C.P. VMIG1 0.85 10/09/03 2,600 2,600,000
</Table>
See Notes to Financial Statements.
8 Visit our website at www.jennisondryden.com
<Page>
<Table>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
Clean Wtr. Drinking, Ser.
97-A, T.E.C.P. VMIG1 0.85% 10/23/03 $ 7,700 $ 7,700,000
Clean Wtr. Drinking, Ser.
652, F.R.W.D. A-1(d) 0.85 9/04/03 10,000 10,000,000
New York St. Hsg. Fin.
Agcy. Rev., Historic
Front Str., Ser. A,
F.R.W.D. VMIG1 0.78 9/03/03 7,000 7,000,000
New York St. Local Govt.
Assist. Corp., Ser. SGA
59, F.R.D.D A-1+(d) 0.85 9/02/03 4,350 4,350,000
New York St. Mtge. Agcy.
Rev.,
Ser. 00B, A.M.T.,
F.R.W.D. VMIG1 0.91 9/03/03 5,229 5,229,000
Ser. 00PP, A.M.T.,
F.R.W.D. VMIG1 0.91 9/03/03 4,660 4,660,000
Ser. A11, F.R.W.D. VMIG1 0.86 9/03/03 1,540 1,540,000
Ser. 33B, A.M.T.,
A.N.N.O.T. VMIG1 1.13 4/02/04 6,000 6,000,000
New York St. Thrwy. Auth.
Rev.,
Highway & Bridge Trust
Fund, Ser. 368, F.R.W.D.,
F.G.I.C. VMIG1 0.85 9/04/03 1,000 1,000,000
Mun. Trust, Ser. SGA 66,
F.R.W.D. A-1+(d) 0.83 9/03/03 7,855 7,855,000
Ser. A, B.A.N. MIG1 1.13 3/25/04 3,000 3,000,119
Svcs. Contract Rev.,
Local Highway & Bridge A3(e) 5.30 4/01/04 1,000 1,024,060
Svcs. Contract Rev.,
Local Highway & Bridge A3(e) 5.50 4/01/04 2,065 2,116,928
Svcs. Contract Rev., Ser.
734, F.R.W.D.,
A.M.B.A.C., T.C.R.S. A-1(d) 0.85 9/04/03 2,500 2,500,000
New York St. Urban Dev.
Corp. Rev., Ser. A25
F.R.W.D., F.G.I.C.,
T.C.R.S. VMIG1 0.86 9/03/03 6,380 6,380,000
Oneida City Sch. Dist.,
G.O.,
Rev. Antic. Nts. NR 1.25 10/16/03 4,495 4,496,094
Port Auth. New York & New
Jersey,
Ser. 93-1, F.R.W.D. NR 0.83 9/04/03 12,000 12,000,000
Ser. A, T.E.C.P. P-1 0.85 9/08/03 5,000 5,000,000
Ser. A, T.E.C.P. P-1 0.82 10/03/03 2,500 2,500,000
Versatile Structure
Oblig.,
Ser. 3, F.R.D.D. VMIG1 0.86 9/02/03 300 300,000
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - New York Money Market Series 9
<Page>
Portfolio of Investments
as of August 31, 2003 Cont'd.
<Table>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
Power Authority New York,
Ser. 2, Yrs. 1+2,
T.E.C.P. P-1 0.85% 9/12/03 $ 2,500 $ 2,500,000
Ser. 2, Yrs. 1+2,
T.E.C.P. P-1 1.08 9/04/03 2,660 2,660,000
Ser. 1, Yrs. 1+2,
T.E.C.P. P-1 0.83 9/10/03 4,300 4,300,000
Puerto Rico Comwlth. Hwy.
& Trans. Auth. Rev., Ser.
771, M.B.I.A., A.N.N.M.T. VMIG1 1.00 6/17/04 9,015 9,015,000
Ramapo Hsg. Auth. Rev.
Fountainview Proj., Ser.
98, F.R.W.D., A.M.T. VMIG1 0.83 9/04/03 10,985 10,985,000
Rensselaer Ind. Dev.
Agcy., Capital View
Office Park Proj. Ser.
86A, A.N.N.O.T., A.M.T. AA-(e) 1.50 12/31/03 3,030 3,030,000
Rockland Cnty. Ind. Dev.
Agcy.,
Asstd. Living Northern
River,
Ser. 99, F.R.W.D. VMIG1 0.99 9/04/03 4,980 4,980,000
Northern Manor Multicare,
Ser. 02, F.R.W.D. VMIG1 0.99 9/04/03 2,700 2,700,000
Triborough Bridge & Tunnel
Auth. Rev., Gen. Purp.
Ser. 262, F.R.W.D. VMIG1 0.86 9/04/03 4,995 4,995,000
Ulster Cnty., B.A.N. SP-1+(d) 1.75 6/11/04 6,500 6,537,424
Unadilla Etc. Central Sch.
Dist., No. 002, G.O.,
F.G.I.C. Aaa(e) 4.50 6/15/04 400 410,784
Westchester Cnty. Ind.
Dev. Agcy. Civic Fac.
Rev., Masters School,
F.R.W.D. VMIG1 0.85 9/04/03 3,150 3,150,000
---------------
TOTAL INVESTMENTS 100.1%
(COST $392,536,647(C)) 392,536,647
Liabilities in excess of
other assets (0.1%) (524,667)
---------------
NET ASSETS 100% $ 392,011,980
---------------
---------------
</Table>
See Notes to Financial Statements.
10 Visit our website at www.jennisondryden.com
<Page>
(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.
A.N.N.M.T.--Annual Mandatory Tender.
A.N.N.O.T.--Annual Optional Tender.
B.A.N.--Bond Anticipation Note.
F.G.I.C.--Financial Guaranty Insurance Company.
F.R.D.D.--Floating Rate (Daily) Demand Note (b).
F.R.W.D.--Floating Rate (Weekly) Demand Note (b).
F.S.A.--Financial Security Assurance.
G.O.--General Obligation.
M.B.I.A.--Municipal Bond Insurance Corporation.
T.C.R.S.--Transferable Custodial Receipts.
T.E.C.P.--Tax Exempt Commercial Paper.
(b) For purposes of amortized cost valuation, the maturity date of Floating
Rate Demand Notes is considered to be 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.
(c) The cost of securities for federal income tax purposes is substantially the
same as for financial reporting purposes.
(d) Standard & Poor's Rating.
(e) Long-term ratings.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information contains a description
of Moody's and Standard & Poor's ratings.
See Notes to Financial Statements.
Dryden Municipal Series Fund - New York Money Market Series 11
<Page>
Statement of Assets and Liabilities
as of August 31, 2003
ASSETS
------------------------------------------------------------------------------
Investments, at amortized cost which approximates market value $392,536,647
Cash 3,485
Receivable for Series shares sold 1,865,562
Interest receivable 1,046,268
Other assets 4,299
------------
TOTAL ASSETS 395,456,261
------------
LIABILITIES
------------------------------------------------------------------------------
Payable for Series shares reacquired 3,089,825
Management fee payable 166,573
Accrued expenses 118,326
Distribution fee payable 41,643
Dividends payable 16,184
Deferred trustees' fees 11,730
------------
TOTAL LIABILITIES 3,444,281
------------
NET ASSETS $392,011,980
------------
------------
------------------------------------------------------------------------------
Net assets were comprised of:
Shares of beneficial interest, at $.01 par value $ 3,920,120
Paid-in capital in excess of par 388,091,860
------------
NET ASSETS, AUGUST 31, 2003 $392,011,980
------------
------------
Net asset value, offering price and redemption price per share
($392,011,980 / 392,011,980 shares of beneficial interest issued
and outstanding; unlimited number of shares authorized) $1.00
-----
-----
See Notes to Financial Statements.
12 Visit our website at www.jennisondryden.com
<Page>
Statement of Operations
Year Ended August 31, 2003
NET INVESTMENT INCOME
------------------------------------------------------------------------------
Income
Interest $5,775,449
-----------
Expenses
Management fee 2,220,076
Distribution fee 555,019
Custodian's fees and expenses 109,000
Transfer agent's fees and expenses 75,000
Reports to shareholders 54,000
Legal fees and expenses 45,000
Registration fees 37,000
Trustees' fees 15,000
Audit fee 13,000
Miscellaneous 9,683
----------
TOTAL EXPENSES 3,132,778
----------
Net investment income 2,642,671
----------
Net realized gain on investments 228,880
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,871,551
----------
----------
See Notes to Financial Statements.
Dryden Municipal Series Fund - New York Money Market Series 13
<Page>
Statement of Changes in Net Assets
<Table>
<Caption>
-----------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------
2003 2002
INCREASE (DECREASE) IN NET ASSETS
-----------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 2,642,671 $ 4,677,390
Net realized gain on investment transactions 228,880 304,798
--------------- -----------------
Net increase in net assets resulting from
operations 2,871,551 4,982,188
--------------- -----------------
DIVIDENDS AND DISTRIBUTIONS PAID TO SHAREHOLDERS
(NOTE 1) (2,871,551 ) (4,982,188)
--------------- -----------------
SERIES SHARE TRANSACTIONS (AT $1 PER SHARE)
Net proceeds from shares sold 1,186,257,467 1,091,466,857
Net asset value of shares issued in reinvestment
of dividends and distributions 2,823,122 4,952,948
Cost of shares reacquired (1,268,848,822 ) (1,074,245,593)
--------------- -----------------
Net increase (decrease) in net assets from Series
share transactions (79,768,233 ) 22,174,212
--------------- -----------------
Total increase (decrease) (79,768,233 ) 22,174,212
NET ASSETS
-----------------------------------------------------------------------------------
Beginning of year 471,780,213 449,606,001
--------------- -----------------
End of year $ 392,011,980 $ 471,780,213
--------------- -----------------
--------------- -----------------
</Table>
See Notes to Financial Statements.
14 Visit our website at www.jennisondryden.com
<Page>
Notes to Financial Statements
Dryden Municipal Series Fund (the 'Fund'), formerly known as Prudential
Municipal Series Fund is registered under the Investment Company Act of 1940 as
an open-end management investment company. The Fund was organized as a
Massachusetts business trust on May 18, 1984 and consists of six series. These
financial statements relate only to New York Money Market Series (the 'Series').
The financial statements of the other series are not presented herein. The
assets of each series are invested in separate, independently managed
portfolios. The Series commenced investment operations in April 1985. The Series
is diversified and seeks to achieve its investment objective of providing the
highest level of income that is exempt from New York State, New York City and
federal income taxes with a minimum of risk by investing in 'investment grade'
tax-exempt securities having a maturity of 13 months or less whose ratings are
within the two highest ratings categories by two nationally recognized
statistical rating organizations, or if not rated, are of comparable quality.
The ability of the issuers of the securities held by the Series to meet their
obligations may be affected by economic developments in a specific state,
industry or region.
NOTE 1. ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund, and the Series, in the preparation of its financial statements.
Securities Valuations: Portfolio securities of the Series are valued at
amortized cost, which approximates market value. The amortized cost involves
valuing a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of any discount or premium. If the amortized
cost method is determined not to represent fair value, the fair value shall be
determined by or under the direction of the Board of Trustees.
Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains (losses) on sales of securities are
calculated on the identified cost basis. The Series amortizes premiums and
accretes discounts on purchases of portfolio securities as adjustments to
interest income. Interest income is recorded on the accrual basis. Expenses are
recorded on the accrual basis which may require the use of certain estimates by
management.
Federal Income Taxes: For federal income tax purposes, each series in the Fund
is treated as a separate taxpaying entity. It is the Series' policy to continue
to meet the requirements of the Internal Revenue Code applicable to regulated
investment
Dryden Municipal Series Fund - New York Money Market Series 15
<Page>
companies and to distribute all of its taxable net income and capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
Dividends and Distributions: The Series declares daily dividends from net
investment income and net realized short-term gains. Payment of dividends is
made monthly. 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 cash earns credits which reduce the fees charged by the
custodian. The Series could have invested a portion of the cash utilized in
connection with the expense offset arrangements in an income producing asset if
it had not entered into such arrangements.
NOTE 2. AGREEMENTS
The Fund has a management agreement with Prudential Investments LLC ('PI' or
'Manager'). Pursuant to a subadvisory agreement between PI and Prudential
Investment Management, Inc. ('PIM' or 'Subadviser'), PIM furnishes investment
advisory services in connection with the management of the Fund. Under the
subadvisory agreement, PIM, subject to the supervision of PI, is responsible for
managing the assets of each Series in accordance with its investment objective
and policies. PI pays for the services of PIM, the cost of compensation of
officers of the Series, occupancy and certain clerical and bookkeeping costs of
the Series. The Series bears all other costs and expenses.
The management fee paid to PI is computed daily and payable monthly, at an
annual rate of .50 of 1% of the average daily net assets of the Series.
The Series has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS') which acts as the distributor of the Series. The Series
compensates PIMS for distributing and servicing the Series' shares pursuant to a
plan of distribution regardless of expenses actually incurred by PIMS. The
Series pays PIMS for distributing and servicing the Series' shares pursuant to
the plan of distribution at an annual rate of .125 of 1% of the Series' average
daily net assets. The distribution fee is accrued daily and payable monthly.
PI, PIM and PIMS are indirect, wholly-owned subsidiaries of Prudential
Financial, Inc. ('Prudential').
16 Visit our website at www.jennisondryden.com
<Page>
NOTE 3. OTHER TRANSACTIONS WITH AFFILIATES
Prudential Mutual Fund Services LLC ('PMFS'), an affiliate of PI and an
indirect, wholly-owned subsidiary of Prudential, serves as the Fund's transfer
agent and during the year ended August 31, 2003, the Series incurred fees of
approximately $71,800 for the services of PMFS. As of August 31, 2003,
approximately $5,500 of such fees were due to PMFS. Transfer agent fees and
expenses in the Statement of Operations include certain out-of-pocket expenses
paid to non-affiliates, where applicable.
NOTE 4. DISTRIBUTIONS AND TAX INFORMATION
For the years ended August 31, 2003 and August 31, 2002, the tax character of
the dividends paid, as reflected in the Statement of Changes in Net Assets, of
$2,642,671 and $4,677,390, respectively, were tax-exempt income and $228,880 and
$304,798, respectively, were taxable ordinary income.
As of August 31, 2003, the Fund had no undistributed tax-exempt income on a tax
basis.
NOTE 5. CAPITAL
The Series offers Class A shares. The Series may also offer Class S shares.
There are no Class S shares currently issued and outstanding.
Dryden Municipal Series Fund - New York Money Market Series 17
<Page>
Financial Highlights
YEAR ENDED
AUGUST 31, 2003
------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 1.00
Net investment income and net realized gains .01
Dividends and distributions to shareholders (.01)
-------
Net asset value, end of year $ 1.00
-------
-------
TOTAL RETURN(A): .64%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 392,012
Average net assets (000) $ 444,015
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees .71%
Expenses, excluding distribution and service (12b-1) fees .58%
Net investment income .60%
- ------------------------------
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each year reported and includes reinvestment
of dividends and distributions.
See Notes to Financial Statements.
18 Visit our website at www.jennisondryden.com
<Page>
YEAR ENDED AUGUST 31,
----------------------------------------------------------------------------
2002 2001 2000 1999
----------------------------------------------------------------------------
$ 1.00 $ 1.00 $ 1.00 $ 1.00
.01 .03 .03 .02
(.01) (.03) (.03) (.02)
------- ------- ------- -------
$ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
------- ------- ------- -------
1.13% 2.91% 3.18% 2.49%
$471,780 $449,606 $361,875 $358,556
$449,597 $403,930 $369,017 $375,650
.69% .70% .70% .70%
.57% .58% .57% .57%
1.04% 2.80% 3.15% 2.46%
See Notes to Financial Statements.
Dryden Municipal Series Fund - New York Money Market Series 19
<Page>
Report of Independent Auditors
To the Shareholders and Trustees of
Dryden Municipal Series Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dryden Municipal Series Fund
(formerly, Prudential Municipal Series Fund), New York Money Market Series (one
of the portfolios constituting Dryden Municipal Series Fund, hereafter referred
to as the 'Fund') at August 31, 2003, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as 'financial statements') are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 2003 by correspondence with the custodian, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
October 22, 2003
20 Visit our website at www.jennisondryden.com
<Page>
Federal Income Tax Information
(Unaudited)
We are required by the Internal Revenue Code to advise you within 60 days of the
Series' fiscal year end (August 31, 2003) as to the federal tax status of
dividends paid by the Series during such fiscal year. Accordingly, we are
advising you that in the fiscal year ended August 31, 2003, the Series paid
dividends and distributions of $0.0057 and $0.0003 which represent federally
tax-exempt interest dividends and short-term capital gains, respectively.
Dryden Municipal Series Fund - New York Money Market Series 21
<Page>
Supplemental Proxy Information
(Unaudited)
A meeting of the Fund's shareholders was held on July 17, 2003. The meeting was
held for the following purposes:
(1) To approve the election of ten (10) trustees to the Board of Trustees, as
follows:
- David E.A. Carson
- Robert E. La Blanc
- Robert F. Gunia
- Douglas H. McCorkindale
- Stephen P. Munn
- Richard A. Redeker
- Judy A. Rice
- Robin B. Smith
- Stephen Stoneburn
- Clay T. Whitehead
(3) To permit an amendment to the management contract between PI and
the Fund.
The results of the proxy solicitation on the preceding matters were:
<Table>
<Caption>
VOTES VOTES VOTES
MATTER FOR AGAINST WITHHELD ABSTENTIONS
--------------------- ------------- ----------- ---------- -----------
(1) David E.A. Carson 354,600,225 -- 2,316,624 --
Robert E. La Blanc 354,600,225 -- 2,316,624 --
Robert F. Gunia 354,600,225 -- 2,316,624 --
Douglas H.
McCorkindale 354,600,225 -- 2,316,624 --
Stephen P. Munn 354,511,451 -- 2,405,398 --
Richard A. Redeker 354,566,727 -- 2,350,122 --
Judy A. Rice 354,600,225 -- 2,316,624 --
Robin B. Smith 354,600,225 -- 2,316,624 --
Stephen Stoneburn 354,600,225 -- 2,316,624 --
Clay T. Whitehead 354,600,225 -- 2,316,624 --
(3) Permit an Amendment
to the Management
Contract between PI
and the Company. 344,689,106 10,289,172 -- 1,938,571
</Table>
One or more matters in addition to the above referenced proposals were submitted
for shareholder approval, and the shareholder meeting relating to those matters
was adjourned until August 21, 2003, and a date following the close of the
reporting period.
22 Visit our website at www.jennisondryden.com
<Page>
Management of the Fund
(Unaudited)
Information pertaining to the Trustees of the Fund is set forth below. Trustees
who are not deemed to be 'interested persons' of the Fund, as defined in the
1940 Act are referred to as 'Independent Trustees.' Trustees who are deemed to
be 'interested persons' of the Fund are referred to as 'Interested Trustees.'
'Fund Complex'(D) consists of the Fund and any other investment companies
managed by PI.
INDEPENDENT TRUSTEES(2)
DAVID E.A. CARSON (69), Trustee since 2003(3)
Oversees 99 portfolios in Fund complex
Principal occupations (last 5 years): Director (January 2000 to May 2000),
Chairman (January 1999 to December 1999), Chairman and Chief Executive Officer
(January 1998 to December 1998) and President, Chairman and Chief Executive
Officer (1983-1997) of People's Bank.
Other Directorships held:(4) Director of United Illuminating and UIL Holdings
(utility company), since 1993.
ROBERT E. LA BLANC (69), Trustee since 2003(3)
Oversees 119 portfolios in Fund complex
Principal occupations (last 5 years): President (since 1981) of Robert E. La
Blanc Associates, Inc. (telecommunications); formerly General Partner at Salomon
Brothers and Vice-Chairman of Continental Telecom; Trustee of Manhattan
College.
Other Directorships held:(4) Director of Storage Technology Corporation (since
1979) (technology), Chartered Semiconductor Manufacturing, Ltd. (since 1998);
Titan Corporation (electronics) (since 1995), Computer Associates International,
Inc. (since 2002) (software company); FiberNet Telecom Group, Inc. (since 2003)
(telecom company); Director (since April 1999) of the High Yield Plus Fund,
Inc.
DOUGLAS H. MCCORKINDALE (64), Trustee since 2003(3)
Oversees 101 portfolios in Fund complex
Principal occupations (last 5 years): Chairman (since February 2001), Chief
Executive Officer (since June 2000) and President (since September 1997) of
Gannett Co. Inc. (publishing and media); formerly Vice Chairman (March 1984-May
2000) of Gannett Co., Inc.
Other Directorships held:(4) Director of Gannett Co. Inc., Director of
Continental Airlines, Inc. (since May 1993); Director of Lockheed Martin Corp.
(aerospace and defense) (since May 2001); Director of The High Yield Plus Fund,
Inc. (since 1996).
STEPHEN P. MUNN (61), Trustee since 1999(3)
Oversees 107 portfolios in Fund complex
Principal occupations (last 5 years): Chairman of the Board (since 1994) and
formerly Chief Executive Officer (1988-2001) and President of Carlisle Companies
Incorporated.
Other Directorships held:(4) Chairman of the Board (since January 1994) and
Director (since 1988) of Carlisle Companies Incorporated (manufacturer of
industrial products); Director of Gannet Co. Inc. (publishing and media).
Dryden Municipal Series Fund - New York Money Market Series 23
<Page>
RICHARD A. REDEKER (60), Trustee since 1993(3)
Oversees 102 portfolios in Fund complex
Principal occupations (last 5 years): Management Consultant; formerly employee
of Prudential Investments (October 1996-December 1998); Director of Invesmart,
Inc. (since 2001) and Director of Penn Tank Lines, Inc. (since 1999).
Other Directorships held:(4) None.
ROBIN B. SMITH (64), Trustee since 2003(3)
Oversees 109 portfolios in Fund complex
Principal occupations (last 5 years): Chairman of the Board (since January 2003)
of Publishers Clearing House (direct marketing), formerly Chairman and Chief
Executive Officer (August 1996-January 2003) of Publishers Clearing House.
Other Directorships held:(4) Director of BellSouth Corporation (since 1992).
STEPHEN STONEBURN (60), Trustee since 2003(3)
Oversees 107 portfolios in Fund complex
Principal occupations (last 5 years): President and Chief Executive Officer
(since June 1996) of Quadrant Media Corp. (a publishing company); formerly
President (June 1995-June 1996) of Argus Integrated Media, Inc.; Senior Vice
President and Managing Director (January 1993-1995) of Cowles Business Media
and Senior Vice President of Fairchild Publications, Inc. (1975-1989).
Other Directorships held:(4) None
CLAY T. WHITEHEAD (64), Trustee since 2003(3)
Oversees 106 portfolios in Fund complex
Principal occupations (last 5 years): President (since 1983) of National
Exchange Inc. (new business development firm).
Other Directorships held:(4) Director (since 2000) of the High Yield Plus Fund,
Inc.
INTERESTED TRUSTEES(1)
JUDY A. RICE (55), President since 2003 and Trustee since 2000(3)
Oversees 109 portfolios in Fund complex
Principal occupations (last 5 years): President, Chief Executive Officer, Chief
Operating Officer and Officer-in-Charge (since 2003) of PI; Director,
Officer-in-Charge, President, Chief Executive Officer and Chief Operating
Officer (since May 2003) of American Skandia Advisory Services, Inc. and
American Skandia Investment Services, Inc.; Director, Officer-in-Charge,
President, Chief Executive Officer (since May 2003) of American Skandia Fund
Services, Inc.; formerly various positions to Senior Vice President (1992-1999)
of Prudential Securities; and various positions to Managing Director (1975-1992)
of Salomon Smith Barney; Member of Board of Governors of the Money Management
Institute.
Other Directorships held:(4) None
24 Visit our website at www.jennisondryden.com
<Page>
ROBERT F. GUNIA (56), Vice President and Trustee since 1996(3)
Oversees 189 portfolios in Fund complex
Principal occupations (last 5 years): Chief Administrative Officer (since June
1999) of PI; Executive Vice President and Treasurer (since January 1996) of PI;
President (since April 1999) of Prudential Investment Management Services LLC
(PIMS); Corporate Vice President (since September 1997) of The Prudential
Insurance Company of America (Prudential); Director, Executive Vice President
and Chief Administrative Officer (since May 2003) of American Skandia Investment
Services, Inc., American Skandia Advisory Services, Inc. and American Skandia
Fund Services, Inc.; formerly Senior Vice President (March 1987-May 1999) of
Prudential Securities.
Other Directorships held:(4) Vice President and Director (since May 1989) and
Treasurer (since 1999) of The Asia Pacific Fund, Inc.
Information pertaining to the Officers of the Trust is set forth below.
OFFICERS(2)
MARGUERITE E.H. MORRISON (47), Chief Legal Officer since 2003 and Assistant
Secretary since 2002(3)
Principal occupations (last 5 years): Vice President and Chief Legal
Officer--Mutual Funds and Unit Investment Trusts (since August 2000) of
Prudential; Senior Vice President and Secretary (since April 2003) of PI; Senior
Vice President and Secretary (since May 2003) of American Skandia Investment
Services, Inc., American Skandia Advisory Services, Inc. and American Skandia
Fund Services, Inc.; Vice President and Assistant Secretary of PIMS (since
October 2001), previously Senior Vice President and Assistant Secretary
(February 2001-April 2003) of PI, Vice President and Associate General Counsel
(December 1996-February 2001) of PI.
DEBORAH A. DOCS (45), Secretary since 1998; Assistant Secretary 1985-1998(3)
Principal occupations (last 5 years): Vice President and Corporate Counsel
(since January 2001) of Prudential; Vice President and Assistant Secretary
(since December 1996) of PI, Vice President and Assistant Secretary (since May
2003) of American Skandia Investment Services, Inc.
MARYANNE RYAN (39), Anti-Money Laundering Compliance Officer since 2002(3)
Principal occupations (last 5 years): Vice President, Prudential (since November
1998), First Vice President, Prudential Securities (March 1997-May 1998);
Anti-Money Laundering Compliance Officer (since 2003) of American Skandia
Investment Services, Inc., American Skandia Advisory Services, Inc. and American
Skandia Marketing, Inc.
GRACE C. TORRES (44), Treasurer and Principal Financial and Accounting Officer
since 1996(3)
Principal occupations (last 5 years): Senior Vice President (since January 2000)
of PI, Senior Vice President and Assistant Treasurer (since May 2003) of
American Skandia Investment Services, Inc. and American Skandia Advisory
Services, Inc.; formerly First Vice President (December 1996-January 2000) of PI
and First Vice President (March 1993-1999) of Prudential Securities.
Dryden Municipal Series Fund - New York Money Market Series 25
<Page>
<Table>
1 'Interested' Trustee, as defined in the 1940 Act, by reason of employment with the
Manager, (Prudential Investments LLC or PI), the Subadviser (Prudential Investment
Management, Inc. or PIM) or the Distributor (Prudential Investment Management
Services LLC or PIMS).
2 Unless otherwise noted, the address of the Trustees and Officers is c/o:
Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, NJ
07102.
3 There is no set term of office for Trustees and Officers. The Independent Trustees
have adopted a retirement policy, which calls for the retirement of Trustees on
December 31 of the year in which they reach the age of 75. The table shows the
individuals length of service as Trustee and/or Officer.
4 This includes only directorships of companies requested to register, or file
reports with the SEC under the Securities and Exchange Act of 1934 (that is,
'public companies') or other investment companies registered under the 1940 Act.
D The Fund Complex consists of all investment companies managed by PI. The Funds for
which PI serves as manager include JennisonDryden Mutual Funds, Strategic Partners
Funds, American Skandia Advisor Funds, Inc., The Prudential Variable Contract
Accounts 2, 10, 11, The Target Portfolio Trust, The Prudential Series Fund, Inc.,
American Skandia Trust, and Prudential's Gibraltar Fund.
</Table>
Additional information about the Fund's Trustees is included in the Fund's
Statement of Additional Information which is available without charge, upon
request, by calling (800) 521-7466 or (732) 482-7555 (Calling from outside the
U.S.)
26 Visit our website at www.jennisondryden.com
MAIL TELEPHONE WEBSITE
Gateway Center Three (800) 225-1852 www.jennisondryden.com
100 Mulberry Street
Newark, NJ 07102-4077
Trustees
David E.A. Carson - Robert F. Gunia - Robert E. La Blanc -
Douglas H. McCorkindale - Stephen P. Munn - Richard A. Redeker -
Judy A. Rice - Robin B. Smith - Stephen D. Stoneburn - Clay T. Whitehead
Officers
Judy A. Rice, President - Robert F. Gunia, Vice President -
Grace C. Torres, Treasurer and Principal Financial and Accounting Officer -
Marguerite E.H. Morrison, Chief Legal Officer and Assistant Secretary -
Deborah A. Docs, Secretary - Maryanne Ryan, Anti-Money Laundering Compliance
Officer
- -------------------------------------------------------------------------------
Manager Prudential Investments LLC Gateway Center Three
100 Mulberry Street
Newark, NJ 07102
- -------------------------------------------------------------------------------
Investment Adviser Prudential Investment Gateway Center Two
Management, Inc. 100 Mulberry Street
Newark, NJ 07102
- -------------------------------------------------------------------------------
Distributor Prudential Investment Gateway Center Three
Management Services LLC 14th Floor
100 Mulberry Street
Newark, NJ 07102
- -------------------------------------------------------------------------------
Custodian State Street Bank One Heritage Drive
and Trust Company North Quincy, MA 02171
Transfer Agent Prudential Mutual Fund PO Box 8098
Services LLC Philadelphia, PA 19101
- -------------------------------------------------------------------------------
Independent AUditors PricewaterhouseCoopers LLP 1177 Avenue of the
Americas
New York, NY 10036
- -------------------------------------------------------------------------------
Legal Counsel Shearman & Sterling LLP 599 Lexington Avenue
New York, NY 10022
- -------------------------------------------------------------------------------
Dryden Municipal Series Fund/New York Money Market Series
Nasdaq PBNXX
CUSIP 262468838
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY
FEDERAL GOVERNMENT AGENCY
MAY LOSE VALUE
ARE NOT A DEPOSIT OF OR GUARANTEED BY
ANY BANK OR ANY BANK AFFILIATE
JennisonDrydenMutualFunds
Dryden Municipal Series Fund/New York Money
Market Series
Nasdaq PBNXX
CUSIP 262468838
MF127E IFS-A084719
<Page>
Dryden
Municipal Series Fund/
Pennsylvania Series
Formerly known as Prudential Municipal Series Fund/
Pennsylvania Series
AUGUST 31, 2003 ANNUAL REPORT
(GRAPHIC)
FUND TYPE
Municipal bond
OBJECTIVE
Maximize current income that is exempt from
Commonwealth of Pennsylvania personal income
tax and federal income tax, consistent with the
preservation of capital
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 Series'
portfolio holdings are for the period covered
by this report and are subject
to change thereafter.
JennisonDryden is a service mark of
The Prudential Insurance Company
of America.
JennisonDrydenMutualFunds
Dear Shareholder, October 10, 2003
There have been welcome signs that the U.S.
economy is growing again. Many corporate
executives and investment research analysts are
expecting profits to rise as well. However,
jobs are not being created as quickly as in
past recoveries, reminding us that the
resumption of growth doesn't mean a return to
an earlier time. The economic picture continues
to change, providing new opportunities and
challenges. Regardless of the direction of
financial markets, it is important to remember
that a wise investor plans today for tomorrow's
needs. A broadly diversified investment
portfolio will increase your chances of
participating in positive changes and is also
your best long-term defense against unexpected
downturns.
Whether you are investing for your retirement,
your children's education, or some other
purpose, JennisonDryden mutual funds offer the
experience, resources, and professional
discipline of three leading asset management
firms that can make a difference for you.
JennisonDryden funds are managed by Prudential
Investment Management's public equity and
fixed-income asset management businesses. The
equity funds are managed by Jennison Associates
and Quantitative Management. Prudential Fixed
Income manages the JennisonDryden fixed income
and money market funds.
We recommend that you develop a diversified
personal asset allocation strategy in
consultation with a financial professional who
knows you, who understands your reasons for
investing, the time you have to reach your
goals, and the amount of risk you are
comfortable assuming. JennisonDryden mutual
funds offer a wide range of investment choices,
and your financial professional can help you
choose the appropriate funds to implement your
strategy.
Sincerely,
Judy A. Rice, President
Dryden Municipal Series Fund/Pennsylvania Series
Dryden Municipal Series Fund/Pennsylvania Series 1
Your Series' Performance
Series Objective
The investment objective of the Dryden
Municipal Series Fund/Pennsylvania Series (the
Series) is to maximize current income that is
exempt from Commonwealth of Pennsylvania
personal income tax and federal income tax,
consistent with the preservation of capital.
There can be no assurance that the Series will
achieve its investment objective.
Cumulative Total Returns1 as of 8/31/03
One Year Five Years Ten Years Since Inception2
Class A 2.57% 22.82% 61.10% (60.79) 129.82% (128.93)
Class B 2.32 21.11 55.73 (55.43) 160.60 (153.55)
Class C 2.06 19.60 N/A 54.36 (54.06)
Lehman Brothers Muni Bond Index3 3.14 29.57 76.44 ***
Lipper PA Muni Debt Funds Avg.4 2.48 21.46 60.35 ****
Average Annual Total Returns1 as of 9/30/03
One Year Five Years Ten Years Since Inception2
Class A 0.26% 3.88% 4.75% (4.73) 6.26% (6.23)
Class B -1.76 4.08 4.73 (4.71) 6.18 (6.00)
Class C 0.93 3.78 N/A 5.08 (5.06)
Lehman Brothers Muni Bond Index3 3.89 5.67 6.03 ***
Lipper PA Muni Debt Funds Avg.4 3.03 4.26 4.98 ****
Distributions and Yields1 as of 8/31/03
Taxable Equivalent 30-Day Yield5
Total Distributions 30-Day at Tax Rates of
Paid for 12 Months SEC Yield 33% 35%
Class A $0.45 3.48% 5.34% 5.51%
Class B 0.42 3.34 5.13 5.29
Class C 0.40 3.06 4.70 4.84
Past performance is not indicative of future
results. Principal value and investment return
will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than
their original cost. 1Source: Prudential
Investments LLC and Lipper Inc. The cumulative
total returns do not take into account
applicable sales charges. If reflected, the
applicable sales charges would reduce the
cumulative total returns performance quoted.
The average annual total returns do take into
account applicable sales charges. Without the
contractual distribution and service (12b-1)
fee waiver of 0.05% and 0.25% for Class A and
Class C shares respectively, the returns for
these classes would have been lower. The
Distributor's 12b-1 fee waiver of 0.25% for
Class C shares continued through August 31,
2003. The Series charges a maximum front-end
sales charge of 3% for Class A shares and a
12b-1 fee of up to 0.30% annually. In some
circumstances, Class A shares may not be
subject to a front-end sales charge, but may be
subject to a 1% contingent deferred sales
charge (CDSC) for the first year. Class B
shares are subject to a declining CDSC of 5%,
4%, 3%, 2%, 1%, and 1% respectively for the
first six years after purchase and a 12b-1 fee
of 0.50% annually. Approximately seven years
after purchase, Class B shares will
automatically convert to Class A shares on a
quarterly basis. Class C shares are subject to
a front-end sales charge of 1%, a CDSC of 1%
for shares redeemed within 18 months of
purchase, and a 12b-1 fee of up to 1% annually.
The returns in the tables do not reflect the
deduction of taxes that a shareholder would pay
on fund distributions or following the
redemption of fund shares. Without waiver of
fees and/or expense subsidization, the Series'
returns would have been lower, as indicated in
parentheses. 2Inception dates: Class A,
1/22/90;
2 Visit our website at www.jennisondryden.com
Class B, 4/3/87; and Class C, 8/1/94. 3The
Lehman Brothers Municipal (Muni) Bond Index is
an unmanaged index of over 39,000 long-term
investment-grade municipal bonds. It gives a
broad look at how long-term investment-grade
municipal bonds have performed. 4The Lipper
Pennsylvania (PA) Muni Debt Funds Average
(Lipper Average) represents returns based on an
average return of all funds in the Lipper PA
Muni Debt Funds category for the periods noted.
Funds in the Lipper Average limit their assets
to those securities that are exempt from
taxation in Pennsylvania. Investors cannot
invest directly in an index. 5Taxable
equivalent yields reflect federal and
applicable state tax rates. The returns for the
Lehman Brothers Muni Bond Index would be lower
if they included the effects of sales charges,
operating expenses of a mutual fund, or taxes.
Returns for the Lipper Average reflect the
deduction of operating expenses, but not sales
charges or taxes. ***Lehman Brothers Muni Bond
Index Closest Month-End to Inception cumulative
total returns as of 8/31/03 are 154.09% for
Class A, 205.89% for Class B, and 76.80% for
Class C. Lehman Brothers Muni Bond Index
Closest Month-End to Inception average annual
total returns as of 9/30/03 are 7.29% for Class
A, 7.20% for Class B, and 6.75% for Class C.
****Lipper Average Closest Month-End to
Inception cumulative total returns as of
8/31/03 are 134.10% for Class A, 175.79% for
Class B, and 62.13% for Class C. Lipper Average
Closest Month-End to Inception average annual
total returns as of 9/30/03 are 6.64% for
Class A, 6.50% for Class B, and 5.70% for
Class C.
Five Largest Issuers expressed as a percentage of total
investments as of 8/31/03
Schuylkill Cnty. Ind. Dev. Auth. Rev. 5.8%
Alleghny Cnty. PA 5.0
Central Bucks Sch. Dist. 5.0
Pennsylvania St. Ind. Dev. Auth. Rev., Econ Dev. 4.6
Puerto Rico Comnwlth. 4.1
Issuers are subject to change.
Portfolio Composition expressed as a percentage
of net assets as of 8/31/03
General Obligation 33.7%
Healthcare 11.8
Water & Sewer 11.4
Corporate-Backed IDB & PCR 11.1
Transportation 9.3
Education 6.1
Solid Waste/Resource Recovery 2.9
Housing 1.9
Other Muni 9.5
Other 2.5
Cash & Equivalents -0.2
Portfolio Composition is subject to change.
Credit Quality expressed as a percentage of net
assets as of 8/31/03
Aaa 61.9%
Aa 11.1
A 8.0
Baa 10.8
NR 8.4
Cash & Equivalents -0.2
Source: Moody's rating, defaulting to S&P when not rated.
Credit Quality is subject to change.
Dryden Municipal Series Fund/Pennsylvania Series 3
Investment Adviser's Report
Market Overview and Performance Summary
The municipal bond market repeatedly rallied,
then sold off, which resulted in a 3.14% return
for the fiscal year ended August 31, 2003,
according to the Lehman Brothers Municipal Bond
Index (the Index). The market's volatility
largely reflected uncertainty about the
prospects for economic growth in the United
States. The outlook was cloudy because
investors did not know how much the Federal
Reserve (the Fed) would cut short-term interest
rates in an effort to stimulate the sluggish
economy. There was also concern that U.S.
involvement in a war in Iraq might harm the
U.S. economy.
Our investment strategy aimed to provide the
Series with the flexibility to readily respond
to changing conditions in the municipal bond
market. However, for the 12 months ended August
31, 2003, the Series' Class A shares trailed
their benchmark, the Index. This occurred because
the Series held certain bonds that declined in value
due to credit quality problems discussed later in
this report. The Index also does not reflect
the operating expenses of mutual funds.
Compared to their peer group, which does take
into account operating expenses, the Series'
Class A shares posted a return that exceeded
the Lipper Pennsylvania Municipal Debt Funds
Average for the 12 months ended August 31,
2003.
Early in our reporting period, municipal bonds
gained in value to such an extent that we
believed a correction in the market was
virtually inevitable. When the equity market
began to recover in October 2002, demand for
municipal bonds faded temporarily and their
prices plunged. The tax-exempt market was also
pressured by a large amount of newly issued bonds
at that time.
The sell-off in municipal bonds soon turned
into a rally. Investors paid higher prices (and
accepted lower yields) for tax-exempt bonds
because the Fed was expected to cut short-term
rates with the goal of boosting economic
growth. In November 2002, it reduced its target
for the federal funds rate by half a percentage
point to 1.25%.
Concern about the economy occurred before and
continued after the war in Iraq began in March
2003. Consequently, there was speculation in
the financial markets that the Fed would
aggressively reduce rates again or purchase
U.S. Treasury securities, which would also
exert downward pressure on the general level of
interest rates. This factor helped the
municipal bond rally remain on track for the
most part until mid-June 2003. At that time,
however, the municipal bond market began to
sell off along with Treasurys. Economic data
suggested that the Fed might not cut rates
sharply when it met in late June. Indeed, it
only lowered its target for the federal funds
rate by a quarter of a percentage point to 1%.
For the rest of the reporting period,
4 Visit our website at www.jennisondryden.com
municipal bond prices slid in July and
stabilized in August. Municipal bond prices
were hurt by signs of stronger economic growth,
even though the job market remained weak.
Credit Quality and Interest-Rate Sensitivity
Despite Pennsylvania's historically
conservative financial practices, the state
faced fiscal challenges during the reporting
period. In light of this and frequent changes
in the level of interest rates, we continued to
work toward achieving the right balance in the
Series with regard to two important overlapping
characteristics. The first was credit quality,
which involves the Series' exposure to high-
quality bonds versus low-quality bonds. The
second was interest-rate sensitivity, which
involves the Series' exposure to bonds with
good potential for price appreciation versus
bonds that behave defensively during a sell-off
in the fixed income market.
From the perspective of credit quality, bonds
rated Aaa (both insured and uninsured)
accounted for roughly 62% of the Series' net
assets as of August 31, 2003. We emphasized
Aaa-rated bonds because they tend to perform
better than lower-quality bonds under
challenging economic conditions. However, as
accelerating economic growth increases demand
for riskier assets, lower-quality bonds tend to
outperform Aaa-rated municipal bonds. The
Series had some exposure to bonds of below-
investment-grade quality.
Among the Series' holdings that performed
poorly were bonds of the Delaware County
Authority for Dunwoody Village, a life-care
facility located in Newtown, Pennsylvania.
Standard & Poor's Ratings Group downgraded the
bonds from single-A to A-minus, citing such
factors as a two-year decline in operating
performance driven by higher staffing and
insurance costs and delays in filling expansion
units. The bonds declined in value and
detracted from the Series' return.
In the volatile interest-rate environment, we
maintained a barbell strategy that essentially
focused on two types of bonds. One side of our
barbell primarily emphasized Aaa-rated, insured
zero coupon bonds, which are so named because
they pay no interest and are sold at discount
prices to make up for their lack of periodic
interest payments. Zero coupon bonds are the
most interest-rate-sensitive of all bonds,
which enables them to perform better than other
types of debt securities when interest rates
decline and bond prices move higher. The other
side of our barbell emphasized intermediate-
term bonds whose higher coupon rates provided
the Series with considerable interest income.
These bonds are considered to have defensive
characteristics, as their prices tend to hold
up relatively well when the municipal bond
market sells off. The bonds are also attractive
to investors because they provide solid income.
Dryden Municipal Series Fund/Pennsylvania Series 5
Periodically readjusting our coupon barbell
strategy was one way to change the Series'
duration, which measures its sensitivity to
fluctuations in the level of interest rates. In
general, when we determined that there was a
trend toward higher interest rates, we aimed to
shorten the Series' duration to help protect
its value as rising interest rates pushed
municipal bond prices lower. On the other hand,
we aimed to lengthen the Series' duration to
help it benefit more fully when falling
interest rates drove municipal bond prices
higher. In general, we employed this tactic
periodically once we determined that the
decline in interest rates was indeed a trend
rather than a temporary development.
Pennsylvania Series Management Team
6 Visit our website at www.jennisondryden.com
Portfolio of Investments
as of August 31, 2003
<Table>
<Caption>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
LONG-TERM INVESTMENTS 93.5%
MUNICIPAL BONDS
-----------------------------------------------------------------------------------
Allegheny Cnty. Hosp. Dev.
Auth.
Rev.,
Allegheny Gen. Hosp.
Proj.,
Ser. A, M.B.I.A. Aaa 6.25% 9/01/20 $ 1,750(c) $ 2,010,890
Magee-Womens Hosp.,
F.G.I.C. Aaa Zero 10/01/14 2,000 1,180,680
Allegheny Cnty. Ind. Dev.
Auth. Rev., USX Proj.,
Ser. A Baa1 6.70 12/01/20 1,500 1,566,375
Allegheny Cnty. San. Auth.
Swr. Rev., M.B.I.A. Aaa 5.375 12/01/17 2,000 2,145,420
M.B.I.A. Aaa 5.50 12/01/20 2,500 2,658,100
M.B.I.A. Aaa 5.50 12/01/30 3,000 3,122,220
Allentown Area Hosp. Auth.
Rev., Sacred Heart Hosp.
of Allentown, Ser. B Baa3 6.75 11/15/15 1,000(c) 974,770
Armstrong Cnty., G.O.,
M.B.I.A. AAA(d) 5.40 6/01/31 2,000 2,052,300
Berks Cnty. Ind. Rev.,
Lutheran Home Proj.,
A.M.B.A.C. Aaa 6.875 1/01/23 1,500 1,506,015
Berks Cnty. Mun. Auth.
Hosp. Rev., Reading Hosp.
Med. Ctr. Proj., M.B.I.A. Aaa 5.70 10/01/14 1,250 1,394,825
Bucks Cnty. Wtr. & Swr.
Auth. Rev. Aaa 5.375 6/01/16 1,080 1,163,074
Butler Cnty., G.O.,
F.G.I.C. Aaa 5.25 7/15/22 1,000 1,033,420
Canon McMillan Sch. Dist.,
Ser. B, F.G.I.C. Aaa 5.50 12/01/29 3,000(f) 3,105,960
Central Bucks Sch. Dist.,
G.O.,
M.B.I.A. Aaa 5.00 5/15/15 3,600 3,818,664
M.B.I.A. Aaa 5.00 5/15/16 3,780 3,978,790
Chartiers Valley Ind.
Rev., Friendship
Vlge./South Hills NR 6.75 8/15/18 2,225 2,225,690
Chester Cnty. Hlth. & Ed.
Facs. Auth. Hosp. Rev.,
Ser. A Baa2 6.75 7/01/31 1,250 1,128,750
Clarion Cnty. Hosp. Auth.
Rev., Clarion Hosp. Proj. BBB-(d) 5.625 7/01/21 1,000 858,580
Dauphin Cnty., G.O., Ser.
2, A.M.B.A.C. Aaa 5.50 11/15/15 1,295 1,413,000
Delaware Cnty. Auth. Rev.,
Dunwoody Vlge. Proj. A-(d) 6.25 4/01/30 1,000 1,028,690
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - Pennsylvania Series 7
<Page>
Portfolio of Investments
as of August 31, 2003 Cont'd.
<Table>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
Delaware Cnty. Ind. Dev.
Auth. Rev.,
Res. Recov. Facs., Ser. A Baa3 6.00% 1/01/09 $ 500 $ 528,650
Res. Recov. Facs., Ser. A Baa3 6.10 7/01/13 2,500 2,577,000
Delaware River Port Auth.
PA & NJ Rev., F.G.I.C. Aaa 5.40 1/01/16 2,750 2,955,205
Port Dist. Proj., Ser. B,
F.S.A. Aaa 5.70 1/01/22 1,000 1,076,320
Easton Area Sch. Dist.,
G.O., F.G.I.C. Aaa 5.00 3/15/15 2,360 2,512,881
Greencastle Antrim Sch.
Dist., Rev., M.B.I.A.
C.A.B.S., Ser. B Aaa Zero 1/01/12 1,000 701,330
C.A.B.S., Ser. B Aaa Zero 1/01/13 1,000 662,970
Harrisburg, G.O.,
C.A.B.S.,
Ser. D, A.M.B.A.C. Aaa Zero 3/15/15 2,380 1,394,275
Hazleton Hlth. Svcs. Auth.
Hosp. Rev., Hazleton Gen.
Hosp. Baa3 5.625 7/01/17 1,000 928,150
Kennett Cons. Sch. Dist.,
G.O.,
Ser. A, F.G.I.C. Aaa 5.50 2/15/16 1,035 1,123,058
Lancaster Ind. Dev. Auth.
Rev., Garden Spot Vlge.
Proj., Ser. A NR 7.625 5/01/31 1,650 1,697,190
Lebanon Cnty. Hlth. Facs.
Auth. Rev., Good
Samaritan Hosp. Proj. Baa1 6.00 11/15/35 1,000 992,140
Lower Merion Sch. Dist.,
G.O. Aaa 5.00 5/15/15 2,050 2,181,241
G.O. Aaa 5.00 5/15/19 2,490 2,565,173
Lower Pottsgrove Twnshp.
Auth. Swr. Rev.,
Montgomery Cnty.,
A.M.B.A.C.,
Ser. A Aaa Zero 11/01/13 1,155 738,160
Ser. A Aaa Zero 11/01/15 1,185 673,187
Montgomery Cnty. G.O. Aaa 5.25 9/15/16 2,895 3,086,765
Mount Pleasant Bus. Dist.
Auth. Hosp. Rev., Frick
Hosp. BBB(d) 5.75 12/01/27 1,000 926,960
Norristown Area Sch.
Dist., G.O., F.G.I.C. Aaa 5.00 9/01/33 2,500 2,469,350
Northampton Cnty. Gen.
Purp. Auth. Rev., F.S.A. Aaa 5.75 10/01/18 3,910(c) 4,491,847
Northampton Cnty. Higher
Ed. Auth. Rev., Moravian
Coll., A.M.B.A.C. Aaa 6.25 7/01/11 2,195 2,563,782
</Table>
See Notes to Financial Statements.
8 Visit our website at www.jennisondryden.com
<Page>
<Table>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
Northumberland Cnty. Ind.
Dev. Auth. Rev., Roaring
Creek Wtr., A.M.T. AA-(d) 6.375% 10/15/23 $ 1,000 $ 1,025,480
Owen J. Roberts Sch.
Dist., G.O., F.S.A. Aaa 5.50 8/15/19 1,520 1,629,896
Penn Hills Twnshp., G.O.,
Ser. A, A.M.B.A.C. Aaa Zero 6/01/10 1,535 1,194,276
Pennsylvania Econ. Dev.
Auth., Wste. Wtr.
Treatment Rev., Sun Co.,
R & M Proj., Ser. A,
A.M.T. Baa2 7.60 12/01/24 2,000 2,103,900
Pennsylvania Econ. Dev.
Fin. Auth., Exempt Facs.
Rev., Amtrak Proj., Ser.
A, A.M.T. A3 6.25 11/01/31 2,000 1,905,840
Pennsylvania Hsg. Fin.
Agcy. Sngl. Fam. Mtge.,
A.M.T. Aa2 10.98(b) 4/01/25 2,000 2,089,000
Pennsylvania St. Higher
Ed. Facs. Auth. Rev.,
Drexel Univ. A2 6.00 5/01/29 2,500 2,624,450
Philadelphia Univ. AA(d) 6.10 6/01/30 195 207,293
Thomas Jefferson Univ. A1 5.50 1/01/17 1,000 1,054,430
Ursinus Coll., Ser. A A-(d) 5.90 1/01/27 1,925 1,994,935
Pennsylvania St. Ind. Dev.
Auth. Rev., Econ. Dev.,
A.M.B.A.C. Aaa 5.50 7/01/17 4,000 4,352,440
A.M.B.A.C. Aaa 5.50 7/01/20 2,750 2,939,420
Pennsylvania St. Tpke.
Comn. Oil Franchise Tax
Rev., Ser. A, A.M.B.A.C. Aaa 5.25 12/01/18 2,500 2,617,750
Pennsylvania St. Tpke.
Comn. Tpke. Rev., Rfdg.,
Ser. S Aa3 5.50 6/01/15 1,000 1,093,160
Pennsylvania St., G.O.,
Ser. 2 Aa2 5.00 8/01/17 4,000 4,120,080
Philadelphia Auth. Ind.
Dev. Arpt., Rev., A.M.T. NR 5.50 1/01/24 2,500 1,961,525
Philadelphia Auth. Ind.
Dev. Lease Rev., Ser. B,
F.S.A. Aaa 5.50 10/01/18 2,000 2,153,460
Philadelphia Hosps. &
Higher Ed. Facs. Auth.
Hosp. Rev.,
Chestnut Hill Hosp. Baa2 6.50 11/15/22 1,250 1,245,088
Grad. Hlth. Sys. Ca 7.25 7/01/18 1,807(e) 18
Philadelphia Parking Auth.
Rev., Arpt., F.S.A. Aaa 5.625 9/01/19 2,500 2,665,025
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - Pennsylvania Series 9
<Page>
Portfolio of Investments
as of August 31, 2003 Cont'd.
<Table>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
Pittsburgh Urban Redev.
Auth., Mtge. Rev., Ser.
A, A.M.T. Aa1 6.25% 10/01/28 $ 875 $ 905,730
Pittsburgh Wtr. & Swr.
Auth., Wtr. & Swr. Sys.
Rev., Ser. A, F.G.I.C. Aaa 6.50 9/01/13 5,000 5,982,700
Puerto Rico Comnwlth.,
G.O., F.G.I.C. Aaa 5.50 7/01/14 1,500 1,690,605
Hwy. & Trans. Auth. Rev.,
Ser. E, F.S.A. Aaa 5.50 7/01/16 2,000 2,247,400
Pub. Impvt. Rfdg.,
M.B.I.A. Aaa 7.00 7/01/10 720 873,021
Rites, PA 625, A.M.B.A.C. NR 12.78(b) 7/01/10 2,015 2,871,496
Rites, PA 642A, M.B.I.A. NR 10.30(b) 7/01/10 1,500 1,924,860
Reading Sch. Dist., G.O.,
Ser. B, F.G.I.C. Aaa Zero 1/15/26 7,000 2,004,520
Schuylkill Cnty. Ind. Dev.
Auth. Rev.,
Pine Grove Landfill,
Inc., A.M.T. BBB(d) 5.10 10/01/19 2,000 2,034,900
Schuykill Engy., A.M.T. NR 6.50 1/01/10 2,560 2,565,094
Springfield Sch. Dist.,
Delaware Cnty., G.O.,
F.S.A. Aaa 5.50 3/15/17 2,450 2,643,771
State Pub. Sch. Bldg.
Auth. Sch. Rev., Conneaut
Sch. Dist. Proj.,
F.G.I.C. Aaa 5.25 11/01/12 1,390 1,529,292
Conneaut Sch. Dist.
Proj., F.G.I.C. Aaa 5.25 11/01/13 1,465 1,607,984
Union Cnty. Higher Ed.
Facs. Fin. Auth. Univ.
Rev., Bucknell Univ.,
Ser. A Aa3 5.25 4/01/20 1,080 1,127,077
Unity Twnshp. Mun. Auth.,
Gtd. Swr. Rev.,
A.M.B.A.C.,
C.A.B.S. Aaa Zero 11/01/12 1,035 700,591
C.A.B.S. Aaa Zero 11/01/13 1,035 661,469
Washington Cnty. Hosp.
Auth. Rev., Monongahela
Valley Hosp. A3 6.25 6/01/22 2,400 2,546,328
Westmoreland Cnty. Ind.
Rev. Gtd., Valley
Landfill Proj., A.M.T. BBB(d) 5.10 5/01/18 1,000 1,017,660
---------------
Total long-term
investments
(cost $146,696,384) 149,123,811
---------------
</Table>
See Notes to Financial Statements.
10 Visit our website at www.jennisondryden.com
<Page>
<Table>
-----------------------------------------------------------------------------------
MOODY'S PRINCIPAL
RATING INTEREST MATURITY AMOUNT
DESCRIPTION (A) (UNAUDITED) RATE DATE (000) VALUE (NOTE 1)
SHORT-TERM INVESTMENTS 5.3%
-----------------------------------------------------------------------------------
Emmaus Gen. Auth. Rev.,
Loan. Prog., Ser. A,
F.S.A., F.R.W.D. A-1(d) 0.85% 9/04/03 $ 1,110(g) $ 1,110,000
Mun. Secs. Trust Certs.,
G.O., Ser. 2000-110,
Class A, F.R.D.D. A-1(d) 0.90 9/02/03 300(g) 300,000
Philadelphia Auth. Ind.
Dev. Rev., Girard Estate
Aramark Proj., F.R.W.D. A-1+(d) 0.82 9/04/03 2,400(g) 2,400,000
Schuylkill Cnty. Ind. Dev.
Auth. Res. Recov. Rev.,
Northeastern Pwr., Ser.
B, A.M.T., F.R.D.D. A-1+(d) 0.95 9/02/03 4,585(g) 4,585,000
---------------
Total short-term
investments
(cost $8,395,000) 8,395,000
---------------
TOTAL INVESTMENTS 98.8%
(COST $155,091,384; NOTE
5) 157,518,811
Other assets in excess of
liabilities 1.2% 1,964,904
---------------
NET ASSETS 100% $ 159,483,715
---------------
---------------
</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.
C.A.B.S.--Capital Appreciation Bonds.
F.G.I.C.--Financial Guaranty Insurance Company.
F.R.D.D.--Floating Rate (Daily) Demand Note (g).
F.R.W.D.--Floating Rate (Weekly) Demand Note (g).
F.S.A.--Financial Security Assurance.
G.O.--General Obligation.
M.B.I.A.--Municipal Bond Insurance Corporation.
(b) Inverse floating rate bond. The coupon is inversely indexed to a floating
interest rate. The rate shown is the rate at year end.
(c) Prerefunded issues are secured by escrowed cash and/or direct U.S.
guaranteed obligations.
(d) Standard & Poor's Rating.
(e) Issuer in default on interest payments. Non-income producing security.
(f) Partial principal amount pledged as collateral for financial futures
contracts.
(g) For purposes of amortized cost valuation, the maturity date of Floating Rate
Demand Notes are considered to be the later of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
NR--Not Rated by Moody's or Standard & Poor's.
The Fund's current Statement of Additional Information contains a description of
Moody's and Standard & Poor's ratings.
See Notes to Financial Statements.
Dryden Municipal Series Fund - Pennsylvania Series 11
<Page>
Statement of Assets and Liabilities
as of August 31, 2003
ASSETS
------------------------------------------------------------------------------
Investments, at value (cost $155,091,384) $157,518,811
Cash 61,698
Interest receivable 2,243,749
Receivable for Series shares sold 120,956
Due from broker--variation margin 7,715
Other assets 3,073
------------
TOTAL ASSETS 159,956,002
------------
LIABILITIES
------------------------------------------------------------------------------
Payable for Series shares reacquired 153,629
Accrued expenses 103,034
Dividends payable 95,578
Management fee payable 67,751
Distribution fee payable 42,081
Deferred trustees' fees 10,214
------------
TOTAL LIABILITIES 472,287
------------
NET ASSETS $159,483,715
------------
------------
------------------------------------------------------------------------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 154,016
Paid-in capital in excess of par 151,380,678
------------
151,534,694
Undistributed net investment income 308,716
Accumulated net realized gain on investments 5,260,926
Net unrealized appreciation on investments 2,379,379
------------
NET ASSETS, AUGUST 31, 2003 $159,483,715
------------
------------
See Notes to Financial Statements.
12 Visit our website at www.jennisondryden.com
<Page>
<Table>
CLASS A
-----------------------------------------------------------------------------------
Net asset value and redemption price per share
($121,770,917 / 11,758,650 shares of beneficial interest issued and
outstanding) $10.36
Maximum sales charge (3% of offering price) .32
------
Maximum offering price to public $10.68
------
------
CLASS B
-----------------------------------------------------------------------------------
Net asset value, offering price and redemption price per share
($36,607,329 / 3,536,151 shares of beneficial interest issued and
outstanding) $10.35
------
------
CLASS C
-----------------------------------------------------------------------------------
Net asset value and redemption price per share
($1,105,469 / 106,781 shares of beneficial interest issued and outstanding) $10.35
Sales charge (1% of offering price) .10
------
Offering price to public $10.45
------
------
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - Pennsylvania Series 13
<Page>
Statement of Operations
Year Ended August 31, 2003
NET INVESTMENT INCOME
-----------------------------------------------------------------------------
Income
Interest $ 8,379,442
-----------
Expenses
Management fee 829,319
Distribution fee--Class A 314,332
Distribution fee--Class B 195,062
Distribution fee--Class C 8,391
Custodians's fees and expenses 116,000
Transfer agent's fees and expenses 89,000
Reports to shareholders 69,000
Legal fees and expenses 28,000
Registration fees 25,000
Audit fee 13,000
Trustees' fees 11,000
Miscellaneous 12,974
-----------
TOTAL EXPENSES 1,711,078
Less: Custodian fee credit (Note 1) (1,633)
-----------
NET EXPENSES 1,709,445
-----------
NET INVESTMENT INCOME 6,669,997
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
-----------------------------------------------------------------------------
Net realized gain (loss) on:
Investment transactions 5,446,205
Financial futures transactions (441,907)
Option written 164,260
-----------
5,168,558
-----------
Net change in unrealized appreciation (depreciation) on:
Investments (7,738,938)
Financial futures contracts 27,466
-----------
(7,711,472)
-----------
Net loss on investments (2,542,914)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,127,083
-----------
-----------
See Notes to Financial Statements.
14 Visit our website at www.jennisondryden.com
<Page>
Statement of Changes in Net Assets
<Table>
<Caption>
-----------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-----------------------------------------
2003 2002
INCREASE (DECREASE) IN NET ASSETS
-----------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 6,669,997 $ 7,677,548
Net realized gain on investment transactions 5,168,558 534,257
Net change in unrealized appreciation
(depreciation) on investments (7,711,472) (161,928)
--------------- -----------------
Net increase in net assets resulting from
operations 4,127,083 8,049,877
--------------- -----------------
DIVIDENDS AND DISTRIBUTIONS (NOTE 1)
Dividends from net investment income
Class A (5,085,982) (5,855,040)
Class B (1,482,488) (1,777,830)
Class C (39,632) (37,387)
--------------- -----------------
(6,608,102) (7,670,257)
--------------- -----------------
Distributions from net realized gains
Class A (259,633) --
Class B (83,960) --
Class C (2,175) --
--------------- -----------------
(345,768) --
--------------- -----------------
FUND SHARE TRANSACTIONS (NET OF SHARE CONVERSIONS)
(NOTE 6)
Net proceeds from shares sold 13,641,605 15,783,624
Net asset value of shares issued in reinvestment
of dividends and distributions 3,912,676 4,262,957
Cost of shares reacquired (23,269,103) (17,957,048)
--------------- -----------------
Net increase (decrease) in net assets from Series
share transactions (5,714,822) 2,089,533
--------------- -----------------
Total increase (decrease) (8,541,609) 2,469,153
NET ASSETS
-----------------------------------------------------------------------------------
Beginning of year 168,025,324 165,556,171
--------------- -----------------
End of year(a) $ 159,483,715 $ 168,025,324
--------------- -----------------
--------------- -----------------
------------------------------
(a) Includes undistributed net investment income
of: $ 308,716 $ --
--------------- -----------------
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - Pennsylvania Series 15
<Page>
Notes to Financial Statements
Dryden Municipal Series Fund (the 'Fund'), formerly known as Prudential
Municipal Series Fund, is registered under the Investment Company Act of 1940 as
an open-end management investment company. The Fund was organized as a
Massachusetts business trust on May 18, 1984 and consists of six series. These
financial statements relate only to Pennsylvania Series (the 'Series'). The
financial statements of the other series are not presented herein. The assets of
each series are invested in separate, independently managed portfolios. The
Series commenced investment operations on April 3, 1987. The Series' investment
objective is to maximize current income that is exempt from Commonwealth of
Pennsylvania personal income tax and federal income tax, consistent with the
preservation of capital. This means the Series invests at least 80% of the
Series' investments in Pennsylvania state and local municipal bonds, which are
debt obligations or fixed income securities, including notes, commercial paper
and other securities, as well as obligations of other issuers (such as issuers
located in Puerto Rico, the Virgin Islands and Guam) that pay interest income
that is tax exempt from those taxes. The ability of the issuers of the
securities held by the Series to meet their obligations may be affected by
economic or political developments in a specific state, industry or region.
NOTE 1. ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund, and the Series, in the preparation of its financial statements.
Securities Valuations: The Series values municipal securities (including
commitments to purchase such securities on a 'when-issued' basis) on the basis
of prices provided by a pricing service which uses information with respect to
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.
Securities, including options, futures contracts and options thereon, for which
the primary market is on a national securities exchange, commodities exchange or
board of trade are valued at the last sale price on such exchange or board of
trade, on the date of valuation or, if there was no sale on such day, at the
average of readily available closing bid and asked prices on such day or at the
bid price in the absence of an asked price.
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<Page>
Securities, including options, that are actively traded in the over-the-counter
market, including listed securities for which the primary market is believed to
be over-the-counter, are valued at the average of the most recently quoted bid
and asked prices provided by a principal market maker or dealer.
Short-term securities which mature in sixty days or less are valued at amortized
cost, which approximates market value. The amortized cost method involves
valuing a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of the difference between the principal amount
due at maturity and cost. Short-term securities which mature in more than sixty
days are valued at current market quotations.
Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities at a set price
for delivery on a future date. Upon entering into a financial futures contract,
the Series 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 Series 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 or loss on financial futures
transactions.
The Series invests in financial futures contracts in order to hedge its existing
portfolio securities, or securities the Series intends to purchase, against
fluctuations in value caused by changes in prevailing interest rates or market
conditions. Should interest rates move unexpectedly, the Series may not achieve
the anticipated benefits of the financial futures contracts and may realize a
loss. The use of futures transactions involves the risk of imperfect correlation
in movements in the price of futures contracts, interest rates and the
underlying hedged assets.
Options: The Series 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 Series currently
owns or intends to purchase. The Series' principal reason for writing options is
to realize, through receipt of premiums, a greater current return than would be
realized on the underlying security alone. When the Series purchases an option,
it pays a premium and an amount equal to that premium is recorded as an asset.
When the Series writes an option, it receives a premium and an amount equal to
that premium is recorded as a liability. The asset or liability is adjusted
daily to reflect the current market value of the option. If an option expires
unexercised, the Series realizes a gain or loss to the extent of the premium
received or paid. If an option is exercised,
Dryden Municipal Series Fund - Pennsylvania Series 17
<Page>
the premium received or paid is recorded as an adjustment to the proceeds from
the sale or the cost of the purchase in determining whether the Series has
realized a gain or loss. The difference between the premium and the amount
received or paid on effecting a closing purchase or sale transaction is also
treated as a realized gain or loss. Gain or loss on purchased options is
included in net realized gain or loss on investment transactions. Gain or loss
on written options is presented separately as net realized gain or loss on
written option transactions.
The Series, as writer of an option, may have no control over whether the
underlying securities may be sold (called) or purchased (put). As a result, the
Series bears the market risk of an unfavorable change in the price of the
security underlying the written option. The Series, as purchaser of an option,
bears the risk of the potential inability of the counterparties to meet the
terms of their contracts.
Interest Rate Swaps: The Series may enter into interest rate swap agreements. In
a simple interest rate swap, one investor pays a floating rate of interest on a
notional principal amount and receives a fixed rate of interest on the same
notional principal amount for a specified period of time. Alternatively, an
investor may pay a fixed rate and receive a floating rate. Interest rate swaps
were conceived as asset/liability management tools. In more complex swaps, the
notional principal amount may decline (or amortize) over time.
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 Series will record a realized gain
(loss) equal to the difference between the proceeds from (or cost of) the
closing transaction and the Series' basis in the contract, if any.
The Series is exposed to credit loss in the event of non-performance by the
other party to the interest rate swap. However, the Series does not anticipate
non-performance by any counterparty.
Written options, swap contracts and futures contracts involve elements of both
market and credit risk in excess of the amounts reflected on the Statement of
Assets and Liabilities.
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 rates 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
18 Visit our website at www.jennisondryden.com
<Page>
rate movements and other market factors can substantially affect the liquidity
of inverse floating rate notes.
Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains or losses on sales of securities are
calculated on the identified cost basis. Interest income, including amortization
of premium and accretion of discount on debt securities, as required, is
recorded on the accrual basis. Expenses are recorded on the accrual basis which
may require the use of certain estimates by management.
Net investment income or loss (other than distribution fees, which are charged
directly to the respective class) 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 Series' policy to continue
to meet the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable net income and capital
gains, if any, to its shareholders. Therefore, no federal income tax provision
is required.
Dividends and Distributions: The Series declares daily dividends from net
investment income. Payment of dividends is made monthly. Distributions of net
capital gains, if any, are made annually. Dividends and distributions to
shareholders, which are determined in accordance with federal income tax
regulations and which may differ from generally accepted accounting principles,
are recorded on the ex-dividend date. Permanent book/tax differences relating to
income and gains are reclassified to paid-in capital when they arise.
Custody Fee Credits: The Fund has an arrangement with its custodian bank,
whereby uninvested cash earns credits which reduce the fees charged by the
custodian. The Series could have invested a portion of the cash utilized in
connection with the expense offset arrangements in an income producing asset if
it had not entered into such arrangements.
NOTE 2. AGREEMENTS
The Fund has a management agreement with Prudential Investments LLC ('PI').
Pursuant to this agreement, PI has responsibility for all investment advisory
services and supervises the subadvisor's performance of such services. PI has
entered into a subadvisory agreement with Prudential Investment Management, Inc.
('PIM'). The subadvisory agreement provides that PIM furnishes investment
advisory services in
Dryden Municipal Series Fund - Pennsylvania Series 19
<Page>
connection with the management of the Series. In connection therewith, PIM is
obligated to keep certain books and records of the Series. PI pays for the
services of PIM, the compensation of officers of the Series, occupancy and
certain clerical and bookkeeping costs of the Series. The Series bears all other
costs and expenses.
The management fee paid to PI is computed daily and payable monthly, at an
annual rate of .50 of 1% of the average daily net assets of the Series.
The Series has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS'), which acts as the distributor of the Series. The Series
compensated PIMS for distributing and servicing the Series' 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 PIMS. The distribution fees
are accrued daily and payable monthly. No distribution or service fees are paid
to PIMS as distributor of the Class Z shares of the Fund.
Pursuant to the Class A, B and C Plans, the Series compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, .50 of 1%
and up to 1%, of the average daily net assets of the Class A, B and C shares,
respectively. PIMS contractually agreed to limit such fees to .25 of 1% and .75
of 1% of the Class A shares and Class C shares, respectively.
PIMS has advised the Series that they have received approximately $61,000 and
$4,800 in front-end sales charges resulting from sales of Class A and Class C
shares, respectively during the year ended August 31, 2003. 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 Series that for the year ended August 31, 2003, they
received approximately $57,700 and $3,300 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PI, PIMS and PIM are indirect, wholly-owned subsidiaries of Prudential
Financial, Inc. ('Prudential').
The Series, along with other affiliated registered investment companies (the
'Funds'), is a party to a syndicated credit agreement ('SCA') with a group of
banks. For the year ended August 31, 2003, the SCA provides for a commitment of
$800 million and allows the Funds to increase the commitment to $1 billion, if
necessary. Interest on any borrowings under the SCA will be incurred at market
rates. The Funds pay a commitment fee of .08 of 1% of the unused portion of the
SCA. The commitment fee is accrued and paid quarterly and is allocated to the
Funds pro rata based on net assets. The purpose of the SCA is to serve as an
alternative source of funding for capital share
20 Visit our website at www.jennisondryden.com
<Page>
redemptions. The expiration date of the SCA was May 2, 2003. On May 2, 2003, the
SCA was renewed under the same terms and conditions ('May 2003 renewal'). The
expiration date of the May 2003 renewal is April 30, 2004. The Series did not
borrow any amounts pursuant to the SCA during the year ended August 31, 2003.
NOTE 3. OTHER TRANSACTIONS WITH AFFILIATES
Prudential Mutual Fund Services LLC ('PMFS'), an affiliate of PI and an
indirect, wholly-owned subsidiary of Prudential, serves as the Fund's transfer
agent. During the year ended August 31, 2003, the Series incurred fees of
approximately $65,100 for the services of PMFS. As of August 31, 2003,
approximately $5,300 of such fees were due to PMFS. Transfer agent fees and
expenses in the Statement of Operations include certain out-of-pocket expenses
paid to non-affiliates, where applicable.
The Series pays networking fees to affiliated and unaffiliated broker/dealers.
These networking fees are payments made to broker/dealers that clear mutual fund
transactions through a national clearing system. The Series incurred
approximately $6,300 in total networking fees of which the amount relating to
the services of Wachovia Securities, LLC ('Wachovia') and Prudential Securities,
Inc. ('PSI'), affiliates of PI, was approximately $5,300 for the year ended
August 31, 2003. Prior to July 1, 2003, PSI was an indirect, wholly-owned
subsidiary of Prudential. As of August 31, 2003, approximately $400 of such fees
were due to Wachovia. These amounts are included in transfer agent's fees and
expenses in the Statement of Operations.
NOTE 4. PORTFOLIO SECURITIES
Purchases and sales of portfolio securities of the Series, excluding short-term
investments, for the year ended August 31, 2003, were $68,888,206 and
$74,335,962 respectively.
During the year ended August 31, 2003, the Series entered into financial futures
contracts. Details of outstanding contracts at year end are as follows:
<Table>
<Caption>
VALUE AT VALUE AT UNREALIZED
NUMBER OF EXPIRATION AUGUST 31, TRADE APPRECIATION
CONTRACTS TYPE DATE 2003 DATE (DEPRECIATION)
- --------- ------------------- ----------------- ----------- ----------- ----------------
Long positions:
30 10 yr. T-Note Sept. 2003 $ 3,345,938 $ 3,342,730 $ 3,208
51 U.S. T-Bond Sept. 2003 5,477,719 5,446,288 31,431
Short position:
139 5 yr. T-Note Sept. 2003 (15,496,328) (15,413,641) (82,687)
-------
$(48,048)
-------
-------
</Table>
Dryden Municipal Series Fund - Pennsylvania Series 21
<Page>
Transactions in options written during the year ended August 31, 2003 were as
follows:
CONTRACTS PREMIUM
--------- -------
Balance as of August 31, 2002 -- $ --
Options written 13 9,302
Options terminated (13) (9,302)
--- -------
Balance as of August 31, 2003 -- $ --
--- -------
--- -------
NOTE 5. DISTRIBUTIONS AND TAX INFORMATION
In order to present undistributed net investment income or loss and accumulated
net realized gains or losses on the Statement of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in-capital in excess of par, undistributed net investment income or loss
and accumulated net realized gain or loss on investments. For the year ended
August 31, 2003, the adjustments were to decrease accumulated net realized gain
by $202,617, increase undistributed net investment income by $246,821, and
decrease paid-in capital by $44,204 primarily due to the difference in the
treatment of accreting market discount between financial and tax reporting. Net
investment income, net realized gains and net assets were not affected by this
change.
For the year ended August 31, 2003, the tax character of dividends paid, as
reflected in the Statement of Changes in Net Assets, was $6,608,102 and $345,768
tax-exempt income and long-term capital gains, respectively. For the year ended
August 31, 2002, the tax character of dividends paid $7,627,546 and $42,711
tax-exempt income and ordinary income, respectively.
As of August 31, 2003, the accumulated undistributed earnings on a tax basis was
$190,600 (includes a timing difference of $95,578 for dividends payable)
tax-exempt income, $213,692 of ordinary income and $5,126,935 long-term capital
gains. The accumulated capital gains and net investment income differs from the
amount on the Statement of Assets and Liabilities primarily due to timing
differences.
The United States federal income tax basis of the Series' investments and the
net unrealized appreciation as of August 31, 2003 were as follows:
TOTAL NET
UNREALIZED
TAX BASIS APPRECIATION DEPRECIATION APPRECIATION
- ------------------ ------------------ ------------------ ------------
$155,005,440 $5,889,319 $3,375,948 $2,513,371
22 Visit our website at www.jennisondryden.com
<Page>
The difference between book basis and tax basis is primarily attributable to the
difference in the treatment of market discount for book and tax purposes.
NOTE 6. CAPITAL
The Series offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge of up to 3%. 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 will automatically convert to Class A shares on a
quarterly basis approximately seven years after purchase. Special exchange
privileges are also available for shareholders who qualify to purchase Class A
shares at net asset value.
The Series 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>
CLASS A SHARES AMOUNT
- ------------------------------------------------------------- ---------- ------------
Year ended August 31, 2003:
Shares sold 577,472 $ 6,114,262
Shares issued in reinvestment of dividends and distributions 289,529 3,046,813
Shares reacquired (1,672,133) (17,646,674)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion (805,132) (8,485,599)
Shares issued upon conversion from Class B 568,514 6,059,699
---------- ------------
Net increase (decrease) in shares outstanding (236,618) $ (2,425,900)
---------- ------------
---------- ------------
Year ended August 31, 2002:
Shares sold 608,060 $ 6,281,237
Shares issued in reinvestment of dividends and distributions 319,533 3,301,704
Shares reacquired (1,270,028) (13,152,591)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion (342,435) (3,569,650)
Shares issued upon conversion from Class B 619,553 6,385,760
---------- ------------
Net increase (decrease) in shares outstanding 277,118 $ 2,816,110
---------- ------------
---------- ------------
<Caption>
CLASS B
- -------------------------------------------------------------
Year ended August 31, 2003:
Shares sold 659,795 $ 6,960,180
Shares issued in reinvestment of dividends and distributions 79,835 839,644
Shares reacquired (493,507) (5,191,759)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion 246,123 2,608,065
Shares issued upon conversion into Class A (568,938) (6,059,699)
---------- ------------
Net increase (decrease) in shares outstanding (322,815) $ (3,451,634)
---------- ------------
---------- ------------
</Table>
Dryden Municipal Series Fund - Pennsylvania Series 23
<Page>
<Table>
<Caption>
CLASS B SHARES AMOUNT
- ------------------------------------------------------------- ---------- ------------
Year ended August 31, 2002:
Shares sold 805,163 $ 8,331,417
Shares issued in reinvestment of dividends and distributions 90,786 937,968
Shares reacquired (376,760) (3,896,087)
---------- ------------
Net increase (decrease) in shares outstanding before
conversion 519,189 5,373,298
Shares reacquired upon conversion into Class A (619,675) (6,385,760)
---------- ------------
Net increase (decrease) in shares outstanding (100,486) $ (1,012,462)
---------- ------------
---------- ------------
<Caption>
CLASS C
- -------------------------------------------------------------
Year ended August 31, 2003:
Shares sold 53,483 $ 567,163
Shares issued in reinvestment of dividends and distributions 2,492 26,219
Shares reacquired (40,576) (430,670)
---------- ------------
Net increase (decrease) in shares outstanding 15,399 $ 162,712
---------- ------------
---------- ------------
Year ended August 31, 2002:
Shares sold 113,103 $ 1,170,970
Shares issued in reinvestment of dividends and distributions 2,252 23,285
Shares reacquired (87,106) (908,370)
---------- ------------
Net increase (decrease) in shares outstanding 28,249 $ 285,885
---------- ------------
---------- ------------
</Table>
24 Visit our website at www.jennisondryden.com
<Page>
Financial Highlights
------------------------------------------------------
AUGUST 31, 2003 ANNUAL REPORT
Dryden Municipal Series Fund
Pennsylvania Series
<Page>
Financial Highlights
<Table>
<Caption>
CLASS A
-----------------
YEAR ENDED
AUGUST 31, 2003
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 10.54
-------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .43
Net realized and unrealized gain (loss) on investment
transactions (.16)
-------
Total from investment operations .27
-------
LESS DISTRIBUTIONS
Dividends from net investment income (.43)
Distributions from net realized gains (.02)
-------
Total distributions (.45)
-------
Net asset value, end of year $ 10.36
-------
-------
TOTAL INVESTMENT RETURN(A): 2.57%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 121,771
Average net assets (000) $ 125,733
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees(c) .97%
Expenses, excluding distribution and service (12b-1) fees .72%
Net investment income 4.08%
For Class A, B and C shares:
Portfolio turnover rate 45%
</Table>
- ------------------------------
(a) Total investment return does not consider the effects of sales loads. Total
investment return is calculated assuming a purchase of shares on the first
day and a sale on the last day of each year reported and includes
reinvestment of dividends and distributions.
(b) Less than $.005 per share.
(c) The distributor of the Series contractually agreed to limit its distribution
and service (12b-1) fees to .25 of 1% on the average daily net assets of the
Class A shares.
(d) Effective September 1, 2001, the Series has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on debt securities. The effect of this change for
the year ended August 31, 2002 was to increase net investment income and
decrease net realized and unrealized gains per share by less than $0.005 and
increase the ratio of net investment income from 4.70% to 4.73%. Per share
amounts and ratios for the years ended prior to August 31, 2002 have not
been restated to reflect this change in presentation.
See Notes to Financial Statements.
26 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS A
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
2002(D) 2001 2000 1999
-----------------------------------------------------------------------------------
$ 10.52 $ 10.05 $ 10.13 $ 10.92
------- ------- ------- -------
.49 .51 .53 .53
.02 .47 (.05) (.67)
------- ------- ------- -------
.51 .98 .48 (.14)
------- ------- ------- -------
(.49) (.51) (.53) (.53)
-- --(b) (.03) (.12)
------- ------- ------- -------
(.49) (.51) (.56) (.65)
------- ------- ------- -------
$ 10.54 $ 10.52 $ 10.05 $ 10.13
------- ------- ------- -------
------- ------- ------- -------
5.03% 10.07% 4.98% (1.35)%
$126,410 $123,254 $109,068 $104,210
$123,971 $116,925 $106,181 $104,460
.96% .93% .90% .84%
.71% .68% .65% .64%
4.73% 4.97% 5.31% 5.00%
31% 35% 21% 23%
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - Pennsylvania Series 27
<Page>
Financial Highlights
Cont'd.
<Table>
<Caption>
CLASS B
-----------------
YEAR ENDED
AUGUST 31, 2003
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 10.53
------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .40
Net realized and unrealized gain (loss) on investment
transactions (.16)
------
Total from investment operations .24
------
LESS DISTRIBUTIONS
Dividends from net investment income (.40)
Distributions from net realized gains (.02)
------
Total distributions (.42)
------
Net asset value, end of year $ 10.35
------
------
TOTAL INVESTMENT RETURN(A): 2.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $36,607
Average net assets (000) $39,012
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees 1.22%
Expenses, excluding distribution and service (12b-1) fees .72%
Net investment income 3.84%
</Table>
- ------------------------------
(a) Total investment return does not consider the effects of sales loads. Total
investment return is calculated assuming a purchase of shares on the first
day and a sale on the last day of each year reported and includes
reinvestment of dividends and distributions.
(b) Less than $.005 per share.
(c) Effective September 1, 2001, the Series has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on debt securities. The effect of this change for
the year ended August 31, 2002 was to increase net investment income and
decrease net realized and unrealized gains per share by less than $0.005 and
increase the ratio of net investment income from 4.46% to 4.49%. Per share
amounts and ratios for the years ended prior to August 31, 2002 have not
been restated to reflect this change in presentation.
See Notes to Financial Statements.
28 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS B
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
2002(C) 2001 2000 1999
-----------------------------------------------------------------------------------
$ 10.52 $ 10.05 $ 10.13 $ 10.92
------ ------ ------ -------
.46 .48 .50 .50
.01 .47 (.05) (.67)
------ ------ ------ -------
.47 .95 .45 (.17)
------ ------ ------ -------
(.46) (.48) (.50) (.50)
-- --(b) (.03) (.12)
------ ------ ------ -------
(.46) (.48) (.53) (.62)
------ ------ ------ -------
$ 10.53 $ 10.52 $ 10.05 $ 10.13
------ ------ ------ -------
------ ------ ------ -------
4.68% 9.79% 4.72% (1.65)%
$ 40,653 $ 41,638 $ 54,665 $ 88,519
$ 39,674 $ 44,507 $ 68,309 $104,860
1.21% 1.18% 1.15% 1.14%
.71% .68% .65% .64%
4.49% 4.74% 5.06% 4.70%
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - Pennsylvania Series 29
<Page>
Financial Highlights
Cont'd.
<Table>
<Caption>
CLASS C
-----------------
YEAR ENDED
AUGUST 31, 2003
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 10.54
-----
INCOME FROM INVESTMENT OPERATIONS
Net investment income .38
Net realized and unrealized gain (loss) on investment
transactions (.17)
-----
Total from investment operations .21
-----
LESS DISTRIBUTIONS
Dividends from net investment income (.38)
Distributions from net realized gains (.02)
-----
Total distributions (.40)
-----
Net asset value, end of year $ 10.35
-----
-----
TOTAL INVESTMENT RETURN(A): 2.06%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $ 1,105
Average net assets (000) $ 1,119
Ratios to average net assets:
Expenses, including distribution and service (12b-1) fees(c) 1.47%
Expenses, excluding distribution and service (12b-1) fees .72%
Net investment income 3.58%
</Table>
- ------------------------------
(a) Total investment return does not consider the effects of sales loads. Total
investment return is calculated assuming a purchase of shares on the first
day and a sale on the last day of each year reported and includes
reinvestment of dividends and distributions.
(b) Less than $.005 per share.
(c) The distributor of the Series contractually agreed to limit its distribution
and service (12b-1) fees to .75 of 1% on the average daily net assets of the
Class C shares.
(d) Effective September 1, 2001, the Series has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on debt securities. The effect of this change for
the year ended August 31, 2002 was to increase net investment income and
decrease net realized and unrealized gains per share by less than $0.005 and
increase the ratio of net investment income from 4.20% to 4.23%. Per share
amounts and ratios for the years ended prior to August 31, 2002 have not
been restated to reflect this change in presentation.
See Notes to Financial Statements.
30 Visit our website at www.jennisondryden.com
<Page>
<Table>
<Caption>
CLASS C
-------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------------
2002(D) 2001 2000 1999
-----------------------------------------------------------------------------------
$10.52 $10.05 $10.13 $10.92
----- ----- ----- -----
.44 .46 .48 .47
.02 .47 (.05) (.67)
----- ----- ----- -----
.46 .93 .43 (.20)
----- ----- ----- -----
(.44) (.46) (.48) (.47)
-- --(b) (.03) (.12)
----- ----- ----- -----
(.44) (.46) (.51) (.59)
----- ----- ----- -----
$10.54 $10.52 $10.05 $10.13
----- ----- ----- -----
----- ----- ----- -----
4.42% 9.52% 4.46% (1.91)%
$963 $664 $479 $882
$885 $493 $655 $1,075
1.46% 1.43% 1.40% 1.39%
.71% .68% .65% .64%
4.23% 4.47% 4.79% 4.46%
</Table>
See Notes to Financial Statements.
Dryden Municipal Series Fund - Pennsylvania Series 31
<Page>
Report of Independent Auditors
To the Shareholders and Trustees of
Dryden Municipal Series Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dryden Municipal Series Fund
(formerly, Prudential Municipal Series Fund), Pennsylvania Series (one of the
portfolios constituting Dryden Municipal Series Fund, hereafter referred to as
the 'Fund') at August 31, 2003, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as 'financial statements') are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 2003 by
correspondence with the custodian and broker, provide a reasonable basis for our
opinion.
PricewaterhouseCoopers LLP
New York, New York
October 22, 2003
32 Visit our website at www.jennisondryden.com
<Page>
Federal Income Tax Information
(Unaudited)
We are required by the Internal Revenue Code to advise you within 60 days of the
Series' fiscal year end (August 31, 2003) as to the federal tax status of
dividends paid by the Series during such fiscal year. Accordingly, we are
advising you that in the fiscal year ended August 31, 2003, dividends paid from
net investment income of $0.43 per share for Class A shares, $0.40 per Class B
share and $0.37 per Class C share were all federally tax-exempt interest
dividends. In addition, the Series paid distributions of $0.0219 per share which
represents distributions from 18% long-term capital gains.
We wish to advise you that the corporate dividends received deduction for the
Series is zero. Only funds that invest in U.S. equity securities are entitled to
pass-through a corporate dividends received deduction.
In January 2004, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV
as to the federal tax status of the dividends and distributions received by you
in calendar year 2003.
Dryden Municipal Series Fund - Pennsylvania Series 33
<Page>
Supplemental Proxy Information
(Unaudited)
A meeting of the Fund's shareholders was held on July 17, 2003. The meeting was
held for the following purposes:
(1) To approve the election of ten (10) trustees to the Board of Trustees, as
follows:
- David E.A. Carson
- Robert E. La Blanc
- Robert F. Gunia
- Douglas H. McCorkindale
- Stephen P. Munn
- Richard A. Redeker
- Judy A. Rice
- Robin B. Smith
- Stephen Stoneburn
- Clay T. Whitehead
(2) To approve a proposal to permit the manager to enter into, or make
material changes to, subadvisory agreements without shareholder approval.
(3) To permit an amendment to the management contract between PI and
the Fund.
(4a) To approve changes to fundamental investment restrictions and policies,
relating to: fund diversification.
(4b) To approve changes to fundamental investment restrictions and policies,
relating to: issuing senior securities, borrowing money or pledging
assets.
(4c) To approve changes to fundamental investment restrictions and policies,
relating to: buying and selling real estate.
(4d) To approve changes to fundamental investment restrictions and policies,
relating to: buying and selling commodities and commodity contracts.
(4f) To approve changes to fundamental investment restrictions and policies,
relating to: making loans.
(4g) To approve changes to fundamental investment restrictions and policies,
relating to: other investment restrictions, including investing in
securities of other investment companies.
34 Visit our website at www.jennisondryden.com
<Page>
The results of the proxy solicitation on the preceding matters were:
<Table>
<Caption>
VOTES VOTES VOTES
MATTER FOR AGAINST WITHHELD ABSTENTIONS
--------------------- ------------- ---------- ---------- -----------
(1) David E.A. Carson 160,595,240 -- 1,615,802 --
Robert E. La Blanc 160,600,208 -- 1,610,834 --
Robert F. Gunia 160,644,905 -- 1,566,137 --
Douglas H.
McCorkindale 160,435,395 -- 1,775,647 --
Stephen P. Munn 160,567,619 -- 1,643,423 --
Richard A. Redeker 160,452,275 -- 1,758,767 --
Judy A. Rice 160,644,709 -- 1,566,333 --
Robin B. Smith 160,376,337 -- 1,834,705 --
Stephen Stoneburn 160,595,240 -- 1,615,802 --
Clay T. Whitehead 160,644,709 -- 1,566,333 --
(2) Permit the Manager to
enter into, or make
changes to,
Subadvisory
Agreements without
Shareholder approval 6,702,179 876,911 -- 346,238
(3) Permit an Amendment
to the Management
Contract between PI
and the Company 7,857,289 530,552 -- 387,732
(4a) Fund Diversification 7,135,767 412,999 -- 376,562
(4b) Issuing Senior
Securities,
Borrowing Money or
Pledging Assets 6,906,032 552,967 -- 466,329
(4c) Buying and Selling
Real Estate 7,058,309 494,289 -- 372,730
</Table>
Dryden Municipal Series Fund - Pennsylvania Series 35
<Page>
Supplemental Proxy Information
(Unaudited) Cont'd.
<Table>
<Caption>
VOTES VOTES VOTES
MATTER FOR AGAINST WITHHELD ABSTENTIONS
--------------------- ------------- ---------- ---------- -----------
(4d) Buying and Selling
Commodities and
Commodity Contracts 6,992,156 565,574 -- 367,598
(4f) Making Loans 6,895,557 640,222 -- 389,549
(4g) Other Investment
Restrictions 6,986,054 548,053 -- 391,221
</Table>
One or more matters in addition to the above referenced proposals, were
submitted for shareholders approval, and the shareholder meeting relating to
those matters was adjourned until August 21, 2003, and a date following the
close of the reporting period.
36 Visit our website at www.jennisondryden.com
<Page>
Management of the Fund
(Unaudited)
Information pertaining to the Trustees of the Fund is set forth below. Trustees
who are not deemed to be 'interested persons' of the Fund as defined in the 1940
Act are referred to as 'Independent Trustees.' Trustees who are deemed to be
'interested persons' of the Fund are referred to as 'Interested Trustees.' 'Fund
Complex'(D) consists of the Fund and any other investment companies managed by
PI.
INDEPENDENT TRUSTEES(2)
DAVID E.A. CARSON (69), Trustee since 2003(3)
Oversees 99 portfolios in Fund complex
Principal occupations (last 5 years): Director (January 2000 to May 2000),
Chairman (January 1999 to December 1999), Chairman and Chief Executive Officer
(January 1998 to December 1998) and President, Chairman and Chief Executive
Officer (1983-1997) of People's Bank.
Other Directorships held:(4) Director of United Illuminating and UIL Holdings
(utility company), since 1993.
ROBERT E. LA BLANC (69), Trustee since 2003(3)
Oversees 119 portfolios in Fund complex
Principal occupations (last 5 years): President (since 1981) of Robert E. La
Blanc Associates, Inc. (telecommunications); formerly General Partner at Salomon
Brothers and Vice-Chairman of Continental Telecom; Trustee of Manhattan
College.
Other Directorships held:(4) Director of Storage Technology Corporation (since
1979) (technology), Chartered Semiconductor Manufacturing, Ltd. (since 1998);
Titan Corporation (electronics) (since 1995), Computer Associates International,
Inc. (since 2002) (software company); FiberNet Telecom Group, Inc. (since 2003)
(telecom company); Director (since April 1999) of the High Yield Plus Fund,
Inc.
DOUGLAS H. MCCORKINDALE (64), Trustee since 2003(3)
Oversees 101 portfolios in Fund complex
Principal occupations (last 5 years): Chairman (since February 2001), Chief
Executive Officer (since June 2000) and President (since September 1997) of
Gannett Co. Inc. (publishing and media); formerly Vice Chairman (March 1984-May
2000) of Gannett Co., Inc.
Other Directorships held:(4) Director of Gannett Co. Inc., Director of
Continental Airlines, Inc. (since May 1993); Director of Lockheed Martin Corp.
(aerospace and defense) (since May 2001); Director of The High Yield Plus Fund,
Inc. (since 1996).
STEPHEN P. MUNN (61), Trustee since 1999(3)
Oversees 107 portfolios in Fund complex
Principal occupations (last 5 years): Chairman of the Board (since 1994) and
formerly Chief Executive Officer (1988-2001) and President of Carlisle Companies
Incorporated.
Other Directorships held:(4) Chairman of the Board (since January 1994) and
Director (since 1988) of Carlisle Companies Incorporated (manufacturer of
industrial products); Director of Gannet Co. Inc. (publishing and media).
Dryden Municipal Series Fund - Pennsylvania Series 37
<Page>
RICHARD A. REDEKER (60), Trustee since 1993(3)
Oversees 102 portfolios in Fund complex
Principal occupations (last 5 years): Management Consultant; formerly employee
of Prudential Investments (October 1996-December 1998); Director of Invesmart,
Inc. (since 2001) and Director of Penn Tank Lines, Inc. (since 1999).
Other Directorships held:(4) None.
ROBIN B. SMITH (64), Trustee since 2003(3)
Oversees 109 portfolios in Fund complex
Principal occupations (last 5 years): Chairman of the Board (since January 2003)
of Publishers Clearing House (direct marketing), formerly Chairman and Chief
Executive Officer (August 1996-January 2003) of Publishers Clearing House.
Other Directorships held:(4) Director of BellSouth Corporation (since 1992).
STEPHEN STONEBURN (60), Trustee since 2003(3)
Oversees 107 portfolios in Fund complex
Principal occupations (last 5 years): President and Chief Executive Officer
(since June 1996) of Quadrant Media Corp. (a publishing company); formerly
President (June 1995-June 1996) of Argus Integrated Media, Inc.; Senior Vice
President and Managing Director (January 1993-1995) of Cowles Business Media and
Senior Vice President of Fairchild Publications, Inc. (1975-1989).
Other Directorships held:(4) None
CLAY T. WHITEHEAD (64), Trustee since 2003(3)
Oversees 106 portfolios in Fund complex
Principal occupations (last 5 years): President (since 1983) of National
Exchange Inc. (new business development firm).
Other Directorships held:(4) Director (since 2000) of the High Yield Plus Fund,
Inc.
INTERESTED TRUSTEES(1)
JUDY A. RICE (55), President since 2003 and Trustee since 2000(3)
Oversees 109 portfolios in Fund complex
Principal occupations (last 5 years): President, Chief Executive Officer, Chief
Operating Officer and Officer-in-Charge (since 2003) of PI; Director,
Officer-in-Charge, President, Chief Executive Officer and Chief Operating
Officer (since May 2003) of American Skandia Advisory Services, Inc. and
American Skandia Investment Services, Inc.; Director, Officer-in-Charge,
President, Chief Executive Officer (since May 2003) of American Skandia Fund
Services, Inc.; formerly various positions to Senior Vice President (1992-1999)
of Prudential Securities; and various positions to Managing Director (1975-1992)
of Salomon Smith Barney; Member of Board of Governors of the Money Management
Institute.
Other Directorships held:(4) None
38 Visit our website at www.jennisondryden.com
<Page>
ROBERT F. GUNIA (56), Vice President and Trustee since 1996(3)
Oversees 189 portfolios in Fund complex
Principal occupations (last 5 years): Chief Administrative Officer (since June
1999) of PI; Executive Vice President and Treasurer (since January 1996) of PI;
President (since April 1999) of Prudential Investment Management Services LLC
(PIMS); Corporate Vice President (since September 1997) of The Prudential
Insurance Company of America (Prudential); Director, Executive Vice President
and Chief Administrative Officer (since May 2003) of American Skandia Investment
Services, Inc., American Skandia Advisory Services, Inc. and American Skandia
Fund Services, Inc.; formerly Senior Vice President (March 1987-May 1999) of
Prudential Securities.
Other Directorships held:(4) Vice President and Director (since May 1989) and
Treasurer (since 1999) of The Asia Pacific Fund, Inc.
Information pertaining to the Officers of the Trust is set forth below.
OFFICERS(2)
MARGUERITE E.H. MORRISON (47), Chief Legal Officer since 2003 and Assistant
Secretary since 2002(3)
Principal occupations (last 5 years): Vice President and Chief Legal
Officer--Mutual Funds and Unit Investment Trusts (since August 2000) of
Prudential; Senior Vice President and Secretary (since April 2003) of PI; Senior
Vice President and Secretary (since May 2003) of American Skandia Investment
Services, Inc., American Skandia Advisory Services, Inc. and American Skandia
Fund Services, Inc.; Vice President and Assistant Secretary of PIMS (since
October 2001), previously Senior Vice President and Assistant Secretary
(February 2001-April 2003) of PI, Vice President and Associate General Counsel
(December 1996-February 2001) of PI.
DEBORAH A. DOCS (45), Secretary since 1998; Assistant Secretary 1985-1998(3)
Principal occupations (last 5 years): Vice President and Corporate Counsel
(since January 2001) of Prudential; Vice President and Assistant Secretary
(since December 1996) of PI, Vice President and Assistant Secretary (since May
2003) of American Skandia Investment Services, Inc.
MARYANNE RYAN (39), Anti-Money Laundering Compliance Officer since 2002(3)
Principal occupations (last 5 years): Vice President, Prudential (since November
1998), First Vice President, Prudential Securities (March 1997-May 1998);
Anti-Money Laundering Compliance Officer (since 2003) of American Skandia
Investment Services, Inc., American Skandia Advisory Services, Inc. and American
Skandia Marketing, Inc.
GRACE C. TORRES (44), Treasurer and Principal Financial and Accounting Officer
since 1996(3)
Principal occupations (last 5 years): Senior Vice President (since January 2000)
of PI, Senior Vice President and Assistant Treasurer (since May 2003) of
American Skandia Investment Services, Inc. and American Skandia Advisory
Services, Inc.; formerly First Vice President (December 1996-January 2000) of PI
and First Vice President (March 1993-1999) of Prudential Securities.
Dryden Municipal Series Fund - Pennsylvania Series 39
<Page>
<Table>
1 'Interested' Trustee, as defined in the 1940 Act, by reason of employment with the
Manager, (Prudential Investments LLC or PI), the Subadviser (Prudential Investment
Management, Inc. or PIM) or the Distributor (Prudential Investment Management
Services LLC or PIMS).
2 Unless otherwise noted, the address of the Trustees and Officers is c/o:
Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, NJ
07102.
3 There is no set term of office for Trustees and Officers. The Independent Trustees
have adopted a retirement policy, which calls for the retirement of Trustees on
December 31 of the year in which they reach the age of 75. The table shows the
individuals length of service as Trustee and/or Officer.
4 This includes only directorships of companies requested to register, or file
reports with the SEC under the Securities and Exchange Act of 1934 (that is,
'public companies') or other investment companies registered under the 1940 Act.
D The Fund Complex consists of all investment companies managed by PI. The Funds for
which PI serves as manager include JennisonDryden Mutual Funds, Strategic Partners
Funds, American Skandia Advisor Funds, Inc., The Prudential Variable Contract
Accounts 2, 10, 11, The Target Portfolio Trust, The Prudential Series Fund, Inc.,
American Skandia Trust, and Prudential's Gibraltar Fund.
</Table>
Additional information about the Fund's Trustees is included in the Fund's
Statement of Additional Information which is available without charge, upon
request, by calling (800) 521-7466 or (732) 482-7555 (Calling from outside the
U.S.)
40 Visit our website at www.jennisondryden.com
Growth of a $10,000 Investment
(CHART)
Average Annual Total Returns (with Sales Charge) as of 8/31/03
One Year Five Years Ten Years Since Inception
Class A -0.50% 3.56% 4.56% (4.54) 6.07% (6.04)
Class B -2.60 3.74 4.53 (4.51) 6.01 (5.83)
Class C 0.07 3.44 N/A 4.78 (4.76)
Average Annual Total Returns (without Sales Charge) as of 8/31/03
One Year Five Years Ten Years Since Inception
Class A 2.57% 4.20% 4.88% (4.86) 6.31% (6.28)
Class B 2.32 3.91 4.53 (4.51) 6.01 (5.83)
Class C 2.06 3.64 N/A 4.89 (4.87)
Past performance is not indicative of future
results. Principal value and investment return
will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than
their original cost. Source: Prudential
Investments LLC and Lipper Inc. Inception
dates: Class A, 1/22/90; Class B, 4/3/87; and
Class C, 8/1/94.
The graph compares a $10,000 investment in the
Dryden Municipal Series Fund/Pennsylvania
Series (Class A shares) with a similar
investment in the Lehman Brothers Municipal
Bond Index by portraying the initial account
values at the beginning of the ten-year period
of Class A shares (August 31, 1993) and the
account values at the end of the current fiscal
year (August 31, 2003) as measured on a
quarterly basis. For purposes of the graph, and
unless otherwise indicated, it has been assumed
that (a) the maximum applicable front-end sales
charge was deducted from the initial $10,000
investment in Class A shares; (b) all recurring
fees (including management fees) were deducted;
and (c) all dividends and distributions were
reinvested. The line graph provides information
for Class A shares only. As indicated in the
tables, performance for Class B and Class C
shares will vary due to the differing charges
and expenses applicable to each share class (as
indicated in the following paragraphs). Without
a distribution and service (12b-1) fee waiver
of 0.05% for Class A shares, the returns for
Class A shares shown in the graph and in the
tables would have been lower. The returns on
investment in the graph and in the tables do
not reflect the deduction of taxes that a
shareholder would pay on fund distributions or
following the redemption of fund shares.
Visit our website at www.jennisondryden.com
The Lehman Brothers Municipal Bond Index is an
unmanaged index of over 39,000 long-term
investment-grade municipal bonds. It gives a
broad look at how long-term investment-grade
municipal bonds have performed. The Lehman
Brothers Municipal Bond Index's total returns
include the reinvestment of all dividends, but
do not include the effects of sales charges,
operating expenses of a mutual fund, or taxes.
These returns would be lower if they included
the effects of sales charges, operating
expenses, or taxes. The securities that
comprise the Lehman Brothers Municipal Bond
Index may differ substantially from the
securities in the Series. The Lehman Brothers
Municipal Bond Index is not the only index that
may be used to characterize performance of
municipal bond funds. Other indexes may portray
different comparative performance. Investors
cannot invest directly in an index.
The Series charges a maximum front-end sales
charge of 3% for Class A shares and a 12b-1 fee
of up to 0.30% annually. Class A shares may not
be subject to a front-end sales charge, but may
be subject to a 1% contingent deferred sales
charge (CDSC) for the first year. Class B
shares are subject to a declining CDSC of 5%,
4%, 3%, 2%, 1%, and 1% respectively for the
first six years after purchase and a 12b-1 fee
of 0.50% annually. Approximately seven years
after purchase, Class B shares will
automatically convert to Class A shares on a
quarterly basis. Class C shares are subject to
a front-end sales charge of 1%, a CDSC of 1%
for shares redeemed within 18 months of
purchase, and a 12b-1 fee of up to 1% annually.
Without waiver of fees and/or expense
subsidization, the Series' returns in the
tables would have been lower, as indicated in
parentheses.
Dryden Municipal Series Fund/Pennsylvania Series
Mail Telephone Website
Gateway Center Three (800) 225-1852 www.jennisondryden.com
100 Mulberry Street
Newark, NJ 07102-4077
Trustees
David E.A. Carson -- Robert F. Gunia -- Robert E. La Blanc --
Douglas H. McCorkindale -- Stephen P. Munn -- Richard A. Redeker --
Judy A. Rice -- Robin B. Smith -- Stephen D. Stoneburn --
Clay T. Whitehead
Officers
Judy A. Rice, President -- Robert F. Gunia, Vice President --
Grace C. Torres, Treasurer and Principal Financial and Accounting Officer --
Marguerite E.H. Morrison, Chief Legal Officer and Assistant Secretary --
Deborah A. Docs, Secretary -- Maryanne Ryan, Anti-Money Laundering Compliance
Officer
Manager Prudential Investments LLC Gateway Center Three
100 Mulberry Street
Newark, NJ 07102
Investment Adviser Prudential Investment Gateway Center Two
Management, Inc. 100 Mulberry Street
Newark, NJ 07102
Distributor Prudential Investment Gateway Center Three
Management Services LLC 14th Floor
100 Mulberry Street
Newark, NJ 07102
Custodian State Street Bank One Heritage Drive
and Trust Company North Quincy, MA 02171
Transfer Agent Prudential Mutual Fund PO Box 8098
Services LLC Philadelphia, PA 19101
Independent Auditors PricewaterhouseCoopers LLP 1177 Avenue of the Americas
New York, NY 10036
Legal Counsel Shearman & Sterling LLP 599 Lexington Avenue
New York, NY 10022
Dryden Municipal Series Fund/Pennsylvania Series
Share Class A B C
Nasdaq PMPAX PBPAX PPNCX
CUSIP 262468762 262468754 262468747
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY
FEDERAL GOVERNMENT AGENCY
MAY LOSE VALUE
ARE NOT A DEPOSIT OF OR GUARANTEED BY
ANY BANK OR ANY BANK AFFILIATE
JennisonDrydenMutualFunds
Dryden Municipal Series Fund/Pennsylvania Series
Share Class A B C
Nasdaq PMPAX PBPAX PPNCX
CUSIP 262468762 262468754 262468747
MF132E IFS-A084966
<Page>
Item 2 -- Code of Ethics -- See Exhibit (a)
As of the end of the period covered by this report, the registrant has
adopted a code of ethics (the "Section 406 Standards for Investment
Companies -- Ethical Standards for Principal Executive and Financial
Officers") that applies to the registrant's Principal Executive Officer
and Principal Financial Officer; the registrant's Principal Financial
Officer also serves as the Principal Accounting Officer.
The registrant hereby undertakes to provide any person, without charge,
upon request, a copy of the code of ethics. To request a copy of the
code of ethics, contact the registrant at 973-367-7521, and ask for a
copy of the Section 406 Standards for Investment Companies - Ethical
Standards for Principal Executive and Financial Officers.
Item 3 -- Audit Committee Financial Expert --
The registrant's Board has determined that Mr. Stephen Munn, member of
the Board's Audit Committee is an "audit committee financial expert,"
and that he is "independent," for purposes of this Item.
Item 4 -- Principal Accountant Fees and Services -- Not required in this
filing
Item 5 -- Reserved
Item 6 -- Reserved
Item 7 -- Disclosure of Proxy Voting Policies and Procedures for Closed-
End Management Investment Companies -- Not required in this filing
Item 8 -- Reserved
Item 9 -- Controls and Procedures
(a) It is the conclusion of the registrant's principal executive
officer and principal financial officer that the effectiveness of
the registrant's current disclosure controls and procedures (such
disclosure controls and procedures having been evaluated within 90
days of the date of this filing) provide reasonable assurance that
the information required to be disclosed by the registrant has been
recorded, processed, summarized and reported within the time period
specified in the Commission's rules and forms and that the
information required to be disclosed by the registrant has been
accumulated and communicated to the registrant's principal
executive officer and principal financial officer in order to allow
timely decisions regarding required disclosure.
(b) There have been no significant changes in the registrant's
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Item 10 -- Exhibits
(a) Code of Ethics -- Attached hereto
(b) Certifications pursuant to Sections 302 and 906 of the
Sarbanes-Oxley Act -- Attached hereto
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
(Registrant) Dryden Municipal Series Fund
By (Signature and Title)* /s/Deborah A. Docs
------------------
Deborah A. Docs
Secretary
Date October 28, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
By (Signature and Title)* /s/Judy A. Rice
---------------
Judy A. Rice
President and Principal Executive Officer
Date October 28, 2003
By (Signature and Title)* /s/Grace C. Torres
------------------
Grace C. Torres
Treasurer and Principal Financial Officer
Date October 28, 2003
* Print the name and title of each signing officer under his or her
signature.