<PAGE>
As filed with the Securities and Exchange Commission on July 2, 1999
Securities Act Registration No. 33-31603
Investment Company Act Registration No. 811-5951
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 12 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 13 /X/
(Check appropriate box or boxes)
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PRUDENTIAL SPECIAL MONEY MARKET FUND, INC.
(Exact name of registrant as specified in charter)
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (973) 367-3028
ROBERT C. ROSSELOT, ESQ.
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this Registration Statement
It is proposed that this filing will become effective
(check appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/X/ 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / This post-effective amendment designates a new
effective date for a previously filed post-effective
amendment
<TABLE>
<S> <C>
Title of Securities Being Registered................. Shares of common stock, $.001 par value
per share
</TABLE>
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<PAGE>
FUND TYPE:
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Money market
INVESTMENT OBJECTIVE:
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High current income
consistent with the preservation
of principal and liquidity
[ICON]
PRUDENTIAL SPECIAL MONEY
MARKET FUND, INC.
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MONEY MARKET SERIES
PROSPECTUS: SEPTEMBER , 1999
As with all mutual funds, the Securities and
Exchange Commission has not approved
or disapproved the Fund's shares, nor has the SEC
determined that this prospectus is complete or
accurate. It is a criminal offense to state
otherwise. [LOGO] PRUDENTIAL
INVESTMENTS
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
1 RISK/RETURN SUMMARY
1 Investment Objective and Principal Strategies
1 Principal Risks
2 Evaluating Performance
3 Fees and Expenses
5 HOW THE FUND INVESTS
5 Investment Objective and Policies
6 Other Investments
7 Additional Strategies
8 Investment Risks
10 HOW THE FUND IS MANAGED
10 Board of Directors
10 Manager
10 Investment Adviser
10 Distributor
11 Year 2000 Readiness Disclosure
12 FUND DISTRIBUTIONS AND TAX ISSUES
12 Distributions
12 Tax Issues
14 HOW TO BUY, SELL AND EXCHANGE SHARES OF THE FUND
14 How to Buy Shares
16 How to Sell Your Shares
18 How to Exchange Your Shares
19 FINANCIAL HIGHLIGHTS
20 THE PRUDENTIAL MUTUAL FUND FAMILY
FOR MORE INFORMATION (Back Cover)
</TABLE>
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PRUDENTIAL SPECIAL MONEY MARKET FUND, INC. [LOGO] (800) 225-1852
<PAGE>
RISK/RETURN SUMMARY
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This section highlights key information about the PRUDENTIAL SPECIAL MONEY
MARKET FUND, INC.--MONEY MARKET SERIES, which we refer to as "the Fund."
Additional information follows this summary.
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is HIGH CURRENT INCOME CONSISTENT WITH THE PRESERVATION
OF PRINCIPAL AND LIQUIDITY. To achieve this objective, we invest primarily in
dollar-denominated commercial paper, asset-backed securities, obligations of
financial institutions, funding agreements, securities with demand features and
other high-quality money market instruments with remaining maturities of 13
months or less. Some of the money market instruments we may purchase are issued
by foreign companies and banks. While we make every effort to achieve our
investment objective and maintain a net asset value of $1 per share, it is
possible to lose money by investing in the Fund. To date, the Fund's net asset
value has never deviated from $1 per share.
PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. The money market
securities in which the Fund invests are generally subject to the risk that the
issuer of a particular security may be unable to make principal and interest
payments when they are due. There is also the risk that the securities could
lose value because interest rates change or investors lose confidence in the
ability of issuers in general to pay back their debt. With respect to the Fund's
investments in asset-backed securities, there is a risk of prepayment, which
means that if the underlying obligations are repaid before they are due, the
security will discontinue paying an attractive rate of income. The Fund's
investments in foreign securities involve additional risks. For example, foreign
banks and companies generally are not subject to regulatory requirements
comparable to those applicable to U.S. banks and companies. In addition,
political developments and changes in currency rates may adversely affect the
value of the Fund's foreign securities. In all
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MONEY MARKET FUNDS
Money market funds--which hold high-quality short-term debt obligations--
provide investors with a lower risk, highly liquid investment option. These
funds attempt to maintain a net asset value of $1 per share, although there can
be no guarantee that they will always be able to do so.
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1
<PAGE>
RISK/RETURN SUMMARY
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cases, however, we invest only in U.S. dollar-denominated securities. Although
investments in mutual funds involve risk, investing in money market portfolios
like the Fund is generally less risky than investing in other types of funds.
This is because the Fund invests only in high-quality securities with remaining
maturities of 13 months or less and limits the average maturity of the portfolio
to 90 days or less. To satisfy the average maturity and maximum maturity
requirements, securities with demand features are treated as maturing on the
date that the Fund can demand repayment of the security.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
EVALUATING PERFORMANCE
A number of factors--including risk--affect how the Fund performs. The following
bar chart shows the Fund's performance for each full calendar year of operation.
The tables compare the Fund's average annual returns and yield for the periods
indicated with those of a group of similar mutual funds. They demonstrate the
risk of investing in the Fund and how returns can change. Past performance does
not mean that the Fund will achieve similar results in the future. For current
yield information, you can call us at
(800) 225-1852.
ANNUAL RETURNS(1) (AS OF 12/31/98)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
BEST QUARTER: % (quarter of)
WORST QUARTER: % (quarter of)
</TABLE>
1 THE FUND'S RETURNS ARE AFTER DEDUCTION OF EXPENSES. THE TOTAL RETURN OF THE
FUND'S SHARES FROM 1-1-99 TO 6-30-99 WAS %.
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2 PRUDENTIAL SPECIAL MONEY MARKET FUND, INC. [LOGO] (800) 225-1852
<PAGE>
RISK/RETURN SUMMARY
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AVERAGE ANNUAL RETURNS(1) (AS OF 12/31/98)
<TABLE>
<CAPTION>
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1 YR 5 YR SINCE INCEPTION
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<S> <C> <C> <C>
Fund Shares(1) % % % (since 1-22-90)
Lipper Average(2) % % N/A
</TABLE>
7-DAY YIELD(1) (AS OF 12/31/98)
<TABLE>
<S> <C> <C> <C>
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Fund Shares %
IBC Average(3) %
</TABLE>
1 THE FUND'S RETURNS AND YIELD ARE AFTER DEDUCTION OF EXPENSES.
2 THE LIPPER FUNDS AVERAGE IS BASED UPON THE AVERAGE RETURN OF ALL MUTUAL
FUNDS IN THE U.S. TAXABLE MONEY MARKET FUNDS CATEGORY.
3 THE IBC AVERAGE IS BASED UPON THE AVERAGE YIELD OF ALL MUTUAL FUNDS IN THE
INTERNATIONAL BUSINESS COMMUNICATIONS FINANCIAL DATA ALL TAXABLE MONEY
MARKET FUND CATEGORY.
FEES AND EXPENSES
These tables show the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<S> <C>
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Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) None
Maximum deferred sales charge (load)
(as a percentage of the lower of original
purchase price or sale proceeds) 5%(1)
Maximum sales charge (load) imposed on
reinvested dividends and other distributions None
Redemption fees None
Exchange fee None
</TABLE>
1 SHARES OF THE FUND ARE SOLD WITHOUT ANY SALES CHARGE. SHAREHOLDERS WHO
EXCHANGE INTO THE FUND, HOWEVER, MAY BE SUBJECT TO A CONTINGENT DEFERRED
SALES CHARGE (CDSC) IMPOSED BY THE ORIGINAL FUND UPON THEIR REDEMPTION OF
FUND SHARES DEPENDING ON THE DATE OF PURCHASE OF SHARES OF THE ORIGINAL
FUND AND THE CLASS OF SHARES PURCHASED. SEE "HOW TO BUY, SELL AND EXCHANGE
SHARES OF THE FUND-- HOW TO SELL YOUR SHARES." THE CDSC IS BASED ON THE
PERIOD SHARES OF THE ORIGINAL FUND WERE HELD CALCULATED WITHOUT REGARD TO
THE PERIOD DURING WHICH SHARES OF THE FUND ARE HELD AND IS GENERALLY
CALCULATED WITH RESPECT TO CLASS B SHARES AT THE FOLLOWING RATES: 5% DURING
THE FIRST YEAR, DECREASING BY 1% ANNUALLY TO 1% IN THE FIFTH AND SIXTH
YEARS AND 0% IN THE SEVENTH YEAR AND THEREAFTER. CLASS C SHARES ARE
GENERALLY SUBJECT TO A 1% CDSC FOR EIGHTEEN MONTHS AFTER PURCHASE (ONE YEAR
FOR CLASS C SHARES PURCHASED BEFORE NOVEMBER 2, 1998). INVESTORS ARE
REFERRED TO THE PROSPECTUS OF THE ORIGINAL FUND FOR A DESCRIPTION OF THE
APPLICABLE CDSC.
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3
<PAGE>
RISK/RETURN SUMMARY
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ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
<TABLE>
<S> <C>
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Management fees .50%
+ Distribution and service (12b-1) fees None
+ Other expenses %
= TOTAL ANNUAL FUND OPERATING EXPENSES %
</TABLE>
EXAMPLE(1)
This example will help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
<TABLE>
<CAPTION>
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1 YR 3 YRS 5 YRS 10 YRS
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<S> <C> <C> <C> <C>
Fund shares $ $ $ $
</TABLE>
You would pay the following expenses on the same investment if you did not
sell your shares:
<TABLE>
<CAPTION>
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1 YR 3 YRS 5 YRS 10 YRS
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<S> <C> <C> <C> <C>
Fund shares $ $ $ $
</TABLE>
1 SHAREHOLDERS WHO EXCHANGE CLASS B OR CLASS C SHARES INTO THE FUND ARE
GENERALLY SUBJECT TO A CDSC IMPOSED BY THE ORIGINAL FUND UPON THEIR
REDEMPTION OF FUND SHARES DEPENDING ON THE DATE OF PURCHASE OF SHARES OF
THE ORIGINAL FUND. THE EXAMPLE TAKES INTO ACCOUNT THE DEFERRED SALES LOAD
GENERALLY APPLICABLE TO CLASS B SHARES. SEE "HOW TO BUY, SELL AND EXCHANGE
SHARES OF THE FUND-- HOW TO SELL YOUR SHARES."
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4 PRUDENTIAL SPECIAL MONEY MARKET FUND, INC. [LOGO] (800) 225-1852
<PAGE>
HOW THE FUND INVESTS
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INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is HIGH CURRENT INCOME CONSISTENT WITH THE
PRESERVATION OF PRINCIPAL AND LIQUIDITY. While we make every effort to achieve
our objective, we can't guarantee success.
The Fund invests in high-quality money market instruments to try to provide
investors with current income while maintaining a stable net asset value of $1
per share. We manage the Fund to comply with specific rules designed for money
market mutual funds. We will purchase obligations such as commercial paper,
asset-backed securities, certificates of deposit, time deposits of banks,
bankers' acceptances, bank notes, funding agreements and other obligations of
both banks and corporations. These obligations must be rated in one of the two
highest rating categories by at least two nationally recognized statistical
rating organizations (NRSROs), such as Moody's Investors Service, Inc. (rated at
least Aa or Prime-2), Standard & Poor's Ratings Group (rated at least AA or A-2)
and Fitch IBCA (rated at least F2) or, if unrated, of comparable quality. We may
also purchase securities of the U.S. Government and its agencies. There is no
limitation as to the amount of assets we can invest in the securities of foreign
companies and banks. All securities that we purchase will be denominated in U.S.
dollars.
COMMERCIAL PAPER is short-term debt obligations of banks, corporations and
other borrowers. The obligations are usually issued by financially strong
businesses and often include a line of credit to protect purchasers of the
obligations. An ASSET-BACKED SECURITY is a loan or note that pays interest based
upon the cash flow of a pool of assets, such as mortgages, loans and credit card
receivables. CERTIFICATES OF DEPOSIT, TIME DEPOSITS, BANKERS' ACCEPTANCES and
BANK NOTES are obligations issued by or through a bank. These instruments depend
upon the strength of the bank involved in the borrowing to give investors
comfort that the borrowing will be repaid as promised. FUNDING AGREEMENTS are
contracts issued by insurance companies that guarantee a return of principal,
plus some amount of interest. When purchased by money market funds, funding
agreements will typically be short-term and provide an adjustable rate of
interest.
DEBT OBLIGATIONS in general, including those listed above and any others
that we may purchase, are basically written promises to repay a debt. Among the
various types of debt securities we may purchase, the terms of repayment may
vary, as may the commitment of other parties to
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5
<PAGE>
HOW THE FUND INVESTS
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honor the obligations of the issuer of the security. We may purchase securities
that include DEMAND FEATURES, which allow us to demand repayment of a debt
obligation before the obligation would otherwise be due. This means that we can
purchase longer-term securities because of the expectation that we can demand
repayment of the obligation at an agreed-upon price within a relatively short
period of time. This procedure follows the rules applicable to money market
funds.
Any of the money market instruments that the Fund may purchase may be
accompanied by the right to resell the instrument prior to the instrument's
maturity. In addition, we may separately purchase rights to resell these
instruments. These rights are referred to as "PUTS." The purchase of instruments
with puts or puts standing alone allows the Fund to sell the security when the
investment adviser believes it is appropriate to do so to honor redemption
requests or to buy more attractive securities.
The securities that we may purchase may change over time as new types of
money market instruments are developed. We will purchase these new instruments,
however, only if their characteristics and features follow the rules governing
the operation of money market funds.
For more information about this Fund and its investments, see "Investment
Risks" and the Statement of Additional Information, "Descriptions of the Fund,
its Investments and Risks." The Statement of Additional Information--which we
refer to as the SAI--contains additional information about the Fund. To obtain a
copy, see the back cover of this prospectus.
The Fund's investment objective is a fundamental policy that cannot be
changed without shareholder approval. The Board of Directors of the Fund can
change investment policies that are not fundamental.
OTHER INVESTMENTS
In addition to the principal strategies discussed above, we may also use the
following investments to increase the Fund's returns or protect its assets if
market conditions warrant.
The Fund may invest in DEBT OBLIGATIONS ISSUED BY THE U.S. TREASURY.
Treasury securities have varying interest rates and maturities, but they are all
backed by the full faith and credit of the U.S. Government.
Treasury debt obligations are sometimes "stripped" into their component
parts: the Treasury's obligation to make periodic interest payments and
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6 PRUDENTIAL SPECIAL MONEY MARKET FUND, INC. [LOGO] (800) 225-1852
<PAGE>
HOW THE FUND INVESTS
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its obligation to repay the amount borrowed. These STRIPPED SECURITIES are sold
to investors separately. Stripped securities do not make periodic interest
payments. They are usually sold at a discount and then redeemed for their face
value on their maturity dates. These securities increase in value when interest
rates fall and lose value when interest rates rise. However, the value of
stripped securities generally fluctuates more in response to interest rate
movements than the value of traditional bonds. The Fund may try to earn money by
buying stripped securities at a discount and either selling them after they
increase in value or holding them until they mature.
The Fund may also invest in other DEBT OBLIGATIONS ISSUED OR GUARANTEED BY
THE U.S. GOVERNMENT and government-related entities. Some of these debt
securities are backed by the full faith and credit of the U.S. Government, like
obligations of the Government National Mortgage Association (GNMA or "Ginnie
Mae"). Debt securities issued by other government entities, like obligations of
the Federal National Mortgage Association (FNMA or "Fannie Mae") and the Student
Loan Marketing Association (SLMA or "Sallie Mae"), are not backed by the full
faith and credit of the U.S. Government. However, these issuers have the right
to borrow from the U.S. Treasury to meet their obligations. In contrast, the
debt securities of other issuers, like the Farm Credit System, depend entirely
upon their own resources to repay their debt.
The Fund may invest up to 10% of its total assets in shares of OTHER
INVESTMENT COMPANIES. Such investment can result in the duplication of
management and advisory fees.
The Fund may also use REPURCHASE AGREEMENTS, where a party agrees to sell a
security to the Fund and then repurchase it at an agreed-upon price at a stated
time. These transactions constitute short-term cash loans by the Fund to
financial institutions. This creates a fixed return for the Fund.
ADDITIONAL STRATEGIES
The Fund may purchase money market obligations on a "WHEN-ISSUED" or
"DELAYED-DELIVERY" basis. When the Fund makes this type of purchase, the price
and interest rate are fixed at the time of purchase, but delivery and payment
for the obligations take place at a later time. The Fund does not earn interest
income until the date the obligations are delivered.
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7
<PAGE>
HOW THE FUND INVESTS
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The Fund may purchase FLOATING RATE and VARIABLE RATE securities. These
securities pay interest at rates that change periodically to reflect changes in
market interest rates. Because these securities adjust the interest they pay,
they may be beneficial when interest rates are rising because of the additional
return the Fund will receive, and they may be detrimental when interest rates
are falling because of the reduction in interest payments to the Fund.
The Fund intends to purchase investment securities jointly with certain
other mutual funds. Our ability to engage in joint investment is subject to
conditions imposed by an order of the Securities and Exchange Commission. Joint
investment can allow the Fund to achieve better investment performance because
of reduced transaction costs and greater investment leverage.
The Fund also follows certain policies when it BORROWS MONEY (the Fund can
borrow up to 20% of the value of its total assets); LENDS ITS SECURITIES to
others (the Fund may lend up to 10% of its total assets); and holds ILLIQUID
SECURITIES (the Fund may hold up to 10% of its net assets in illiquid
securities, including securities with legal or contractual restrictions, those
without a readily available market, privately placed commercial paper and
repurchase agreements with maturities longer than seven days). The Fund is
subject to certain investment restrictions that are fundamental policies, which
means they cannot be changed without shareholder approval. For more information
about these restrictions, see the SAI.
INVESTMENT RISKS
As noted, all investments involve risk, and investing in the Fund is no
exception.
The Fund's investments in money market instruments involve both CREDIT
RISK--the possibility that the issuer of a particular security will default, and
MARKET RISK--the risk that an instrument will lose value because interest rates
change or investors lose confidence in the ability of issuers in general to pay
back their debt. To limit these risks, we invest only in high-quality securities
with remaining maturities of no more than 13 months.
Foreign securities (that is, securities of non-U.S. based issuers) and
foreign markets involve additional risk. Foreign laws and accounting standards
typically are not as strict as they are in the U.S. Foreign fixed-
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8 PRUDENTIAL SPECIAL MONEY MARKET FUND, INC. [LOGO] (800) 225-1852
<PAGE>
HOW THE FUND INVESTS
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income and currency markets may be less stable than U.S. markets. Changes in the
exchange rates of foreign currencies can affect the value of foreign assets.
There is a risk that foreign companies and governments, just as is the case in
the U.S., will not be prepared to handle issues that will arise when we reach
the year 2000 if their computer systems cannot differentiate the year 2000 from
the year 1900.
This chart outlines the key risks and potential rewards of the principal
strategies and certain other investments of the Fund. See, too, "Description of
the Fund, its Investments and Risks" in the SAI.
INVESTMENT TYPE
<TABLE>
<CAPTION>
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% OF FUND'S TOTAL ASSETS RISKS POTENTIAL REWARDS
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<S> <C> <C>
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HIGH-QUALITY MONEY -- Credit risk--the risk -- Regular interest
MARKET OBLIGATIONS that default of an income
OF ALL TYPES issuer would leave -- May be more secure
the Fund with unpaid than stock and
UP TO 100% interest or equity securities
principal since companies must
-- Market risk--the risk pay their debts
that bonds and other before they pay
debt instruments may dividends
lose value because
interest rates
change or there is a
lack of confidence
in a group of
borrowers or an
industry
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MONEY MARKET -- Foreign markets, -- Investors may realize
OBLIGATIONS OF economies and higher returns based
FOREIGN ISSUERS political systems upon higher interest
(DOLLAR-DENOMINATED) may not be as stable rates paid on
as in the U.S. foreign investments
UP TO 100% -- Differences in -- Increased
foreign laws, diversification by
accounting expanding the
standards, public allowable choices of
information and high-quality debt
custody and securities
settlement practices
-- Year 2000 conversion
may be more of a
problem for some
foreign issuers
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ILLIQUID SECURITIES -- May be difficult to -- May offer a more
value precisely attractive yield
UP TO 10% OF NET -- May be difficult to than more widely
ASSETS sell at the time or traded securities
price desired
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</TABLE>
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9
<PAGE>
HOW THE FUND IS MANAGED
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BOARD OF DIRECTORS
The Board of Directors oversees the actions of the Manager, investment adviser
and Distributor and decides on general policies. The Board also oversees the
Fund's officers who conduct and supervise the daily business operations of the
Fund.
MANAGER
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM)
GATEWAY CENTER THREE, 100 MULBERRY STREET
NEWARK, NJ 07102-4077
Under a management agreement with the Fund, PIFM manages the Fund's
investment operations and administers its business affairs. For the fiscal year
ended June 30, 1999, the Fund paid PIFM management fees of .50% of the Fund's
average net assets.
As of June 30, 1999, PIFM served as the Manager to all of the Prudential
Mutual Funds, and as Manager or administrator to closed-end investment
companies, with aggregate assets of approximately $ billion.
INVESTMENT ADVISER
The Prudential Investment Corporation, called Prudential Investments, is the
Fund's investment adviser. Its address is Prudential Plaza, 751 Broad Street,
Newark, NJ 07102. PIFM has responsibility for all investment advisory services,
supervises Prudential Investments and reimburses Prudential Investments for its
reasonable costs and expenses.
Prudential Investments Fixed Income Group is organized into teams that
specialize by sector. The Fixed Income Investment Policy Committee, which is
comprised of senior investment staff from each sector team, provides guidance to
the teams regarding duration risk, asset allocations and general risk
parameters. Portfolio managers contribute bottom up security selection within
those guidelines.
DISTRIBUTOR
Prudential Investment Management Services LLC (PIMS) distributes the Fund's
shares under a Distribution Agreement with the Fund.
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10 PRUDENTIAL SPECIAL MONEY MARKET FUND, INC. [LOGO] (800) 225-1852
<PAGE>
HOW THE FUND IS MANAGED
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YEAR 2000 READINESS DISCLOSURE
The services provided to the Fund and the shareholders by the Manager, the
Distributor, the Transfer Agent and the Custodian depend on the smooth
functioning of their computer systems and those of outside service providers.
Many computer software systems in use today cannot distinguish the year 2000
from the year 1900 because of the way dates are encoded and calculated. Such
event could have a negative impact on handling securities trades, payments of
interest and dividends, pricing and account services. Although, at this time,
there can be no assurance that there will be no adverse impact on the Fund, the
Manager, the Distributor, the Transfer Agent and the Custodian have advised the
Fund that they have been actively working on necessary changes to their computer
systems to prepare for the year 2000. The Fund and its Board receive, and have
received since early 1998, satisfactory quarterly reports from the principal
service providers as to their preparations for year 2000 readiness, although
there can be no assurance that the service providers (or other securities market
participants) will successfully complete the necessary changes in a timely
manner. Moreover, the Fund at this time has not considered retaining alternative
service providers or directly undertaken efforts to achieve year 2000 readiness,
the latter of which would involve substantial expenses without an assurance of
success.
Additionally, issuers of securities generally as well as those purchased by
the Fund may confront year 2000 compliance issues which, if material and not
resolved, could have an adverse impact on securities markets and/or a specific
issuer's performance and could result in a decline in the value of the
securities held by the Fund.
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11
<PAGE>
FUND DISTRIBUTIONS
AND TAX ISSUES
- -------------------------------------
Investors who buy shares of the Fund should be aware of some important tax
issues. For example, the Fund distributes DIVIDENDS of ordinary income and any
realized net CAPITAL GAINS to shareholders. These distributions are subject to
taxes, unless you hold your shares in a 401(k) plan, an Individual Retirement
Account (IRA), or some other qualified tax-deferred plan or account.
The following briefly discusses some of the important federal tax issues you
should be aware of, but is not meant to be tax advice. For tax advice, please
speak with your tax adviser.
DISTRIBUTIONS
The Fund distributes DIVIDENDS of any net investment income to shareholders
every month. The dividends you receive from the Fund will be taxed as ORDINARY
INCOME, whether or not they are reinvested in the Fund.
Although the Fund is not likely to realize capital gains because of the
types of securities we purchase, any realized net CAPITAL GAINS will be paid to
shareholders (typically once a year). Capital gains are generated when the Fund
sells its assets for a profit.
For your convenience, Fund distributions of dividends and capital gains are
automatically reinvested in the Fund. If you ask us to pay the distributions in
cash, we will send you a check instead of purchasing more shares of the Fund.
Either way, the distributions are subject to taxes, unless your shares are held
in a qualified tax-deferred plan or account. For more information about
automatic reinvestment and other shareholder services, see "How to Buy, Sell and
Exchange Shares of the Fund--How to Buy Shares" at Step 3: Additional
Shareholder Services.
TAX ISSUES
FORM 1099
Every year, you will receive a Form 1099, which reports the amount of dividends
and capital gains we distributed to you during the prior year. If you own shares
of the Fund as part of a qualified tax-deferred plan or account, your taxes are
deferred, so you will not receive a Form 1099. However, you will receive a Form
1099 when you take any distributions from your qualified tax-deferred plan or
account.
Fund distributions are generally taxable to you in the year they are
received, except when we declare certain dividends in December of a
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12 PRUDENTIAL SPECIAL MONEY MARKET FUND, INC. [LOGO] (800) 225-1852
<PAGE>
FUND DISTRIBUTIONS
AND TAX ISSUES
- ------------------------------------------------
calendar year and actually pay them in January of the following year. In such
cases, the dividends are treated as if they were paid on December 31 of the
prior year.
WITHHOLDING TAXES
If federal tax law requires you to provide the Fund with your tax identification
number and certifications as to your tax status, and you fail to do so, or if
you are otherwise subject to back-up withholding, we will withhold and pay to
the U.S. Treasury 31% of your distributions. Dividends of net investment income
and short-term capital gains paid to a nonresident foreign shareholder generally
will be subject to a U.S. withholding tax of 30%. This rate may be lower,
depending on any tax treaty the U.S. may have with the shareholder's country.
- --------------------------------------------------------------------------------
13
<PAGE>
HOW TO BUY, SELL AND
EXCHANGE SHARES OF THE FUND
- -------------------------------------
HOW TO BUY SHARES
STEP 1: OPEN AN ACCOUNT
If you don't have an account with us or a securities firm that is permitted to
buy or sell shares of the Fund for you, call Prudential Mutual Fund Services LLC
(PMFS) at (800) 225-1852 or contact:
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: INVESTMENT SERVICES
P.O. BOX 15020
NEW BRUNSWICK, NJ 08906-5020
To purchase by wire, call the number above to obtain an application. After
PMFS receives your completed application, you will receive an account number.
For additional information about purchasing shares of the Fund, see the back
cover page of this prospectus. We have the right to reject any purchase order
(including an exchange into the Fund) or suspend or modify the Fund's sale of
its shares.
Shares of the Fund may be purchased:
-- through the exchange of Class B and Class C shares of the Prudential
Mutual Funds without the imposition of a CDSC at the time of the
exchange (minimum initial investment of $1,000 and a minimum
subsequent investment of $100)
-- through the exchange of certain Prudential money market funds
acquired by an investor prior to January 22, 1990 in exchange for
shares of a Prudential Mutual Fund subject to a CDSC (minimum initial
investment of $1,000 with no minimum subsequent investment)
-- directly by investors (minimum initial investment of $1,000,000 with
no minimum subsequent investment) or
-- by certain retirement and employee savings plans with the proceeds
from the sale of shares of The Target Portfolio Trust (no minimum
initial or subsequent investment)
STEP 2: UNDERSTANDING THE PRICE YOU'LL PAY
When you invest in a mutual fund, you buy shares of the Fund. Shares of a money
market mutual fund, like the Fund, are priced differently than shares of common
stock and other securities.
- -------------------------------------------------------------------
14 PRUDENTIAL SPECIAL MONEY MARKET FUND, INC. [LOGO] (800) 225-1852
<PAGE>
HOW TO BUY, SELL AND
EXCHANGE SHARES OF THE FUND
- ------------------------------------------------
The price you pay for each share of the Fund is based on the share value.
The share value of a mutual fund--known as the NET ASSET VALUE or NAV--is
determined by a simple calculation: it's the total value of the Fund (assets
minus liabilities) divided by the total number of shares outstanding. In
determining NAV, the Fund values its securities using the amortized cost method.
The Fund seeks to maintain a NAV of $1 at all times. Your broker may charge you
a separate or additional fee for purchases of shares.
We determine the NAV of our shares once each business day at 4:30 p.m. New
York Time on days that the New York Stock Exchange is open for trading. We do
not determine NAV on days when we have not received any orders to purchase, sell
or exchange Fund shares, or when changes in the value of the Fund's portfolio do
not affect the NAV.
STEP 3: ADDITIONAL SHAREHOLDER SERVICES
As a Fund shareholder, you can take advantage of the following services and
privileges:
AUTOMATIC REINVESTMENT. As we explained in the Fund Distributions and Tax Issues
section, the Fund pays out--or distributes--its net investment income and
capital gains to all shareholders. For your convenience, we will automatically
reinvest your distributions in the Fund at NAV. If you want your distributions
paid in cash, you can indicate this preference on your application or notify the
Transfer Agent in writing (at the address below) at least five business days
before the date we determine who receives dividends.
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTENTION: ACCOUNT MAINTENANCE
P.O. BOX 15015
NEW BRUNSWICK, NJ 08906-5015
REPORTS TO SHAREHOLDERS. Every year we will send you an annual report (along
with an updated prospectus) and a semi-annual report, which contain important
financial information about the Fund. To reduce Fund expenses, we will send one
annual shareholder report, one semi-annual shareholder report and one annual
prospectus per household, unless you
- --------------------------------------------------------------------------------
15
<PAGE>
HOW TO BUY, SELL AND
EXCHANGE SHARES OF THE FUND
- ------------------------------------------------
instruct us or your broker otherwise.
HOW TO SELL YOUR SHARES
You can sell your shares of the Fund for cash (in the form of a check, by wire
or by electronic deposit to your bank account) at any time, subject to certain
restrictions.
When you sell shares of the Fund--also known as redeeming shares-- the price
you will receive will generally be the NAV next determined after the Transfer
Agent, the Distributor or your broker receives your order to sell. If you
acquired your shares of the Fund through the exchange of shares of other
Prudential Mutual Funds, however, the proceeds from the sale of shares of the
Fund will be reduced by the amount of any applicable Contingent Deferred Sales
Charge (CDSC) imposed by the other Prudential Mutual Fund. See "Contingent
Deferred Sales Charge (CDSC)" below. If your broker holds your shares, he must
receive your order to sell by 4:30 p.m. New York Time to process the sale on
that day. Otherwise contact:
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: REDEMPTION SERVICES
P.O. BOX 15010
NEW BRUNSWICK, NJ 08906-5010
Generally, we will pay you for the shares that you sell within seven days
after the Transfer Agent, the Distributor or your broker receives your sell
order. If you hold shares through a broker, payment will be credited to your
account. If you are selling shares you recently purchased with a check, we may
delay payment of your proceeds until your check clears, which can take up to 10
days from the purchase date. You can avoid delay if you purchase shares by wire,
certified check or cashier's check. Your broker may charge you a separate or
additional fee for sales of shares.
RESTRICTIONS ON SALES
There are certain times when you may not be able to sell shares of the Fund, or
when we may delay paying you the proceeds from a sale. This may happen during
unusual market conditions or emergencies when the Fund can't determine the value
of its assets or sell its holdings. For more information, see the SAI, "Purchase
and Redemption of Fund Shares--Sale
- -------------------------------------------------------------------
16 PRUDENTIAL SPECIAL MONEY MARKET FUND, INC. [LOGO] (800) 225-1852
<PAGE>
HOW TO BUY, SELL AND
EXCHANGE SHARES OF THE FUND
- ------------------------------------------------
of Shares."
If you are selling more than $100,000 of shares, you want the check sent to
someone or some place that is not in our records, or you are a business or
trust, and if you hold your shares directly with the Transfer Agent, you will
have to have the signature on your sell order guaranteed by an "eligible
guarantor institution." An "eligible guarantor institution" includes any bank,
broker, dealer or credit union. For more information, see the SAI, "Purchase and
Redemption of Fund Shares--Sale of Shares--Signature Guarantee."
In addition, we may withhold wiring redemption proceeds if the Fund's
investment adviser determines that the Fund could be adversely affected by
making immediate payment, and we may take up to seven days to wire redemption
proceeds.
CONTINGENT DEFERRED SALES CHARGE (CDSC)
Shares of the Fund generally may be sold without any sales charge. If you
exchange into the Fund from another Prudential Mutual Fund, however, you will be
subject to any applicable CDSC imposed by the original fund when you sell your
shares of the Fund. The amount of the CDSC imposed on your sale of shares of the
Fund will depend on the date you purchased the shares of the original fund,
without regard to the time the shares were held in the Fund. You should read the
prospectus of the original fund for a description of the applicable CDSC. You
can obtain copies of prospectuses of the Prudential Mutual Funds by calling
(800) 225-1852.
REDEMPTION IN KIND
If the sales of Fund shares you make during any 90-day period reach the lesser
of $250,000 or 1% of the value of the Fund's net assets, we can then give you
securities from the Fund's portfolio instead of cash. If you want to sell the
securities for cash, you would have to pay the costs charged by a broker.
SMALL ACCOUNTS
If you make a sale that reduces your account value to less than $500, we may
sell the rest of your shares (without charging any CDSC) and close your account.
We would do this to minimize the Fund's expenses paid by other shareholders. We
will give you 60 days' notice, during which time you
- --------------------------------------------------------------------------------
17
<PAGE>
HOW TO BUY, SELL AND
EXCHANGE SHARES OF THE FUND
- ------------------------------------------------
can purchase additional shares to avoid this action. This involuntary sale does
not apply to shareholders who own their shares as part of a 401(k) plan, an IRA,
or some other tax-deferred plan or account.
90-DAY REPURCHASE PRIVILEGE
After you redeem your shares, you have a 90-day period during which you may
reinvest any of the redemption proceeds in shares of the same Fund without
paying an initial sales charge. Also, if you paid a CDSC when you redeemed your
shares, we will credit your new account with the appropriate number of shares to
reflect the amount of the CDSC you paid. In order to take advantage of this
one-time privilege, you must notify the Transfer Agent or your broker at the
time of the repurchase. See the SAI, "Purchase and Redemption of Fund
Shares--Sale of Shares."
HOW TO EXCHANGE YOUR SHARES
You can exchange Class B and Class C shares of a Prudential Mutual Fund for
shares of the Fund without imposition of a CDSC. If you sell your shares of the
Fund or re-exchange them for Class B or Class C shares of the original fund or
another Prudential Mutual Fund, your shares will be subject to any applicable
CDSC upon the sale or any redemption after the re-exchange without regard to the
time the shares were held in the Fund. You can only exchange shares of the Fund
into Class B or Class C shares of another Prudential Mutual Fund if you meet the
minimum investment requirements of such other Prudential Mutual Fund. Shares of
the Fund may not be exchanged for Class A or Class Z shares of the Prudential
Mutual Funds.
If you hold shares through a broker, you must exchange your shares through
your broker. Otherwise contact:
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: EXCHANGE PROCESSING
P.O. BOX 15010
NEW BRUNSWICK, NJ 08906-5010
- -------------------------------------------------------------------
18 PRUDENTIAL SPECIAL MONEY MARKET FUND, INC. [LOGO] (800) 225-1852
<PAGE>
FINANCIAL HIGHLIGHTS
- -------------------------------------
The financial highlights will help you evaluate the Fund's financial
performance. The TOTAL RETURN in the chart represents the rate that a
shareholder earned on an investment in the Fund, assuming reinvestment of all
dividends and other distributions. The information is for shares of the Fund for
the periods indicated.
Review this chart with the financial statements and report of independent
accountants which appear in the SAI. Additional performance information is
contained in the annual report, which you can receive at no charge.
The financial highlights for the three fiscal years ended June 30, 1999 were
audited by PricewaterhouseCoopers LLP, independent accountants, and the
financial highlights for the two fiscal years ended June 30, 1996 were audited
by other independent auditors. Their reports were unqualified.
FUND SHARES (FISCAL YEARS ENDED 6-30)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income and net
realized gains
Dividends and distributions to
shareholders
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN(1) % % % % %
- ------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000) $ $ $ $ $
RATIOS TO AVERAGE NET ASSETS:
Net investment income % % % % %
Expenses % % % % %
</TABLE>
1 TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS BUT DOES
NOT INCLUDE THE EFFECT OF ANY SALES CHARGES. IT IS CALCULATED ASSUMING
SHARES ARE PURCHASED ON THE FIRST DAY AND SOLD ON THE LAST DAY OF EACH YEAR
REPORTED.
- --------------------------------------------------------------------------------
19
<PAGE>
THE PRUDENTIAL MUTUAL FUND FAMILY
- -------------------------------------
Prudential offers a broad range of mutual funds designed to meet your individual
needs. For information about these funds, contact your financial adviser or call
us at (800) 225-1852. Read the prospectus carefully before you invest or send
money.
STOCK FUNDS
PRUDENTIAL DISTRESSED SECURITIES FUND, INC.
PRUDENTIAL EMERGING GROWTH FUND, INC.
PRUDENTIAL EQUITY FUND, INC.
PRUDENTIAL EQUITY INCOME FUND
PRUDENTIAL INDEX SERIES FUND
PRUDENTIAL SMALL-CAP INDEX FUND
PRUDENTIAL STOCK INDEX FUND
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
PRUDENTIAL JENNISON GROWTH FUND
PRUDENTIAL JENNISON GROWTH & INCOME FUND
PRUDENTIAL MID-CAP VALUE FUND
PRUDENTIAL REAL ESTATE SECURITIES FUND
PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
PRUDENTIAL SMALL COMPANY VALUE FUND, INC.
PRUDENTIAL TAX-MANAGED EQUITY FUND
PRUDENTIAL 20/20 FOCUS FUND
PRUDENTIAL UTILITY FUND, INC.
NICHOLAS-APPLEGATE FUND, INC.
NICHOLAS-APPLEGATE GROWTH EQUITY FUND
ASSET ALLOCATION/BALANCED FUNDS
PRUDENTIAL BALANCED FUND
PRUDENTIAL DIVERSIFIED FUNDS
CONSERVATIVE GROWTH FUND
MODERATE GROWTH FUND
HIGH GROWTH FUND
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
PRUDENTIAL ACTIVE BALANCED FUND
GLOBAL FUNDS
GLOBAL STOCK FUNDS
PRUDENTIAL DEVELOPING MARKETS FUND
PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
PRUDENTIAL LATIN AMERICA EQUITY FUND
PRUDENTIAL EUROPE GROWTH FUND, INC.
PRUDENTIAL GLOBAL GENESIS FUND, INC.
PRUDENTIAL INDEX SERIES FUND
PRUDENTIAL EUROPE INDEX FUND
PRUDENTIAL PACIFIC INDEX FUND
PRUDENTIAL NATURAL RESOURCES
FUND, INC.
PRUDENTIAL PACIFIC GROWTH FUND, INC.
PRUDENTIAL WORLD FUND, INC.
GLOBAL SERIES
INTERNATIONAL STOCK SERIES
GLOBAL UTILITY FUND, INC.
GLOBAL BOND FUNDS
PRUDENTIAL GLOBAL LIMITED MATURITY
FUND, INC.
LIMITED MATURITY PORTFOLIO
PRUDENTIAL INTERMEDIATE GLOBAL
INCOME FUND, INC.
PRUDENTIAL INTERNATIONAL BOND
FUND, INC.
THE GLOBAL TOTAL RETURN FUND, INC.
- -------------------------------------------------------------------
20 PRUDENTIAL SPECIAL MONEY MARKET FUND, INC. [LOGO] (800) 225-1852
<PAGE>
- -------------------------------------
BOND FUNDS
TAXABLE BOND FUNDS
PRUDENTIAL DIVERSIFIED BOND FUND, INC.
PRUDENTIAL GOVERNMENT INCOME FUND, INC.
PRUDENTIAL GOVERNMENT SECURITIES TRUST
SHORT-INTERMEDIATE TERM SERIES
PRUDENTIAL HIGH YIELD FUND, INC.
PRUDENTIAL HIGH YIELD TOTAL RETURN FUND, INC.
PRUDENTIAL INDEX SERIES FUND
PRUDENTIAL BOND MARKET INDEX FUND
PRUDENTIAL STRUCTURED MATURITY
FUND, INC.
INCOME PORTFOLIO
TAX-EXEMPT BOND FUNDS
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA SERIES
CALIFORNIA INCOME SERIES
PRUDENTIAL MUNICIPAL BOND FUND
HIGH INCOME SERIES
INSURED SERIES
PRUDENTIAL MUNICIPAL SERIES FUND
FLORIDA SERIES
MASSACHUSETTS SERIES
NEW JERSEY SERIES
NEW YORK SERIES
NORTH CAROLINA SERIES
OHIO SERIES
PENNSYLVANIA SERIES
PRUDENTIAL NATIONAL MUNICIPALS FUND, INC.
MONEY MARKET FUNDS
TAXABLE MONEY MARKET FUNDS
CASH ACCUMULATION TRUST
LIQUID ASSETS FUND
NATIONAL MONEY MARKET FUND
PRUDENTIAL GOVERNMENT SECURITIES TRUST
MONEY MARKET SERIES
U.S. TREASURY MONEY MARKET SERIES
PRUDENTIAL SPECIAL MONEY MARKET FUND, INC.
MONEY MARKET SERIES
PRUDENTIAL MONEYMART ASSETS, INC.
TAX-FREE MONEY MARKET FUNDS
PRUDENTIAL TAX-FREE MONEY FUND, INC.
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
CALIFORNIA MONEY MARKET SERIES
PRUDENTIAL MUNICIPAL SERIES FUND
CONNECTICUT MONEY MARKET SERIES
MASSACHUSETTS MONEY MARKET SERIES
NEW JERSEY MONEY MARKET SERIES
NEW YORK MONEY MARKET SERIES
COMMAND FUNDS
COMMAND MONEY FUND
COMMAND GOVERNMENT FUND
COMMAND TAX-FREE FUND
INSTITUTIONAL MONEY MARKET FUNDS
PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
INSTITUTIONAL MONEY MARKET SERIES
- --------------------------------------------------------------------------------
21
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
Please read this prospectus before you invest in the Fund and keep it for future
reference. For information or shareholder questions contact:
PRUDENTIAL MUTUAL FUND SERVICES LLC
P.O. BOX 15005
NEW BRUNSWICK, NJ 08906-5005
(800) 225-1852
(732) 417-7555
(if calling from outside the U.S.)
- --------------------------------
Outside Brokers Should Contact:
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
P.O. BOX 15035
NEW BRUNSWICK, NJ 08906-5035
(800) 778-8769
- ------------------------------------
Visit Prudential's Web Site At:
http://www.prudential.com
- --------------------------------
Additional information about the Fund can be obtained without charge and can be
found in the following documents:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
(incorporated by reference into this prospectus)
ANNUAL REPORT
SEMI-ANNUAL REPORT
You can also obtain copies of Fund documents from the Securities and Exchange
Commission as follows:
By Mail:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-6009
(The SEC charges a fee to copy documents.)
In Person:
Public Reference Room in
Washington, DC
(For hours of operation, call 1(800) SEC-0330)
Via the Internet:
http://www.sec.gov
- --------------------------------
CUSIP Number:
74436K-10-4
Investment Company Act File No:
811-5951
MF141A [LOGO] Printed on Recycled Paper
<PAGE>
PRUDENTIAL SPECIAL MONEY MARKET FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED SEPTEMBER , 1999
Prudential Special Money Market Fund, Inc. (the Fund) is an open-end,
diversified, management investment company which is currently comprised of one
series, the Money Market Series (the Series or the Fund, as the context
requires). The investment objective of the Fund is high current income
consistent with the preservation of principal and liquidity. The Fund seeks to
achieve its objective by investing in a diversified portfolio of high quality
money market instruments maturing in thirteen months or less. There can be no
assurance that the Fund's investment objective will be achieved. See
"Description of the Fund, its Investments and Risks."
The Fund's address is Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077 and its telephone number is (800) 225-1852.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's Prospectus dated September , 1999, a copy
of which may be obtained from the Fund upon request.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Fund History................................................ B-2
Description of the Fund, its Investments and Risks.......... B-2
Investment Restrictions..................................... B-5
Management of the Fund...................................... B-7
Control Persons and Principal Holders of Securities......... B-9
Investment Advisory and Other Services...................... B-10
Brokerage Allocation and Other Practices.................... B-12
Capital Stock and Organization.............................. B-13
Purchase and Redemption of Fund Shares...................... B-13
Net Asset Value............................................. B-16
Taxes, Dividends and Distributions.......................... B-16
Calculation of Yield........................................ B-18
Financial Statements........................................ B-19
Reports of Independent Accountants.......................... B-
Appendix I-Description of Security Ratings.................. I-1
Appendix II-Information Relating to Prudential.............. II-1
</TABLE>
- --------------------------------------------------------------------------------
MF141B
<PAGE>
FUND HISTORY
The Fund was organized as a corporation under the laws of Maryland on
October 20, 1989. Effective March 7, 1996, the Fund's name was changed from
Prudential-Bache Special Money Market Fund, Inc. to Prudential Special Money
Market Fund, Inc.
DESCRIPTION OF THE FUND, ITS INVESTMENTS AND RISKS
(a)CLASSIFICATION. The Fund is a diversified open-end management investment
company.
(b)INVESTMENT STRATEGIES AND RISKS.
The Fund's investment objective is high current income consistent with the
preservation of principal and liquidity. While the principal investment policies
and strategies for seeking to achieve this objective are described in the Fund's
Prospectus, the Fund may from time to time also utilize the securities,
instruments, policies and strategies described below in seeking to achieve its
objective. The Fund may not be successful in achieving its objective and you can
lose money.
OBLIGATIONS ISSUED OR GUARANTEED BY THE U.S. GOVERNMENT, ITS AGENCIES AND
INSTRUMENTALITIES
The Fund may invest in U.S. Treasury obligations including bills, notes,
bonds and other debt obligations issued by the U.S. Treasury. These instruments
are direct obligations of the U.S. Government and, as such, are backed by the
"full faith and credit" of the United States. They differ primarily in their
interest rates, the lengths of their maturities and the dates of their
issuances. The Fund will also invest in obligations which are guaranteed by
federal agencies or instrumentalities and which may or may not be backed by the
full faith and credit of the United States. Obligations of the Government
National Mortgage Association (GNMA), the Farmers Home Administration and the
Small Business Administration are backed by the full faith and credit of the
United States. In the case of obligations not backed by the full faith and
credit of the United States, the Fund must look principally to the agency
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the United States if the agency or
instrumentality does not meet its commitments. Instruments in which the Fund may
invest which are not backed by the full faith and credit of the United States
include obligations issued by the Federal Home Loan Banks, the Federal Home Loan
Mortgage Corporation (FHLMC), the Federal National Mortgage Association (FNMA),
the Student Loan Marketing Association, Resolution Funding Corporation and the
Tennessee Valley Authority, each of which under certain conditions has the right
to borrow from the U.S. Treasury to meet its obligations, and obligations of the
Farm Credit System, the obligations of which may be satisfied only by the
individual credit of the issuing agency. The Fund's investment in
mortgage-backed securities (E.G., GNMA, FNMA and FHLMC certificates) will be
made only to the extent such securities are used as collateral for repurchase
agreements entered into by the Fund.
FLOATING RATE AND VARIABLE RATE SECURITIES
The Fund may purchase "floating rate" and "variable rate" securities.
Investments in floating or variable rate securities normally will involve
securities which provide that the rate is set as a spread to a designated base
rate, such as rates on Treasury bills, and, in some cases, that the purchaser
can demand payment of the obligation at specified intervals or after a specified
notice period (in each case a period of less than thirteen months) at par plus
accrued interest, which amount may be more or less than the amount paid for
them. Variable rate securities provide for a specified periodic adjustment in
the interest rate, while floating rate securities have an interest rate which
changes whenever there is a change in the designated base interest rate.
DEMAND FEATURES AND GUARANTEES
The Fund may purchase demand features and guarantees. A demand feature
supporting a money market fund instrument can be relied upon in a number of
respects. First, the demand feature can be relied upon to effectively SHORTEN
THE MATURITY of the underlying instrument. Second, the demand feature, if
unconditional, can be used to EVALUATE THE CREDIT QUALITY of the underlying
security. This means that the credit quality of the underlying security can be
based solely on the credit quality of the unconditional demand feature
supporting that security.
A GUARANTEE is a form of unconditional credit support that may include bond
insurance, a letter of credit, and an unconditional demand feature. A money
market fund holding a security subject to a guarantee may determine the credit
quality of the underlying security solely on the basis of the credit quality of
the supporting guarantee.
B-2
<PAGE>
The Fund can invest 10% of its total assets in securities directly issued
by, or supported by, a demand feature provider or guarantor. Investment Company
Act Rule 2a-7 provides a more stringent limit on demand features and guarantees
that are "second tier securities" under the Rule; that is, those securities that
are rated in the second highest category by a specified number of rating
organizations. Specifically, Rule 2a-7 provides that a money market fund cannot
invest more than 5% of its total assets in securities directly issued or
supported by second tier demand features or guarantees that are issued by the
same entity.
LIQUIDITY PUTS
The Fund may purchase money market instruments together with the right to
resell the instruments at an agreed-upon price or yield within a specified
period prior to the maturity date of the instruments. Such a right to resell is
commonly known as a "put," and the aggregate price which the Fund pays for
instruments with a put may be higher than the price which otherwise would be
paid for the instruments. Consistent with the Fund's investment objective and
applicable rules issued by the Securities and Exchange Commission and subject to
the supervision of the Board of Directors, the purpose of this practice is to
permit the Fund to be fully invested while preserving the necessary liquidity to
meet unusually large redemptions and to purchase at a later date securities
other than those subject to the put. The Fund may choose to exercise puts during
periods in which proceeds from sales of its shares and from recent sales of
portfolio securities are insufficient to meet redemption requests or when the
funds available are otherwise allocated for investment. In determining whether
to exercise puts prior to their expiration date and in selecting which puts to
exercise in such circumstances, the investment adviser considers, among other
things, the amount of cash available to the Fund, the expiration dates of the
available puts, any future commitments for securities purchases, the yield,
quality and maturity dates of the underlying securities, alternative investment
opportunities and the desirability of retaining the underlying securities in the
Fund's portfolio.
The Fund values instruments which are subject to puts at amortized cost; no
value is assigned to the put. The cost of the put, if any, is carried as an
unrealized loss from the time of purchase until it is exercised or expires.
LENDING OF SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and financial institutions, provided
that outstanding loans for the Fund do not exceed in the aggregate 10% of the
value of its respective total assets, and provided that such loans are callable
at any time by the Fund and are at all times secured by cash or equivalent
collateral (which may include a secured letter of credit) that is equal to at
least the market value, determined daily, of the loaned securities. The
advantage of such loans is that the Fund continues to receive payments in lieu
of the interest on the loaned securities, while at the same time earning
interest either directly from the borrower or on the cash collateral which will
be invested in short-term obligations. Any voting rights, or rights to consent,
relating to the securities loaned pass to the borrower. However, if a material
event affecting the investment occurs, such loans will be called so securities
may be voted by the Fund.
A loan may be terminated by the borrower on one business day's notice or by
the Fund at any time. If the borrower fails to maintain the requisite amount of
collateral, the loan automatically terminates, and the Fund could use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over collateral. As with any extensions of credit,
there are risks of delay in recovery and in some cases loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms determined to be
creditworthy pursuant to procedures approved by the Board of Directors of the
Fund. On termination of the loan, the borrower is required to return the
securities to the Fund, and any gain or loss in the market price during the loan
would inure to the Fund.
The Fund will pay reasonable finders', administrative and custodial fees in
connection with a loan of its securities or may share the interest earned on
collateral with the borrower.
ILLIQUID SECURITIES
The Fund may not hold more than 10% of its net assets in illiquid
securities, including securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale and
repurchase agreements which have a maturity of longer than seven days.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (Securities Act),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placement
securities or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
B-3
<PAGE>
amount of these restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations on resale may
have an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might also have to
register such restricted securities in order to dispose of them, resulting in
additional expense and delay. Adverse market conditions could impede such a
public offering of securities.
However, a large institutional market has developed for certain securities
that are not registered under the Securities Act, including repurchase
agreements, commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Institutional investors depend on an efficient
institutional market in which the unregistered security can be readily resold or
on an issuer's ability to honor a demand for repayment. The fact that there are
contractual or legal restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such securities.
Rule 144A of the Securities Act allows for a broader institutional trading
market for securities otherwise subject to restriction on resale to the general
public. Rule 144A establishes a "safe harbor" from the registration requirements
of the Securities Act for resales of certain securities to qualified
institutional buyers. The investment adviser anticipates that the market for
certain restricted securities such as institutional commercial paper and foreign
securities will expand further as a result of this regulation and the
development of automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act and commercial paper for which there is a readily available
market will not be deemed to be illiquid under procedures established by the
Board of Directors. The investment adviser will monitor the liquidity of such
restricted securities subject to the supervision of the Board of Directors. In
reaching liquidity decisions, the investment adviser will consider, inter alia,
the following factors: (1) the frequency of trades and quotes for the security;
(2) the number of dealers wishing to purchase or sell the security and the
number of other potential purchasers; (3) dealer undertakings to make a market
in the security; and (4) the nature of the security and the nature of the
marketplace trades (E.G., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of the transfer). In addition, in order
for commercial paper that is issued in reliance on Section 4(2) of the
Securities Act to be considered liquid, (i) it must be rated in one of the two
highest rating categories by at least two nationally recognized statistical
rating organizations (NRSRO), or if only one NRSRO rates the securities, by that
NRSRO, or, if unrated, be of comparable quality in the view of the investment
adviser; and (ii) it must not be "traded flat" (i.e., without accrued interest)
or in default as to principal or interest. Repurchase agreements subject to
demand are deemed to have a maturity equal to the notice period.
The Fund's investment in Rule 144A securities could have the effect of
increasing the Fund's illiquidity to the extent that qualified institutional
buyers become uninterested for a time in purchasing these securities.
SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest up to 10% of its total assets in securities of other
money market funds registered under the Investment Company Act. To the extent
that the Fund invests in securities of other registered investment companies,
shareholders of the Fund may be subject to duplicate management and advisory
fees.
BORROWING
The Fund may borrow from banks (including through entering into reverse
repurchase agreements) up to and including 20% of the value of its total assets
taken at cost for temporary, extraordinary or emergency purposes or for the
clearance of transactions. The Fund may pledge up to and including 20% of its
total assets to secure such borrowings. The Fund will not purchase portfolio
securities if its borrowings (other than permissible securities loans) exceed 5%
of its total assets.
REPURCHASE AGREEMENTS
The Fund may purchase securities and concurrently enter into "repurchase
agreements" with the seller, whereby the seller agrees to repurchase such
securities at a specified price within a specified time (generally seven days or
less). The repurchase agreements provide that the Fund will sell the underlying
instruments back to the dealer or the bank at the specified price and at a fixed
time in the future, usually not more than seven days from the date of purchase.
The difference between the purchase price and the resale price represents the
interest earned by the Fund, which is unrelated to the coupon rate or maturity
of the purchased
B-4
<PAGE>
security. Repurchase agreements will at all times be fully collateralized by
U.S. Government obligations in an amount at least equal to the resale price.
Such collateral will be held by the Fund's Custodian, either directly or through
a sub-custodian, either physically or in a book-entry account.
The Fund will enter into repurchase transactions only with parties which
meet creditworthiness standards approved by the Fund's Board of Directors. The
Fund's investment adviser monitors the creditworthiness of such parties under
the general supervision of the Board of Directors. In the event of a default or
bankruptcy by a seller, the Fund will promptly seek to liquidate the collateral.
To the extent that the proceeds from any sale of such collateral upon a default
in the obligation to repurchase are less than the resale price, the Fund will
suffer a loss. In circumstances where the financial institution that is a party
to the repurchase agreement petitions for bankruptcy or becomes subject to the
U.S. Bankruptcy Code, the law regarding the rights of the Fund is unsettled. As
a result, under these circumstances, there may be a restriction on the Fund's
ability to sell the collateral, and the Fund could suffer a loss.
The Fund participates in a joint repurchase account with other investment
companies managed by Prudential Investments Fund Management LLC (PIFM or the
Manager) pursuant to an order of the Securities and Exchange Commission. On a
daily basis, any uninvested cash balances of the Fund may be aggregated with
those of such other investment companies and invested in one or more repurchase
agreements. The Fund participates in the income earned or accrued in the joint
account based on the percentage of its investment. In connection with
transactions in repurchase agreements with U.S. financial institutions, it is
the Fund's policy that its custodian or designated subcustodians, as the case
may be, under triparty repurchase agreements, take possession of the underlying
collateral securities, the value of which equals or exceeds the resale price of
the agreement. If the seller defaults and the value of the collateral declines
or if bankruptcy proceedings are commenced with respect to the seller of the
security, realization on the collateral by the Fund may be delayed or limited.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements have the characteristics of borrowing and
involve the sale of securities held by the Fund with an agreement to repurchase
the securities at a specified price, date and interest payment. The Fund intends
only to use reverse repurchase agreements when it will be to its advantage to do
so. These transactions are only advantageous if the Fund has an opportunity to
earn a greater rate of interest on the cash derived from the transaction than
the interest cost of obtaining that cash. The Fund may be unable to realize
earnings from the use of the proceeds equal to or greater than the interest
required to be paid. The use of reverse repurchase agreements may exaggerate any
increase or decrease in the value of the Fund's portfolio. The Fund's Custodian
will maintain in a segregated account cash, or other liquid assets, maturing not
later than the expiration of the reverse repurchase agreements and having a
value equal to or greater than such commitments. The Fund does not intend to
enter into reverse repurchase agreements during the coming year.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Fund may purchase securities on a "when-issued" or delayed delivery
basis. When-issued or delayed delivery transactions arise when securities are
purchased or sold by the Fund with payment and delivery taking place in the
future in order to secure what is considered to be an advantageous price and
yield to the Fund at the time of entering into the transaction. The Fund will
limit such purchases to those for which the date of delivery and payment falls
within 90 days of the date of the commitment. The Fund will make commitments for
such when-issued transactions only with the intention of actually acquiring the
securities. The Fund's Custodian will segregate cash or other liquid assets
having a value equal to or greater than the Fund's purchase commitments. If the
Fund chooses to dispose of the right to acquire a when-issued security prior to
its acquisition, it could, as with the disposition of any other portfolio
security, incur a gain or loss due to market fluctuations. The securities so
purchased are subject to market fluctuation and no interest accrues to the
purchaser during the period between purchase and settlement.
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies. Fundamental policies
are those which cannot be changed without the approval of the holders of a
majority of the outstanding voting securities of the Fund. A "majority of the
outstanding voting securities," when used in this Statement of Additional
Information, means the lesser of (i) 67% of the voting shares represented at a
meeting at which more than 50% of the outstanding voting shares are present in
person or represented by proxy or (ii) more
B-5
<PAGE>
than 50% of the outstanding voting shares. With respect to the submission of a
change in fundamental policy or investment objective of the Fund, such matters
shall be deemed to have been effectively acted upon with respect to the Fund if
a majority of the outstanding voting securities of the Fund votes for the
approval of such matters as provided above.
The Fund may not:
1. Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions).
2. Make short sales of securities or maintain a short position.
3. Issue senior securities, borrow money or pledge its assets, except
insofar as the Fund may be deemed to have issued a senior security by reason of
entering into a reverse repurchase agreement and except that the Fund may borrow
up to 20% of the value of its total assets (calculated when the loan is made)
from banks for temporary, extraordinary or emergency purposes or for the
clearance of transactions. The Fund may pledge up to 20% of the value of its
total assets to secure such borrowings or reverse repurchase agreements. For
purposes of this restriction, the purchase or sale of securities on a
"when-issued" or delayed delivery basis and obligations of the Fund to Directors
pursuant to deferred compensation arrangements are not deemed to be the issuance
of a senior security and such arrangements are not deemed to be a pledge of
assets.
4. Buy or sell real estate or interests in real estate, except that the Fund
may purchase and sell mortgage-backed securities, securities collateralized by
mortgages, securities which are secured by real estate, securities of companies
which invest or deal in real estate and publicly traded securities of real
estate investment trusts. The Fund may not purchase interests in real estate
limited partnerships which are not readily marketable.
5. Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter under
certain federal securities laws.
6. Make investments for the purpose of exercising control or management.
7. Invest in interests in oil, gas or other mineral exploration or
development programs.
8. Make loans to others, except through the purchase of debt obligations,
repurchase agreements and loans of portfolio securities limited to 10% of the
value of the Fund's total assets.
9. Purchase common stock or other voting securities, preferred stock,
warrants or other equity securities, except as may be permitted by the Fund by
restriction number 13 (below).
10. Buy or sell commodities or commodity contracts (including futures
contracts and options thereon).
11. Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result, with respect to 75% of the
Fund's total assets, more than 5% of the Fund's total assets (determined at the
time of investment) would then be invested in securities of a single issuer.
12. Purchase any securities (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result 25% or more of the value of
the Fund's total assets (determined at the time of investment) would be invested
in the securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to money market instruments of domestic banks (including U.S. branches
of foreign banks that are subject to the same regulations as U.S. banks and
foreign branches of domestic banks, provided the domestic bank is
unconditionally liable in the event of the failure of the foreign branch to make
payment on its instruments for any reason).
13. Invest in securities of other registered investment companies, except by
purchases in the open market involving only customary brokerage commissions and
as a result of which not more than 10% of its total assets (determined at the
time of investment) would be invested in such securities, or except as part of a
merger, consolidation or other acquisition.
Whenever any fundamental investment policy or investment restriction states
a maximum percentage of the Fund's assets, it is intended that if the percentage
limitation is met at the time the investment is made, a later change in
percentage resulting from changing total or net asset values will not be
considered a violation of such policy. However, in the event that the Fund's
asset coverage for borrowings falls below 300%, the Fund will take action within
three days to reduce its borrowing, as required by applicable law.
B-6
<PAGE>
MANAGEMENT OF THE FUND
(a) DIRECTORS
The Fund has Directors who, in addition to overseeing the actions of the
Fund's Manager, Subadviser, and Distributor, decide upon matters of general
policy.
The Directors also review the actions of the officers of the Fund, who
conduct and supervise the daily business operations of the Fund.
(b) MANAGEMENT INFORMATION--DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
POSITION WITH AND OTHER AFFILIATIONS FOR
NAME, ADDRESS AND AGE (1) THE FUND THE LAST FIVE YEARS
- ------------------------------ ------------------------------ -----------------------------------------------------------------
<S> <C> <C>
Edward D. Beach (74) Director President and Director of BMC Fund, Inc., a closed-end investment
company; previously Vice Chairman of Broyhill Furniture
Industries, Inc., Certified Public Accountant; Secretary and
Treasurer of Broyhill Family Foundation, Inc.; Member of the
Board of Trustees of Mars Hill College; and Director of The High
Yield Income Fund, Inc.
Delayne Dedrick Gold (60) Director Marketing and Management Consultant; Director of The High Yield
Income Fund, Inc.
*Robert F. Gunia (52) Director and Vice President Vice President of Prudential Investments (since September 1997);
Executive Vice President and Treasurer (since December 1996) of
Prudential Investments Fund Management LLC (PIFM); Senior Vice
President (since March 1987) of Prudential Securities
Incorporated (Prudential Securities); formerly Chief
Administrative Officer (July 1990-September 1996), Director
(January 1989-September 1996) and Executive Vice President,
Treasurer and Chief Financial Officer (June 1987-September 1996)
of Prudential Mutual Fund Management, Inc. (PMF); Vice President
and Director (since May 1989) of The Asia Pacific Fund, Inc.;
Director of The High Yield Income Fund, Inc.
Don G. Hoff (63) Director Chairman and Chief Executive Officer (since 1980) of Intertec,
Inc. (investments); Chairman and Chief Executive Officer of The
Lamaur Corporation, Inc.; Director of Innovative Capital
Management, Inc. and The Greater China Fund, Inc.; and Chairman
and Director of The Asia Pacific Fund, Inc.
Robert E. LaBlanc (64) Director President (since 1981) of Robert E. LaBlanc Associates, Inc.
(telecommunications); formerly General Partner at Salomon
Brothers; and Vice-Chairman of Continental Telecom; Director of
Storage Technology Corporation, Titan Corporation, Salient 3
Communications, Inc. and Tribune Company; and Trustee of
Manhattan College.
Robin B. Smith (59) Director Chairman and Chief Executive Officer (since August 1996) of
Publishers Clearing House; formerly President and Chief
Executive Officer (January 1988-August 1996) and President and
Chief Operating Officer (September 1981-December 1988) of
Publishers Clearing House; Director of BellSouth Corporation,
Texaco Inc., Springs Industries Inc., and Kmart Corporation.
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
POSITION WITH AND OTHER AFFILIATIONS FOR
NAME, ADDRESS AND AGE (1) THE FUND THE LAST FIVE YEARS
- ------------------------------ ------------------------------ -----------------------------------------------------------------
<S> <C> <C>
Stephen Stoneburn (55) Director 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; Senior Vice President (January 1991-1992)
and Publishing Vice President (May 1989-December 1990) of Gralla
Publications (a division of United Newspapers, U.K.); and Senior
Vice President of Fairchild Publications, Inc.
*John R. Strangfeld, Jr. (45) Director and President Chief Executive Officer, Chairman, President and Director of The
Prudential Investment Corporation (since January 1990);
Executive Vice President of the Prudential Global Asset
Management Group of Prudential (since February 1998); Chairman
of Pricoa Capital Group (since August 1989); Chief Executive
Officer of Private Asset Management Group of Prudential
(November 1994-December 1998).
Nancy H. Teeters (68) Director Economist; Director of Inland Steel Industries; formerly, Vice
President and Chief Economist of International Business
Machines; Member of the Board of Governors of the Federal
Reserve System; Governor of the Horace H. Rackham School of
Graduate Studies of the University of Michigan; Assistant
Director of the Committee on the Budget of the US House of
Representatives; Senior Fellow at the Library of Congress;
Senior Fellow at the Brookings Institution; staff at Office of
Management and Budget, Council of Economic Advisors and the
Federal Reserve Board.
Robert C. Rosselot (39) Secretary Assistant General Counsel (since September 1997) of PIFM;
formerly, partner with the firm of Howard & Howard, Bloomfield
Hills, Michigan (December 1995-September 1997) and Corporate
Counsel (September 1990-December 1995) of Federated Investors.
Grace C. Torres (40) Treasurer and Principal First Vice President (since December 1996) of PIFM; First Vice
Financial and Accounting President (since March 1994) of Prudential Securities; formerly
Officer First Vice President (March 1994-September 1996) of Prudential
Mutual Fund Management, Inc. and Vice President (July 1989-March
1994) of Bankers Trust Corporation.
Stephen M. Ungerman (45) Assistant Treasurer Vice President and Tax Director (since March 1996) of Prudential
Investments; formerly First Vice President of Prudential Mutual
Fund Management, Inc. (February 1993-September 1996).
</TABLE>
- ------------
(1) Unless otherwise noted, the address for each of the above persons is c/o
Prudential Investments Fund Management LLC, Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102-4077.
* "Interested" Director of the Fund, as defined in the Investment Company Act
of 1940 (the Investment Company Act).
Directors and officers of the Fund are also trustees, directors and officers
of some or all of the other investment companies distributed by Prudential
Securities or Prudential Investment Management Services LLC.
The Directors have adopted a retirement policy which calls for the
retirement of Directors on December 31 of the year in which they reach the age
of 72, except that retirement is being phased in for Directors who were age 68
or older as of December 31, 1993. Under this phase-in provision, Mr. Beach is
scheduled to retire on December 31, 1999.
B-8
<PAGE>
Pursuant to the terms of the Management Agreement with the Fund, the Manager
pays all compensation of officers of the Fund as well as the fees and expenses
of all Directors of the Fund who are affiliated persons of the Manager.
The Fund pays each of its Directors who is not an affiliated person of PIFM
or Prudential Investments (PI) annual compensation of $1,500, in addition to
certain out-of-pocket expenses. The amount of annual compensation paid to each
Director may change as a result of the introduction of additional funds on the
board of which the Director will be asked to serve.
Directors may receive their Directors' fees pursuant to a deferred fee
agreement with the Fund. Under the terms of the agreement, the Fund accrues
daily the amount of such Trustee's fees in installments which accrue interest at
a rate equivalent to the prevailing rate applicable to 90-day U.S. Treasury
Bills at the beginning of each calendar quarter or at the daily rate of return
of the Fund (the Fund Rate). Payment of the interest so accrued is also deferred
and accruals become payable at the option of the Director. The Fund's obligation
to make payments of deferred Directors' fees, together with interest thereon, is
a general obligation of the Fund.
The following table sets forth the aggregate compensation paid by the Fund
to the Directors who are not affiliated with the Manager for the fiscal year
ended June 30, 1999 and the aggregate compensation paid to such Directors for
service on the Fund's Board and that of all other funds managed by PIFM (Fund
Complex) for the calendar year ended December 31, 1998.
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT APPROXIMATE
BENEFITS COMPENSATION
ACCRUED ESTIMATED FROM FUND
AGGREGATE AS PART OF ANNUAL AND FUND
COMPENSATION TRUST BENEFITS UPON COMPLEX PAID
NAME AND POSITION FROM FUND EXPENSES RETIREMENT TO DIRECTORS(2)
- ----------------------------------------------------- ------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
Edward D. Beach--Director $ 1,500 None N/A $ 135,000( 44/71)*
Stephen C. Eyre--Former Director $ 1,500 None N/A $ 45,000( 14/17)*
Delayne D. Gold--Director $ 1,500 None N/A $ 135,000( 44/71)*
Robert F. Gunia(1)--Director -- None N/A --
Don G. Hoff--Director $ 1,500 None N/A $ 45,000( 14/17)*
Robert E. LaBlanc--Director $ 1,500 None N/A $ 45,000( 14/17)*
Mendel A. Melzer(1)--Former Director -- None N/A --
Richard A. Redeker(1)--Former Director -- None N/A --
Robin B. Smith--Director $ 1,500 None N/A $ 90,000( 32/41)*
Stephen Stoneburn--Director $ 1,500 None N/A $ 45,000( 14/17)*
Brian Storms(1)--Former Director -- None N/A --
John R. Strangfeld(1)--Director -- None N/A --
Nancy H. Teeters--Director $ 1,500 None N/A $ 90,000( 26/47)*
</TABLE>
- ------------
* Indicates number of funds/portfolios in Prudential Fund Complex (including
the Fund) to which aggregate compensation relates.
(1) Directors who are "interested" do not receive compensation from the Fund
Complex (including the Fund).
(2) Total compensation from all the funds in the Prudential Fund Complex for the
calendar year ended December 31, 1998, including amounts deferred at the
election of Directors under the funds' deferred compensation plans.
Including accrued interest, total deferred compensation amounted to $116,225
for Director Robin B. Smith. Currently, Ms. Smith has agreed to defer some
of her fees at the T-Bill rate and other fees at the Fund Rate.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of August , 1999, the Directors and officers of the Fund, as a group,
owned less than 1% of the outstanding shares of common stock of the Fund and
there were no beneficial owners of greater than 5% of the outstanding shares of
the Fund.
As of August , 1999, Prudential Securities was the record holder for other
beneficial owners of shares (or approximately %) of the outstanding
common stock of the Fund. In the event of any meetings of shareholders,
Prudential Securities will forward, or cause the forwarding of, proxy materials
to the beneficial owners for which it is the record holder.
B-9
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
(a) INVESTMENT ADVISERS
The manager of the Fund is Prudential Investments Fund Management LLC (PIFM
or the Manager), Gateway Center Three, 100 Mulberry Street, Newark, New Jersey
07102-4077. PIFM serves as manager to all of the other investment companies
that, together with the Fund, comprise the Prudential Mutual Funds. See "How the
Fund is Managed--Manager" in the Prospectus. As of , PIFM
managed and/or administered open-end and closed-end management investment
companies with assets of approximately $ billion. According to the Investment
Company Institute, as of October 31, 1998, the Prudential Mutual Funds were the
largest family of mutual funds in the United States.
PIFM is a subsidiary of Prudential Securities. Prudential Mutual Fund
Services LLC (PMFS or the Transfer Agent), a wholly-owned subsidiary of PIFM,
serves as the transfer agent for the Prudential Mutual Funds and, in addition,
provides customer service, recordkeeping and management and administration
services to qualified plans.
Pursuant to a Management Agreement with the Fund (the Management Agreement),
PIFM, subject to the supervision of the Fund's Board of Directors and in
conformity with the stated policies of the Fund, manages both the investment
operations of the Fund and the composition of the Fund's portfolio, including
the purchase, retention, disposition and loan of securities. In connection
therewith, PIFM is obligated to keep certain books and records of the Fund. PIFM
also administers the Fund's corporate affairs and, in connection therewith,
furnishes the Fund with office facilities, together with those ordinary clerical
and bookkeeping services which are not being furnished by State Street Bank and
Trust Company, the Fund's custodian, and PMFS, the Fund's transfer and dividend
disbursing agent. The management services of PIFM for the Fund are not exclusive
under the terms of the Management Agreement and PIFM is free to, and does,
render management services to others.
For its services, PIFM receives, pursuant to the Management Agreement, fees
at an annual rate of .50 of 1% of the average daily net assets of the Fund. The
fees are computed daily and payable monthly. In the event the expenses of the
Fund (including the fees of the Manager but excluding interest, taxes, brokerage
commissions, litigation and indemnification expenses and other extraordinary
expenses) for any fiscal year exceed the lowest applicable annual expense
limitation established and enforced pursuant to the statutes or regulations of
any jurisdictions in which shares of the Fund are then qualified for offer and
sale, the Manager will reduce its fee by the amount of such excess, or, if such
reduction exceeds the compensation payable to the Manager, the Manager will pay
to the Fund the amount of such reduction which exceeds the amount of such
compensation. Any such reductions or payments will be made monthly and are
subject to readjustment during the year. Currently, the Fund believes that there
are no such expense limitations.
In connection with its management of the corporate affairs of the Fund, PIFM
bears the following expenses:
(a) the salaries and expenses of all of its and of the Fund's personnel,
except the fees and expenses of Directors who are not affiliated persons of PIFM
or the Fund's investment adviser;
(b) all expenses incurred by PIFM or by the Fund in connection with managing
the ordinary course of the Fund's business, other than those assumed by the
Fund, as described below; and
(c) the costs and expenses payable to The Prudential Investment Corporation
(PIC), doing business as Prudential Investments (PI), pursuant to the
subadvisory agreement between PIFM and PI (the Subadvisory Agreement).
Under the terms of the Management Agreement, the Fund is responsible for the
payment of the following expenses: (a) the fee payable to the Manager, (b) the
fees and expenses of Directors who are not affiliated persons of the Manager or
the Fund's investment adviser, (c) the fees and certain expenses of the Fund's
Custodian and Transfer and Dividend Disbursing Agent, including the cost of
providing records to the Manager in connection with its obligation of
maintaining required records of the Fund and of pricing the Fund's shares, (d)
the charges and expenses of the Fund's legal counsel and independent accountants
for the Fund, (e) brokerage commissions and any issue or transfer taxes
chargeable to the Fund in connection with its securities transactions, (f) all
taxes and corporate fees payable by the Fund to governmental agencies, (g) the
fees of any trade association of which the Fund may be a member, (h) the cost of
stock certificates representing shares of the Fund, (i) the cost of fidelity and
liability insurance, (j) certain organizational expenses and the fees and
expenses involved in registering and maintaining registration of the Fund and of
its shares with the Commission, registering the Fund and qualifying its shares
under state securities laws, including the preparation and printing of the
Fund's registration statements and prospectuses for such purposes,
B-10
<PAGE>
(k) allocable communications expenses with respect to investor services and all
expenses of shareholders' and Board of Directors' meetings and of preparing,
printing and mailing reports to shareholders and (l) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business.
The Management Agreement provides that PIFM will not be liable for any error
of judgment or for any loss suffered by the Fund in connection with the matters
to which the Management Agreement relates, except a loss resulting from willful
misfeasance, bad faith, gross negligence or reckless disregard of duty. The
Management Agreement provides that it will terminate automatically if assigned,
and that it may be terminated without penalty by either party upon not more than
60 days', nor less than 30 days', written notice. The Management Agreement
provides that it will continue in effect for a period of more than two years
from its execution only so long as such continuance is specifically approved at
least annually in accordance with the requirements of the Investment Company
Act. The Management Agreement was last approved by the Board of Directors,
including a majority of the Directors who are not parties to the contract or
interested persons of any such party as defined in the Investment Company Act,
on May 25, 1999, and by the Fund's shareholders on October 30, 1990.
For the fiscal years ended June 30, 1999, 1998 and 1997, the Fund paid
management fees of , $1,195,235 and $1,494,105, respectively.
PIFM has entered into a Subadvisory Agreement with PI. The Subadvisory
Agreement provides that PI will furnish investment advisory services in
connection with the management of the Fund. In connection therewith, PI is
obligated to keep certain books and records of the Fund. PIFM continues to have
responsibility for all investment advisory services pursuant to the Management
Agreement and supervises PI's performance of those services. PI is reimbursed by
PIFM for the reasonable costs and expenses incurred by PI in furnishing those
services.
The Subadviser maintains a corporate credit unit which provides credit
analysis and research on taxable fixed-income securities including money market
instruments. The portfolio manager consults routinely with the credit unit in
managing the Fund's portfolio. The credit unit, which currently maintains a
staff of credit analysts, reviews on an ongoing basis commercial paper issuers,
commercial banks, non-bank financial institutions and issuers of other taxable
fixed-income obligations. Credit analysts have broad access to research and
financial reports, data retrieval services and industry analysts. They maintain
relationships with the management of corporate issuers and from time to time
visit companies in whose securities the Fund may invest.
The Subadvisory Agreement was last approved by the Board of Directors,
including a majority of the Directors who are not parties to the contract or
interested persons of any such party as defined in the Investment Company Act,
on May 25, 1999, and by shareholders of the Fund on October 30, 1990.
The Subadvisory Agreement provides that it will terminate in the event of
its assignment as defined in the Investment Company Act or upon the termination
of the Management Agreement. The Subadvisory Agreement may be terminated by the
Fund, PIFM, or PI upon not less than 30 days' nor more than 60 days' written
notice. The Subadvisory Agreement provides that it will continue in effect for a
period of more than two years from its execution only so long as such
continuance is specifically approved at least annually in accordance with the
requirements of the Investment Company Act.
(b) PRINCIPAL UNDERWRITER, DISTRIBUTOR AND RULE 12b-1 PLAN
Prudential Investment Management Services LLC (PIMS or the Distributor),
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, acts
as the distributor of the shares of the Fund. Prior to July 1, 1998, Prudential
Securities Incorporated (Prudential Securities, also referred to as the
Distributor), One Seaport Plaza, New York, New York 10292, served as the
distributor of the Fund's shares.
The Fund's Distribution Agreement provides that it will terminate
automatically if assigned and that it may be terminated, without payment of any
penalty, by a majority of the Directors who are not parties to the Distribution
Agreement or interested persons of any such parties and who have no direct or
indirect financial interest in the Distribution Agreement or in any agreement
related thereto or by vote of a majority of the outstanding voting securities of
the Fund or by the Distributor, on 60 days' written notice to the other party.
The Distribution Agreement was last approved by the Board of Directors,
including a majority of the Directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the Distribution
Agreement, on May 25, 1999.
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Pursuant to the Distribution Agreement, the Fund has agreed to indemnify the
Distributor to the extent permitted by applicable law against certain
liabilities under the federal securities laws.
(c) OTHER SERVICE PROVIDERS
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities,
and in that capacity maintains cash and certain financial and accounting books
and records pursuant to an agreement with the Fund.
Prudential Mutual Fund Services LLC (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as the Transfer and Shareholder Servicing Agent of the
Fund. It is a wholly-owned subsidiary of PIFM. PMFS provides customary transfer
agency services to the Fund, including the handling of shareholder
communications, the processing of shareholder transactions, the maintenance of
shareholder account records, payment of dividends and distributions and related
functions. In connection with services rendered to the Fund, PMFS receives an
annual fee per shareholder account, a new account set up fee for each
manually-established account and a monthly inactive zero balance account fee per
shareholder account. PMFS is also reimbursed for its out-of-pocket expenses,
including but not limited to postage, stationery, printing, allocable
communications and other costs.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, serves as the Fund's independent public accountants and in that capacity
audits the Fund's annual financial statements.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Manager is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions, if any. (For purposes of this section, the
term "Manager" includes the Subadviser.) The Fund does not normally incur any
brokerage commission expense on such transactions. In the market for money
market instruments, securities are generally traded on a "net" basis, with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount. On occasion, certain money market
instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Portfolio securities may not be purchased
from any underwriting or selling syndicate of which the Distributor, or an
affiliate (including Prudential Securities), during the existence of the
syndicate, is a principal underwriter (as defined in the Investment Company
Act), except in accordance with rules of the SEC. The Fund will not deal with
the Distributor or its affiliates on a principal basis.
In placing orders for portfolio securities of the Fund, the Manager is
required to give primary consideration to obtaining the most favorable price and
efficient execution. This means that the Manager will seek to execute each
transaction at a price and commission, if any, which provide the most favorable
total cost or proceeds reasonably attainable under the circumstances. While the
Manager generally seeks reasonably competitive spreads or commissions, the Fund
will not necessarily be paying the lowest spread or commission available. Within
the framework of this policy, the Manager may consider research and investment
services provided by brokers or dealers who effect or are parties to portfolio
transactions of the Fund, the Manager or the Manager's other clients. Such
research and investment services are those which brokerage houses customarily
provide to institutional investors and include statistical and economic data and
research reports on particular companies and industries. Such services are used
by the Manager in connection with all of its investment activities, and some of
such services obtained in connection with the execution of transactions for the
Fund may be used in managing other investment accounts. Conversely, brokers
furnishing such services may be selected for the execution of transactions for
such other accounts, whose aggregate assets are far larger than the Fund's, and
the services furnished by such brokers may be used by the Manager in providing
investment management for the Fund. While such services are useful and important
in supplementing its own research and facilities, the Manager believes that the
value of such services is not determinable and does not significantly reduce
expenses. The Fund does not reduce the advisory fee it pays to the Manager by
any amount that may be attributed to the value of such services.
Subject to the above considerations, Prudential Securities, as an affiliate
of the Fund, may act as a securities broker (or futures commission merchant) for
the Fund. In order for Prudential Securities to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration received
by Prudential Securities must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar
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securities being purchased or sold during a comparable period of time. This
standard would allow Prudential Securities to receive no more than the
remuneration which would be expected to be received by an unaffiliated broker in
a commensurate arm's-length transaction. Furthermore, the Board of Directors of
the Fund, including a majority of the Directors who are not "interested"
persons, has adopted procedures which are reasonably designed to provide that
any commissions, fees or other remuneration paid to Prudential Securities are
consistent with the foregoing standard. Brokerage transactions with Prudential
Securities are also subject to such fiduciary standards as may be imposed by
applicable law.
During the fiscal years ended June 30, 1997, 1998 and 1999, the Fund paid no
brokerage commissions.
CAPITAL STOCK AND ORGANIZATION
The Fund was incorporated in Maryland on October 20, 1989. Effective March
7, 1996, the Fund's name changed from Prudential-Bache Special Money Market
Fund, Inc. to Prudential Special Money Market Fund, Inc. The Fund is authorized
to issue 2 billion shares of common stock of $.001 par value, of which 1 billion
shares are authorized for the Money Market Series. The Board of Directors may
increase or decrease the number of authorized shares without approval by
shareholders. Shares of the Fund, when issued, are fully paid, nonassessable,
fully transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of the Fund under certain circumstances as described
under "Purchase and Redemption of Fund Shares--Sale of Shares--Involuntary
Redemption." All shares of the Fund are equal as to earnings, assets and voting
privileges. There are no conversion, preemptive or other subscription rights. In
the event of liquidation, each share of common stock of the Fund is entitled to
its portion of all of the Fund's assets after all debts and expenses of the Fund
have been paid. The Fund's shares do not have cumulative voting rights for the
election of Directors. Pursuant to the Fund's Articles of Incorporation, the
Board of Directors may authorize the creation of additional series of common
stock and classes within such series, with such preferences, privileges,
limitations and voting and dividend rights as the Board may determine.
The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold meetings of
shareholders unless, for example, the election of Directors is required to be
acted on by shareholders under the Investment Company Act. Shareholders have
certain rights, including the right to call a meeting upon a vote of 10% of the
Fund's outstanding shares for the purpose of voting on the removal of one or
more Directors or to transact any other business.
PURCHASE AND REDEMPTION OF FUND SHARES
PURCHASE OF SHARES
Shares of the Fund are offered to holders of Class B and Class C shares of
the Prudential Mutual Funds as part of their exchange privilege with a minimum
initial investment of $1,000 and a minimum subsequent investment of $100. As
part of their exchange privilege, shares of the Fund are also offered to
shareholders of certain Prudential money market funds who acquired their money
market fund shares prior to January 22, 1990 from a Prudential Mutual Fund
subject to a contingent deferred sales charge, provided that a minimum initial
investment of $1,000 is satisfied. Shares of the Fund may also be purchased
directly by investors for cash with a minimum initial investment of $1,000,000
and no minimum on subsequent investments. Shares of the Fund may also be
purchased by Individual Retirement Accounts, retirement plans for self-employed
individuals and employee benefit plans (collectively, Plans) with the proceeds
from any redemption of shares by such Plans from The Target Portfolio Trust.
There is no minimum investment requirement for the purchase of shares of the
Fund by Plans.
Application forms can be obtained from the Transfer Agent or the
Distributor. If a stock certificate is desired, it must be requested in writing
for each transaction. Certificates are issued only for full shares. Shareholders
who hold their shares through Prudential Securities will not receive stock
certificates.
The Fund reserves the right to reject any purchase order (including an
exchange into the Fund) or to suspend or modify the continuous offering of its
shares.
SALE OF SHARES
You can redeem your shares at any time for cash at the NAV next determined
after the redemption request is received in proper form (in accordance with
procedures established by the Transfer Agent in connection with investors'
accounts) by the Transfer Agent, the Distributor or your broker. In certain
cases, however, redemption proceeds will be reduced by the amount of
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any applicable CDSC imposed by the original fund. See "Contingent Deferred Sales
Charge" below. If you are redeeming your shares through a broker, your broker
must receive your sell order before the Fund computes its NAV for that day
(i.e., 4:30 p.m., New York time) in order to receive that day's NAV. Your broker
will be responsible for furnishing all necessary documentation to the
Distributor and may charge you for its services in connection with redeeming
shares of the Fund.
If you hold shares of the Fund through Prudential Securities, you must
redeem your shares by contacting your Prudential Securities financial adviser.
If you hold shares in non-certificate form, a written request for redemption
signed by you exactly as the account is registered is required. If you hold
certificates, the certificates, signed in the name(s) shown on the face of the
certificates, must be received by the Transfer Agent, the Distributor, or your
broker in order for the redemption request to be processed. If redemption is
requested by a corporation, partnership, trust or fiduciary, written evidence of
authority acceptable to the Transfer Agent must be submitted before such request
will be accepted. All correspondence and documents concerning redemptions should
be sent to the Fund in care of the Transfer Agent, Prudential Mutual Fund
Services LLC, Attention: Redemption Services, P.O. Box 15010, New Brunswick, New
Jersey 08906-5010, to the Distributor or to your broker.
Payment for shares presented for redemption will be made by check within
seven days after receipt by the Transfer Agent, the Distributor, or your broker
of the certificate and/or written request except as indicated below. If you hold
shares through a Dealer, payment for shares presented for redemption will be
credited to your account, unless you indicate otherwise. Such payment may be
postponed or the right of redemption suspended at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on such Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (d) during any other period when the Commission,
by order, so permits; provided that applicable rules and regulations of the
Commission shall govern as to whether the conditions described in (b), (c) or
(d) exist.
Payment of redemption proceeds of recently purchased shares will be delayed
until the Fund or its Transfer Agent has been advised that the purchase check
has been honored, which may take up to 10 calendar days from the time of receipt
of the purchase check by the Transfer Agent. Such delay may be avoided if shares
are purchased by wire or by certified or official bank check.
SIGNATURE GUARANTEE. If the proceeds of the redemption (a) exceed $50,000,
(b) are to be paid to a person other than the record owner, (c) are to be sent
to an address other than the address on the Transfer Agent's records, or (d) are
to be paid to a corporation, partnership, trust or fiduciary, the signature(s)
on the redemption request and on the certificates, if any, or stock power must
be guaranteed by an eligible guarantor institution. An eligible guarantor
institution includes any bank, broker, dealer or credit union. The Transfer
Agent reserves the right to request additional information from, and make
reasonable inquiries of, any eligible guarantor institution. For clients of
Pruco Securities Corporation (Prusec), a signature guarantee may be obtained
from the agency or office manager of most Prudential Insurance and Financial
Services or Preferred Services offices.
CHECK REDEMPTION. At your request, State Street Bank and Trust Company
(State Street) will establish a personal checking account for you. Checks drawn
on this account can be made payable to the order of any person in any amount
greater than $500. When such check is presented to State Street for payment,
State Street presents the check to the Fund as authority to redeem a sufficient
number of shares of the Fund in your account to cover the amount of the check
plus any applicable contingent deferred sales charges. If insufficient shares
are in the account or if the purchase was made by check within 10 calendar days,
the check will be returned marked "insufficient funds." Checks in an amount less
than $500 will not be honored. Shares for which certificates have been issued
cannot be redeemed by check. There is a service charge of $5.00 payable to PMFS
to establish a checking account and order checks.
EXPEDITED REDEMPTION. By pre-authorizing Expedited Redemption, you may
arrange to have payment for redeemed shares wired to your bank, normally on the
next business day following redemption. In order to use Expedited Redemption,
you may so designate at the time the initial investment is made or at a later
date. Once an Expedited Redemption authorization form has been completed, the
signature on the authorization form guaranteed as set forth above and the form
returned to PMFS, requests for redemption may be made by telegraph, letter or
telephone. To request Expedited Redemption by telephone, you should call PMFS at
(800) 225-1852. Calls must be received by PMFS before 4:30 p.m., New York time,
to permit redemption as of such date. Requests by letter should be addressed to
Prudential Mutual Fund Services LLC, Attention: Prudential Special Money Market
Fund, Inc., P.O. Box 15010, New Brunswick, New Jersey 08906-5010. A signature
guarantee is not required under Expedited Redemption once the authorization form
is properly completed and returned. The Expedited Redemption privilege may be
used to redeem shares in an amount of $200 or more, except that if an account
for which expedited redemption is requested
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has a net asset value of less than $200, the entire account must be redeemed.
The proceeds of redeemed shares in the amount of $1,000 or more are transmitted
by wire to your account at a domestic commercial bank which is a member of the
Federal Reserve System. Proceeds of less than $1,000 are forwarded by check to
your designated bank account. Any applicable contingent deferred sales charge
will be deducted from the proceeds of redeemed shares.
In periods of severe market or economic conditions, Expedited Redemptions
may be difficult to implement and shareholders should redeem their shares by
mail as described above.
REDEMPTION IN KIND. If the Board of Directors determines that it would be
detrimental to the best interests of the remaining shareholders of the Fund to
make payment wholly or partly in cash, the Fund may pay the redemption price in
whole or in part by a distribution in kind of securities from the investment
portfolio of the Fund, in lieu of cash, in conformity with applicable rules of
the Commission. Securities will be readily marketable and will be valued in the
same manner as in a regular redemption. If your shares are redeemed in kind, you
would incur transaction costs in converting the assets into cash. The Fund,
however, has elected to be governed by Rule 18f-1 under the Investment Company
Act, pursuant to which the Fund is obligated to redeem shares solely in cash up
to the lesser of $250,000 or 1% of the net asset value of the Fund during any
90-day period for any one shareholder.
INVOLUNTARY REDEMPTION. In order to reduce expenses of the Fund, the Board
of Directors may redeem all of the shares of any shareholder, other than a
shareholder which is an IRA or other tax-deferred retirement plan, whose account
has a NAV of less than $500 due to a redemption. The Fund will give any such
shareholder 60 days' prior written notice in which to purchase or acquire
sufficient additional shares to avoid such redemption. No CDSC will be imposed
on any involuntary redemption.
90-DAY REPURCHASE PRIVILEGE. If you redeem your shares and have not
previously exercised the repurchase privilege, you may reinvest any portion or
all of the proceeds of such redemption in shares of the Fund at the net asset
value next determined after the order is received, which must be within 90 days
after the date of the redemption. Any contingent deferred sales charge (CDSC)
paid in connection with such redemption will be credited (in shares) to your
account. (If less than a full repurchase is made, the credit will be on a PRO
RATA basis.) You must notify the Transfer Agent, either directly or through the
Distributor or your Dealer, at the time the repurchase privilege is exercised to
adjust your account for the CDSC you previously paid. Thereafter, any
redemptions will be subject to the CDSC applicable at the time of the
redemption. See "Contingent Deferred Sales Charge" below. Exercise of the
repurchase privilege will generally not affect federal tax treatment of any gain
realized upon redemption. However, if the redemption was made within a 30 day
period of the repurchase and if the redemption resulted in a loss, some or all
of the loss, depending on the amount reinvested, may not be allowed for federal
income tax purposes.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund are sold without any
sales charge. Shareholders who exchange into the Fund, however, are generally
subject to a contingent deferred sales charge imposed by the original fund upon
their redemption of shares of the Fund depending on the date of purchase of
shares of the original fund and the class of shares purchased, without regard to
the time shares were held in the Fund.
The following example is provided to assist an investor in understanding how
a contingent deferred sales charge is applied. Shareholders are advised to read
the prospectus of the original fund for a description of the applicable
contingent deferred sales charge. Shareholders may obtain copies of prospectuses
of the Prudential Mutual Funds by telephoning the Fund at (800) 225-1852 or by
writing to Prudential Mutual Fund Services LLC, P.O Box 15010, New Brunswick,
New Jersey 08906-5010.
For example, assume an investor purchased 100 Class B shares of a fund (the
original fund) (subject to a contingent deferred sales charge declining from 5%
to 1% over a period of six years) at $10 per share for a total cost of $1,000.
Subsequently, the shareholder acquired 5 additional shares of the original fund
through dividend reinvestment. During the second year after the original
purchase, the investor exchanged into the Fund. Assuming at the time of the
exchange, the net asset value of the original fund had appreciated to $12 per
share, the value of the investor's shares would be $1260 (105 shares at $12 per
share). Subsequently, the shareholder acquired 1 additional share of the Fund
through dividend reinvestment (1 share at $1.00 per share). In year three, the
investor decided to redeem $500 of his or her investment. A contingent deferred
sales charge would not be applied to the amount which represents appreciation
and the value of the reinvested dividend shares ($261). Therefore, $239 of the
redemption proceeds ($500 minus $261) would be charged at a rate of 4% (the
applicable contingent defined sales charge in the second year after purchase of
the original fund, I.E., without regard to the time shares were held in the
Fund) for a total contingent deferred sales charge of $9.56.
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NET ASSET VALUE
The Fund's net asset value per share is determined by subtracting its
liabilities from the value of its assets and dividing the remainder by the
number of outstanding shares.
The Fund uses the amortized cost method of valuation to determine the value
of its portfolio securities. In that regard, the Fund's Board of Directors has
determined to maintain a dollar-weighted average portfolio maturity of 90 days
or less, to purchase only instruments having remaining maturities of thirteen
months or less, and to invest only in securities determined by the investment
adviser under the supervision of the Board of Directors to be of minimal credit
risk and to be of "eligible quality" in accordance with regulations of the
Commission. The remaining maturity of an instrument held by the Fund that is
subject to a put is deemed to be the period remaining until the principal amount
can be recovered through demand or, in the case of a variable rate instrument,
the next interest reset date, if longer. The value assigned to the put is zero.
The Board of Directors also has established procedures designed to stabilize, to
the extent reasonably possible, the Fund's price per share as computed for the
purpose of sales and redemptions at $1.00. Such procedures will include review
of the Fund's portfolio holdings by the Board, at such intervals as deemed
appropriate, to determine whether the Fund's net asset value calculated by using
available market quotations deviates from $1.00 per share based on amortized
cost. The extent of any deviation will be examined by the Board, and if such
deviation exceeds 1/2 of 1%, the Board will promptly consider what action, if
any, will be initiated. In the event the Board of Directors determines that a
deviation exists which may result in material dilution or other unfair results
to investors or existing shareholders, the Board will take such corrective
action as it regards necessary and appropriate, including the sale of portfolio
instruments prior to maturity to realize gains or losses, the shortening of
average portfolio maturity, the withholding of dividends or the establishment of
net asset value per share by using available market quotations.
The Fund computes its net asset value at 4:30 p.m. New York time, on each
day the New York Stock Exchange (the Exchange) is open for trading except on
days on which no orders to purchase, sell or redeem shares have been received by
the Fund. In the event the New York Stock Exchange closes early on any business
day, the net asset value of the Fund's shares shall be determined at a time
between such closing and 4:30 p.m. New York time. The Exchange is closed on the
following holidays: New Year's Day, Martin Luther King Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
TAXES, DIVIDENDS AND DISTRIBUTIONS
The Fund has elected to qualify and intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. This relieves a fund (but not its shareholders) from paying
federal income tax on income which is distributed to shareholders, and, if a
fund did realize long-term capital gains, permits net capital gains of the fund
(i.e., the excess of net long-term capital gains over net short-term capital
losses) to be treated as long-term capital gains of the shareholders, regardless
of how long shareholders have held their shares in that fund.
Qualification as a regulated investment company requires, among other
things, that (a) at least 90% of a fund's annual gross income (without reduction
for losses from the sale or other disposition of securities or foreign
currencies) be derived from interest, dividends, payments with respect to
securities loans, and gains from the sale or other disposition of securities or
options thereon, or other income (including, but not limited to, gains from
options) derived with respect to its business of investing in such securities;
(b) a fund must diversify its holdings so that, at the end of each quarter of
the taxable year, (i) at least 50% of the market value of a fund's assets is
represented by cash, U.S. Government obligations and other securities limited in
respect of any one issuer to an amount not greater than 5% of the market value
of the fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than U.S. Government obligations) and (c)
the fund must distribute to its shareholders at least 90% of its net investment
income and net short-term gains (i.e., the excess of net short-term capital
gains over net long-term capital losses) in each year.
Gains or losses on sales of securities by the Fund will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year. The Fund does not anticipate realizing long-term capital
gains or losses. Other gains or losses on the sale of securities will be
short-term capital gains or losses. In addition, debt securities acquired by the
Fund may be subject to original issue discount and market discount rules.
The Fund is required to distribute 98% of its ordinary income in the same
calendar year in which it is earned. The Fund is also required to distribute
during the calendar year 98% of the capital gain net income it earned during the
twelve months ending on October 31 of such calendar year, as well as all
undistributed ordinary income and undistributed capital gain net income from
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the prior year or the twelve-month period ending on October 31 of such prior
year, respectively. To the extent it does not meet these distribution
requirements, the Fund will be subject to a non-deductible 4% excise tax on the
undistributed amount. For purposes of this excise tax, income on which the Fund
pays income tax is treated as distributed. The Fund intends to make timely
distributions in order to avoid this excise tax. For this purpose, dividends
declared in October, November and December payable to shareholders of record on
a specified date in October, November and December and paid in the following
January will be treated as having been received by shareholders on December 31
of the calendar year in which declared. Under this rule, therefore, a
shareholder may be taxed in the prior year on dividends or distributions
actually received in January of the following year.
It is anticipated that the net asset value per share of the Fund will remain
constant. However, if the net asset value per share fluctuates, a shareholder
may realize gain or loss upon the disposition of a share. Distributions of net
investment income and net short-term gains will be taxable to the shareholder at
ordinary income rates regardless of whether the shareholder receives such
distributions in additional shares or cash. Any gain or loss realized upon a
sale or redemption of shares by a shareholder who is not a dealer in securities
will generally be treated as long-term capital gain or loss if the shares have
been held for more than one year and otherwise as short-term capital gain or
loss. Any such loss, however, although otherwise treated as short-term capital
loss, will be treated as long-term capital loss to the extent of any capital
gain distributions received by the shareholder, if the shares have been held for
six months or less. Futhermore, certain rules may apply which would limit the
ability of the shareholder to recognize any loss if, for example, the
shareholder replaced the shares within 30 days of the disposition of the shares.
Because none of the Fund's net income is anticipated to arise from dividends on
common or preferred stock, none of its distributions to shareholders will be
eligible for the dividends received deduction for corporations under the
Internal Revenue Code.
Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Income tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is impossible to determine in advance the effective rate of
foreign tax to which the Fund will be subject, since the amount of the Fund's
assets to be invested in various countries is not known.
If the Fund is liable for foreign income taxes, and if more than 50% of the
value of the Fund's assets consists of securities of foreign corporations, the
Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign income taxes paid by the Fund, but there can be no assurance that the
Fund will be able to do so. If the Fund does elect to "pass through" the foreign
taxes paid, shareholders will be required to (i) include in gross income (in
addition to taxable dividends actually received) their PRO RATA share of the
foreign income taxes paid by the Fund; and (ii) treat their PRO RATA share of
foreign income taxes as paid by them. Shareholders will then be permitted either
to deduct their PRO RATA share of foreign income taxes in computing their
taxable income or to claim a foreign tax credit against U.S. income taxes. No
deduction for foreign taxes may be claimed by a shareholder who does not itemize
deductions. Foreign shareholders may not deduct or claim a credit for foreign
tax unless the dividends paid to them by the Fund are effectively connected with
a U.S. trade or business. Accordingly, a foreign shareholder may recognize
additional taxable income as a result of the Fund's election to pass through the
foreign taxes to shareholders.
The amount of foreign taxes for which a shareholder may claim a credit in
any year will generally be subject to a separate limitation for "passive income"
which includes, among other things, dividends, interest and certain foreign
currency gains. Gain from the sale of a security will be treated as derived from
sources within the United States, potentially reducing the amount allowable as a
credit under the limitation.
Each shareholder will be notified within 60 days after the close of the
Fund's taxable year whether the foreign taxes paid by the Fund will "pass
through" for that year and, if so, such notification will designate (a) the
shareholder's portion of the foreign taxes paid by the Fund and (b) the portion
of the dividend which represents income derived from foreign sources.
The tax consequences to a foreign shareholder entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are advised to consult their own tax advisers with respect
to the particular tax consequences to them of an investment in the Fund.
Under the laws of certain states, distributions of net income may be taxable
to shareholders as income even though a portion of such distributions may be
derived from interest on U.S. Government obligations which, if realized
directly, would be exempt from state income taxes. Shareholders are advised to
consult their tax advisers concerning the application of state and local taxes.
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CALCULATION OF YIELD
The Fund will prepare a current quotation of yield daily. The yield quoted
will be the simple annualized yield for an identified seven calendar day period.
The yield calculation will be based on a hypothetical account having a balance
of exactly one share at the beginning of the seven-day period. The base period
return will be the change in the value of the hypothetical account during the
seven-day period, including dividends declared on any shares purchased with
dividends on the shares, but excluding any capital changes, divided by the value
of the account at the beginning of the base period. The yield will vary as
interest rates and other conditions affecting money market instruments change.
Yield also depends on the quality, length of maturity and type of instruments in
the Fund's portfolio, and its operating expenses. The Fund also may prepare an
effective annual yield computed by compounding the unannualized seven-day period
return as follows: by adding 1 to the unannualized seven-day period return,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the
result.
Effective yield = [(base period return+1)TO THE POWER OF 365/7]-1
The yield and effective yield for the Fund based on the 7 days ended June
30, 1999 were % and %, respectively.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Morningstar Publications, Inc., IBC Financial Data,
Inc., The Bank Rate Monitor, other industry publications, business periodicals
and market indices.
The Fund's yield fluctuates, and an annualized yield quotation is not a
representation by the Fund as to what an investment in the Fund will actually
yield for any given period. Actual yields will depend upon not only changes in
interest rates generally during the period in which the investment in the Fund
is held, but also on changes in the Fund's expenses. Yield does not take into
account any federal or state income taxes.
B-18
<PAGE>
FINANCIAL STATEMENTS
[TO BE INSERTED HERE]
B-19
<PAGE>
APPENDIX I--DESCRIPTION OF SECURITY RATINGS
BOND RATINGS
MOODY'S INVESTORS SERVICE--Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than Aaa securities. Bonds
which are rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future. Moody's
applies numerical modifiers "1", "2" and "3" in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier "1" indicates that the company ranks in the higher end of its generic
rating category; the modifier "2" indicates a mid-range ranking; and the
modifier "3" indicates that the company ranks in the lower end of its generic
rating category.
STANDARD & POOR'S RATINGS GROUP--Debt rated AAA has the highest rating
assigned by S&P. Capacity to pay interest and repay principal is extremely
strong. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree. Debt
rated A has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
DUFF AND PHELPS CREDIT RATING CO.--The following summarizes the ratings used
by Duff & Phelps for long-term debt:
"AAA": Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
"AA+", "AA" or "AA-": High credit quality. Protection factors are strong.
Risk is modest but may vary slightly from time to time because of
economic conditions.
"A+", "A" or "A-": Protection factors are average but adequate. However,
risk factors are more variable and greater in periods of economic stress.
FITCH IBCA--The following summarizes the ratings used by Fitch IBCA for
long-term debt:
"AAA": Highest credit quality. "AAA" ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely affected by
foreseeable events.
"AA": Very high credit quality. "AA" ratings denote a very low
expectation of credit risk. They indicate very strong capacity for timely
payment of financial commitments. This capacity is not significantly
vulnerable to foreseeable events.
"A": High credit quality. "A" ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable to
changes in circumstances or in economic conditions than is the case for
higher ratings.
"BBB": Good credit quality. "BBB" ratings indicate that there is
currently a low expectation of credit risk. The capacity for timely
payment of financial commitments is considered adequate, but adverse
changes in circumstances and in economic conditions are more likely to
impair this capacity. This is the lowest investment grade category.
"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the "AAA" long-term rating
category or to categories below "CCC".
COMMERCIAL PAPER RATINGS
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year. Issuers rated "Prime-1" (or supporting institutions) have a
superior ability for
I-1
<PAGE>
repayment of senior short-term debt obligations. Issuers rated "Prime-2" (or
supporting institutions) have a strong ability for repayment of senior
short-term debt obligations. Issuers rated "Prime-3" (or supporting
institutions) have an acceptable ability for repayment of senior short-term
obligations.
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market. The
designation A-1 indicates that the degree of safety regarding timely payment is
strong. A "+" designation is applied to those issues rated A-1 which possess
extremely strong safety characteristics. Capacity for timely payment on issues
with the designation A-2 is satisfactory. However, the relative degree of safety
is not as high as for issues designated A-1. Issues carrying the designation A-3
have adequate capacity for timely payment. They are however, somewhat more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations.
The following summarizes the ratings used by Duff & Phelps for short-term
debt, which apply to all obligations with maturities of under one year,
including commercial paper.
D-1+: Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding and safety is just below risk-free U.S. Treasury short-term
obligations.
D-1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
D-1-: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
D-2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
D-3: Satisfactory liquidity and other protection factors qualify issue as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
The following summarizes the ratings used by Fitch IBCA for short-term debt,
which apply to most obligations with maturities of less than 12 months, or up to
three years for U.S. public finance securities:
"F1": Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" to denote any
exceptionally strong credit feature.
"F2": Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the case
of the higher ratings.
"F3": Fair credit quality. The capacity for timely payment of financial
commitments is adequate, however, near-term adverse changes could result in a
reduction to non-investment grade.
"B": Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in financial and
economic conditions.
"C": High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
"D": Default. Denotes actual or imminent payment default.
"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to short-term ratings other than
"F1".
I-2
<PAGE>
APPENDIX II--INFORMATION RELATING TO PRUDENTIAL
Set forth below is information relating to The Prudential Insurance Company
of America (Prudential) and its subsidiaries as well as information relating to
the Prudential Mutual Funds. See "How the Fund is Managed--Manager" in
Prudential Utility Fund's Prospectus and "How the Funds are Managed--Manager" in
the other Funds' Prospectus. The data will be used in sales materials relating
to the Prudential Mutual Funds. Unless otherwise indicated, the information is
as of December 31, 1997 and is subject to change thereafter. All information
relies on data provided by The Prudential Investment Corporation (PIC) or from
other sources believed by the Manager to be reliable. Such information has not
been verified by the Fund.
INFORMATION ABOUT PRUDENTIAL
The Manager and PIC(1) are subsidiaries of Prudential, which is one of the
largest diversified financial services institutions in the world and, based on
total assets, the largest insurance company in North America as of December 31,
1997. Principal products and services include life and health insurance, other
healthcare products, property and casualty insurance, securities brokerage,
asset management, investment advisory services and real estate brokerage.
Prudential (together with its subsidiaries) employs more than 79,000 persons
worldwide, and maintains a sales force of approximately 10,100 agents and 6,500
domestic and international financial advisors. Prudential is a major issuer of
annuities, including variable annuities. Prudential seeks to develop innovative
products and services to meet consumer needs in each of its business areas.
Prudential uses the rock of Gibraltar as its symbol. The Prudential rock is a
recognized brand name throughout the world.
INSURANCE. Prudential has been engaged in the insurance business since 1875.
It insures or provides financial services to nearly 40 million people worldwide.
Long one of the largest issuers of life insurance, Prudential has 25 million
life insurance policies in force today with a face value of almost $1 trillion.
Prudential has the largest capital base ($12.1 billion) of any life insurance
company in the United States. Prudential provides auto insurance for more than
1.5 million cars and insures approximately 1.2 million homes.
MONEY MANAGEMENT. Prudential is one of the largest pension fund managers in
the country, providing pension services to 1 in 3 Fortune 500 firms. It manages
$36 billion of individual retirement plan assets, such as 401(k) plans. As of
December 31, 1997, Prudential had more than $370 billion in assets under
management. Prudential Investments, a business group of Prudential (of which
Prudential Mutual Funds is a key part), manages over $211 billion in assets of
institutions and individuals. In INSTITUTIONAL INVESTOR, July 1998, Prudential
was ranked eighth in terms of total assets under management as of December 31,
1997.
REAL ESTATE. The Prudential Real Estate Affiliates is one of the leading
real estate residential and commercial brokerage networks in North America and
has more than 37,000 real estate brokers and agents with over 1,400 offices
across the United States.(2)
HEALTHCARE. Over two decades ago, Prudential introduced the first
federally-funded, for-profit HMO in the country. Today, approximately 4.9
million Americans receive healthcare from a Prudential managed care
membership.(3)
FINANCIAL SERVICES. The Prudential Savings Bank FSB, a wholly-owned
subsidiary of Prudential, has nearly $1 billion in assets and serves nearly 1.5
million customers across 50 states.
INFORMATION ABOUT THE PRUDENTIAL MUTUAL FUNDS
As of November 30, 1998, Prudential Investments Fund Management was the
eighteenth largest mutual fund company in the country, with over 2.5 million
shareholders invested in more than 50 mutual fund portfolios and variable
annuities with more than 3.7 million shareholder accounts.
The Prudential Mutual Funds have over 30 portfolio managers who manage over
$55 billion in mutual fund and variable annuity assets. Some of Prudential's
portfolio managers have over 20 years of experience managing investment
portfolios.
- ------------
(1)PIC serves as the Subadviser to substantially all of the Prudential
Mutual Funds. Wellington Management Company serves as the subadviser to Global
Utility Fund, Inc., Nicholas-Applegate Capital Management as the subadviser to
Nicholas-Applegate Fund, Inc., Jennison Associates LLC as one of the subadvisers
to Prudential Diversified Funds, Prudential 20/20 Focus Fund and The Prudential
Investment Portfolios, Inc. and Mercator Asset Management LP as the subadviser
to International Stock Series, a portfolio of Prudential World Fund, Inc. There
are multiple subadvisers for The Target Portfolio Trust.
(2)As of December 31, 1997.
(3)On December 10, 1998, Prudential announced its intention to sell
Prudential Health Care to Aetna Inc. for $1 billion.
II-1
<PAGE>
From time to time, there may be media coverage of portfolio managers and
other investment professionals associated with the Manager and the Subadviser in
national and regional publications, on television and in other media.
Additionally, individual mutual fund portfolios are frequently cited in surveys
conducted by national and regional publications and media organizations such as
THE WALL STREET JOURNAL, THE NEW YORK TIMES, BARRON'S and USA TODAY.
EQUITY FUNDS. Prudential Equity Fund is managed with a "value" investment
style by PIC. In 1995, Prudential Securities introduced Prudential Jennison
Growth Fund, a growth-style equity fund managed by Jennison Associates LLC, a
premier institutional equity manager and a subsidiary of Prudential.
HIGH YIELD FUNDS. Investing in high yield bonds is a complex and research
intensive pursuit. A separate team of high yield bond analysts monitor
approximately 200 issues held in the Prudential High Yield Fund (currently the
largest fund of its kind in the country) along with 100 or so other high yield
bonds, which may be considered for purchase.(4) Non-investment grade bonds, also
known as junk bonds or high yield bonds, are subject to a greater risk of loss
of principal and interest including default risk than higher-rated bonds.
Prudential high yield portfolio managers and analysts meet face-to-face with
almost every bond issuer in the High Yield Fund's portfolio annually, and have
additional telephone contact throughout the year.
Prudential's portfolio managers are supported by a large and sophisticated
research organization. Investment grade bond analysts monitor the financial
viability of different bond issuers in the investment grade corporate and
municipal bond markets-- from IBM to small municipalities, such as Rockaway
Township, New Jersey. These analysts consider among other things sinking fund
provisions and interest coverage ratios.
Prudential's portfolio managers and analysts receive research services from
almost 200 brokers and market service vendors. They also receive nearly 100
trade publications and newspapers--from PULP AND PAPER FORECASTER to WOMEN'S
WEAR DAILY--to keep them informed of the industries they follow.
Prudential Mutual Funds' traders scan over 100 computer monitors to collect
detailed information on which to trade. From natural gas prices in the Rocky
Mountains to the results of local municipal elections, a Prudential portfolio
manager or trader is able to monitor it if it's important to a Prudential Mutual
Fund.
Prudential Mutual Funds trade billions in U.S. and foreign government
securities a year. PIC seeks information from government policy makers.
Prudential's portfolio managers met with several senior U.S. and foreign
government officials, on issues ranging from economic conditions in foreign
countries to the viability of index-linked securities in the United States.
INFORMATION ABOUT PRUDENTIAL SECURITIES
Prudential Securities is the fifth largest retail brokerage firm in the
United States with approximately 6,000 financial advisors. It offers to its
clients a wide range of products, including Prudential Mutual Funds and
Annuities. As of December 31, 1998, assets held by Prudential Securities for its
clients approximated $268 billion. During 1998, over 31,000 new customer
accounts were opened each month at Prudential Securities.(5)
Prudential Securities has a two-year Financial Advisor training program plus
advanced education programs, including Prudential Securities "university," which
provides advanced education in a wide array of investment and financial planning
areas.
In addition to training, Prudential Securities provides its financial
advisors with access to firm economists and market analysts. It has also
developed proprietary tools for use by financial advisors, including the
Financial ArchitectsSFinancial Advisors to evaluate a client's objectives and
overall financial plan, and a comprehensive mutual fund information and analysis
system that compares different mutual funds.
For more complete information about any of the Prudential Mutual Funds,
including charges and expenses, call your Prudential Securities financial
adviser or Pruco/Prudential representative for a free prospectus. Read it
carefully before you invest or send money.
- ------------
(4)As of December 31, 1997. The number of bonds and the size of the Fund are
subject to change.
(5)As of December 31, 1998.
II-2
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a). Articles of Amendment and Restatement. Incorporated by reference to
Exhibit No. 1 to Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1A filed via EDGAR on August 26, 1997 (File No.
33-31603).
(b). By-Laws of the Registrant. Incorporated by reference to Exhibit No.
2 to Post-Effective Amendment No. 10 to the Registration Statement
on Form N-1A filed via EDGAR on August 26, 1997 (File No. 33-31603).
(c). Specimen stock certificate of the Registrant, $.001 par value per
share. Incorporated by reference to Exhibit No. 4 to Post-Effective
Amendment No. 10 to the Registration Statement on Form N-1A filed
via EDGAR on August 26, 1997 (File No. 33-31603).
(d). (i) Management Agreement between the Registrant (Money Market
Series) and Prudential Mutual Fund Management, Inc. Incorporated by
reference to Exhibit No. 5(a) to Post-Effective Amendment No. 10 to
the Registration Statement on Form N-1A filed via EDGAR on August
26, 1997 (File No. 33-31603).
(ii) Subadvisory Agreement between Prudential Mutual Fund
Management, Inc. and The Prudential Investment Corporation with
respect to the Money Market Series. Incorporated by reference to
Exhibit No. 5(b) to Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A filed via EDGAR on August 26,
1997 (File No. 33-31603).
(e). (i) Distribution Agreement, amended and restated as of April 12,
1995, between the Registrant and Prudential Mutual Fund
Distributors, Inc. Incorporated by reference to Exhibit No. 6 to
Post-Effective Amendment No. 8 to the Registration Statement on Form
N-1A filed via EDGAR on August 29, 1995 (File No. 33-31603).
(ii) Amendment to Distribution Agreements. Incorporated by reference
to Exhibit 6(b) to Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A filed via EDGAR on August 27,
1996 (File No. 33-31603).
(iii) Distribution Agreement between the Registrant and Prudential
Investment Management Services LLC. Incorporated by reference to
Exhibit No. 6(c) to Post-Effective Amendment No. 11 filed via EDGAR
on August 31, 1998 (File No. 33-31603).
(iv) Form of Dealer Agreement. Incorporated by reference to Exhibit
No. 6(d) to Post-Effective Amendment No. 11 filed via EDGAR on
August 31, 1998 (File No. 33-31603).
(f). Not applicable.
(g). Custodian Agreement, dated January 12, 1990, between the Registrant
and State Street Bank and Trust Company. Incorporated by reference
to Exhibit No. 8 to Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A filed via EDGAR on August 26,
1997 (File No. 33-31603).
(h). Transfer Agency and Service Agreement, dated January 12, 1990,
between the Registrant and Prudential Mutual Fund Services, Inc.
Incorporated by reference to Exhibit No. 9 to Post-Effective
Amendment No. 10 to the Registration Statement on Form N-1A filed
via EDGAR on August 26, 1997 (File No. 33-31603).
(i). Opinion of counsel. Incorporated by reference to Exhibit No. 10 to
Post-Effective Amendment No. 10 to the Registration Statement on
Form N-1A filed via EDGAR on August 26, 1997 (File No. 33-31603).
(j). Consent of Independent Accountants.*
(k). Not applicable.
(l). Not applicable.
(m). Not applicable.
(n). Not applicable.
(o). Not applicable.
- ------------------------
*To be filed by amendment.
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<PAGE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
As permitted by Section 17(h) and (i) of the Investment Company Act of 1940,
as amended (the 1940 Act), and pursuant to Article VI of the Fund's Articles of
Incorporation (Exhibit (a) to the Registration Statement) and Section 2-418 of
the Maryland General Corporation Law, officers, directors, employees and agents
of the Registrant will not be liable to the Registrant, any stockholder,
officer, director, employee, agent or other person for any action or failure to
act, except for bad faith, willful misfeasance, gross negligence or reckless
disregard of duties, and those individuals may be indemnified against
liabilities in connection with the Registrant, subject to the same exceptions.
Section 2-418 of Maryland General Corporation Law permits indemnification of
directors who acted in good faith and reasonably believed that the conduct was
in the best interests of the Registrant. As permitted by Section 17(i) of the
1940 Act, pursuant to Section 10 of the Distribution Agreement (Exhibit (e)(iii)
to the Registration Statement), the Distributor of the Registrant may be
indemnified against liabilities which it may incur, except liabilities arising
from bad faith, gross negligence, willful misfeasance or reckless disregard of
duties.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the Securities Act), may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in connection with the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person in connection with
the shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The Registrant has purchased an insurance policy insuring its officers and
directors against liabilities, and certain costs of defending claims against
such officers and directors, to the extent such officers and directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers and directors under certain circumstances.
Section 9 of the Management Agreement (Exhibit (d)(i) to the Registration
Statement) and Section 4 of the Subadvisory Agreement (Exhibit (d)(ii) to the
Registration Statement) limit the liability of Prudential Investments Fund
Management LLC (PIFM) and The Prudential Investment Corporation (PIC),
respectively, to liabilities arising from willful misfeasance, bad faith or
gross negligence in the performance of their respective duties or from reckless
disregard by them of their respective obligations and duties under the
agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its Articles of Incorporation, Management, Subadvisory and
Distribution Agreements in a manner consistent with Release No. 11330 of the
Securities and Exchange Commission under the 1940 Act so long as the
interpretation of Section 17(h) and 17(i) of such Act remains in effect and is
consistently applied.
Under Section 17(h) of the 1940 Act, it is the position of the staff of the
Securities and Exchange Commission that if there is neither a court
determination on the merits that the defendant is not liable nor a court
determination that the defendant was not guilty of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of one's office, no indemnification will be permitted unless an
independent legal counsel (not including a counsel who does work for either the
Registrant, its investment advisor, its principal underwriters or persons
affiliated with these persons) determines, based upon a review of the facts,
that the person in question was not guilty of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
Under its Articles of Incorporation, the Registrant may advance funds to
provide for indemnification. Pursuant to the Securities and Exchange Commission
staff's position on Section 17(h), advances will be limited in the following
respect:
(1) Any advances must be limited to amounts used, or to be used, for the
preparation and/or presentation of a defense to the action (including costs
connected with preparation of a settlement);
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<PAGE>
(2) Any advances must be accompanied by a written promise by, or on
behalf of, the recipient to repay that amount of the advance which exceeds the
amount to which it is ultimately determined that he is entitled to receive
from the Registrant by reason of indemnification;
(3) Such promise must be secured by a surety bond or other suitable
insurance; and
(4) Such surety bond or other insurance must be paid for by the recipient
of the advance.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
(a) Prudential Investments Fund Management LLC (PIFM)
See "How the Fund is Managed--Manager" in the Prospectus constituting Part A
of this Post-Effective Amendment to the Registration Statement and "Investment
Advisory and Other Services--Investment Adviser" in the Statement of Additional
Information constituting Part B of this Post-Effective Amendment to the
Registration Statement.
The business and other connections of the officers of PIFM are listed in
Schedules A and D of Form ADV of PIFM as currently on file with the Securities
and Exchange Commission, the text of which is hereby incorporated by reference
(File No. 801-31104).
The business and other connections of PIFM's directors and principal
executive officers are set forth below. The address of each person is Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIFM PRINCIPAL OCCUPATIONS
- -------------------- ------------------------------ -----------------------------------------------------------------
<S> <C> <C>
William V. Healey Executive Vice President, Executive Vice President, Secretary and General Counsel, PIFM
Secretary and Chief Legal
Officer
Robert F. Gunia Executive Vice President and Vice President, Prudential Investments; Executive Vice President
Treasurer and Treasurer, PIFM; Senior Vice President, Prudential
Securities
Neil A. McGuinness Executive Vice President Executive Vice President and Director of Marketing, PMF&A;
Executive Vice President, PIFM
John V. Scicutella Officer-in-Charge, Acting Acting President, PMF&A; Officer-in-Charge, Acting President,
President, Chief Executive Chief Executive Officer and Chief Operating Officer, PIFM
Officer and Chief Operating
Officer
</TABLE>
(b) The Prudential Investment Corporation (PIC)
See "How the Fund is Managed--Manager" in the Prospectus constituting Part A
of this Post-Effective Amendment to the Registration Statement and "Investment
Advisory and Other Services--Investment Adviser" in the Statement of Additional
Information constituting Part B of this Post-Effective Amendment to the
Registration Statement.
The business and other connections of PIC's directors and executive officers
are as set forth below. The address of each person is Prudential Plaza, Newark,
New Jersey 07102-4077.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
- -------------------- ------------------------- ----------------------------------------------------------------------
<S> <C> <C>
E. Michael Caulfield Chairman of the Board, Chief Executive Officer of Prudential Investments
President and Chief
Executive Officer and
Director
John R. Strangfeld Vice President and President of Private Asset Management Group of Prudential; Senior Vice
Director President of Prudential
</TABLE>
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<PAGE>
ITEM 27. PRINCIPAL UNDERWRITER.
(a) Prudential Investment Management Services LLC is distributor for
Prudential Government Securities Trust, The Target Portfolio Trust, Cash
Accumulation Trust, Command Government Fund, Command Money Fund, Command
Tax-Free Fund, Global Utility Fund, Inc., Nicholas-Applegate Fund, Inc.
(Nicholas-Applegate Growth Equity Fund), Prudential Balanced Fund, Prudential
California Municipal Fund, Prudential Developing Markets Fund, Prudential
Distressed Securities Fund, Inc., Prudential Diversified Bond Fund, Inc.,
Prudential Diversified Funds, Prudential Emerging Growth Fund, Inc., Prudential
Equity Fund, Inc., Prudential Equity Income Fund, Prudential Europe Growth Fund,
Inc., Prudential Global Genesis Fund, Inc., Prudential Global Limited Maturity
Fund, Inc., The Global Total Return Fund, Inc., Prudential High Yield Fund,
Inc., Prudential Index Series Fund, Prudential MoneyMart Assets Inc., Prudential
Natural Resources Fund, Inc., Prudential Government Income Fund, Inc.,
Prudential High Yield Total Return Fund, Inc., Prudential International Bond
Fund, Inc., Prudential Institutional Liquidity Portfolio, Inc., Prudential
Intermediate Global Income Fund, Inc., The Prudential Investment Portfolios,
Inc., Prudential Mid-Cap Value Fund, Prudential Municipal Bond Fund, Prudential
Municipal Series Fund, Prudential National Municipals Fund, Inc., Prudential
Pacific Growth Fund, Inc., Prudential Real Estate Securities Fund, Prudential
Small-Cap Quantum Fund, Inc., Prudential Small Company Value Fund, Inc.,
Prudential Special Money Market Fund, Inc., Prudential Structured Maturity Fund,
Inc., Prudential Tax-Free Money Fund, Inc., Prudential Tax-Managed Equity Fund,
Prudential 20/20 Focus Fund, Prudential Utility Fund, Inc. and Prudential World
Fund, Inc.
(b) Information concerning the Directors and officers of Prudential
Investment Management Services LLC is set forth below:
<TABLE>
<CAPTION>
POSITIONS AND
POSITIONS AND OFFICES OFFICES WITH
NAME(1) WITH UNDERWRITER REGISTRANT
- ---------------------- ----------------------------------------- ------------------
<S> <C> <C>
Robert F. Gunia....... President Vice President
and Director
John R. Strangfeld, Executive Vice President President and
Jr.................... Director
William V. Healy...... Senior Vice President, Secretary and None
Chief Legal Officer
Kevin Frawley......... Senior Vice President and Chief None
Compliance Officer
Margaret Deverell..... Vice President and Chief Financial None
Officer
Brian Henderson....... Senior Vice President and Chief Operating None
Officer
</TABLE>
(1) The address of each named is Prudential Plaza, 751 Broad Street,
Newark, New Jersey 07102, unless otherwise indicated.
(c) Registrant has no principal underwriter who is not an affiliated person
of the Registrant.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder are maintained at the offices of
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts, The Prudential Investment Corporation, Prudential Plaza, 751
Broad Street, Newark, New Jersey, the Registrant, Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102-4077, and Prudential Mutual Fund
Services LLC, Raritan Plaza One, Edison, New Jersey. Documents required by Rules
31a-1(b)(4), (5), (6), (7), (9), (10) and (11) and 31a-1(d) and (f) will be kept
at Gateway Center Three, and the remaining accounts, books and other documents
required by such other pertinent provisions of Section 31(a) and the Rules
promulgated thereunder will be kept by State Street Bank and Trust Company and
Prudential Mutual Fund Services LLC.
ITEM 29. MANAGEMENT SERVICES.
Other than as set forth under the captions "How the Fund is Managed--Manager"
and "How the Fund is Managed--Distributor" in the Prospectus and the caption
"Investment Advisory and Other Services" in the Statement of Additional
Information, constituting Parts A and B, respectively, of this Post-Effective
Amendment to the Registration Statement, Registrant is not a party to any
management-related service contract.
ITEM 30. UNDERTAKINGS.
None.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Newark, and
State of New Jersey, on the 2nd day of July, 1999.
PRUDENTIAL SPECIAL MONEY MARKET FUND, INC.
By: /s/ John R. Strangfeld
-----------------------------------------------
JOHN R. STRANGFELD, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------------------- -----------------
<S> <C> <C>
/s/ Edward D. Beach Director July 2,1999
- ------------------------------------
EDWARD D. BEACH
/s/ Delayne D. Gold Director July 2,1999
- ------------------------------------
DELAYNE D. GOLD
/s/ Robert F. Gunia Director July 2,1999
- ------------------------------------
ROBERT F. GUNIA
/s/ Don G. Hoff Director July 2,1999
- ------------------------------------
DON G. HOFF
/s/ Robert E. LaBlanc Director July 2, 1999
- ------------------------------------
ROBERT E. LABLANC
/s/ Robin B. Smith Director July 2, 1999
- ------------------------------------
ROBIN B. SMITH
/s/ Stephen D. Stoneburn Director July 2, 1999
- ------------------------------------
STEPHEN D. STONEBURN
/s/ John R. Strangfeld Director and President July 2, 1999
- ------------------------------------
JOHN R. STRANGFELD
/s/ Nancy H. Teeters Director July 2, 1999
- ------------------------------------
NANCY H. TEETERS
/s/ Grace C. Torres Treasurer and Principal Financial July 2, 1999
- ------------------------------------ and Accounting Officer
GRACE C. TORRES
</TABLE>
<PAGE>
EXHIBIT INDEX
(a).Articles of Amendment and Restatement. Incorporated by reference to
Exhibit No. 1 to Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1A filed via EDGAR on August 26, 1997 (File No.
33-31603).
(b).By-Laws of the Registrant. Incorporated by reference to Exhibit No. 2
to Post-Effective Amendment No. 10 to the Registration Statement on
Form N-1A filed via EDGAR on August 26, 1997 (File No. 33-31603).
(c).Specimen stock certificate of the Registrant, $.001 par value per
share. Incorporated by reference to Exhibit No. 4 to Post-Effective
Amendment No. 10 to the Registration Statement on Form N-1A filed via
EDGAR on August 26, 1997 (File No. 33-31603).
(d).(i) Management Agreement between the Registrant (Money Market Series)
and Prudential Mutual Fund Management, Inc. Incorporated by reference
to Exhibit No. 5(a) to Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A filed via EDGAR on August 26,
1997 (File No. 33-31603).
(ii) Subadvisory Agreement between Prudential Mutual Fund Management,
Inc. and The Prudential Investment Corporation with respect to the
Money Market Series. Incorporated by reference to Exhibit No. 5(b) to
Post-Effective Amendment No. 10 to the Registration Statement on Form
N-1A filed via EDGAR on August 26, 1997 (File No. 33-31603).
(e).(i) Distribution Agreement, amended and restated as of April 12,
1995, between the Registrant and Prudential Mutual Fund Distributors,
Inc. Incorporated by reference to Exhibit No. 6 to Post-Effective
Amendment No. 8 to the Registration Statement on Form N-1A filed via
EDGAR on August 29, 1995 (File No. 33-31603).
(ii) Amendment to Distribution Agreements. Incorporated by reference
to Exhibit 6(b) to Post-Effective Amendment No. 9 to the Registration
Statement on Form N-1A filed via EDGAR on August 27, 1996 (File No.
33-31603).
(iii) Distribution Agreement between the Registrant and Prudential
Investment Management Services LLC. Incorporated by reference to
Exhibit No. 6(c) to Post-Effective Amendment No. 11 filed via EDGAR
on August 31, 1998 (File No. 33-31603).
(iv) Form of Dealer Agreement. Incorporated by reference to Exhibit
No. 6(d) to Post-Effective Amendment No. 11 filed via EDGAR on August
31, 1998 (File No. 33-31603).
(f).Not applicable.
(g).Custodian Agreement, dated January 12, 1990, between the Registrant
and State Street Bank and Trust Company. Incorporated by reference to
Exhibit No. 8 to Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1A filed via EDGAR on August 26, 1997 (File No.
33-31603).
(h).Transfer Agency and Service Agreement, dated January 12, 1990,
between the Registrant and Prudential Mutual Fund Services, Inc.
Incorporated by reference to Exhibit No. 9 to Post-Effective
Amendment No. 10 to the Registration Statement on Form N-1A filed via
EDGAR on August 26, 1997 (File No. 33-31603).
(i).Opinion of counsel. Incorporated by reference to Exhibit No. 10 to
Post-Effective Amendment No. 10 to the Registration Statement on Form
N-1A filed via EDGAR on August 26, 1997 (File No. 33-31603).
(j).Consent of Independent Accountants.*
(k).Not applicable.
(l).Not applicable.
(m).Not applicable.
(n).Not applicable.
(o).Not applicable.
- ------------------------
*To be filed by amendment.
