PRUDENTIAL INDEX SERIES FUND, N-30D, 1999-12-09

PRUDENTIAL INDEX SERIES FUND
N-30D, 1999-12-09

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<PAGE>

(ICON)

Prudential
Bond
Market
Index Fund

ANNUAL
REPORT

Sept. 30, 1999

(LOGO)

<PAGE>
A Message from the Fund's President November 18, 1999
(PHOTO)

Dear Shareholder,
Prudential Bond Market Index Fund's Class Z shares posted a negative return of
0.66% for its fiscal year that ended on September 30, 1999. This return
trailed the negative 0.37% return of the Lehman Brothers Aggregate Bond Index,
but beat the negative 1.46% return of the Lipper Intermediate U.S. Government
Average.

Bond markets were very volatile as the Federal Reserve repeatedly cut short-
term interest rates in the autumn of 1998 and then reversed the course of U.S.
monetary policy during the following year. The Fed raised short-term interest
rates twice in the summer of 1999 to slow U.S. economic growth and prevent a
buildup in inflation pressures. In anticipation of these rate increases,
investors demanded higher yields on bonds, which caused their prices to
decline.

The following report takes a closer look at developments in the debt securities
markets during our fiscal year, and explains how the Fund was positioned
accordingly.

One integrated and expanded team
I would like to take this opportunity to tell you about some changes we've
made to our Fixed Income Group. Earlier in the year, we combined our fixed-
income areas into one integrated group that manages money for Prudential's
investors and policyholders. This group now manages approximately $135 billion
in assets, making it one of the three largest fixed-income money managers in
the country. Our expanded depth, breadth, and scale also allow us to tap the
best talent and share investment ideas, proprietary research, and analytical
tools.

To utilize these resources effectively, we recently organized the group into
teams, each specializing in a different sector of the fixed-income market.
The High Grade Corporate Bond team, headed by Steven Kellner, is responsible
for the day-to-day management of your Prudential Bond Market Index Fund. Many
of the investment professionals who supported the management of the Fund in
the past, including Jim Herbst, will work together to share their knowledge
and strive to enhance performance.

Thank you for your continued confidence in Prudential mutual funds. I firmly
believe that the group's combined resources and our new team approach will
make us a powerhouse in the world of fixed-income investing across all
sectors.

Sincerely,

John R. Strangfeld
President
Prudential Index Series Fund

<PAGE>
Performance Review
(PHOTO) (PHOTO)

Steven Kellner, team leader of the High Grade Corporate Bond team, and Jim
Herbst, a team member.

Investment Goals and Style
The Prudential Bond Market Index Fund seeks to provide investment results that
correspond to the total return performance of a broad-based index of fixed-
income securities that currently is the Lehman Brothers Aggregate Bond Index
(the Index). The Index is composed of U.S. government securities, corporate
bonds, mortgage-backed securities, and asset-backed securities--all of which
must be investment grade and pay a fixed interest rate. The difference between
the Fund's return and that of the Index is primarily due to fees and management
expenses. There can be no assurance that the Fund will achieve its investment
objective.

A volatile time for bonds
Our reporting period began on a positive note as U.S. Treasuries rallied
sharply in early October 1998 amid growing concern about a global financial
crisis. There was also speculation that the U.S. economy could suffer if some
of the Asian and Latin American countries in crisis continued to purchase
fewer American-made products. Many investors began moving their money into
the safest government securities, such as Treasuries, from stocks, asset-
backed securities, mortgage-backed securities, and corporate bonds. This
"flight-to-quality" trend drove the prices of Treasuries higher and their
yields, which move in the opposite direction, lower. The 30-year Treasury
bond yield fell to its lowest level in over 30 years in the autumn of 1998.

Fed shifted U.S. monetary policy
By 1999, the trend that caused Treasuries to rally had begun to reverse. The
Federal Reserve had cut the Federal funds rate--the rate U.S. banks charge
each other for overnight loans-- by a quarter of a percentage point three
times in the autumn of 1998, leaving the rate at 4.75%. These rate reductions
helped calm global financial markets and bolster U.S. economic growth by
lowering borrowing costs.

The U.S. economy expanded at such a brisk pace that it fueled fears of rising
inflation pressures, which erode the value of bonds' fixed interest payments.
In order to slow U.S. economic growth and avoid spiraling inflation, the Fed
increased the Federal funds rate by a quarter of a percentage point in June
and August 1999, which left the rate at 5.25%. The discount rate--the rate
the Fed charges member banks to borrow at its discount window--was also raised
to 4.75% from 4.50% in August. In anticipation of these rate hikes, investors
demanded higher yields on bonds, which forced their prices lower.

Most sectors suffered
Some fixed-income markets performed poorly during our reporting period. U.S.
Treasuries lost 1.97% for the 12-month period ended September 30, 1999, based
on the Index. However, some other investment-grade U.S. bond markets fared
better than Treasuries, according to the Index, but still lost ground during
the past year. U.S. government agency securities declined 0.59%, and
investment-grade U.S. corporate bonds declined 1.40%, hurt by a heavy supply
of their newly issued debt, as well as inflation concerns. Companies had
rushed to borrow

<PAGE>
money while interest rates remained at relatively low levels. One of the best-
performing sectors of the corporate bond market was financial companies, which
include brokerage firms.

Meanwhile, mortgage-backed securities returned 2.27% and asset-backed
securities returned 1.95% for the 12-month reporting period. As mortgage rates
rose along with bond yields, there was less opportunity for homeowners to
save money by refinancing their mortgages. When mortgages are refinanced,
mortgage-backed securities get paid off early, forcing investors to decide
whether to reinvest their money at lower interest rates. Since it was apparent
that fewer mortgages would be refinanced, mortgage-backed securities became
more appealing to investors. In addition, asset-backed securities, which had
sold off significantly during the "flight to quality," rebounded when that
trend shifted. Asset-backed securities found buyers among investors who sought
bonds that provide higher yields than Treasuries.

Looking Ahead
U.S. bond markets' near-term outlook positive
Despite the recent turbulence, the outlook appears encouraging for the U.S.
bond markets in the near term. On the cautious side, if upward moves in wages
and the prices of goods and services continue, we could see the yield on the
30-year Treasury bond climb further, but it is not likely to go above 6.50%.

Since the Federal government is running a budget surplus, it doesn't need to
hold as many Treasury auctions to raise money. Therefore, fewer Treasuries
will probably be issued. While the government will likely continue to auction
30-year Treasury bonds in February and August, it has already put an end to
its November auction. There may also be a reduction in the frequency of
auctions of one-year bills and two-year notes. Early next year, the Treasury
may even buy back some of its older securities. This decreasing supply could
benefit the prices of government securities if investor demand remains strong,
U.S. economic growth slows, and inflation stays in check.

Performance at a Glance
<TABLE>
<CAPTION>
Cumulative Total Returns1 As of 9/30/99
One Since
Year Inception2
<S> <C> <C>
Class Z -0.66% (-0.86) 10.05% (9.41)
Lipper Intermediate U.S. Gov't Avg.3 -1.46 8.92
Lehman Brothers Aggregate Bond Index4 -0.37 11.10
</TABLE>

<TABLE>
<CAPTION>
Average Annual Total Returns1 As of 9/30/99
One Since
Year Inception2
<S> <C> <C>
Class Z -0.66% (-0.86) 4.91% (4.61)
</TABLE>

Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.

1 Source: Prudential Investments Fund Management LLC and Lipper, Inc. Without
waiver of management fees and/or expense subsidization, the Fund's cumulative
and average annual total returns would have been lower, as indicated in
parentheses ( ).

2 Inception date: Class Z, 10/1/97. The Lipper reporting period begins 9/30/97.

3 The Lipper Since Inception return is for all funds in the Intermediate U.S.
Government Fund category. The Lipper average is unmanaged. Intermediate U.S.
Government funds invest at least 65% of their assets in securities issued or
guaranteed by the U.S. government, its agencies, or its instrumentalities,
with dollar-weighted average maturities of five to ten years.

4 Source: Lehman Brothers, Inc. based on data retrieved by Lipper, Inc. The
Lehman Brothers Aggregate Bond Index is an unmanaged index that measures the
total return provided by a universe of bonds weighted by market value. The
Fund is neither sponsored by, nor affiliated with, Lehman Brothers, Inc.
Investors cannot invest directly in an index.
- -------------------------------------------------------------------------------
1

<PAGE>
Review Cont'd.

As for U.S. monetary policy, the Fed increased the Federal funds rate by a
quarter of a percentage point to 5.50% on November 16, 1999. The discount rate
was raised to 5.00% from 4.75%. This short-term rate hike took back the last
quarter-point rate cut of three made in 1998 during the global financial
crisis.

The Fed noted that its latest rate increase, along with the two rate hikes in
the summer of 1999 and the general rise in yields on fixed-income securities,
should "markedly diminish" the risk of inflation going forward. We believe the
U.S. central bank will decide to leave monetary policy unchanged for the
remainder of this calendar year.

Additional Performance Tracking Tools
You can access comprehensive information about the performance of your
Prudential mutual funds 24 hours a day through our Web site and automated
phone service. At www.prudential.com/investing, you'll find the daily closing
values, changes from the previous day, and quarterly performance for all of
our retail mutual funds. Other available resources include daily, monthly,
and quarterly market commentary.

Prudential is committed to meeting shareholders' needs. That is why we
continue to upgrade and make improvements to our Web site. Please send us
your comments about how we can continue to improve our site to meet your needs.

Daily fund values are also a toll-free call away from any touch-tone phone.
Call (800) 225-1852 and follow the voice prompts to obtain mutual fund closing
values and yields. You can even set up a personalized "watch list" to track
specific Prudential mutual funds.

Mutual Fund Automated Service: (800) 225-1852

Main Menu Submenus
1. Account information 1. Account balance
2. Transactions
3. Order forms
2. Prices and yields
3. Transactions
4. Order checks and statements
5. PIN change

Portfolio Composition
Expressed as a percentage of total long-term
investments as of 9/30/99

U.S. Treasury Securities 32%
Mortgage-Backed 31
Corporates 22
U.S. Government Agency 10
Collateralized Mortgage 2
Obligations
Asset-Backed 2
Foreign Government Obligations 1

Credit Quality
Expressed as a percentage of total long-term
investments as of 9/30/99

Aaa 77%
Aa 5
A 10
Baa 8
- -------------------------------------------------------------------------------
2

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Portfolio of Investments as of September 30, 1999
PRUDENTIAL BOND MARKET INDEX FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description (a) (Unaudited) Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--93.2%
- ------------------------------------------------------------------------------------------------------------------------------
Corporate Bonds--19.1%
Finance--8.3%
BankAmerica Corp. Aa3 7.20% 4/15/06 $ 330 $ 331,591
BankAmerica Corp. Aa3 7.50 9/15/06 100 102,024
BankBoston Corp. A2 6.125 3/15/02 115 113,390
Chase Manhattan Corp. A1 7.125 3/01/05 250 253,092
Chemical Bank Aa3 7.00 6/01/05 180 179,514
Citicorp A1 7.625 5/01/05 300 307,731
Donaldson, Lufkin & Jenrette, Inc. A3 6.50 6/01/08 350 328,233
First Union Corp. A2 7.50 7/15/06 110 111,851
Heller Financial, Inc. A3 6.00 3/19/04 200 191,760
Lehman Brothers Holdings, Inc. Baa1 6.625 2/05/06 35 33,545
Merrill Lynch and Co., Inc. Aa3 6.50 4/01/01 60 60,140
Merrill Lynch and Co., Inc. Aa3 6.00 2/17/09 500 456,470
Morgan Stanley Dean Witter Aa3 5.625 1/20/04 400 382,184
Spieker Properties LP Baa2 6.65 12/15/00 325 321,194
Swiss Bank Corp. Aa2 7.00 10/15/15 200 187,040
U.S. West Capital Funding Inc. Baa1 6.875 8/15/01 400 400,280
-----------
3,760,039
- ------------------------------------------------------------------------------------------------------------------------------
Industrials--6.7%
Coca Cola Enterprises, Inc. A3 8.50 2/01/22 50 54,651
Comcast Corp. Baa3 6.20 11/15/08 400 365,976
Delta Air Lines, Inc. Baa3 9.75 5/15/21 150 170,307
Ford Motor Co. A1 6.375 2/01/29 100 85,553
Ford Motor Co. A1 9.98 2/15/47 220 281,435
General Motors Corp. A2 7.70 4/15/16 280 285,163
IBM Corp. A1 5.625 4/12/04 150 144,843
Lockheed Martin Corp. Baa1 7.70 6/15/08 210 211,329
Lucent Technologies, Inc. A2 6.45 3/15/29 150 134,918
News America Holdings, Inc. Baa3 9.25 2/01/13 200 220,370
Northrop Grumman Corp. Baa3 8.625 10/15/04 200 210,818
Penney (J.C.) & Co. A3 9.05 3/01/01 250 257,182
Rockwell International Corp. A1 6.625 6/01/05 450 447,579
Waste Management, Inc. Ba1 6.625 7/15/02 150 142,023
-----------
3,012,147
- ------------------------------------------------------------------------------------------------------------------------------
Utilities--4.1%
AT&T Corp. A1 6.00 3/15/09 150 139,308
Carolina Power & Light Co. A2 6.80 8/15/07 70 68,801
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Portfolio of Investments as of September 30, 1999
PRUDENTIAL BOND MARKET INDEX FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description (a) (Unaudited) Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Utilities (cont'd.)
Commonwealth Edison Co. Baa2 7.375% 1/15/04 $ 600 $ 604,902
Electric Lightwave Inc. A2 6.05 5/15/04 150 143,598
GTE Corp. Baa1 6.36 4/15/06 250 239,760
GTE Corp. Baa1 7.51 4/01/09 75 77,153
Pacificorp A2 6.375 5/15/08 300 291,459
Sprint Capital Corp. Baa1 6.90 5/01/19 180 167,396
TCI Communications, Inc. A2 8.75 8/01/15 100 111,640
-----------
1,844,017
-----------
Total corporate bonds (cost $8,924,958) 8,616,203
- ------------------------------------------------------------------------------------------------------------------------------
Asset Backed Securities--1.7%
Credit Card Receivables Trust, Series 1998-I Aaa 6.478 12/22/02 264 263,582
World Financial Network Credit Card Master Trust, Series
1996 B, Class A Aaa 6.95 4/15/06 500 501,719
-----------
Total asset backed securities (cost $777,136) 765,301
- ------------------------------------------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations--1.8%
American Housing Trust, Series VI, Class 1-I Aaa 9.15 5/25/20 128 135,397
Lb Commercial Conduit Mortgage Trust, Series 1998 C1,
Class A3 Aaa 6.48 1/18/08 300 283,714
Shurgard Securities Trust, Series 1, Class 1 AA(b) 8.24 6/15/01 380 386,412
-----------
Total collateralized mortgage obligations (cost $841,932) 805,523
- ------------------------------------------------------------------------------------------------------------------------------
Mortgage Backed Securities--28.7%
Federal Home Loan Mortgage Corp. 8.00 10/01/24 59 60,455
Federal Home Loan Mortgage Corp. 8.00 8/01/27 927 948,435
Federal Home Loan Mortgage Corp. 6.50 11/01/28 879 843,680
Federal Home Loan Mortgage Corp.(a) 6.50 12/01/99 1,000 959,370
Federal Home Loan Mortgage Corp.(a) 7.00 12/01/99 1,000 983,120
Federal National Mortgage Assoc. 7.50 5/01/13 304 308,484
Federal National Mortgage Assoc. 7.50 1/01/14 102 103,845
Federal National Mortgage Assoc. 7.50 4/01/14 395 401,757
Federal National Mortgage Assoc. 6.00 6/01/14 980 942,822
Federal National Mortgage Assoc. 7.50 6/01/26 516 517,273
Federal National Mortgage Assoc. 7.50 11/01/27 435 436,291
Federal National Mortgage Assoc. 7.50 9/01/28 374 375,352
Federal National Mortgage Assoc. 6.00 4/01/29 496 463,112
Federal National Mortgage Assoc. 6.00 6/01/29 498 464,489
Federal National Mortgage Assoc.(a) 6.50 12/01/99 1,500 1,438,125
Federal National Mortgage Assoc.(a) 6.50 12/01/99 500 490,625
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Portfolio of Investments as of September 30, 1999
PRUDENTIAL BOND MARKET INDEX FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description (a) (Unaudited) Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Mortgage Backed Securities (cont'd.)
Federal National Mortgage Assoc.(a) 7.00% 12/01/99 $ 500 $ 491,250
Federal National Mortgage Assoc.(a) 7.00 12/01/99 200 199,812
Government National Mortgage Assoc. 8.49 1/15/19 127 132,675
Government National Mortgage Assoc. 7.50 4/15/26 51 51,006
Government National Mortgage Assoc. 7.50 4/15/27 320 321,456
Government National Mortgage Assoc. 7.50 8/15/28 550 552,481
Government National Mortgage Assoc.(a) 6.50 9/15/28 963 920,917
Government National Mortgage Assoc.(a) 7.00 12/15/99 500 490,465
-----------
Total mortgage backed securities (cost $13,079,589) 12,897,297
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Government Obligations--29.9%
United States Treasury Bond(c) 11.875 11/15/03 315 382,086
United States Treasury Bond(c) 10.375 11/15/12 570 714,905
United States Treasury Bond(c) 7.50 11/15/16 250 276,718
United States Treasury Bond(c) 8.125 8/15/19 400 473,436
United States Treasury Bond(c) 7.875 2/15/21 3,075 3,576,133
United States Treasury Bond(c) 8.125 8/15/21 100 119,375
United States Treasury Bond(c) 6.375 8/15/27 120 120,206
United States Treasury Bond(c) 5.25 11/15/28 425 368,356
United States Treasury Note(c) 5.75 11/15/00 200 200,532
United States Treasury Note(c) 5.625 2/28/01 1,100 1,100,682
United States Treasury Note(c) 6.25 1/31/02 975 986,573
United States Treasury Note(c) 6.50 5/31/02 1,680 1,711,500
United States Treasury Note(c) 6.25 8/31/02 480 486,297
United States Treasury Note(c) 5.75 10/31/02 200 200,062
United States Treasury Note 5.75 8/15/03 1,400 1,395,618
United States Treasury Note(c) 6.00 8/15/04 85 85,824
United States Treasury Note(c) 6.50 8/15/05 60 61,435
United States Treasury Note(c) 7.00 7/15/06 680 714,211
United States Treasury Note(c) 5.625 5/15/08 170 165,005
United States Treasury Note(c) 4.75 11/15/08 155 141,098
United States Treasury Note(c) 6.00 8/15/09 160 161,299
-----------
Total U.S. government obligations (cost $13,640,204) 13,441,351
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Government Agency Obligations--9.6%
Federal Farm Credit Bank 5.25 5/01/02 400 391,478
Federal Home Loan Mortgage Corp. 5.50 5/15/02 700 689,281
Federal National Mortgage Assoc. 5.75 6/15/05 1,200 1,161,372
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Portfolio of Investments as of September 30, 1999
PRUDENTIAL BOND MARKET INDEX FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Interest Maturity Amount Value
Description (a) (Unaudited) Rate Date (000) (Note 1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Government Agency Obligations (cont'd.)
Federal National Mortgage Assoc. 6.72% 8/01/05 $ 200 $ 201,812
Federal National Mortgage Assoc. 5.25 1/15/09 600 541,872
Federal National Mortgage Assoc. 6.375 6/15/09 700 685,783
Small Business Administration 6.55 12/01/17 649 630,637
-----------
Total U.S. government agency obligations (cost
$4,360,042) 4,302,235
- ------------------------------------------------------------------------------------------------------------------------------
Foreign Corporate Bonds--1.3%
Hanson PLC (United Kingdom) A3 7.375 1/15/03 300 305,649
Tyco International Group (Luxembourg) Baa1 6.375 6/15/05 300 289,881
-----------
Total foreign corporate bonds (cost $607,562) 595,530
- ------------------------------------------------------------------------------------------------------------------------------
Foreign Government Obligations--1.1%
Quebec Hydro (Canada)
(cost $523,095) A2 7.50 4/01/16 500 502,185
-----------
Total long-term investments (cost $42,754,518) 41,925,625
-----------
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--18.9%
Repurchase Agreement--14.7%
Joint Repurchase Agreement Account (Note 5) 5.222 10/01/99 6,617 6,617,000
U.S. Government Obligations--4.2%
United States Treasury Note(c) 6.25 8/31/00 600 604,314
United States Treasury Note(c) 4.50 9/30/00 1,290 1,277,707
-----------
Total short-term investments (cost $8,498,280) 8,499,021
-----------
Total Investments--112.1%
(cost $51,252,798; Note 4) 50,424,646
Liabilities in excess of other assets--(12.1)% (5,462,485)
-----------
Net Assets--100% $44,962,161
-----------
-----------
</TABLE>
- ---------------
LP--Limited Partnership.
PLC--Public Limited Company (British Corporation).
(a) Mortgage dollar roll, see Note 1 and Note 4.
(b) Standard & Poor's Rating.
(c) All or partial principal amount pledged as collateral for dollar rolls.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Statement of Assets and Liabilities PRUDENTIAL BOND MARKET INDEX FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets September 30, 1999
------------------
<S> <C>
Investments excluding repurchase agreement, at value (cost $44,635,798)................................ $ 43,807,646
Repurchase agreement, at value (cost $6,617,000)....................................................... 6,617,000
Cash................................................................................................... 1,772
Receivable for investments sold........................................................................ 3,503,470
Interest receivable.................................................................................... 529,773
Receivable for Fund shares sold........................................................................ 55,812
Due from Manager....................................................................................... 27,834
Prepaid expenses....................................................................................... 430
------------------
Total assets........................................................................................ 54,543,737
------------------
Liabilities
Dollar roll payable.................................................................................... 5,983,622
Payable for investments purchased...................................................................... 3,496,659
Accrued expenses....................................................................................... 59,578
Payable for Fund shares repurchased.................................................................... 41,717
------------------
Total liabilities................................................................................... 9,581,576
------------------
Net Assets............................................................................................. $ 44,962,161
------------------
------------------
Net assets were comprised of:
Shares of beneficial interest, at par............................................................... $ 4,385
Paid-in capital in excess of par.................................................................... 44,307,560
------------------
44,311,945
Undistributed net investment income.................................................................... 1,838,292
Accumulated net realized loss on investments........................................................... (359,924)
Net unrealized depreciation on investments............................................................. (828,152)
------------------
Net assets, September 30, 1999......................................................................... $ 44,962,161
------------------
------------------
Class Z:
Net asset value per share
($44,962,161 / 4,384,875 shares of beneficial interest issued and outstanding)...................... $10.25
------------------
------------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7

<PAGE>
PRUDENTIAL INDEX SERIES FUND
PRUDENTIAL BOND MARKET INDEX FUND
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income September 30, 1999
<S> <C>
Income
Interest.................................. $ 2,526,772
------------------
Expenses
Management fee............................ 105,970
Custodian's fees and expenses............. 90,000
Audit fee................................. 18,000
Registration expense...................... 15,000
Reports to shareholders................... 13,000
Legal fees................................ 10,000
Transfer agent's fees and expenses........ 8,000
Trustees' fees............................ 7,000
Miscellaneous............................. 6,682
------------------
Total operating expenses............... 273,652
Less: Expense subsidy (Note 2)............ (104,092)
------------------
Net expenses........................... 169,560
------------------
Net investment income....................... 2,357,212
------------------
Realized and Unrealized Gain (Loss) on
Investments
Net realized loss on investment
transactions.............................. (356,867)
Net change in unrealized depreciation on
investments............................... (2,258,971)
------------------
Net loss on investments..................... (2,615,838)
------------------
Net Decrease in Net Assets
Resulting from Operations................... $ (258,626)
------------------
------------------
</TABLE>

PRUDENTIAL INDEX SERIES FUND
PRUDENTIAL BOND MARKET INDEX FUND
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
October 1, 1997(a)
Year Ended Through
Increase in September 30, September 30,
Net Assets 1999 1998
<S> <C> <C>
Operations
Net investment income.......... $ 2,357,212 $ 1,904,798
Net realized gain (loss) on
investments................. (356,867) 220,276
Net change in unrealized
appreciation (depreciation)
on investments.............. (2,258,971) 1,430,819
------------- ------------------
Net increase (decrease) in net
assets resulting from
operations.................. (258,626) 3,555,893
------------- ------------------
Dividends and distributions (Note 5)
Dividends from net investment
income...................... (1,981,623) (461,718)
------------- ------------------
Distributions from net realized
gains....................... (204,867) (18,466)
------------- ------------------
Fund share transactions
Net proceeds from shares
sold........................ 12,886,652 38,076,778
Net asset value of shares
issued in reinvestment of
dividends and
distributions............... 2,184,408 469,351
Cost of shares reacquired...... (7,453,391) (1,832,230)
------------- ------------------
Net increase in net assets from
Fund share transactions..... 7,617,669 36,713,899
------------- ------------------
Total increase................... 5,172,553 39,789,608
Net Assets
Beginning of period.............. 39,789,608 --
------------- ------------------
End of period(b)................. $ 44,962,161 $ 39,789,608
------------- ------------------
------------- ------------------
- ---------------
(a) Commencement of operations.
(b) Includes undistributed net
investment income of......... $ 1,838,292 $ 1,462,703
------------- ------------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 8

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Notes to Financial Statements PRUDENTIAL BOND MARKET INDEX FUND
- --------------------------------------------------------------------------------
Prudential Index Series Fund (the 'Company') is registered under the Investment
Company Act of 1940 as an open-end, diversified management investment company.
The Company was established as a Delaware business trust on May 11, 1992 and
currently consists of five separate funds, one of which is Prudential Bond
Market Index Fund (the 'Fund').

The Fund's investment objective is to seek to provide investment results that
correspond to the total return performance of a broad-based index of
fixed-income securities, currently the Lehman Brothers Aggregate Index.

- ------------------------------------------------------------
Note 1. Accounting Policies

The following is a summary of significant accounting policies followed by the
Company and the Fund in the preparation of its financial statements.

Securities Valuation: Securities for which the primary market is on an exchange
are valued at the last sale price on such exchange on the day of valuation or,
if there were no sales on such day, at the mean between the last bid price and
asked prices on such day or at the bid price on such day in the absence of an
asked price. Securities that are actively traded in the over-the-counter market,
including listed securities for which the primary market is believed to be
over-the-counter, are valued by an independent pricing agent or a principal
market maker. U.S. Government securities for which market quotations are
available are valued at a price provided by an independent broker/dealer or
pricing service.

Options on securities that are listed on an exchange are valued at the mean
between the most recently quoted bid and asked prices on such exchange. Futures
contracts and options thereon traded on a commodities exchange or board of trade
are valued at the last sale price at the close of trading on such exchange or
board of trade or, if there was no sale on the applicable commodities exchange
or board of trade on such day, at the mean between the most recently quoted bid
and asked prices on such exchange or board of trade.

Securities for which reliable market quotations are not available or for which
the pricing agent or principal market maker does not provide a valuation or
methodology that, in the judgement of the manager or subadviser, represents fair
value, are valued by the Valuation Committee or Board of Trustees in
consultation with the manager and the subadviser.

Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.

In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Company's policy that its custodian or designated
subcustodians under triparty repurchase agreements, as the case may be, take
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction including accrued interest.
To the extent that any repurchase transaction exceeds one business day, the
value of the collateral is marked-to-market on a daily basis to ensure the
adequacy of the collateral. 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 of the collateral by the Fund may be
delayed or limited.

Dollar Rolls: The Fund enters into mortgage dollar rolls in which the Fund sells
mortgage securities for delivery in the current month, realizing a gain or loss
and simultaneously contracts to repurchase somewhat similar (same type, coupon
and maturity) securities on a specified future date. During the roll period, the
Fund forgoes principal and interest paid on the securities. The Fund is
compensated by the interest earned on the cash proceeds of the initial sale and
by the lower repurchase price at the future date. The difference between the
sales proceeds and the lower repurchase price is recorded as interest income.
The Fund maintains a segregated account, the dollar value of which is at least
equal to its obligations, in respect of dollar rolls.

Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains or losses from investment
transactions are calculated on the identified cost basis. Interest income is
recorded on the accrual basis. The Fund accretes discounts and amortizes
premiums on portfolio securities as adjustments to interest income. Expenses are
recorded on the accrual basis which may require the use of certain estimates by
management.

Dividends and Distributions: The Fund expects to pay dividends of net investment
income and distributions of net realized capital gains, if any, at least
annually. Dividends and distributions are recorded on the ex-dividend date.

Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.

Taxes: For federal income tax purposes, each fund in the Company is treated as a
separate taxpaying entity. It is the Fund's policy to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
- --------------------------------------------------------------------------------
9

The Company 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 Company. PIFM pays for the cost of the
subadviser's services, the compensation of officers of the Company, occupancy
and certain clerical and bookkeeping costs of the Company. The Company bears all
other costs and expenses.

The management fee paid PIFM is computed daily and payable monthly, at an annual
rate of .25 of 1% of the Fund's average daily net assets.

The Company has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS') which acts as the distributor of the Fund. No distribution
or service fees are paid to PIMS as distributor of the Fund.

PIC, PIFM and PIMS are wholly owned subsidiaries of The Prudential Insurance
Company of America ('The Prudential').

PIFM has agreed to subsidize the operating expenses of the Fund, so that total
Fund operating expenses do not exceed .40% on an annualized basis of the Fund's
average daily net assets. For the year ended September 30, 1999, PIFM subsidized
$104,092 of the expenses of the Fund (0.25% of the average daily net assets or
$0.024 per share).

As of March 11, 1999, the Company, along with other affiliated registered
investment companies (the 'Funds'), entered into a syndicated credit agreement
('SCA') with an unaffiliated lender. The maximum commitment under the SCA is $1
billion. Interest on any borrowings will be at market rates. The Funds pay a
commitment fee at an annual rate of .065 of 1% on the unused portion of the
credit facility, which is accrued and paid quarterly on a pro rata basis by the
Funds. The SCA expires on March 9, 2000. Prior to March 11, 1999, the Funds had
a credit agreement with a maximum commitment of $200,000,000. The commitment fee
was .055 of 1% on the unused portion of the credit facility. The Fund did not
borrow any amounts pursuant to either agreement during the year ended September
30, 1999. The purpose of the agreements is to serve as an alternative source of
funding for capital share redemptions.

Note 3. Other Transactions With Affiliates

Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Company's transfer agent. During the year ended September 30,
1999, the Fund incurred fees of approximately $7,300 for the services of PMFS.
As of September 30, 1999, approximately $800 of such fees were due to PMFS.
Transfer agent fees and expenses in the Statement of Operations also include
certain out-of-pocket expenses paid to nonaffiliates.

- ------------------------------------------------------------
Note 4. Portfolio Securities

Purchases and sales of investment securities, other than short-term investments,
for the year ended September 30, 1999, were $135,352,109 and $125,936,187,
respectively, which includes purchases and sales of U.S. government obligations
of $47,507,859 and $32,639,639, respectively.

The federal income tax basis of the Fund's investments at September 30, 1999 was
$51,258,968 and, accordingly, net unrealized depreciation for federal income tax
purposes was $834,322 (gross unrealized appreciation-$40,463; gross unrealized
depreciation-$874,785).

For federal income tax purposes, the Fund had a capital loss carryforward as of
September 30, 1999 of $34,592 which expires in 2007. Accordingly, no capital
gains distributions are expected to be paid to shareholders until future net
gains have been realized in excess of such carryforward.

The Fund will elect, for United States Federal income tax purposes, to treat
short-term capital losses of $374,080 and long-term capital gains of $57,975
incurred in the eleven months ended September 30, 1999 as having been incurred
in the following fiscal year.

The average monthly balance of dollar rolls outstanding during the year ended
September 30, 1999 was approximately $8,535,305.

- ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account

The Company, along with other affiliated registered investment companies,
transfers uninvested cash balances into a single joint account, the daily
aggregate balance of which is invested in one or more repurchase agreements
collateralized by U.S. Treasury or federal agency obligations. As of September
30, 1999, the Fund had a 1.00% undivided interest in the repurchase agreements
in the joint account. This undivided interest represented $6,617,000 in
principal amount. As of such date, the repurchase agreements in the joint
account and the value of the collateral therefor were as follows:
- --------------------------------------------------------------------------------
10

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Notes to Financial Statements PRUDENTIAL BOND MARKET INDEX FUND
- --------------------------------------------------------------------------------
Warburg Dillon Read LLC, 5.32%, in the principal amount of $190,000,000,
repurchase price $190,028,078, due 10/1/99. The value of the collateral
including accrued interest was $193,802,299.

Bear, Stearns & Co. Inc., 5.32%, in the principal amount of $190,000,000,
repurchase price $190,028,078, due 10/1/99. The value of the collateral
including accrued interest was $194,200,266.

Morgan (J.P.) Securities, Inc., 5.25%, in the principal amount of $190,000,000,
repurchase price $190,027,708, due 10/1/99. The value of the collateral
including accrued interest was $193,800,121.

Goldman, Sachs & Co., 4.75%, in the principal amount of $88,875,000, repurchase
price $88,886,727, due 10/1/99. The value of the collateral including accrued
interest was $90,653,200.
- ------------------------------------------------------------
Note 6. Capital

The Fund has authorized an unlimited number of Class Z shares of beneficial
interest at $.001 par value per share. Class Z shares are not subject to any
sales or redemption charges and are offered exclusively for sale to a limited
group of investors. Transactions in shares of beneficial interest were as
follows:

<TABLE>
<CAPTION>
Class Z Shares
- -------------------------------------------------- ---------
<S> <C>
Year ended September 30, 1999:
Shares sold....................................... 1,253,085
Shares issued in reinvestment of dividends and
distributions................................... 213,321
Shares reacquired................................. (727,602)
---------
Net increase in shares outstanding................ 738,804
October 1, 1997(a) through September 30, 1998:
Shares sold....................................... 3,776,725
Shares issued in reinvestment of dividends and
distributions................................... 46,470
Shares reacquired................................. (177,124)
---------
Net increase in shares outstanding................ 3,646,071
</TABLE>

As of September 30, 1999, 3,267,863 shares of the Fund were owned by The
Prudential.
- ---------------
(a) Commencement of investment operations.
- --------------------------------------------------------------------------------
11

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Financial Highlights PRUDENTIAL BOND MARKET INDEX FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
October 1, 1997(c)
Year Ended Through
September 30, September 30,
1999 1998
------------- ------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............................................. $ 10.91 $ 10.00
------ ------
Income from investment operations
Net investment income(d)......................................................... .55 .55
Net realized and unrealized gain (loss) on investment transactions............... (.62) .52
------ ------
Total from investment operations.............................................. (.07) 1.07
------ ------
Less distributions
Dividends from net investment income............................................. (.53) (.15)
Distributions from net realized gains............................................ (.06) (.01)
------ ------
Total dividends and distributions............................................. (.59) (.16)
------ ------
Net asset value, end of period................................................... $ 10.25 $ 10.91
------ ------
------ ------
TOTAL RETURN(a):................................................................. (.66)% 10.79%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).................................................. $44,962 $ 39,790
Average net assets (000)......................................................... $42,388 $ 33,637
Ratios to average net assets(d):
Expenses...................................................................... .40% .40%(b)
Net investment income......................................................... 5.56% 5.68%(b)
Portfolio turnover rate.......................................................... 313%(e) 33%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each period reported and includes reinvestment
of dividends and distributions. Total returns for periods of less than a
full year are not annualized.
(b) Annualized.
(c) Commencement of investment operations.
(d) Net of expense subsidy.
(e) Includes dollar rolls.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 12

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Report of Independent Accountants PRUDENTIAL BOND MARKET INDEX FUND
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
Prudential Index Series Fund--Prudential Bond Market Index Fund

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential Index Series
Fund--Prudential Bond Market Index Fund (the 'Fund,' one of the portfolios
constituting Prudential Index Series Fund) at September 30, 1999, the results of
its operations for the year then ended, and the changes in its net assets and
the financial highlights for each of the two years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as 'financial
statements') are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 1999 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
November 17, 1999
- --------------------------------------------------------------------------------
13

<PAGE>
Important Notice for Certain Shareholders PRUDENTIAL INDEX SERIES FUND
(Unaudited) PRUDENTIAL BOND MARKET INDEX FUND
- --------------------------------------------------------------------------------
We are required by Massachusetts, Missouri and Oregon to inform you that
dividends which have been derived from interest on federal obligations are not
taxable to shareholders providing the mutual fund meets certain requirements
mandated by the prospective state's taxing authorities. We are pleased to report
that 35% of the dividends paid by the Prudential Index Series Fund--Prudential
Bond Market Index Fund qualify for such deduction.

We wish to advise you that the corporate dividends received deduction for the
Fund is zero. Only funds that invest in U.S. equity securities are entitled to
pass-through a corporate dividends received deduction.

For more information regarding your state and local taxes, you should contact
your tax advisor or the state/local taxing authorities.
- --------------------------------------------------------------------------------
14

<PAGE>
Comparing a $10,000 Investment
Prudential Bond Market Index Fund vs. the Lehman Brothers Aggregate Bond Index

Class Z
(GRAPH)

Average Annual Total Returns
Since Inception 4.91% (4.61%)
One Year -0.66% (-0.86%)

Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.

This graph compares a $10,000 investment in the Prudential Bond Market Index
Fund (Class Z shares) with a similar investment in the Lehman Brothers
Aggregate Bond Index (the Index) by portraying the account values at the
commencement of operations of Class Z shares, and at the end of the fiscal
year (September 30), as measured on a quarterly basis, beginning in 1997. For
purposes of the graph, and unless otherwise indicated, it has been assumed
that all recurring fees (including management fees) were deducted, and all
dividends and distributions were reinvested. The graph and accompanying tables
reflect the past subsidy and/or waiver of expenses and/or management fees.
Without waiver of management fees and/or expense subsidization, the Fund's
average annual total returns would have been lower, as indicated in
parentheses ( ).

The Index is an unmanaged index that consists of three major classes of
fixed-income investments: U.S. Treasury and government agency securities,
investment-grade corporate debt obligations, and mortgage-backed securities.
The securities in the Index must be U.S. dollar denominated, investment grade,
have a fixed-rate coupon with a remaining maturity or average life of at least
one year, and generally have an outstanding market value of at least $100
million. These returns include the reinvestment of interest, but do not
include the effect of any operating expenses of a mutual fund. These returns
would be lower if they included the effect of operating expenses. The Index is
not the only index that may be used to characterize performance of bond funds,
and other indexes may portray different comparative performance. Investors
cannot invest directly in an index.

This graph is furnished to you in accordance with SEC regulations.

<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077

(800) 225-1852
http://www.prudential.com

Class NASDAQ Cusip
Z PBIDX 74438C605

Trustees
Edward D. Beach
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
Robin B. Smith
John R. Strangfeld
Louis A. Weil, III
Clay T. Whitehead

Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Marguerite E.H. Morrison, Secretary

Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street, Newark, NJ 07102-4077

Investment Adviser
The Prudential Investment Corporation
Prudential Plaza, Newark, NJ 07102-3777

Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street, Newark, NJ 07102-4077

Custodian
State Street Bank and Trust Company
One Heritage Drive, North Quincy, MA 02171

Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005, New Brunswick, NJ 08906

Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas, New York, NY 10036

Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street, Chicago, IL 60610-4795

Prudential Investments is a unit of The Prudential Insurance Company of
America, 751 Broad Street, Newark, NJ 07102.

The views expressed in this report and information about the Fund's portfolio
holdings are for the period covered by this report and are subject to change
thereafter.

This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.

MF174E5

<PAGE>

(ICON)

Prudential
Europe
Index Fund

ANNUAL
REPORT
Sept. 30, 1999

(LOGO)

<PAGE>

A Message from the Fund's President November 18, 1999
- -----------------------------------------------------------------------------
(PHOTO)

Dear Shareholder,
For the 12 months ended September 30, 1999, the Prudential Europe Index Fund
returned a strong 16.86%, slightly behind the 17.21% return of the benchmark
Morgan Stanley Capital International (MSCI) Europe Index. Most of the gain
came early in the period, as European stocks, like other global equities,
bounced back from their lows during last summer's financial turmoil.

Early in the period, European economic growth had been focused in countries on
the periphery of the Continent, such as Portugal, Spain, and Ireland. Larger
nations--Germany, France, and Italy--seemed economically stagnant until signs
of strength began to emerge during the summer and fall of 1999.

Although recent growth has been steady and prospects for earnings now seem much
improved for companies in Europe's larger "core economies," this better news
had yet to be reflected in stock prices by the end of our reporting period.
Ironically, the MSCI Europe Index improved least during the period when
economic growth was strongest. This has largely been because global investors
moved capital into Latin America and Asia, where some expected the recovery
from last summer's financial woes to be larger than in Europe's more stable
markets. As global portfolios return to geographical balance, this effect
should taper off.

The large number of securities held by your Fund reduced the volatility of the
portfolio in this period, while capturing the rise of the companies that led
the MSCI Europe Index. Different businesses and countries in Europe will
outperform at different times, but the diversification of your Europe Index
Fund ensures that you own the market leaders, whatever--and wherever in
Europe--they are.

Thank you for your confidence in Prudential Mutual Funds.

Sincerely,

John R. Strangfeld
President
Prudential Index Series Fund

<PAGE>

Performance Review
- -------------------------------------------------------------------------------
(PHOTO)

John Moschberger
Fund Manager

Investment Goals and Style
Prudential Europe Index Fund seeks to provide investment results that
correspond to the price and yield performance of a broad-based index of stocks
of European issuers. Currently, we use the Morgan Stanley Capital International
(MSCI) Europe Index. This Index consists of stocks in 15 countries. The United
Kingdom represented 31% of the MSCI Index on September 30, 1999, and France and
Germany together made up more than 28%. The difference between the Fund's
return and that of the Index is primarily management fees and expenses. There
can be no assurance that the Fund will achieve its investment objective.

Continental Europe revives
Corporations in Europe continued to consolidate and restructure during our
12-month reporting period ended September 30, 1999. Deregulation and a more
competitive free trade environment--including introduction of the common
currency, the euro--played a role in Europe's widespread restructuring and
prompted more than $1 trillion in mergers and acquisitions in Continental
Europe in 1999 through the third quarter. The impact of the Russian economic
and financial turmoil that helped slow European growth was now a distant memory
as the pace of European economic activity increased briskly over the past year.

Demand for goods and services from abroad increased in Germany, France and, to
a smaller degree, Italy for the first time since late 1998. In France and
Germany, consumer spending is stronger than it has been in a long time. These
turns of events have led to clear signs of economic recovery in these
countries. The gradual strengthening in the global economies of Latin America
and Asia also helped. However, corporate restructuring was the driving force
for stock returns. As a result, French stocks gained 30.4%, in U.S. dollar
terms, over our 12-month reporting period, Germany returned 6.7%, and Italy
returned 12.1%.

France led the way
France, with its large market capitalization and strong return, was one of the
reasons the Europe Index Fund performed well over our reporting period. A
combination of factors drove the favorable performance in France. French
consumer confidence rose to an all-time record high in September 1999. Solid
growth in the French economy, improvement in labor market conditions, low
inflation, and a stable political scene provided investors with improved
confidence and the willingness to spend more money. Moreover, France's trade
surplus grew 33% in September 1999 to $2.2 billion, bolstered mainly by a
decade-high confidence level among manufacturers about France's export sales.
In addition, France's Gross Domestic Product (GDP) accelerated by 0.5% in the
second quarter of 1999 and will probably reach 2.2% to 2.5% overall for 1999.
The increase in industrial production during the second quarter led companies
to restock their inventories and invest again, boosting economic growth.

An increase in merger and acquisition activity and corporate restructuring
helped stock performance as well. Elf Aquitaine and Total Fina, France's two
largest oil companies, were locked in a bidding war to buy each other.

<PAGE>

Each company had strong returns during most of our reporting period because of
investors' interest in their possible merger. Furthermore, shares of Danone,
Europe's third largest food company, had their biggest one-day rise in 10
years, when its net income rose due to a reorganization and merging of business
operations. Renault, Europe's sixth largest auto- maker, benefited from
purchasing a 37% stake in Nissan Motor Co. It is now the Japanese automaker's
largest shareholder.

Germany begins to awaken
German manufacturing orders rose in August 1999 at their fastest pace in a
decade. The orders were bolstered by a fairly large jump in the demand for
machine tools--one of Germany's biggest exports--as Asian manufacturers gear
up.

European inflation remains subdued, even with strong economic growth.
Therefore, the European Central Bank is likely to leave interest rates
unchanged for the rest of 1999.

The United Kingdom's resurgence
The United Kingdom, the largest component of the MSCI Europe Index, returned
16.7%, in U.S. dollar terms, for the 12 months ended September 30, 1999. As
with the Continent, merger and acquisition activities benefited British
companies.

Annual incomes in the United Kingdom rose sharply toward the end of our
reporting period, and unemployment fell to its lowest level in 19 years.
Furthermore, retail sales in the United Kingdom rose at their fastest pace in
over two years and the British pound hit a 10-month high versus the U.S.
dollar. Amid all this positive economic data, inflation remained relatively
tame in the United Kingdom. Confident investors pushed stock prices higher as
they felt more comfortable investing their money, and any lingering fears they
had about the past year's global financial crisis were largely gone. The Bank
of England played a major role in keeping any signs of rising inflation under
control.

Performance at a Glance

Cumulative Total Returns1 As of 9/30/99
<TABLE>
<CAPTION>
One Since
Year Inception2
<S> <C> <C>
Class Z 16.86% (15.61) 25.23% (22.35)
Lipper European
Region Fund Average3 15.40 21.65
MSCI Europe Index4 17.21 26.98
</TABLE>

Average Annual Total Returns1 As of 9/30/99
<TABLE>
<CAPTION>
One Since
Year Inception2
<S> <C> <C>
Class Z 16.86% (15.61) 11.94% (10.45)
</TABLE>

Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.

2 Inception date: Class Z, 10/1/97. The Lipper reporting period is from 9/30/97
to 9/30/99.

3 The Lipper Since Inception return is for all funds in the European Region
Fund category. The Lipper average is unmanaged. European Region funds
concentrate their investments in equity securities whose primary trading
markets or operations are concentrated in the European region or a single
country within this region.

4 The Morgan Stanley Capital International (MSCI) Europe Index is an unmanaged,
weighted index comprising more than 550 companies representing about 15
developed European countries. The Fund is neither sponsored by, nor affiliated
with, Morgan Stanley & Co. Incorporated. The benchmark shown includes net
dividends reinvested, reflecting a subtraction for withholding taxes retained
at the source of foreigners who do not benefit from a double taxation treaty.
Investors cannot invest directly in an index.

<PAGE>

Review Cont'd.
- -------------------------------------------------------------------------------
Additional Performance Tracking Tools
You can access comprehensive information about the performance of your
Prudential mutual funds 24 hours a day through our Web site and automated phone
service. At www.prudential.com/investing, you'll find the daily closing
values, changes from the previous day, and quarterly performance for all of our
retail mutual funds. Other available resources include daily, monthly, and
quarterly market commentary.

Prudential is committed to meeting shareholders' needs. That is why we
continue to upgrade and make improvements to our Web site. Please send us your
comments about how we can continue to improve our site to meet your needs.

Mutual Fund Automated Service: (800) 225-1852

Main Menu Submenus
1. Account information 1. Account balance
2. Transactions
3. Order forms
2. Prices and yields
3. Transactions
4. Order checks and statements
5. PIN change

Portfolio Composition
Expressed as a percentage of total investments as of 9/30/99
United Kingdom 31.2%
France 14.4
Germany 13.8
Switzerland 9.9
Netherlands 8.3
Italy 6.4
Spain 4.0
Sweden 3.4
Finland 2.6
Belgium 1.9
Denmark 1.1
United States 0.8
Portugal 0.7
Ireland 0.6
Norway 0.6
Austria 0.3

Looking Ahead
The prospects for earnings growth in European companies appear healthy heading
toward the end of 1999 and into next year. The European Central Bank has
managed to keep higher inflation in check with its proactive stance, raising
or lowering interest rates quickly in response to changing conditions.

Most of the stock markets in the MSCI Europe Index are reporting very favorable
returns. The changes that led to these improved returns are continuing to take
place as we move forward. The Prudential Europe Index Fund is well positioned
should this current trend continue.

<PAGE>

Portfolio of Investments as of PRUDENTIAL INDEX SERIES FUND
September 30, 1999 PRUDENTIAL EUROPE INDEX FUND
- ---------------------------------------------------------------
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--97.9%
COMMON STOCKS--97.4%
- ------------------------------------------------------------
Austria--0.3%
40 Austria Tabak AG $ 1,886
100 Austrian Airlines 2,054
482 Bank Austria AG 23,998
50 Boehler-Uddeholm AG 2,237
25 EA-Generali AG 3,999
80 Flughafen Wien AG 3,193
150 Oesterreichische
Electrizitaetswirtschafts AG, Ser.
A 22,132
130 OMV AG 12,052
65 Va Technologie AG 5,222
280 Wienerberger Baustoffindustrie AG 6,232
------------
83,005
- ------------------------------------------------------------
Belgium--1.9%
20 D'Ieteren SA 8,807
44 Barco Industries N.V. 5,553
6 Bekaert N.V. 2,748
68 Cimenteries CBR Cementbedrijven 6,272
12 Colruyt N.V. 7,317
30 Compaignie Maritime Belge SA 1,389
197 Delhaize-Le Lion SA 15,735
229 Electrabel SA 79,359
147 Fortis AG CVG 896
2,970 Fortis AG NVP 96,788
1,323 Fortis AG Strip VVPR 14
20 Glaverbel SA 2,130
106 Groupe Bruxelles Lambert SA 20,207
40 KBC Bancassurance Holding Strip N.V. 1
1,245 KBC Bancassurance Holding N.V. 63,312
340 Solvay SA 24,224
360 Tractebel 63,797
600 Ucb SA 24,250
78 Union Miniere SA 3,223
------------
426,022
Denmark--1.1%
30 Bang & Olufsen Holding A/S $ 1,762
129 Carlsberg A/S, Ser. A 4,713
94 Carlsberg A/S, Ser. B 3,461
5 D/S 1912, Ser. B 51,432
3 D/S Svendborg, Ser. B 42,980
235 Danisco A/S 9,831
206 Den Danske Bank Group 23,463
170 FLS Industries A/S, Ser. B 4,506
60 International Service Systems A/S 3,361
300 Novo Nordisk A/S, Ser. B 35,673
962 Tele Danmark A/S 57,334
212 Unidanmark A/S 14,366
------------
252,882
- ------------------------------------------------------------
Finland--2.6%
180 Cultor Oyj, Ser. 1 3,441
40 Instrumentarium Group, Ser. A 1,342
500 Kemira Oyj 2,796
350 Kesko Oyj 4,212
50 Kone Corp., Ser. B 6,587
3,200 Merita plc, Ser. A 17,994
150 Metra Oyj, Ser. B 2,875
4,960 Nokia Oyj 444,246
500 Outokumpu Oyj, Ser. A 5,809
80 Pohjola Insurance Group, Ser. A 3,842
200 Sampo Insurance Co. Ltd., Ser. A 6,646
1,660 Sonera Group Oyj 48,086
130 Tieto Corp, Ser. B 4,112
1,050 UPM-Kymmene Oyj 35,784
------------
587,772
- ------------------------------------------------------------
France--14.2%
150 Accor SA 34,969
840 Alcatel Alsthom SA 115,760
1,450 Axa-UAP 183,455
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3

<PAGE>

Portfolio of Investments as of PRUDENTIAL INDEX SERIES FUND
September 30, 1999 PRUDENTIAL EUROPE INDEX FUND
- ---------------------------------------------------------------
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
France (cont'd.)
1,957 Banque Nationale de Paris $ 156,210
120 Bouygues SA 38,059
520 Canal Plus 31,068
290 Cap Gemini SA 45,709
960 Carrefour SA 153,665
50 Club Mediterranee SA 5,059
380 Compagnie de Saint Gobain 70,822
50 Compagnie Francaise d'Etudes et de
Construction Technip 5,317
20 Compagnie Generale de Geophysique SA 1,220
550 Compagnie Generale des Etablissements
Michelin, Ser. B 25,960
320 Danone 77,872
350 Dassault Systemes SA 13,792
1,190 Elf Aquitaine SA 207,843
100 Eridania Beghin-Say SA 12,120
40 Essilor International SA 12,780
310 Etablissements Economiques du Casino
Guichard-Perrachon SA 35,656
4,230 France Telecom SA 371,204
20 Gecina 2,428
50 Groupe GTM 5,527
50 Imetal SA 7,577
376 L'Air Liquide 59,665
275 L'OREAL 175,577
469 Lafarge SA 51,846
450 Lagardere S.C.A. 18,686
110 Legrand SA 24,718
398 Louis Vuitton Moet Hennessy 119,318
90 Pathe SA 9,307
230 Pechiney 12,737
250 Pernod Ricard 16,800
505 Pinault-Printemps-Redoute SA 95,732
80 Promodes 70,758
200 PSA Peugeot Citroen 40,086
1,610 Rhone Poulenc SA, Ser. A 83,160
20 Sagem SA 14,058
2,640 Sanofi-Synthelabo SA 112,463
660 Schneider SA 48,289
50 SEB SA 3,365
150 SEITA 8,946
100 Sidel SA $ 10,181
50 Simco SA 4,260
200 Societe Bic SA 9,760
10 Societe Eurafrance SA 6,177
440 Societe Generale 90,673
140 Sodexho Alliance 23,707
640 Suez Lyonnaise des Eaux 103,602
710 Thomson CSF 24,121
405 Total Fina SA 50,853
495 Total Fina SA Strip 5
1,040 Total SA, Ser. B 130,696
20 Unibail SA 2,835
950 Usinor SA 13,406
333 Valeo SA 24,098
2,020 Vivendi 141,877
------------
3,215,834
- ------------------------------------------------------------
Germany--13.1%
160 Adidas-Salomon AG 13,606
150 AGIV AG 2,788
995 Allianz AG 286,745
150 AMB Aachener & Muenchner
Beteiligungs AG 13,882
100 Axa Colonia Konzern AG 10,650
2,590 BASF AG 110,333
3,060 Bayer AG 122,045
1,700 Bayerische Vereinsbank AG 99,214
300 Beiersdorf AG, Ser. A 20,927
100 Bilfinger & Berger Bau AG 2,279
260 Buderus AG 4,430
500 Continental AG 10,969
4,061 DaimlerChrysler AG 279,823
2,500 Deutsche Bank AG 167,336
1,520 Deutsche Lufthansa AG 27,811
9,400 Deutsche Telekom 385,420
106 Douglas Holding AG 4,572
2,110 Dresdner Bank AG 99,323
200 Fag Kugelfischer Georg Schaefer AG 1,896
200 Heidelberger Zement AG 17,082
250 Hochtief AG 10,863
30 Karstadt AG 13,547
430 Linde AG 23,859
500 MAN AG 15,070
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4

<PAGE>

Portfolio of Investments as of PRUDENTIAL INDEX SERIES FUND
September 30, 1999 PRUDENTIAL EUROPE INDEX FUND
- ---------------------------------------------------------------
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Germany (cont'd.)
1,580 Mannesmann AG $ 252,403
650 Merck KGaA 23,536
1,130 Metro AG 58,848
754 Munchener Ruckversicherungs-
Gesellschaft AG 152,329
716 Preussag AG 36,068
1,980 RWE AG 82,133
260 SAP AG 100,237
290 Schering AG 31,657
50 SGL Carbon AG 3,435
2,420 Siemens AG 199,868
2,250 Thyssen AG 45,169
2,070 VEBA AG 113,423
2,830 Viag AG 53,648
1,310 Volkswagen AG 73,105
------------
2,970,329
- ------------------------------------------------------------
Ireland--0.6%
3,700 Allied Irish Banks plc 44,409
1,550 CRH plc 29,680
200 DCC plc 1,570
4,000 Eercom plc 17,381
1,000 Fyffes plc 1,832
600 Greencore Group plc 1,789
1,000 Independent Newspapers plc 5,272
870 Irish Permanent plc 9,775
3,900 Jefferson Smurfit Group plc 11,546
600 Kerry Group plc, Ser. A 7,604
500 Ryanair Holdings plc 4,686
800 Tullow Oil plc 826
------------
136,370
- ------------------------------------------------------------
Italy--6.3%
7,600 Alitalia SpA 21,449
4,364 Assicurazioni Generali 145,006
7,800 Banca Commerciale Italiana 53,829
9,918 Banca Intesa SpA 41,511
2,000 Banca Intesa SpA (Nonconvertible) 3,898
1,000 Banca Popolare di Milano 7,317
6,000 Benetton Group SpA 13,067
1,000 Bulgari SpA $ 7,444
500 Burgo (Cartiere) SpA 3,940
3,030 Edison SpA 26,654
33,300 ENI SpA 208,884
1,696 Fiat SpA 56,535
450 Fiat SpA (Private) 7,404
350 Fiat SpA (Nonconvertible) 5,927
16,700 Istituto Nazionale delle
Assicurazioni (INA) 54,423
500 Italcementi SpA 6,843
4,250 Italgas (Soc Ital) SpA 18,376
500 La Rinascente SpA 3,754
1,400 Magneti Marelli 3,921
140 Marzotto (Gaetano) & Figlia SpA 1,079
4,810 Mediaset SpA 49,126
2,400 Mediobanca SpA 26,557
500 Mondadori (Arnoldo) Editore SpA 8,733
9,880 Montedison SpA 19,361
12,350 Olivetti Group SpA 26,634
5,500 Parmalat Finanziaria SpA 7,380
8,670 Pirelli SpA 21,098
2,180 Riunione Adriatica di Sicurta SpA 21,777
6,132 San Paolo-IMI SpA 79,672
1,000 Sirti SpA 5,208
2,000 Snia BPD SpA 2,339
500 Societa Assicuratrice Industriale
(SAI) 5,724
28,350 Telecom Italia Mobile SpA 176,324
6,000 Telecom Italia Mobile SpA (di Risp) 22,109
15,410 Telecom Italia SpA 133,918
3,500 Telecom Italia SpA (di Risp) 17,594
20,210 Unicredito Italiano SpA 98,793
16,000 Unione Immobiliare SpA 8,503
------------
1,422,111
- ------------------------------------------------------------
Netherlands--8.1%
5,968 ABN AMRO Holding N.V. 134,109
2,460 AEGON N.V. 211,686
1,180 Akzo Nobel N.V. 50,016
324 Buhrmann N.V. 5,452
2,632 Elsevier N.V. 27,049
365 Getronics N.V. 19,689
550 Hagemeyer N.V. 13,209
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5

<PAGE>

Portfolio of Investments as of PRUDENTIAL INDEX SERIES FUND
September 30, 1999 PRUDENTIAL EUROPE INDEX FUND
- ---------------------------------------------------------------
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Netherlands (cont'd.)
1,307 Heineken N.V. $ 65,004
100 Hollandsche Beton Groep N.V. 1,022
93 IHC Caland N.V. 4,615
3,886 ING Groep N.V. 211,066
269 KLM Royal Dutch Airlines N.V. 7,005
2,650 Koninklijke Ahold N.V. 87,207
121 Koninklijke Hoogovens N.V. 6,868
2,004 Koninklijke KPN BT 87,824
107 Koninklijke Pakhoed Holdings N.V. 2,957
1,421 Koninklijke Philips Electronics N.V. 143,012
308 Oce N.V. 5,675
8,770 Royal Dutch Petroleum Co. 509,028
100 Stork N.V. 2,077
2,019 TNT Post Group N.V. 51,390
2,366 Unilever N.V. 161,013
180 Vedior N.V. 3,153
1,136 Wolters Kluwer N.V. 38,956
------------
1,849,082
- ------------------------------------------------------------
Norway--0.6%
200 Aker RGI ASA 2,838
200 Bergesen dy ASA, Ser. A 3,251
100 Bergesen dy ASA, Ser. B 1,548
2,300 Christiania Bank Og Kreditkasse 12,342
2,600 Den Norske Bank ASA 10,263
100 Dyno Industrier ASA 2,193
200 Elkem ASA 3,612
210 Kvaerner ASA, Ser. A 4,199
120 Leif Hoegh & Co. ASA 1,362
350 Merkantildata ASA 3,589
700 NCL Holdings ASA 2,032
1,250 Norsk Hydro ASA 52,888
100 Norske Skogindustrier ASA, Ser. A 4,012
600 Orkla ASA, Ser. A 9,094
160 Orkla ASA, Ser. B 2,115
200 Petroleum Geo Services 3,754
140 Sas Norge ASA 1,363
200 Schibsted ASA 1,974
80 Smedvig ASA 887
1,100 Storebrand ASA, Ser. A 8,230
200 Tomra Systems ASA 7,533
------------
139,079
Portugal--0.7%
878 Banco Comercial Portugues SA $ 23,657
520 Banco Espirito Santo e Comercial de
Lisboa 13,053
400 BPI-SGPS SA 8,171
220 Brisa-Auto Estradas de Portugal SA 8,404
560 Cimpor-Cimentos de Portugal, SGPS SA 9,244
50 Companhia de Seguros Tranquilidade 1,464
2,560 EDP-Electricadade de Portugal SA 40,405
300 Jeronimo Martins, SGPS SA 8,499
350 Portucel Industrial-Empresa Produtora
de Celulose SA 2,565
750 Portugal Telecom SA 31,215
170 Sonae Investimentos-Sociedade
Gestorade Participacoes Sociais SA 5,538
100 Unicer-Uniao Cervejeira 1,890
------------
154,105
- ------------------------------------------------------------
Spain--4.0%
200 Acerinox SA 6,198
119 Acs Actividades Co. 3,170
2,028 Argentaria SA 44,622
1,015 Autopistas del Sol SA 11,199
218 Azucarera Ebro Agricolas 3,945
8,990 Banco Bilbao Vizcaya SA 118,529
15,286 Banco Central Hispanoamericano 158,073
324 Corporacion Financiera Alba SA 8,937
216 Corporacion Mapfre 4,037
600 Dragados & Constucciones SA 6,901
4,110 Endesa SA 78,088
440 Fomento de Construcion Y Contra 12,010
1,896 Gas Natural SDG SA 40,546
3,756 Iberdrola SA 55,681
210 Metrovacesa SA 4,692
4,190 Repsol SA 82,062
492 Sociedade General de Aguas de
Barcelona SA 8,242
740 Tabacalera SA, Ser. A 14,012
13,293 Telefonica de Espana SA 212,778
709 Telepizza 3,285
1,073 Union Electrica Fenosa SA 16,101
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6

<PAGE>

Portfolio of Investments as of PRUDENTIAL INDEX SERIES FUND
September 30, 1999 PRUDENTIAL EUROPE INDEX FUND
- ---------------------------------------------------------------
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Spain (cont'd.)
300 Vallehermoso SA $ 2,888
100 Viscofan Industria Navarra Envolturas
Celuosicas SA 907
338 Zardoya Otis SA 4,590
------------
901,493
- ------------------------------------------------------------
Sweden--3.3%
500 AGA AB, Ser. A 8,539
400 AGA AB, Ser. B 6,831
500 Atlas Copco AB, Ser. A 14,028
200 Atlas Copco AB, Ser. B 5,538
156 Boliden Ltd. AB 413
100 Diligentia AB 750
500 Drott AB 4,635
1,700 Electrolux AB, Ser. B 31,728
2,250 Forenings Sparbanken AB, Ser. A 36,504
3,400 Hennes & Mauritz AB, Ser. B 85,645
400 NetCom Systems AB 14,833
400 OM Gruppen AB 4,489
800 Sandvik AB, Ser. A 21,713
200 Sandvik AB, Ser. B 5,465
1,200 Securitas AB, Ser. B 18,005
2,200 Skandia Forsakring AB 45,891
2,400 Skandinaviska Enskilda Banken, Ser. A 24,446
500 Skanska AB, Ser. B 18,603
100 SKF AB, Ser. A 2,123
200 SKF AB, Ser. B 4,489
900 Svenska Cellulosa AB, Ser. B 23,988
3,000 Svenska Handelsbanken, Ser. A 41,902
150 Svenska Handelsbanken, Ser. B 1,940
300 Svenskt Stal AB, Ser. A 3,861
1,300 Swedish Match AB 4,821
8,000 Telefonaktiebolaget LM Ericsson 247,872
400 Trelleborg AB, Ser. B 3,806
600 Volvo AB, Ser. A 16,907
1,300 Volvo AB, Ser. B 36,711
300 Wm-Data AB, Ser. B 12,991
------------
749,467
Switzerland--9.8%
654 ABB AG $ 67,093
582 ABB AG (Registered) 60,117
70 Adecco SA 39,138
25 Alusuisse-Lonza Holding AG
(Registered) 28,789
1,085 Credit Suisse Group 198,840
7 Fischer (Georg) AG 2,239
10 Forbo Holding AG 4,365
20 Holderbank Financiere Glarus AG 25,977
35 Holderbank Financiere Glarus AG
(Registered) 12,315
2 Jelmoli Holding AG 2,184
10 Merkur Holding AG 2,539
160 Nestle SA 300,684
277 Novartis AG 410,910
7 Roche Holdings AG 129,707
29 Roche Holdings AG (Registered) 335,594
50 Sairgroup 10,813
1 Schindler Holding AG 1,543
3 Schindler Holding AG (Registered) 4,898
56 Schweizerische Rueckversicherungs-
Gesellschaft 111,770
3 SGS Societe Generale de Surveillance
Holding SA 3,367
10 SGS Societe Generale de Surveillance
Holding SA (Registered) 2,826
7 Sika Finanz AG 2,179
14 SMH AG 10,897
50 SMH AG (Registered) 8,164
10 Sulzer AG 6,318
300 Swisscom AG 93,564
846 UBS-Union Bank of Switzerland 238,480
190 Zurich Versicherungs-Gesellschaff 105,979
------------
2,221,289
- ------------------------------------------------------------
United Kingdom--30.8%
5,850 Abbey National plc 103,377
6,750 Allied Zurich 79,206
840 Anglian Water plc 10,002
3,050 Arjo Wiggins Appleton plc 9,946
3,036 Associated British Foods plc 19,800
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7

<PAGE>

Portfolio of Investments as of PRUDENTIAL INDEX SERIES FUND
September 30, 1999 PRUDENTIAL EUROPE INDEX FUND
- ---------------------------------------------------------------
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
United Kingdom (cont'd.)
4,400 BAA plc $ 44,239
6,100 Barclays plc 178,821
750 Barratt Development plc 3,236
3,457 Bass plc 41,590
1,450 BBA Group plc 10,340
16,629 BG plc 95,578
1,450 BICC plc 2,587
2,800 Blue Circle Industries plc 16,831
2,100 BOC Group plc 43,854
4,100 Boots Co. plc 45,747
550 Bowthorpe plc 5,124
1,900 BPB plc 11,609
7,500 British Aerospace plc 49,407
4,350 British Airways plc 24,411
7,250 British America Tobacco plc 62,208
1,900 British Land Co. plc 14,832
39,450 British Petroleum Co. plc 721,170
7,300 British Sky Broadcasting plc 70,331
7,800 British Steel plc 19,783
26,300 British Telecom plc 398,484
1,400 Bunzl plc 6,642
625 Burmah Castrol plc 11,734
9,800 Cable & Wireless plc 106,602
8,600 Cadbury Schweppes plc 59,769
1,800 Caradon plc 4,514
2,100 Carlton Communications plc 15,909
15,120 Centrica plc 41,460
1,750 Coats Viyella plc 1,590
300 Cobham plc 4,021
5,550 Commercial Union plc 85,370
2,900 Compass Group plc 28,608
2,150 Courtaulds Textiles plc 5,028
850 De La Rue plc 4,480
14,605 Diageo plc 149,129
1,400 Electrocomponents plc 11,897
1,170 Elementis plc 1,965
3,050 EMI Group plc $ 22,302
1,800 FKI plc 5,662
11,800 General Electric Co. plc 113,297
2,900 GKN plc 46,184
14,650 Glaxo Wellcome plc 380,002
7,700 Granada Group plc 66,322
1,000 Great Portland Estates plc 3,396
4,200 Great Universal Stores plc 31,853
9,758 Halifax plc 122,698
900 Hammerson plc 7,104
2,000 Hanson plc 15,399
400 Hepworth plc 1,375
33,750 HSBC Holdings plc (GBP) 386,579
300 Hyder plc 2,678
1,050 IMI plc 4,842
3,200 Imperial Chemical Industries plc 35,231
15,745 Invensys plc 76,495
7,850 J. Sainsbury plc 48,998
750 Johnson Matthey plc 7,145
5,850 Kingfisher plc 63,009
5,400 Ladbroke Group plc 18,831
400 Laird Group plc 2,013
2,000 Land Securities plc 27,207
3,350 LASMO plc 7,917
21,600 Legal & General Group plc 61,186
200 Lex Service plc 1,877
22,050 Lloyds TSB Group plc 269,814
663 Lonrho plc 7,010
12,900 Marks & Spencer plc 66,816
1,156 MEPC plc 8,472
250 Meyer International plc 1,667
2,007 Misys plc 19,620
6,052 National Grid Co. plc 42,260
5,200 National Power plc 40,507
1,400 Next plc 14,088
360 Ocean Group plc 5,532
2,500 P & O Finance plc 37,796
2,500 Pearson plc 53,404
3,850 Pilkington plc 6,467
916 Provident Financial plc 10,937
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 8

<PAGE>

<CAPTION>
Shares
Warrants Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
2,150 Wolseley plc $ 14,907
7,231 Zeneca Group plc 303,673
------------
6,981,898
------------
Total common stocks
(cost US$18,892,957) 22,090,738
------------
- ------------------------------------------------------------
PREFERRED STOCKS--0.5%
- ------------------------------------------------------------
Germany--0.5%
100 Dyckerhoff AG, DM 1.5 3,078
10 Friedrich Grohe AG, DM 21.00 3,063
150 MAN AG, DM 1.6 2,908
510 RWE AG, EUR 1.0 15,778
180 Sap AG, EUR 1.6 80,705
400 Volkswagen AG, DM 1.6 12,673
------------
Total preferred stocks
(cost US$103,677) 118,205
------------
- ------------------------------------------------------------
WARRANTS(a)
- ------------------------------------------------------------
France
20 Axa-UAP, expiring 12/31/01 @ EUR
121.96 186
468 Banque Nationale de Paris,
expiring 7/15/02 @ EUR 100.00 3,887
------------
4,073
- ------------------------------------------------------------
Germany
12 Munchener
Ruckversicherungs-Gesellschaft AG,
expiring 6/3/02 @ EUR 163.61 412
- ------------------------------------------------------------
Italy
400 Mediobanca SpA, expiring 12/31/00
@ EUR 8.26 818
------------
Total warrants (cost US$0) 5,303
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 9

<PAGE>

Total Investments--98.7%
(cost US$19,173,548; Note 4) $ 22,392,750
Other assets in excess of
liabilities--1.3% 282,441
------------
Net Assets--100% $ 22,675,191
------------
------------
</TABLE>
- ---------------
(a) Non-income producing security.
(b) Pledged as initial margin for financial futures contracts.

The industry classification of portfolio holdings and other
assets in excess of liabilities shown as a percentage of net
assets as of September 30, 1999 was as follows:

Finance............................................... 24.6%
Utilities............................................. 15.9
Health Technology..................................... 9.1
Energy Minerals....................................... 8.4
Consumer Non-Durables................................. 6.9
Process Industries.................................... 6.3
Electronic Technology................................. 5.7
Retail Trade.......................................... 4.6
Producer Manufacturing................................ 4.0
Consumer Durables..................................... 2.8
Consumer Services..................................... 1.9
Commercial Services................................... 1.8
Transportation........................................ 1.7
Non-Energy Minerals................................... 1.7
Technology Services................................... 1.5
Industrial Services................................... 1.0
Repurchase Agreement.................................. 0.6
U.S. Government Obligations........................... 0.2
-----
98.7
Other assets in excess of liabilities................. 1.3
-----
100.0%
-----
-----
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 10

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Statement of Assets and Liabilities PRUDENTIAL EUROPE INDEX FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets September 30, 1999
<S> <C>
Investments, at value (cost $19,173,548)............................................................... $ 22,392,750
Foreign currency, at value (cost $334,324)............................................................. 336,962
Cash................................................................................................... 341
Dividends and interest receivable...................................................................... 74,832
Receivable for investments sold........................................................................ 7,007
Receivable for Fund shares sold........................................................................ 4,851
Other assets........................................................................................... 260
------------------
Total assets........................................................................................ 22,817,003
------------------
Liabilities
Accrued expenses and other liabilities................................................................. 86,791
Payable for Fund shares reacquired..................................................................... 35,220
Due to Manager......................................................................................... 13,816
Foreign withholding taxes payable...................................................................... 4,326
Due to broker - variation margin....................................................................... 1,029
Payable for investments purchased...................................................................... 630
------------------
Total liabilities................................................................................... 141,812
------------------
Net Assets............................................................................................. $ 22,675,191
------------------
------------------
Net assets were comprised of:
Shares of beneficial interest, at par............................................................... $ 1,865
Paid-in capital in excess of par.................................................................... 19,219,373
------------------
19,221,238
Undistributed net investment income................................................................. 123,922
Accumulated net realized gains on investment transactions and foreign currencies.................... 120,524
Net unrealized appreciation on investments and foreign currencies................................... 3,209,507
------------------
Net assets, September 30, 1999......................................................................... $ 22,675,191
------------------
------------------
Class Z:
Net asset value per share
($22,675,191 / 1,865,011 shares of beneficial interest issued and outstanding)................... $ 12.16
------------------
------------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 11

<PAGE>
PRUDENTIAL INDEX SERIES FUND
PRUDENTIAL EUROPE INDEX FUND
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Year Ended
September 30,
Net Investment Income 1999
Income
Dividends (net of foreign withholding
taxes of $60,320)...................... $ 468,230
Interest.................................. 5,467
-----------------
Total Income........................... 473,697
-----------------
Expenses
Management fee............................ 87,936
Custodian's fees and expenses............. 214,000
Audit fee and expenses.................... 18,000
Registration fees......................... 17,500
Trustees' fees............................ 7,000
Transfer agent's fees and expenses........ 5,000
Legal fees and expenses................... 3,000
Miscellaneous............................. 519
-----------------
Total expenses......................... 352,955
Less: Expense subsidy (Note 2)............ (221,050)
-----------------
Net expenses........................... 131,905
-----------------
Net investment income........................ 341,792
-----------------
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions
Net realized gain (loss) on:
Investment transactions................... 70,151
Foreign currency transactions............. (25,676)
Financial futures transactions............ 76,058
-----------------
120,533
-----------------
Net change in unrealized appreciation (depreciation) on:
Investments............................... 2,638,573
Foreign currencies........................ (1,773)
Financial futures......................... (1,023)
-----------------
2,635,777
-----------------
Net gain on investments and foreign
currencies................................ 2,756,310
-----------------
Net Increase in Net Assets
Resulting from Operations.................... $ 3,098,102
-----------------
-----------------
</TABLE>

PRUDENTIAL INDEX SERIES FUND
PRUDENTIAL EUROPE INDEX FUND
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
October 1, 1997(a)
Year Ended Through
Increase (Decrease) September 30, September 30,
in Net Assets 1999 1998
<S> <C> <C>
Operations
Net investment income........ $ 341,792 $ 288,375
Net realized gain on
investments and foreign
currency transactions..... 120,533 37,994
Net change in unrealized
appreciation/depreciation
on investments and foreign
currencies................ 2,635,777 573,730
--------------- ------------------
Net increase in net assets
resulting from
operations................ 3,098,102 900,099
--------------- ------------------
Dividends and distributions
(Note 1):
Dividends from net investment
income.................... (403,257) (108,089)
--------------- ------------------
Distributions from net
realized gains............ (52,600) --
--------------- ------------------
Fund share transactions (Note
6):
Net proceeds from shares
sold...................... 4,333,863 18,141,700
Net asset value of shares
issued in reinvestment of
dividends and
distributions............. 455,044 108,032
Cost of shares reacquired.... (2,782,271) (1,015,432)
--------------- ------------------
Net increase in net assets
from Fund share
transactions.............. 2,006,636 17,234,300
--------------- ------------------
Total increase.................. 4,648,881 18,026,310
Net Assets
Beginning of period............. 18,026,310 --
--------------- ------------------
End of period(b)................ $22,675,191 $ 18,026,310
--------------- ------------------
--------------- ------------------
- ---------------
(a) Commencement of investment
operations.
(b) Undistributed net investment
income....................... $ 123,922 $ 213,033
--------------- ------------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 12

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Notes to Financial Statements PRUDENTIAL EUROPE INDEX FUND
- --------------------------------------------------------------------------------
Prudential Index Series Fund (the 'Company') is registered under the Investment
Company Act of 1940 as an open-end diversified management investment company.
The Company was established as a Delaware business trust on May 11, 1992 and
currently consists of five separate funds, one of which is the Prudential Europe
Index Fund (the 'Fund').
The Fund's investment objective is to seek to provide investment results that
correspond to the price and yield performance of a broad-based index of
securities of European issuers, currently the Morgan Stanley Capital
International Europe Index.

- ------------------------------------------------------------
Note 1. Accounting Policies

The following is a summary of significant accounting policies followed by the
Company and the Fund in the preparation of its financial statements.

Securities Valuation: Securities for which the primary market is on an exchange,
are valued at the last sale price on such exchange on the day of valuation or,
if there were no sales on such day, at the mean between the last bid and asked
prices on such day or at the bid price in the absence of an asked price.
Securities that are actively traded in the over-the-counter market, including
listed securities for which the primary market is believed to be
over-the-counter, are valued by an independent pricing agent or a principal
market maker. Securities for which reliable market quotations are not available
or for which the pricing agent or principal market maker does not provide a
valuation or methodology or provides a valuation or methodology that, in the
judgment of the manager or subadviser, does not represent fair value, are valued
by the Valuation Committee or Board of Trustees in consultation with the manager
or the subadviser.

Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.

In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Company's policy that its custodian or designated
subcustodians under triparty repurchase agreements, as the case may be, takes
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction including accrued interest.
To the extent that any repurchase transaction exceeds one business day, the
value of the collateral is marked-to-market on a daily basis to ensure the
adequacy of the collateral. 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 of the collateral by the Fund may be
delayed or limited.

Foreign Currency Translation: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:

(i) market value of investment securities, other assets and liabilities--at the
closing rates of exchange;

(ii) purchases and sales of investment securities, income and expenses--at the
rate of exchange prevailing on the respective dates of such transactions.

Although the net assets of the Fund are presented at the foreign exchange rates
and market values at the close of the fiscal period, the Fund does not isolate
that portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of securities held at the end of the fiscal period. Similarly, the Fund
does not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of long-term securities
sold during the fiscal period. Accordingly, realized foreign currency gains
(losses) are included in the reported net realized gains on investment
transactions.

Net realized losses on foreign currency transactions represent net foreign
exchange gains or losses from forward currency contracts, disposition of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on security transactions, and the difference between the amounts of
interest, dividends and foreign taxes recorded on the Fund's books and the U.S.
dollar equivalent amounts actually received or paid. Net currency gains and
losses from valuing foreign currency denominated assets and liabilities at
fiscal period end exchange rates are reflected as a component of unrealized
appreciation on investments and foreign currencies.

Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin as a result of,
among other factors, the possibility of political and economic instability and
the level of governmental supervision and regulation of foreign securities
markets.

Forward Currency Contracts: A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The Fund enters into forward currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings or on specific receivables and payables denominated in a
- --------------------------------------------------------------------------------
13

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Notes to Financial Statements PRUDENTIAL EUROPE INDEX FUND
- --------------------------------------------------------------------------------
foreign currency. The contracts are valued daily at current exchange rates and
any unrealized gain or loss is included in net unrealized appreciation or
depreciation on investments. Gain or loss is realized on settlement date of the
contract equal to the difference between settlement value of the original and
renegotiated forward contracts. This gain or loss, if any, is included in net
realized gain (loss) on foreign currency transactions. Risks may arise upon
entering into these contracts from the potential inability of the counter
parties to meet the terms of their contracts.

Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities or commodities at
a set price for delivery on a future date. Upon entering into a financial
futures contract, the Fund is required to pledge to the broker an amount of cash
and/or other assets equal to a certain percentage of the contract amount. This
amount is known as the 'initial margin.' Subsequent payments, known as
'variation margin,' are made or received by the Fund each day, depending on the
daily fluctuations in the value of the underlying security. Such variation
margin is recorded for financial statement purposes on a daily basis as
unrealized gain or loss. When the contract expires or is closed, the gain or
loss is realized and is presented in the statement of operations as net realized
gain (loss) on financial futures contracts.

The Fund invests in financial futures contracts in order to hedge existing
portfolio securities, or securities the Fund intends to purchase, against
fluctuations in value. Under a variety of circumstances, the Fund may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts and the underlying
assets.

Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses from investment and
foreign currency transactions are calculated on the identified cost basis.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual basis. Expenses are recorded on the accrual basis which
may require the use of certain estimates by management.

Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.

Withholding taxes on foreign dividends, interest and capital gains have been
provided for in accordance with the Fund's understanding of the applicable
country's tax rules and rates.

Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with American Institute of Certified
Public Accountants (AICPA), Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect of applying
this Statement of Position was to increase accumulated net realized gain and
decrease undistributed net investment income by $27,646 for realized foreign
currency losses and mark to market of passive foreign investment companies
during the year ended September 30, 1999. Net investment income, net realized
gains and net assets were not affected by this change.

- ------------------------------------------------------------
Note 2. Agreements

The management fee paid to PIFM is computed daily and payable monthly at an
annual rate of .40 of 1% of the average daily net assets of the Fund.

PIFM has agreed to subsidize the operating expenses of the Fund so that total
Fund operating expenses do not exceed .60% on an annualized basis of the Fund's
average daily net assets. For the year ended September 30, 1999, PIFM subsidized
$221,050 of the expenses of the Fund (1.01% of average daily net assets, or
$0.12 per share).
- --------------------------------------------------------------------------------
14

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Notes to Financial Statements PRUDENTIAL EUROPE INDEX FUND
- --------------------------------------------------------------------------------
The Fund has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS'), which acts as the distributor of the Fund. No
distribution or service fees are paid to PIMS as distributor of the Fund.

PIFM, PIMS and PIC are wholly owned subsidiaries of The Prudential Insurance
Company of America ('Prudential').

The Fund, along with other unaffiliated registered investment companies (the
'Funds'), entered into a syndicated agreement ('SCA') with an unaffiliated
lender. The maximum commitment under the SCA is $1 billion. Interest on any
borrowings will be at market rates. The Funds pay a commitment fee at an annual
rate of .065 of 1% on the unused portion of the credit facility, which is
accrued and paid quarterly on a pro rata basis by the Funds. The SCA expires on
March 9, 2000. Prior to March 11, 1999, the Funds had a credit agreement with a
maximum commitment of $200,000,000. The commitment fee was .055 of 1% on the
unused portion of the credit facility. The Fund did not borrow any amounts
pursuant to either agreement during the year ended September 30, 1999. The
purpose of the agreements is to serve as an alternative source of funding for
capital share redemptions.

- ------------------------------------------------------------
Note 3. Other Transactions With Affiliates

Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Company's transfer agent. During the year ended September 30,
1999, the Fund incurred fees of approximately $4,000 for the services of PMFS.
As of September 30, 1999, approximately $400 of such fees were due to PMFS.
Transfer agent fees and expenses in the Statement of Operations include certain
out-of-pocket expenses paid to nonaffiliates.

- ------------------------------------------------------------
Note 4. Portfolio Securities

Purchases and sales of investment securities, other than short-term investments,
for the year ended September 30, 1999 were $2,817,786 and $840,793,
respectively.

The United States federal income tax cost basis of the Fund's investments at
September 30, 1999 was $19,270,353 and, accordingly, net unrealized appreciation
for federal income tax purposes was $3,122,397 (gross unrealized
appreciation--$4,187,197; gross unrealized depreciation--$1,064,800).

The Fund will elect for United States federal income tax purposes to treat net
currency losses of approximately $27,900 incurred in the eleven month period
ending September 30, 1999, as having been incurred in the following year.

At September 30, 1999, the Fund had open purchases of 100 EUROTOP and 10 FTSE
100 financial futures contracts expiring on December 17, 1999.

The unrealized depreciation on such contracts as of September 30, 1999 was as
follows:
<TABLE>
<CAPTION>
Value at Value on Unrealized
Acquisition September 30, 1999 Depreciation
----------- ------------------ ------------
<S> <C> <C> <C>
EUROTOP.................. $ 303,100 $292,500 $(10,600)
FTSE 100................. 102,972 100,197 (2,775)
------------
$(13,375)
------------
------------
</TABLE>

- ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account

The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or federal agency obligations. As of September 30, 1999, the
Fund had a .019% undivided interest in the repurchase agreements in the joint
account. This undivided interest represented $124,000 in principal amount. As of
such date, the repurchase agreements in the joint account and the value of the
collateral therefor were as follows:

Warburg Dillon Read LLC, 5.32%, in the principal amount of $190,000,000,
repurchase price $190,028,078, due 10/1/99. The value of the collateral
including accrued interest was $193,802,299.

Bear, Stearns & Co., Inc., 5.32%, in the principal amount of $190,000,000,
repurchase price $190,028,078, due 10/1/99. The value of the collateral
including accrued interest was $194,200,266.

Morgan (J.P.) Securities, Inc., 5.25%, in the principal amount of $190,000,000,
repurchase price $190,027,708, due 10/1/99. The value of the collateral
including accrued interest was $193,800,121.

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Notes to Financial Statements PRUDENTIAL EUROPE INDEX FUND
- --------------------------------------------------------------------------------
Note 6. Capital

<TABLE>
<CAPTION>
Year ended September 30, 1999: Shares
--------
<S> <C>
Shares sold......................................... 360,875
Shares issued in reinvestment of dividends and
distributions..................................... 39,398
Shares reacquired................................... (230,061)
--------
Net increase in shares outstanding.................. 170,212
--------
--------
<CAPTION>
October 1, 1997(a) through September 30, 1998:
Shares sold........................................ 1,771,843
Shares issued in reinvestment of dividends and
distributions.................................... 11,206
Shares reacquired.................................. (88,250)
---------
Net increase in shares outstanding................. 1,694,799
---------
---------
</TABLE>

As of September 30, 1999, 1,563,008 of the outstanding shares were owned by The
Prudential Insurance Company of America.

- ---------------
(a) Commencement of investment operations.
- --------------------------------------------------------------------------------
16

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Financial Highlights PRUDENTIAL EUROPE INDEX FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
October 1, 1997(a)
Year Ended Through
September 30, September 30,
1999 1998
--------------- ------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.............................................. $ 10.64 $ 10.00
------ ------
Income from investment operations
Net investment income(c).......................................................... .17 .18
Net realized and unrealized gain on investment and foreign currency
transactions................................................................... 1.61 .53
------ ------
Total from investment operations............................................... 1.78 .71
------ ------
Less distributions
Dividends from net investment income.............................................. (.23) (.07)
Distributions from net realized gains............................................. (.03) --
------ ------
Total distributions............................................................ (.26) (.07)
------ ------
Net asset value, end of period.................................................... $ 12.16 $ 10.64
------ ------
------ ------
TOTAL RETURN(d):.................................................................. 16.86% 7.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)................................................... $22,675 $ 18,026
Average net assets (000).......................................................... $21,984 $ 17,728
Ratios to average net assets:(c)
Expenses....................................................................... .60% .60%(b)
Net investment income.......................................................... 1.55% 1.64%(b)
Portfolio turnover rate........................................................... 4% 4%
</TABLE>
- ---------------
(a) Commencement of investment operations.
(b) Annualized.
(c) Net of expense subsidy.
(d) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each period reported and includes reinvestment
of dividends and distributions. Total returns for periods of less than a
full year are not annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 17

<PAGE>
PRUDENTIAL INDEX SERIES FUND
Report of Independant Accountants PRUDENTIAL EUROPE INDEX FUND
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
Prudential Index Series Fund--Prudential Europe Index Fund

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential Index Series
Fund--Prudential Europe Index Fund (the 'Fund', one of the portfolios
constituting Prudential Index Series Fund) at September 30, 1999, the results of
its operations for the year then ended, and the changes in its net assets and
the financial highlights for each of the two years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as 'financial
statements') are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 1999 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
November 17, 1999

PRUDENTIAL INDEX SERIES FUND
Tax Information (Unaudited) PRUDENTIAL EUROPE INDEX FUND
- --------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days of the
Fund's fiscal year end (September 30, 1999) as to the federal tax status of
dividends paid by the Fund during such fiscal year. Accordingly, we are advising
you that in the fiscal year ended September 30, 1999, the Fund paid ordinary
income dividends of $0.23 per share, and a short-term capital gain distribution
of $0.02 per share, which is taxable as ordinary income. A long-term capital
gain distribution of $0.01 per share was also paid to shareholders and is
taxable at a maximum rate of 20%.

The Fund has elected to give the benefit of foreign tax credits to its
shareholders. Accordingly, shareholders who must report their gross income
dividends and distributions in a federal income tax return will be entitled to a
foreign tax credit, or an itemized deduction, in computing their U.S. income tax
liability. It is generally more advantageous to claim a credit rather than to
take a deduction. For the fiscal year ended September 30, 1999, the Fund intends
on passing through 19.3% of ordinary income distributions as a foreign tax
credit.
- --------------------------------------------------------------------------------
18

<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
When you invest through Prudential Mutual Funds, you receive financial advice
from a Prudential Securities Financial Advisor or Prudential/Pruco Securities
registered representative. Your advisor or representative can provide you with
the following services:

- -------------------------------------------------------------------------------
There's No Reward Without Risk; but Is This Risk Worth It?
Your financial advisor or registered representative can help you match the
reward you seek with the risk you can tolerate. Risk can be difficult to
gauge--sometimes even the simplest investments bear surprising risks. The
educated investor knows that markets seldom move in just one direction. There
are times when a market sector or asset class will lose value or provide little
in the way of total return. Managing your own expectations is easier with help
from someone who under-stands the markets and who knows you!

- -------------------------------------------------------------------------------
Keeping Up With the Joneses
A financial advisor or registered representative can help you wade through the
numerous available mutual funds to find the ones that fit your own individual
investment profile and risk tolerance. While the newspapers and popular
magazines are full of advice about investing, they are aimed at generic groups
of people or representative individuals--not at you personally. Your financial
advisor or registered representative will review your investment objectives
with you. This means you can make financial decisions based on the assets and
liabilities in your current portfolio and your risk tolerance--not just based
on the current investment fad.

- -------------------------------------------------------------------------------
Buy Low, Sell High
Buying at the top of a market cycle and selling at the bottom are among the
most common investor mistakes. But, sometimes it's difficult to hold on to an
investment when it's losing value every month. Your financial advisor or
registered representative can answer questions when you're confused or worried
about your investment, and should remind you that you're investing for the
long haul.

<PAGE>

Comparing a $10,000 Investment
- ---------------------------------------------------
Prudential Europe Index Fund vs. the Morgan Stanley
Capital International Europe Index

Class Z
(GRAPH)

Average Annual Total Returns
Since Inception 11.94% (10.45%)
One Year 16.86% (15.61%)

Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.

The graph compares a $10,000 investment in the Prudential Europe Index Fund
(Class Z shares) with a similar investment in the Morgan Stanley Capital
International Europe Index (the Index) by portraying the account values at the
commencement of operations of Class Z shares, and at the end of the fiscal
year (September 30), as measured on a quarterly basis, beginning in 1997. For
purposes of the graph, and unless otherwise indicated, it has been assumed that
all recurring fees (including management fees) were deducted, and all dividends
and distributions were reinvested. The graph and accompanying table reflect the
past subsidy and/or waiver of expenses and/or management fees. Without waiver
of management fees and/or expense subsidization, the Fund's average annual
total returns would have been lower, as indicated in parentheses ( ).

The Index is an unmanaged index comprising more than 550 companies representing
about 15 developed European countries. The Index includes the reinvestment of
all dividends, but does not reflect the payment of transaction costs and
advisory fees associated with an investment in the Fund. The Index is not the
only index that may be used to characterize performance of stock funds, and
other indexes may portray different comparative performance. Investors cannot
invest directly in an index.

This graph is furnished to you in accordance with SEC regulations.

<PAGE>

Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077

(800) 225-1852
http://www.prudential.com

Class NASDAQ Cusip
Z -- 74438C704

Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Marguerite E.H. Morrison, Secretary
Stephen M. Ungerman, Assistant Treasurer