<PAGE>
(ICON)
Prudential Special Money Market Fund, Inc.--
Money Market Series
Semi-Annual Report
December 31, 1999
(LOGO)
<PAGE>
A Message from the Fund's President February 3, 2000
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(PHOTO)
Dear Shareholder,
I am pleased to report that Prudential Special Money Market Fund--Money Market
Series maintained a stable $1 net asset value and provided a competitive yield
during the six-month period that ended on December 31, 1999. On that date, its
seven-day current yield was 5.41%, above the 5.15% for the average money market
fund as measured by IBC Financial Data.
The Fund took advantage of good buying opportunities that emerged as money
market yields climbed. This trend toward higher yields occurred as the Federal
Reserve tightened monetary policy to slow U.S. economic growth. There were also
attractively priced money market securities available as some companies rushed
to complete their year-end borrowing early. This was done to avoid
complications that might have occurred if computers malfunctioned when
changing their internal dates from 1999 to 2000.
The following report takes a closer look at developments in the money markets
during our fiscal half year, and explains how the Fund was positioned
accordingly.
High-quality investments to help reduce risk
Having a conservative, high-quality investment alternative, such as a money
market fund, made good sense for most investors amid the highly volatile
conditions in financial markets during 1999. Indeed, most investors should have
a money market fund. For any of life's unexpected events, it is comforting to
have quick access to your money and an investment vehicle that provides safety
of principal and liquidity.
Thank you for your continued confidence in Prudential mutual funds.
Sincerely,
John R. Strangfeld
President
Prudential Special Money Market Fund, Inc.--Money Market Series
<PAGE>
Performance Review
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(PHOTOS)
Team Portfolio managers Joseph
Tully (Money Market [Sector] Team
Leader) and Robert Browne
Investment Goals and Style
Prudential Special Money Market Fund, Inc.--Money Market Series seeks high
current income consistent with the preservation of principal and liquidity. The
Fund is a diversified portfolio of high-quality, U.S. dollar-denominated money
market securities issued by the U.S. government and its agencies, and major
corporations and commercial banks of the United States and foreign countries.
Maturities can range from one day to a maximum of 13 months. There can be no
assurance that the Fund will achieve its investment objective.
The Fed tried to rein in U.S. economic growth
Shortly after the Fund's six-month reporting period began in July 1999, there
was renewed concern that the U.S. economy continued to grow rapidly enough to
ignite higher inflation. Even though inflationary pressures remained relatively
tame in 1999, investors were still wary because of the tight job market and
rising oil prices. The Federal Reserve had recently hiked its main short-term
interest rate to slow the economic expansion and reduce economic imbalances
that could lead to mounting inflation. However, some investors believed the
Fed would soon have to act again.
They did not have long to wait. On August 24, 1999, the Fed raised its federal
funds rate (what U.S. banks charge each other for overnight loans) by another
quarter of a percentage point to 5.25%. Investors had driven money market
yields higher in anticipation of this second change in monetary policy, and
yields continued to rise after the Fed moved. We took advantage of this trend
by locking in attractive yields on securities of banks and corporations
maturing in 13 months. Our purchases caused the Fund's weighted average
maturity (WAM) to lengthen in August and September. (WAM is a measurement tool
that determines a fund's sensitivity to changes in the level of interest rates.
It takes into account the maturity level of each security held by a fund.)
Y2K computer anxieties created buying opportunities
Repeated changes in U.S. monetary policy were just one of the concerns that
affected money markets in the second half of 1999. Corporate treasurers, among
others, wanted to minimize any risk that computers might malfunction at the end
of the year when they tried to switch their internal dates from 1999 to 2000.
Accordingly, some banks and corporations rushed to complete their year-end
borrowing early. For example, in the summer of 1999, they began to issue an
unusually large amount of money market securities with interest rates that
adjusted periodically, based on London Interbank Offered Rates. (LIBORs are
widely quoted money market yields.) These securities provided unusually
attractive yield spreads in order to entice investors. We took advantage of
this buying opportunity, increasing adjustable-rate securities to nearly 40% of
the Fund's total investments in late 1999--up from roughly 30% earlier in the
year. These inexpensively priced adjustable-rate securities should help
the Fund to be advantageously positioned heading into 2000.
<PAGE>
We jumped the gun
We also prepared the Fund to accommodate normal year-end shareholder liquidity
needs and any additional withdrawals that might occur due to potential year
2000 computer difficulties. In October, we purchased securities that matured at
the end of 1999 so the Fund could have enough cash on hand at that potentially
volatile time of year. In hindsight, we should have waited until early
December. The Federal Reserve had hiked the federal funds rate by another
quarter of a percentage point to 5.50% in mid-November. As a result, money
market yields were much higher in early December than in October, and
securities maturing at the end of the year were priced more attractively.
Nevertheless, in December 1999, we were able to buy attractively priced
securities maturing in February and March 2000. These purchases enhanced the
Fund's yield and allowed us to avoid having to invest during the
lower-interest-rate environment that typically occurs in early January.
Performance at a Glance
Fund Facts As of 12/31/99
<TABLE>
<CAPTION>
7-Day Net Asset Weighted Avg. Net Assets
Current Yield Value (NAV) Maturity (WAM) (Millions)
<S> <C> <C> <C> <C>
Special Money Market Fund, Inc.-- 5.41% $1.00 49 Days $309
Money Market Series
IBC Financial Data Money
Fund (General Purpose) Avg.* 5.15% $1.00 53 Days N/A
</TABLE>
Note: Yields will fluctuate from time to time, and past performance is not
indicative of future results. An investment in the Fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
* International Business Communications (IBC) Financial Data reports a
seven-day current yield, NAV, and WAM on Tuesdays. This is the data of all
funds in the IBC Money Fund (General Purpose--Taxable 1st & 2nd Tier) Average
category as of December 28, 1999, the closest date to the end of our reporting
period.
Money Fund Yield Comparison
(GRAPH)
1
<PAGE>
Review Cont'd.
- -------------------------------------------------------------------------------
Transition from 1999 to 2000 proceeded smoothly
As it turned out, the financial markets did not experience any major computer
problems as the year changed, and few glitches arose elsewhere. Corporations
and financial companies had spent heavily to correct any potential computer
problems. More importantly, both the Fed and the U.S. Treasury had taken steps
to ensure that banks, thrifts, and credit unions in the United States would
have access to extra liquidity, if needed, at the end of 1999. As the year-end
pressures quickly subsided, we reduced the Fund's cash position.
Looking Ahead
We expect more short-term rate hikes
Continued heavy spending by consumers and a strong domestic labor market have
heightened the risk of rising inflation in the U.S. economy. Therefore, we
expect the Fed to tighten monetary policy on more than one occasion in 2000.
Weighted Average Maturity Compared to the Average Money Market Fund
(GRAPH)
Additional Performance Tracking Tools
You can access comprehensive information about the performance of your
Prudential mutual fund 24 hours a day through our website and automated phone
service. At www.prudential.com/investing, you'll find the daily closing values,
changes from the previous day, and quarterly performance for all of our retail
mutual funds. Other available resources include daily, monthly, and quarterly
market commentary.
Daily fund values are also a toll-free call away from any touch-tone phone.
Call (800) 225-1852 and follow the voice prompts to obtain mutual fund closing
values and yields. You can even set up a personalized "watch list" to track
specific Prudential mutual funds.
2
<PAGE>
Portfolio of Investments as of PRUDENTIALSPECIAL MONEY MARKET FUND, INC.
December 31, 1999 (Unaudited) MONEY MARKET SERIES
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Bank Notes--14.2%
American Express Centurion Bank
$1,000 5.13%, 1/3/00(a) $ 1,000,000
2,000 6.43875%, 1/10/00(a) 2,000,000
Comerica Bank
4,000 6.36125%, 1/13/00(a) 3,998,848
First Bank National Associates
2,500 6.4825%, 1/19/00(a) 2,500,508
First Union National Bank
3,000 6.015%, 3/10/00(a) 3,000,000
12,400 6.27%, 11/13/00(a) 12,414,879
Key Bank N.A.
5,000 5.125%, 3/24/00 4,998,855
4,000 6.23625%, 7/17/00(a) 4,001,598
National City Bank of Cleveland
4,200 6.65625%, 1/10/00(a) 4,203,743
Northern Trust Company Bank
6,000 5.10%, 2/22/00 5,999,671
------------
44,118,102
- ------------------------------------------------------------
Certificates Of Deposit - Domestic--8.4%
Chase Manhattan Bank
10,000 5.365%, 5/22/00 9,997,757
Royal Bank of Canada
5,000 4.97%, 2/4/00 4,999,820
Toronto Dominion
6,000 5.00%, 2/4/00 5,999,457
5,000 5.02%, 2/4/00 4,999,865
------------
25,996,899
- ------------------------------------------------------------
Certificates Of Deposit - Yankee--4.9%
Credit Communal De Belgique S.A.
10,000 6.06%, 1/31/00 10,000,000
Deutsche Bank
5,000 4.98%, 2/2/00 4,999,873
------------
14,999,873
Commercial Paper--38.8%
Alliance & Leicester PLC
$10,000 5.87%, 2/28/00 $ 9,905,428
Associates First Capital Corp.
4,600 6.40%, 1/31/00 4,575,467
BankAmerica Corp.
3,000 6.5213%, 3/29/00(a) 3,002,937
Barton Capital Corp.
10,000 6.20%, 1/20/00 9,967,278
Blue Ridge Asset Funding
5,000 7.00%, 1/5/00 4,996,111
5,000 6.70%, 2/11/00 4,961,847
Coca-Cola Enterprises, Inc.
504 6.50%, 1/28/00 501,543
Cregem North America Inc.
538 6.03%, 3/13/00 531,512
Finova Capital Corp.
5,000 6.25%, 3/10/00 4,940,104
Forrestal Funding Master Trust
950 6.15%, 3/10/00 938,802
Gannett Inc.
2,800 6.60%, 1/26/00 2,787,167
General Electric Capital Corp.
4,200 6.40%, 1/31/00 4,177,600
General Electric Capital
International Funding
10,400 5.97%, 3/10/00 10,280,999
General Motors Acceptance Corp.
10,595 5.88%, 2/10/00 10,525,779
GTE Funding, Inc.
5,000 6.50%, 2/3/00 4,970,208
Int'l Nederlanden U.S. Funding
Corp
4,700 5.895%, 3/20/00 4,639,200
MCI Worldcom Inc.
1,750 6.15%, 1/19/00 1,744,619
Morgan Stanley Group, Inc.
3,203 5.98%, 2/25/00 3,173,737
Nationwide Building Society
8,156 6.00%, 2/4/00 8,109,783
Nordbanken North America, Inc.
3,398 5.85%, 2/7/00 3,377,570
</TABLE>
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See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of PRUDENTIALSPECIAL MONEY MARKET FUND, INC.
December 31, 1999 (Unaudited) MONEY MARKET SERIES
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Commercial Paper (cont'd.)
PNC Funding Corp.
$3,000 6.20%, 1/31/00 $ 2,984,500
2,000 5.93%, 2/18/00 1,984,187
10,000 5.91%, 2/22/00 9,914,633
Thunder Bay Funding Inc.
2,928 6.21%, 1/21/00 2,917,898
Unifunding Inc.
$4,007 5.50%, 1/7/00 4,003,327
------------
119,912,236
- ------------------------------------------------------------
Other Corporate Obligations--32.3%
Associates Corp. of North America
8,100 6.4103%, 1/31/00(a) 8,097,211
1,900 6.00%, 3/15/00 1,901,489
Bank One Corp.
3,000 6.15375%, 2/22/00(a) 3,000,000
3,300 6.18%, 3/13/00(a) 3,300,789
Chrysler Financial Corp.
3,000 6.13%, 12/11/00 2,998,275
Citicorp
1,000 6.5125%, 8/2/00(a) 1,000,000
Commercial Credit Group Inc.
2,500 5.75%, 7/15/00 2,500,230
Conseco Finance Vehicle Trust
2,000 6.6213%, 1/18/00(a) 2,000,000
DaimlerChrysler
8,000 6.3568%, 7/6/00(a) 7,994,672
First Chicago Corp.
9,800 6.13%, 11/17/00(a) 9,802,317
First Union Corp.
2,600 6.60%, 6/15/00 2,611,074
Ford Motor Credit Co.
11,000 6.0375%, 8/18/00(a) 10,994,399
Goldman Sachs Group LP
13,000 6.0025%, 5/15/00(a)
(cost $13,000,000; date
purchased 6/25/97)(c) 13,000,000
International Lease Finance Corp.
3,685 6.625%, 8/15/00 3,701,752
Restructured Asset Securities
98MM12-3
6,000 6.5688%, 1/10/00(a)
(cost $6,000,000; date
purchased 12/23/98)(c) 6,000,000
Restructured Asset Securities
Enhanced 99-25MM-MBS
$6,000 6.5588%, 1/6/00(a)
(cost $6,000,000; date
purchased 9/2/99)(c) $ 6,000,000
Strategic Money Market Trust
1998-E
4,000 6.1813%, 3/15/00(a) 4,000,000
Strategic Money Market Trust
1999-B
6,000 6.5613%, 1/18/00(a) 6,000,000
U.S. Bancorp
5,000 6.5325%, 1/20/00(a) 4,998,230
------------
99,900,438
- ------------------------------------------------------------
Total Investments--98.6%
(amortized cost $304,927,548(b)) 304,927,548
Other assets in excess of
liabilities--1.4% 4,310,014
------------
Net Assets--100% $309,237,562
------------
------------
</TABLE>
- ---------------
(a) Variable rate instrument. The maturity date presented for these instruments
is the later of the next date on which the security can be redeemed at par
or the next date on which the rate of interest is adjusted.
(b) The cost basis for federal income tax purposes is the same as that used for
financial statement purposes.
(c) Private placement restricted as to resale and does not have a readily
available market. The aggregate cost of such securities is $25,000,000. The
aggregate value ($25,000,000) is approximately 8.1% of net assets.
The industry classification of portfolio holdings shown as a percentage of net
assets as of December 31, 1999 was as follows:
<TABLE>
<S> <C>
Banks 47.4%
Asset-Backed Securities 14.8
Business Credit Institutions 8.2
Motor Vehicle Parts 7.0
Bank Holding Companies-Domestic 6.0
Personal Credit Institutions 5.5
Security Brokers & Dealers 5.2
Electric, Industrial 2.2
Equipment Rental & Leasing 1.2
Newspaper Publishing 0.9
Beverages 0.2
-----
98.6
Other assets in excess of liabilities 1.4
-----
100%
-----
-----
</TABLE>
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See Notes to Financial Statements. 4
<PAGE>
Statement of Assets and Liabilities PRUDENTIAL SPECIAL MONEY MARKET FUND, INC.
(Unaudited) MONEY MARKET SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets December 31, 1999
<S> <C>
Investments, at amortized cost which approximates market value.......................................... $ 304,927,548
Receivable for Series shares sold....................................................................... 4,392,909
Interest receivable..................................................................................... 2,983,268
Prepaid expenses........................................................................................ 7,664
-----------------
Total assets......................................................................................... 312,311,389
-----------------
Liabilities
Bank overdraft.......................................................................................... 158,801
Payable for Series shares reacquired.................................................................... 2,662,932
Management fee payable.................................................................................. 128,401
Accrued expenses........................................................................................ 81,359
Dividends payable....................................................................................... 42,334
-----------------
Total liabilities.................................................................................... 3,073,827
-----------------
Net Assets.............................................................................................. $ 309,237,562
-----------------
-----------------
Net assets were comprised of:
Common stock, $0.001 par value per share............................................................. $ 309,238
Paid-in capital in excess of par..................................................................... 308,928,324
-----------------
Net assets, December 31, 1999........................................................................... $ 309,237,562
-----------------
-----------------
Net asset value, offering price and redemption price per share
($309,237,562 / 309,237,562 shares of common stock issued and outstanding; two billion shares
authorized).......................................................................................... $1.00
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL SPECIAL MONEY MARKET FUND, INC.
MONEY MARKET SERIES
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income December 31, 1999
<S> <C>
Income
Interest and discount earned.......... $ 9,172,201
-----------------
Expenses
Management fee........................ 832,655
Transfer agent's fees and expenses.... 150,000
Custodian's fees and expenses......... 38,000
Reports to shareholders............... 28,000
Registration fees..................... 25,000
Audit fee............................. 13,000
Legal fees............................ 8,000
Directors' fees....................... 6,000
Insurance expense..................... 2,000
Miscellaneous......................... 728
-----------------
Total expenses..................... 1,103,383
-----------------
Net investment income.................... 8,068,818
Realized Gain on Investments
Net realized gain on investment
transactions.......................... 1,848
-----------------
Net Increase in Net Assets
Resulting from Operations................ $ 8,070,666
-----------------
-----------------
</TABLE>
PRUDENTIAL SPECIAL MONEY MARKET FUND, INC.
MONEY MARKET SERIES
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) December 31, June 30,
in Net Assets 1999 1999
<S> <C> <C>
Operations
Net investment income....... $ 8,068,818 $ 15,534,970
Net realized gain on
investment
transactions............. 1,848 21,888
------------- ---------------
Net increase in net assets
resulting from
operations............... 8,070,666 15,556,858
------------- ---------------
Dividends and distributions
paid to shareholders (Note
1).......................... (8,070,666) (15,556,858)
------------- ---------------
Series share transactions
(at $1 per share)
Proceeds from shares sold... 723,995,146 1,651,788,988
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions........ 6,886,321 12,820,482
Cost of shares reacquired... (742,167,739) (1,558,565,530)
------------- ---------------
Net increase (decrease) in
net assets from Series
share transactions....... (11,286,272) 106,043,940
------------- ---------------
Total increase (decrease)...... (11,286,272) 106,043,940
Net Assets
Beginning of period............ 320,523,834 214,479,894
------------- ---------------
End of period.................. $ 309,237,562 $ 320,523,834
------------- ---------------
------------- ---------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
Notes to Financial Statements PRUDENTIAL SPECIAL MONEY MARKET FUND, INC.
(Unaudited) MONEY MARKET SERIES
- --------------------------------------------------------------------------------
Prudential Special Money Market Fund, Inc. (the 'Fund') is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company consisting of only the Money Market Series (the 'Series'). Investment
operations of the Series commenced on January 22, 1990.
The investment objective of the Series is high current income consistent with
the preservation of principal and liquidity. The Series invests in a diversified
portfolio of high quality money market securities maturing in 13 months or less.
The ability of issuers of securities held by the Series to meet their
obligations may be affected by economic developments in a specific industry or
region.
- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Securities Valuation: Portfolio securities are valued at amortized cost, which
approximates market value. The amortized cost method of valuation involves
valuing a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of the difference between the principal amount
due at maturity and cost. If the amortized cost method is determined not to
represent fair value, the value shall be determined by or under the discretion
of the Board of Trustees.
The Fund may hold up to 10% of its net assets in illiquid securities, including
those which are restricted as to disposition under securities law ('restricted
securities'). None of the issues of restricted securities held by the Fund at
December 31, 1999 include registration rights under which the Fund may demand
registration by the issuer.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Interest income is recorded on the
accrual basis. Expenses are recorded on the accrual basis which may require the
use of certain estimates by management. Net investment income of the Series
consists of accrued interest and amortizations of premiums and discounts, plus
or minus any gains or losses realized on sales of portfolio securities, and less
the estimated expenses of the Series applicable to the dividend period.
Federal Income Taxes: It is the intent of the Fund to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable net income to its shareholders.
Therefore, no federal income tax provision is required. The cost of portfolio
securities for federal income tax purposes is substantially the same as the cost
for financial reporting purposes.
Dividends and Distributions: The Fund declares daily and pays monthly dividends
from net investment income and short-term capital gains.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM has entered into a subadvisory agreement with The Prudential
Investment Corporation ('PIC'); PIC furnishes investment advisory services in
connection with the management of the Fund. PIFM pays for the cost of the
subadviser's services, the compensation of officers and employees of the Fund,
occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears
all other costs and expenses.
The management fee paid to PIFM is computed daily and payable monthly at an
annual rate of .50% of the average daily net assets of the Fund.
The Fund has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS'), where PIMS acts as the distributor of the shares of the
Series and serves the Fund without compensation.
PIFM, PIC and PIMS are wholly owned subsidiaries of The Prudential Insurance
Company of America.
- ------------------------------------------------------------
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Servicies LLC ('PMFS'), a wholly owned subsidiary of
PIFM, serves as the Fund's transfer agent. During the six months ended December
31, 1999, the Series incurred fees of approximately $134,700 for the services of
PMFS. As of December 31, 1999, approximately $22,900 of such fees were owed to
PMFS. Transfer agent fees and expenses in the Statement of Operations include
certain out of pocket expenses paid to nonaffiliates. At December 31, 1999, PMFS
held 607 shares of the Series.
- --------------------------------------------------------------------------------
7
<PAGE>
PUDENTIAL SPECIAL MONEY MARKET FUND, INC.
Financial Highlights (Unaudited) MONEY MARKET SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended June 30,
December 31, -----------------------------------------------
1999 1999 1998 1997 1996
------------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income and net realized gains................. .024 .047 .050 .049 .051
Dividends and distributions.................................. (.024) (.047) (.050) (.049) (.051)
------------ -------- -------- -------- --------
Net asset value, end of period............................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ -------- -------- -------- --------
------------ -------- -------- -------- --------
TOTAL RETURN(a):............................................. 4.74% 4.80% 5.11% 4.96% 5.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............................. $ 309,238 $320,524 $214,480 $261,856 $263,168
Average net assets (000)..................................... $ 331,252 $330,135 $239,047 $298,821 $326,849
Ratios to average net assets:
Expenses.................................................. .66%(b) .65% .75% .71% .73%
Net investment income..................................... 4.85%(b) 4.71% 5.05% 4.86% 5.07%
<CAPTION>
1995
<S> <C>
--------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......................... $ 1.00
Net investment income and net realized gains................. .049
Dividends and distributions.................................. (.049)
--------
Net asset value, end of period............................... $ 1.00
--------
--------
TOTAL RETURN(a):............................................. 5.05%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............................. $359,197
Average net assets (000)..................................... $416,899
Ratios to average net assets:
Expenses.................................................. .70%
Net investment income..................................... 4.93%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each period reported and includes reinvestment
of dividends and distributions. Total returns for periods less than a full
year are not annualized.
(b) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 8
<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 Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
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Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Mid-Cap Value Fund
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund
Prudential 20/20 Focus Fund
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Target Funds
Large Capitalization Growth Fund
Large Capitalization Value Fund
Small Capitalization Growth Fund
Small Capitalization Value 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.
Prudential Global Growth Fund
Prudential International Value Fund
Prudential Jennison International Growth Fund
Global Utility Fund, Inc.
Target Funds
International Equity Fund
Global Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
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
Target Funds
Total Return Bond Fund
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
<PAGE>
Getting the Most from Your Prudential Mutual Fund
How many times have you read these reports--or other financial materials-- and
stumbled across a word that you don't understand?
Many shareholders have run into the same problem. We'd like to help. So we'll
use this space from time to time to explain some of the words you might have
read, but not understood. And if you have a favorite word that no one can
explain to your satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half of one percent is 50 basis
points.
Collateralized Mortgage Obligations (CMOs): Mortgage-backed bonds that separate
mortgage pools into different maturity classes, called tranches. These
instruments are sensitive to changes in interest rates and homeowner
refinancing activity. They are subject to prepayment and maturity extension
risk.
Derivatives: Securities that derive their value from other securities. The rate
of return of these financial instruments rises and falls--sometimes very
suddenly--in response to changes in some specific interest rate, currency,
stock, or other variable.
Discount Rate: The interest rate charged by the Federal Reserve on loans to
member banks.
Federal Funds Rate: The interest rate charged by one bank to another on
overnight loans.
Futures Contract: An agreement to purchase or sell a specific amount of a
commodity or financial instrument at a set price at a specified date in the
future.
Leverage: The use of borrowed assets to enhance return. The expectation is that
the interest rate charged on borrowed funds will be lower than the return on
the investment. While leverage can increase profits, it can also magnify
losses.
Liquidity: The ease with which a financial instrument (or product) can be
bought or sold (converted into cash) in the financial markets.
Price/Earnings Ratio: The price of a share of stock divided by the earnings per
share for a 12-month period.
Option: An agreement to purchase or sell something, such as shares of stock, by
a certain time for a specified price. An option need not be exercised.
Spread: The difference between two values; often used to describe the
difference between "bid" and "asked" prices of a security, or between the
yields of two similar maturity bonds.
Yankee Bond: A bond sold by a foreign company or government in the U.S. market
and denominated in U.S. dollars.
<PAGE>
Getting the Most from Your Prudential Mutual Fund
Some mutual fund shareholders won't ever read this--they don't read annual and
semiannual reports. It's quite understandable. These annual and semiannual
reports are prepared to comply with federal regulations, and are often written
in language that is difficult to understand. So, when most people run into
those particularly daunting sections of these reports, they don't read them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some changes to our report to make it
easier to understand and more pleasant to read. We hope you'll find it
profitable to spend a few minutes familiarizing yourself with your investment.
Here's what you'll find in the report:
Performance at a Glance
Since an investment's performance is often a shareholder's primary concern, we
present performance information in two different formats. You'll find it first
on the "Performance at a Glance" page where we compare the Fund and the
comparable average calculated by Lipper, Inc., a nationally recognized mutual
fund rating agency. We report both the cumulative total returns and the average
annual total returns. The cumulative total return is the total amount of income
and appreciation the Fund has achieved in various time periods. The average
annual total return is an annualized representation of the Fund's performance.
It gives you an idea of how much the Fund has earned in an average year for a
given time period. Under the performance box, you'll see legends that explain
the performance information, whether fees and sales charges have been included
in returns, and the inception dates for the Fund's share classes.
See the performance comparison charts at the back of the report for more
performance information. Please keep in mind that past performance is not
indicative of future results.
Portfolio Manager's Report
The portfolio manager, who invests your money for you, reports on successful--
and not-so-successful--strategies in this section of your report. Look for
recent purchases and sales here, as well as information about the sectors the
portfolio manager favors, and any changes that are on the drawing board.
Portfolio of Investments
This is where the report begins to appear technical, but it's really just a
listing of each security held at the end of the reporting period, along with
valuations and other information. Please note that sometimes we discuss a
security in the Portfolio Manager's Report that doesn't appear in this listing
because it was sold before the close of the reporting period.
<PAGE>
Statement of Assets and Liabilities
The balance sheet shows the assets (the value of the Fund's holdings),
liabilities (how much the Fund owes), and net assets (the Fund's equity, or
holdings after the Fund pays its debts) as of the end of the reporting period.
It also shows how we calculate the net asset value per share for each class of
shares. The net asset value is reduced by payment of your dividend, capital
gain, or other distribution, but remember that the money or new shares are
being paid or issued to you. The net asset value fluctuates daily, along with
the value of every security in the portfolio.
Statement of Operations
This is the income statement, which details income (mostly interest and
dividends earned) and expenses (including what you pay us to manage your
money). You'll also see capital gains here--both realized and unrealized.
Statement of Changes in Net Assets
This schedule shows how income and expenses translate into changes in net
assets. The Fund is required to pay out the bulk of its income to shareholders
every year, and this statement shows you how we do it--through dividends and
distributions--and how that affects the net assets. This statement also shows
how money from investors flowed into and out of the Fund.
Notes to Financial Statements
This is the kind of technical material that can intimidate readers, but it does
contain useful information. The Notes provide a brief history and explanation
of your Fund's objectives. In addition, they outline how Prudential Mutual
Funds prices securities. The Notes also explain who manages and distributes the
Fund's shares and, more importantly, how much they are paid for doing so.
Finally, the Notes explain how many shares are outstanding and the number
issued and redeemed over the period.
Financial Highlights
This information contains many elements from prior pages, but on a per-share
basis. It is designed to help you understand how the Fund performed, and to
compare this year's performance and expenses to those of prior years.
Independent Auditor's Report
Once a year, an outside auditor looks over our books and certifies that the
information is fairly presented and complies with generally accepted accounting
principles.
Tax Information
This is information which we report annually about how much of your total
return is taxable. Should you have any questions, you may want to consult a tax
adviser.
Performance Comparison
These charts are included in the annual report and are required by the
Securities Exchange Commission. Performance is presented here as a hypothetical
$10,000 investment in the Fund since its inception or for 10 years (whichever
is shorter). To help you put that return in context, we are required to include
the performance of an unmanaged, broad-based securities index as well. The
index does not reflect the cost of buying the securities it contains or the
cost of managing a mutual fund. Of course, the index holdings do not mirror
those of the Fund--the index is a broad-based reference point commonly used by
investors to measure how well they are doing. A definition of the selected
index is also provided. Investors cannot invest directly in an index.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
visit our website at www.prudential.com
Directors
Delayne Dedrick Gold
Robert F. Gunia
Robert E. LaBlanc
David R. Odenath, Jr.
Robin B. Smith
Stephen Stoneburn
John R. Strangfeld
Nancy H. Teeters
Clay T. Whitehead
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Robert C. Rosselot, Secretary
Stephen M. Ungerman, Assistant Treasurer
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
The views expressed in this report and information about the Fund's portfolio
holdings are for the period covered by this report and are subject to change
thereafter.
The accompanying financial statements as of December 31, 1999, were not audited
and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(LOGO)
Printed on Recycled Paper
<PAGE>
(LOGO)
Prudential Mutual Funds BULK RATE
Gateway Center Three U.S. POSTAGE
100 Mulberry Street PAID
Newark, NJ 07102-4077 Permit 6807
(800) 225-1852 New York, NY
MF141E2 74436K104
