PRUDENTIAL DEVELOPING MARKETS FUND, 497, 1998-06-29

PRUDENTIAL DEVELOPING MARKETS FUND
497, 1998-06-29

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Prudential Developing Markets Equity Fund

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PROSPECTUS DATED JUNE 26, 1998
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Prudential Developing Markets Equity Fund (the Fund) is a series of Prudential
Developing Markets Fund, an open-end, diversified, management investment
company. The Fund's investment objective is long-term growth of capital. It
seeks to achieve this objective by investing primarily in equity related
securities of companies whose principal activities are in developing markets
throughout the world. "Developing markets" include countries or markets that
are defined as emerging or developing by the International Finance
Corporation, the International Bank for Reconstruction and Development (World
Bank) or the United Nations or its authorities. See "How the Fund Invests--
Investment Objective and Policies." Under normal circumstances, the Fund
intends to invest at least 65% of its total assets in such securities in at
least the three following regions: Europe, Asia and Latin America. The Fund
may also invest in equity related securities of other companies and debt
securities, engage in various derivatives transactions, including options on
equity securities, stock indices, foreign currencies and futures contracts on
foreign currencies, and may purchase and sell futures contracts on foreign
currencies, groups of currencies and stock indices so as to hedge its
portfolio and to attempt to enhance return. There can be no assurance that the
Fund's investment objective will be achieved. See "How the Fund Invests--
Investment Objective and Policies." The Fund's address is Gateway Center
Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, and its telephone
number is (800) 225-1852.

The Fund is not intended to constitute a complete investment program. Because
of its objective and policies, including its foreign orientation and its
emphasis on developing markets, the Fund may be considered of a speculative
nature and subject to greater investment risks than are assumed by certain
other investment companies that invest solely in securities of U.S. issuers or
that do not emphasize investments in regions with developing or emerging
economies. See "How the Fund Invests--Investment Objective and Policies--
Special Considerations and Risks of Investing in Developing Market
Securities."

This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing and is available at the Web
site of The Prudential Insurance Company of America
(http://www.prudential.com). Additional information about the Fund has been
filed with the Securities and Exchange Commission (the Commission) in a
Statement of Additional Information, dated June 26, 1998, which information is
incorporated herein by reference (is legally considered part of this
Prospectus) and is available without charge upon request to the Fund at the
address or telephone number noted above. The Commission maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding the Fund.

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Investors are advised to read this Prospectus and retain it for future
reference.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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FUND HIGHLIGHTS

The following summary is intended to highlight certain information contained
in the Prospectus and is qualified in its entirety by the more detailed
information appearing elsewhere herein.

WHAT IS PRUDENTIAL DEVELOPING MARKETS EQUITY FUND?

Prudential Developing Markets Equity Fund is a mutual fund. A mutual fund
pools the resources of investors by selling its shares to the public and
investing the proceeds of such sale in a portfolio of securities designed to
achieve its investment objective. Technically, the Fund is a series of
Prudential Developing Markets Fund, an open-end, diversified, management
investment company.

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is long-term growth of capital. It seeks to
achieve this objective by investing primarily in equity related securities of
companies whose principal activities are in developing markets. "Developing
markets" include countries or markets that are defined as emerging or
developing by the International Finance Corporation, the International Bank
for Reconstruction and Development (World Bank) or the United Nations or its
authorities. There can be no assurance that the Fund's investment objective
will be achieved. See "How the Fund Invests--Investment Objective and
Policies" at page 5.

WHAT ARE THE FUND'S RISK FACTORS AND SPECIAL CHARACTERISTICS?

The Fund invests primarily in equity related securities of companies whose
principal activities are in developing markets. Unlike a mutual fund that
invests in more established economic markets, the Fund's concentration on
developing markets can result in more pronounced risks and rewards based upon
economic conditions that impact these markets more or less than other global
regions. Foreign securities in general involve certain risks and
considerations not typically associated with investments in U.S. Government
securities and securities of domestic companies, including political or
economic instability in the country of the issuer, the difficulty of
predicting international trade patterns, the possibility of imposition of
exchange controls and the risk of currency fluctuations. See "How the Fund
Invests--Special Considerations and Risks of Investing in Developing Market
Securities" at page 7. In addition, the Fund may engage in various hedging and
return enhancement strategies, including the use of derivatives transactions.
These activities may be considered speculative and may result in higher risks
and costs to the Fund. See "How the Fund Invests--Hedging and Return
Enhancement Strategies" at page 8. As with an investment in any mutual fund,
an investment in this Fund can decrease in value and you can lose money.

WHO MANAGES THE FUND?

Prudential Investments Fund Management LLC (PIFM or the Manager) is the
Manager of the Fund and is compensated for its services at an annual rate of
1.25% of the Fund's average daily net assets. As of May 31, 1998, PIFM served
as manager or administrator to 67 investment companies, including 45 mutual
funds, with aggregate assets of approximately $65 billion. The Prudential
Investment Corporation (PIC), doing business as Prudential Investments (PI,
the Subadviser or the investment adviser), furnishes investment advisory
services in connection with the management of the Fund under a Subadvisory
Agreement with PIFM. See "How the Fund is Managed--Manager" at page 14.

WHO DISTRIBUTES THE FUND'S SHARES?

Until approximately July 1, 1998, Prudential Securities Incorporated
(Prudential Securities or the Distributor), a major securities underwriter and
securities and commodities broker, will act as the Distributor of the Fund's
Class A, Class B, Class C and Class Z shares. On or about July 1, 1998,
Prudential Investment Management Services LLC (the Distributor) will serve as
the distributor of the Fund's shares. The Distributor is paid a distribution
and service fee with respect to Class A shares which is currently being
charged at the annual rate of .25 of 1% of the average daily net assets of the
Class A shares and is paid a distribution and service fee with respect to
Class B and Class C shares at the annual rate of 1% of

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the average daily net assets of each of the Class B and Class C shares. The
Distributor incurs the expenses of distributing the Fund's Class Z shares under
a Distribution Agreement with the Fund, none of which is reimbursed or paid for
by the Fund. See "How the Fund is Managed--Distributor" at page 15.

WHAT IS THE MINIMUM INVESTMENT?

The minimum initial investment is $1,000 per class for Class A and Class B
shares and $5,000 for Class C shares. The minimum subsequent investment is $100
for Class A, Class B and Class C shares. Class Z shares are not subject to any
minimum investment requirements. There is no minimum investment requirement for
certain retirement and employee savings plans or custodial accounts for the
benefit of minors. For purchases made through the Automatic Savings
Accumulation Plan, the minimum initial and subsequent investment is $50. See
"Shareholder Guide--How to Buy Shares of the Fund" at page 21 and "Shareholder
Guide--Shareholder Services" at page 31.

HOW DO I PURCHASE SHARES?

You may purchase shares of the Fund through the Distributor or brokers or
dealers that have entered into agreements to act as participating or
introducing brokers for the Distributor, or directly from the Fund, through its
transfer agent, Prudential Mutual Fund Services LLC (PMFS or the Transfer
Agent), at the net asset value per share (NAV) next determined after receipt of
your purchase order by the Transfer Agent, a dealer or the Distributor plus a
sales charge which may be imposed either (i) at the time of purchase (Class A
shares) or (ii) on a deferred basis (Class B or Class C shares). Class Z shares
are offered to a limited group of investors at NAV without any sales charge.
See "How the Fund Values its Shares" at page 17 and "Shareholder Guide--How to
Buy Shares of the Fund" at page 21.

WHAT ARE MY PURCHASE ALTERNATIVES?

The Fund offers four classes of shares through this Prospectus:

. Class A Shares: Sold with an initial sales charge of up to 5% of the
offering price.
. Class B Shares: Sold without an initial sales charge but are subject to a
contingent deferred sales charge or CDSC (declining from
5% to zero of the lower of the amount invested or the
redemption proceeds) which will be imposed on certain
redemptions made within six years of purchase. Although
Class B shares are subject to higher ongoing distribution-
related expenses than Class A shares, Class B shares will
automatically convert to Class A shares (which are subject
to lower ongoing distribution-related expenses)
approximately seven years after purchase.
. Class C Shares: Sold without an initial sales charge and, for one year
after purchase, are subject to a 1% CDSC on redemptions.
Like Class B shares, Class C shares are subject to higher
ongoing distribution-related expenses than Class A shares
but do not convert to another class.
.Class Z Shares: Sold without either an initial sales charge or CDSC to a
limited group of investors. Class Z shares are not subject
to any ongoing service or distribution expenses.

See "Shareholder Guide--Alternative Purchase Plan" at page 22.

HOW DO I SELL MY SHARES?

You may redeem your shares at any time at the NAV next determined after your
dealer, the Distributor or the Transfer Agent receives your sell order.
However, the proceeds of redemptions of Class B and Class C shares may be
subject to a CDSC. See "Shareholder Guide--How to Sell Your Shares" at page 26.
Participants in programs sponsored by Prudential Retirement Services should
contact their client representative for more information about selling their
Class Z shares.

HOW ARE DIVIDENDS AND DISTRIBUTIONS PAID?

The Fund expects to pay dividends of net investment income, if any, and make
distributions of any net capital gains at least annually. Dividends and
distributions will be automatically reinvested in additional shares of the Fund
at NAV without a sales charge unless you request that they be paid to you in
cash. See "Taxes, Dividends and Distributions" at page 18.

3
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FUND EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Z SHARES
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES+
Maximum Sales Load
Imposed on Purchases
(as a percentage of
offering price)........ 5% None None None
Maximum Sales Load or
Deferred Sales Load
Imposed on Reinvested
Dividends.............. None None None None
Maximum Deferred Sales
Load (as a percentage
of original purchase
price or redemption
proceeds, whichever is
lower)................. None 5% during the 1% on redemp- None
first year, de- tions made
creasing by 1% within one
annually to 1% year of pur-
in the fifth chase
and sixth years
and 0% the sev-
enth year*
Redemption Fees........ None None None None
Exchange Fee........... None None None None
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Z SHARES
average net assets) -------------- --------------- ------------------ --------------
<S> <C> <C> <C> <C>
Management Fees ....... 1.25% 1.25% 1.25% 1.25%
12b-1 Fees+............ .25++ 1.00 1.00 None
Other Expenses......... .50 .50 .50 .50%
----- ----- ----- -----
Total Fund Operating
Expenses............... 2.00%++ 2.75% 2.75% 1.75%
==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
EXAMPLE ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period:
Class A....................................................... $69 $110
Class B....................................................... $78 $115
Class C....................................................... $38 $ 85
Class Z ...................................................... $18 $ 55
You would pay the following expenses on the same investment,
assuming no redemption:
Class A....................................................... $69 $110
Class B....................................................... $28 $ 85
Class C....................................................... $28 $ 85
Class Z ...................................................... $18 $ 55
</TABLE>

The above example is based on anticipated data for the Fund's fiscal year
ending May 31, 1999. The example should not be considered a representation of
past or future expenses. Actual expenses may be greater or less than those
shown.

The purpose of this table is to assist investors in understanding the various
costs and expenses that an investor in the Fund will bear, whether directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "How the Fund is Managed." "Other Expenses" includes estimated operating
expenses of the Fund for the current fiscal year, which ends May 31, 1999, such
as Trustees' and professional fees, registration fees, reports to shareholders,
transfer agency and custodian (domestic and foreign) fees and miscellaneous
fees, but excludes foreign withholding taxes.

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* Class B shares will automatically convert to Class A shares approximately
seven years after purchase. See "Shareholder Guide--Conversion Feature--
Class B Shares."
+ Pursuant to rules of the National Association of Securities Dealers, Inc.,
the aggregate initial sales charges, deferred sales charges and asset-based
sales charges on shares of the Fund may not exceed 6.25% of total gross
sales, subject to certain exclusions. This 6.25% limitation is imposed on
each class of the Fund rather than on a per shareholder basis. Therefore,
long-term shareholders of the Fund may pay more in total sales charges than
the economic equivalent of 6.25% of such shareholders' investment in such
shares. See "How the Fund is Managed--Distributor."
++ Although the Class A Distribution and Service Plan provides that the Fund
may pay up to an annual rate of .30 of 1% of average daily net assets of the
Class A shares, the Distributor has agreed to limit its distribution fee
with respect to Class A shares of the Fund to .25 of 1% of the average daily
net asset value of the Class A shares for the fiscal year ending May 31,
1999. Total operating expenses of Class A shares without such limitation
would be 2.05%. See "How the Fund is Managed--Distributor."

4
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HOW THE FUND INVESTS

INVESTMENT OBJECTIVE AND POLICIES

THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL. THE FUND
SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING PRIMARILY IN EQUITY
RELATED SECURITIES OF COMPANIES WHOSE PRINCIPAL ACTIVITIES ARE IN DEVELOPING
MARKETS THROUGHOUT THE WORLD. UNDER NORMAL CIRCUMSTANCES, THE FUND WILL INVEST
AT LEAST 65% OF ITS TOTAL ASSETS IN EQUITY RELATED SECURITIES OF DEVELOPING
MARKETS ISSUERS IN AT LEAST THE THREE FOLLOWING REGIONS: EUROPE, ASIA AND
LATIN AMERICA. THERE CAN BE NO ASSURANCE THAT THE FUND'S INVESTMENT OBJECTIVE
WILL BE ACHIEVED. See "Investment Objective and Policies" in the Statement of
Additional Information.

THE FUND'S INVESTMENT OBJECTIVE IS A FUNDAMENTAL POLICY AND, THEREFORE, MAY
NOT BE CHANGED WITHOUT THE APPROVAL OF THE HOLDERS OF A MAJORITY OF THE FUND'S
OUTSTANDING VOTING SECURITIES, AS DEFINED IN THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED (THE INVESTMENT COMPANY ACT). FUND POLICIES THAT ARE NOT
FUNDAMENTAL MAY BE MODIFIED BY THE BOARD OF TRUSTEES WITHOUT SHAREHOLDER
APPROVAL.

For purposes of this Prospectus, "securities of developing market issuers"
and "developing market securities" are defined as: (i) securities of companies
the principal securities trading market for which is located in a developing
market country; (ii) securities, traded in any market, of companies that
derive 50% or more of their total revenue from either goods or services
produced in a developing market country or sales made in a developing market
country; (iii) securities of companies organized under the laws of, and with a
principal office in, a developing market country; or (iv) securities issued or
guaranteed by the government of a developing market country, its agencies or
instrumentalities, political subdivisions or the central bank of such a
country. As used in this Prospectus, "developing markets" include countries or
markets that are defined as emerging or developing by the International
Finance Corporation, the International Bank for Reconstruction and Development
(World Bank) or the United Nations or its authorities. These countries
generally include every country in the world except Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Iceland, Ireland, Italy,
Japan, Kuwait, Luxembourg, the Netherlands, New Zealand, Norway, Spain,
Sweden, Switzerland, the United Kingdom, and the United States. "Equity
related securities," as used in this Prospectus, generally refers to common
stock, preferred stock, warrants or rights to purchase or to subscribe to such
securities, as well as sponsored or unsponsored American Depositary Receipts
(ADRs), European Depositary Receipts (EDRs) and Global Depositary Receipts
(GDRs and, collectively with ADRs and EDRs, Depositary Receipts), convertible
securities, trust certificates, limited partnership interests and equity
participations. See "Other Investments and Policies--Depositary Receipts."

Determinations as to the eligibility of any security to be included in the
Fund's portfolio will be made by the Fund's investment adviser, under the
supervision of the Fund's Manager and Board of Trustees, based upon publicly
available information and inquiries made to the issuer of such security.

As with an investment in any mutual fund, an investment in this Fund can
decrease in value and you can lose money.

DEVELOPING MARKET COMPANIES

The Fund's investment adviser intends to invest in equity related securities
of developing market issuers in countries in which it believes investing is
feasible and does not involve undue political risk. The issuers considered by
the investment adviser may have varying levels of net worth and may include
companies with small market capitalizations whose securities may be more
volatile than securities offered by companies with greater market
capitalizations or with higher levels of net worth.

In analyzing companies for investment, the investment adviser ordinarily
looks for one or more of the following characteristics: prospects for above-
average earnings per share growth; high return on invested capital; healthy
balance sheets; sound financial and accounting policies; overall financial
strength; strong competitive advantages; effective research and product
development and marketing; efficient service; pricing flexibility; strength of
management; and general operating

5
<PAGE>

characteristics which will enable the companies to compete successfully in
their marketplace--all in relation to the prevailing prices of the securities
of such companies.

THERE ARE CERTAIN RISKS ASSOCIATED WITH INVESTING IN SECURITIES OF
DEVELOPING MARKET COMPANIES IN GENERAL AND SMALLER DEVELOPING MARKET COMPANIES
IN PARTICULAR. INSOFAR AS THE FUND INVESTS IN THE SECURITIES OF SMALLER
COMPANIES, THERE ARE RISKS THAT THE MARKET PRICES OF SUCH SECURITIES WILL BE
MORE VOLATILE THAN THOSE OF LARGER COMPANIES. BECAUSE SMALLER COMPANIES
USUALLY HAVE FEWER SHARES OUTSTANDING THAN LARGER COMPANIES, IT MAY BE MORE
DIFFICULT FOR THE FUND TO BUY OR SELL SIGNIFICANT AMOUNTS OF SUCH SHARES
WITHOUT AN UNFAVORABLE IMPACT ON PREVAILING MARKET PRICES. THERE IS TYPICALLY
LESS PUBLICLY AVAILABLE INFORMATION CONCERNING SMALLER COMPANIES THAN FOR
LARGER, MORE ESTABLISHED ONES. BECAUSE SMALLER COMPANIES TYPICALLY HAVE
SMALLER PRODUCT LINES AND COMMAND A SMALLER MARKET SHARE THAN DO LARGER
COMPANIES, SMALLER COMPANIES MAY BE MORE VULNERABLE TO FLUCTUATIONS IN THE
ECONOMIC CYCLE. See "Special Considerations and Risks of Investing in
Developing Market Securities" below.

GENERAL

THE FUND MAY INVEST IN SECURITIES NOT LISTED ON SECURITIES EXCHANGES. These
securities will generally have an established market (such as the over-the-
counter market), the depth and liquidity of which may vary from time to time
and from security to security. The Fund may also hold up to 15% of its net
assets (determined at the time of investment) in restricted securities or
other securities that have a limited market. See "Other Investments and
Policies--Illiquid Securities" below.

The Fund intends to invest primarily in equity related securities of
companies whose principal activities are in developing markets throughout the
world. Developing market countries may have relatively unstable governments,
economies based only on a few industries and securities markets that trade a
limited number of securities. Securities of issuers located in these countries
tend to have volatile prices and offer the potential for substantial loss as
well as gain. In addition, these securities may be less liquid than
investments in securities of issuers whose principal activities are in more
established markets as a result of inadequate trading volume or restrictions
on trading imposed by the governments or securities exchanges of such
countries. See "Special Considerations and Risks of Investing in Developing
Market Securities" below.

THE FUND INTENDS TO INVEST AT LEAST 65% OF ITS TOTAL ASSETS IN EQUITY
RELATED SECURITIES OF DEVELOPING MARKET ISSUERS IN AT LEAST THE THREE
FOLLOWING REGIONS: EUROPE, ASIA AND LATIN AMERICA. UNDER NORMAL CIRCUMSTANCES,
THE REMAINDER OF THE FUND'S INVESTMENTS MAY BE IN OTHER SECURITIES OR
INVESTMENT VEHICLES, INCLUDING EQUITY RELATED SECURITIES OF OTHER COMPANIES
AND DEBT SECURITIES (INCLUDING MONEY MARKET INSTRUMENTS) OF FOREIGN AND
DOMESTIC COMPANIES, OR THE FUND MAY ENGAGE IN VARIOUS DERIVATIVES
TRANSACTIONS, INCLUDING OPTIONS ON EQUITY SECURITIES, STOCK INDICES, FOREIGN
CURRENCIES AND FUTURES CONTRACTS ON FOREIGN CURRENCIES, AND MAY PURCHASE AND
SELL FUTURES CONTRACTS ON FOREIGN CURRENCIES, GROUPS OF CURRENCIES AND STOCK
INDICES SO AS TO HEDGE ITS PORTFOLIO AND TO ATTEMPT TO ENHANCE RETURN. IN
ADDITION, THE FUND MAY (I) PURCHASE SECURITIES ON A WHEN-ISSUED OR DELAYED
DELIVERY BASIS, (II) MAKE SHORT SALES AGAINST-THE-BOX AND (III) ENTER INTO
REPURCHASE AGREEMENTS. THE FUND MAY FROM TIME TO TIME LEND ITS PORTFOLIO
SECURITIES TO BROKERS OR DEALERS, BANKS OR OTHER RECOGNIZED INSTITUTIONAL
BORROWERS OF SECURITIES AND MAY INVEST TO A LIMITED EXTENT IN SECURITIES OF
COMPANIES THAT HAVE BEEN IN EXISTENCE FOR LESS THAN THREE YEARS, IN SECURITIES
FOR WHICH MARKET QUOTATIONS ARE NOT READILY AVAILABLE AND IN SECURITIES OF
OTHER REGISTERED INVESTMENT COMPANIES. SEE "INVESTMENT RESTRICTIONS" IN THE
STATEMENT OF ADDITIONAL INFORMATION.

When conditions dictate a temporary defensive strategy (which during periods
of market volatility could be for an extended period of time), the Fund may
invest in money market instruments (including repurchase agreements maturing
in seven days or less) without limit. The Fund will only invest in money
market instruments that are rated, or are issued by companies that have
outstanding debt securities rated, at least C by S&P or Moody's, commercial
paper rated at least A-2 or Prime-2 by S&P or Moody's, respectively, or in
unrated securities that the Fund's investment adviser has determined to be of
comparable quality.

6
<PAGE>

SPECIAL CONSIDERATIONS AND RISKS OF INVESTING IN DEVELOPING MARKET SECURITIES

DEVELOPING MARKET SECURITIES INVOLVE CERTAIN RISKS WHICH SHOULD BE
CONSIDERED CAREFULLY BY AN INVESTOR IN THE FUND. THESE RISKS INCLUDE POLITICAL
OR ECONOMIC INSTABILITY IN THE COUNTRIES IN WHICH THE ISSUER'S PRINCIPAL
ACTIVITIES TAKE PLACE, THE DIFFICULTY OF PREDICTING INTERNATIONAL TRADE
PATTERNS, THE POSSIBILITY OF IMPOSITION OF EXCHANGE CONTROLS AND THE RISK OF
CURRENCY FLUCTUATIONS. Such securities may be, and in the recent past have
been, subject to greater fluctuations in price than securities issued by U.S.
corporations; securities issued or guaranteed by the U.S. Government, its
instrumentalities or agencies; or securities of companies in other markets
that are considered developed. In addition, there may be less publicly
available information about a developing market company than about a domestic
company. Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable to
domestic companies. There is generally less government regulation of
securities exchanges, brokers and listed companies in developing markets than
in the United States and an increased risk, therefore, of uninsured loss due
to lost, stolen or counterfeit stock certificates. Certain countries may have
only one securities depository which, if the Fund decides to invest in
securities that are located at such depository, may result in risks to the
Fund that cannot be avoided. There is a possibility of expropriation,
nationalization, confiscatory taxation or diplomatic developments which could
affect investment in those countries. In the event of a default on debt
obligations of developing market issuers, it may be more difficult for the
Fund to obtain or to enforce a judgment against the issuers of such
securities. The Fund may encounter difficulties or be unable to vote proxies,
exercise shareholder rights, pursue legal remedies and obtain judgments in
foreign courts. Also, some countries may withhold portions of income and
dividends at the source. Finally, developing markets may have increased risks
associated with clearance and settlement as well as increased costs for
commissions, custodial services and other items associated with making an
investment. Delays in settlement could result in periods of uninvested assets,
missed investment opportunities or losses to the Fund.

ALTHOUGH THE FUND INTENDS TO INVEST PRIMARILY IN EQUITY RELATED SECURITIES,
IT MAY INVEST FROM TIME TO TIME IN DEBT SECURITIES OF DEVELOPING MARKET
ISSUERS. In many instances, debt securities of developing market issuers may
provide higher yields than securities of domestic issuers which have similar
maturities and are of similar quality. Under certain market conditions these
investments may be less liquid than the securities of U.S. corporations and
are certainly less liquid than securities issued or guaranteed by the U.S.
Government, its instrumentalities or agencies.

Shareholders should be aware that investing in the equity and fixed-income
markets of developing countries involves exposure to economies that are
generally less diverse and mature, and political systems which can be expected
to have less stability, than those of developed countries. Historical
experience indicates that the markets of developing market countries have been
more volatile than the markets of developed countries. Many developing markets
countries have economies based on only a few commodities or industries and
securities markets that trade infrequently or with low levels of volume.
Additionally, some developing markets countries may also restrict the extent
to which foreign investors may invest in their securities markets or in a
particular company.

IF A SECURITY IS DENOMINATED IN A FOREIGN CURRENCY, IT WILL BE AFFECTED BY
CHANGES IN CURRENCY EXCHANGE RATES AND IN EXCHANGE CONTROL REGULATIONS, AND
COSTS WILL BE INCURRED IN CONNECTION WITH CONVERSIONS BETWEEN CURRENCIES. IN
ADDITION, IF A SECURITY IS DENOMINATED IN U.S. DOLLARS, THE ABILITY OF THE
ISSUER TO REPAY MAY BE SUBSTANTIALLY IMPAIRED BY DEVALUATION AND THE COUNTRY'S
AVAILABLE FOREIGN EXCHANGE RESERVES. A change in the value of any such
currency against the U.S. dollar will result in a corresponding change in the
U.S. dollar value of the Fund's securities denominated in that currency. Such
changes also will affect the Fund's income and distributions to shareholders.
In addition, although the Fund will receive income in such currencies, the
Fund will be required to compute and distribute its income in U.S. dollars.
Therefore, if the exchange rate for any such currency declines after the
Fund's income has been accrued and translated into U.S. dollars, the Fund
could be required to liquidate portfolio securities to make such
distributions, particularly in instances in which the amount of income the
Fund is required to distribute is not immediately reduced by the decline in
such currency. Similarly, if an exchange rate declines between the time the
Fund incurs expenses in U.S. dollars and the time such expenses are paid, the
amount of such currency required to be converted into U.S. dollars

7
<PAGE>

in order to pay such expenses in U.S. dollars will be greater than the amount
of such currency at the time they were incurred. The Fund may, but need not,
enter into futures contracts on foreign currencies, forward foreign currency
exchange contracts and options on foreign currencies for hedging purposes,
including: locking-in the U.S. dollar price of the purchase or sale of
securities denominated in a foreign currency; locking-in the U.S. dollar
equivalent of interest or dividends to be paid on such securities which are
held by the Fund; and protecting the U.S. dollar value of such securities
which are held by the Fund.

HEDGING AND RETURN ENHANCEMENT STRATEGIES

THE FUND MAY ENGAGE IN VARIOUS PORTFOLIO STRATEGIES, INCLUDING PURCHASING
AND SELLING DERIVATIVES, TO REDUCE CERTAIN RISKS OF ITS INVESTMENTS AND TO
ATTEMPT TO ENHANCE RETURN, BUT NOT FOR SPECULATION. THESE STRATEGIES CURRENTLY
INCLUDE THE USE OF OPTIONS, FORWARD CURRENCY EXCHANGE CONTRACTS AND FUTURES
CONTRACTS AND OPTIONS THEREON. The Fund, and thus investors, may lose money
through any unsuccessful use of these strategies. The Fund's ability to use
these strategies may be limited by market conditions, regulatory limits and
tax considerations and there can be no assurance that any of these strategies
will succeed. See "Investment Objective and Policies" and "Taxes, Dividends
and Distributions" in the Statement of Additional Information. New financial
products and risk management techniques continue to be developed, and the Fund
may use these new investments and techniques to the extent consistent with its
investment objective and policies.

OPTIONS TRANSACTIONS

THE FUND MAY PURCHASE AND WRITE (I.E., SELL) PUT AND CALL OPTIONS ON
SECURITIES, FINANCIAL INDICES AND CURRENCIES THAT ARE TRADED ON U.S. OR
FOREIGN SECURITIES EXCHANGES OR IN THE OVER-THE-COUNTER MARKET TO ATTEMPT TO
ENHANCE RETURN OR TO HEDGE THE FUND'S PORTFOLIO. These options will be on
equity securities, financial indices (e.g., the S&P 500) and foreign
currencies. The Fund may write covered put and call options to generate
additional income through the receipt of premiums, purchase put options in an
effort to protect the value of a security that it owns against a decline in
market value and purchase call options in an effort to protect against an
increase in the price of securities (or currencies) it intends to purchase.
The Fund may also purchase put and call options to offset previously written
put and call options of the same series. See "Investment Objective and
Policies--Options Transactions" in the Statement of Additional Information.

A CALL OPTION GIVES THE PURCHASER, IN EXCHANGE FOR A PREMIUM PAID, THE
RIGHT, FOR A SPECIFIED PERIOD OF TIME, TO PURCHASE THE SECURITIES OR CURRENCY
SUBJECT TO THE OPTION AT A SPECIFIED PRICE (THE EXERCISE PRICE OR STRIKE
PRICE). The writer of a call option, in return for the premium, has the
obligation, upon exercise of the option, to deliver to the purchaser,
depending upon the terms of the option contract, the underlying securities or
currency upon receipt of the exercise price or a specified amount of cash.
When the Fund writes a call option, it gives up the potential for gain on the
underlying securities or currency in excess of the exercise price of the
option during the period that the option is open.

A PUT OPTION GIVES THE PURCHASER, IN RETURN FOR A PREMIUM, THE RIGHT, FOR A
SPECIFIED PERIOD OF TIME, TO SELL THE SECURITIES OR CURRENCY SUBJECT TO THE
OPTION TO THE WRITER OF THE PUT AT THE SPECIFIED EXERCISE PRICE. The writer of
the put option, in return for the premium, has the obligation, upon exercise
of the option, to acquire the securities or currency underlying the option at
the exercise price or deliver a specified amount of cash to the purchaser. The
Fund might, therefore, be obligated to purchase the underlying securities or
currency for more than their current market price.

THE FUND WILL WRITE ONLY "COVERED" OPTIONS. A written option is covered if,
as long as the Fund is obligated under the option, (i) it owns an offsetting
position in the underlying security or currency or (ii) it maintains in a
segregated account cash or other liquid assets in an amount equal to or
greater than its obligation under the option. The value of covered options
that the Fund may write is limited to 35% of its total assets. When the Fund
writes a "covered" option as described in (i) in the first sentence of this
paragraph, its losses are limited because it owns an offsetting position of
the underlying security or currency. When the Fund otherwise writes an option,
its losses are potentially unlimited. See "Investment Objective and Policies--
Options Transactions" in the Statement of Additional Information.

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<PAGE>

the right to take or make delivery of the securities at a specified price, an
option on a securities index gives the holder the right, in return for a
premium paid, to receive, upon exercise of the option, an amount of cash if
the closing level of the securities index upon which the option is based is
greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. The writer of an index option, in return for the
premium, is obligated to pay the amount of cash due upon exercise of the
option.

The Fund may purchase and sell put and call options on securities indices
for hedging against a decline in the value of the securities owned by the Fund
or against an increase in the market value of the type of securities in which
the Fund may invest. Securities index options are designed to reflect price
fluctuations in a group of securities or segment of the securities market
rather than price fluctuations in a single security. Purchasing or selling
securities index options is subject to the risk that the value of its
portfolio securities may not change as much as or more than the index because
the Fund's investments generally will not match the composition of the index.
See "Investment Objective and Policies--Risks of Options on Indices" in the
Statement of Additional Information.

OVER-THE-COUNTER OPTIONS. THE FUND MAY ALSO PURCHASE AND WRITE (I.E., SELL)
PUT AND CALL OPTIONS ON SECURITIES, SECURITIES INDICES AND CURRENCIES IN THE
OVER-THE-COUNTER MARKET (OTC OPTIONS). Unlike exchange-traded options, OTC
options are contracts between the Fund and its counterparty without the
interposition of any clearing organization. Thus, the value of an OTC option
is particularly dependent on the financial viability of the OTC counterparty.
The Fund's ability to purchase and write OTC options may be limited by market
conditions, regulatory limits and tax considerations. There are certain risks
associated with investments in OTC options. See "Investment Objective and
Policies--Special Risks of OTC Options" in the Statement of Additional
Information.

FORWARD CURRENCY EXCHANGE CONTRACTS

THE FUND MAY ENTER INTO FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS TO
PROTECT THE VALUE OF ITS PORTFOLIO AGAINST FUTURE CHANGES IN THE LEVEL OF
CURRENCY EXCHANGE RATES. The Fund may enter into such contracts on a spot,
i.e., cash, basis at the rate then prevailing in the currency exchange market
or on a forward basis, by entering into a forward contract to purchase or sell
currency. A forward contract on foreign currency is an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days agreed upon by the parties from the date of the contract, at a price set
on the date of the contract.

THE FUND'S DEALINGS IN FORWARD CONTRACTS WILL BE LIMITED TO HEDGING
INVOLVING EITHER SPECIFIC TRANSACTIONS OR PORTFOLIO POSITIONS. Transaction
hedging is the purchase or sale of a forward contract with respect to specific
receivables or payables of the Fund generally arising in connection with the
purchase or sale of its portfolio securities and accruals of interest or
dividends receivable and Fund expenses. Position hedging is the sale of a
foreign currency with respect to portfolio security positions denominated or
quoted in that currency or in a currency bearing a substantial correlation to
the value of that currency (a cross hedge). Although there are no limits on
the number of forward contracts which the Fund may enter into, the Fund may
not position hedge (including cross hedges) with respect to a particular
currency for an amount greater than the aggregate market value (determined at
the time of making any sale of the foreign currency) of the securities held in
its portfolio denominated or quoted in, or currently convertible into, such
currency. See "Investment Objective and Policies--Risks Related to Forward
Currency Exchange Contracts" in the Statement of Additional Information.

FUTURES CONTRACTS AND OPTIONS THEREON

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<PAGE>

dollar amount times the difference between the value of a specific stock index
at the close of the last trading day of the contract and the price at which
the agreement is made. No physical delivery of the underlying stocks is made.
The Fund may purchase and sell stock index futures or related options as a
hedge against changes in market conditions.

UNDER REGULATIONS OF THE COMMODITY EXCHANGE ACT, INVESTMENT COMPANIES
REGISTERED UNDER THE INVESTMENT COMPANY ACT ARE EXEMPT FROM THE DEFINITION OF
"COMMODITY POOL OPERATOR," SUBJECT TO COMPLIANCE WITH CERTAIN CONDITIONS. THE
EXEMPTION IS CONDITIONED UPON THE FUND'S PURCHASING AND SELLING FUTURES
CONTRACTS AND OPTIONS THEREON FOR BONA FIDE HEDGING TRANSACTIONS, EXCEPT THAT
THE FUND MAY PURCHASE AND SELL FUTURES CONTRACTS AND OPTIONS THEREON FOR ANY
OTHER PURPOSE TO THE EXTENT THAT THE AGGREGATE INITIAL MARGIN AND OPTION
PREMIUMS DO NOT EXCEED 5% OF THE LIQUIDATION VALUE OF THE FUND'S TOTAL ASSETS.
THE VALUE OF ALL FUTURES CONTRACTS SOLD WILL NOT EXCEED 35% OF THE FUND'S
TOTAL ASSETS.

THE FUND'S SUCCESSFUL USE OF FUTURES CONTRACTS AND OPTIONS THEREON DEPENDS
UPON THE INVESTMENT ADVISER'S ABILITY TO PREDICT THE DIRECTION OF THE MARKET
AND REQUIRES SKILLS AND TECHNIQUES DIFFERENT FROM THOSE USED IN SELECTING
PORTFOLIO SECURITIES. The correlation between movements in the price of a
futures contract and movements in the index or price of the currency being
hedged is imperfect, and there is a risk that the value of the index or
currency being hedged may increase or decrease at a greater rate than the
related futures contract, resulting in losses to the Fund. Certain futures
exchanges or boards of trade have established daily limits on the amount that
the price of futures contracts or options thereon may vary, either up or down,
from the previous day's settlement price. These daily limits may restrict the
Fund's ability to purchase or sell certain futures contracts or options
thereon on any particular day.

The Fund's ability to enter into or close out futures contracts and options
thereof is limited by the requirements of the Internal Revenue Code for
qualification as a regulated investment company. See "Taxes, Dividends and
Distributions" in the Statement of Additional Information.

RISKS OF HEDGING AND RETURN ENHANCEMENT STRATEGIES

PARTICIPATION IN THE OPTIONS OR FUTURES MARKETS AND IN CURRENCY EXCHANGE
TRANSACTIONS INVOLVES INVESTMENT RISKS AND TRANSACTION COSTS TO WHICH THE FUND
WOULD NOT BE SUBJECT ABSENT THE USE OF THESE STRATEGIES. THE FUND, AND THUS
INVESTORS, MAY LOSE MONEY THROUGH ANY UNSUCCESSFUL USE OF THESE STRATEGIES. If
the investment adviser's predictions of movements in the direction of
securities, foreign currencies and interest rate markets are inaccurate, the
adverse consequences to the Fund may leave the Fund in a worse position than
if such strategies were not used. Risks inherent in the use of options,
foreign currency exchange contracts and futures contracts and options thereon
include (1) dependence on the investment adviser's ability to predict
correctly movements in the direction of interest rates, securities prices and
currency markets; (2) imperfect correlation between the price of options and
futures contracts and options thereon and movements in the prices of the
securities or currencies being hedged; (3) the fact that the skills needed to
use these strategies are different from those needed to select portfolio
securities; (4) the possible absence of a liquid secondary market for any
particular instrument at any time; (5) the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences; and (6) the
possible inability of the Fund to purchase or sell a portfolio security at a
time that otherwise would be favorable for it to do so, or the possible need
for the Fund to sell a portfolio security at a disadvantageous time, due to
the need for the Fund to maintain "cover" or to segregate securities in
connection with hedging transactions. See "Taxes, Dividends & Distributions"
in the Statement of Additional Information.

OTHER INVESTMENTS AND POLICIES

DEPOSITARY RECEIPTS

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<PAGE>

by either a foreign or a U.S. corporation. Generally, depositary receipts in
registered form are designed for use in the U.S. securities market and
depositary receipts in bearer form are designed for use in securities markets
outside the U.S. Depositary receipts may not necessarily be denominated in the
same currency as the underlying securities into which they may be converted.
Depositary receipts may be issued pursuant to sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have its
securities traded in the form of depositary receipts. In unsponsored programs,
the issuer may not be directly involved in the creation of the program.
Although regulatory requirements with respect to sponsored and unsponsored
programs are generally similar, in some cases it may be easier to obtain
financial information from an issuer that has participated in the creation of
a sponsored program. Accordingly, there may be less information available
regarding issuers of securities underlying unsponsored programs and there may
not be a correlation between such information and the market value of the
depositary receipts. Depositary receipts also involve the risks of other
investments in foreign securities, as discussed above. For purposes of the
Fund's investment policies, the Fund's investments in depositary receipts will
be deemed to be investments in the underlying securities.

CONVERTIBLE SECURITIES

A convertible security is a bond or preferred stock which may be converted
at a stated price within a specified period of time into a certain quantity of
the common stock of the same or a different issuer. Convertible securities are
senior to common stock in a corporation's capital structure, but are usually
subordinated to similar nonconvertible securities. While providing a fixed
income stream (generally higher in yield than the income derivable from a
common stock but lower than that afforded by a similar nonconvertible
security), a convertible security also affords an investor the opportunity,
through its conversion feature, to participate in the capital appreciation
dependent upon a market price advance in the convertible security's underlying
common stock.

In general, the market value of a convertible security is at least the
higher of its "investment value" (i.e., its value as a fixed-income security)
or its "conversion value" (i.e., its value upon conversion into its underlying
common stock). As a fixed-income security, a convertible security tends to
increase in market value when interest rates decline and tends to decrease in
value when interest rates rise. However, the price of a convertible security
is also influenced by the market value of the security's underlying stock. The
price of a convertible security tends to increase as the market value of the
underlying stock rises, whereas it tends to decrease as the market value of
the underlying stock declines. While no securities investment is without some
risk, investments in convertible securities generally entail less risk than
investments in the common stock of the same issuer.

Convertible debt securities in which the Fund may invest must comply with
the quality restrictions for debt securities described below. See "Other
Investments--Debt Securities Including Investment Grade Securities and High
Yield Debt Securities (Junk Bonds)."

WHEN-ISSUED OR DELAYED DELIVERY SECURITIES

The Fund may purchase or sell securities on a when-issued or delayed
delivery basis. When-issued or delayed delivery transactions arise when
securities are purchased or sold by the Fund with payment and delivery taking
place in the future in order to secure what is considered to be an
advantageous price and yield to the Fund at the time of entering into the
transaction. The Fund's Custodian will maintain, in a segregated account of
the Fund, cash or other liquid assets, marked-to-market daily, having a value
equal to or greater than the Fund's purchase commitments. The securities so
purchased are subject to market fluctuation and no interest accrues to the
purchaser during the period between purchase and settlement. At the time of
delivery of the securities the value may be more or less than the purchase
price and an increase in the percentage of the Fund's assets committed to the
purchase of securities on a when-issued or delayed delivery basis may increase
the volatility of the Fund's net asset value. See "Investment Objective and
Policies--When-Issued or Delayed Delivery Securities" in the Statement of
Additional Information.

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<PAGE>

REPURCHASE AGREEMENTS

The Fund may enter into repurchase agreements whereby the seller of a
security agrees to repurchase that security from the Fund at a mutually
agreed-upon time and price. The repurchase date is usually quite short,
possibly overnight or a few days, although it may extend over a number of
months. The resale price is in excess of the purchase price, reflecting an
agreed-upon rate of return effective for the period of time the Fund's money
is invested in the repurchase agreement. The Fund's repurchase agreements will
at all times be fully collateralized in an amount at least equal to the resale
price. The instruments held as collateral are valued daily, and if the value
of the instruments declines, the Fund will require additional collateral. If
the seller defaults and the value of the collateral securing the repurchase
agreement declines, the Fund may incur a loss. The Fund participates in a
joint repurchase account with other investment companies managed by Prudential
Investments Fund Management LLC pursuant to an order of the Securities and
Exchange Commission (SEC). See "Investment Objective and Policies--Repurchase
Agreements" in the Statement of Additional Information.

SECURITIES LENDING

The Fund may lend its portfolio securities to brokers or dealers, banks or
other recognized institutional borrowers of securities, provided that the
borrower at all times maintains cash or other liquid assets in a segregated
account or secures an irrevocable letter of credit in favor of the Fund in an
amount equal to at least 100%, determined daily, of the market value of the
securities loaned pursuant to applicable regulations. During the time
portfolio securities are on loan, the borrower will pay the Fund an amount
equivalent to any dividend or interest paid on such securities and the Fund
may invest the cash collateral and earn additional income, or it may receive
an agreed upon amount of interest income from the borrower. As an operating
policy that may be changed without shareholder approval, the Fund will not
lend more than 30% of the value of its total assets. The Fund may pay
reasonable administration and custodial fees in connection with a loan. See
"Investment Objective and Policies--Lending of Portfolio Securities" in the
Statement of Additional Information.

INVESTMENT FUNDS

Certain developing markets are closed in whole or in part to equity
investments by foreigners except through specifically authorized investment
funds. Securities of other investment companies may be acquired by the Fund to
the extent permitted by the Investment Company Act. As a shareholder in an
investment fund, the Fund would bear not only its share of that investment
fund's expenses, including its investment advisory fee and other operating
fees, but also its own investment advisory fee and other operating expenses.

ILLIQUID SECURITIES

The Fund may hold up to 15% of its net assets (determined at the time of the
transaction) in illiquid securities, including repurchase agreements which
have a maturity of longer than seven days, securities with legal or
contractual restrictions on resale (restricted securities) and securities that
are not readily marketable in securities markets either within or outside of
the United States. Restricted securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933, as amended (the Securities Act), and
privately placed commercial paper that have a readily available market are not
considered illiquid for purposes of this limitation. The investment adviser
will monitor the liquidity of such restricted securities under the supervision
of the Board of Trustees. The Fund's investment in Rule 144A securities could
have the effect of increasing illiquidity to the extent that qualified
institutional buyers become, for a limited time, uninterested in purchasing
Rule 144A securities. See "Investment Objective and Policies--Illiquid
Securities" in the Statement of Additional Information. Repurchase agreements
subject to demand are deemed to have a maturity equal to the applicable notice
period.

The staff of the SEC has taken the position that purchased OTC Options and
the assets used as "cover" for written OTC Options are illiquid securities
unless the Fund and the counterparty have provided for the Fund, at the Fund's
election, to unwind the OTC Option. The exercise of such an option ordinarily
would involve the payment by the Fund of an amount designed to reflect the
counterparty's economic loss from an early termination, but does allow the
Fund to treat the assets used as "cover" as "liquid."

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<PAGE>

DEBT SECURITIES INCLUDING INVESTMENT GRADE SECURITIES AND HIGH YIELD DEBT
SECURITIES (JUNK BONDS)

The Fund may hold up to 35% of its total assets in debt securities rated at
least C by S&P or Moody's or, if unrated, determined to be of comparable
quality by the investment adviser. As an operating policy, which may be
changed without shareholder approval, the Fund will not invest more than 10%
of its total assets in debt securities rated BBB or lower by S&P or Baa or
lower by Moody's or, if unrated, debt securities that the Fund's investment
adviser has determined to be of comparable quality. Subsequent to its purchase
by the Fund, a security may be assigned a lower rating or cease to be rated.
Such an event would not require the elimination of the issue from the
portfolio, but the investment adviser will consider such an event in
determining whether the Fund should continue to hold the security in its
portfolio. Securities rated Baa by Moody's, although considered to be
investment grade, lack outstanding investment characteristics and, in fact,
have speculative characteristics. Bonds rated C by S&P are of the lowest
quality and may be used when the issuer has filed a bankruptcy petition, but
debt payments are still being made. Moody's lowest rating is C, which is
applied to bonds that have extremely poor prospects of ever attaining any real
investment standing. See "Description of Security Ratings" in Appendix I to
the Statement of Additional Information.

The Fund may also invest in certain debt obligations customarily referred to
as "Brady Bonds," which are created in connection with debt restructuring
through the exchange of existing commercial bank loans to sovereign entities
for new obligations. Investments in Brady Bonds are generally considered
speculative and many Brady Bonds are rated below investment grade. As noted
above, the Fund does not currently intend to invest more than 10% of its
assets in debt securities, including Brady Bonds, rated lower than Baa by
Moody's or BBB by S&P. See "Investment Objective and Policies--Brady Bonds"
and "Description of Security Ratings" in Appendix I to the Statement of
Additional Information.

Lower-rated debt securities, including securities rated from BB to C by S&P
or Ba to C by Moody's or, if unrated, of comparable quality in the opinion of
the investment adviser, will usually offer higher yields than higher-rated
securities. However, there is more risk associated with lower-rated debt
securities due to the reduced creditworthiness and increased likelihood of
default that these securities carry. Lower-rated debt securities generally
tend to reflect short-term corporate and market developments to a greater
extent than higher-rated securities that react primarily to fluctuations in
the general level of interest rates. In addition, lower-rated debt securities
tend to demonstrate greater sensitivity to significant increases or decreases
in the level of interest rates. Also, since there may be fewer investors in
lower-rated debt securities, it may be more difficult to dispose of such
securities at times advantageous to the Fund.

The risk of loss due to default by the issuer of lower-rated securities is
significantly greater because such securities are usually unsecured and are
often subordinated to other obligations of the issuer. During an economic
downturn or a sustained period of rising interest rates, issuers of lower-
rated debt securities that are either highly leveraged companies or companies
in cyclically sensitive industries may experience deteriorated cash flow or
other financial stress that impairs the ability of the issuer to meet its
obligation to pay principal and interest to bondholders on a timely basis.
When the issuer of a lower-rated debt security that is included in the Fund's
investment portfolio is unable to honor its payment obligations to
bondholders, the Fund's net asset value may be adversely affected. In
addition, the Fund may incur additional expenses if it seeks recovery upon a
default in the payment of principal and interest on a debt security.

BORROWING

The Fund may borrow an amount equal to no more than 33 1/3% of the value of
its total assets (computed at the time the loan is made) for temporary,
extraordinary or emergency purposes or for the clearance of transactions.
Asset coverage for borrowings must be maintained at 300% at all times. The
Fund may pledge up to 20% of its total assets to secure these borrowings. If
the Fund borrows to invest in securities, any investment gains made on the
securities in excess of interest paid on the borrowing will cause the net
asset value of the shares to rise faster than would otherwise be the case. On
the other hand, if the investment performance of the additional securities
purchased fails to cover their cost (including any interest paid on the money
borrowed) to the Fund, the net asset value of the Fund's shares will decrease
faster than would otherwise be the case. This is the speculative factor known
as "leverage." The Fund does not currently intend to borrow money in order to
invest in securities. See "Investment Restrictions" in the Statement of
Additional Information.

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<PAGE>

PORTFOLIO TURNOVER

As a result of the Fund's investment policies, the portfolio turnover rate
is not expected to exceed 250%. The portfolio turnover rate is calculated by
dividing the lesser of sales or purchases of portfolio securities by the
average monthly value of the Fund's portfolio securities, excluding securities
having a maturity at the date of purchase of one year or less. High portfolio
turnover (100% or more) may involve correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Fund. See "Portfolio Transactions and Brokerage" in the Statement of
Additional Information. In addition, high portfolio turnover may result in
increased short-term capital gains, which, when distributed to shareholders,
are treated as ordinary income. See "Taxes, Dividends and Distributions."

INVESTMENT RESTRICTIONS

The Fund is subject to certain investment restrictions which, like its
investment objective, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company
Act. See "Investment Restrictions" in the Statement of Additional Information.

HOW THE FUND IS MANAGED

THE FUND HAS A BOARD OF TRUSTEES WHICH, IN ADDITION TO OVERSEEING THE
ACTIONS OF THE FUND'S MANAGER, SUBADVISER AND DISTRIBUTOR, AS SET FORTH BELOW,
DECIDES UPON MATTERS OF GENERAL POLICY. THE FUND'S MANAGER CONDUCTS AND
SUPERVISES THE DAILY BUSINESS OPERATIONS OF THE FUND. THE FUND'S SUBADVISER
FURNISHES DAILY INVESTMENT ADVISORY SERVICES.

MANAGER

PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM OR THE MANAGER), GATEWAY
CENTER THREE, 100 MULBERRY STREET, NEWARK, NEW JERSEY 07102-4077, IS THE
MANAGER OF THE FUND AND IS COMPENSATED FOR ITS SERVICES AT AN ANNUAL RATE OF
1.25% OF THE FUND'S AVERAGE DAILY NET ASSETS. PIFM IS ORGANIZED IN NEW YORK AS
A LIMITED LIABILITY COMPANY.

PIFM may from time to time waive its management fee (or a portion thereof)
and subsidize operating expenses of the Fund. See "Fund Expenses." The Fund is
not required to reimburse PIFM for such fee waiver or expense subsidy. Fee
waivers and expense subsidies will increase the Fund's total return. See "How
the Fund Calculates Performance."

As of May 31, 1998, PIFM served as the manager to 45 open-end investment
companies, constituting all of the Prudential Mutual Funds, and as manager or
administrator to 22 closed-end investment companies, with aggregate assets of
approximately $65 billion.

UNDER THE MANAGEMENT AGREEMENT WITH THE FUND, PIFM MANAGES THE INVESTMENT
OPERATIONS OF THE FUND AND ALSO ADMINISTERS THE FUND'S CORPORATE AFFAIRS. See
"Manager" in the Statement of Additional Information.

UNDER A SUBADVISORY AGREEMENT BETWEEN PIFM AND THE PRUDENTIAL INVESTMENT
CORPORATION (PIC), DOING BUSINESS AS PRUDENTIAL INVESTMENTS (PI, THE
SUBADVISER OR THE INVESTMENT ADVISER), PI FURNISHES INVESTMENT ADVISORY
SERVICES IN CONNECTION WITH THE MANAGEMENT OF THE FUND AND IS REIMBURSED BY
PIFM FOR ITS REASONABLE COSTS AND EXPENSES INCURRED IN PROVIDING SUCH
SERVICES. Under the Management Agreement, PIFM continues to have
responsibility for all investment advisory services and supervises PI's
performance of such services.

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<PAGE>

Fund. Ms. Carrion has been employed by PIC since 1997. Prior to joining PIC,
Ms. Carrion was employed by Bankers Trust Company as a portfolio manager
beginning in April 1993. From June 1991 to April 1993, she was employed by
Latin American Securities (London). Ms. Carrion is a Chartered Financial
Analyst.

PIFM and PIC are wholly-owned subsidiaries of The Prudential Insurance
Company of America (Prudential), a major diversified insurance and financial
services company.

DISTRIBUTOR

PRUDENTIAL SECURITIES INCORPORATED (PRUDENTIAL SECURITIES OR THE
DISTRIBUTOR), ONE SEAPORT PLAZA, NEW YORK, NEW YORK 10292, IS A CORPORATION
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE AND, UNTIL APPROXIMATELY
JULY 1, 1998, SERVES AS THE DISTRIBUTOR OF THE SHARES OF THE FUND. IT IS AN
INDIRECT, WHOLLY-OWNED SUBSIDIARY OF PRUDENTIAL. ON OR ABOUT JULY 1, 1998,
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC (THE DISTRIBUTOR), THREE GATEWAY
CENTER, 100 MULBERRY STREET, NEWARK, NEW JERSEY 07102-4077, WILL BEGIN ACTING
AS THE FUND'S DISTRIBUTOR. PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC IS A
LIMITED LIABILITY COMPANY ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
AND IS A WHOLLY-OWNED SUBSIDIARY OF PRUDENTIAL.

UNDER SEPARATE DISTRIBUTION AND SERVICE PLANS (THE CLASS A PLAN, THE CLASS B
PLAN AND THE CLASS C PLAN, COLLECTIVELY, THE PLANS) ADOPTED BY THE FUND UNDER
RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT AND A DISTRIBUTION AGREEMENT (THE
DISTRIBUTION AGREEMENT), THE DISTRIBUTOR INCURS THE EXPENSES OF DISTRIBUTING
THE FUND'S CLASS A, CLASS B AND CLASS C SHARES. The Distributor also incurs
the expenses of distributing the Fund's Class Z shares under the Distribution
Agreement, none of which is reimbursed by or paid for by the Fund. These
expenses include commissions and account servicing fees paid to, or on account
of, financial advisers of Prudential Securities and representatives of Pruco
Securities Corporation (Prusec), an affiliated broker-dealer, commissions and
account servicing fees paid to, or on account of, other broker-dealers or
financial institutions (other than national banks) which have entered into
agreements with the Distributor, advertising expenses, the cost of printing
and mailing prospectuses to potential investors and indirect and overhead
costs of the Distributor, Prudential Securities and Prusec associated with the
sale of Fund shares, including lease, utility, communications and sales
promotion expenses.

Under the Plans, the Fund is obligated to pay distribution and/or service
fees to the Distributor as compensation for its distribution and service
activities, not as reimbursement for specific expenses incurred. If the
Distributor's expenses exceed its distribution and service fees, the Fund will
not be obligated to pay any additional expenses. If the Distributor's expenses
are less than such distribution and service fees, it will retain its full fees
and realize a profit.

UNDER THE CLASS A PLAN, THE FUND MAY PAY THE DISTRIBUTOR FOR ITS
DISTRIBUTION-RELATED ACTIVITIES WITH RESPECT TO CLASS A SHARES AT AN ANNUAL
RATE OF UP TO .30 OF 1% OF THE AVERAGE DAILY NET ASSETS OF THE CLASS A SHARES.
The Class A Plan provides that .25 of 1% of the average daily net assets of
the Class A shares may be used to pay for personal service and/or the
maintenance of shareholder accounts (service fee) and other distribution fees.
The Distributor has voluntarily agreed to limit its distribution-related fees
payable under the Class A Plan to .25% of the average daily net assets of the
Class A shares. This voluntary waiver may be terminated at any time by the
Distributor without notice.

UNDER THE CLASS B AND CLASS C PLANS, THE FUND PAYS THE DISTRIBUTOR FOR ITS
DISTRIBUTION-RELATED ACTIVITIES WITH RESPECT TO CLASS B AND CLASS C SHARES AT
AN ANNUAL RATE OF UP TO 1% OF THE AVERAGE DAILY NET ASSETS OF EACH OF THE
CLASS B AND CLASS C SHARES. The Class B and Class C Plans provide for the
payment to Prudential Securities of (i) an asset-based sales charge of .75 of
1% of the average daily net assets of each of the Class B and Class C shares
and (ii) a service fee of .25 of 1% of the average daily net assets of each of
the Class B and Class C shares. The service fee is used to pay for personal
service and/or the maintenance of shareholder accounts. Prudential Securities
also receives contingent deferred sales charges from certain redeeming
shareholders. See "Shareholder Guide--How to Sell Your Shares--Contingent
Deferred Sales Charges."

The Fund records all payments made under the Plans as expenses in the
calculation of net investment income. See "Distributor" in the Statement of
Additional Information.

15
<PAGE>

Distribution expenses attributable to the sale of Class A, Class B and Class
C shares of the Fund will be allocated to each such class based upon the ratio
of sales of each such class to the sales of Class A, Class B or Class C shares
of the Fund other than expenses allocable to a particular class. The
distribution fee and sales charge of one class will not be used to subsidize
the sale of another class.

Each Plan provides that it shall continue in effect from year to year
provided that a majority of the Board of Trustees of Prudential Developing
Markets Fund, including a majority of the Trustees who are not "interested
persons" of the Fund (as defined in the Investment Company Act) and who have
no direct or indirect financial interest in the operation of the Plan or any
agreement related to the Plan (the Rule 12b-1 Trustees), vote annually to
continue the Plan. Each Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees or of a majority of the outstanding shares
of the applicable class of the Fund. The Fund will not be obligated to pay
distribution and service fees incurred under any Plan if it is terminated or
not continued.

In addition to distribution and service fees paid by the Fund under the
Class A, Class B and Class C Plans, the Manager (or one of its affiliates) may
make payments out of its own resources to dealers (including Prudential
Securities) and other persons who distribute shares of the Fund (including
Class Z shares). Such payments may be calculated by reference to the net asset
value of shares sold by such persons or otherwise.

The Distributor is subject to the rules of the National Association of
Securities Dealers, Inc. governing maximum sales charges.

FEE WAIVERS

The Distributor has agreed to limit its distribution fee for the Class A
shares as described above under "Distributor." Fee waivers will increase the
Fund's total return. See "Performance Information" in the Statement of
Additional Information and "Fund Expenses" above.

PORTFOLIO TRANSACTIONS

The Distributor or an affiliate of the Distributor may act as a broker or
futures commission merchant for the Fund, provided that the commissions, fees
or other remuneration it receives are fair and reasonable. See "Portfolio
Transactions and Brokerage" in the Statement of Additional Information.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT

State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts, 02171, serves as Custodian for the Fund's portfolio securities
and cash and, in that capacity, maintains certain financial and accounting
books and records pursuant to an agreement with the Fund. Its mailing address
is P.O. Box 1713, Boston, Massachusetts 02105.

Prudential Mutual Fund Services LLC (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as Transfer Agent and Dividend Disbursing Agent and, in
those capacities, maintains certain books and records for the Fund. PMFS is a
wholly-owned subsidiary of PIFM. Its mailing address is P.O. Box 15005, New
Brunswick, New Jersey 08906-5005.

YEAR 2000

The services provided to the Fund and the shareholders by the Manager, the
Distributor, the Transfer Agent and the Custodian depend on the smooth
functioning of their computer systems and those of their outside service
providers. Many computer software systems in use today cannot distinguish the
year 2000 from the year 1900 because of the way dates are encoded and
calculated. Such event could have a negative impact on handling securities
trades, payments of interest and dividends, pricing and account services.
Although, at this time, there can be no assurance that there will be no
adverse impact on the Fund, the Manager, the Distributor, the Transfer Agent
and the Custodian have advised the Fund that they have been actively working
on necessary changes to their computer systems to prepare for the year 2000
and expect that their systems, and those of their outside service providers,
will be adapted in time for that event.

16
<PAGE>

HOW THE FUND VALUES ITS SHARES

THE FUND'S NET ASSET VALUE PER SHARE OR NAV IS DETERMINED BY SUBTRACTING ITS
LIABILITIES FROM THE VALUE OF ITS ASSETS AND DIVIDING THE REMAINDER BY THE
NUMBER OF OUTSTANDING SHARES. NAV IS CALCULATED SEPARATELY FOR EACH CLASS. For
valuation purposes, quotations of foreign securities in a foreign currency are
converted to U.S. dollar equivalents. THE BOARD OF TRUSTEES HAS FIXED THE
SPECIFIC TIME OF DAY FOR THE COMPUTATION OF THE FUND'S NET ASSET VALUE TO BE
AS OF 4:15 P.M., NEW YORK TIME.

Portfolio securities are valued based on market quotations or, if not
readily available or if such quotations are deemed not representative of fair
value, at fair value as determined in good faith under procedures established
by the Fund's Board of Trustees. See "Net Asset Value" in the Statement of
Additional Information.

The Fund will compute its NAV once daily on days that the New York Stock
Exchange is open for trading except on days on which no orders to purchase,
sell or redeem shares have been received by the Fund or days on which changes
in the value of the Fund's portfolio securities do not materially affect the
NAV.

Although the legal rights of each class of shares are substantially
identical, the different expenses borne by each class will result in different
NAVs and dividends. The NAV of Class B and Class C shares will generally be
lower than the NAV of Class A shares as a result of the larger distribution-
related fee to which Class B and Class C shares are subject. The NAV of Class
Z shares will generally be higher than the NAV of the other three classes
because Class Z shares are not subject to any distribution and/or service
fees. It is expected, however, that the NAV of the four classes will tend to
converge immediately after the recording of dividends, if any, which will
differ by approximately the amount of the distribution and/or service fee
expense accrual differential among the classes.

HOW THE FUND CALCULATES PERFORMANCE

FROM TIME TO TIME THE FUND MAY ADVERTISE ITS AVERAGE ANNUAL TOTAL RETURN,
AGGREGATE TOTAL RETURN AND YIELD IN ADVERTISEMENTS OR SALES LITERATURE. TOTAL
RETURN AND YIELD ARE CALCULATED SEPARATELY FOR CLASS A, CLASS B, CLASS C AND
CLASS Z SHARES. These figures will be based on historical earnings and are not
intended to indicate future performance. The total return shows how much an
investment in the Fund would have increased (decreased) over a specified
period of time (i.e., one, five or ten years or since inception of the Fund)
assuming that all distributions and dividends by the Fund were reinvested on
the reinvestment dates during the period and less all recurring fees. The
aggregate total return reflects actual performance over a stated period of
time. Average annual total return is a hypothetical rate of return that, if
achieved annually, would have produced the same aggregate total return if
performance had been constant over the entire period. Average annual total
return smooths out variations in performance and takes into account any
applicable initial or contingent deferred sales charges. Neither average
annual total return nor aggregate total return takes into account any federal
or state income taxes which may be payable upon redemption. The yield refers
to the income generated by an investment in the Fund over a one-month or 30-
day period. This income is then "annualized"; that is, the amount of income
generated by the investment during that 30-day period is assumed to be
generated each 30-day period for twelve periods and is shown as a percentage
of the investment. The income earned on the investment is also assumed to be
reinvested at the end of the sixth 30-day period. The Fund also may include
comparative performance information in advertising or marketing the Fund's
shares. Such performance information may include data from Lipper Analytical
Services, Inc., Morningstar Publications, Inc., other industry publications,
business periodicals and market indices. See "Performance Information" in the
Statement of Additional Information. Further performance information is
contained in the Fund's annual and semi-annual reports to shareholders, which
may be obtained without charge. See "Shareholder Guide--Shareholder Services--
Reports to Shareholders."

17
<PAGE>

TAXES, DIVIDENDS AND DISTRIBUTIONS

TAXATION OF THE FUND

THE FUND INTENDS TO QUALIFY AND INTENDS TO REMAIN QUALIFIED AS A REGULATED
INVESTMENT COMPANY UNDER THE INTERNAL REVENUE CODE. ACCORDINGLY, THE FUND WILL
NOT BE SUBJECT TO FEDERAL INCOME TAXES ON ITS NET INVESTMENT INCOME AND NET
CAPITAL GAINS, IF ANY, THAT IT DISTRIBUTES TO ITS SHAREHOLDERS. See "Taxes,
Dividends and Distributions" in the Statement of Additional Information.

Under the Internal Revenue Code, special rules apply to the treatment of
certain options and futures contracts (Section 1256 contracts). At the end of
each year, such investments held by the Fund will be required to be "marked to
market" for federal income tax purposes; that is, treated as having been sold
at market value. Sixty percent of any gain or loss recognized on these "deemed
sales" and on actual dispositions will be treated as long-term capital gain or
loss, and the remainder will be treated as short-term capital gain or loss.
See "Taxes, Dividends and Distributions" in the Statement of Additional
Information.

The Fund may incur foreign income taxes in connection with some of its
foreign investments. Certain of these taxes may be credited to shareholders.
See "Taxes, Dividends and Distributions" in the Statement of Additional
Information. The Fund may, from time to time, invest in passive foreign
investment companies (PFICs). PFICs are foreign corporations which own mostly
passive assets or derive 75% or more of their income from passive sources. The
Fund's investments in PFICs may subject the Fund to federal income tax on
certain income and gains realized by the Fund.

TAXATION OF SHAREHOLDERS

All dividends out of net investment income, together with distributions of
net short-term gains (i.e., the excess of net short-term capital gains over
net long-term capital losses) distributed to shareholders, will be taxable as
ordinary income to the shareholder whether or not reinvested. Certain gains or
losses from fluctuations in foreign currency exchange rates ("Section 988"
gains or losses) will affect the amount of ordinary income the Fund will be
able to pay as dividends. See "Taxes, Dividends and Distributions" in the
Statement of Additional Information. Any net capital gains (i.e., the excess
of net capital gains from the sale of assets held for more than 12 months over
net short-term capital losses) distributed to shareholders and properly
designated by the Fund will be taxable as capital gains to the shareholders,
whether or not reinvested and regardless of the length of time a shareholder
has owned his shares. The maximum capital gains rate for individuals is 28%
with respect to assets held by the Fund for more than 12 months, but not more
than 18 months, and 20% with respect to assets held by the Fund for more than
18 months. The maximum capital gains rate for corporate shareholders currently
is the same as the maximum tax rate for ordinary income.

Any gain or loss realized upon a sale or redemption (including any exchange)
of Fund shares by a shareholder who is not a dealer in securities will be
treated as capital gain or loss. In the case of any individual, any such
capital gain will be treated as short-term capital gain if the shares were
held for not more than 12 months, mid-term gain, taxable at the maximum rate
of 28%, if such shares were held for more than 12, but not more than 18
months, and long term capital gain, taxable at the maximum rate of 20%, if
such shares were held for more than 18 months. In the case of a corporation,
any such capital gain will be treated as long-term capital gain, taxable at
the same rates as ordinary income, if such shares were held for more than 12
months. Any such capital loss will be treated as long-term capital loss if the
shares have been held more than one year and otherwise as a short-term capital
gain or loss. Any such loss on shares that are held for six months or less,
however, will be treated as a long-term capital loss to the extent of any
capital gain distributions received by the shareholder.

18
<PAGE>

to interest income, capital and currency gain, gain or loss from Section 1256
contracts, dividend income from foreign corporations and income from some
other sources will not be eligible for the corporate dividends received
deduction. Since the Fund is likely to have a substantial portion of its
assets invested in securities of foreign issuers, the amount of the Fund's
dividends eligible for the corporate dividends received deduction will be
minimal. See "Taxes, Dividends and Distributions" in the Statement of
Additional Information. Corporate shareholders should consult their tax
advisers regarding other requirements applicable to the dividends received
deduction.

The Fund has obtained opinions of counsel to the effect that neither (i) the
conversion of Class B shares into Class A shares nor (ii) the exchange of any
class of the Fund's shares for any other class of its shares constitutes a
taxable event for federal income tax purposes. However, such opinions are not
binding on the Internal Revenue Service.

Shareholders should consult their own tax advisers regarding specific
questions as to federal, state or local taxes.

WITHHOLDING TAXES

Under the Internal Revenue Code, the Fund is required to withhold and remit
to the U.S. Treasury 31% of dividend, capital gain income and redemption
proceeds on the accounts of certain shareholders who fail to furnish their tax
identification numbers on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) with the required certifications regarding the
shareholder's status under the federal income tax law. Withholding at this
rate is also required from dividends and capital gains distributions (but not
redemption proceeds) payable to shareholders who are otherwise subject to
backup withholding. Dividends of net investment income and short-term capital
gains paid to a foreign shareholder will generally be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate).

DIVIDENDS AND DISTRIBUTIONS

THE FUND EXPECTS TO PAY DIVIDENDS OF NET INVESTMENT INCOME, IF ANY, AND MAKE
DISTRIBUTIONS OF ANY CAPITAL GAINS IN EXCESS OF NET LONG-TERM CAPITAL LOSSES
AT LEAST ANNUALLY. Dividends paid by the Fund with respect to each class of
shares, to the extent any dividends are paid, will be calculated in the same
manner, at the same time, on the same day and will be in the same amount
except that each class (other than Class Z) will bear its own distribution
charges, generally resulting in lower dividends for Class B and Class C shares
in relation to Class A and Class Z shares and lower dividends for Class A
shares in relation to Class Z shares. Distributions of net capital gains, if
any, will be paid in the same amount per share for each class of shares. See
"How the Fund Values its Shares."

DIVIDENDS AND DISTRIBUTIONS WILL BE PAID IN ADDITIONAL FUND SHARES BASED ON
THE NAV OF EACH CLASS ON THE RECORD DATE OR SUCH OTHER DATE AS THE BOARD OF
TRUSTEES MAY DETERMINE, UNLESS THE SHAREHOLDER ELECTS IN WRITING NOT LESS THAN
FIVE BUSINESS DAYS PRIOR TO THE RECORD DATE TO RECEIVE SUCH DIVIDENDS AND
DISTRIBUTIONS IN CASH. Such election should be submitted to Prudential Mutual
Fund Services LLC, Attention: Account Maintenance, P.O. Box 15015, New
Brunswick, New Jersey 08906-5015. If you hold shares through Prudential
Securities, you should contact your financial adviser to elect to receive
dividends and distributions in cash. The Fund will notify each shareholder
after the close of the Fund's taxable year both of the dollar amount and the
taxable status of that year's dividends and distributions on a per share
basis.

IF YOU BUY SHARES ON OR IMMEDIATELY PRIOR TO THE RECORD DATE (THE DATE THAT
DETERMINES WHO RECEIVES THE DIVIDEND), YOU WILL RECEIVE A PORTION OF THE MONEY
YOU INVESTED AS A TAXABLE DIVIDEND. THEREFORE, YOU SHOULD CONSIDER THE TIMING
OF DIVIDENDS WHEN BUYING SHARES OF THE FUND.

19
<PAGE>

GENERAL INFORMATION

DESCRIPTION OF COMMON STOCK

THE FUND WAS ORGANIZED AS A SERIES OF PRUDENTIAL DEVELOPING MARKETS FUND, A
DELAWARE BUSINESS TRUST, ON OCTOBER 24, 1997. THE FUND IS AUTHORIZED TO ISSUE
AN UNLIMITED NUMBER OF SHARES OF BENEFICIAL INTEREST, $.001 PAR VALUE PER
SHARE, DIVIDED INTO FOUR CLASSES, DESIGNATED CLASS A, CLASS B, CLASS C AND
CLASS Z SHARES. Each class of shares represents an interest in the same assets
of the Fund and is identical in all respects except that (i) each class is
subject to different sales charges and distribution and/or service fees
(except for Class Z shares, which are not subject to any sales charges and
distribution and/or service fees), which may affect performance, (ii) each
class has exclusive voting rights on any matter submitted to shareholders that
relates solely to its arrangement and has separate voting rights on any matter
submitted to shareholders in which the interests of one class differ from the
interests of any other class, (iii) each class has a different exchange
privilege, (iv) only Class B shares have a conversion feature and (v) Class Z
shares are offered exclusively for sale to a limited group of investors. See
"How the Fund is Managed--Distributor." In accordance with the Prudential
Developing Markets Fund's Declaration of Trust, the Board of Trustees may
authorize the creation of additional series and classes within such series,
with such preferences, privileges, limitations and voting and dividend rights
as the Board of Trustees may determine.

Shares of the Fund, when issued, are fully paid, nonassessable, fully
transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of the Fund under certain circumstances as described
under "Shareholder Guide--How to Sell Your Shares." Each share of each class
is equal as to earnings, assets and voting privileges, except as noted above,
and each class (with the exception of Class Z shares, which are not subject to
any distribution or service fees) bears the expenses related to the
distribution of its shares. Except for the conversion feature applicable to
the Class B shares, there are no conversion, preemptive or other subscription
rights. In the event of liquidation, each share of the Fund is entitled to its
portion of all of the Fund's assets after all debt and expenses of the Fund
have been paid. Since Class B and Class C shares generally bear higher
distribution expenses than Class A shares, the liquidation proceeds to
shareholders of those classes are likely to be lower than to Class A
shareholders and to Class Z shareholders, whose shares are not subject to any
distribution and/or service fees. The Fund's shares do not have cumulative
voting rights for the election of Trustees.

THE FUND DOES NOT INTEND TO HOLD ANNUAL MEETINGS OF SHAREHOLDERS UNLESS
OTHERWISE REQUIRED BY LAW. THE FUND WILL NOT BE REQUIRED TO HOLD MEETINGS OF
SHAREHOLDERS UNLESS, FOR EXAMPLE, THE ELECTION OF TRUSTEES IS REQUIRED TO BE
ACTED ON BY SHAREHOLDERS UNDER THE INVESTMENT COMPANY ACT. SHAREHOLDERS HAVE
CERTAIN RIGHTS, INCLUDING THE RIGHT TO CALL A MEETING UPON A VOTE OF 10% OF
THE FUND'S OUTSTANDING SHARES FOR THE PURPOSE OF VOTING ON THE REMOVAL OF ONE
OR MORE TRUSTEES OR TO TRANSACT ANY OTHER BUSINESS.

ADDITIONAL INFORMATION

This Prospectus, including the Statement of Additional Information which has
been incorporated by reference herein, does not contain all the information
set forth in the Registration Statement filed by the Prudential Developing
Markets Fund with the SEC under the Securities Act of 1933. Copies of the
Registration Statement may be obtained at a reasonable charge from the SEC or
may be examined, without charge, at the office of the SEC in Washington, D.C.

20
<PAGE>

SHAREHOLDER GUIDE

HOW TO BUY SHARES OF THE FUND

YOU MAY PURCHASE SHARES OF THE FUND THROUGH THE DISTRIBUTOR, THROUGH
DEALERS, INCLUDING PRUDENTIAL SECURITIES AND PRUSEC, OR DIRECTLY FROM THE
FUND, THROUGH ITS TRANSFER AGENT, PRUDENTIAL MUTUAL FUND SERVICES LLC (PMFS OR
THE TRANSFER AGENT), ATTENTION: INVESTMENT SERVICES, P.O. BOX 15020, NEW
BRUNSWICK, NEW JERSEY 08906-5020. Participants in programs sponsored by
Prudential Retirement Services should contact their client representative for
more information about Class Z shares. The purchase price is the NAV next
determined following receipt of an order in proper form (in accordance with
procedures established by the Transfer Agent in connection with investors'
accounts) by the Transfer Agent or the Distributor plus a sales charge which,
at your option, may be imposed either (i) at the time of purchase (Class A
shares) or (ii) on a deferred basis (Class B or Class C shares). Class Z
shares are offered to a limited group of investors at net asset value without
any sales charge. Payment may be made by wire, check or through your brokerage
account. See "Alternative Purchase Plan" below. See also "How the Fund Values
its Shares."

The minimum initial investment is $1,000 per class for Class A and Class B
shares and $5,000 for Class C shares, except that the minimum initial
investment for Class C shares may be waived from time to time. There is no
minimum investment requirement for Class Z shares. The minimum subsequent
investment is $100 for all classes, except for Class Z shares for which there
is no such minimum. All minimum investment requirements are waived for certain
retirement and employee savings plans or custodial accounts for the benefit of
minors. For purchases made through the Automatic Savings Accumulation Plan,
the minimum initial and subsequent investment is $50. See "Shareholder
Services" below.

Application forms can be obtained from PMFS, the Distributor, Prudential
Securities or Prusec. If a stock certificate is desired, it must be requested
in writing for each transaction. Certificates are issued only for full shares.
Shareholders who hold their shares through Prudential Securities will not
receive stock certificates.

The Fund reserves the right to reject any purchase order (including an
exchange into the Fund) or to suspend or modify the continuous offering of its
shares. See "How to Sell Your Shares" below.

Your dealer is responsible for forwarding payment promptly to the Fund. The
Distributor reserves the right to cancel any purchase order for which payment
has not been received by the third business day following the investment.

Transactions in Fund shares may be subject to postage and handling charges
imposed by your dealer.

PURCHASE BY WIRE. For an initial purchase of shares of the Fund by wire, you
must first telephone PMFS at (800) 225-1852 (toll-free) to receive an account
number. The following information will be requested: your name, address, tax
identification number, class election, dividend distribution election, amount
being wired and wiring bank. Instructions should then be given by you to your
bank to transfer funds by wire to State Street Bank and Trust Company (State
Street), Boston, Massachusetts, Custody and Shareholder Services Division,
Attention: Prudential Developing Markets Fund, Equity Fund Series, specifying
on the wire the account number assigned by PMFS and your name and identifying
the class in which you are eligible to invest (Class A, Class B, Class C or
Class Z shares).

If you arrange for receipt by State Street of federal funds prior to the
calculation of NAV (4:15 P.M., New York time), on a business day, you may
purchase shares of the Fund as of that day. See "Net Asset Value" in the
Statement of Additional Information.

In making a subsequent purchase order by wire, you should wire State Street
directly and should be sure that the wire specifies Prudential Developing
Markets Fund, Equity Fund Series, Class A, Class B, Class C or Class Z shares
and your name and individual account number. It is not necessary to call PMFS
to make subsequent purchase orders utilizing federal funds. The minimum amount
which may be invested by wire is $1,000.

21
<PAGE>

ALTERNATIVE PURCHASE PLAN

THE FUND OFFERS THROUGH THIS PROSPECTUS FOUR CLASSES OF SHARES (CLASS A,
CLASS B, CLASS C AND CLASS Z SHARES) WHICH ALLOWS YOU TO CHOOSE THE MOST
BENEFICIAL SALES CHARGE STRUCTURE FOR YOUR INDIVIDUAL CIRCUMSTANCES GIVEN THE
AMOUNT OF THE PURCHASE, THE LENGTH OF TIME YOU EXPECT TO HOLD THE SHARES AND
OTHER RELEVANT CIRCUMSTANCES (ALTERNATIVE PURCHASE PLAN).

<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
------------------------------------- ------------------------ --------------------------------------
<S> <C> <C> <C>
CLASS A Maximum initial sales charge of 5% of .30 of 1% (Currently Initial sales charge waived or reduced
the public offering price being charged at a for certain purchases
rate of .25 of 1%)
CLASS B Maximum contingent deferred sales 1% Shares convert to Class A shares
charge or CDSC of 5% of the lesser of approximately seven years after
the amount invested or the redemption purchase
proceeds; declines to zero after six
years
CLASS C Maximum CDSC of 1% of the lesser 1% Shares do not convert to another class
of the amount invested or the
redemption proceeds on redemptions
made within one year of purchase
CLASS Z None None Sold to a limited group of investors
</TABLE>

The four classes of shares represent an interest in the same portfolio of
investments of the Fund and have the same rights, except that (i) each class
(with the exception of the Class Z shares, which are not subject to any
distribution or service fees) bears the separate expenses of its Rule 12b-1
distribution and service plan, (ii) each class has exclusive voting rights on
any matter submitted to shareholders that relates solely to its arrangement
and has separate voting rights on any matter submitted to shareholders in
which the interests of one class differ from the interest of any other class,
and (iii) each class has a different exchange privilege, (iv) only Class B
shares have a conversion feature and (v) Class Z shares are offered
exclusively for sale to a limited group of investors. The four classes also
have separate exchange privileges. See "How to Exchange Your Shares" below.
The income attributable to each class and the dividends payable on the shares
of each class will be reduced by the amount of the distribution fee (if any)
of each class. Class B and Class C shares bear the expense of a higher
distribution fee which will generally cause them to have higher expense ratios
and to pay lower dividends than the Class A and Class Z shares.

Financial advisers and other sales agents who sell shares of the Fund will
receive different compensation for selling Class A, Class B, Class C and Class
Z shares and will generally receive more compensation initially for selling
Class A and Class B shares than for selling Class C or Class Z shares.

IN SELECTING A PURCHASE ALTERNATIVE, YOU SHOULD CONSIDER, AMONG OTHER
THINGS, (1) the length of time you expect to hold your investment, (2) the
amount of any applicable sales charge (whether imposed at the time of purchase
or redemption) and distribution-related fees, as noted above, (3) whether you
qualify for any reduction or waiver of any applicable sales charge, (4) the
various exchange privileges among the different classes of shares (see "How to
Exchange Your Shares" below) and (5) the fact that Class B shares
automatically convert to Class A shares approximately seven years after
purchase (see "Conversion Feature--Class B Shares" below).

The following is provided to assist you in determining which method of
purchase best suits your individual circumstances and is based on current fees
and expenses being charged to the Fund:

22
<PAGE>

If you intend to hold your investment in the Fund for less than 7 years and
do not qualify for a reduced sales charge on Class A shares, since Class A
shares are subject to a maximum initial sales share of 5% and Class B shares
are subject to a CDSC of 5% which declines to zero over a 6 year period, you
should consider purchasing Class C shares over either Class A or Class B
shares.

If you intend to hold your investment for 7 years or more and do not qualify
for a reduced sales charge on Class A shares, since Class B shares convert to
Class A shares approximately 7 years after purchase and because all of your
money would be invested initially in the case of Class B shares, you should
consider purchasing Class B shares over either Class A or Class C shares.

If you qualify for a reduced sales charge on Class A shares, it may be more
advantageous for you to purchase Class A shares over either Class B or Class C
shares regardless of how long you intend to hold your investment. However,
unlike Class B and Class C shares, you would not have all of your money
invested initially because the sales charge on Class A shares is deducted at
the time of purchase.

If you do not qualify for a reduced sales charge on Class A shares and you
purchase Class B or Class C shares, you would have to hold your investment for
more than 6 years in the case of Class B shares and Class C shares for the
higher cumulative annual distribution-related fee on those shares to exceed
the initial sales charge plus cumulative annual distribution-related fees on
Class A shares. This does not take into account the time value of money, which
further reduces the impact of the higher Class B or Class C distribution-
related fee on the investment, fluctuations in NAV, the effect of the return
on the investment over this period of time or redemptions when the CDSC is
applicable.

ALL PURCHASES OF $1 MILLION OR MORE, EITHER AS PART OF A SINGLE INVESTMENT
OR UNDER RIGHTS OF ACCUMULATION OR LETTERS OF INTENT, MUST BE FOR CLASS A
SHARES UNLESS THE PURCHASER IS ELIGIBLE TO PURCHASE CLASS Z SHARES. See
"Reduction and Waiver of Initial Sales Charges" and "Class Z Shares" below.

CLASS A SHARES

The offering price of Class A shares for investors choosing the initial
sales charge alternative is the next determined NAV plus a sales charge
(expressed as a percentage of the offering price and of the amount invested)
as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS DEALER CONCESSION
PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
------------------ --------------- --------------- -----------------
<S> <C> <C> <C>
Less than $25,000 5.00% 5.26% 4.75%
$25,000 to $49,999 4.50 4.71 4.25
$50,000 to $99,999 4.00 4.17 3.75
$100,000 to $249,999 3.25 3.36 3.00
$250,000 to $499,999 2.50 2.56 2.40
$500,000 to $999,999 2.00 2.04 1.90
$1,000,000 and above None None None
</TABLE>

The Distributor may reallow the entire sales charge to dealers. Selling
dealers may be deemed to be underwriters, as that term is defined in the
Securities Act.

In connection with the sale of Class A shares at NAV (without payment of an
initial sales charge), the Manager, the Distributor or one of their affiliates
will pay dealers, financial advisers and other persons which distribute shares
a finders' fee from its own resources based on a percentage of the NAV of
shares sold by such persons.

23
<PAGE>

market funds other than those acquired pursuant to the exchange privilege) may
be aggregated to determine the applicable reduction. See "Purchase and
Redemption of Fund Shares--Reduction and Waiver of Initial Sales Charges--
Class A Shares" in the Statement of Additional Information.

Benefit Plans. Class A shares may be purchased at NAV, without payment of an
initial sales charge, by pension, profit-sharing or other employee benefit
plans qualified under Section 401 of the Internal Revenue Code and deferred
compensation and annuity plans under Sections 457 and 403(b)(7) of the
Internal Revenue Code (collectively, Benefit Plans), provided that the Benefit
Plan has existing assets of at least $1 million invested in shares of
Prudential Mutual Funds (excluding money market funds other than those
acquired pursuant to the exchange privilege) or 250 eligible employees or
participants. In the case of Benefit Plans whose accounts are held directly
with the Transfer Agent or Prudential Securities and for which the Transfer
Agent or Prudential Securities does individual account recordkeeping (Direct
Account Benefit Plans) and Benefit Plans sponsored by Prudential Securities or
its subsidiaries (Prudential Securities or Subsidiary Prototype Benefit
Plans), Class A shares may be purchased at NAV by participants who are
repaying loans made from such plans to the participant.

Prudential Retirement Programs. Class A shares may be purchased at NAV by
certain savings, retirement and deferred compensation plans, qualified or non-
qualified under the Internal Revenue Code, for which Prudential serves as the
plan administrator or recordkeeper, provided that (i) the plan has at least $1
million in existing assets or 250 eligible employees and (ii) the Fund is an
available investment option. These plans include pension, profit-sharing,
stock-bonus or other employee benefit plans under Section 401 of the Internal
Revenue Code, deferred compensation and annuity plans under Sections 457 or
403(b)(7) of the Internal Revenue Code and plans that participate in the
Transfer Agent's PruArray and SmartPath Programs (benefit plan recordkeeping
services) (hereafter referred to as a PruArray or SmartPath Plan). All plans
of a company for which Prudential serves as plan administrator or recordkeeper
are aggregated in meeting the $1 million threshold. The term "existing assets"
as used herein includes stock issued by a plan sponsor, shares of Prudential
Mutual Funds and shares of certain unaffiliated mutual funds that participate
in the PruArray or Smart Path Program (Participating Funds). "Existing assets"
also include monies invested in The Guaranteed Interest Account (GIA), a group
annuity insurance product issued by Prudential, and units of The Stable Value
Fund (SVF), an unaffiliated bank collective fund. Class A shares may also be
purchased at NAV by plans that have monies invested in GIA and SVF, provided
(i) the purchase is made with the proceeds of a redemption from either GIA or
SVF and (ii) Class A shares are an investment option of the plan.

PruArray Association Benefit Plans. Class A shares are also offered at NAV
to Benefit Plans or non-qualified plans sponsored by employers which are
members of a common trade, professional or membership association
(Association) that participate in the PruArray Program provided that the
Association enters into a written agreement with Prudential. Such Benefit
Plans or non-qualified plans may purchase Class A shares at NAV without regard
to the assets or number of participants in the individual employer's qualified
plan(s) or non-qualified plans so long as the employers in the Association (i)
have retirement plan assets in the aggregate of at least $1 million or 250
participants in the aggregate and (ii) maintain their accounts with the
Transfer Agent.

PruArray Savings Program. Class A shares are also offered at NAV to
employees of companies that enter into a written agreement with Prudential
Retirement Services to participate in the PruArray Savings Program. Under this
Program, a limited number of Prudential Mutual Funds are available for
purchase at NAV by Individual Retirement Accounts and Savings Accumulation
Plans of the company's employees. The Program is available only to (i)
employees who open an IRA or Savings Accumulation Plan account with the
Transfer Agent and (ii) spouses of employees who open an IRA account with the
Transfer Agent. The program is offered to companies that have at least 250
eligible employees.

Special Rules Applicable to Retirement Plans. After a Benefit Plan or
PruArray Plan qualifies to purchase Class A shares at NAV, all subsequent
purchases will be made at NAV.

24
<PAGE>

Other Waivers. In addition, Class A shares may be purchased at NAV, through
the Distributor or the Transfer Agent, by the following persons: (a) officers
of the Prudential Mutual Funds (including the Fund), (b) employees of
Prudential Securities and PIFM and their subsidiaries and members of the
families of such persons who maintain an "employee related" account at
Prudential Securities or the Transfer Agent, (c) employees of subadvisers of
the Prudential Mutual Funds provided that such purchases at NAV are permitted
by such person's employer, (d) Prudential employees and special agents of
Prudential and its subsidiaries and all persons who have retired directly from
active service with Prudential or one of its subsidiaries, (e) registered
representatives and employees of dealers who have entered into a selected
dealer agreement with the Distributor provided that purchases at NAV are
permitted by such person's employer, (f) investors who have a business
relationship with a financial adviser who joined Prudential Securities from
another investment firm, provided that (i) the purchase is made within 180
days of the commencement of the financial adviser's employment at Prudential
Securities, or within one year in the case of Benefit Plans, (ii) the purchase
is made with proceeds of a redemption of shares of any open-end, non-money
market fund sponsored by the financial adviser's previous employer (other than
a fund which imposes a distribution or service fee of .25 of 1% or less) and
(iii) the financial adviser served as the client's broker on the previous
purchase, and (g) investors in Individual Retirement Accounts, provided the
purchase is made with the proceeds of a tax-free rollover of assets from a
Benefit Plan for which Prudential Investments serves as the recordkeeper or
administrator.

You must notify the Transfer Agent either directly or through your dealer
that you are entitled to the reduction or waiver of the sales charge. The
reduction or waiver will be granted subject to confirmation of your
entitlement. No initial sales charges are imposed upon Class A shares acquired
upon the reinvestment of dividends and distributions. See "Purchase and
Redemption of Fund Shares--Reduction and Waiver of Initial Sales Charges--
Class A Shares" in the Statement of Additional Information.

CLASS B AND CLASS C SHARES

The offering price of Class B and Class C shares for investors choosing one
of the deferred sales charge alternatives is the NAV per share next determined
following receipt of an order by the Transfer Agent, Prudential Securities,
Prusec or a dealer. Although there is no sales charge imposed at the time of
purchase, redemptions of Class B and Class C shares may be subject to a CDSC.
See "How to Sell Your Shares--Contingent Deferred Sales Charges" below. The
Distributor will pay, from its own resources, sales commissions of up to 4% of
the purchase price of Class B shares to dealers, financial advisers and other
persons who sell Class B shares at the time of sale. This facilitates the
ability of the Fund to sell the Class B shares without an initial sales charge
being deducted at the time of purchase. The Distributor anticipates that it
will recoup its payment of sales commissions from the combination of the CDSC
and the distribution fee. See "How the Fund is Managed--Distributor." In
connection with the sale of Class C shares, the Distributor will pay, from its
own resources, dealers, financial advisers and other persons which distribute
Class C shares a sales commission of up to 1% of the purchase price at the
time of the sale.

CLASS Z SHARES

25
<PAGE>

for which Prudential Retirement Services serves as recordkeeper and that, as
of September 20, 1996, (a) were Class Z shareholders of the Prudential Mutual
Funds or (b) executed a letter of intent to purchase Class Z shares of the
Prudential Mutual Funds; (v) current and former Directors/Trustees of the
Prudential Mutual Funds (including the Fund); (vi) employees of Prudential
and/or Prudential Securities who participate in a Prudential-sponsored
employee savings plan; and (vii) Prudential with an investment of $10 million
or more.

In connection with the sale of Class Z shares, the Manager, the Distributor
or one of their affiliates may pay dealers, financial advisers and other
persons which distribute shares a finders' fee from its own resources based on
a percentage of the net asset value of shares sold by such persons.

HOW TO SELL YOUR SHARES

YOU CAN REDEEM YOUR SHARES OF THE FUND AT ANY TIME FOR CASH AT THE NAV NEXT
DETERMINED AFTER THE REDEMPTION REQUEST IS RECEIVED IN PROPER FORM (IN
ACCORDANCE WITH PROCEDURES ESTABLISHED BY THE TRANSFER AGENT IN CONNECTION
WITH INVESTORS' ACCOUNTS) BY THE TRANSFER AGENT OR THE DISTRIBUTOR. See "How
the Fund Values its Shares." In certain cases, however, redemption proceeds
will be reduced by the amount of any applicable contingent deferred sales
charge, as described below. See "Contingent Deferred Sales Charges" below.

IF YOU HOLD SHARES OF THE FUND THROUGH PRUDENTIAL SECURITIES, YOU MUST
REDEEM YOUR SHARES THROUGH PRUDENTIAL SECURITIES. PLEASE CONTACT YOUR
PRUDENTIAL SECURITIES FINANCIAL ADVISOR. IF YOU HOLD SHARES IN NON-CERTIFICATE
FORM, A WRITTEN REQUEST FOR REDEMPTION SIGNED BY YOU EXACTLY AS THE ACCOUNT IS
REGISTERED IS REQUIRED. IF YOU HOLD CERTIFICATES, THE CERTIFICATES, SIGNED IN
THE NAME(S) SHOWN ON THE FACE OF THE CERTIFICATES, MUST BE RECEIVED BY THE
TRANSFER AGENT IN ORDER FOR THE REDEMPTION REQUEST TO BE PROCESSED. IF
REDEMPTION IS REQUESTED BY A CORPORATION, PARTNERSHIP, TRUST OR FIDUCIARY,
WRITTEN EVIDENCE OF AUTHORITY ACCEPTABLE TO THE TRANSFER AGENT MUST BE
SUBMITTED BEFORE SUCH REQUEST WILL BE ACCEPTED. All correspondence and
documents concerning redemptions should be sent to the Fund in care of its
Transfer Agent, Prudential Mutual Fund Services LLC, Attention: Redemption
Services, P.O. Box 15010, New Brunswick, New Jersey 08906-5010.

If the proceeds of the redemption (a) exceed $50,000, (b) are to be paid to
a person other than the record owner, (c) are to be sent to an address other
than the address on the Transfer Agent's records, or (d) are to be paid to a
corporation, partnership, trust or fiduciary, the signature(s) on the
redemption request and on the certificates, if any, or stock power must be
guaranteed by an "eligible guarantor institution." An "eligible guarantor
institution" includes any bank, broker, dealer or credit union. The Transfer
Agent reserves the right to request additional information from, and make
reasonable inquiries of, any eligible guarantor institution. For clients of
Prusec, a signature guarantee may be obtained from the agency or office
manager of most Prudential Insurance and Financial Services or Preferred
Services offices. In the case of redemptions from a PruArray or Smart Path
Plan, if the proceeds of the redemption are invested in another investment
option of the plan in the name of the record holder and at the same address as
reflected in the Transfer Agent's records, a signature guarantee is not
required.

PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE MADE BY CHECK WITHIN
SEVEN DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE CERTIFICATE AND/OR
WRITTEN REQUEST, EXCEPT AS INDICATED BELOW. IF YOU HOLD SHARES THROUGH
PRUDENTIAL SECURITIES, PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE
CREDITED TO YOUR PRUDENTIAL SECURITIES ACCOUNT, UNLESS YOU INDICATE OTHERWISE.
Such payment may be postponed or the right of redemption suspended at times
(a) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (b) when trading on such Exchange is restricted, (c)
when an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
(d) during any other period when the SEC, by order, so permits; provided that
applicable rules and regulations of the SEC shall govern as to whether the
conditions prescribed in (b), (c) or (d) exist.

26
<PAGE>

PURCHASE CHECK BY THE TRANSFER AGENT. SUCH DELAY MAY BE AVOIDED BY PURCHASING
SHARES BY WIRE OR BY CERTIFIED OR CASHIER'S CHECK.

REDEMPTION IN KIND. If the Board of Trustees determines that it would be
detrimental to the best interests of the remaining shareholders of the Fund to
make payment wholly or partly in cash, the Fund may pay the redemption price
in whole or in part by a distribution in kind of securities from the
investment portfolio of the Fund, in lieu of cash, in conformity with
applicable rules of the SEC. Securities will be readily marketable and will be
valued in the same manner as a regular redemption. See "How the Fund Values
its Shares." If your shares are redeemed in kind, you will incur transaction
costs in converting the assets into cash. The Fund, however, has elected to be
governed by Rule 18f-1 under the Investment Company Act, under which the Fund
is obligated to redeem shares solely in cash up to the lesser of $250,000 or
1% of the NAV of the Fund during any 90-day period for any one shareholder.

INVOLUNTARY REDEMPTION. In order to reduce expenses of the Fund, the Board
of Trustees may redeem all of the shares of any shareholder, other than a
shareholder which is an IRA or other tax-deferred retirement plan, whose
account has a net asset value of less than $500 due to a redemption. The Fund
will give such shareholders 60 days' prior written notice in which to purchase
sufficient additional shares to avoid such redemption. No CDSC will be imposed
on any such involuntary redemption.

90-DAY REPURCHASE PRIVILEGE. If you redeem your shares and have not
previously exercised the repurchase privilege, you may reinvest any portion or
all of the proceeds of such redemption in shares of the Fund at the NAV next
determined after the order is received, which must be within 90 days after the
date of the redemption. Any CDSC paid in connection with such redemption will
be credited (in shares) to your account. (If less than a full repurchase is
made, the credit will be on a pro rata basis.) You must notify the Fund's
Transfer Agent, either directly or through the Distributor, at the time the
repurchase privilege is exercised to adjust your account for the CDSC you
previously paid. Thereafter, any redemptions will be subject to the CDSC
applicable at the time of the redemption. See "Contingent Deferred Sales
Charges" below. Exercise of the repurchase privilege will generally not affect
the federal tax treatment of any gain realized upon redemption. However, if
the redemption was made within a 30 day period of the repurchase and if the
redemption resulted in a loss, some or all of the loss, depending on the
amount reinvested, may not be allowed for federal income tax purposes. See
"Taxes, Dividends and Distributions" in the Statement of Additional
Information.

CONTINGENT DEFERRED SALES CHARGES

Redemptions of Class B shares will be subject to a contingent deferred sales
charge or CDSC declining from 5% to zero over a six-year period. Class C
shares redeemed within one year of purchase will be subject to a 1% CDSC. The
CDSC will be deducted from the redemption proceeds and reduce the amount paid
to you. The CDSC will be imposed on any redemption by you which reduces the
current value of your Class B or Class C shares of the Fund to an amount which
is lower than the amount of all payments by you for shares during the
preceding six years, in the case of Class B shares, and one year, in the case
of Class C shares. A CDSC will be applied on the lesser of the original
purchase price or the current value of the shares being redeemed. Increases in
the value of your shares or shares acquired through reinvestment of dividends
or distributions are not subject to a CDSC. The amount of any CDSC will be
paid to and retained by the Distributor. See "How the Fund is Managed--
Distributor" and "Waiver of the Contingent Deferred Sales Charges--Class B
Shares" below.

The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchase of shares, all payments
during a month will be aggregated and deemed to have been made on the last day
of the month. The CDSC will be calculated from the first day of the month
after the initial purchase, excluding the time shares were held in a money
market fund. See "How to Exchange Your Shares" below.

27
<PAGE>

The following table sets forth the rates of the CDSC applicable to
redemptions of Class B shares:

<TABLE>
<CAPTION>
YEAR SINCE CONTINGENT DEFERRED SALES CHARGE
PURCHASE AS A PERCENTAGE OF DOLLARS INVESTED
PAYMENT MADE OR REDEMPTION PROCEEDS
------------ -----------------------------------
<S> <C>
First................ 5.0%
Second............... 4.0%
Third................ 3.0%
Fourth............... 2.0%
Fifth................ 1.0%
Sixth................ 1.0%
Seventh.............. None
</TABLE>

In determining whether a CDSC is applicable to a redemption, the calculation
will be made in a manner that results in the lowest possible rate. It will be
assumed that the redemption is made first of amounts representing shares
acquired pursuant to the reinvestment of dividends and distributions; then of
amounts representing the increase in net asset value above the total amount of
payments for the purchase of Fund shares made during the preceding six years;
then of amounts representing the cost of shares held beyond the applicable
CDSC period; and finally, of amounts representing the cost of shares held for
the longest period of time within the applicable CDSC period.

For example, assume you purchased 100 Class B shares at $10 per share for a
cost of $1,000. Subsequently, you acquired 5 additional Class B shares through
dividend reinvestment. During the second year after the purchase you decided
to redeem $500 of your investment. Assuming at the time of the redemption the
NAV had appreciated to $12 per share, the value of your Class B shares would
be $1,260 (105 shares at $12 per share). The CDSC would not be applied to the
value of the reinvested dividend shares and the amount which represents
appreciation ($260). Therefore, $240 of the $500 redemption proceeds ($500
minus $260) would be charged at a rate of 4% (the applicable rate in the
second year after purchase) for a total CDSC of $9.60.

For federal income tax purposes, the amount of the CDSC will reduce the gain
or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.

WAIVER OF THE CONTINGENT DEFERRED SALES CHARGES--CLASS B SHARES. The CDSC
will be waived in the case of a redemption following the death or disability
of a shareholder or, in the case of a trust account, following the death or
disability of the grantor. The waiver is available for total or partial
redemptions of shares owned by a person, either individually or in joint
tenancy (with rights of survivorship), at the time of death or initial
determination of disability, provided that the shares were purchased prior to
death or disability.

The CDSC will also be waived in the case of a total or partial redemption in
connection with certain distributions made without penalty under the Internal
Revenue Code from a tax-deferred retirement plan, an IRA or a Section 403(b)
custodial account. These distributions are: (i) in the case of a tax-deferred
retirement plan, a lump-sum or other distribution after retirement; (ii) in
the case of an IRA (including a Roth IRA), a lump-sum or other distribution
after attaining age 59 1/2 or a periodic distribution based on life
expectancy; (iii) in the case of a Section 403(b) custodial account, a lump
sum or other distribution after attaining age 59 1/2; and (iv) a tax-free
return of an excess contribution or plan distributions following the death or
disability of the shareholder, provided that the shares were purchased prior
to death or disability. The waiver does not apply in the case of a tax-free
rollover or transfer of assets, other than one following a separation from
service (i.e., following voluntary or involuntary termination of employment or
following retirement). Under no circumstances will the CDSC be waived on
redemptions resulting from the termination of a tax-deferred retirement plan,
unless such redemptions otherwise qualify for a waiver as described above. In
the case of Direct Account and Prudential Securities or Subsidiary Prototype
Benefit Plans, the CDSC will be waived on redemptions which represent
borrowings from such plans. Shares purchased with amounts used to repay a loan
from such plans on which a CDSC was not previously deducted will thereafter be
subject to a CDSC without regard to the time such amounts were previously
invested. In the case of a 401(k) plan, the

28
<PAGE>

CDSC will also be waived upon the redemption of shares purchased with amounts
used to repay loans made from the account to the participant and from which a
CDSC was previously deducted.

SYSTEMATIC WITHDRAWAL PLAN. The CDSC will be waived (or reduced) on certain
redemptions from a Systematic Withdrawal Plan. On an annual basis, up to 12%
of the total dollar amount subject to the CDSC may be redeemed without charge.
The Transfer Agent will calculate the total amount available for this waiver
annually on the anniversary date of your purchase. The CDSC will be waived (or
reduced) on redemptions until this threshold 12% amount is reached.

In addition, the CDSC will be waived on redemptions of shares held by a
Trustee of the Fund.

You must notify the Fund's Transfer Agent either directly or through
Prudential Securities or Prusec, at the time of redemption, that you are
entitled to waiver of the CDSC and provide the Transfer Agent with such
supporting documentation as it may deem appropriate. The waiver will be
granted subject to confirmation of your entitlement. See "Purchase and
Redemption of Fund Shares--Waiver of the Contingent Deferred Sales Charge--
Class B Shares" in the Statement of Additional Information.

WAIVER OF THE CONTINGENT DEFERRED SALES CHARGES--CLASS C SHARES

PruArray or SmartPath Plans. The CDSC will be waived on redemptions from
qualified and non-qualified retirement and deferred compensation plans that
participate in the Transfer Agent's PruArray and SmartPath Programs.

CONVERSION FEATURE--CLASS B SHARES

Class B shares will automatically convert to Class A shares on a quarterly
basis approximately seven years after purchase. Conversions will be effected
at relative net asset value without the imposition of any additional sales
charge.

Since the Fund tracks amounts paid rather than the number of shares bought
on each purchase of Class B shares, the number of Class B shares eligible to
convert to Class A shares (excluding shares acquired through the automatic
reinvestment of dividends and other distributions) (the Eligible Shares) will
be determined on each conversion date in accordance with the following
formula: (i) the ratio of (a) the amounts paid for Class B shares purchased at
least seven years prior to the conversion date to (b) the total amount paid
for all Class B shares purchased and then held in your account (ii) multiplied
by the total number of Class B shares purchased and then held in your account.
Each time any Eligible Shares in your account convert to Class A shares, all
shares or amounts representing Class B shares then in your account that were
acquired through the automatic reinvestment of dividends and other
distributions will convert to Class A shares.

For purposes of determining the number of Eligible Shares, if the Class B
shares in your account on any conversion date are the result of multiple
purchases at different NAVs per share, the number of Eligible Shares
calculated as described above will generally be either more or less than the
number of shares actually purchased approximately seven years before such
conversion date. For example, if 100 shares were initially purchased at $10
per share (for a total of $1,000) and a second purchase of 100 shares was
subsequently made at $11 per share (for a total of $1,100), 95.24 shares would
convert approximately seven years from the initial purchase (i.e., $1,000
divided by $2,100 (47.62%) multiplied by 200 shares equals 95.24 shares). The
Manager reserves the right to modify the formula for determining the number of
Eligible Shares in the future as it deems appropriate on notice to
shareholders.

Since annual distribution-related fees are lower for Class A shares than
Class B shares, the per share net asset value of the Class A shares may be
higher than that of the Class B shares at the time of conversion. Thus,
although the aggregate dollar value will be the same, you may receive fewer
Class A shares than Class B shares converted. See "How the Fund Values its
Shares."

For purposes of calculating the applicable holding period for conversions,
all payments for Class B shares during a month will be deemed to have been
made on the last day of the month, or for Class B shares acquired through
exchange, or a series of exchanges, on the last day of the month in which the
original payment for purchases of such Class B shares was made. For Class B
shares previously exchanged for shares of a money market fund, the time period
during which such

29
<PAGE>

shares were held in the money market fund will be excluded. For example, Class
B shares held in a money market fund for one year will not convert to Class A
shares until approximately eight years from purchase. For purposes of
measuring the time period during which shares are held in a money market fund,
exchanges will be deemed to have been made on the last day of the month. Class
B shares acquired through exchange will convert to Class A shares after
expiration of the conversion period applicable to the original purchase of
such shares.

The conversion feature may be subject to the continuing availability of
opinions of counsel or rulings of the Internal Revenue Service (i) that the
dividends and other distributions paid on Class A, Class B, Class C and Class
Z shares will not constitute "preferential dividends" under the Internal
Revenue Code and (ii) that the conversion of shares does not constitute a
taxable event. The conversion of Class B shares into Class A shares may be
suspended if such opinions or rulings are no longer available. If conversions
are suspended, Class B shares of the Fund will continue to be subject,
possibly indefinitely, to their higher annual distribution and service fee.

HOW TO EXCHANGE YOUR SHARES

AS A SHAREHOLDER OF THE FUND, YOU HAVE AN EXCHANGE PRIVILEGE WITH CERTAIN
OTHER PRUDENTIAL MUTUAL FUNDS (THE EXCHANGE PRIVILEGE), INCLUDING ONE OR MORE
SPECIFIED MONEY MARKET FUNDS, SUBJECT TO THE MINIMUM INVESTMENT REQUIREMENTS
OF SUCH FUNDS. CLASS A, CLASS B, CLASS C AND CLASS Z SHARES MAY BE EXCHANGED
FOR CLASS A, CLASS B, CLASS C AND CLASS Z SHARES, RESPECTIVELY, OF ANOTHER
FUND ON THE BASIS OF THE RELATIVE NAV. No sales charge will be imposed at the
time of the exchange. Any applicable CDSC payable upon the redemption of
shares exchanged will be calculated from the first day of the month after the
initial purchase, excluding the time shares were held in a money market fund.
Class B and Class C shares may not be exchanged into money market funds other
than Prudential Special Money Market Fund, Inc. For purposes of calculating
the holding period applicable to the Class B conversion feature, the time
period during which Class B shares were held in a money market fund will be
excluded. See "Conversion Feature--Class B Shares" above. An exchange will be
treated as a redemption and purchase for tax purposes. See "Shareholder
Investment Account--Exchange Privilege" in the Statement of Additional
Information.

IN ORDER TO EXCHANGE SHARES BY TELEPHONE, YOU MUST AUTHORIZE TELEPHONE
EXCHANGES ON YOUR INITIAL APPLICATION FORM OR BY WRITTEN NOTICE TO THE
TRANSFER AGENT AND HOLD SHARES IN NON-CERTIFICATE FORM. Thereafter, you may
call the Fund at (800) 225-1852 to execute a telephone exchange of shares, on
weekdays, except holidays, between the hours of 8:00 A.M. and 6:00 P.M., New
York time. For your protection and to prevent fraudulent exchanges, your
telephone call will be recorded and you will be asked to provide your personal
identification number. A written confirmation of the exchange transaction will
be sent to you. NEITHER THE FUND NOR ITS AGENTS WILL BE LIABLE FOR ANY LOSS,
LIABILITY OR COST WHICH RESULTS FROM ACTING UPON INSTRUCTIONS REASONABLY
BELIEVED TO BE GENUINE UNDER THE FOREGOING PROCEDURES. All exchanges will be
made on the basis of the relative NAV of the two funds next determined after
the request is received in good order. The Exchange Privilege is available
only in states where the exchange may legally be made.

IF YOU HOLD SHARES THROUGH PRUDENTIAL SECURITIES, YOU MUST EXCHANGE YOUR
SHARES BY CONTACTING YOUR PRUDENTIAL SECURITIES FINANCIAL ADVISOR.

IF YOU HOLD CERTIFICATES, THE CERTIFICATES, SIGNED IN THE NAME(S) SHOWN ON
THE FACE OF THE CERTIFICATES, MUST BE RETURNED IN ORDER FOR THE SHARES TO BE
EXCHANGED. SEE "HOW TO SELL YOUR SHARES" ABOVE.

You may also exchange shares by mail by writing to Prudential Mutual Fund
Services LLC, Attention: Exchange Processing, P.O. Box 15010, New Brunswick,
New Jersey 08906-5010.

IN PERIODS OF SEVERE MARKET OR ECONOMIC CONDITIONS, THE TELEPHONE EXCHANGE
OF SHARES MAY BE DIFFICULT TO IMPLEMENT AND SHAREHOLDERS SHOULD MAKE EXCHANGES
BY MAIL BY WRITING TO PRUDENTIAL MUTUAL FUND SERVICES LLC, AT THE ADDRESS
NOTED ABOVE.

30
<PAGE>

SPECIAL EXCHANGE PRIVILEGES. A special exchange privilege is available for
shareholders who qualify to purchase Class A shares at NAV. (see "Alternative
Purchase Plan--Class A Shares--Reduction and Waiver of Initial Sales Charges"
above) and for shareholders who qualify to purchase Class Z shares (see
"Alternative Purchase Plan--Class Z Shares" above). Under this exchange
privilege, amounts representing any Class B and Class C shares (which are not
subject to a CDSC) held in the account of a shareholder who qualifies to
purchase Class A shares at NAV will be automatically exchanged for Class A
shares on a quarterly basis, unless the shareholder elects otherwise.
Similarly, shareholders who qualify to purchase Class Z shares will have their
Class B and Class C shares which are not subject to a CDSC and their Class A
shares exchanged for Class Z shares on a quarterly basis. Eligibility for this
exchange privilege will be calculated on the business day prior to the date of
the exchange. Amounts representing Class B or Class C shares which are not
subject to a CDSC include the following: (1) amounts representing Class B or
Class C shares acquired pursuant to the automatic reinvestment of dividends
and distributions, (2) amounts representing the increase in the net asset
value above the total amount of payments for the purchase of Class B or Class
C shares and (3) amounts representing Class B or Class C shares held beyond
the applicable CDSC period. Class B and Class C shareholders must notify the
Transfer Agent either directly or through Prudential Securities, Prusec or a
dealer that they are eligible for this special exchange privilege.

Participants in any fee-based program for which the Fund is an available
option will have their Class A shares, if any, exchanged for Class Z shares
when they elect to have those assets become a part of the fee-based program.
Upon leaving the program (whether voluntarily or not), such Class Z shares
(and, to the extent provided for in the program, Class Z shares acquired
through participation in the program) will be exchanged for Class A shares at
net asset value.

The Fund reserves the right to reject any exchange order, including
exchanges (and market timing transactions) which are of a size and/or
frequency engaged in by one or more accounts acting in concert or otherwise,
that have or may have an adverse effect on the ability of the Subadviser to
manage the portfolio. The determination that such exchanges or activity may
have an adverse effect and the determination to reject any exchange order
shall be in the discretion of the Manager and the Subadviser.

The Exchange Privilege is not a right and may be suspended, modified or
terminated on 60 days' notice to shareholders.

FREQUENT TRADING. The Fund and other Prudential Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market timing
investment strategies and excessive trading can have on efficient portfolio
management, each Prudential Mutual Fund, including the Fund, reserves the
right to refuse purchase orders and exchanges by any person, group or commonly
controlled accounts if, in the Manager's sole judgement, such person, group or
accounts were following a market timing strategy or were otherwise engaged in
excessive trading ("Market Timers").

To implement this authority to protect the Fund and its shareholders from
excessive trading, the Fund will reject all exchanges and purchases from a
Market Timer unless the Market Timer has entered into a written agreement with
the Fund or its affiliates pursuant to which the Market Timer has agreed to
abide by certain procedures, which include a daily dollar limit on trading.
The Fund may notify the Market Timer of rejection of an exchange or purchase
order subsequent to the day on which the order was placed.

SHAREHOLDER SERVICES

In addition to the Exchange Privilege, as a shareholder of the Fund, you can
take advantage of the following services and privileges:

. AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS WITHOUT A SALES
CHARGE. For your convenience, all dividends and distributions are
automatically reinvested in full and fractional shares of the Fund at NAV
without a sales charge. You may direct the Transfer Agent in writing not less
than 5 full business days prior to the record date to have

31
<PAGE>

subsequent dividends and/or distributions sent in cash rather than reinvested.
If you hold shares through Prudential Securities, you should contact your
financial adviser.

. AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP). Under ASAP you may make
regular purchases of the Fund's shares in amounts as little as $50 via an
automatic debit to a bank account or Prudential Securities account (including
a Command Account). For additional information about this service, you may
contact your Prudential Securities financial adviser, Prusec representative or
the Transfer Agent directly.

. TAX-DEFERRED RETIREMENT PLANS. Various tax-deferred retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
"tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue Code
are available through the Distributor. These plans are for use by both self-
employed individuals and corporate employers. These plans permit either self-
direction of accounts by participants or a pooled account arrangement.
Information regarding the establishment of these plans, the administration,
custodial fees and other details is available from Prudential Securities or
the Transfer Agent. If you are considering adopting such a plan, you should
consult with your own legal or tax adviser with respect to the establishment
and maintenance of such a plan.

. SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available to
shareholders which provides for monthly or quarterly checks. Withdrawals of
Class B and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares--Contingent Deferred Sales Charges."

. REPORTS TO SHAREHOLDERS. The Fund will send you annual and semi-annual
reports. The financial statements appearing in annual reports are audited by
independent accountants. In order to reduce duplicate mailing and printing
expenses, the Fund will provide one annual and semi-annual shareholder report
and annual prospectus per household. You may request additional copies of such
reports by calling (800) 225-1852 or by writing to the Fund at Gateway Center
Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. In addition,
monthly unaudited financial data is available upon request from the Fund.

. SHAREHOLDER INQUIRIES. Inquiries should be addressed to the Fund at
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, or
by telephone at (800) 225-1852 (toll-free) or, from outside the U.S.A., at
(732) 417-7555 (collect).

For additional information regarding the services and privileges described
above, see "Shareholder Investment Account" in the Statement of Additional
Information.

32
<PAGE>

THE PRUDENTIAL MUTUAL FUND FAMILY

Prudential offers a broad range of mutual funds designed to meet your
individual needs. We welcome you to review the investment options available
through our family of funds. For more information on the Prudential Mutual
Funds, including charges and expenses, contact your Prudential Securities
financial adviser or Prusec representative or telephone the Fund at (800) 225-
1852 for a free prospectus. Read the prospectus carefully before you invest or
send money.

TAXABLE BOND FUNDS

Prudential Diversified Bond Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential High Yield Total Return Fund, Inc.
Prudential Mortgage Income Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio

TAX-EXEMPT BOND
FUNDS

Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Intermediate Series
Prudential Municipal Series Fund
Florida Series
Maryland Series
Massachusetts Series
Michigan Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.

GLOBAL FUNDS

Prudential Developing Market Fund
Developing Markets Equity Fund
Latin America Equity Fund
Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Limited Maturity Fund, Inc.
Limited Maturity Portfolio
Prudential Intermediate Global Income Fund, Inc.
Prudential International Bond Fund, Inc.
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Global Series
International Stock Series
The Global Total Return Fund, Inc.
Global Utility Fund, Inc.
EQUITY FUNDS

Prudential Balanced Fund
Prudential Distressed Securities Fund, Inc.
Prudential Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Index Series Fund
Prudential Bond Market Index Fund
Prudential Europe Index Fund
Prudential Pacific Index Fund
Prudential Small-Cap Index Fund
Prudential Stock Index Fund
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Mid-Cap Value Fund
Prudential Real Estate Securities Fund
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Prudential 20/20 Focus Fund
MONEY MARKET FUNDS
. Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund, Inc.
Money Market Series
Prudential MoneyMart Assets, Inc.
. Tax-Free Money Market Funds
Prudential Tax-Free Money Fund, Inc.
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
. Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
. Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series

A-1
<PAGE>

No dealer, sales representative or any other person has been authorized to give
any information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained herein, and, if given
or made, such other information or representations must not be relied upon as
having been authorized by the Fund or the Distributor. This Prospectus does not
constitute an offer by the Fund or by the Distributor to sell, or a solicita-
tion of any offer to buy any of the securities offered hereby in any jurisdic-
tion to any person to whom it is unlawful to make such offer in such
jurisdiction.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FUND HIGHLIGHTS........................................................... 2
What are the Fund's Risk Factors and Special Characteristics?............ 2
FUND EXPENSES............................................................. 4
HOW THE FUND INVESTS...................................................... 5
Investment Objective and Policies........................................ 5
Special Considerations and Risks of Investing in Developing Market Secu-
rities................................................................. 7
Hedging and Return Enhancement Strategies................................ 8
Other Investments and Policies........................................... 10
Investment Restrictions.................................................. 14
HOW THE FUND IS MANAGED................................................... 14
Manager.................................................................. 14
Distributor.............................................................. 15
Fee Waivers.............................................................. 16
Portfolio Transactions................................................... 16
Custodian and Transfer and Dividend Disbursing Agent..................... 16
Year 2000................................................................ 16
HOW THE FUND VALUES ITS SHARES............................................ 17
HOW THE FUND CALCULATES PERFORMANCE....................................... 17
TAXES, DIVIDENDS AND DISTRIBUTIONS........................................ 18
GENERAL INFORMATION....................................................... 20
Description of Common Stock.............................................. 20
Additional Information................................................... 20
SHAREHOLDER GUIDE......................................................... 21
How to Buy Shares of the Fund............................................ 21
Alternative Purchase Plan................................................ 22
How to Sell Your Shares.................................................. 26
Conversion Feature--Class B Shares....................................... 29
How to Exchange Your Shares.............................................. 30
Shareholder Services..................................................... 31
THE PRUDENTIAL MUTUAL FUND FAMILY......................................... A-1
</TABLE>
- --------------------------------------------------------------------------------

MF179A

<TABLE>
<S> <C>
Class A: 74431P108
Class B: 74431P207
CUSIP Nos.: Class C: 74431P306
Class Z: 74431P405
</TABLE>
<PAGE>

Prudential Latin America Equity Fund

- -------------------------------------------------------------------------------

PROSPECTUS DATED JUNE 26, 1998
- -------------------------------------------------------------------------------

Prudential Latin America Equity Fund (the Fund) is a series of Prudential
Developing Markets Fund, an open-end, diversified, management investment
company. The Fund's investment objective is long-term growth of capital. It
seeks to achieve this objective by investing primarily in equity related
securities of companies domiciled in, or whose principal activities are in,
Latin America. "Latin America" is defined as Mexico and all countries located
in Central America and South America. See "How the Fund Invests--Investment
Objective and Policies." Under normal circumstances, the Fund intends to
invest at least 65% of its total assets in such securities. The Fund may also
invest in equity related securities of other companies and debt securities,
engage in various derivatives transactions, including options on equity
securities, stock indices, foreign currencies and futures contracts on foreign
currencies, and may purchase and sell futures contracts on foreign currencies,
groups of currencies and stock indices so as to hedge its portfolio and to
attempt to enhance return. There can be no assurance that the Fund's
investment objective will be achieved. See "How the Fund Invests--Investment
Objective and Policies." The Fund's address is Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102-4077, and its telephone number is
(800) 225-1852.

The Fund is not intended to constitute a complete investment program. Because
of its objective and policies, including its emphasis on Latin America, the
Fund may be considered of a speculative nature and subject to greater
investment risks than are assumed by certain other investment companies that
invest solely in securities of U.S. issuers or that do not emphasize
investments in a particular global region. See "How the Fund Invests--
Investment Objective and Policies--Special Considerations and Risks of
Investing in Latin American Securities."

This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing and is available at the Web
site of the Prudential Insurance Company of America
(http://www.prudential.com). Additional information about the Fund has been
filed with the Securities and Exchange Commission (the Commission) in a
Statement of Additional Information, dated June 26, 1998, which information is
incorporated herein by reference (is legally considered part of this
Prospectus) and is available without charge upon request to the Fund at the
address or telephone number noted above. The Commission maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding the Fund.

- -------------------------------------------------------------------------------

Investors are advised to read this Prospectus and retain it for future
reference.
- -------------------------------------------------------------------------------

FUND HIGHLIGHTS

The following summary is intended to highlight certain information contained
in the Prospectus and is qualified in its entirety by the more detailed
information appearing elsewhere herein.

WHAT IS PRUDENTIAL LATIN AMERICA EQUITY FUND?

Prudential Latin America Equity Fund is a mutual fund. A mutual fund pools
the resources of investors by selling its shares to the public and investing
the proceeds of such sale in a portfolio of securities designed to achieve its
investment objective. Technically, the Fund is a series of Prudential
Developing Markets Fund, an open-end, diversified, management investment
company.

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is long-term growth of capital. It seeks to
achieve this objective by investing primarily in equity related securities of
Latin American companies. There can be no assurance that the Fund's investment
objective will be achieved. See "How the Fund Invests--Investment Objective
and Policies" at page 5.

WHAT ARE THE FUND'S RISK FACTORS AND SPECIAL CHARACTERISTICS?

The Fund invests primarily in equity related securities of issuers domiciled
in, or whose principal activities are in, Latin America. Unlike a mutual fund
that invests on a global basis, the Fund's concentration on Latin American
companies can result in more pronounced risks and rewards based upon economic
conditions that impact the region more or less than other global regions.
Foreign securities in general involve certain risks and considerations not
typically associated with investments in U.S. government securities and
securities of domestic companies, including political or economic instability
in the country of the issuer, the difficulty of predicting international trade
patterns, the possibility of imposition of exchange controls and the risk of
currency fluctuations. See "How the Fund Invests--Special Considerations and
Risks of Investing in Latin American Securities" at page 7. In addition, the
Fund may engage in various hedging and return enhancement strategies,
including the use of derivatives transactions. These activities may be
considered speculative and may result in higher risks and costs to the Fund.
See "How the Fund Invests--Hedging and Return Enhancement Strategies" at page
8. As with an investment in any mutual fund, an investment in this Fund can
decrease in value and you can lose money.

WHO MANAGES THE FUND?

Prudential Investments Fund Management LLC (PIFM or the Manager) is the
Manager of the Fund and is compensated for its services at an annual rate of
1.25% of the Fund's average daily net assets. As of May 31, 1998, PIFM served
as manager or administrator to 67 investment companies, including 45 mutual
funds, with aggregate assets of approximately $63 billion. The Prudential
Investment Corporation (PIC), doing business as Prudential Investments (PI,
the Subadviser or the investment adviser), furnishes investment advisory
services in connection with the management of the Fund under a Subadvisory
Agreement with PIFM. See "How the Fund is Managed--Manager" at page 14.

WHO DISTRIBUTES THE FUND'S SHARES?

2
<PAGE>

WHAT IS THE MINIMUM INVESTMENT?

HOW DO I PURCHASE SHARES?

You may purchase shares of the Fund through the Distributor or brokers or
dealers that have entered into agreements to act as participating or
introducing brokers for the Distributor, or directly from the Fund, through its
transfer agent, Prudential Mutual Fund Services LLC (PMFS or the Transfer
Agent), at the net asset value per share (NAV) next determined after receipt of
your purchase order by the Transfer Agent, a dealer or the Distributor plus a
sales charge which may be imposed either (i) at the time of purchase (Class A
shares) or (ii) on a deferred basis (Class B or Class C shares). Class Z shares
are offered to a limited group of investors at net asset value without any
sales charge. See "How the Fund Values its Shares" at page 17 and "Shareholder
Guide--How to Buy Shares of the Fund" at page 21.

WHAT ARE MY PURCHASE ALTERNATIVES?

The Fund offers four classes of shares through this Prospectus:

. Class A Shares: Sold with an initial sales charge of up to 5% of the
offering price.
. Class B Shares: Sold without an initial sales charge but are subject to a
contingent deferred sales charge or CDSC (declining from
5% to zero of the lower of the amount invested or the
redemption proceeds) which will be imposed on certain
redemptions made within six years of purchase. Although
Class B shares are subject to higher ongoing distribution-
related expenses than Class A shares, Class B shares will
automatically convert to Class A shares (which are subject
to lower ongoing distribution-related expenses)
approximately seven years after purchase.
. Class C Shares: Sold without an initial sales charge and, for one year
after purchase, are subject to a 1% CDSC on redemptions.
Like Class B shares, Class C shares are subject to higher
ongoing distribution-related expenses than Class A shares
but do not convert to another class.
. Class Z Shares: Sold without either an initial sales charge or CDSC to a
limited group of investors. Class Z shares are not subject
to any ongoing service or distribution expenses.

See "Shareholder Guide--Alternative Purchase Plan" at page 22.

HOW DO I SELL MY SHARES?

HOW ARE DIVIDENDS AND DISTRIBUTIONS PAID?

3
<PAGE>

FUND EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Z SHARES
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES+
Maximum Sales Load
Imposed on Purchases
(as a percentage of
offering price)........ 5% None None None
Maximum Sales Load or
Deferred Sales Load
Imposed on Reinvested
Dividends.............. None None None None
Maximum Deferred Sales
Load (as a percentage
of original purchase
price or redemption
proceeds, whichever is
lower)................. None 5% during the 1% on redemp- None
first year, de- tions made
creasing by 1% within one
annually to 1% year of pur-
in the fifth chase
and sixth years
and 0% the sev-
enth year*
Redemption Fees........ None None None None
Exchange Fee........... None None None None
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Z SHARES
average net assets) -------------- --------------- ------------------ --------------
<S> <C> <C> <C> <C>
Management Fees ....... 1.25% 1.25% 1.25% 1.25%
12b-1 Fees+............ .25++ 1.00 1.00 None
Other Expenses......... .50 .50 .50 .50%
---- ---- ---- ----
Total Fund Operating
Expenses............... 2.00%++ 2.75% 2.75% 1.75%
==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
EXAMPLE ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period:
Class A....................................................... $69 $110
Class B....................................................... $78 $115
Class C....................................................... $38 $ 85
Class Z ...................................................... $18 $ 55
You would pay the following expenses on the same investment,
assuming no redemption:
Class A....................................................... $69 $110
Class B....................................................... $28 $ 85
Class C....................................................... $28 $ 85
Class Z ...................................................... $18 $ 55
</TABLE>

4
<PAGE>

HOW THE FUND INVESTS

INVESTMENT OBJECTIVE AND POLICIES

THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL. THE FUND
SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING PRIMARILY IN EQUITY
RELATED SECURITIES OF COMPANIES DOMICILED IN, OR DOING BUSINESS PRINCIPALLY
IN, LATIN AMERICA. UNDER NORMAL CIRCUMSTANCES, THE FUND WILL INVEST AT LEAST
65% OF ITS TOTAL ASSETS IN EQUITY RELATED SECURITIES OF LATIN AMERICAN
ISSUERS. THERE CAN BE NO ASSURANCE THAT THE FUND'S INVESTMENT OBJECTIVE WILL
BE ACHIEVED. See "Investment Objective and Policies" in the Statement of
Additional Information.

For purposes of this Prospectus, "securities of Latin American issuers" and
"Latin American securities" are defined as: (i) securities of companies the
principal securities trading market for which is located in Latin America;
(ii) securities, traded in any market, of companies that derive 50% or more of
their total revenue from either goods or services produced in Latin America or
sales made in Latin America; (iii) securities of companies organized under the
laws of, and with a principal office in, Latin America; or (iv) securities
issued or guaranteed by the government of a country in Latin America, its
agencies or instrumentalities, political subdivisions or the central bank of
such a country. As used in this Prospectus, "Latin America" is defined as
Mexico and all countries located in Central America and South America,
including Argentina, Brazil, Chile, Columbia, Peru and Venezuela. "Equity
related securities," as used in this Prospectus, generally refers to common
stock, preferred stock, warrants or rights to purchase or to subscribe to such
securities, as well as sponsored or unsponsored American Depositary Receipts
(ADRs), European Depositary Receipts (EDRs) and Global Depositary Receipts
(GDRs and, collectively with ADRs and EDRs, Depositary Receipts), convertible
securities, trust certificates, limited partnership interests and equity
participations. See "Other Investments and Policies--Depositary Receipts."

As with an investment in any mutual fund, an investment in this Fund can
decrease in value and you can lose money.

LATIN AMERICAN COMPANIES

The Fund's investment adviser intends to invest in the equity related
securities of Latin American issuers in countries in which it believes
investing is feasible and does not involve undue political risk. The issuers
considered by the investment adviser may have varying levels of net worth and
may include companies with small market capitalizations whose securities may
be more volatile than securities offered by companies with greater market
capitalizations or with higher levels of net worth.

CERTAIN LATIN AMERICAN COUNTRIES, SUCH AS ARGENTINA, BRAZIL AND MEXICO, ARE
SOME OF THE WORLD'S LARGEST DEBTORS TO COMMERCIAL BANKS AND FOREIGN
GOVERNMENTS, WHICH CAN RESULT IN GREATER INVESTMENT RISK IF SUCH

5
<PAGE>

COUNTRIES DECLARE MORATORIA ON THE PAYMENT OF PRINCIPAL OR INTEREST OF THEIR
DEBT OBLIGATIONS OR INSTITUTE ECONOMIC REFORMS, AS HAS HAPPENED WITH RESPECT
TO CERTAIN LATIN AMERICAN COUNTRIES. IN ADDITION, MOST LATIN AMERICAN
COUNTRIES HAVE EXPERIENCED SUBSTANTIAL, AND IN SOME PERIODS EXTREMELY HIGH,
RATES OF INFLATION FOR MANY YEARS, THOUGH IN MANY SUCH COUNTRIES GOVERNMENTAL
POLICIES DESIGNED TO REDUCE INFLATION HAVE BEEN EFFECTIVE. THERE CAN BE NO
ASSURANCE THAT HIGH RATES OF INFLATION WILL NOT CONTINUE OR WILL NOT RETURN IN
THOSE COUNTRIES WHERE IT HAS BEEN REDUCED. INFLATION AND RAPID FLUCTUATIONS IN
INFLATION RATES HAVE HAD AND MAY CONTINUE TO HAVE VERY NEGATIVE EFFECTS ON THE
ECONOMIES OF CERTAIN LATIN AMERICAN COUNTRIES AND ON THE PRICES FOR SECURITIES
OF ISSUERS LOCATED THEREIN.

THERE ARE CERTAIN RISKS ASSOCIATED WITH INVESTING IN SECURITIES OF LATIN
AMERICAN COMPANIES IN GENERAL AND SMALLER LATIN AMERICAN COMPANIES IN
PARTICULAR. THE FUND INVESTS PRIMARILY IN SECURITIES OF LATIN AMERICAN ISSUERS
AND, UNLIKE A FUND THAT INVESTS ON A GLOBAL BASIS, ECONOMIC CONDITIONS THAT
IMPACT LATIN AMERICA SPECIFICALLY CAN RESULT IN MORE PRONOUNCED RISKS OR
REWARDS TO INVESTORS. INSOFAR AS THE FUND INVESTS IN THE SECURITIES OF SMALLER
COMPANIES, THERE ARE ADDITIONAL RISKS THAT THE MARKET PRICES OF SUCH
SECURITIES WILL BE MORE VOLATILE THAN THOSE OF LARGER COMPANIES. BECAUSE
SMALLER COMPANIES USUALLY HAVE FEWER SHARES OUTSTANDING THAN LARGER COMPANIES,
IT MAY BE MORE DIFFICULT FOR THE FUND TO BUY OR SELL SIGNIFICANT AMOUNTS OF
SUCH SHARES WITHOUT AN UNFAVORABLE IMPACT ON PREVAILING MARKET PRICES. THERE
IS TYPICALLY LESS PUBLICLY AVAILABLE INFORMATION CONCERNING SMALLER COMPANIES
THAN FOR LARGER, MORE ESTABLISHED ONES. BECAUSE SMALLER COMPANIES TYPICALLY
HAVE SMALLER PRODUCT LINES AND COMMAND A SMALLER MARKET SHARE THAN DO LARGER
COMPANIES, SMALLER COMPANIES MAY BE MORE VULNERABLE TO FLUCTUATIONS IN THE
ECONOMIC CYCLE. See "Special Considerations and Risks of Investing in Latin
American Securities" below.

GENERAL

The Fund intends to invest primarily in equity related securities of
companies domiciled in, or doing business principally in, Latin America. Latin
American countries may have relatively unstable governments, economies based
only on a few industries and securities markets that trade a limited number of
securities. Securities of issuers located in these countries tend to have
volatile prices and offer the potential for substantial loss as well as gain.
In addition, these securities may be less liquid than investments in
securities of issuers whose principal activities are in more established
markets as a result of inadequate trading volume or restrictions on trading
imposed by the governments or securities exchanges of such countries. See
"Special Considerations and Risks of Investing in Latin American Securities"
below.

THE FUND INTENDS TO INVEST AT LEAST 65% OF ITS TOTAL ASSETS IN EQUITY
RELATED SECURITIES OF LATIN AMERICAN ISSUERS. UNDER NORMAL CIRCUMSTANCES, THE
REMAINDER OF THE FUND'S INVESTMENTS MAY BE IN OTHER SECURITIES OR INVESTMENT
VEHICLES, INCLUDING EQUITY RELATED SECURITIES OF OTHER COMPANIES AND DEBT
SECURITIES (INCLUDING MONEY MARKET INSTRUMENTS) OF FOREIGN AND DOMESTIC
COMPANIES, OR THE FUND MAY ENGAGE IN VARIOUS DERIVATIVES TRANSACTIONS,
INCLUDING OPTIONS ON EQUITY SECURITIES, STOCK INDICES, FOREIGN CURRENCIES AND
FUTURES CONTRACTS ON FOREIGN CURRENCIES, AND MAY PURCHASE AND SELL FUTURES
CONTRACTS ON FOREIGN CURRENCIES, GROUPS OF CURRENCIES AND STOCK INDICES SO AS
TO HEDGE ITS PORTFOLIO AND TO ATTEMPT TO ENHANCE RETURN. IN ADDITION, THE FUND
MAY (I) PURCHASE SECURITIES ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS, (II)
MAKE SHORT SALES AGAINST-THE-BOX AND (III) ENTER INTO REPURCHASE AGREEMENTS.
THE FUND MAY FROM TIME TO TIME LEND ITS PORTFOLIO SECURITIES TO BROKERS OR
DEALERS, BANKS OR OTHER RECOGNIZED INSTITUTIONAL BORROWERS OF SECURITIES AND
MAY INVEST TO A LIMITED EXTENT IN SECURITIES OF COMPANIES THAT HAVE BEEN IN
EXISTENCE FOR LESS THAN THREE YEARS, IN SECURITIES FOR WHICH MARKET QUOTATIONS
ARE NOT READILY AVAILABLE AND IN SECURITIES OF OTHER REGISTERED INVESTMENT
COMPANIES. SEE "INVESTMENT RESTRICTIONS" IN THE STATEMENT OF ADDITIONAL
INFORMATION.

6
<PAGE>

When conditions dictate a temporary defensive strategy (which during periods
of market volatility could be for an extended period of time), the Fund may
invest in money market instruments (including repurchase agreements maturing
in seven days or less) without limit. The Fund will only invest in money
market instruments that are rated, or are issued by companies that have
outstanding debt securities rated, at least C by S&P or Moody's, commercial
paper rated at least A-2 or Prime-2 by S&P or Moody's, respectively, or in
unrated securities of issuers that the Fund's investment adviser has
determined to be of comparable quality.

SPECIAL CONSIDERATIONS AND RISKS OF INVESTING IN LATIN AMERICAN SECURITIES

LATIN AMERICAN SECURITIES INVOLVE CERTAIN RISKS WHICH SHOULD BE CONSIDERED
CAREFULLY BY AN INVESTOR IN THE FUND. THESE RISKS INCLUDE POLITICAL OR
ECONOMIC INSTABILITY IN THE COUNTRIES IN WHICH THE ISSUER'S PRINCIPAL
ACTIVITIES TAKE PLACE, THE DIFFICULTY OF PREDICTING INTERNATIONAL TRADE
PATTERNS, THE POSSIBILITY OF IMPOSITION OF EXCHANGE CONTROLS AND THE RISK OF
CURRENCY FLUCTUATIONS. Such securities may be, and in the recent past have
been, subject to greater fluctuations in price than securities issued by U.S.
corporations; securities issued or guaranteed by the U.S. Government, its
instrumentalities or agencies; or securities of companies in other global
regions. In addition, there may be less publicly available information about a
Latin American company than about a domestic company. Foreign companies,
including Latin American companies, generally are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic companies. There is generally less government
regulation of securities exchanges, brokers and listed companies in Latin
America than in the United States and an increased risk, therefore, of
uninsured loss due to lost, stolen or counterfeit stock certificates. Certain
countries may have only one securities depository which, if the Fund decides
to invest in securities that are located at such depository, may result in
risks to the Fund that cannot be avoided. With respect to certain Latin
American countries, there is a possibility of expropriation, nationalization,
confiscatory taxation or diplomatic developments which could affect investment
in those countries. In the event of a default on debt obligations of Latin
American issuers, it may be more difficult for the Fund to obtain or to
enforce a judgment against the issuers of such securities. The Fund may
encounter difficulties or be unable to vote proxies, exercise shareholder
rights, pursue legal remedies and obtain judgments in foreign courts. Also,
some countries may withhold portions of income and dividends at the source.
Finally, developing markets may have increased risks associated with clearance
and settlement as well as increased costs for commissions, custodial services
and other items associated with making an investment. Delays in settlement
could result in periods of uninvested assets, missed investment opportunities
or losses to the Fund.

ALTHOUGH THE FUND INTENDS TO INVEST PRIMARILY IN EQUITY RELATED SECURITIES,
IT MAY INVEST FROM TIME TO TIME IN DEBT SECURITIES OF LATIN AMERICAN ISSUERS.
In many instances, debt securities of Latin American issuers may provide
higher yields than securities of domestic issuers which have similar
maturities and are of similar quality. Under certain market conditions these
investments may be less liquid than the securities of U.S. corporations and
are certainly less liquid than securities issued or guaranteed by the U.S.
Government, its instrumentalities or agencies.

Shareholders should be aware that investing in the equity and fixed-income
markets of Latin American countries involves exposure to economies that are
generally less diverse and mature, and to political systems which can be
expected to have less stability, than those of developed countries. Historical
experience indicates that the markets of developing countries have been more
volatile than the markets of developed countries and have often experienced
extremely high rates of inflation.

Many Latin American countries have economies based on only a few commodities
or industries and securities markets that trade infrequently or with low
levels of volume. Additionally, some Latin American countries may also
restrict the extent to which foreign investors may invest in their securities
markets or in a particular company.

7
<PAGE>

CURRENCIES. IN ADDITION, IF A SECURITY IS DENOMINATED IN U.S. DOLLARS, THE
ABILITY OF THE ISSUER TO REPAY MAY BE SUBSTANTIALLY IMPAIRED BY DEVALUATION
AND THE COUNTRY'S AVAILABLE FOREIGN EXCHANGE RESERVES. A change in the value
of any such currency against the U.S. dollar will result in a corresponding
change in the U.S. dollar value of the Fund's securities denominated in that
currency. Such changes also will affect the Fund's income and distributions to
shareholders. In addition, although the Fund will receive income in such
currencies, the Fund will be required to compute and distribute its income in
U.S. dollars. Therefore, if the exchange rate for any such currency declines
after the Fund's income has been accrued and translated into U.S. dollars, the
Fund could be required to liquidate portfolio securities to make such
distributions, particularly in instances in which the amount of income the
Fund is required to distribute is not immediately reduced by the decline in
such currency. Similarly, if an exchange rate declines between the time the
Fund incurs expenses in U.S. dollars and the time such expenses are paid, the
amount of such currency required to be converted into U.S. dollars in order to
pay such expenses in U.S. dollars will be greater than the amount of such
currency at the time they were incurred. The Fund may, but need not, enter
into futures contracts on foreign currencies, forward foreign currency
exchange contracts and options on foreign currencies for hedging purposes,
including: locking-in the U.S. dollar price of the purchase or sale of
securities denominated in a foreign currency; locking-in the U.S. dollar
equivalent of interest or dividends to be paid on such securities which are
held by the Fund; and protecting the U.S. dollar value of such securities
which are held by the Fund.

HEDGING AND RETURN ENHANCEMENT STRATEGIES

OPTIONS TRANSACTIONS

8
<PAGE>

put option, in return for the premium, has the obligation, upon exercise of
the option, to acquire the securities or currency underlying the option at the
exercise price or deliver a specified amount of cash to the purchaser. The
Fund might, therefore, be obligated to purchase the underlying securities or
currency for more than their current market price.

OPTIONS ON SECURITIES INDICES ARE SIMILAR TO OPTIONS ON EQUITY SECURITIES,
EXCEPT THAT THE EXERCISE OF SECURITIES INDEX OPTIONS REQUIRES CASH PAYMENTS
AND DOES NOT INVOLVE THE ACTUAL PURCHASE OR SALE OF SECURITIES. Rather than
the right to take or make delivery of the securities at a specified price, an
option on a securities index gives the holder the right, in return for a
premium paid, to receive, upon exercise of the option, an amount of cash if
the closing level of the securities index upon which the option is based is
greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. The writer of an index option, in return for the
premium, is obligated to pay the amount of cash due upon exercise of the
option.

FORWARD CURRENCY EXCHANGE CONTRACTS

9
<PAGE>

value of that currency (a cross hedge). Although there are no limits on the
number of forward contracts which the Fund may enter into, the Fund may not
position hedge (including cross hedges) with respect to a particular currency
for an amount greater than the aggregate market value (determined at the time
of making any sale of the foreign currency) of the securities held in its
portfolio denominated or quoted in, or currently convertible into, such
currency. See "Investment Objective and Policies--Risks Related to Forward
Currency Exchange Contracts" in the Statement of Additional Information.

FUTURES CONTRACTS AND OPTIONS THEREON

THE FUND MAY PURCHASE AND SELL FINANCIAL FUTURES CONTRACTS AND OPTIONS
THEREON WHICH ARE TRADED ON A COMMODITIES EXCHANGE OR BOARD OF TRADE FOR
CERTAIN HEDGING AND RISK MANAGEMENT PURPOSES AND TO ATTEMPT TO ENHANCE RETURN
IN ACCORDANCE WITH REGULATIONS OF THE COMMODITY FUTURES TRADING COMMISSION.
The Fund, and thus investors, may lose money through any unsuccessful use of
these strategies. These futures contracts and options thereon will be on
financial indices and foreign currencies or groups of foreign currencies. A
financial futures contract is an agreement to purchase or sell an agreed
amount of securities or currency at a set price for delivery in the future. A
stock index futures contract is an agreement in which one party agrees to
deliver to another an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
No physical delivery of the underlying stocks is made. The Fund may purchase
and sell stock index futures or related options as a hedge against changes in
market conditions.

RISKS OF HEDGING AND RETURN ENHANCEMENT STRATEGIES

10
<PAGE>

dependence on the investment adviser's ability to predict correctly movements
in the direction of interest rates, securities prices and currency markets;
(2) imperfect correlation between the price of options and futures contracts
and options thereon and movements in the prices of the securities or
currencies being hedged; (3) the fact that the skills needed to use these
strategies are different from those needed to select portfolio securities; (4)
the possible absence of a liquid secondary market for any particular
instrument at any time; (5) the possible need to defer closing out certain
hedged positions to avoid adverse tax consequences; and (6) the possible
inability of the Fund to purchase or sell a portfolio security at a time that
otherwise would be favorable for it to do so, or the possible need for the
Fund to sell a portfolio security at a disadvantageous time, due to the need
for the Fund to maintain "cover" or to segregate securities in connection with
hedging transactions. See "Taxes, Dividends & Distributions" in the Statement
of Additional Information.

OTHER INVESTMENTS AND POLICIES

DEPOSITARY RECEIPTS

ADRs are depositary receipts typically issued by a U.S. bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. EDRs and GDRs are typically issued by foreign banks or trust
companies, although they also may be issued by U.S. banks or trust companies,
and evidence ownership of underlying securities issued by either a foreign or
a U.S. corporation. Generally, depositary receipts in registered form are
designed for use in the U.S. securities market and depositary receipts in
bearer form are designed for use in securities markets outside the U.S.
Depositary receipts may not necessarily be denominated in the same currency as
the underlying securities into which they may be converted. Depositary
receipts may be issued pursuant to sponsored or unsponsored programs. In
sponsored programs, an issuer has made arrangements to have its securities
traded in the form of depositary receipts. In unsponsored programs, the issuer
may not be directly involved in the creation of the program. Although
regulatory requirements with respect to sponsored and unsponsored programs are
generally similar, in some cases it may be easier to obtain financial
information from an issuer that has participated in the creation of a
sponsored program. Accordingly, there may be less information available
regarding issuers of securities underlying unsponsored programs and there may
not be a correlation between such information and the market value of the
depositary receipts. Depositary receipts also involve the risks of other
investments in foreign securities, as discussed above. For purposes of the
Fund's investment policies, the Fund's investments in depositary receipts will
be deemed to be investments in the underlying securities.

CONVERTIBLE SECURITIES

11
<PAGE>

WHEN-ISSUED OR DELAYED DELIVERY SECURITIES

The Fund may purchase or sell securities on a when-issued or delayed
delivery basis. When-issued or delayed delivery transactions arise when
securities are purchased or sold by the Fund with payment and delivery taking
place in the future in order to secure what is considered to be an
advantageous price and yield to the Fund at the time of entering into the
transaction. The Fund's Custodian will maintain, in a segregated account of
the Fund, cash or other liquid assets, marked-to-market daily, having a value
equal to or greater than the Fund's purchase commitments. The securities so
purchased are subject to market fluctuation and no interest accrues to the
purchaser during the period between purchase and settlement. At the time of
delivery of the securities the value may be more or less than the purchase
price and an increase in the percentage of the Fund's assets committed to the
purchase of securities on a when-issued or delayed delivery basis may increase
the volatility of the Fund's net asset value. See "Investment Objective and
Policies--When Issued or Delayed Delivery Securities" in the Statement of
Additional Information.

REPURCHASE AGREEMENTS

SECURITIES LENDING

INVESTMENT FUNDS

ILLIQUID SECURITIES

The Fund may hold up to 15% of its net assets (determined at the time of
investment) in illiquid securities, including repurchase agreements which have
a maturity of longer than seven days, securities with legal or contractual
restrictions on resale (restricted securities) and securities that are not
readily marketable in securities markets either within or outside of the
United States. Restricted securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933, as amended (the Securities Act), and
privately placed commercial paper that have a readily available market are not

12
<PAGE>

considered illiquid for purposes of this limitation. The investment adviser
will monitor the liquidity of such restricted securities under the supervision
of the Board of Trustees. The Fund's investment in Rule 144A securities could
have the effect of increasing illiquidity to the extent that qualified
institutional buyers become, for a limited time, uninterested in purchasing
Rule 144A securities. See "Investment Objective and Policies--Illiquid
Securities" in the Statement of Additional Information. Repurchase agreements
subject to demand are deemed to have a maturity equal to the applicable notice
period.

DEBT SECURITIES INCLUDING INVESTMENT GRADE SECURITIES AND HIGH YIELD DEBT
SECURITIES (JUNK BONDS)

The Fund may hold up to 35% of its total assets in debt securities rated at
least C by S&P or Moody's or, if unrated, determined to be of comparable
quality by the investment adviser. As an operating policy, which may be
changed without shareholder approval, the Fund will not invest more than 10%
of its total assets in debt securities rated BBB or lower by S&P or Baa or
lower by Moody's or, if unrated, debt securities that the Fund's investment
adviser has determined to be of comparable quality. Subsequent to its purchase
by the Fund, a security may be assigned a lower rating or cease to be rated.
Such an event would not require the elimination of the issue from the
portfolio, but the investment adviser will consider such an event in
determining whether the Fund should continue to hold the security in its
portfolio. Securities rated Baa by Moody's, although considered to be
investment grade, lack outstanding investment characteristics and, in fact,
have speculative characteristics. Bonds rated C by S&P are of the lowest
quality and may be used when the issuer has filed a bankruptcy petition, but
debt payments are still being made. Moody's lowest rating is C, which is
applied to bonds that have extremely poor prospects of ever attaining any real
investment standing. See "Description of Security Ratings" in the Appendix I
to Statement of Additional Information.

The Fund may also invest in certain debt obligations customarily referred to
as "Brady Bonds," which are created in connection with debt restructuring
through the exchange of existing commercial bank loans to sovereign entities
for new obligations. Investments in Brady Bonds are generally considered
speculative and many Brady Bonds are rated below investment grade. As noted
above, the Fund does not currently intend to invest more than 10% of its
assets in debt securities, including Brady Bonds, rated lower than Baa by
Moody's or BBB by S&P. See "Investment Objective and Policies--Brady Bonds"
and "Description of Security Ratings" in the Appendix I to Statement of
Additional Information.

13
<PAGE>

bondholders, the Fund's net asset value may be adversely affected. In
addition, the Fund may incur additional expenses if it seeks recovery upon a
default in the payment of principal and interest on a debt security.

BORROWING

PORTFOLIO TURNOVER

INVESTMENT RESTRICTIONS

HOW THE FUND IS MANAGED

MANAGER

14
<PAGE>

The Fund's portfolio has been managed since its inception by a team of
investment professionals led by Maria Elena Carrion. Ms. Carrion oversees the
investment process and manages the overall regional and country allocations of
the Fund. Ms. Carrion has been employed by PIC since 1997. Prior to joining
PIC, Ms. Carrion was employed by Bankers Trust Company as a portfolio manager
beginning in April 1993. From June 1991 to April 1993, she was employed by
Latin American Securities (London). Ms. Carrion is a Chartered Financial
Analyst.

PIFM and PIC are wholly-owned subsidiaries of The Prudential Insurance
Company of America (Prudential), a major diversified insurance and financial
services company.

DISTRIBUTOR

UNDER THE CLASS A PLAN, THE FUND MAY PAY THE DISTRIBUTOR FOR ITS
DISTRIBUTION-RELATED ACTIVITIES WITH RESPECT TO CLASS A SHARES AT AN ANNUAL
RATE OF UP TO .30 OF 1% OF THE AVERAGE DAILY NET ASSETS OF THE CLASS A SHARES.
The Class A Plan provides that up to .25 of 1% of the average daily net assets
of the Class A shares may be used to pay for personal service and/or the
maintenance of shareholder accounts (service fee) and other distribution fees.
The Distributor has voluntarily agreed to limit its distribution-related fees
payable under the Class A Plan to .25% of the average daily net assets of the
Class A shares. This voluntary waiver may be terminated at any time by the
Distributor without notice.

15
<PAGE>

The Fund records all payments made under the Plans as expenses in the
calculation of net investment income. See "Distributor" in the Statement of
Additional Information.

The Distributor is subject to the rules of the National Association of
Securities Dealers, Inc. governing maximum sales charges.

FEE WAIVERS

PORTFOLIO TRANSACTIONS

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT

16
<PAGE>

YEAR 2000

The services provided to the Fund and the shareholders by the Manager, the
Distributor, the Transfer Agent and the Custodian depend on the smooth
functioning of their computer systems and those of their outside providers.
Many computer software systems in use today cannot distinguish the year 2000
from the year 1900 because of the way dates are encoded and calculated. Such
event could have a negative impact on handling securities trades, payments of
interest and dividends, pricing and account services. Although, at this time,
there can be no assurance that there will be no adverse impact on the Fund,
the Manager, the Distributor, the Transfer Agent and the Custodian have
advised the Fund that they have been actively working on necessary changes to
their computer systems to prepare for the year 2000 and expect that their
systems, and those of their outside service providers, will be adapted in time
for that event.

HOW THE FUND VALUES ITS SHARES

HOW THE FUND CALCULATES PERFORMANCE

17
<PAGE>

Average annual total return smooths out variations in performance and takes
into account any applicable initial or contingent deferred sales charges.
Neither average annual total return nor aggregate total return takes into
account any federal or state income taxes which may be payable upon
redemption. The yield refers to the income generated by an investment in the
Fund over a one-month or 30-day period. This income is then "annualized"; that
is, the amount of income generated by the investment during that 30-day period
is assumed to be generated each 30-day period for twelve periods and is shown
as a percentage of the investment. The income earned on the investment is also
assumed to be reinvested at the end of the sixth 30-day period. The Fund also
may include comparative performance information in advertising or marketing
the Fund's shares. Such performance information may include data from Lipper
Analytical Services, Inc., Morningstar Publications, Inc., other industry
publications, business periodicals and market indices. See "Performance
Information" in the Statement of Additional Information. Further performance
information is contained in the Fund's annual and semi-annual reports to
shareholders, which may be obtained without charge. See "Shareholder Guide--
Shareholder Services--Reports to Shareholders."

TAXES, DIVIDENDS AND DISTRIBUTIONS

TAXATION OF THE FUND

TAXATION OF SHAREHOLDERS

18
<PAGE>

Dividends received by corporate shareholders are eligible for a dividends-
received deduction of 70% to the extent the Fund's income is derived from
qualified dividends received by the Fund from domestic corporations. Dividends
attributable to interest income, capital and currency gain, gain or loss from
Section 1256 contracts, dividend income from foreign corporations and income
from some other sources will not be eligible for the corporate dividends
received deduction. Since the Fund is likely to have a substantial portion of
its assets invested in securities of foreign issuers, the amount of the Fund's
dividends eligible for the corporate dividends received deduction will be
minimal. See "Taxes, Dividends and Distributions" in the Statement of
Additional Information. Corporate shareholders should consult their tax
advisers regarding other requirements applicable to the dividends received
deduction.

Shareholders should consult their own tax advisers regarding specific
questions as to federal, state or local taxes.

WITHHOLDING TAXES

DIVIDENDS AND DISTRIBUTIONS

19
<PAGE>

adviser to elect to receive dividends and distributions in cash. The Fund will
notify each shareholder after the close of the Fund's taxable year both of the
dollar amount and the taxable status of that year's dividends and
distributions on a per share basis.

GENERAL INFORMATION

DESCRIPTION OF COMMON STOCK

ADDITIONAL INFORMATION

20
<PAGE>

with the SEC under the Securities Act of 1933. Copies of the Registration
Statement may be obtained at a reasonable charge from the SEC or may be
examined, without charge, at the office of the SEC in Washington, D.C.

SHAREHOLDER GUIDE

HOW TO BUY SHARES OF THE FUND

The Fund reserves the right to reject any purchase order (including an
exchange into the Fund) or to suspend or modify the continuous offering of its
shares. See "How to Sell Your Shares" below.

Transactions in Fund shares may be subject to postage and handling charges
imposed by your dealer.

PURCHASE BY WIRE. For an initial purchase of shares of the Fund by wire, you
must first telephone PMFS at (800) 225-1852 (toll-free) to receive an account
number. The following information will be requested: your name, address, tax
identification number, class election, dividend distribution election, amount
being wired and wiring bank. Instructions should then be given by you to your
bank to transfer funds by wire to State Street Bank and Trust Company (State
Street), Boston, Massachusetts, Custody and Shareholder Services Division,
Attention: Prudential Developing Markets Fund, Latin America Equity Fund
Series, specifying on the wire the account number assigned by PMFS and your
name and identifying the class in which you are eligible to invest (Class A,
Class B, Class C or Class Z shares).

In making a subsequent purchase order by wire, you should wire State Street
directly and should be sure that the wire specifies Prudential Developing
Markets Fund, Latin America Equity Fund Series, Class A, Class B, Class C or
Class Z shares and your name and individual account number. It is not
necessary to call PMFS to make subsequent purchase orders utilizing federal
funds. The minimum amount which may be invested by wire is $1,000.

21
<PAGE>

ALTERNATIVE PURCHASE PLAN

<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
------------------------------------- ------------------------ --------------------------------------
<S> <C> <C> <C>
CLASS A Maximum initial sales charge of 5% of .30 of 1% Initial sales charge waived or reduced
the public offering price (currently being for certain purchases
charged at a rate
of .25 of 1%)
CLASS B Maximum contingent deferred sales 1% Shares convert to Class A shares
charge or CDSC of 5% of the lesser of approximately seven years after
the amount invested or the redemption purchase
proceeds; declines to zero after six
years
CLASS C Maximum CDSC of 1% of the lesser 1% Shares do not convert to another class
of the amount invested or the
redemption proceeds on redemptions
made within one year of purchase
CLASS Z None None Sold to a limited group of investors
</TABLE>

The following is provided to assist you in determining which method of
purchase best suits your individual circumstances and is based on current fees
and expenses being charged to the Fund:

22
<PAGE>

CLASS A SHARES

The Distributor may reallow the entire sales charge to dealers. Selling
dealers may be deemed to be underwriters, as that term is defined in the
Securities Act.

REDUCTION AND WAIVER OF INITIAL SALES CHARGES. Reduced sales charges are
available through Rights of Accumulation and Letters of Intent. Shares of the
Fund and shares of other Prudential Mutual Funds (excluding money market funds
other than those acquired pursuant to the exchange privilege) may be
aggregated to determine the applicable

23
<PAGE>

reduction. See "Purchase and Redemption of Fund Shares--Reduction and Waiver
of Initial Sales Charges--Class A Shares" in the Statement of Additional
Information.

Special Rules Applicable to Retirement Plans. After a Benefit Plan or
PruArray Plan qualifies to purchase Class A shares at NAV, all subsequent
purchases will be made at NAV.

24
<PAGE>

Securities and PIFM and their subsidiaries and members of the families of such
persons who maintain an "employee related" account at Prudential Securities or
the Transfer Agent, (c) employees of subadvisers of the Prudential Mutual
Funds provided that such purchases at NAV are permitted by such person's
employer, (d) Prudential employees and special agents of Prudential and its
subsidiaries and all persons who have retired directly from active service
with Prudential or one of its subsidiaries, (e) registered representatives and
employees of dealers who have entered into a selected dealer agreement with
the Distributor provided that purchases at NAV are permitted by such person's
employer, (f) investors who have a business relationship with a financial
adviser who joined Prudential Securities from another investment firm,
provided that (i) the purchase is made within 180 days of the commencement of
the financial adviser's employment at Prudential Securities, or within one
year in the case of Benefit Plans, (ii) the purchase is made with proceeds of
a redemption of shares of any open-end, non-money market fund sponsored by the
financial adviser's previous employer (other than a fund which imposes a
distribution or service fee of .25 of 1% or less) and (iii) the financial
adviser served as the client's broker on the previous purchase, and (g)
investors in Individual Retirement Accounts, provided the purchase is made
with the proceeds of a tax-free rollover of assets from a Benefit Plan for
which Prudential Investments serves as the recordkeeper or administrator.

CLASS B AND CLASS C SHARES

The offering price of Class B and Class C shares for investors choosing one
of the deferred sales charge alternatives is the NAV per share next determined
following receipt of an order by the Transfer Agent, Prudential Securities
Prusec or a dealer. Although there is no sales charge imposed at the time of
purchase, redemptions of Class B and Class C shares may be subject to a CDSC.
See "How to Sell Your Shares--Contingent Deferred Sales Charges" below. The
Distributor will pay from its own resources, sales commissions of up to 4% of
the purchase price of Class B shares to dealers, financial advisers and other
persons who sell Class B shares at the time of sale. This facilitates the
ability of the Fund to sell the Class B shares without an initial sales charge
being deducted at the time of purchase. The Distributor anticipates that it
will recoup its payment of sales commissions from the combination of the CDSC
and the distribution fee. See "How the Fund is Managed--Distributor." In
connection with the sale of Class C shares, the Distributor will pay, from its
own resources, dealers, financial advisers and other persons which distribute
Class C shares a sales commission of up to 1% of the purchase price at the
time of the sale.

CLASS Z SHARES

Class Z shares of the Fund are currently available for purchase by the
following categories of investors: (i) pension, profit-sharing or other
employee benefit plans qualified under Section 401 of the Internal Revenue
Code, deferred compensation and annuity plans under Sections 457 and 403(b)(7)
of the Internal Revenue Code and non-qualified plans for which the Fund is an
available option (collectively, Benefit Plans), provided such Benefit Plans
(in combination with other plans sponsored by the same employer or group of
related employers) have at least $50 million in defined contribution assets;
(ii) participants in any fee-based program or trust program sponsored by
Prudential Securities, The Prudential Savings Bank, F.S.B. or any affiliate
which includes mutual funds as investment options and for which the Fund is an
available option; (iii) certain participants in the MEDLEY Program (group
variable annuity contracts) sponsored by Prudential for whom Class Z shares of
the Prudential Mutual Funds are an available investment option; (iv) Benefit
Plans for which Prudential Retirement Services serves as recordkeeper and
that, as of September 20, 1996, (a) were Class Z shareholders of the
Prudential Mutual Funds or (b) executed a letter of intent to purchase Class Z
shares of the Prudential Mutual Funds; (v) current and former
Directors/Trustees of the Prudential Mutual Funds (including the Fund); (vi)
employees of Prudential and/or Prudential Securities who participate in a
Prudential-sponsored employee savings plan; and (vii) Prudential with an
investment of $10 million or more.

25
<PAGE>

HOW TO SELL YOUR SHARES

PAYMENT FOR REDEMPTION OF RECENTLY PURCHASED SHARES WILL BE DELAYED UNTIL
THE FUND OR ITS TRANSFER AGENT HAS BEEN ADVISED THAT THE PURCHASE CHECK HAS
BEEN HONORED, UP TO 10 CALENDAR DAYS FROM THE TIME OF RECEIPT OF THE PURCHASE
CHECK BY THE TRANSFER AGENT. SUCH DELAY MAY BE AVOIDED BY PURCHASING SHARES BY
WIRE OR BY CERTIFIED OR CASHIER'S CHECK.

26
<PAGE>

with applicable rules of the SEC. Securities will be readily marketable and
will be valued in the same manner as a regular redemption. See "How the Fund
Values its Shares." If your shares are redeemed in kind, you will incur
transaction costs in converting the assets into cash. The Fund, however, has
elected to be governed by Rule 18f-1 under the Investment Company Act, under
which the Fund is obligated to redeem shares solely in cash up to the lesser
of $250,000 or 1% of the NAV of the Fund during any 90-day period for any one
shareholder.

CONTINGENT DEFERRED SALES CHARGES
Redemptions of Class B shares will be subject to a contingent deferred sales
charge or CDSC declining from 5% to zero over a six-year period. Class C
shares redeemed within one year of purchase will be subject to a 1% CDSC. The
CDSC will be deducted from the redemption proceeds and reduce the amount paid
to you. The CDSC will be imposed on any redemption by you which reduces the
current value of your Class B or Class C shares of the Fund to an amount which
is lower than the amount of all payments by you for shares during the
preceding six years, in the case of Class B shares, and one year, in the case
of Class C shares. A CDSC will be applied on the lesser of the original
purchase price or the current value of the shares being redeemed. Increases in
the value of your shares or shares acquired through reinvestment of dividends
or distributions are not subject to a CDSC. The amount of any CDSC will be
paid to and retained by the Distributor. See "How the Fund is Managed--
Distributor" and "Waiver of the Contingent Deferred Sales Charges--Class B
Shares" below.

27
<PAGE>

The following table sets forth the rates of the CDSC applicable to
redemptions of Class B shares:

For federal income tax purposes, the amount of the CDSC will reduce the gain
or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.

The CDSC will also be waived in the case of a total or partial redemption in
connection with certain distributions made without penalty under the Internal
Revenue Code from a tax-deferred retirement plan, an IRA or a Section 403(b)
custodial account. These distributions are: (i) in the case of a tax-deferred
retirement plan, a lump-sum or other distribution after retirement; (ii) in
the case of an IRA (including a Roth IRA), a lump-sum or other distribution
after attaining age 59 1/2 or a periodic distribution based on life
expectancy; (iii) in the case of a Section 403(b) custodial account, a lump
sum or other distribution after attaining age 59 1/2; and (iv); a tax-free
return of an excess contribution or plan distributions following the death or
disability of the shareholder, provided that the shares were purchased prior
to death or disability. The waiver does not apply in the case of a tax-free
rollover or transfer of assets, other than one following a separation from
service (i.e., following voluntary or involuntary termination of employment or
following retirement). Under no circumstances will the CDSC be waived on
redemptions resulting from the termination of a tax-deferred retirement plan,
unless such redemptions otherwise qualify for a waiver as described above. In
the case of Direct Account and Prudential Securities or Subsidiary Prototype
Benefit Plans, the CDSC will be waived on redemptions which represent
borrowings from such plans. Shares purchased with amounts used to repay a loan
from such plans on which a CDSC was not previously deducted will thereafter

28
<PAGE>

be subject to a CDSC without regard to the time such amounts were previously
invested. In the case of a 401(k) plan, the CDSC will also be waived upon the
redemption of shares purchased with amounts used to repay loans made from the
account to the participant and from which a CDSC was previously deducted.

In addition, the CDSC will be waived on redemptions of shares held by a
Trustee of the Fund.

WAIVER OF THE CONTINGENT DEFERRED SALES CHARGES--CLASS C SHARES

CONVERSION FEATURE--CLASS B SHARES

29
<PAGE>

or a series of exchanges, on the last day of the month in which the original
payment for purchases of such Class B shares was made. For Class B shares
previously exchanged for shares of a money market fund, the time period during
which such shares were held in the money market fund will be excluded. For
example, Class B shares held in a money market fund for one year will not
convert to Class A shares until approximately eight years from purchase. For
purposes of measuring the time period during which shares are held in a money
market fund, exchanges will be deemed to have been made on the last day of the
month. Class B shares acquired through exchange will convert to Class A shares
after expiration of the conversion period applicable to the original purchase
of such shares.

HOW TO EXCHANGE YOUR SHARES

IF YOU HOLD SHARES THROUGH PRUDENTIAL SECURITIES, YOU MUST EXCHANGE YOUR
SHARES BY CONTACTING YOUR PRUDENTIAL SECURITIES FINANCIAL ADVISOR.

IF YOU HOLD CERTIFICATES, THE CERTIFICATES, SIGNED IN THE NAME(S) SHOWN ON
THE FACE OF THE CERTIFICATES, MUST BE RETURNED IN ORDER FOR THE SHARES TO BE
EXCHANGED. SEE "HOW TO SELL YOUR SHARES" ABOVE.

You may also exchange shares by mail by writing to Prudential Mutual Fund
Services LLC, Attention: Exchange Processing, P.O. Box 15010, New Brunswick,
New Jersey 08906-5010.

30
<PAGE>

The Exchange Privilege is not a right and may be suspended, modified or
terminated on 60 days' notice to shareholders.

SHAREHOLDER SERVICES

In addition to the Exchange Privilege, as a shareholder of the Fund, you can
take advantage of the following services and privileges:

31
<PAGE>

subsequent dividends and/or distributions sent in cash rather than reinvested.
If you hold shares through Prudential Securities, you should contact your
financial adviser.

For additional information regarding the services and privileges described
above, see "Shareholder Investment Account" in the Statement of Additional
Information.

32
<PAGE>

THE PRUDENTIAL MUTUAL FUND FAMILY

TAXABLE BOND FUNDS

TAX-EXEMPT BOND
FUNDS

GLOBAL FUNDS

Prudential Developing Markets Fund
Developing Markets Equity Fund
Latin America Equity Fund
Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Limited Maturity Fund, Inc.
Limited Maturity Portfolio
Prudential Intermediate Global Income Fund, Inc.
Prudential International Bond Fund, Inc.
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Global Series
International Stock Series
The Global Total Return Fund, Inc.
Global Utility Fund, Inc.

EQUITY FUNDS

MONEY MARKET FUNDS

. Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund, Inc.
Money Market Series
Prudential MoneyMart Assets, Inc.
. Tax-Free Money Market Funds
Prudential Tax-Free Money Fund, Inc.
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
. Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
. Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series

A-1
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FUND HIGHLIGHTS........................................................... 2
What are the Fund's Risk Factors and Special Characteristics?............ 2
FUND EXPENSES............................................................. 4
HOW THE FUND INVESTS...................................................... 5
Investment Objective and Policies........................................ 5
Special Considerations and Risks of Investing in Latin American
Securities............................................................. 7
Hedging and Return Enhancement Strategies................................ 8
Other Investments and Policies........................................... 11
Investment Restrictions.................................................. 14
HOW THE FUND IS MANAGED................................................... 14
Manager.................................................................. 14
Distributor.............................................................. 15
Fee Waivers.............................................................. 16
Portfolio Transactions................................................... 16
Custodian and Transfer and Dividend Disbursing Agent..................... 16
Year 2000................................................................ 17
HOW THE FUND VALUES ITS SHARES............................................ 17
HOW THE FUND CALCULATES PERFORMANCE....................................... 17
TAXES, DIVIDENDS AND DISTRIBUTIONS........................................ 18
GENERAL INFORMATION....................................................... 20
Description of Common Stock.............................................. 20
Additional Information................................................... 20
SHAREHOLDER GUIDE......................................................... 21
How to Buy Shares of the Fund............................................ 21
Alternative Purchase Plan................................................ 22
How to Sell Your Shares.................................................. 26
Conversion Feature--Class B Shares....................................... 29
How to Exchange Your Shares.............................................. 30
Shareholder Services..................................................... 31
THE PRUDENTIAL MUTUAL FUND FAMILY......................................... A-1
</TABLE>
- --------------------------------------------------------------------------------

MF180A__________________________________________________________________________

<TABLE>
<S> <C>
Class A: 74437M 109
Class B: 74437M 208
CUSIP Nos.: Class C: 74437M 307
Class Z: 74437M 406
</TABLE>
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND

PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
PRUDENTIAL LATIN AMERICA EQUITY FUND

Statement of Additional Information
dated June 26, 1998

Prudential Developing Markets Fund (the Fund) is an open-end, diversified
management company presently consisting of two series: Prudential Developing
Markets Equity Fund and Prudential Latin America Equity Fund (each, a Series
and collectively, the Series). The Fund has no prior history.

Prudential Developing Markets Equity Fund's investment objective is long-
term growth of capital. The Developing Markets Equity Fund seeks to achieve
its objective by investing primarily in equity related securities of companies
whose principal activities are in developing markets throughout the world.
Under normal circumstances, the Series will invest at least 65% of its total
assets in equity related securities of developing market issuers in at least
the three following regions: Europe, Asia and Latin America. "Developing
markets" include countries or markets that are defined as emerging or
developing by the International Finance Corporation, the International Bank
for Reconstruction and Development (World Bank) or the United Nations or its
authorities. The Series may also invest in equity related securities of other
companies and debt securities, engage in various derivatives transactions,
including options on equity securities, stock indices, foreign currencies and
futures contracts on foreign currencies, and may purchase and sell futures
contracts on foreign currencies, groups of currencies and stock indices so as
to hedge its portfolio and to attempt to enhance return. There can be no
assurance that the Series' investment objective will be achieved. See
"Investment Objective and Policies."

Prudential Latin America Equity Fund's investment objective is long term
growth of capital. It seeks to achieve this objective by investing primarily
in equity related securities of companies domiciled in, or doing business
principally in Latin America. "Latin America" is defined as Mexico and all
countries located in Central America and South America. Under normal
circumstances the Series intends to invest at least 65% of its total assets in
such securities. The Series may also invest in equity related securities of
other companies and debt securities, engage in various derivatives
transactions, including options on equity securities, stock indices, foreign
currencies and futures contracts on foreign currencies, and may purchase and
sell futures contracts on foreign currencies, groups of currencies and stock
indices so as to hedge its portfolio and to attempt to enhance return. There
can be no assurance that the Series' investment objective will be achieved.
See "Investment Objective and Policies."

The Fund's address is Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077, and its telephone number is (800) 225-1852.

This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus for the relevant Series dated June 26,
1998, a copy of which may be obtained from the Fund upon request.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
CROSS-REFERENCE
TO PAGE IN
PAGE PROSPECTUS
----- ---------------
<S> <C> <C>
Investment Objective and Policies........................ B-2 5
Investment Restrictions.................................. B-11 14
Trustees and Officers.................................... B-13 14
Manager.................................................. B-16 14
Distributor.............................................. B-17 15
Portfolio Transactions and Brokerage..................... B-18 16
Purchase and Redemption of Fund Shares................... B-19 22
Shareholder Investment Account........................... B-21 32
Net Asset Value.......................................... B-25 17
Taxes, Dividends and Distributions....................... B-25 18
Performance Information.................................. B-28 19
Custodian, Transfer and Dividend Disbursing Agent and In-
dependent Accountants................................... B-29 16
Financial Statements..................................... B-30 --
Report of Independent Accountants........................ B-33 --
Appendix I--Description of Security Ratings.............. I-1 --
Appendix II--General Investment Information.............. II-1 --
Appendix III--Historical Performance Data................ III-1 --
Appendix IV--Information Relating to Prudential.......... IV-1 --
</TABLE>

- -------------------------------------------------------------------------------
MF179B
<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

PRUDENTIAL DEVELOPING MARKETS EQUITY FUND SERIES: The Prudential Developing
Markets Equity Fund's investment objective is long-term growth of capital. The
Developing Markets Equity Fund seeks to achieve its objective by investing
primarily in equity related securities of companies whose principal activities
are in developing markets throughout the world. "Developing markets" include
countries or markets that are defined as emerging or developing by the
International Finance Corporation, the International Bank for Reconstruction
and Development (World Bank) or the United Nations or its authorities. Under
normal circumstances, the Series intends to invest at least 65% of its total
assets in such securities in at least the three following regions: Europe,
Asia and Latin America. There can be no assurance that the Fund's investment
objective will be achieved. See "How the Fund Invests--Investment Objective
and Policies" in the Series' Prospectus.

PRUDENTIAL LATIN AMERICA EQUITY FUND SERIES: Prudential Latin America Equity
Fund's investment objective is long term growth of capital. It seeks to
achieve this objective by investing primarily in equity related securities of
companies domiciled in, or doing business principally in Latin America. "Latin
America" is defined as Mexico and all countries located in Central America and
South America. Under normal circumstances, the Series intends to invest at
least 65% of its total assets in such securities. There can be no assurance
that the Series investment objective will be achieved. See "Investment
Objective and Policies" in the Series' Prospectus.

PORTFOLIO STRATEGY

In selecting portfolio securities, The Prudential Investment Corporation
(PIC), doing business as Prudential Investments (PI or the Subadviser),
focuses on individual companies with the potential for long-term capital
growth, including established companies with the potential for high earnings
growth and smaller and medium-sized companies that are well positioned to
adapt to market and industry changes. The Subadviser identifies such companies
on the basis of fundamental analysis, which involves assessing a company and
its business environment, management, balance sheet, income statement,
anticipated earnings and dividends and other related measures of value.
Although the primary portfolio management approach is company analysis, the
Subadviser also analyzes foreign currency movements against the U.S. dollar in
order to manage the foreign currency exposure of each Series and performs an
analysis of individual countries. The Subadviser uses a variety of sources and
techniques in analyzing these companies and countries and maintains strong
local contacts in securities markets around the world. The Subadviser monitors
and evaluates the economic and political climate and principal securities
markets of the country in which each company is located. The Subadviser has
broad access to international research and financial reports, data retrieval
services and industry analysts. In addition, the Subadviser maintains
relationships with the management of corporate issuers and from time to time
visits companies overseas in whose securities a Series may invest.

OPTIONS TRANSACTIONS

OPTIONS ON EQUITY SECURITIES. Each Series intends to purchase and write
(i.e., sell) put and call options that are traded on U.S. or foreign
securities exchanges or that are listed on NASDAQ or that are traded over-the-
counter. A call option is a short-term contract (having a duration of nine
months or less) pursuant to which the purchaser, in return for a premium paid,
has the right to buy the security underlying the option at a specified
exercise price at any time during the term of the option. The writer of the
call option, who receives the premium, has the obligation, upon exercise of
the option, to deliver the underlying security against payment of the exercise
price. A put option is a similar contract which gives the purchaser, in return
for a premium, the right to sell the underlying security at a specified price
during the term of the option. The writer of the put, who receives the
premium, has the obligation to buy the underlying security upon exercise at
the exercise price. The premium paid by the purchaser of an option will
reflect, among other things, the relationship of the exercise price to the
market price and volatility of the underlying security, the remaining term of
the option, supply and demand and interest rates. Each Series will write put
options only when the investment adviser desires to invest in the underlying
security.

A call option written by a Series is "covered" if such Series owns the
security underlying the option or has an absolute and immediate right to
acquire that security without additional consideration (or for additional
consideration held in a segregated account by its Custodian) upon conversion
or exchange of other securities held in its portfolio. A call option is also
covered if a Series holds on a share-for-share basis a call on the same
security as the call written where the exercise price of the call held is
equal to or less than the exercise price of the call written or is greater
than the exercise price of the call written if the difference is maintained by
such Series in cash or other liquid assets in a segregated account with its
Custodian. A put option written by a Series is "covered" if the Series either
maintains in a segregated account with its Custodian cash, U.S. Government
obligations, equity securities or other liquid, unencumbered assets with a
value, marked to market daily, equal to the exercise price or holds on a
share-for-share basis a put of the same security as the put written if the
exercise price of the put held is equal to or greater than the exercise price
of the put written.

"Liquid Assets," as used in each Series' Prospectus and this Statement of
Additional Information, include U.S. Government securities, equity securities
(including foreign securities), investment grade debt obligation and other
liquid unencumbered assets.

B-2
<PAGE>

If the writer of an option wishes to terminate the obligation, he or she may
effect a "closing purchase transaction." This is accomplished by buying an
option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be cancelled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after he or she has been notified of the exercise of an option. Similarly, an
investor who is the holder of an option may liquidate his or her position by
effecting a "closing sale transaction." This is accomplished by selling an
option of the same series as the option previously purchased. There is no
guarantee that either a closing purchase or a closing sale transaction can be
effected. To secure the obligation to deliver the underlying security in the
case of a call option, the writer of the option is generally required to
pledge for the benefit of the broker the underlying security or other assets
in accordance with the rules of the relevant exchange or clearinghouse, such
as The Options Clearing Corporation (OCC), an institution created to interpose
itself between buyers and sellers of options in the United States.
Technically, the clearinghouse assumes the other side of every purchase and
sale transaction on an exchange and, by doing so, guarantees the transaction.

A Series will realize a profit from a closing transaction if the price of
the transaction is less than the premium received from writing the option or
is more than the premium paid to purchase the option; such Series will realize
a loss from a closing transaction if the price of the transaction is more than
the premium received from writing the option or is less than the premium paid
to purchase the option. Because increases in the market price of a call option
will generally reflect increases in the market price of the underlying
security, any loss resulting from the repurchase of a call option is likely to
be offset in whole or in part by appreciation of the underlying security owned
by a Series.

A Series may also purchase a "protective put," i.e., a put option acquired
for the purpose of protecting a portfolio security from a decline in market
value. In exchange for the premium paid for the put option, such Series
acquires the right to sell the underlying security at the exercise price of
the put regardless of the extent to which the underlying security declines in
value. The loss to such Series is limited to the premium paid for, and
transaction costs in connection with, the put plus the initial excess, if any,
of the market price of the underlying security over the exercise price.
However, if the market price of the security underlying the put rises, the
profit such Series realizes on the sale of the security will be reduced by the
premium paid for the put option less any amount (net of transaction costs) for
which the put may be sold. Similar principles apply to the purchase of puts on
stock indices, as described below.

OPTIONS ON STOCK INDICES. In addition to options on equity securities, a
Series may also purchase and sell put and call options on stock indices traded
on securities exchanges, listed on NASDAQ or traded over-the-counter. Options
on stock indices are similar to options on stock except that, rather than the
right to take or make delivery of stock at a specified price, an option on a
stock index gives the holder the right to receive, upon exercise of the
option, an amount of cash if the closing level of the stock index upon which
the option is based is greater than, in the case of a call, or less than, in
the case of a put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index and the
exercise price of the option, expressed in dollars times a specified multiple
(the multiplier). The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Unlike stock options, all
settlements are in cash, and gain or loss depends on price movements in the
stock market generally (or in a particular industry or segment of the market)
rather than price movements in individual stocks.

The multiplier for an index option performs a function similar to the unit
of trading for a stock option. It determines the total dollar value per
contract of each point in the difference between the exercise price of an
option and the current level of the underlying index. A multiplier of 100
means that a one-point difference will yield $100. Options on different
indices may have different multipliers.

Because exercises of index options are settled in cash, a call writer cannot
determine the amount of its settlement obligations in advance and, unlike call
writing on specific stocks, cannot provide in advance for, or cover, its
potential settlement obligations by acquiring and holding the underlying
securities. In addition, unless a Series has other liquid assets which are
sufficient to satisfy the exercise of a call, such Series would be required to
liquidate portfolio securities or borrow in order to satisfy the exercise.

Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular stock, whether a Series will
realize a gain or loss on the purchase or sale of an option on an index
depends upon movements in the level of stock prices in the stock market
generally or in an industry or market segment rather than movements in the
price of a particular stock. Accordingly, successful use by a Series of
options on indices would be subject to the Subadviser's ability to predict
correctly movements in the direction of the stock market generally or of a
particular industry. This requires different skills and techniques than
predicting changes in the price of individual stocks. The Subadviser currently
uses such techniques in conjunction with the management of other mutual funds.

B-3
<PAGE>

RISKS OF TRANSACTIONS IN OPTIONS

An option position may be closed out only on an exchange, board of trade or
other trading facility which provides a secondary market for an option of the
same series. Although each Series will generally purchase or write only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option, or at any particular time, and for some options no
secondary market on an exchange or otherwise may exist. In such event it might
not be possible to effect closing transactions in particular options, with the
result that a Series would have to exercise its options in order to realize
any profit and would incur brokerage commissions upon the exercise of call
options and upon the subsequent disposition of underlying securities acquired
through the exercise of call options or upon the purchase of underlying
securities for the exercise of put options. If a Series, as a covered call
option writer, is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon exercise.

Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening
transactions, closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the
facilities of an exchange or a clearing corporation may not at all times be
adequate to handle current trading volume; or (vi) one or more exchanges
could, for economic or other reasons, decide or be compelled at some future
date to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in the
class or series of options) would cease to exist, although outstanding options
on that exchange that had been issued by a clearing corporation as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms. There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render certain of the
facilities of any of the clearing corporations inadequate, and thereby result
in the institution by an exchange of special procedures which may interfere
with the timely execution of customers' orders. Each Series intends to
purchase and sell only those options which are cleared by clearinghouses whose
facilities are considered to be adequate to handle the volume of options
transactions.

RISKS OF OPTIONS ON INDICES

Each Series' purchase and sale of options on indices will be subject to
risks described above under "Risks of Transactions in Options." In addition,
the distinctive characteristics of options on indices create certain risks
that are not present with stock options.

Index prices may be distorted if trading of certain stocks included in the
index is interrupted. Trading in index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number
of stocks included in the index. If this occurred, a Series would not be able
to close out options which it had purchased or written and, if restrictions on
exercise were imposed, may be unable to exercise an option it holds, which
could result in substantial losses to a Series. It is each Series' policy to
purchase or write options only on indices which include a number of stocks
sufficient to minimize the likelihood of a trading halt in the index.

The ability to establish and close out positions on such options will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop in all index option contracts. Each
Series will not purchase or sell any index option contract unless and until,
in the Subadviser's opinion, the market for such options has developed
sufficiently that the risk in connection with such transactions is no greater
than the risk in connection with options on stocks.

SPECIAL RISKS OF WRITING CALLS ON INDICES. Because exercises of index
options are settled in cash, a call writer such as either Series cannot
determine the amount of its settlement obligations in advance and, unlike call
writing on specific stocks, cannot provide in advance for, or cover, its
potential settlement obligations by acquiring and holding the underlying
securities. However, each Series will write call options on indices only under
the circumstances described below under "Limitations on Purchase and Sale of
Stock Options and Options on Stock Indices, Foreign Currencies and Futures
Contracts on Foreign Currencies."

Price movements in a Series portfolio probably will not correlate precisely
with movements in the level of the index and, therefore, a Series bears the
risk that the price of the securities held by such Series may not increase as
much as the index. In such event, the relevant Series would bear a loss on the
call which is not completely offset by movements in the price of such Series'
portfolio. It is also possible that the index may rise when a Series'
portfolio of stocks does not rise. If this occurred, such Series would
experience a loss on the call which would not be offset by an increase in the
value of its portfolio and might also experience a loss in its portfolio.
However, because the value of a diversified portfolio will, over time, tend to
move in the same direction as the market, movements in the value of the
relevant Series portfolio in the opposite direction as the market would be
likely to occur for only a short period or to a small degree.

B-4
<PAGE>

Unless a Series has other liquid assets which are sufficient to satisfy the
exercise of a call, such Series would be required to liquidate portfolio
securities in order to satisfy the exercise. Because an exercise must be
settled within hours after receiving the notice of exercise, if a Series fails
to anticipate an exercise, it may have to borrow from a bank (in amounts not
exceeding 20% of such Series' total assets) pending settlement of the sale of
securities in its portfolio and would incur interest charges thereon.

When a Series has written a call on an index, there is also a risk that the
market may decline between the time such Series has a call exercised against
it, at a price which is fixed as of the closing level of the index on the date
of exercise, and the time such Series is able to sell stocks in its portfolio
to generate cash to settle the exercise. As with stock options, a Series will
not learn that an index option has been exercised until the day following the
exercise date but, unlike a call on stock where a Series would be able to
deliver the underlying securities in settlement, a Series may have to sell
part of its investment portfolio in order to make settlement in cash, and the
price of such investments might decline before they can be sold. This timing
risk makes certain strategies involving more than one option substantially
more risky with index options than with stock options. For example, even if an
index call which a Series has written is "covered" by an index call held by
such Series with the same strike price, such Series will bear the risk that
the level of the index may decline between the close of trading on the date
the exercise notice is filed with the clearing corporation and the close of
trading on the date such Series exercises the call it holds or the time such
Series sells the call which, in either case, would occur no earlier than the
day following the day the exercise notice was filed.

If a Series holds an index option and exercises it before final
determination of the closing index value for that day, it runs the risk that
the level of the underlying index may change before closing. If such a change
causes the exercised option to fall out-of-the-money, a Series will be
required to pay the difference between the closing index value and the
exercise price of the option (times the applicable multiplier) to the assigned
writer. Although a Series may be able to minimize this risk by withholding
exercise instructions until just before the daily cutoff time or by selling
rather than exercising an option when the index level is close to the exercise
price, it may not be possible to eliminate this risk entirely because the
cutoff times for index options may be earlier than those fixed for other types
of options and may occur before definitive closing index values are announced.

SPECIAL RISKS OF OTC OPTIONS

When a Series writes an OTC option, it generally will be able to close out
the OTC option prior to its expiration only by entering into a closing
purchase transaction with the dealer with which the relevant Series originally
wrote the OTC option. Any such cancellation if agreed to, may require the
relevant Series to pay a premium to the counterparty. While a Series will
enter into OTC options only with dealers which agree to, and which are
expected to be capable of, entering into closing transactions with such
Series, there can be no assurance that such Series will be able to liquidate
an OTC option at a favorable price at any time prior to expiration. Until a
Series is able to effect a closing purchase transaction in a covered OTC call
option that such Series has written, it will not be able to liquidate
securities used as cover until the option expires or is exercised or different
cover is substituted. Alternatively, a Series could write an OTC call option
to, in effect, close an existing OTC call option or write an OTC put option to
close its position on an OTC put option. However, the Series would remain
exposed to each counterparty's credit risk on the put or call until such
option is exercised or expires. There is no guarantee that a Series will be
able to write put or call options, as the case may be, that would effectively
close an existing position. In the event of insolvency of the counterparty, a
Series may be unable to liquidate an OTC option.

In entering into OTC options, a Series will be exposed to the risk that the
counterparty will default on, or be unable to complete, due to bankruptcy or
otherwise, its obligation on the option. In such event, a Series may lose the
benefit of the transaction. The value of an OTC option to a Series is
dependent upon the financial viability of the counterparty. If a Series
decides to enter into transactions in OTC options, the Subadviser will take
into account the credit quality of counterparties in order to limit the risk
of default by the counterparty.

RISKS OF OPTIONS ON FOREIGN CURRENCIES

Because there are two currencies involved, developments in either or both
countries can affect the values of options on foreign currencies. Risks
include those described in the Prudential Developing Markets Equity Fund
Prospectus under "How the Fund Invests--Investment Objective and Policies--
Special Considerations and Risks of Investing in Developing Market Securities"
and the Prudential Latin America Fund Prospectus under "How the Fund Invests--
Investment Objective and Policies--Special Considerations and Risks of
Investing in Latin American Securities," including government actions
affecting currency valuation and the movements of currencies from one country
to another. The quantities of currency underlying option contracts represent
odd lots in a market dominated by transactions between banks; this can mean
extra transaction costs upon exercise. Option markets may be closed while
round-the-clock interbank currency markets are open, which can create price
and rate discrepancies.

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<PAGE>

RISKS RELATED TO FORWARD CURRENCY EXCHANGE CONTRACTS

Each Series may enter into forward foreign currency exchange contracts in
several circumstances. When a Series enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or when a Series
anticipates the receipt in a foreign currency of dividends or interest
payments on a security which it holds, such Series may desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of such
dividend or interest payment, as the case may be. By entering into a forward
contract for a fixed amount of dollars for the purchase or sale of the amount
of foreign currency involved in the underlying transactions, a Series will be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date on which the security is purchased
or sold, or on which the dividend or interest payment is declared, and the
date on which such payments are made or received.

Additionally, when the Subadviser believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar, a
Series may enter into a forward contract for a fixed amount of dollars, to
sell the amount of foreign currency approximating the value of some or all of
such Series' portfolio securities denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
securities in denominated foreign currencies will change as a consequence of
market movements in the value of those securities between the date on which
the forward contract is entered into and the date it matures. The projection
of short-term currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly uncertain. A
Series does not intend to enter into such forward contracts to protect the
value of its portfolio securities on a regular or continuous basis. A Series
will also not enter into such forward contracts or maintain a net exposure to
such contracts where the consummation of the contracts would obligate such
Series to deliver an amount of foreign currency in excess of the value of such
Series' portfolio securities or other assets denominated in that currency.
Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the long-term investment decisions made
with regard to overall diversification strategies. However, the Manager and
Subadviser believe that it is important to have the flexibility to enter into
such forward contracts when they determine that the best interests of a Series
will thereby be served. If a Series enters into a position hedging
transaction, the transaction will be "covered" by the position being hedged,
or the Series' Custodian or subcustodian will place cash or other liquid
assets in a segregated account of such Series (less the value of the
"covering" positions, if any) in an amount equal to the value of such Series'
total assets committed to the consummation of the given forward contract. The
assets placed in the segregated account will be marked to market daily, and if
the value declines, additional cash or securities will be placed in the
account so that the value of the account will, at all times, equal the amount
of a Series' net commitment with respect to the forward contract. A Series'
ability to enter into forward foreign currency exchange contracts may be
limited by certain requirements for qualification as a regulated investment
company under the Internal Revenue Code. See "Taxes, Dividends and
Distributions."

A Series generally will not enter into a forward contract with a term of
greater than one year. At the maturity of a forward contract, a Series may
sell the portfolio security and make delivery of the foreign currency, or it
may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same
currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency.

It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly,
it may be necessary for a Series to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if the market value of
the security is less than the amount of foreign currency that such Series is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency.

If a Series retains the portfolio security and engages in an offsetting
transaction, such Series will incur a gain or a loss to the extent that there
has been movement in forward contract prices. Should forward contract prices
decline during the period between the date a Series enters into a forward
contract for the sale of a foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, such Series will
realize a gain to the extent that the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should
forward contract prices increase, a Series will suffer a loss to the extent
that the price of the currency it has agreed to purchase exceeds the price of
the currency it has agreed to sell.

A Series' dealings in forward foreign currency exchange contracts will be
limited to the transactions described above. Of course, a Series is not
required to enter into such transactions with regard to its foreign currency-
denominated securities. It also should be realized that this method of
protecting the value of a Series' portfolio securities against a decline in
the value of a currency does not eliminate fluctuations in the underlying
prices of the securities which are unrelated to exchange rates. Additionally,
although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, they also tend to limit any potential gain
which might result should the value of such currency increase.

B-6
<PAGE>

Although each Series values its assets daily in terms of U.S. dollars, it
does not intend physically to convert its holdings of foreign currencies into
U.S. dollars on a daily basis. It will do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the difference (the spread) between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign
currency to a Series at one rate, while offering a lesser rate of exchange
should a Series desire to resell that currency to the dealer.

RISKS OF TRANSACTIONS IN FUTURES CONTRACTS

There are several risks in connection with the use of futures contracts as a
hedging device. Due to the imperfect correlation between the price of futures
contracts and movements in the currency or group of currencies, the price of a
futures contract may move more or less than the price of the currencies being
hedged. In the case of futures contracts on stock indices, the correlation
between the price of the futures contract and the movements in the index may
not be perfect. Therefore, a correct forecast of currency rates, market trends
or international political trends by the Subadviser may still not result in a
successful hedging transaction.

Although each Series will purchase or sell futures contracts only on
exchanges where there appears to be an adequate secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular contract or at any particular time. Accordingly, there can be no
assurance that it will be possible, at any particular time, to close a futures
position. In the event a Series could not close a futures position and the
value of such position declined, such Series would be required to continue to
make daily cash payments of variation margin. There is no guarantee that the
price movements of the portfolio securities denominated in foreign currencies
will, in fact, correlate with the price movements in the futures contract and
thus provide an offset to losses on a futures contract. Currently, futures
contracts are available on the Australian Dollar, British Pound, Canadian
Dollar, Japanese Yen, Swiss Franc, German Mark and Euro, among others. Futures
contracts are also available on the S&P 500 Stock Index, the NYSE Composite
Index and the Major Market Index, and other global exchanges.

Under regulations of the Commodity Exchange Act, investment companies
registered under the Investment Company Act of 1940, as amended (the
Investment Company Act), are exempt from the definition of "commodity pool
operator," subject to compliance with certain conditions. The exemption is
conditioned upon a Series' purchasing and selling futures contracts and
options thereon for bona fide hedging transactions, except that a Series may
purchase and sell futures contracts and options thereon for any other purpose
to the extent that the aggregate initial margin and option premiums do not
exceed 5% of the liquidation value of the relevant Series' total assets. Each
Series will use currency futures and options on futures or commodity options
contracts in a manner consistent with these requirements.

Successful use of futures contracts by a Series is also subject to the
ability of such Series' Subadviser to predict correctly movements in the
direction of markets and other factors affecting currencies or the stock
market generally. For example, if a Series has hedged against the possibility
of an increase in currency rates which would adversely affect the price of
securities in its portfolio and the price of such securities increases
instead, such Series will lose part or all of the benefit of the increased
value of its securities because it will have offsetting losses in its futures
positions. In addition, in such situations, if a Series has insufficient cash
to meet daily variation margin requirements, it may need to sell securities to
meet such requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising market. A Series
may have to sell securities at a time when it is disadvantageous to do so.

The hours of trading of futures contracts may not conform to the hours
during which a Series may trade the underlying securities. To the extent that
the futures markets close before the securities markets, significant price and
rate movements can take place in the securities markets that cannot be
reflected in the futures markets.

OPTIONS ON FUTURES CONTRACTS

An option on a futures contract gives the purchaser the right, but not the
obligation, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer of
the option is required upon exercise to assume an offsetting futures position
(a short position if the option is a call and a long position if the option is
a put). Upon exercise of the option, the assumption of offsetting futures
positions by the writer and holder of the option will be accompanied by
delivery of the accumulated cash balance in the writer's futures margin
account which represents the amount by which the market price of the futures
contract, at exercise, exceeds, in the case of a call, or is less than, in the
case of a put, the exercise price of the option on the futures contract.
Currently options can be purchased or written with respect to futures
contracts on the Australian Dollar, British Pound, Canadian Dollar, Japanese
Yen, Swiss Franc, German Mark and Euro, among others. With respect to stock
indices, options are traded on futures contracts for the S&P 500 Stock Index
and the NYSE Composite Index and other global indices.

B-7
<PAGE>

The holder or writer of an option may terminate its position by selling or
purchasing an option of the same series. There is no guarantee that such
closing transactions can be effected.

LIMITATIONS ON PURCHASE AND SALE OF STOCK OPTIONS AND OPTIONS ON STOCK
INDICES, FOREIGN CURRENCIES AND FUTURES CONTRACTS ON FOREIGN CURRENCIES

Each Series may write put and call options on stocks only if they are
covered, and such options must remain covered so long as the Fund is obligated
as a writer. Each Series will write put options on stock indices and foreign
currencies and futures contracts on foreign currencies only if they are
covered by segregating with the Fund's Custodian an amount of cash, short-term
investments or other liquid assets equal to the aggregate exercise price of
the puts. During the coming fiscal year, neither Series intends to purchase or
sell options on equity securities or stock indices if the aggregate premiums
paid for such outstanding options would exceed 5% of the relevant Series'
total assets.

Except as described below, a Series will write call options on indices only
if it holds a portfolio of stocks at least equal to the value of the index
times the multiplier times the number of contracts. When a Series writes a
call option on a broadly-based stock market index, such Series will segregate
or put into escrow with its Custodian, or pledge to a broker as collateral for
the option, cash, U.S. Government securities, or other liquid assets with a
market value at the time the option is written of not less than 100% of the
current index value times the multiplier times the number of contracts.

If a Series has written an option on an industry or market segment index, it
will segregate or put into escrow with its Custodian, or pledge to a broker as
collateral for the option, at least ten "qualified securities," all of which
are stocks of issuers in such industry or market segment, with a market value
at the time the option is written of not less than 100% of the current index
value times the multiplier times the number of contracts. Such stocks will
include stocks which represent at least 50% of the weighting of the industry
or market segment index and will represent at least 50% of the relevant
Series' holdings in that industry or market segment. No individual security
will represent more than 15% of the amount so segregated, pledged or escrowed
in the case of broadly-based stock market index options or 25% of such amount
in the case of industry or market segment index options. If at the close of
business on any day the market value of such qualified securities so
segregated, escrowed or pledged falls below 100% of the current index value
times the multiplier times the number of contracts, a Series will so
segregate, escrow or pledge an amount in cash, or other liquid assets equal in
value to the difference. In addition, when a Series writes a call on an index
which is in-the-money at the time the call is written, such Series will
segregate with its Custodian or pledge to the broker as collateral cash or
other liquid assets equal in value to the amount by which the call is in-the-
money times the multiplier times the number of contracts. Any amount
segregated pursuant to the foregoing sentence may be applied to a Series'
obligation to segregate additional amounts in the event that the market value
of the qualified securities falls below 100% of the current index value times
the multiplier times the number of contracts. A "qualified security" is an
equity security which is listed on a national securities exchange or listed on
NASDAQ against which the relevant Series has not written a stock call option
and which has not been hedged by such Series by the sale of stock index
futures. However, if a Series holds a call on the same index as the call
written and the exercise price of the call held either is equal to or less
than the exercise price of the call written or is greater than the exercise
price of the call written but the difference is maintained by such Series in
cash or other liquid assets in a segregated account with its Custodian, it
will not be subject to the requirements described in this paragraph.

Each Series intends to engage in futures contracts and options on futures
transactions as a hedge against changes, resulting from market or political
conditions, in the value of the currencies to which such Series is subject or
to which such Series expects to be subject in connection with future
purchases. Each Series also intends to engage in such transactions when they
are economically appropriate for the reduction of risks inherent in the
ongoing management of such Series. Each Series may write options on futures
contracts to realize through the receipt of premium income a greater return
than would be realized in a Series' portfolio securities alone.

POSITION LIMITS. Transactions by a Series in futures contracts and options
will be subject to limitations, if any, established by each of the exchanges,
boards of trade or other trading facilities (including NASDAQ) governing the
maximum number of options in each class which may be written or purchased by a
single investor or group of investors acting in concert, regardless of whether
the options are written on the same or different exchanges, boards of trade or
other trading facilities or are held or written in one or more accounts or
through one or more brokers. Thus, the number of futures contracts and options
which a Series may write or purchase may be affected by the futures contracts
and options written or purchased by other investment advisory clients of the
Manager or Subadviser. An exchange, board of trade or other trading facility
may order the liquidation of positions found to be in excess of these limits,
and it may impose certain other sanctions.

B-8
<PAGE>

BRADY BONDS

Each Series may invest in certain debt obligations customarily referred to
as "Brady Bonds," which are created in connection with debt restructuring
through the exchange of existing commercial bank loans to sovereign entities
for new obligations under a plan introduced by former U.S. Secretary of the
Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan debt restructurings
have been implemented in a number of countries to date including Argentina,
Brazil, Bulgaria, Costa Rica, Croatia, the Dominican Republic, Ecuador, Ivory
Coast, Jordan, the former Yugoslav Republic of Macedonia, Mexico, Nigeria,
Panama, Peru, the Philippines, Poland, Russia, Slovenia, Uruguay, Venezuela
and Vietnam (collectively, the "Brady Countries"). In addition, some countries
have reached an agreement in principle to restructure their bank debt
according to a Brady Plan and other countries are expected to negotiate
similar restructurings in the future. In some cases countries have
restructured or are planning to restructure their external bank debt into new
loans or promissory notes.

Many of the Brady Bonds have been issued relatively recently, and,
accordingly, do not have a long payment history. They may be collateralized or
uncollateralized and issued in various currencies (although most are U.S.
dollar-denominated), and they have been actively traded in the over-the-
counter secondary market.

U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed rate
par bonds or floating rate discount bonds, are generally collateralized in
full as to principal by U.S. Treasury zero coupon bonds which have the same
maturity as the Brady Bonds. Interest payments on these Brady Bonds generally
are collateralized on a one-year or longer rolling-forward basis by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of interest payments or, in the case of floating rate bonds,
initially is equal to at least one year's interest payments based on the
applicable interest rate at that time and is adjusted at regular intervals
thereafter. Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect constitute supplemental interest
payments. Brady Bonds are often viewed as having three or four valuation
components: (i) the collateralized repayment of principal at final maturity;
(ii) the collateralized interest payments; (iii) the uncollateralized interest
payments; and (iv) any uncollateralized repayment of principal at maturity
(these uncollateralized amounts constitute the "residual risk"). There can be
no assurance that Brady Bonds in which a Series may invest will not be subject
to restructuring arrangements or to requests for new credit, which may cause
such Series to suffer a loss of interest or principal on any of its holdings.

Most Brady Bonds issued by Mexico to date have principal repayments at final
maturity fully collateralized by U.S. Treasury zero coupon bonds (or
comparable collateral denominated in other currencies) and interest coupon
payments collateralized on an 18-month rolling-forward basis by funds held in
escrow by an agent for the bondholders. A significant portion of Brady Bonds
issued by Venezuela and Argentina to date have principal repayments at final
maturity collateralized by U.S. Treasury zero coupon bonds (or comparable
collateral denominated in other currencies) and/or interest coupon payments
collateralized on a 14-month (for Venezuela) or 12-month (for Argentina)
rolling-forward basis by securities held by the Federal Reserve Bank of New
York as collateral agent.

In light of the residual risk of Brady Bonds and, among other factors, the
history of defaults with respect to commercial bank loans by public and
private entities of countries issuing Brady Bonds, investments in Brady Bonds
are generally considered speculative. In addition, many Brady Bonds currently
are rated below investment grade. These securities are subject to each Series'
current operating policy of not investing more than 10% of its total assets in
debt securities rated lower than Baa by Moody's or BBB by S&P.

DEFENSIVE STRATEGY AND SHORT-TERM INVESTMENTS

When conditions dictate a temporary defensive strategy (which during periods
of market volatility could be for an extended period of time), a Series may
invest in money market instruments, including commercial paper of domestic
corporations, certificates of deposit, bankers' acceptances and other
obligations of domestic and foreign banks, obligations issued or guaranteed by
the U.S. Government, its agencies or its instrumentalities and repurchase
agreements (described more fully below). Such investments may be subject to
certain risks, including future political and economic developments, the
possible imposition of withholding taxes on interest income, the seizure or
nationalization of foreign deposits and foreign exchange controls or other
restrictions.

WHEN-ISSUED OR DELAYED DELIVERY SECURITIES

From time to time, in the ordinary course of business, a Series may purchase
securities on a when-issued or delayed delivery basis; that is, delivery and
payment can take place a month or more after the date of the transaction. A
Series will make commitments for such when-issued or delayed delivery
transactions only with the intention of actually acquiring the securities. The
Fund's Custodian will maintain, in a separate account of the relevant Series,
cash, or other liquid, unencumbered assets, marked-to-market daily, having a
value equal to or greater than such commitments. If a Series chooses to
dispose of the right to acquire a when-issued or delayed delivery security
prior to its acquisition, it could, as with the disposition of any other
portfolio security, incur

B-9
<PAGE>

a gain or loss due to market fluctuations. The Series do not intend to have
more than 5% of their respective net assets (determined at the time of
entering into the transaction) involved in transactions on a when-issued or
delayed delivery basis during the coming year.

SHORT SALES AGAINST-THE-BOX

Each Series may make short sales of securities or maintain a short position,
provided that (i) at all times when a short position is open the relevant
Series owns an equal amount of such securities or securities convertible into
or exchangeable, without payment of any further consideration, for an equal
amount of the securities of the same issuer as the securities sold short (a
short sale against-the-box) and (ii) not more than 25% of the relevant Series'
net assets (determined at the time of the short sale) may be subject to such
sales. The Series do not intend to have more than 5% of their respective net
assets (determined at the time of the short sale) subject to short sales
against-the-box during the coming year.

REPURCHASE AGREEMENTS

Each Series' repurchase agreements will be collateralized by U.S. Government
obligations. A Series' will enter into repurchase transactions only with
parties meeting creditworthiness standards approved by the Fund's Board of
Trustees. Each Series' Subadviser will monitor the creditworthiness of such
parties, under the general supervision of the Board of Trustees. In the event
of a default or bankruptcy by a seller, a Series will promptly seek to
liquidate the collateral. To the extent that the proceeds from any sale of
such collateral upon a default in the obligation to repurchase are less than
the repurchase price, a Series will suffer a loss.

Each Series participates in a joint repurchase account with other investment
companies managed by Prudential Investments Fund Management LLC (PIFM)
pursuant to an order of the Securities and Exchange Commission (SEC). On a
daily basis, any uninvested cash balances of a Series may be aggregated with
those of such investment companies and invested in one or more repurchase
agreements. Each Series participates in the income earned or accrued in the
joint account based on the percentage of its investment.

LENDING OF PORTFOLIO SECURITIES

Consistent with applicable regulatory requirements, a Series may lend its
portfolio securities to brokers, dealers and financial institutions, provided
that outstanding loans do not exceed in the aggregate 30% of the value of the
relevant Series' total assets and provided that such loans are callable at any
time by such Series and are at all times secured by cash or equivalent
collateral (or a letter of credit) that is equal to at least the market value,
determined daily, of the loaned securities. The advantage of such loans is
that a Series continues to receive payments in lieu of the interest and
dividends of the loaned securities, while at the same time earning interest
either directly from the borrower or on the collateral which will be invested
in short-term obligations.

A loan may be terminated by the borrower on one business day's notice or by
the relevant Series at any time. If the borrower fails to maintain the
requisite amount of collateral, the loan automatically terminates and the
relevant Series can use the collateral to replace the securities while holding
the borrower liable for any excess of replacement cost over collateral. As
with any extensions of credit, there are risks of delay in recovery and in
some cases loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities will
only be made to firms determined to be creditworthy pursuant to procedures
approved by the Board of Trustees of the Fund. On termination of the loan, the
borrower is required to return the securities to the relevant Series, and any
gain or loss in the market price during the loan would inure to such Series.

Since voting or consent rights which accompany loaned securities pass to the
borrower, each Series will follow the policy of calling the loan, in whole or
in part as may be appropriate, to permit the exercise of such rights if the
matters involved would have a material effect on the relevant Series'
investment in the securities which are the subject of the loan. Each Series
will pay reasonable finders', administrative and custodial fees in connection
with a loan of its securities or may share the interest earned on collateral
with the borrower.

SECURITIES OF OTHER INVESTMENT COMPANIES

A Series may invest up to 5% of its total assets in securities of other
registered investment companies. Each Series does not intend to invest in such
securities during the coming fiscal year. If a Series does invest in
securities of other registered investment companies, shareholders of such
Series may be subject to duplicate management and advisory fees.

SEGREGATED ACCOUNTS

The Fund will establish a segregated account with its Custodian, State
Street Bank and Trust Company, in which it will maintain cash, U.S. Government
securities, equity securities (including foreign securities), debt securities
or other liquid, unencumbered assets equal in value to its obligations in
respect of potentially leveraged transactions. These include forward
contracts, when-issued and delayed delivery securities, futures contracts,
written options and options on futures contracts (unless otherwise

B-10
<PAGE>

covered). If collateralized or otherwise covered, in accordance with SEC
guidelines, these will not be deemed to be senior securities. The assets
deposited in the segregated account will be marked-to-market daily.

ILLIQUID SECURITIES

A Series may not hold more than 15% of its net assets in repurchase
agreements which have a maturity of longer than seven days or in other
illiquid securities, including securities that are illiquid by virtue of the
absence of a readily available market (either within or outside of the United
States) or legal or contractual restrictions on resale. Historically, illiquid
securities have included securities subject to contractual or legal
restrictions on resale because they have not been registered under the
Securities Act of 1933, as amended (Securities Act), securities which are
otherwise not readily marketable and repurchase agreements having a maturity
of longer than seven days. Securities which have not been registered under the
Securities Act are referred to as private placements or restricted securities
and are purchased directly from the issuer or in the secondary market. Mutual
funds do not typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven days. A mutual fund might also have to register such restricted
securities in order to dispose of them resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities, convertible securities and corporate bonds and notes.
Institutional investors depend on an efficient institutional market in which
the unregistered security can be readily resold or on an issuer's ability to
honor a demand for repayment. The fact that there are contractual or legal
restrictions on resale to the general public or to certain institutions may
not be indicative of the liquidity of such investments.

Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to
the general public. Rule 144A establishes a "safe harbor" from the
registration requirements of the Securities Act for resales of certain
securities to qualified institutional buyers. The investment adviser
anticipates that the market for certain restricted securities such as
institutional commercial paper and foreign securities will expand further as a
result of this regulation and the development of automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National
Association of Securities Dealers, Inc.

Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act and commercial paper for which there is a readily available
market will not be deemed to be illiquid. The investment adviser will monitor
the liquidity of such restricted securities subject to the supervision of the
Board of Trustees. In reaching liquidity decisions, the Subadviser will
consider, inter alia, the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers wishing to purchase or sell
the security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security; and (4) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer). In addition, in order for commercial paper that is issued in
reliance on Section 4(2) of the Securities Act to be considered liquid, (i) it
must be rated in one of the two highest rating categories by at least two
nationally recognized statistical rating organizations (NRSRO), or if only one
NRSRO rates the securities, by that NRSRO, or, if unrated, be of comparable
quality in the view of the investment adviser, and (ii) it must not be "traded
flat" (i.e., without accrued interest) or in default as to principal or
interest. Repurchase agreements subject to demand are deemed to have a
maturity equal to the notice period.

The staff of the SEC has taken the position that purchased over-the-counter
options and the assets used as "cover" for written over-the-counter options
are illiquid securities unless a Series and the counterparty have provided for
such Series, at such Series' election, to unwind the over-the-counter option.
The exercise of such an option ordinarily would involve the payment by such
Series of an amount designed to reflect the counterparty's economic loss from
an early termination, but does allow such Series to treat the assets used as
"cover" as "liquid."

INVESTMENT RESTRICTIONS

The following restrictions are fundamental policies. Fundamental policies
are those which cannot be changed without (i) in the case of the Prudential
Developing Markets Equity Fund, the approval of the holders of a majority of
such Series outstanding voting securities and (ii) in the case of the
Prudential Latin America Equity Fund, the approval of the holders of a
majority of such Series' outstanding voting securities. A "majority of such
Series' outstanding voting securities," when used in this Statement of
Additional Information, means the lesser of (i) 67% of the voting shares
represented at a meeting at which more than 50% of the outstanding voting
shares are present in person or represented by proxy or (ii) more than 50% of
the outstanding voting shares.

B-11
<PAGE>

A Series may not:

1. Purchase securities on margin (but a Series may obtain such short-term
credits as may be necessary for the clearance of transactions); provided that
the deposit or payment by the Series of initial or maintenance margin in
connection with futures or options is not considered the purchase of a
security on margin.

2. Make short sales of securities or maintain a short position, except to
the extent permitted by applicable law. The Fund currently does not intend to
engage in short sales.

3. Issue senior securities, borrow money or pledge its assets, except that a
Series may borrow up to 33 1/3% of the value of its total assets (calculated
when the loan is made) for temporary, extraordinary or emergency purposes or
for the clearance of transactions. A Series may pledge up to 20% of the value
of its total assets to secure such borrowings. For purposes of this
restriction, the purchase or sale of securities on a when-issued or delayed
delivery basis, forward foreign currency exchange contracts and collateral and
collateral arrangements relating thereto, and collateral arrangements with
respect to futures contracts and options thereon and with respect to the
writing of options and obligations of a Series to Trustees pursuant to
deferred compensation arrangements are not deemed to be a pledge of assets or
the issuance of a senior security.

4. Purchase any security (other than obligations of the U.S. Government, its
agencies or instrumentalities) if as a result: (i) with respect to 75% of a
Series' total assets, more than 5% of such assets (determined at the time of
investment) would then be invested in securities of a single issuer, or (ii)
25% or more of the Fund's total assets (determined at the time of investment)
would be invested in a single industry.

5. Purchase any security if as a result such Series would then hold more
than 10% of the outstanding voting securities of an issuer.

6. Buy or sell real estate or interests in real estate, except that a Series
may purchase and sell securities which are secured by real estate, securities
of companies which invest or deal in real estate and publicly traded
securities of real estate investment trusts.

7. Purchase or sell commodities or contracts on commodities, except to the
extent that such Series may do so in accordance with applicable law, as may be
amended from time to time, and without registering as a commodity pool
operator under the Commodity Exchange Act.

8. Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter
under certain federal securities laws.

9. Make investments for the purpose of exercising control or management.

10. Make loans, except through (i) repurchase agreements and (ii) loans of
portfolio securities.

Whenever any fundamental investment policy or investment restriction states
a maximum percentage of a Series' assets or net assets, it is intended that if
the percentage limitation is met at the time the investment is made, then a
later change in percentage resulting from changing total or net asset values
will not be considered a violation of such policy. However, in the event that
a Series' asset coverage for borrowings falls below 300%, such Series will
take prompt action to reduce its borrowings, as required by applicable law.

B-12
<PAGE>

TRUSTEES AND OFFICERS

<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE(1) WITH FUND DURING PAST FIVE YEARS
- ------------------------ --------- ----------------------
<S> <C> <C>
Edward Trustee President and Director of BMC Fund, Inc., a closed-end
D. Beach investment company; previously, Vice Chairman of
(73) Broyhill Furniture Industries, Inc.; Certified Public
Accountant; Secretary and Treasurer of Broyhill Family
Foundation, Inc.; Member of the Board of Trustees of
Mars Hill College; and Director of The High Yield
Income Fund, Inc.
Stephen Trustee Executive Director (May 1985 through December 1997) of
C. Eyre The John A. Hartford Foundation, Inc. (charitable
(75) foundation); Director of Faircom, Inc.; and Trustee
Emeritus of Pace University.
Delayne Trustee Marketing and Management Consultant; Director of The
Dedrick High Yield Income Fund, Inc.
Gold
(59)
*Robert Trustee Vice President, of Prudential Investments since
F. Gunia September 1997; Executive Vice President and Treasurer
(51) (since December 1996), Prudential Investments Fund
Management LLC (PIFM); Senior Vice President (since
March 1987) of Prudential Securities Incorporated
(Prudential Securities); formerly Chief Administrative
Officer (July 1990-September 1996), Director (January
1989-September 1996) and Executive Vice President,
Treasurer and Chief Financial Officer (June 1987-
September 1996) of Prudential Mutual Fund Management,
Inc. (PMF); Vice President and Director (since May
1989) of The Asia Pacific Fund, Inc.; Director of The
High Yield Income Fund, Inc.
Don G. Trustee Chairman and Chief Executive Officer (since 1980) of
Hoff Intertec, Inc. (investments); Chairman and Chief
(62) Executive Officer of The Lamaur Corporation, Inc.;
Director of Innovative Capital Management, Inc. and The
Greater China Fund, Inc.; and Chairman and Director of
The Asia Pacific Fund, Inc.
Robert Trustee President (since 1981) of Robert E. LaBlanc Associates,
E. Inc. (telecommunications); formerly General Partner at
LaBlanc Salomon Brothers and Vice-Chairman of Continental
(63) Telecom; Director of Storage Technology Corporation,
Titan Corporation, Salient 3 Communications, Inc. and
Tribune Company; and Trustee of Manhattan College.
*Mendel Trustee Chief Investment Officer (since October 1996) of
A. Prudential Mutual Funds; formerly Chief Financial
Melzer, Officer (November 1995-September 1996) of Prudential
CFA (37) Investments, Senior Vice President and Chief Financial
751 Officer (April 1993-November 1995) of Prudential
Broad Preferred Financial Services, Managing Director (April
Street 1991-April 1993) of Prudential Investment Advisors and
Newark, Senior Vice President (July 1989-April 1991) of
NJ 07102 Prudential Capital Corporation; Chairman and Director
of Prudential Series Fund, Inc.; and Director of The
High Yield Income Fund, Inc.
*Richard President and Employee of Prudential Investments; formerly President,
A. Trustee Chief Executive Officer and Director (October 1993-
Redeker September 1996) Prudential Mutual Fund Management,
(54) Inc., Executive Vice President, Director and Member of
751 Operating Committee (October 1993-September 1996),
Broad Prudential Securities, Director (October 1993-September
Street 1996) of Prudential Securities Group, Inc., Executive
Newark, Vice President (January 1994-September 1996) of The
NJ 07102 Prudential Investment Corporation, Director (January
1994-September 1996) of Prudential Mutual Fund
Distributors, Inc. and Prudential Mutual Fund Services,
Inc. and Senior Executive Vice President and Director
(September 1978-September 1993) of Kemper Financial
Services, Inc.; President and Director of The High
Yield Income Fund, Inc.
</TABLE>

B-13
<PAGE>

<TABLE>
<CAPTION>
POSITION PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE(1) WITH FUND DURING PAST FIVE YEARS
- ------------------------ --------- ----------------------
<S> <C> <C>
Robin B. Trustee Chairman (since August 1996) and Chief Executive Officer
Smith (since January 1988), formerly President (September
(58) 1981-August 1996) and Chief Operating Officer
(September 1981-December 1988) of Publishers Clearing
House; Director of BellSouth Corporation, Texaco Inc.,
Springs Industries Inc. and Kmart Corporation.
Stephen Trustee President and Chief Executive Officer (since June 1996)
Stoneburn of Quadrant Media Corp. (a publishing company);
(54) formerly President (June 1995-June 1996) of Argus
Integrated Media, Inc., Senior Vice President and
Managing Director (January 1993-1995) of Cowles
Business Media, Senior Vice President (January 1991-
1992) and Publishing Vice President (May 1989-December
1990) of Gralla Publications (a division of United
Newspapers, U.K.) and Senior Vice President of
Fairchild Publications, Inc.
Nancy H. Trustee Economist; Director of Inland Steel Industries,
Teeters director/trustee of other Prudential Mutual Funds;
(67) formerly, Vice President and Chief Economist of
International Business Machines; Member of the Board of
Governors of the Federal Reserve System; Governor of
the Horace H. Rackham School of Graduate Studies of the
University of Michigan; Assistant Director of the
Committee on the Budget of the US House of
Representatives; Senior Fellow at the Library of
Congress; Senior Fellow at the Brookings Institution;
staff at Office of Management and Budget, Council of
Economic Advisors and the Federal Reserve Board.
S. Jane Secretary Senior Vice President (since December 1996) of PIFM;
Rose (52) Senior Vice President and Senior Counsel (since July
1992) of Prudential Securities; formerly Senior Vice
President (January 1991-September 1996) and Senior
Counsel (June 1987-September 1996) of Prudential Mutual
Fund Management, Inc.
Robert C. Assistant Secretary Assistant General Counsel (since September 1997) of
Rosselot PIFM; formerly a partner with the firm of Howard &
(37) Howard, Bloomfield Hills, Michigan (December 1995-
September 1997) and Corporate Counsel of Federated
Investors (1990-1995).
Grace C. Treasurer and First Vice President (since December 1996) of PIFM;
Torres Principal First Vice President (since March 1994) of Prudential
(38) Financial and Securities; formerly First Vice President (March 1994-
Accounting Officer September 1996) of Prudential Mutual Fund Management,
Inc. and Vice President (July 1989-March 1994) of
Bankers Trust.
Stephen Assistant Vice President and Tax Director (since March 1996) of
M. Treasurer Prudential Investments; formerly First Vice President
Ungerman (February 1993-March 1996).
(44)
</TABLE>
- ---------
(1) Unless otherwise stated, the address is c/o Prudential Investments Fund
Management LLC, Gateway Center Three, Newark, New Jersey 07102-4077.

* "Interested" Director, as defined in the Investment Company Act, by reason
of his affiliation with Prudential, Prudential Securities or PIFM.

Trustees and officers of the Fund are also trustees, directors and officers
of some or all of the other investment companies distributed by Prudential
Securities.

B-14
<PAGE>

The officers conduct and supervise the daily business operations of the
Fund, while the Trustees, in addition to their functions set forth under
"Manager" and "Distributor," review such actions and decide on general policy
of the Fund.

The Board of Trustees has adopted a retirement policy which calls for the
retirement of Trustees on December 31 of the year in which they reach the age
of 72, except that retirement is being phased in for Trustees who were age 68
or older as of December 31, 1993. Under the phase-in provision, Messrs. Beach
and Eyre are scheduled to retire on December 31, 1999 and 1998, respectively.

Pursuant to the terms of the Management Agreement with the Fund on behalf of
the Series, the Manager pays all compensation of officers and employees of
each Series as well as the fees and expenses of all Trustees of the Fund who
are affiliated persons of the Manager. The Fund pays each of its Trustees who
is not an affiliated person of PIFM annual compensation of $4,000, in addition
to certain out-of-pocket expenses. Such amount is allocated to each Series.
The amount of annual compensation paid to each Trustee may change as a result
of the introduction of additional funds upon which the Trustee will be asked
to serve.

Trustees may receive their Trustees' fees pursuant to a deferred fee
agreement with the Fund. Under the terms of the agreement, the Fund accrues
daily the amount of such Trustees' fees which accrue interest at a rate
equivalent to the prevailing rate applicable to 90-day U.S. Treasury Bills at
the beginning of each calendar quarter or, pursuant to an SEC exemptive order,
at the daily rate of return of the Fund. Payment of the interest so accrued is
also deferred and accruals become payable at the option of the Trustee. The
Fund's obligation to make payments of deferred Trustees' fees, together with
interest thereon, is a general obligation of the Fund.

The following table sets forth the aggregate compensation paid by the Fund
to the Trustees who are not affiliated with the Manager for the fiscal year
ended July 31, 1998 and the aggregate compensation paid to such Trustees for
service on the Fund's Board and that of all other investment companies managed
by PIFM (Fund Complex) for the calendar year ended December 31, 1997.

COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
RETIREMENT ESTIMATED FROM FUND
AGGREGATE BENEFITS ACCRUED ANNUAL AND FUND
COMPENSATION AS PART OF FUND BENEFITS UPON COMPLEX PAID
NAME AND POSITION FROM TRUST EXPENSES RETIREMENT TO TRUSTEES(2)
----------------- ------------ ---------------- ------------- --------------
<S> <C> <C> <C> <C>
Edward D. Beach--
Trustee................ --0-- None N/A $135,000(38/63)*
Stephen C. Eyre--
Trustee................ --0-- None N/A $ 45,000(12/13)*
Delayne D. Gold--
Trustee................ --0-- None N/A $135,000(38/63)*
Robert F. Gunia(1)--
Trustee................ --0-- None N/A --
Don G. Hoff--Trustee.... --0-- None N/A $ 45,000(12/13)*
Robert F. LaBlanc--
Trustee................ --0-- None N/A $ 45,000(12/13)*
Mendel A. Melzer(1)--
Trustee................ --0-- None N/A --
Richard A. Redeker(1)--
Trustee................ --0-- None N/A --
Robin B. Smith--Trustee. --0-- None N/A $ 90,000(27/34)*
Stephen Stoneburn--
Trustee................ --0-- None N/A $ 45,000(12/13)*
Nancy H. Teeters--
Trustee................ --0-- None N/A $ 90,000(26/50)*
</TABLE>
- ---------
* Indicates number of funds/portfolios in Fund Complex (including the Fund)
to which aggregate compensation relates.
(1) Robert F. Gunia, Mendel A. Melzer and Richard A. Redeker, who are
interested Trustees, do not receive compensation from the Fund or any fund
in the Fund Complex.
(2) Total compensation from all the funds in the Fund Complex for the calendar
year ended December 31, 1997, including amounts deferred at the election
of Trustees under the funds' deferred compensation plans. Including
accrued interest, total deferred compensation amounted to $139,081 for
Trustee Robin Smith. Currently, Ms. Smith has agreed to defer some of her
fees at the T-Bill rate and other fees at the Fund rate.

B-15
<PAGE>

MANAGER

The manager of each Series is Prudential Investments Fund Management LLC
(formerly Prudential Mutual Fund Management LLC), as successor to Prudential
Mutual Fund Management, Inc. (PIFM or the Manager), Gateway Center Three, 100
Mulberry Street, Newark, New Jersey 07102-4077. PIFM serves as manager to all
of the other investment companies that, together with the Series, comprise the
Prudential Mutual Funds. See "How the Fund is Managed--Manager" in the
relevant Series' Prospectus. As of May 31, 1998, PIFM managed and/or
administered open-end and closed-end management investment companies with
assets of approximately $65 billion. According to the Investment Company
Institute, as of December 31, 1997, the Prudential Mutual Funds were the 17th
largest family of mutual funds in the United States.

PIFM is a subsidiary of Prudential Securities and Prudential. Prudential
Mutual Fund Services LLC (PMFS or the Transfer Agent), a wholly-owned
subsidiary of PIFM, serves as the transfer agent for the Prudential Mutual
Funds and, in addition, provides customer service, recordkeeping and
management and administration services to qualified plans.

Pursuant to the Management Agreement with the Fund with respect to the
Series (the Management Agreement), PIFM, subject to the supervision of the
Fund's Board of Trustees and in conformity with the stated policies of each
Series, manages both the investment operations of the Series and the
composition of the Series' portfolio, including the purchase, retention,
disposition and loan of securities. In connection therewith, PIFM is obligated
to keep certain books and records of the Series. PIFM also administers the
Trust's business affairs and, in connection therewith, furnishes the Series
with office facilities, together with those ordinary clerical and bookkeeping
services which are not being furnished by State Street Bank and Trust Company,
the Fund's custodian, and PMFS, the Fund's transfer and dividend disbursing
agent. The management services of PIFM for the Series are not exclusive under
the terms of the Management Agreement and PIFM is free to, and does, render
management services to others.

For its services, PIFM receives, pursuant to the Management Agreement, a fee
at an annual rate of 1.25% of each Series' average daily net assets. The fee
is computed daily and payable monthly.

In connection with its management of the business affairs of each Series,
PIFM bears the following expenses:

(a) the salaries and expenses of all of its and each Series personnel except
the fees and expenses of Trustees who are not affiliated persons of PIFM or
the Series' Subadviser;

(b) all expenses incurred, by PIFM or a Series in connection with managing
the ordinary course of such Series' business, other than those assumed by a
Series as described below; and

(c) the costs and expenses payable to The Prudential Investment Corporation,
doing business as Prudential Investments (PI, the Subadviser or the investment
adviser), pursuant to the subadvisory agreement between PIFM and PI (the
Subadvisory Agreement).

Under the terms of the Management Agreement, each Series is responsible for
the payment of the following expenses: (a) the fees payable to the Manager,
(b) the fees and expenses of Trustees who are not affiliated persons of the
Manager or such Series' Subadviser, (c) the fees and certain expenses of the
Custodian and Transfer and Dividend Disbursing Agent, including the cost of
providing records to the Manager in connection with its obligation to maintain
required records of each Series and to price such Series' shares, (d) the
charges and expenses of legal counsel and independent accountants for such
Series, (e) brokerage commissions and any issue or transfer taxes chargeable
to such Series in connection with its securities transactions, (f) all taxes
and corporate fees payable by such Series to governmental agencies, (g) the
fees of any trade associations of which such Series may be a member, (h) the
cost of stock certificates representing shares of such Series, (i) the cost of
fidelity and liability insurance, (j) the fees and expenses involved in
registering and maintaining registration of such Series and its shares with
the SEC and the states, including the preparation and printing of the Fund's
registration statements and prospectuses for such purposes, (k) allocable
communications expenses with respect to investor services and all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing
reports, proxy statements and prospectuses to shareholders in the amount
necessary for distribution to the shareholders, (l) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of such Series' business and (m) distribution fees.

The Management Agreement provides that PIFM will not be liable for any error
of judgment or for any loss suffered by a Series in connection with the
matters to which the Management Agreement relates, except a loss resulting
from willful misfeasance, bad faith, gross negligence or reckless disregard of
duty. The Management Agreement provides that it will terminate automatically
if assigned, and that it may be terminated without penalty by either party
upon not more than 60 days' nor less than 30 days' written notice. The
Management Agreement will continue in effect for a period of more than two
years from the date of execution only so long as such continuance is
specifically approved at least annually in conformity with the Investment
Company Act. The Management Agreement was last approved by the Board of
Trustees of the Fund, including a majority of the Trustees who are not parties
to the contract or interested persons of any such party, as defined in the
Investment Company Act, on October 25, 1997.

B-16
<PAGE>

PIFM has entered into a Subadvisory Agreement with PI. The Subadvisory
Agreement provides that PI will furnish investment advisory services in
connection with the management of each Series. In connection therewith, PI is
obligated to keep certain books and records of the Series. PIFM continues to
have responsibility for all investment advisory services pursuant to the
Management Agreement and supervises PI's performance of such services. PI is
reimbursed by PIFM for the reasonable costs and expenses incurred by PI in
furnishing those services.

The Subadvisory Agreement was last approved by the Board of Trustees,
including a majority of the Trustees who are not parties to the contract or
interested persons of any such party, as defined in the Investment Company
Act, on October 25, 1997.

The Subadvisory Agreement provides that it will terminate in the event of
its assignment (as defined in the Investment Company Act) or upon the
termination of the Management Agreement. The Subadvisory Agreement may be
terminated by a Series, PIFM or PI upon not more than 60 days', nor less than
30 days', written notice. The Subadvisory Agreement provides that it will
continue in effect for a period of more than two years from its execution only
so long as such continuance is specifically approved at least annually in
accordance with the requirements of the Investment Company Act.

DISTRIBUTOR

Until July 1, 1998 Prudential Securities Incorporated (Prudential Securities
or, until July 1, 1998, the Distributor), One Seaport Plaza, New York, New
York 10292 will continue to act as the distributor of the shares of the
Series. Beginning July 1, 1998, Prudential Investment Management Services LLC
(the Distributor), Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077, will act as Distributor of each Series.

Pursuant to separate distribution and service plans (the Class A Plan, the
Class B Plan and the Class C Plan, collectively, the Plans) adopted by the
Fund on behalf of the Series under Rule 12b-1 under the Investment Company Act
and a distribution agreement (the Distribution Agreement), the Distributor
incurs the expenses of distributing the Series' Class A, Class B and Class C
shares. The Distributor also incurs the expenses of distributing the Series'
Class Z shares under the Distribution Agreement, none of which are reimbursed
by or paid for by either Series. See "How the Fund is Managed--Distributor" in
the relevant Series' Prospectus.

The Distributor also receives the proceeds of contingent deferred sales
charges paid by investors upon certain redemptions of Class B and Class C
shares. See "Shareholder Guide--How to Sell Your Shares--Contingent Deferred
Sales Charges" in the relevant Series' Prospectus.

The Class A, Class B and Class C Plans continue in effect from year to year,
provided that each such continuance is approved at least annually by a vote of
the Board of Trustees, including a majority vote of the Trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Class A, Class B, or Class C Plans (the Rule
12b-1 Trustees), cast in person at a meeting called for the purpose of voting
on such continuance. The Plans may each be terminated at any time, without
penalty, by the vote of a majority of the Rule 12b-1 Trustees, or by the vote
of the holders of a majority of the outstanding shares of the applicable class
of a Series on not more than 30 days' written notice to any other party to the
Plans. The Plans may not be amended to increase materially the amounts to be
spent for the services described therein without approval by the shareholders
of the applicable class (by both Class A and Class B shareholders, voting
separately, in the case of material amendments to the Class A Plan), and all
material amendments are required to be approved by the Board of Trustees in
the manner described above. Each Plan will automatically terminate in the
event of its assignment. A Series will not be contractually obligated to pay
expenses incurred under any Plan if it is terminated or not continued.

Pursuant to each Plan, the Board of Trustees will review at least quarterly
a written report of the distribution expenses incurred on behalf of each class
of shares of a Series by the Distributor. The report includes an itemization
of the distribution expenses and the purposes of such expenditures. In
addition, as long as the Plans remain in effect, the selection and nomination
of Rule 12b-1 Trustees shall be committed to the Rule 12b-1 Trustees.

Pursuant to the Distribution Agreement, the Fund has agreed to indemnify the
Distributor to the extent permitted by applicable law against certain
liabilities under the federal securities laws. The Distribution Agreement was
approved by the Board of Trustees, including a majority of the Rule 12b-1
Trustees, on October 25, 1997.

NASD MAXIMUM SALES CHARGE RULE. Pursuant to rules of the NASD, the
Distributor is required to limit aggregate initial sales charges, deferred
sales charges and asset-based sales charges to 6.25% of total gross sales of
each class of shares. Interest charges on unreimbursed distribution expenses
equal to the prime rate plus one percent per annum may be added to the 6.25%
limitation. Sales from the reinvestment of dividends and distributions are not
included in the calculation of the 6.25% limitation. The annual asset-based
sales charge on shares of a Series may not exceed .75 of 1% per class. The
6.25% limitation applies to each class of a Series rather than on a per
shareholder basis. If aggregate sales charges were to exceed 6.25% of total
gross sales of any class, all sales charges on shares of that class would be
suspended.

B-17
<PAGE>

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Manager is responsible for decisions to buy and sell securities, futures
and options on securities and futures for the Series, the selection of
brokers, dealers and futures commission merchants to effect the transactions
and the negotiation of brokerage commissions, if any. The term "Manager" as
used in this section includes the Subadviser. Broker-dealers may receive
negotiated brokerage commissions on a Series' portfolio transactions,
including options and the purchase and sale of underlying securities upon the
exercise of options. On foreign securities exchanges, commissions may be
fixed. Orders may be directed to any broker or futures commission merchant
including, to the extent and in the manner permitted by applicable law,
Prudential Securities and its affiliates. Brokerage commissions on United
States securities, options and futures exchanges or boards of trade are
subject to negotiation between the Manager and the broker or futures
commission merchant.

Equity securities traded in the over-the-counter market and bonds, including
convertible bonds, are generally traded on a "net" basis with dealers acting
as principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price which includes an amount
of compensation to the underwriter, generally referred to as the underwriter's
concession or discount. On occasion, certain money market instruments and U.S.
Government agency securities may be purchased directly from the issuer, in
which case no commissions or discounts are paid. A Series will not deal with
Prudential Securities in any transaction in which Prudential Securities acts
as principal. Thus, it will not deal with Prudential Securities acting as
market maker, and it will not execute a negotiated trade with Prudential
Securities if execution involves Prudential Securities' acting as principal
with respect to any part of a Series' order.

In placing orders for portfolio securities or futures contracts of the
Series, the Manager is required to give primary consideration to obtaining the
most favorable price and efficient execution. Within the framework of this
policy, the Manager will consider the research and investment services
provided by brokers, dealers or futures commission merchants who effect or are
parties to portfolio transactions of a Series, the Manager or the Manager's
other clients. Such research and investment services are those which brokerage
houses customarily provide to institutional investors and include statistical
and economic data and research reports on particular companies and industries.
Such services are used by the Manager in connection with all of its investment
activities, and some of such services obtained in connection with the
execution of transactions for a Series may be used in managing other
investment accounts. Conversely, brokers, dealers or futures commission
merchants furnishing such services may be selected for the execution of
transactions of such other accounts, whose aggregate assets are far larger
than the Series', and the services furnished by such brokers, dealers or
futures commission merchants may be used by the Manager in providing
investment management for the Series. Commission rates are established
pursuant to negotiations with the broker, dealer or futures commission
merchant based on the quality and quantity of execution services provided by
the broker, dealer or futures commission merchant in the light of generally
prevailing rates. The Manager's policy is to pay higher commissions to
brokers, other than Prudential Securities, for particular transactions than
might be charged if a different broker had been selected, on occasions when,
in the Manager's opinion, this policy furthers the objective of obtaining best
price and execution. In addition, the Manager is authorized to pay higher
commissions on brokerage transactions for the Series to brokers other than
Prudential Securities in order to secure research and investment services
described above, subject to review by the Fund's Board of Trustees from time
to time as to the extent and continuation of this practice. The allocation of
orders among brokers and the commission rates paid are reviewed periodically
by the Trust's Board of Trustees.

Portfolio securities may not be purchased from any underwriting or selling
syndicate of which Prudential Securities (or any affiliate), during the
existence of the syndicate, is a principal underwriter (as defined in the
Investment Company Act), except in accordance with rules of the SEC. This
limitation, in the opinion of each Series, will not significantly affect the
Series' ability to pursue its present investment objective. However, in the
future in other circumstances, a Series may be at a disadvantage because of
this limitation in comparison to other funds with similar objectives but not
subject to such limitations.

Subject to the above considerations, Prudential Securities may act as a
securities broker or futures commission merchant for the Series. In order for
Prudential Securities (or any affiliate) to effect any portfolio transactions
for a Series, the commissions, fees or other remuneration received by
Prudential Securities (or any affiliate) must be reasonable and fair compared
to the commissions, fees or other remuneration paid to other brokers or
futures commission merchants in connection with comparable transactions
involving similar securities or futures being purchased or sold on an exchange
during a comparable period of time. This standard would allow Prudential
Securities (or any affiliate) to receive no more than the remuneration which
would be expected to be received by an unaffiliated broker or futures
commission merchant in a commensurate arm's-length transaction. Furthermore,
the Board of Trustees of the Fund, including a majority of the non-interested
Trustees, has adopted procedures which are reasonably designed to provide that
any commissions, fees or other remuneration paid to Prudential Securities (or
any affiliate) are consistent with the foregoing standard. In accordance with
Section 11(a) of the Securities Exchange Act of 1934, Prudential Securities
may not retain

B-18
<PAGE>

compensation for effecting transactions on a national securities exchange for
a Series unless such Series has expressly authorized the retention of such
compensation. Prudential Securities must furnish to each Series at least
annually a setting forth the total amount of all compensation retained by
Prudential Securities from transactions effected for such Series during the
applicable period. Brokerage and futures transactions with Prudential
Securities (or any affiliate) are also subject to such fiduciary standards as
may be imposed upon Prudential Securities (or such affiliate) by applicable
law.

Transactions in options by a Series will be subject to limitations
established by each of the exchanges governing the maximum number of options
which may be written or held by a single investor or group of investors acting
in concert, regardless of whether the options are written or held on the same
or different exchanges or are written or held in one or more accounts or
through one or more brokers. Thus, the number of options which a Series may
write or hold may be affected by options written or held by the Manager and
other investment advisory clients of the Manager. An exchange may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.

PURCHASE AND REDEMPTION OF FUND SHARES

Shares of a Series may be purchased at a price equal to the next determined
net asset value per share plus a sales charge which, at the election of the
investor, may be imposed either (i) at the time of purchase (Class A shares)
or (ii) on a deferred basis (Class B or Class C shares). Class Z shares of a
Series are offered to a limited group of investors at net asset value without
any sales charge. See "Shareholder Guide--How to Buy Shares of the Fund" in
the relevant Series' Prospectus.

Each class of shares represents an interest in the same assets of such
Series and is identical in all respects except that (i) each class is subject
to different sales charges and distribution and/or service fees (except for
Class Z shares, which are not subject to any sales charges and distribution
and/or service fees), which may affect performance, (ii) each class has
exclusive voting rights with respect to any matter submitted to shareholders
that relates solely to its arrangement and has separate voting rights on any
matter submitted to shareholders in which the interests of one class differ
from the interests of any other class, (iii) each class has a different
exchange privilege, (iv) only Class B shares have a conversion feature and (v)
Class Z shares are offered exclusively for sale to a limited group of
investors. See "Distributor" and "Shareholder Investment Account--Exchange
Privilege."

ISSUANCE OF SERIES SHARES FOR SECURITIES

Transactions involving the issuance of Series shares for securities (rather
than cash) will be limited to (i) reorganizations, (ii) statutory mergers, or
(iii) other acquisitions of portfolio securities that: (a) meet the investment
objective and policies of such Series, (b) are liquid and not subject to
restrictions on resale and (c) have a value that is readily ascertainable via
listing on or trading in a recognized United States or international exchange
or market, and (d) are approved by the Series investment adviser.

SPECIMEN PRICE MAKE-UP

Under the current distribution arrangements between each Series and the
Distributor, Class A shares are sold at a maximum sales charge of 5% and Class
B*, Class C* and Class Z shares are sold at net asset value. Using each
Series' initial net asset value of $10.00 per share, the maximum offering
price of each Series' shares is as follows:

<TABLE>
<CAPTION>
DEVELOPING
LATIN AMERICA MARKETS
EQUITY FUND EQUITY FUND
------------- -----------
<S> <C> <C>
CLASS A
Net asset value and redemption price per Class
A share....................................... $10.00 $10.00
Maximum sales charge (5% of offering price).... .53 .53
------ ------
Maximum offering price to public............... $10.53 $10.53
====== ======
CLASS B
Net asset value, offering price and redemption
price per Class B share*...................... $10.00 $10.00
====== ======
CLASS C
Net asset value, offering price and redemption
price per Class C share*...................... $10.00 $10.00
====== ======
CLASS Z
Net asset value, offering price and redemption
price per Class Z share....................... $10.00 $10.00
====== ======
</TABLE>
---------
*Class B and Class C shares are subject to a contingent
deferred sales charge on certain redemptions. See "Shareholder
Guide--How to Sell Your Shares--Contingent Deferred Sales
Charges" in either Prospectus.

REDUCTION AND WAIVER OF INITIAL SALES CHARGES--CLASS A SHARES

COMBINED PURCHASE AND CUMULATIVE PURCHASE PRIVILEGE. If an investor or
eligible group of related investors purchases Class A shares of a Series
concurrently with Class A shares of other Prudential Mutual Funds, the
purchases may be combined to take advantage of the reduced sales charges
applicable to larger purchases. See the table of breakpoints under
"Shareholder Guide--Alternative Purchase Plan" in the relevant Prospectus.

B-19
<PAGE>

An eligible group of related Series investors includes any combination of
the following:

(a) an individual;

(b) the individual's spouse, their children and their parents;

(d) any company controlled by the individual (a person, entity or group that
holds 25% or more of the outstanding voting securities of a company will be
deemed to control the company, and a partnership will be deemed to be
controlled by each of its general partners);

(e) a trust created by the individual, the beneficiaries of which are the
individual, his or her spouse, parents or children;

(f) a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act account
created by the individual or the individual's spouse; and

(g) one or more employee benefits plans of a company controlled by an
individual.

In addition, an eligible group of related Series investors may include an
employer (or group of related employers) and one or more retirement or group
plans of such employer or employers (an employer controlling, controlled by or
under common control with another employer is deemed related to that
employer).

The Distributor must be notified at the time of purchase that the investor
is entitled to a reduced sales charge. The reduced sales charges will be
granted subject to confirmation of the investor's holdings. The Combined
Purchase and Cumulative Purchase Privilege does not apply to individual
participants in any retirement or group plans.

RIGHTS OF ACCUMULATION. Reduced sales charges are also available through
Rights of Accumulation, under which an investor or an eligible group of
related investors, as described above under "Combined Purchase and Cumulative
Purchase Privilege," may aggregate the value of their existing holdings of
shares of the Series and shares of other Prudential Mutual Funds (excluding
money market funds other than those acquired pursuant to the exchange
privilege) to determine the reduced sales charge. However, the value of shares
held directly with the Transfer Agent and through Prudential Securities will
not be aggregated to determine the reduced sales charge. All shares must be
held either directly with the Transfer Agent or through Prudential Securities.
The value of existing holdings for purposes of determining the reduced sales
charge is calculated using the maximum offering price (NAV plus maximum sales
charge) as of the previous business day. See "How the Fund Values its Shares"
in either Prospectus.

The Distributor must be notified at the time of purchase that the
shareholder is entitled to a reduced sales charge. The reduced sales charges
will be granted subject to confirmation of the investors' holdings. Rights of
Accumulation are not available to individual participants in any retirement or
group plans.

LETTER OF INTENT. Reduced sales charges are also available to investors (or
an eligible group of related investors), including retirement and group plans,
who enter into a written Letter of Intent providing for the purchase, within a
thirteen-month period, of shares of a Series and shares of other Prudential
Mutual Funds (Investment Letter of Intent). Retirement and group plans may
also qualify to purchase Class A shares at NAV by entering into a Letter of
Intent whereby they agree to enroll, within a thirteen-month period, a
specified number of eligible employees or participants (Participant Letter of
Intent).

For purposes of the Investment Letter of Intent, all shares of the Series
and shares of other Prudential Mutual Funds (excluding money market funds
other than those acquired pursuant to the exchange privilege) which were
previously purchased and are still owned are also included in determining the
applicable reduction. However, the value of shares held directly with the
Transfer Agent and through Prudential Securities will not be aggregated to
determine the reduced sales charge. All shares must be held either directly
with the Transfer Agent or through Prudential Securities.

A Letter of Intent permits a purchaser, in the case of an Investment Letter
of Intent, to establish a total investment goal to be achieved by any number
of investments over a thirteen-month period and, in the case of a Participant
Letter of Intent, to establish a minimum eligible employee or participant
enrollment goal over a thirteen-month period. Each investment made during the
period, in the case of an Investment Letter of Intent, will receive the
reduced sales charge applicable to the amount represented by the goal, as if
it were a single investment. In the case of a Participant Letter of Intent,
each investment made during the period will be made at net asset value.
Escrowed Class A shares totaling 5% of the dollar amount of the Letter of
Intent will be held by the Transfer Agent in the name of the purchaser, except
in the case of retirement and group plans where the employer or plan sponsor
will be responsible for paying any applicable sales charge. The effective date
of an Investment Letter of Intent (except in the case of retirement and group
plans) may be back-dated up to 90 days, in order that any investments made
during this 90-day period, valued at the purchaser's cost, can be applied to
the fulfillment of the Letter of Intent goal.

B-20
<PAGE>

The Investment Letter of Intent does not obligate the investor to purchase,
nor a Series to sell, the indicated amount. Similarly, the Participant Letter
of Intent does not obligate the retirement or group plan to enroll the
indicated number of eligible employees or participants. In the event the
Letter of Intent goal is not achieved within the thirteen-month period, the
purchaser (or the employer or plan sponsor, in the case of any retirement or
group plan) is required to pay the difference between the sales charge
otherwise applicable to the purchases made during this period and sales
charges actually paid. Such payment may be made directly to the Distributor
or, if not paid, the Distributor will liquidate sufficient escrowed shares to
obtain such difference. Investors electing to purchase Class A shares of a
Series pursuant to a Letter of Intent should carefully read such Letter of
Intent.

The Distributor must be notified at the time of purchase that the investor
is entitled to a reduced sales charge. The reduced sales charge will, in the
case of an Investment Letter of Intent, be granted subject to confirmation of
the investor's holdings or in the case of a Participant Letter of Intent,
subject to confirmation of the number of eligible employees or participants in
the retirement or group plan. Letters of Intent are not available to
individual participants in any retirement or group plans.

WAIVER OF THE CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES

The contingent deferred sales charge is waived under circumstances described
in each Series' Prospectus. See "Shareholder Guide--How to Sell Your Shares--
Waiver of the Contingent Deferred Sales Charges--Class B Shares" in either
Prospectus. In connection with these waivers, the Transfer Agent will require
you to submit the supporting documentation set forth below.

<TABLE>
<CAPTION>
CATEGORY OF WAIVER REQUIRED DOCUMENTATION
<S> <C>
Death A copy of the shareholder's death certificate
or, in the case of a trust, a copy of the
grantor's death certificate, plus a copy of
the trust agreement identifying the grantor.
Disability--An individual will A copy of the Social Security Administration
be considered disabled if he or award letter or a letter from a physician on
she is unable to engage in any the physician's letterhead stating that the
substantial gainful activity by shareholder (or, in the case of a trust, the
reason of any medically grantor) is permanently disabled. The letter
determinable physical or mental must also indicate the date of disability.
impairment which can be expected
to result in death or to be of
long-continued and indefinite
duration.
<CAPTION>
CATEGORY OF WAIVER REQUIRED DOCUMENTATION
<S> <C>
Distribution from an IRA or A copy of the distribution form from the
403(b) Custodial Account custodial firm indicating (i) the date of
birth of the shareholder and (ii) that the
shareholder is over age 59 1/2 and is taking
a normal distribution--signed by the
shareholder.
Distribution from Retirement A letter signed by the plan
Plan administrator/trustee indicating the reason
for the distribution.
Excess Contributions A letter from the shareholder (for an IRA) or
the plan administrator/trustee on company
letterhead indicating the amount of the
excess and whether or not taxes have been
paid.
</TABLE>

The Transfer Agent reserves the right to request such additional documents
as it may deem appropriate.

SHAREHOLDER INVESTMENT ACCOUNT

Upon the initial purchase of a Series' shares, a Shareholder Investment
Account is established for each investor under which the shares are held for
the investor by the Transfer Agent. If a stock certificate is desired, it must
be requested in writing for each transaction. Certificates are issued only for
full shares and may be redeposited in the Account at any time. There is no
charge to the investor for the issuance of a certificate. Each Series makes
available to its shareholders the following privileges and plans.

AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS

For the convenience of investors, all dividends and distributions are
automatically reinvested in full and fractional shares of the applicable
Series at the NAV per share at the close of business on the record date. An
investor may direct the Transfer Agent in writing not less than five full
business days prior to the record date to have subsequent dividends or
distributions sent in cash rather than reinvested. In the case of recently
purchased shares for which registration instructions have not been received on
the record date, cash payment will be made directly to the dealer. Any
shareholder who receives a cash payment representing a dividend or

B-21
<PAGE>

distribution may reinvest such distribution at NAV by returning the check or
the proceeds to the Transfer Agent within 30 days after the payment date. Such
investment will be made at the net asset value per share next determined after
receipt of the check or proceeds by the Transfer Agent. Such shareholder will
receive credit for any contingent deferred sales charge paid in connection
with the amount of proceeds being reinvested.

EXCHANGE PRIVILEGE

Each Series makes available to its shareholders the privilege of exchanging
their shares of such Series for shares of certain other Prudential Mutual
Funds, including one or more specified money market funds, subject in each
case to the minimum investment requirements of such funds. Shares of such
other Prudential Mutual Funds may also be exchanged for shares of the Fund.
All exchanges are made on the basis of the relative NAV next determined after
receipt of an order in proper form. An exchange will be treated as a
redemption and purchase for tax purposes. Shares may be exchanged for shares
of another fund only if shares of such fund may legally be sold under
applicable state laws. For retirement and group plans having a limited menu of
Prudential Mutual Funds, the Exchange Privilege is available for those funds
eligible for investment in the particular program.

It is contemplated that the Exchange Privilege may be applicable to new
mutual funds whose shares may be distributed by the Distributor.

CLASS A. Shareholders of a Series may exchange their Class A shares for
Class A shares of certain other Prudential Mutual Funds, shares of Prudential
Government Securities Trust (Short-Intermediate Term Series) and shares of the
money market funds specified below. No fee or sales load will be imposed upon
the exchange. Shareholders of money market funds who acquired such shares upon
exchange of Class A shares may use the Exchange Privilege only to acquire
Class A shares of the Prudential Mutual Funds participating in the Exchange
Privilege.

The following money market funds participate in the Class A Exchange
Privilege:

Prudential California Municipal Fund
(California Money Market Series)
Prudential Government Securities Trust
(Money Market Series)
(U.S. Treasury Money Market Series)
Prudential Municipal Series Fund
(Connecticut Money Market Series)
(Massachusetts Money Market Series)
(New Jersey Money Market Series)
(New York Money Market Series)
Prudential MoneyMart Assets, Inc. (Class A Shares)
Prudential Tax-Free Money Fund, Inc.

CLASS B AND CLASS C. Shareholders of a Series may exchange their Class B and
Class C shares for Class B and Class C shares, respectively, of certain other
Prudential Mutual Funds. No CDSC will be payable upon such exchange, but a
CDSC may be payable upon the redemption of the Class B and Class C shares
acquired as a result of an exchange. The applicable sales charge will be that
imposed by the fund in which shares were initially purchased and the purchase
date will be deemed to be the first day of the month after the initial
purchase, rather than the date of the exchange.

Class B and Class C shares of a Series may also be exchanged for shares of
Prudential Special Money Market Fund, Inc., without imposition of any CDSC at
the time of exchange. Upon subsequent redemption from such money market fund
or after re-exchange into the Fund, such shares will be subject to the CDSC
calculated by excluding the time such shares were held in the money market
fund. In order to minimize the period of time in which shares are subject to a
CDSC, shares exchanged out of the money market fund will be exchanged on the
basis of their remaining holding periods, with the longest remaining holding
periods being transferred first. In measuring the time period shares are held
in a money market fund and "tolled" for purposes of calculating the CDSC
holding period, exchanges are deemed to have been made on the last day of the
month. Thus, if shares are exchanged into a Series from a money market fund
during the month (and are held in a Series at the end of month), the entire
month will be included in the CDSC holding period. Conversely, if shares are
exchanged into a money market fund prior to the last day of the month (and are
held in the money market fund on the last day of the month), the entire month
will be excluded from the CDSC holding period. For purposes of calculating the
seven year holding period applicable to the Class B conversion feature, the
time period during which Class B shares were held in a money market fund will
be excluded.

B-22
<PAGE>

At any time after acquiring shares of other funds participating in the Class
B or Class C Exchange Privilege, a shareholder may again exchange those shares
(and any reinvested dividends and distributions) for Class B or Class C shares
of a Series, respectively, without subjecting such shares to any CDSC upon the
exchange. Shares of any fund participating in the Class B or Class C exchange
privilege that were acquired through reinvestment of dividends or
distributions may be exchanged for Class B or Class C shares, respectively, of
other funds without being subject to any CDSC.

CLASS Z. Class Z shares may be exchanged for Class Z shares of other
Prudential Mutual Funds.

Additional details about the Exchange Privilege and prospectuses for each of
the Prudential Mutual Funds are available from the Fund's Transfer Agent,
Prudential Securities or Prusec. The Exchange Privilege may be modified,
terminated or suspended on sixty days' notice, and any fund, including either
Series, or the Distributor, has the right to reject any exchange application
relating to such fund's shares.

DOLLAR COST AVERAGING

Dollar cost averaging is a method of accumulating shares by investing a
fixed amount of dollars in shares at set intervals. An investor buys more
shares when the price is low and fewer shares when the price is high. The
average cost per share is lower than it would be if a constant number of
shares were bought at set intervals.

Dollar cost averaging may be used, for example, to plan for retirement, to
save for a major expenditure, such as the purchase of a home, or to finance a
college education. The cost of a year's education at a four-year college today
averages around $14,000 at a private college and around $6,000 at a public
university. Assuming these costs increase at a rate of 7% a year, as has been
projected, for the freshman class beginning in 2011, the cost of four years at
a private college could reach $210,000 and over $90,000 at a public
university./1/

The following chart shows how much you would need in monthly investments to
achieve specified lump sums to finance your investment goals./2/

<TABLE>
<CAPTION>
PERIOD OF
MONTHLY INVESTMENTS: $100,000 $150,000 $200,000 $250,000
-------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
25 years.............................. $ 110 $ 165 $ 220 $ 275
20 years.............................. 176 264 352 440
15 years.............................. 296 444 592 740
10 years.............................. 555 833 1,110 1,388
5 years.............................. 1,371 2,057 2,742 3,428
</TABLE>

See "Automatic Savings Accumulation Plan."
- ---------
/1/Source information concerning the costs of education at public and private
universities is available from The College Board Annual Survey of Colleges,
1993. Average costs for private institutions include tuition, fees, room and
board for the 1993-1994 academic year.

/2/The chart assumes an effective rate of return of 8% (assuming monthly
compounding). This example is for illustrative purposes only and is not
intended to reflect the performance of an investment in shares of a Series.
The investment return and principal value of an investment will fluctuate so
that an investor's shares when redeemed may be worth more or less than their
original cost.

AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP)

Under ASAP, an investor may arrange to have a fixed amount automatically
invested in shares of a Series monthly by authorizing his or her bank account
or Prudential Securities account (including a Command Account) to be debited
to invest specified dollar amounts in shares of such Series. The investor's
bank must be a member of the Automatic Clearing House System. Stock
certificates are not issued to ASAP participants.

Further information about this program and an application form can be
obtained from the Transfer Agent, Prudential Securities or Prusec.

SYSTEMATIC WITHDRAWAL PLAN

A systematic withdrawal plan is available to shareholders through the
Distributor or the Transfer Agent. Such withdrawal plan provides for monthly
or quarterly checks in any amount, except as provided below, up to the value
of the shares in the shareholder's account. Withdrawals of Class B or Class C
shares may be subject to a CDSC. See "Shareholder Guide--How to Sell Your
Shares--Contingent Deferred Sales Charges" in either Series' Prospectus.

In the case of shares held through the Transfer Agent (i) a $10,000 minimum
account value applies, (ii) withdrawals may not be for less than $100 and
(iii) the shareholder must elect to have all dividends and/or distributions
automatically reinvested in

B-23
<PAGE>

additional full and fractional shares at NAV on shares held under this plan.
See '"Shareholder Investment Account-- Automatic Reinvestment of Dividends
and/or Distributions" above.

The Distributor and the Transfer Agent act as agents for the shareholder in
redeeming sufficient full and fractional shares to provide the amount of the
periodic withdrawal payment. The systematic withdrawal plan may be terminated
at any time, and the Distributor reserves the right to initiate a fee of up to
$5 per withdrawal, upon 30 days' written notice to the shareholder.

Withdrawal payments should not be considered as dividends, yield or income.
If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.

Furthermore, each withdrawal constitutes a redemption of shares, and any
gain or loss realized must be generally recognized for federal income tax
purposes. In addition, withdrawals made concurrently with purchases of
additional shares are inadvisable because of the sales charges applicable to
(i) the purchase of Class A shares and (ii) the withdrawal of Class B and
Class C shares. Each shareholder should consult his or her own tax adviser
with regard to the tax consequences of the systematic withdrawal plan,
particularly if used in connection with a retirement plan.

TAX-DEFERRED RETIREMENT PLANS

Various tax-deferred retirement plans, including a 401(k) plan, self-
directed individual retirement accounts and "tax-deferred accounts" under
Section 403(b)(7) of the Internal Revenue Code are available through the
Distributor. These plans are for use by both self-employed individuals and
corporate employers. These plans permit either self-direction of accounts by
participants, or a pooled account arrangement. Information regarding the
establishment of these plans, and the administration, custodial fees and other
details are available from Prudential Securities or the Transfer Agent.

Investors who are considering the adoption of such a plan should consult
with their own legal counsel or tax adviser with respect to the establishment
and maintenance of any such plan.

TAX-DEFERRED RETIREMENT ACCOUNTS

INDIVIDUAL RETIREMENT ACCOUNTS. An individual retirement account (IRA)
permits the deferral of federal income tax on income earned in the account
until the earnings are withdrawn. The following chart represents a comparison
of the earnings in a personal savings account with those in an IRA, assuming a
$2,000 annual contribution, an 8% rate of return and a 39.6% federal income
tax bracket and shows how much more retirement income can accumulate within an
IRA as opposed to a taxable individual savings account.

TAX-DEFERRED COMPOUNDING/1/

<TABLE>
<CAPTION>
CONTRIBUTIONS PERSONAL
MADE OVER: SAVINGS IRA
------------- -------- --------
<S> <C> <C>
10 years $ 26,165 $ 31,291
15 years 44,675 58,649
20 years 68,109 98,846
25 years 97,780 157,909
30 years 135,346 244,692
</TABLE>
- ---------
/1/The chart is for illustrative purposes only and does not represent the
performance of a Series or any specific investment. It shows taxable versus
tax-deferred compounding for the periods and on the terms indicated. Earnings
in a traditional IRA account will be subject to tax when withdrawn from the
account. Distributions from a Roth IRA which meet the conditions required
under the Internal Revenue Code will not be subject to tax upon withdrawal
from the account.

MUTUAL FUND PROGRAMS

From time to time, a Series may be included in a mutual fund program with
other Prudential Mutual Funds. Under such a program, a group of portfolios
will be selected and thereafter marketed collectively. Typically, these
programs are created with an investment theme, e.g., to seek greater
diversification, protection from interest rate movements or access to
different management styles. In the event such a program is instituted, there
may be a minimum investment requirement for the program as a whole. A Series
may waive or reduce its minimum initial investment requirements in connection
with such a program.

The mutual funds in the program may be purchased individually or as part of
a program. Since the allocation of portfolios included in the program may not
be appropriate for all investors, individuals should consult their Prudential
Securities Financial Advisor or Prudential/Pruco Securities Representative
concerning the appropriate blend of portfolios for them. If investors elect to
purchase the individual mutual funds that constitute the program in an
investment ratio different from that offered by the program, the standard
minimum investment requirements for the individual mutual funds will apply.

B-24
<PAGE>

NET ASSET VALUE

Under the Investment Company Act, with respect to securities for which
market quotations are not readily available, the Board of Trustees is
responsible for determining in good faith the fair value of securities of the
Fund. In accordance with procedures adopted by the Board of Trustees, the
value of investments listed on a securities exchange and NASDAQ National
Market System securities (other than options on stock and stock indices) are
valued at the last sale price on the day of valuation or, if there was no sale
on such day, the mean between the last bid and asked prices on such day, as
provided by a pricing service or principal market maker. Corporate bonds
(other than convertible debt securities) and U.S. Government 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 on the basis of valuations provided by a pricing service which uses
information with respect to transactions in bonds, quotations from bond
dealers, agency ratings, market transactions in comparable securities and
various relationships between securities in determining value. Convertible
debt 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 at the mean between the last reported bid and
asked prices provided by principal market makers. Options on stock and stock
indices traded on an exchange are valued at the mean between the most recently
quoted bid and asked prices on the respective exchange and futures contracts
and options thereon are valued at their last sale prices as of the close of
trading on the applicable commodities exchange. Quotations of foreign
securities in a foreign currency are converted to U.S. dollar equivalents at
the current rate obtained from a recognized bank or dealer and forward
currency exchange contracts are valued at the current cost of covering or
offsetting such contracts. Should an extraordinary event, which is likely to
affect the value of the security, occur after the close of an exchange on
which a portfolio security is traded, such security will be valued at fair
value considering factors determined in good faith by the Manager of
Subadviser under procedures established by and under the general supervision
of the Fund's Board of Trustees.

Securities or other assets for which reliable market quotations are not
readily 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 (or Valuation
Committee or Board of Trustees), does not represent fair value, are valued by
the Valuation Committee or Board in consultation with the Manager and
Subadviser, under procedures established by the Board of Trustees.

Short-term debt securities are valued at cost, with interest accrued or
discount amortized to the date of maturity, if their original maturity was 60
days or less, unless this is determined by the Board of Trustees not to
represent fair value. Short-term securities with remaining maturities of more
than 60 days, for which market quotations are readily available, are valued at
their current market quotations as supplied by an independent pricing agent or
principal market maker.

A Series will compute its net asset value at 4:15 P.M., New York time, on
each day the New York Stock Exchange is open for trading except on days on
which no orders to purchase, sell or redeem such Series' shares have been
received or days on which changes in the value of such Series' portfolio
securities do not affect net asset value. In the event the New York Stock
Exchange closes early on any business day, the net asset value of a Series'
shares shall be determined at a time between such closing and 4:15 P.M., New
York time. The New York Stock Exchange is closed on the following holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

Net asset value (NAV) is calculated separately for each class of each
Series. The NAV of Class B and Class C shares of a Series will generally be
lower than the NAV of Class A shares and Class Z shares of such Series as a
result of the larger distribution-related fee to which Class B and Class C
shares are subject. The NAV of Class Z shares of a Series will generally be
higher than the NAV of Class A, Class B or Class C shares of such Series as a
result of the fact that Class Z shares are not subject to any distribution or
service fee. It is expected, however, that the NAV per share of each class
will tend to converge immediately after the recording of dividends, if any,
which will differ by approximately the amount of the distribution and/or
service fee expense accrual differential among the classes.

TAXES, DIVIDENDS AND DISTRIBUTIONS

The Series has elected to qualify and intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code.
This relieves a Series (but not its shareholders) from paying federal income
tax on income which is distributed to shareholders and permits net capital
gains of a Series (i.e., the excess of net long-term capital gains over net
short-term capital losses) to be treated as long-term capital gains of the
shareholders, regardless of how long shares in such Series are held.

Qualification as a regulated investment company requires, among other
things, that (a) at least 90% of a Series' annual gross income (without
reduction for losses from the sale or other disposition of securities) be
derived from interest, dividends, payments with respect to securities loans,
and gains from the sale or other disposition of securities or foreign
currencies, or other income (including but not limited to, gains from options,
futures or forward contracts) derived with respect to its business of
investing

B-25
<PAGE>

in such securities or currencies; (b) a Series diversifies its holdings so
that, at the end of each quarter of the taxable year, (i) at least 50% of the
value of a Series' assets is represented by cash, U.S. Government securities
and other securities limited in respect of any one issuer to an amount not
greater than 5% of the value of the assets of such Series and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its assets is invested in the securities of any one issuer (other
than U.S. Government securities) and (c) a Series distribute to its
shareholders at least 90% of its net investment income and net short-term
gains (i.e., the excess of net short-term capital gains over net long-term
capital losses) in each year.

The Fund is required under the Internal Revenue Code to distribute 98% of
its ordinary income in the same calendar year in which it is earned. Each
Series is also required to distribute during the calendar year 98% of the
capital gain net income it earned during the twelve months ending on October
31 of such calendar year. In addition, each Series must distribute during the
calendar year any undistributed ordinary income and undistributed capital gain
net income from the prior year or the twelve-month period ending on October 31
of such prior calendar year, respectively. To the extent it does not meet
these distribution requirements, a Series will be subject to a non-deductible
4% excise tax on the undistributed amount. For purposes of this excise tax,
income on which a Series pays income tax is treated as distributed.

Gains or losses on sales of securities by a Series will generally be treated
as long-term capital gains or losses if the securities have been held by it
for more than one year, except in certain cases where a Series acquires a put
or writes a call thereon or otherwise holds an offsetting position with
respect to the securities. Other gains or losses on the sale of securities
will be short-term capital gains or losses. Gains and losses on the sale,
lapse or other termination of options on securities will generally be treated
as gains and losses from the sale of securities. If an option written by a
Series on securities lapses or is terminated through a closing transaction,
such as a repurchase by such Series of the option from its holder, such Series
will generally realize capital gain or loss. If securities are sold by a
Series pursuant to the exercise of a call option written by it, such Series
will include the premium received in the sale proceeds of the securities
delivered in determining the amount of gain or loss on the sale. Certain of a
Series' transactions may be subject to wash sale, short sale and straddle
provisions of the Internal Revenue Code which may, among other things, require
such Series to defer recognition of losses. In addition, debt securities
acquired by a Series may be subject to original issue discount and market
discount rules which, respectively, may cause such Series to accrue income in
advance of the receipt of cash with respect to interest or cause gains to be
treated as ordinary income.

Special rules apply to most options on stock indices, futures contracts and
options thereon, and forward foreign currency exchange contracts in which a
Series may invest. See "Investment Objective and Policies." These investments
will generally constitute Section 1256 contracts and will be required to be
"marked to market" for federal income tax purposes at the end of the Series'
taxable year; that is, treated as having been sold at market value. Except
with respect to certain forward foreign currency exchange contracts, sixty
percent of any gain or loss recognized on such deemed sales and on actual
dispositions will be treated as long-term capital gain or loss, and the
remainder will be treated as short-term capital gain or loss.

Forward currency contracts, options and futures contracts entered into by a
Series may create "straddles" for federal income tax purposes. Positions which
are part of a straddle will be subject to certain wash sale and short sale
provisions of the Internal Revenue Code. In the case of a straddle, a Series
may be required to defer the recognition of losses on positions it holds to
the extent of any unrecognized gain on offsetting positions held by such
Series.

Gains or losses attributable to fluctuations in exchange rates which occur
between the time a Series accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time
such Series actually collects such receivables or pays such liabilities are
treated as ordinary income or ordinary loss. Similarly, gains or losses on
forward foreign currency exchange contracts or dispositions of debt securities
denominated in a foreign currency attributable to fluctuations in the value of
the foreign currency between the date of acquisition of the security and the
date of disposition also are treated as ordinary gain or loss. These gains or
losses, referred to under the Internal Revenue Code as "Section 988" gains or
losses, increase or decrease the amount of a Series' investment company
taxable income available to be distributed to its shareholders as ordinary
income, rather than increasing or decreasing the amount of a Series' net
capital gain. If Section 988 losses exceed other investment company taxable
income during a taxable year, a Series would not be able to make any ordinary
dividend distributions, or distributions made before the losses were realized
would be recharacterized as a return of capital to shareholders, rather than
as an ordinary dividend, reducing each shareholder's basis in his or her
Series shares.

Shareholders of a Series electing to receive dividends and distributions in
the form of additional shares will have a cost basis for federal income tax
purposes in each share so received equal to the net asset value of a share of
such Series on the reinvestment date.

B-26
<PAGE>

Any dividends paid shortly after a purchase by an investor may have the
effect of reducing the per share net asset value of the investor's shares by
the per share amount of the dividends. Furthermore, such dividends, although
in effect a return of capital, are subject to federal income taxes. Therefore,
prior to purchasing shares of a Series, the investor should carefully consider
the impact of dividends, including capital gains distributions, which are
expected to be or have been announced.

Any loss realized on a sale, redemption or exchange of shares of a Series by
a shareholder will be disallowed to the extent the shares are replaced within
a 61-day period (beginning 30 days before the disposition of shares). Shares
purchased pursuant to the reinvestment of a dividend will constitute a
replacement of shares.

If a shareholder who acquires shares of a Series sells or otherwise disposes
of such shares within 90 days of acquisition, certain sales charges incurred
in acquiring such shares may not be included in the basis of such shares for
purposes of calculating gain or loss realized upon such sale or disposition.

The per share dividends on Class B and Class C shares will be lower than the
per share dividends on Class A and Class Z shares of such Series as a result
of the higher distribution-related fee applicable to the Class B and Class C
shares and lower on Class A shares in relation to Class Z shares. The per
share distributions of net capital gains, if any, will be paid in the same
amount for Class A, Class B, Class C and Class Z shares of a Series. See "Net
Asset Value."

Dividends of net investment income and distributions of net short-term
capital gains paid to a shareholder (including a shareholder acting as a
nominee or fiduciary) who is a nonresident alien individual, a foreign
corporation or a foreign partnership (foreign shareholder) are subject to a
30% (or lower treaty rate) withholding tax upon the gross amount of the
dividends unless the dividends are effectively connected with a U.S. trade or
business conducted by the foreign shareholder. Capital gain dividends paid to
a foreign shareholder generally are not subject to withholding tax. A foreign
shareholder will, however, be required to pay U.S. income tax on any dividends
and capital gain distributions which are effectively connected with a U.S.
trade or business of the foreign shareholder.

Income received by a Series from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Income tax
treaties between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine in advance the effective
rate of foreign tax to which a Series will be subject, since the amount of a
Series' assets to be invested in various countries is not known.

If a Series is liable for foreign income taxes, and if more than 50% of the
value of such Series' assets consists of securities of foreign corporations,
such Series may elect to "pass through" to such Series' shareholders the
amount of foreign income taxes paid by such Series. If a Series elects to
"pass through" the foreign taxes, shareholders will be required to: (i)
include in gross income (in addition to taxable dividends actually received)
their pro rata share of the foreign income taxes paid by such Series; and (ii)
treat their pro rata share of foreign income taxes as paid by them.
Shareholders will then be permitted either to deduct their pro rata share of
foreign income taxes in computing their taxable income or to claim a foreign
tax credit against U.S. income taxes. No deduction for foreign taxes may be
claimed by a shareholder who does not itemize deductions. Foreign shareholders
may not deduct or claim a credit for foreign tax unless the dividends paid to
them by a Series are effectively connected with a U.S. trade or business.
Accordingly, a foreign shareholder may recognize additional taxable income as
a result of a Series' election to "pass through" the foreign income taxes to
shareholders.

The amount of foreign taxes for which a shareholder may claim a credit in
any year will generally be subject to a separate limitation for "passive
income," which includes, among other things, dividends, interest and certain
foreign currency gains. Gain from the sale of a security and gain or loss from
a Section 988 transaction which is treated as ordinary income or loss (or
would have been so treated absent an election by the applicable Series) will
be treated as derived from sources within the United States, potentially
reducing the amount allowable as a credit under the limitation.

Each shareholder will be notified within 60 days after the close of the
Series' taxable year whether the foreign taxes paid by the applicable Series
will "pass through" for that year and, if so, such notification will designate
(a) the shareholder's portion of the foreign taxes paid by such Series and (b)
the portion of the dividend which represents income derived from foreign
sources.

The tax consequences to a foreign shareholder entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a
Series.

B-27
<PAGE>

PERFORMANCE INFORMATION

AVERAGE ANNUAL TOTAL RETURN. A Series may from time to time advertise its
average annual total return. Average annual total return is determined
separately for Class A, Class B, Class C and Class Z shares. See "How the Fund
Calculates Performance" in the applicable Prospectus.

Average annual total return is computed according to the following formula:

P(1+T) to the nth power = ERV

Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value at the end of the 1, 5 or 10 year periods
(or fractional portion thereof) of a hypothetical $1,000 payment made
at the beginning of the 1, 5 or 10 year periods.

Average annual total return takes into account any applicable initial or
contingent deferred sales charges but does not take into account any federal
or state income taxes that may be payable upon redemption.

AGGREGATE TOTAL RETURN. A Series may also advertise its aggregate total
return. Aggregate total return is determined separately for Class A, Class B,
Class C and Class Z shares. See "How the Fund Calculates Performance" in the
applicable Prospectus.

Aggregate total return represents the cumulative change in the value of an
investment in a Series and is computed according to the following formula:

ERV-P
-----
P

Where: P = a hypothetical initial payment of $1,000.
ERV = ending redeemable value at the end of the 1, 5 or 10 year
periods (or fractional portion thereof) of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year periods.

Aggregate total return does not take into account any federal or state
income taxes that may be payable upon redemption or any applicable initial or
contingent deferred sales charges.

YIELD. A Series may from time to time advertise its yield as calculated over
a 30-day period. Yield is calculated separately for Class A, Class B, Class C
and Class Z shares. This yield will be computed by dividing a Series' net
investment income per share earned during this 30-day period by the maximum
offering price per share on the last day of the period. Yield is calculated
according to the following formula:

a -- b
________
YIELD = 2 [( +1) to the 6th power - 1]
cd

Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.

Yield fluctuates and an annualized yield quotation is not a representation
by a Series as to what an investment in such Series will actually yield for
any given period.

B-28
<PAGE>

From time to time, the performance of a Series may be measured against
various indices. Set forth below is a chart which compares the performance of
different types of investments over the long-term and the rate of
inflation./1/

BAR GRAPH

A LOOK AT PERFORMANCE OVER THE LONG-TERM
AVERAGE ANNUAL RETURNS
1/1/26 - 12/31/97

COMMON STOCKS LONG-TERM GOV'T BONDS INFLATION
11.0% 5.2% 3.1%

/1/Source: Ibbotson Associates, "Stocks, Bonds, Bills and Inflation--1997
Yearbook", (annually updates the work of Roger G. Ibbotson and Rex A.
Sinquefield). All rights reserved. Common stock returns are based on the
Standard & Poor's 500 Stock Index, a market-weighted, unmanaged index of 500
common stocks in a variety of industry sectors. It is a commonly used
indicator of broad stock price movements. This chart is for illustrative
purposes only, and is not intended to represent the performance of any
particular investment or fund. Investors cannot invest directly in an index.
Past performance is not a guarantee of future results.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
AND INDEPENDENT ACCOUNTANTS

State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities
and cash and in that capacity maintains certain financial and accounting books
and records pursuant to an agreement with the Fund. Subcustodians provide
custodial services for the Fund's foreign assets held outside the United
States. See "How the Fund is Managed--Custodian and Transfer and Dividend
Disbursing Agent" in the applicable Prospectus.

Prudential Mutual Fund Services LLC (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as the Transfer and Dividend Disbursing Agent of each
Series. It is a wholly-owned subsidiary of PIFM. PMFS provides customary
transfer agency services to the Series, including the handling of shareholder
communications, the processing of shareholder transactions, the maintenance of
shareholder account records, payment of dividends and distributions and
related functions. For these services, PMFS receives an annual fee per
shareholder account, a new account set-up fee for each manually established
account and a monthly inactive zero balance account fee per shareholder
account. PMFS is also reimbursed for its out-of-pocket expenses, including but
not limited to postage, stationery, printing, allocable communication expenses
and other costs.

Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036,
serves as the Series' independent accountants and in that capacity audits each
Series' annual financial statements.

B-29
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
PRUDENTIAL LATIN AMERICA EQUITY FUND

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
JUNE 16,
1998
--------
<S> <C>
ASSETS
Cash.................................................................. $ 50,000
Deferred registration fees............................................ 165,000
Deferred organization costs (Note 1).................................. 75,000
--------
Total assets........................................................ 290,000
--------
LIABILITIES
Deferred organization costs payable (Note 1).......................... 75,000
Deferred registration fees payable.................................... 165,000
--------
Total liabilities................................................... 240,000
========
Net Assets (Note 1)
Applicable to 5,000 shares of beneficial interest.................... $ 50,000
========
Calculation of Offering Price
Class A:
Net asset value and redemption price per Class A share............... $ 10.00
($12,500 / 1,250 shares of beneficial interest issued and outstand-
ing)
Maximum sales charge (5.0% of offering price)........................ .53
--------
Offering price to public............................................. $ 10.53
========
Class B:
Net asset value, offering price and redemption price per Class B
share............................................................... $ 10.00
========
($12,500 / 1,250 shares of beneficial interest issued and outstand-
ing)
Class C:
Net asset value, offering price and redemption price per Class C
share............................................................... $ 10.00
========
($12,500 / 1,250 shares of beneficial interest issued and outstand-
ing)
Class Z:
Net asset value, offering price and redemption price per Class Z
share............................................................... $ 10.00
========
($12,500 / 1,250 shares of beneficial interest issued and outstand-
ing)
</TABLE>

B-30
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
PRUDENTIAL DEVELOPING MARKETS EQUITY FUND

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
JUNE 16,
1998
--------
<S> <C>
ASSETS
Cash.................................................................. $50,000
Deferred registration fees............................................ 165,000
Deferred organization costs (Note 1).................................. 75,000
-------
Total assets........................................................ 290,000
-------
LIABILITIES
Deferred organization costs payable (Note 1).......................... 75,000
Deferred registration fees payable.................................... 165,000
-------
Total liabilities................................................... 240,000
-------
Net Assets (Note 1)
Applicable to 5,000 shares of beneficial interest.................... $50,000
=======
Calculation of Offering Price
Class A:
Net asset value and redemption price per Class A share............... $ 10.00
($12,500 / 1,250 shares of beneficial interest issued and outstand-
ing)
Maximum sales charge (5.0% of offering price)........................ .53
-------
Offering price to public............................................. $ 10.53
=======
Class B:
Net asset value, offering price and redemption price per Class B
share............................................................... $ 10.00
=======
($12,500 / 1,250 shares of beneficial interest issued and outstand-
ing)
Class C:
Net asset value, offering price and redemption price per Class C
share............................................................... $ 10.00
=======
($12,500 / 1,250 shares of beneficial interest issued and outstand-
ing)
Class Z:
Net asset value, offering price and redemption price per Class Z
share............................................................... $ 10.00
=======
($12,500 / 1,250 shares of beneficial interest issued and outstand-
ing)
</TABLE>

B-31
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND

NOTES TO FINANCIAL STATEMENTS

NOTE 1. Prudential Developing Markets Fund (the Fund), consisting of two
series: Prudential Developing Markets Equity Fund and Prudential Latin America
Equity Fund, which was organized as a business trust in Delaware on October
24, 1997, is an open-end, diversified management investment company. The Fund
has had no significant operations other than the issuance of 1,250 shares each
of Class A, Class B, Class C and Class Z shares for each series of beneficial
interest for $100,000 on June 16, 1998 to Prudential Investments Fund
Management LLC (PIFM).

Costs incurred and expected to be incurred in connection with the
organization of the Fund will be paid initially by PIFM and will be repaid to
PIFM upon commencement of investment operations. Organizational costs will be
deferred and amortized over the period of benefit not to exceed 60 months from
the date the Fund commences investment operations. If any of the initial
shares of the Fund are redeemed by PIFM during the period of amortization of
organization expenses, the redemption proceeds will be reduced by the pro rata
amount of unamortized organization expenses based on the number of initial
shares being redeemed to the number of the initial shares outstanding.

Registration fees will be deferred and amortized over a period not to exceed
12 months.

NOTE 2. AGREEMENTS. The Fund has entered into a management agreement with
PIFM.

The management fee paid PIFM will be computed daily and payable monthly, at
an annual rate of 1.25 of 1% of the average daily net assets of the Fund.

The Fund has entered into a distribution agreement with Prudential
Securities Incorporated (Prudential Securities or the Distributor) until July
1, 1998 for distribution of the Fund's shares. On July 1, 1998, Prudential
Investment Management Services LLC (the Distributor), will become the Fund's
Distributor.

Pursuant to separate Plans of Distribution (the Class A Plan, the Class B
Plan and the Class C Plan, collectively the Plans) adopted by the Fund under
Rule 12b-1 of the Investment Company Act of 1940, the Distributor incurs the
expenses of distributing the Fund's Class A, Class B and Class C shares. These
expenses include commissions and account servicing fees paid to, or on account
of financial advisers of Prudential Securities and Pruco Securities
Corporation (Prusec), an affiliated broker-dealer, commissions paid to, or on
account of, other broker-dealers or certain financial institutions which have
entered into agreements with the Distributor, advertising expenses, the cost
of printing and mailing prospectuses to potential investors and indirect and
overhead costs of Prudential Securities and Prusec associated with the sale of
Fund shares, including lease, utility, communications and sales promotion
expenses.

Pursuant to the Class A Plan, the Fund will compensate the Distributor for
its expenses with respect to Class A shares at an annual rate of up to .30 of
1% of the average daily net asset value of the Class A shares. The Distributor
has agreed to limit its distribution-related fees payable under the Class A
Plan to .25 of 1% of the average daily net asset value of the Class A shares
for the fiscal period ending May 31, 1999.

Pursuant to the Class B and Class C Plans, the Fund compensates the
Distributor for its distribution-related expenses with respect to the Class B
and Class C shares at an annual rate of 1% of the average daily net assets of
the Class B and C shares.

The Distributor incurs the expense of distributing the Fund's Class Z shares
under a distribution agreement with the Fund, none of which is paid for or
reimbursed by the Fund.

Prudential Mutual Fund Services LLC, a wholly-owned subsidiary of PIFM,
serves as the Fund's transfer agent.

PIFM, PIMS and Prudential Securities are indirect wholly-owned subsidiaries
of The Prudential Insurance Company of America.

B-32
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholder and Trustees of
Prudential Developing Markets Fund:

In our opinion, the accompanying statements of assets and liabilities presents
fairly, in all material respects, the financial position of Prudential
Developing Markets Equity Fund and Prudential Latin America Equity Fund (the
two series constituting Prudential Developing Markets Fund, collectively
referred to hereafter as the "Fund") at June 16, 1998, in conformity with
generally accepted accounting principles. These 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 statement, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
June 16, 1998

B-33
<PAGE>

APPENDIX I--DESCRIPTION OF SECURITY RATINGS

MOODY'S INVESTORS SERVICE, INC.

BOND RATINGS

Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the Aaa
securities.

A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.

Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e. (they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa: Bonds which are rated Caa are of poor standing. Such issuances may be
in default or there may be present elements of danger with respect to
principal or interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.

SHORT-TERM DEBT RATINGS

Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations. These obligations have an original
maturity not exceeding one year, unless explicitly noted.

PRIME-1: Issues rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations.

PRIME-2: Issues rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations.

STANDARD & POOR'S RATINGS GROUP

DEBT RATINGS

AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

I-1
<PAGE>

AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.

BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.

BB, B, CCC, CC, C: Debt rated BB, B, CCC, CC and C is regarded, as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

BB: Debt rated B has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.

B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.

CCC: Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B-rating.

CC: The rating CC typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.

C: The rating C typically is applied to debt subordinated to senior debt
which is assigned an actual or implied CCC-debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

C1: The rating C1 is reserved for income bonds on which no interest is being
paid.

D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless Standard & Poor's believes
that such payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.

COMMERCIAL PAPER RATINGS

S&P's commercial paper ratings are current assessments of the likelihood of
timely payment of debt considered short-term in the relevant market.

A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high for issues
designated A-1.

I-2
<PAGE>

APPENDIX II--GENERAL INVESTMENT INFORMATION

ASSET ALLOCATION

Asset allocation is a technique for reducing risk, providing balance. Asset
allocation among different types of securities within an overall investment
portfolio helps to reduce risk and to potentially provide stable returns,
while enabling investors to work toward their financial goal(s). Asset
allocation is also a strategy to gain exposure to better performing asset
classes while maintaining investment in other asset classes.

DIVERSIFICATION

Diversification is a time-honored technique for reducing risk, providing
"balance" to an overall portfolio and potentially achieving more stable
returns. Owning a portfolio of securities mitigates the individual risks (and
returns) of any one security. Additionally, diversification among types of
securities reduces the risks (and general returns) of any one type of
security.

DURATION

Debt securities have varying levels of sensitivity to interest rates. As
interest rates fluctuate, the value of a bond (or a bond portfolio) will
increase or decrease. Longer term bonds are generally more sensitive to
changes in interest rates. When interest rates fall, bond prices generally
rise. Conversely, when interest rates rise, bond prices generally fall.

Duration is an approximation of the price sensitivity of a bond (or a bond
portfolio) to interest rate changes. It measures the weighted average maturity
of a bond's (or a bond portfolio's) cash flows, i.e., principal and interest
rate payments. Duration is expressed as a measure of time in years--the longer
the duration of a bond (or a bond portfolio), the greater the impact of
interest rate changes on the bond's (or the bond portfolio's) price. Duration
differs from effective maturity in that duration takes into account call
provisions, coupon rates and other factors. Duration measures interest rate
risk only and not other risks, such as credit risk and, in the case of non-
U.S. dollar denominated securities, currency risk. Effective maturity measures
the final maturity dates of a bond (or a bond portfolio).

MARKET TIMING

Market timing--buying securities when prices are low and selling them when
prices are relatively higher--may not work for many investors because it is
impossible to predict with certainty how the price of a security will
fluctuate. However, owning a security for a long period of time may help
investors offset short-term price volatility and realize positive returns.

POWER OF COMPOUNDING

Over time, the compounding of returns can significantly impact investment
returns. Compounding is the effect of continuous investment on long-term
investment results, by which the proceeds of capital appreciation (and income
distributions, if elected) are reinvested to contribute to the overall growth
of assets. The long-term investment results of compounding may be greater than
that of an equivalent initial investment in which the proceeds of capital
appreciation and income distributions are taken in cash.

II-1
<PAGE>

APPENDIX III--HISTORICAL PERFORMANCE DATA

The historical performance data contained in this Appendix relies on data
obtained from statistical services, reports and other services believed by the
Manager to be reliable. The information has not been independently verified by
the Manager.

The following chart shows the long-term performance of various asset classes
and the rate of inflation.

EDGAR Representation of Chart
Value of $1.00 invested
on 1/1/26 through 12/31/97.
<TABLE>
<S> <C>
Small Stocks $5,519.97
Common Stocks $1,828.33
Long-Term Bonds $39.07
Treasury Bills $14.25
Inflation $9.02
</TABLE>

Source: Stocks, Bonds, Bills and Inflation 1997 Yearbook, Ibbotson Associates,
Chicago, Illinois (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. This chart is for illustrative purposes
only and is not indicative of the past, present, or future performance of any
asset class or any Prudential Mutual Fund.

Generally, stock returns are due to capital appreciation and the reinvestment
of any gains. Bond returns are due mainly to reinvesting interest. Also, stock
prices are usually more volatile than bond prices over the long-term. Small
stock returns for 1926-1980 are those of stocks comprising the 5th quintile of
the New York Stock Exchange. Thereafter, returns are those of the Dimensional
Fund Advisors (DFA) Small Company Fund. Common stock returns are based on the
S&P Composite Index, a market-weighted, unmanaged index of 500 stocks
(currently) in a variety of industries. It is often used as a broad measure of
stock market performance.

Long-term government bond returns are measured using a constant one-bond
portfolio with a maturity of roughly 20 years. Treasury bill returns are for a
one-month bill. Treasuries are guaranteed by the U.S. government as to the
timely payment of principal and interest; equities are not. Inflation is
measured by the consumer price index (CPI).

III-1
<PAGE>

Set forth below is historical performance data relating to various sectors of
the fixed-income securities markets. The chart shows the historical total
returns of U.S. Treasury bonds, U.S. mortgage securities, U.S. corporate bonds,
U.S. high yield bonds and world government bonds on an annual basis from 1987
through 1997. The total returns of the indices include accrued interest, plus
the price changes (gains or losses) of the underlying securities during the
period mentioned. The data is provided to illustrate the varying historical
total returns and investors should not consider this performance data as an
indication of the future performance of a Series or of any sector in which a
Series invests.

All information relies on data obtained from statistical services, reports
and other services believed by the Manager to be reliable. Such information has
not been verified. The figures do not reflect the operating expenses and fees
of a mutual fund. See "Fund Expenses" in the applicable prospectus. The net
effect of the deduction of the operating expenses of a mutual fund on these
historical total returns, including the compounded effect over time, could be
substantial.

Historical Total Returns of Different Bond Market Sectors

<TABLE>
<CAPTION>
YEAR 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT
TREASURY
BONDS/1/ 2.0% 7.0% 14.4% 8.5% 15.3% 7.2% 10.7% -3.4% 18.4% 2.7% 9.6%
- -------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT
MORTGAGE
SECURITIES/2/ 4.3% 8.7% 15.4% 10.7% 15.7% 7.0% 6.8% -1.6% 16.8% 5.4% 9.5%
- -------------------------------------------------------------------------------------------------------------
U.S. INVESTMENT GRADE
CORPORATE BONDS/3/ 2.6% 9.2% 14.1% 7.1% 18.5% 8.7% 12.2% -3.9% 22.3% 3.3% 10.2%
- -------------------------------------------------------------------------------------------------------------
U.S. HIGH YIELD
CORPORATE BONDS/4/ 5.0% 12.5% 0.8% -9.6% 46.2% 15.8% 17.1% -1.0% 19.2% 11.4% 12.8%
- -------------------------------------------------------------------------------------------------------------
WORLD GOVERNMENT
BONDS/5/ 35.2% 2.3% -3.4% 15.3% 16.2% 4.8% 15.1% -6.0% 19.6% 4.1% (4.3%)
- -------------------------------------------------------------------------------------------------------------
DIFFERENCE BETWEEN
HIGHEST AND LOWEST 33.2% 10.2% 18.8% 24.9% 30.9% 11.0% 10.3% 9.9% 5.5% 8.7% 17.1%
RETURNS PERCENT
- -------------------------------------------------------------------------------------------------------------
</TABLE>

/1/ LEHMAN BROTHERS TREASURY BOND INDEX is an unmanaged index made up of over
150 public issues of the U.S. Treasury having maturities of at least one
year.
/2/ LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX is an unmanaged index that
includes over 600 15- and 30-year fixed-rate mortgage-backed securities of
the Government National Mortgage Association (GNMA), Federal National
Mortgage Association (FNMA), and the Federal Home Loan Mortgage Corporation
(FHLMC).
/3/ LEHMAN BROTHERS CORPORATE BOND INDEX includes over 3,000 public fixed-rate,
nonconvertible investment-grade bonds. All bonds are U.S. dollar-
denominated issues and include debt issued or guaranteed by foreign
sovereign governments, municipalities, governmental agencies or
international agencies. All bonds in the index have maturities of at least
one year.
/4/ LEHMAN BROTHERS HIGH YIELD BOND INDEX is an unmanaged index comprising over
750 public, fixed-rate, nonconvertible bonds that are rated Ba1 or lower by
Moody's Investors Service (or rated BB+ or lower by Standard & Poor's or
Fitch Investors Service). All bonds in the index have maturities of at
least one year.
/5/ SALOMON BROTHERS WORLD GOVERNMENT INDEX (NON U.S.) includes over 800 bonds
issued by various foreign governments or agencies, excluding those in the
U.S., but including those in Japan, Germany, France, the U.K., Canada,
Italy, Australia, Belgium, Denmark, the Netherlands, Spain, Sweden, and
Austria. All bonds in the index have maturities of at least one year.

III-2
<PAGE>

This chart illustrates the This chart shows the growth of a
performance of major world stock hypothetical $10,000 investment made
markets for the period from in the stocks representing the S&P
12/31/85 through 12/31/97. It does 500 stock index with and without
not represent the performance of reinvested dividends.
any Prudential Mutual Fund. (12/31/69-12/31/97)

FOREIGN STOCK MARKETS HAVE OFTEN
OUTPERFORMED THOSE IN THE U.S.
Average Annual Total Returns of
Major World
Stock Markets (12/31/85-12/31/97)

Netherlands 20.5%

Spain 20.4%

Sweden 20.4%

Hong Kong 19.7%

Belgium 19.5% CHART

Switzerland 17.9%

USA 17.1%

UK 16.6%

France 15.6%

Germany 12.1%

Austria 9.6%

Japan 6.6%

Source: Morgan Stanley Capital Source: Stocks, Bonds, Bills, and
International (MSCI) based on data Inflation 1997 Yearbook, Ibbotson
retrieved from Lipper Analytical Associates, Chicago (annually
New Application (LANA) as of updates work by Roger G. Ibbotson
12/31/97. Used with permission. and Rex A. Sinquefield). Used with
Morgan Stanley Country indices are permission. All rights reserved.
unmanaged indices which include This chart is used for illustrative
those stocks making up the largest purposes only and is not intended to
two-thirds of each country's total represent the past, present or
stock market capitalization. future performance of any Prudential
Returns reflect the reinvestment Mutual Fund. Common stock total
of all distributions. This chart return is based on the Standard &
is for illustrative purposes only Poor's 500 Stock Index, a market-
and is not indicative of the past, value-weighted index made up of 500
present or future performance of of the largest stocks in the U.S.
any specific investment. Investors based upon their stock market value.
cannot invest directly in stock Investors cannot invest directly in
indices. indices.

---------------------------------------

WORLD STOCK MARKET CAPITALIZATION BY
REGION
World Total: $12.7 Trillion

PIE CHART

EUROPE PACIFIC BASIN CANADA U.S.
32.1% 15.6% 2.5% 49.8%

Source: Morgan Stanley Capital
International, December 31, 1997.
Used with permission. This chart
represents the capitalization of
major world stock markets as
measured by the Morgan Stanley
Capital International (MSCI) World
Index. The total market
capitalization is based on the value
of approximately 1,600 companies in
22 countries (representing
approximately 60% of the aggregate
market value of the stock
exchanges). This chart is for
illustrative purposes only and does
not represent the allocation of any
Prudential Mutual Fund.

III-3
<PAGE>

This chart below shows the historical volatility of general interest rates
as measured by the long U.S. Treasury Bond.

LONG U.S. TREASURY BOND YIELD IN PERCENT (1926-1997)

[CHART]

- ---------------------------------------
Source: Stocks, Bonds, Bills, and Inflation 1997 Yearbook, Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. All rights reserved. The chart illustrates
the historical yield of the long-term U.S. Treasury Bond from 1926-1996.
Yields represent that of an annually renewed one-bond portfolio with a
remaining maturity of approximately 20 years. This chart is for illustrative
purposes and should not be construed to represent the yields of any Prudential
Mutual Fund.

III-4
<PAGE>

APPENDIX IV--INFORMATION RELATING TO PRUDENTIAL

Set forth below is information relating to The Prudential Insurance Company
of America (Prudential) and its subsidiaries as well as information relating
to the Prudential Mutual Funds. See "Management of the Fund--Manager" in
either Prospectus. The data will be used in sales materials relating to the
Prudential Mutual Funds. Unless otherwise indicated, the information is as of
December 31, 1996 and is subject to change thereafter. All information relies
on data provided by The Prudential Investment Corporation (PIC) or from other
sources believed by the Manager to be reliable. Such information has not been
verified by the Fund.

INFORMATION ABOUT PRUDENTIAL

The Manager and PIC/1/ are subsidiaries of Prudential, which is one of the
largest diversified financial services institutions in the world and, based on
total assets, the largest insurance company in North America as of December
31, 1996. Principal products and services include life and health insurance,
other healthcare products, property and casualty insurance, securities
brokerage, asset management, investment advisory services and real estate
brokerage. Prudential (together with its subsidiaries) employs almost 81,000
persons worldwide, and maintains a sales force of approximately 13,000 agents
and 5,600 financial advisors. Prudential is a major issuer of annuities,
including variable annuities. Prudential seeks to develop innovative products
and services to meet consumer needs in each of its business areas. Prudential
uses the rock of Gibraltar as its symbol. The Prudential rock is a recognized
brand name throughout the world.

Insurance. Prudential has been engaged in the insurance business since 1875.
It insures or provides financial services to nearly 50 million people
worldwide. Long one of the largest issuers of individual life insurance, the
Prudential has 22 million life insurance policies in force today with a face
value of $1 trillion. Prudential has the largest capital base ($12.1 billion)
of any life insurance company in the United States. Prudential provides auto
insurance for approximately 1.6 million cars and insures approximately 1.2
million homes.

Money Management. Prudential is one of the largest pension fund managers in
the country, providing pension services to 1 in 3 Fortune 500 firms. It
manages $36 billion of individual retirement plan assets, such as 401(k)
plans. As of December 31, 1996, Prudential had more than $332 billion in
assets under management. Prudential Investments, a business group of
Prudential (of which Prudential Mutual Funds is a key part) manages over $190
billion in assets of institutions and individuals. In Pensions & Investments,
May 12, 1996, Prudential was ranked third in terms of total assets under
management.

Real Estate. The Prudential Real Estate Affiliates, the fourth largest real
estate brokerage network in the United States, has more than 37,000 brokers
and agents across the United States./2/

Healthcare. Over two decades ago, Prudential introduced the first federally-
funded, for-profit HMO in the country. Today, approximately 4.6 million
Americans receive healthcare from a Prudential managed care membership.

Financial Services. The Prudential Bank, a wholly-owned subsidiary of
Prudential, has over $4 billion in assets and serves nearly 1.5 million
customers across 50 states.

INFORMATION ABOUT THE PRUDENTIAL MUTUAL FUNDS

As of December 31, 1997 Prudential Investments Fund Management is the
eighteenth largest mutual fund company in the country, with over 2.5 million
shareholders invested in more than 50 mutual fund portfolios and variable
annuities with more than 3.7 million shareholder accounts.

The Prudential Mutual Funds have over 30 portfolio managers who manage over
$55 billion in mutual fund and variable annuity assets. Some of Prudential's
portfolio managers have over 20 years of experience managing investment
portfolios.

From time to time, there may be media coverage of portfolio managers and
other investment professionals associated with the Manager and the Subadviser
in national and regional publications, on television and in other media.
Additionally, individual mutual fund portfolios are frequently cited in
surveys conducted by national and regional publications and media
organizations such as The Wall Street Journal, The New York Times, Barron's
and USA Today.
- ---------
/1/ Prudential Investments, a business group of PIC, serves as the Subadviser
to substantially all of the Prudential Mutual Funds. Wellington Management
Company serves as the subadviser to Global Utility Fund, Inc., Nicholas-
Applegate Capital Management as the subadviser to Nicholas-Applegate Fund,
Inc., Jennison Associates Capital Corp. as the subadviser to Prudential
Jennison Series Fund, Inc. and Prudential Active Balanced Fund, a portfolio
of Prudential Index Series Fund, Mercator Asset Management LP as the
Subadviser to International Stock Series, a portfolio of Prudential World
Fund, Inc. and BlackRock Financial Management, Inc. as the subadviser to
The BlackRock Government Income Trust. There are multiple subadvisers for
The Target Portfolio Trust.
/2/ As of December 31, 1996.

IV-1
<PAGE>

Equity Funds. Forbes magazine listed Prudential Equity Fund among twenty
mutual funds on its Honor Roll in its mutual fund issue of August 28, 1995.
Honorees are chosen annually among mutual funds (excluding sector funds) which
are open to new investors and have had the same management for at least five
years. Forbes considers, among other criteria, the total return of a mutual
fund in both bull and bear markets as well as a fund's risk profile.
Prudential Equity Fund is managed with a "value" investment style by PIC. In
1995, Prudential Securities introduced Prudential Jennison Fund, a growth-
style equity fund managed by Jennison Associates Capital Corp., a premier
institutional equity manager and a subsidiary of Prudential.

High Yield Funds. Investing in high yield bonds is a complex and research
intensive pursuit. A separate team of high yield bond analysts monitor the 167
issues held in the Prudential High Yield Fund (currently the largest fund of
its kind in the country) along with 100 or so other high yield bonds, which
may be considered for purchase./3/ Non-investment grade bonds, also known as
junk bonds or high yield bonds, are subject to a greater risk of loss of
principal and interest including default risk than higher-rated bonds.
Prudential high yield portfolio managers and analysts meet face-to-face with
almost every bond issuer in the High Yield Fund's portfolio annually, and have
additional telephone contact throughout the year.

Prudential's portfolio managers are supported by a large and sophisticated
research organization. Fourteen investment grade bond analysts monitor the
financial viability of approximately 1,750 different bond issuers in the
investment grade corporate and municipal bond markets--from IBM to small
municipalities, such as Rockaway Township, New Jersey. These analysts consider
among other things sinking fund provisions and interest coverage ratios.

Prudential's portfolio managers and analysts receive research services from
almost 200 brokers and market service vendors. They also receive nearly 100
trade publications and newspapers--from Pulp and Paper Forecaster to Women's
Wear Daily--to keep them informed of the industries they follow.

Prudential Mutual Funds' traders scan over 100 computer monitors to collect
detailed information on which to trade. From natural gas prices in the Rocky
Mountains to the results of local municipal elections, a Prudential portfolio
manager or trader is able to monitor it if it's important to a Prudential
mutual fund.

Prudential Mutual Funds trade approximately $31 billion in U.S. and foreign
government securities a year. PIC seeks information from government policy
makers. In 1995, Prudential's portfolio managers met with several senior U.S.
and foreign government officials, on issues ranging from economic conditions
in foreign countries to the viability of index-linked securities in the United
States.

Prudential Mutual Funds' portfolio managers and analysts met with over 1,200
companies in 1995, often with the Chief Executive Officer (CEO) or Chief
Financial Officer (CFO). They also attended over 250 industry conferences.

Prudential Mutual Fund global equity managers conducted many of their visits
overseas, often holding private meetings with a company in a foreign language
(our global equity managers speak 7 different languages, including Mandarin
Chinese).

Trading Data./4/ On an average day, Prudential Mutual Funds' U.S. and
foreign equity trading desks traded $77 million in securities representing
over 3.8 million shares with nearly 200 different firms. Prudential Mutual
Funds' bond trading desks traded $157 million in government and corporate
bonds on an average day. That represents more in daily trading than most bond
funds tracked by Lipper even have in assets./5/ Prudential Mutual Funds' money
market desk traded $3.2 billion in money market securities on an average day,
or over $800 billion a year. They made a trade every 3 minutes of every
trading day. In 1994, the Prudential Mutual Funds effected more than 40,000
trades in money market securities and held on average $20 billion of money
market securities./6/

Based on complex-wide data, on an average day, over 7,250 shareholders
telephoned Prudential Mutual Fund Services, Inc., the Transfer Agent of the
Prudential Mutual Funds, on the Prudential Mutual Funds' toll-free number. On
an annual basis, that represents approximately 1.8 million telephone calls
answered.
- ---------
/3/ As of December 31, 1995. The number of bonds and the size of the Fund are
subject to change.
/4/ Trading data represents average daily transactions for portfolios of the
Prudential Mutual Funds for which PIC serves as the subadviser, portfolios
of the Prudential Series Fund and institutional and non-US accounts managed
by Prudential Mutual Fund Investment Management, a division of PIC, for the
year ended December 31, 1995.
/5/ Based on 669 funds in Lipper Analytical Services categories of Short U.S.
Treasury, Short U.S. Government, Intermediate U.S. Treasury, Intermediate
U.S. Government, Short Investment Grade Debt, Intermediate Investment Grade
Debt, General U.S. Treasury, General U.S. Government and Mortgage Funds.
/6/ As of December 31, 1994.

IV-2
<PAGE>

INFORMATION ABOUT PRUDENTIAL SECURITIES

Prudential Securities is the fifth largest retail brokerage firm in the
United States with approximately 6,000 financial advisors. It offers to its
clients a wide range of products, including Prudential Mutual Funds and
Annuities. As of December 31, 1997, assets held by Prudential Securities for
its clients approximated $235 billion. During 1997, over 29,000 new customer
accounts were opened each month at Prudential Securities./7/

Prudential Securities has a two-year Financial Advisor training program plus
advanced education programs, including Prudential Securities "university,"
which provides advanced education in a wide array of investment areas.
Prudential Securities is the only Wall Street firm to have its own in-house
Certified Financial Planner (CFP) program.

In 1995, Prudential Securities' equity research team ranked 8th in
Institutional Investor magazine's 1995 "All America Research Team" survey.
Three Prudential Securities analysts were ranked as first-team finishers./8/

In addition to training, Prudential Securities provides its financial
advisors with access to firm economists and market analysts. It has also
developed proprietary tools for use by financial advisors, including the
Financial Architects SM, a state-of-the-art asset allocation software program
which helps Financial Advisors to evaluate a client's objectives and overall
financial plan, and a comprehensive mutual fund information and analysis
system that compares different mutual funds.

Standard & Poor's rates Prudential Securities Incorporated BBB+ with a
"Stable Outlook."

For more complete information about any of the Prudential Mutual Funds,
including charges and expenses, call your Prudential Securities financial
adviser or Pruco/Prudential representative for a free prospectus. Read it
carefully before you invest or send money.

- ---------
/7/ As of December 31, 1994.
/8/ On an annual basis, Institutional Investor magazine surveys more than 700
institutional money managers, chief investment officers and research
directors, asking them to evaluate analysts in 76 industry sectors. Scores
are produced by taking the number of votes awarded to an individual analyst
and weighting them based on the size of the voting institution. In total,
the magazine sends its survey to approximately 2,000 institutions and a
group of European and Asian institutions.

IV-3