PRUDENTIAL DEVELOPING MARKETS FUND, 485BPOS, 1999-08-10

PRUDENTIAL DEVELOPING MARKETS FUND
485BPOS, 1999-08-10

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As filed with the Securities and Exchange Commission on August 10, 1999
Securities Act Registration No. 333-50373
Investment Company Act Registration No. 811-8753
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [_]

POST-EFFECTIVE AMENDMENT NO. 2 [X]

AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]

AMENDMENT NO. 3 [X]

(Check appropriate box or boxes)

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PRUDENTIAL DEVELOPING MARKETS FUND
(Exact name of registrant as specified in charter)

GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(Address of Principal Executive Offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (973) 367-3028

ROBERT C. ROSSELOT, ESQ.
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(NAME AND ADDRESS OF AGENT FOR SERVICE)

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE
DATE OF THE REGISTRATION STATEMENT.

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX):

[X] immediately upon filing pursuant to paragraph (b)

[_] on (date) pursuant to paragraph (b)

[_] 60 days after filing pursuant to paragraph (a)

[_] on (date) pursuant to paragraph (a)
[_] 75 days after filing pursuant to paragraph (a)(ii)
[_] on (date) pursuant to paragraph (a)(ii) of Rule 485.

IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[_] This post-effective amendment designates a new
effective date for a previously filed post-
effective amendment

TITLE OF SECURITIES BEING REGISTERED . . . . SHARES OF BENEFICIAL INTEREST,
$.001 PAR VALUE.

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FUND TYPE:
_________________________________
Global stock

INVESTMENT OBJECTIVE:
_________________________________
Long-term growth of capital

Prudential Developing
Markets Fund
[GRAPHIC APPEARS HERE]

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PRUDENTIAL DEVELOPING MARKETS EQUITY FUND

PROSPECTUS: AUGUST 10, 1999

As with all mutual funds, the
Securities and Exchange
Commission has not approved or
disapproved the Fund's shares,
nor has the SEC determined that
this prospectus is complete or
accurate. It is a criminal
offense to state otherwise.
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Table of Contents
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1 Risk/Return Summary
1 Investment Objective and Principal Strategies
1 Principal Risks
2 Evaluating Performance
3 Fees and Expenses
5 How the Fund Invests
5 Investment Objective and Policies
7 Other Investments
8 Derivative Strategies
10 Additional Strategies
11 Portfolio Turnover
11 Investment Risks
15 How the Fund is Managed
15 Board of Trustees
15 Manager
15 Investment Adviser
16 Portfolio Managers
16 Distributor
16 Year 2000 Readiness Disclosure
18 Fund Distributions and Tax Issues
18 Distributions
19 Tax Issues
20 If You Sell or Exchange Your Shares
22 How to Buy, Sell and Exchange Shares of the Fund
22 How to Buy Shares
30 How to Sell Your Shares
34 How to Exchange Your Shares
36 Financial Highlights
36 Class A Shares
37 Class B Shares
38 Class C Shares
39 Class Z Shares
40 The Prudential Mutual Fund Family
For More Information (Back Cover)

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PRUDENTIAL DEVELOPING MARKETS EQUITY FUND (800) 225-1852
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Risk/Return Summary
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This section highlights key information about the PRUDENTIAL DEVELOPING MARKETS
EQUITY FUND, which we refer to as "the Fund." Additional information follows
this summary.

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is LONG-TERM GROWTH OF CAPITAL, which means we look
for investments that we think will increase in value over a period of years. To
achieve our objective, we invest primarily in equity-related securities of
companies located in developing markets around the world. We refer to these
securities throughout this Prospectus as DEVELOPING MARKETS SECURITIES.
Developing markets include countries or markets that are defined as developing
or emerging by the International Finance Corporation, the International Bank for
Reconstruction and Development (World Bank) or the United Nations or its
authorities. We normally invest at least 65% of the Fund's total assets in
developing markets securities in at least the three following regions: Europe,
Asia and Latin America. We ordinarily look for one or more of the following
characteristics:
. prospects for above-average earnings growth
per share;
. high return on invested capital;
. healthy balance sheets;
. sound financial and accounting policies and
overall financial strength;
. strong competitive advantages;
. effective research and product development
and marketing;
. efficient service;
. pricing flexibility;
. strength of management; and
. general operating characteristics that will
allow the companies to compete successfully
in their marketplace.

Generally, we consider selling a security when the security no longer
displays the conditions for growth, is no longer undervalued, or falls short of
expectations.
While we make every effort to achieve our objective, we can't guarantee
success.
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WE'RE GROWTH INVESTORS
We look primarily for stock that we believe is undervalued and/or will grow
faster--and earn better profits--than other companies. We also look for
companies with strong competitive advantages, effective research, product
development, strong management or financial strength.

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1
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Risk/Return Summary
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PRINCIPAL RISKS

Although we try to invest wisely, all investments involve risk. Since the Fund
invests primarily in equity-related securities, such as common stock, there is
the risk that the value of a particular stock could go down. In addition to an
individual security losing value, the value of the equity markets as a whole
could go down. Investing in foreign securities presents additional risks, since
foreign political, economic and legal systems may be less stable than those in
the U.S. and these risks or other factors may cause foreign stock markets to
decline. The changing value of foreign currencies also affects the value of the
assets we hold and our performance. Also, the Fund may actively and frequently
trade its portfolio securities.
The risks of investing in foreign securities are heightened for developing
markets securities. Moreover, developing markets securities present additional
risks which should be considered carefully by an investor in the Fund.
Investing in developing markets securities involves exposure to economies that
are less diverse and mature, and political and legal systems which are less
stable, than those of developed markets. In addition, investment decisions by
international investors, such as the Fund, particularly concurrent buying or
selling programs, have a greater effect on securities prices and currency
values than in more developed markets. As a result, developing markets
securities have historically been, and may continue to be, subject to greater
volatility and share price declines than securities issued by U.S. corporations
or companies in other markets that are considered developed.
Many developing markets have also experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have a negative
impact on securities prices.

There is also risk involved in the derivative strategies we may use. Some of
our strategies require us to try to predict whether the price or value of an
underlying investment will go up or down over a certain period of time. There
is always the risk that investments will not perform as we thought they would.
Like any mutual fund, an investment in the Fund could lose value, and you could
lose money. The Fund does not represent a complete investment program.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

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PRUDENTIAL DEVELOPING MARKETS EQUITY FUND (800) 225-1852
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Risk/Return Summary
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EVALUATING PERFORMANCE
A number of factors--including risk--affect how the Fund performs. The Fund has
not operated for a full calendar year, so there is no annual performance to
report. For information about the Fund's performance since its inception, see
"Financial Highlights." Past performance does not mean that the Fund will
achieve similar results in the future.

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3
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Risk/Return Summary
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FEES AND EXPENSES
These tables show the sales charges, fees and expenses for each share class of
the Fund--Class A, B, C and Z. Each share class has different sales charges--
known as loads--and expenses, but represents an investment in the same fund.
Class Z shares are available only to a limited group of investors. For more
information about which share class may be right for you, see "How to Buy, Sell
and Exchange Shares of the Fund."

SHAREHOLDER FEES/1/ (PAID DIRECTLY FROM YOUR INVESTMENT)
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<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Z
<S> <C> <C> <C> <C>
Maximum sales charge 5% None 1% None
(load) imposed
on purchases (as a
percentage of
offering price)

Maximum deferred sales None 5% /2/ 1% /3/ None
charge (load) imposed on
sales (as a percentage
of the lower of original
purchase price or
sale proceeds)

Maximum sales charge None None None None
(load) imposed on
reinvested dividends and
other distributions

Redemption fees None None None None

Exchange fee None None None None

ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
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<CAPTION>
CLASS A CLASS B CLASS C CLASS Z
<S> <C> <C> <C> <C>
Management fees 1.25% 1.25% 1.25% 1.25%
+ Distribution and .30%/4/ 1.00% 1.00% None
service (12b-1) fees
+ Other expenses 1.93% 1.93% 1.93% 1.93%
= TOTAL ANNUAL FUND 3.48% 4.18% 4.18% 3.18%
OPERATING EXPENSES
- - Waivers 1.24%/4/ 1.19%/4/ 1.19%/4/ 1.19%/4/
= NET ANNUAL FUND 2.24% 2.99% 2.99% 1.99%
OPERATING EXPENSES
</TABLE>

1 Your broker may charge you a separate or additional fee for purchases and
sales of shares.
2 The Contingent Deferred Sales Charge (CDSC) for Class B shares decreases by
1% annually to 1% in the fifth and sixth years and 0% in the seventh year.
Class B shares convert to Class A shares approximately seven years after
purchase.
3 The CDSC for Class C shares is 1% for shares redeemed within 18 months of
purchase.
4 For the fiscal year ending May 31, 2000, the Distributor of the Fund has
contractually agreed to reduce its distribution and service fees for Class A
shares to .25 of 1% of the average daily net assets of the Class A shares,
and the Manager has contractually agreed to reimburse the Fund for operating
expenses, exclusive of distribution and service (12b-1) fees, in excess of
1.99% of the average daily net assets of each class of shares.

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PRUDENTIAL DEVELOPING MARKETS EQUITY FUND (800) 225-1852
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Risk/Return Summary
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EXAMPLE
This example will help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. After the first year, the
example does not take into consideration the Distributor's agreement to reduce
its distribution and service fees for Class A shares. Although your actual
costs may be higher or lower, based on these assumptions, your costs would be:

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<TABLE>
<CAPTION>
1 YR 3 YRS 5 YRS 10 YRS
<S> <C> <C> <C> <C>
Class A shares $828 $1,510 $2,213 $4,065
Class B shares $920 $1,569 $2,233 $4,016
Class C shares $616 $1,357 $2,212 $4,412
Class Z shares $321 $ 980 $1,664 $3,485
</TABLE>

You would pay the following expenses on the same investment if you did not sell
your shares:

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<TABLE>
<CAPTION>
1 YR 3 YRS 5 YRS 10 YRS
<S> <C> <C> <C> <C>
Class A shares $828 $1,510 $2,213 $4,065
Class B shares $420 $1,269 $2,133 $4,016
Class C shares $516 $1,357 $2,212 $4,412
Class Z shares $321 $ 980 $1,664 $3,485
</TABLE>

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5
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How the Fund Invests
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INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is LONG-TERM GROWTH OF CAPITAL. This means we
look to build an investment portfolio which, though potentially volatile in the
short term, has the potential for significant capital appreciation over the
longer term. While we make every effort to achieve our objective, we can't
guarantee success.
In pursuing our objective, we invest
primarily in DEVELOPING MARKETS SECURITIES, that
is, equity-related securities of companies
located in developing markets around the world.
We consider a security to be a developing market
security if:
. the principal trading market for the
security is in a developing market
. the company that issued the security
derives 50% or more of its total revenue
from goods produced or sales made in
developing markets
. the company that issued the
security is organized under the laws of, and has a principal office in, a
developing market or
. the security was issued or guaranteed by the government (or its agencies
and instrumentalities), a political subdivision or the central bank of a
developing market
Developing markets include countries or markets that are defined as
developing or emerging by the International Finance Corporation, the
International Bank for Reconstruction and Development (World Bank) or the
United Nations or its authorities. We generally consider every country in the
world to be a developing market other than 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. We normally invest at least 65% of
the Fund's total assets in developing markets securities in at least the three
following regions: Europe, Asia and Latin America.
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OUR GROWTH STRATEGY

We look for companies that are likely to produce strong growth in earnings
and/or sales, and whose stock prices do not reflect this future growth. These
companies usually have a unique market niche, a strong new product profile or
superior management. We analyze companies using both fundamental and
quantitative techniques, including analysis of balance sheets, income
statements and other financial measures.

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PRUDENTIAL DEVELOPING MARKETS EQUITY FUND (800) 225-1852
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How the Fund Invests
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The principal type of equity-related security in which the Fund invests is
common stock. In addition to common stock, equity-related securities include,
but are not limited to, preferred stock, warrants or rights to purchase or
subscribe to common or preferred stock, American Depositary Receipts (ADRs),
European Depositary Receipts (EDRs), Global Depositary Receipts (GDRs),
convertible securities, trust certificates, limited partnership interests and
equity participations. ADRs, EDRs and GDRs are certificates that represent an
equity investment in a domestic or foreign company or some other issuer and are
usually issued by a bank or trust company. Although not considered principal
investments, the Fund may invest up to 35% of its total assets in equity-
related securities of companies in developed markets and in fixed-income
obligations.
In selecting securities for the Fund, we use a bottom-up approach based on a
company's growth potential, and we focus the Fund's portfolio on those areas
with the most attractive near-term prospects.
We ordinarily look for one or more of the following characteristics:
. prospects for above-average earnings growth per share;
. high return on invested capital;
. healthy balance sheets;
. sound financial and accounting policies and overall financial strength;
. strong competitive advantages;
. effective research and product development and marketing;
. efficient service;
. pricing flexibility;
. strength of management; and
. general operating characteristics that will allow the companies to
compete successfully in their marketplace.
Generally, we consider selling a security when the security no longer
displays the conditions for growth, is no longer undervalued, or falls short of
expectations.
For more information, see "Investment Risks" and the Statement of Additional
Information, "Description of the Fund, Its Investments and Risks." The
Statement of Additional Information--which we refer to as the SAI--contains
additional information about the Fund. To obtain a copy, see the back cover
page of this prospectus.
The Fund's investment objective is a fundamental policy that cannot be
changed without shareholder approval. The Fund's Board of Trustees can change
investment policies that are not fundamental.

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7
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How the Fund Invests
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OTHER INVESTMENTS
In addition to the principal strategies discussed above, we may also use the
following strategies to increase the Fund's returns or protect its assets if
market conditions warrant.

MONEY MARKET INSTRUMENTS, BONDS AND OTHER FIXED-INCOME OBLIGATIONS
Under normal conditions, the Fund may invest up to 35% of total assets in MONEY
MARKET INSTRUMENTS, BONDS and other fixed-income obligations. Money market
instruments and bonds are known as fixed-income securities because issuers of
these securities are obligated to pay interest and principal. Typically, fixed-
income securities don't increase or decrease in value in relation to an
issuer's financial condition or business prospects as stock may, although their
value does fluctuate inversely to changes in interest rates generally and
directly in relation to their perceived credit quality. Corporations and
governments issue money market instruments and bonds to raise money. The Fund
may buy obligations of companies, foreign countries or the U.S. Government. The
Fund may also invest in Brady Bonds, which are created in connection with debt
restructuring through the exchange of existing bank loans to foreign nations
for new obligations. Money market instruments include the commercial paper and
short-term obligations of foreign and domestic corporations, banks and
governments and their agencies.

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PRUDENTIAL DEVELOPING MARKETS EQUITY FUND (800) 225-1852
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How the Fund Invests
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An obligation is considered investment grade if it has received one of the
top four long-term debt ratings from a NRSRO. Obligations rated in the fourth
category (Baa for Moody's or BBB for S&P) have speculative characteristics and
are subject to a greater risk of loss of principal and interest. Obligations
rated below investment grade are referred to as high-yield or "junk" bonds, and
their value is more likely to react to developments affecting market or credit
risk than higher-rated debt obligations, which react primarily to movements in
the general level of interest rates. In particular, "junk" bond investments may
increase or decrease in value due to an issuer's financial condition.
Obligations rated C by S&P are of the lowest quality and may be used when an
issuer has filed a bankruptcy petition but continues to make debt payments.
Moody's lowest rating is C, and obligations given this rating have extremely
poor prospects of ever attaining any real investment standing.
For more information about bonds and bond ratings, see the SAI, "Appendix
I--Description of Security Ratings."

TEMPORARY DEFENSIVE INVESTMENTS
In response to adverse market, economic or political conditions, we may
temporarily invest up to 100% of the Fund's assets in money market instruments.
Investing heavily in these securities limits our ability to achieve capital
appreciation, but can help to preserve the Fund's assets when equity markets
are unstable.

REPURCHASE AGREEMENTS
The Fund may also use REPURCHASE AGREEMENTS, where a party agrees to sell a
security to the Fund and then repurchase it at an agreed-upon price at a stated
time. This creates a fixed return for the Fund.

INVESTMENT FUNDS
Certain developing markets are closed to equity investments by foreigners
except through authorized investment funds. An investment in such funds can
result in the duplication of management and advisory fees.

DERIVATIVE STRATEGIES
We may use a number of alternative investment strategies--including
DERIVATIVES--to try to improve the Fund's returns or protect its assets,

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9
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How the Fund Invests
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although we cannot guarantee these strategies will work, that the instruments
necessary to implement these strategies will be available or that the Fund will
not lose money. Derivatives--such as futures, options, forward foreign currency
exchange contracts and options on futures-- involve costs and can be volatile.
With derivatives, the investment adviser tries to predict whether the
underlying investment--a security, market index, currency, interest rate or
some other benchmark--will go up or down at some future date. We may use
derivatives to try to reduce risk or to increase return consistent with the
Fund's overall investment objective. The investment adviser will consider
various factors (such as cost) in deciding whether or not to employ any
particular strategy or use any particular instrument. Any derivatives we may
use may not match the Fund's underlying holdings.

OPTIONS
The Fund may purchase and sell put and call options on equity securities, stock
indices and foreign currencies that are traded on U.S. or foreign securities
exchanges, on NASDAQ or in the over-the-counter market. An option is the right
to buy or sell securities or currencies in exchange for a premium. The Fund
will sell only covered options.

FUTURES CONTRACTS AND RELATED OPTIONS, FOREIGN CURRENCY FORWARD CONTRACTS
The Fund may purchase and sell stock and bond index futures contracts and
related options on stock and bond index futures. The Fund also may purchase and
sell futures contracts on foreign currencies and related options on foreign
currency futures contracts. A futures contract is an agreement to buy or sell a
set quantity of an underlying product at a future date or to make or receive a
cash payment based on the value of a securities index on a stipulated future
date. The Fund may also enter into foreign currency forward contracts to
protect the value of its assets against future changes in the level of foreign
exchange rates. A foreign currency forward contract is an obligation to buy or
sell a given currency on a future date at a set price.

For more information about these strategies, see the SAI, "Description of
the Fund, its Investments and Risks--Hedging and Return Enhancement
Strategies."

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PRUDENTIAL DEVELOPING MARKETS EQUITY FUND (800) 225-1852
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How the Fund Invests
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ADDITIONAL STRATEGIES
The Fund also follows certain policies when it BORROWS MONEY (the Fund can
currently borrow up to 25% of the value of its total assets); LENDS ITS
SECURITIES to others (as an operating policy, which may be changed without
shareholder approval, the Fund will not lend more than 30% of the value of its
total assets, including collateral received in the transaction); and HOLDS
ILLIQUID SECURITIES (the Fund may hold up to 15% of its net assets in illiquid
securities, including securities with legal or contractual restrictions, those
without a readily available market and repurchase agreements with maturities
longer than seven days). The Fund is subject to certain investment restrictions
that are fundamental policies, which means they cannot be changed without
shareholder approval. For more information about these restrictions, see the
SAI.

PORTFOLIO TURNOVER

As a result of the strategies described above, the Fund may have a high annual
portfolio turnover rate. Portfolio turnover is generally the percentage found
by dividing the lesser of portfolio purchases or sales by the monthly average
value of the portfolio. High portfolio turnover (100% or more) results in
higher brokerage commissions and other transaction costs and can affect the
Fund's performance. It can also result in a greater amount of distributions as
ordinary income rather than long-term capital gains.

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How the Fund Invests
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INVESTMENT RISKS
As noted, all investments involve risk, and investing in the Fund is no
exception. This chart outlines the key risks and potential rewards of the
principal strategies and certain other investments of the Fund. See, too,
"Description of the Fund, its Investments and Risks" in the SAI.

INVESTMENT TYPE
% OF FUND'S TOTAL RISKS POTENTIAL REWARDS
ASSETS

DEVELOPING . Subject to . Rewards
MARKETS greater associated with
SECURITIES volatility and foreign
share price securities in
declines than general and
securities issued equity-related
by U.S. securities as
corporations or described below
companies in
other markets
that are
considered
developed

At least 65%; up
to 100%
. Unpredictable
volatility
arising from cash
flows into and
out of developing
markets and
currencies from
international
investors
. Other risks
associated with
foreign
securities in
general and
equity-related
securities as
described below,
which risks are
heightened for
developing
markets
securities

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How the Fund Invests
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INVESTMENT TYPE (CONT'D)
% OF FUND'S TOTAL RISKS POTENTIAL REWARDS
ASSETS

FOREIGN . Foreign markets, . Investors can
SECURITIES IN economies and participate in
GENERAL political systems the growth of
may not be as foreign markets
At least 65%; up stable as in the and companies
to 100% U.S., operating in
particularly those markets
those in
developing
countries

. Currency risk--
changing values
of foreign
currencies or
risk of
devaluation of a
currency by a
country's
government or
central bank

. May be less
liquid than U.S.
stocks and bonds

. Differences in
foreign laws,
accounting
standards, public
information and
custody and
settlement
practices

. Year 2000
conversion may be
more of a problem
for some foreign
issuers,
governments and
securities
markets

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COMMON STOCK AND . Individual stocks . Historically,
OTHER EQUITY- could lose value stocks have
RELATED . The equity outperformed
SECURITIES markets could go other
down, resulting investments over
in a decline in the long term
value of the
Fund's
investments

For U.S. . Generally,
companies or economic growth
companies in . Companies that means higher
other developed pay dividends may corporate
markets, up to not do so if they profits, which
35%, usually less don't have leads to an
profits or increase in
adequate cash stock prices,
flow known as capital
appreciation

For companies in . Changes in . May be a source
developing economic or of dividend
markets, at least political income
65%, up to 100% conditions, both
domestic and
international,
resulting in a
decline in value
of the Fund's
investments

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How the Fund Invests
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INVESTMENT TYPE (CONT'D)
% OF FUND'S TOTAL RISKS POTENTIAL REWARDS
ASSETS

FIXED-INCOME . The Fund's . Bonds have
OBLIGATIONS holdings, share generally
price, yield and outperformed
total return may money market
fluctuate in instruments over
response to bond the long term
market movements with less risk
than stocks
. Credit risk--the
Up to 35% default of an
issuer would . Most bonds will
leave the Fund rise in value
with unpaid when interest
interest or rates fall
principal. The
lower a bond's . Regular interest
quality, the income
higher its . Investment grade
potential bonds have a
volatility lower risk of
default
. Market risk--the
risk that the . Generally more
market value of secure than
an investment may stock since
move up or down, companies must
sometimes rapidly pay their debts
or unpredictably. before paying
Market risk may stockholders
affect an
industry, a
sector or the
market as a whole

. Interest rate
risk--the risk
that the value of
most bonds will
fall when
interest rates
rise; the longer
a bond's maturity
and the lower its
credit quality,
the more its
value typically
falls. It can
lead to price
volatility

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How the Fund Invests
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INVESTMENT TYPE (CONT'D)
% OF FUND'S TOTAL RISKS POTENTIAL REWARDS
ASSETS

DERIVATIVES . Derivatives used . The Fund could
for hedging, such make money and
Percentage varies as futures, protect against
options and losses if the
foreign currency investment
forward analysis proves
contracts, may correct
not fully offset
the underlying
positions and . Derivatives that
this could result involve leverage
in losses to the could generate
Fund that would substantial
not have gains at low
otherwise cost
occurred
. One way to
. Derivatives used manage the
for risk Fund's
management may risk/return
not have the balance is to
intended effects lock in the
and may result in value of an
losses or missed investment ahead
opportunities of time

. The other party
to a derivatives
contract could
default
. Derivatives can
increase share
price volatility
and those that
involve leverage
could magnify
losses
. Certain types of
derivatives
involve costs
that can reduce
returns

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

ILLIQUID . May be difficult . May offer a more
SECURITIES to value attractive yield
precisely or potential for
Up to 15% of net growth than more
assets . May be difficult widely traded
to sell at the securities
time or price
desired

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

. Limits potential . May preserve the
MONEY MARKET for capital Fund's assets
INSTRUMENTS appreciation

. See credit risk
Up to 35%; and market risk

Up to 100% on a
temporary basis
- --------------------------------------------------------------------------------

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

15
<PAGE>

- --------------------------------------------------------------------------------
How the Fund is Managed
- --------------------------------------------------------------------------------

BOARD OF TRUSTEES

The Fund's Board of Trustees oversees the actions of the Manager, Investment
Adviser and Distributor and decides on general policies. The Board also
oversees the Fund's officers who conduct and supervise the daily business
operations of the Fund.

MANAGER
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM)
GATEWAY CENTER THREE, 100 MULBERRY STREET
NEWARK, NJ 07102-4077

Under a management agreement with the Fund, PIFM manages the Fund's
investment operations and administers its business affairs. For the fiscal year
ended May 31, 1999, the Fund paid PIFM management fees of 1.25% of the Fund's
average net assets.

As of May 31, 1999, PIFM served as the Manager to all 46 of the Prudential
mutual funds, and as Manager or administrator to 22 closed-end investment
companies, with aggregate assets of approximately $72 billion.

INVESTMENT ADVISER
The Prudential Investment Corporation, called Prudential Investments, is the
Fund's investment adviser. Its address is Prudential Plaza, 751 Broad Street,
Newark, NJ 07102. PIFM has responsibility for all investment advisory services,
supervises Prudential Investments and reimburses Prudential Investments for its
reasonable costs and expenses.

PORTFOLIO MANAGERS

The Fund is managed by MARIA ELENA CARRION, CFA.

MARIA ELENA CARRION is a Managing Director of Prudential Investments and has
managed the Fund since its inception. She joined Prudential Investments in
1997. Maria Elena was previously employed by Bankers Trust Company as a
portfolio manager beginning in April 1993. She was awarded the Chartered
Financial Analyst (CFA) designation.

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<PAGE>

- --------------------------------------------------------------------------------
How the Fund is Managed
- --------------------------------------------------------------------------------

DISTRIBUTOR
Prudential Investment Management Services LLC (PIMS) distributes the Fund's
shares under a Distribution Agreement with the Fund. The Fund also has
Distribution and Service Plans under Rule 12b-1 of the Investment Company Act.
Under the Plans and the Distribution Agreement, PIMS pays the expenses of
distributing the Fund's Class A, B, C and Z shares and provides certain
shareholder support services. The Fund pays distribution and other fees to PIMS
as compensation for its services for each class of shares other than Class Z.
These fees--known as 12b-1 fees--are shown in the "Fees and Expenses" tables.

YEAR 2000 READINESS DISCLOSURE
The services provided to the Fund and the shareholders by the Manager, the
Distributor, the Transfer Agent and the Custodian depend on the smooth
functioning of their computer systems and those of outside service providers.
Many computer software systems in use today cannot distinguish the year 2000
from the year 1900 because of the way dates are encoded and calculated. Such
event could have a negative impact on handling securities trades, payments of
interest and dividends, pricing and account services. The Manager, the
Distributor, the Transfer Agent and the Custodian have advised the Fund that
they have been actively working on necessary changes to their computer systems
to prepare for the year 2000. The Fund and its Board receive, and have received
since early 1998, satisfactory quarterly reports from the principal service
providers as to their preparations for year 2000 readiness, although there can
be no assurance that the service providers (or other securities market
participants) will successfully complete the necessary changes in a timely
manner or that there will be no adverse impact on the Fund. Moreover, the Fund
at this time has not considered retaining alternative service providers or
directly undertaken efforts to achieve year 2000 readiness, the latter of which
would involve substantial expenses without an assurance of success.

Additionally, issuers of securities generally, as well as those purchased by
the Fund, may confront year 2000 compliance issues which, if material and not
resolved, could have an adverse impact on securities markets and/or a specific
issuer's performance and result in a decline in the value of the securities
held by the Fund. Governments, participants in securities

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

17
<PAGE>

- --------------------------------------------------------------------------------
How the Fund is Managed
- --------------------------------------------------------------------------------

markets and issuers in developing markets may not be as prepared for year 2000
readiness as those in developed markets. As a result, the Fund may have a
greater negative impact in value of securities held or in the duration of the
remediation process than investors in securities in developed markets.

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<PAGE>

- --------------------------------------------------------------------------------
Fund Distributions and Tax Issues
- --------------------------------------------------------------------------------

Investors who buy shares of the Fund should be aware of some important tax
issues. For example, the Fund pays DIVIDENDS of ordinary income and distributes
realized net CAPITAL GAINS, if any, to shareholders. These distributions are
subject to federal income taxes, unless you hold your shares in a 401(k) plan,
an Individual Retirement Account (IRA) or some other qualified tax-deferred
plan or account. Dividends and distributions from the Fund may also be subject
to state income tax in the state where you live.
Also, if you sell shares of the Fund for a profit, you may have to pay
capital gains taxes on the amount of your profit, unless you hold your shares
in a qualified tax-deferred plan or account.
The following briefly discusses some of the important federal income tax
issues you should be aware of, but is not meant to be tax advice. For tax
advice, please speak with your tax adviser.

DISTRIBUTIONS
The Fund distributes DIVIDENDS to shareholders out of any net investment income
plus any realized net capital gains, typically once a year. For example, if the
Fund owns an ACME Corp. stock and the stock pays a dividend, the Fund will pay
out a portion of this dividend to its shareholders, assuming the Fund's income
is more than its costs and expenses. The dividends you receive from the Fund
will be taxed as ordinary income whether or not they are reinvested in the
Fund.
The Fund also distributes realized net CAPITAL GAINS to shareholders--
typically once a year. Capital gains are generated when the Fund sells its
assets for a profit. For example, if the Fund bought 100 shares of ACME Corp.
stock for a total of $1,000 and more than one year later sold the shares for a
total of $1,500, the Fund has net long-term capital gains of $500, which it
will pass on to shareholders (assuming the Fund's total gains are greater than
any losses it may have). Capital gains are taxed differently depending on how
long the Fund holds the security--if a security is held more than one year
before it is sold, LONG-TERM capital gains are taxed at the rate of 20%, but if
the security is held one year or less, SHORT-TERM capital gains are taxed at
rates of up to 39.6%. Different rates apply to corporate shareholders.
For your convenience, Fund distributions of dividends and capital gains are
AUTOMATICALLY REINVESTED in the Fund without any sales charge. If you

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

19
<PAGE>

- --------------------------------------------------------------------------------
Fund Distributions and Tax Issues
- --------------------------------------------------------------------------------

ask us to pay the distributions in cash, we will send you the proceeds if your
account is with the Transfer Agent. Otherwise, if your account is with a
broker, you will receive a credit to your account. Either way, the
distributions may be subject to taxes, unless your shares are held in a
qualified tax-deferred plan or account. For more information about automatic
reinvestment and other shareholder services, see "Step 4: Additional
Shareholder Services" in the next section.

TAX ISSUES
FORM 1099
Every year, you will receive a Form 1099, which reports the amount of dividends
and capital gains we distributed to you during the prior year. If you own
shares of the Fund as part of a qualified tax-deferred plan or account, your
taxes are deferred, so you will not receive a Form 1099. However, you will
receive a Form 1099 when you receive any distributions from your qualified tax-
deferred plan or account.
Fund distributions are generally taxable to you in the calendar year they
are received, except when we declare certain dividends in the fourth quarter
and actually pay them in January of the following year. In such cases, the
dividends are treated as if they were paid on December 31 of the prior year.
Corporate shareholders are eligible for the 70% dividends-received deduction
for certain dividends.

WITHHOLDING TAXES
If federal tax law requires you to provide the Fund with your tax
identification number and certifications as to your tax status, and you fail to
do this, or if you are otherwise subject to backup withholding, we will
withhold and pay to the U.S. Treasury 31% of your distributions and sale
proceeds. Dividends of net investment income and short-term capital gains paid
to a nonresident foreign shareholder generally will be subject to a U.S.
withholding tax of 30%. This rate may be lower, depending on any tax treaty the
U.S. may have with the shareholder's country.

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<PAGE>

- --------------------------------------------------------------------------------
Fund Distributions and Tax Issues
- --------------------------------------------------------------------------------

income or capital gains taxes. You may think you've done well since you bought
shares one day and soon thereafter received a distribution. That is not so
because when dividends are paid out, the value of each share of the Fund
decreases by the amount of the dividend to reflect the payout although this may
not be apparent because the value of each share of the Fund will also be
affected by market changes, if any. The distribution you receive makes up for
the decrease in share value. However, the timing of your purchase means that
part of your investment came back to you as taxable income.

QUALIFIED RETIREMENT PLANS
Retirement plans and accounts allow you to defer paying taxes on investment
income and capital gains. Contributions to these plans may also be tax
deductible, although distributions from these plans generally are taxable. In
the case of Roth IRA accounts, contributions are not tax deductible, but
distributions from the plan may be tax-free. Please contact your financial
adviser for information on a variety of Prudential mutual funds that are
suitable for retirement plans offered by Prudential.

IF YOU SELL OR EXCHANGE YOUR SHARES
If you sell any shares of the Fund for a profit, you have REALIZED A CAPITAL
GAIN, which is subject to tax unless you hold shares in a qualified tax-
deferred plan or account. The amount of tax you pay depends on how
long you owned your shares. If you sell shares of the Fund for a loss, you may
have a capital loss, which you may use to offset certain capital gains you
have.
If you sell shares and realize a loss, you will not be permitted to use the
loss to the extent you replace the shares (including pursuant to the
reinvestment of a dividend) within a 61-day period (beginning 30 days before
the sale of the shares). If you acquire shares of the Fund and sell your shares
within 90 days, you may not be allowed to include certain

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

CAPITAL GAIN
(taxes owed)
RECEIPTS FROM SALE OR
CAPITAL LOSS
(offset against gain)

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

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

21
<PAGE>

- --------------------------------------------------------------------------------
Fund Distributions and Tax Issues
- --------------------------------------------------------------------------------

charges incurred in acquiring the shares for purposes of calculating gain or
loss realized upon the sale of the shares.
Exchanging your shares of the Fund for the shares of another Prudential
mutual fund is considered a sale for tax purposes. In other words, it's a
"taxable event." Therefore, if the shares you exchanged have increased in value
since you purchased them, you have capital gains, which are subject to the
taxes described above.
Any gain or loss you may have from selling or exchanging Fund shares will
not be reported on the Form 1099; however, proceeds from the sale or exchange
will be reported on Form 1099-B. Therefore, unless you hold your shares in a
qualified tax-deferred plan or account, you or your financial adviser should
keep track of the dates on which you buy and sell--or exchange--Fund shares, as
well as the amount of any gain or loss on each transaction. For tax advice,
please see your tax adviser.

AUTOMATIC CONVERSION OF CLASS B SHARES
We have obtained a legal opinion that the conversion of Class B shares into
Class A shares--which happens automatically approximately seven years after
purchase--is not a "taxable event" because it does not involve an actual sale
of your Class B shares. This opinion, however, is not binding on the Internal
Revenue Service (IRS). For more information about the automatic conversion of
Class B shares, see "Class B Shares Convert to Class A Shares After
Approximately Seven Years" in the next section.

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22
<PAGE>

How to Buy, Sell and
- --------------------------------------------------------------------------------
Exchange Shares of the Fund
- --------------------------------------------------------------------------------

HOW TO BUY SHARES
STEP 1: OPEN AN ACCOUNT
If you don't have an account with us or a securities firm that is permitted to
buy or sell shares of the Fund for you, call Prudential Mutual Fund Services
LLC (PMFS) at (800) 225-1852 or contact:

PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: INVESTMENT SERVICES
P.O. BOX 15020
NEW BRUNSWICK, NJ 08906-5020

To purchase by wire, call the number above to obtain an application. After
PMFS receives your completed application, you will receive an account number.
For additional information about purchasing shares of the Fund, see the back
cover page of this prospectus. We have the right to reject any purchase order
(including an exchange into the Fund) or suspend or modify the Fund's sale of
its shares.

STEP 2: CHOOSE A SHARE CLASS
Individual investors can choose among Class A, Class B, Class C and Class Z
shares of the Fund, although Class Z shares are available only to a limited
group of investors.
Multiple share classes let you choose a cost structure that better meets
your needs. With Class A shares, you pay the sales charge at the time of
purchase, but the operating expenses each year are lower than the expenses of
Class B and Class C shares. With Class B shares, you only pay a sales charge if
you sell your shares within six years (that is why it is called a Contingent
Deferred Sales Charge or CDSC), but the operating expenses each year are higher
than the Class A share expenses. With Class C shares, you pay a 1% front-end
sales charge and a 1% CDSC if you sell within 18 months of purchase, but the
operating expenses are also higher than the expenses for Class A shares.
When choosing a share class, you should consider the following:
. The amount of your investment
. The length of time you expect to hold the shares and the impact of the
varying distribution fees

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

23
<PAGE>

How to Buy, Sell and

- --------------------------------------------------------------------------------
Exchange Shares of the Fund
- --------------------------------------------------------------------------------

. The different sales charges that apply to each share class--Class A's
front-end sales charge vs. Class B's CDSC vs. Class C's low front-end
sales charge and low CDSC
. Whether you qualify for any reduction or waiver of sales charges
. The fact that Class B shares automatically convert to Class A shares
approximately seven years after purchase
. Whether you qualify to purchase Class Z shares.
See "How to Sell Your Shares" for a description of the impact of CDSCs.

Share Class Comparison. Use this chart to help you compare the Fund's different
share classes. The discussion following this chart will tell you whether you
are entitled to a reduction or waiver of any sales charges.

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Z

<S> <C> <C> <C> <C>
Minimum purchase $1,000 $1,000 $2,500 None
amount/1/

Minimum amount for $100 $100 $100 None
subsequent purchases/1/

Maximum initial 5% of the public None 1% of the public None
sales charge offering price offering price

Contingent Deferred None If sold during: 1% on sales None
Sales Charge Year 1 5% made within
(CDSC)/2/ Year 2 4% 18 months of
Year 3 3% purchase/2/
Year 4 2%
Years 5/6 1%
Year 7 0%
Annual distribution and .30 of 1%; 1% 1% None
service (12b-1) fees (.25 of 1%
(shown as a percentage currently)
of average net
assets)/3/
</TABLE>
1 The minimum investment requirements do not apply to certain retirement and
employee savings plans and custodial accounts for minors. The minimum initial
and subsequent investment for purchases made through the Automatic Investment
Plan is $50. For more information, see "Additional Shareholder Services--
Automatic Investment Plan."
2 For more information about the CDSC and how it is calculated, see "How to
Sell Your Shares-- Contingent Deferred Sales Charge (CDSC)." Class C shares
bought before November 2, 1998, have a 1% CDSC if sold within one year.
3 These distribution fees are paid from the Fund's assets on a continuous
basis. Over time, the fees will increase the cost of your investment and may
cost you more than paying other types of sales charges. The service fee for
Class A, Class B and Class C shares is .25 of 1%. The distribution fee for
Class A shares is limited to .30 of 1% (including the .25 of 1% service fee).
Class B and Class C shares pay a distribution fee (in addition to the service
fee) of .75 of 1%.

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<PAGE>

REDUCING OR WAIVING CLASS A'S INITIAL SALES CHARGE
The following describes the different ways investors can reduce or avoid paying
Class A's initial sales charge.

Increase the Amount of Your Investment. You can reduce Class A's sales charge
by increasing the amount of your investment. This table shows you how the sales
charge decreases as the amount of your investment increases.

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SALES CHARGE AS % SALES CHARGE AS % DEALER
AMOUNT OF PURCHASE OF OFFERING PRICE OF AMOUNT INVESTED REALLOWANCE
<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 million and above* None None None
</TABLE>

* If you invest $1 million or more, you can buy only Class A shares, unless you
qualify to buy Class Z shares.

To satisfy the purchase amounts above, you can:
. invest with an eligible group of investors who are related to you;
. buy the Class A shares of two or more Prudential mutual funds at the same
time;
. use your RIGHTS OF ACCUMULATION, which allow you to combine the value of
Prudential mutual fund shares you already own with the value of the
shares you are purchasing for purposes of determining the applicable
sales charge (note: you must notify the Transfer Agent if you qualify for
Rights of Accumulation); or
. sign a LETTER OF INTENT, stating in writing that you or an eligible group
of related investors will purchase a certain amount of shares in the Fund
and other Prudential mutual funds within 13 months.

Benefit Plans. Certain group retirement and savings plans may purchase Class A
shares without the initial sales charge, provided that they meet the required
minimum amount of assets, average account balance or number of eligible
employees. For more information about these requirements, call Prudential at
(800) 353-2847.

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

25
<PAGE>

Mutual Fund Programs. The initial sales charge will be waived for investors in
certain programs sponsored by broker-dealers, investment advisers and financial
planners who have agreements with Prudential Investments Advisory Group
relating to:
. Mutual fund "wrap" or asset allocation programs where the sponsor places
Fund trades and charges its clients a management, consulting or other fee
for its services; and
. Mutual fund "supermarket" programs where the sponsor links its customers'
accounts to a master account in the sponsor's name and the sponsor
charges a fee for its services.

Broker-dealers, investment advisers or financial planners sponsoring these
mutual fund programs may offer their clients more than one class of shares in
the Fund in connection with different pricing options for their programs.
Investors should consider carefully any separate transaction and other fees
charged by these programs in connection with investing in each available share
class before selecting a share class.

Other Types of Investors. Other investors pay no sales charge, including
certain officers, employees or agents of Prudential and its affiliates,
Prudential Mutual Funds, the subadvisers of the Prudential Mutual Funds and
clients of brokers that have entered into a selected dealer agreement with the
Distributor. To qualify for a reduction or waiver of the sales charge, you must
notify the Transfer Agent or your broker at the time of purchase. For more
information about reducing or eliminating Class A's sales charge, see the SAI,
"Purchase, Redemption and Pricing of Fund Shares--Reduction and Waiver of
Initial Sales Charge--Class A Shares."

WAIVING CLASS C'S INITIAL SALES CHARGE

Benefit Plans. Certain group retirement plans may purchase Class C shares
without the initial sales charge. For more information, call Prudential at
(800) 353-2847.

Investment of Redemption Proceeds from Other Investment Companies. The initial
sales charge will be waived for purchases of Class C shares if the purchase is
made with money from the redemption of shares of any unaffiliated investment
company, as long as the shares were not held in an account at Prudential
Securities Incorporated (Prudential Securities) or one

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

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<PAGE>

of its affiliates. Such purchases must be made within 60 days of the
redemption. To qualify for this waiver, you must:
. purchase your shares through an account at Prudential Securities;
. purchase your shares through an ADVANTAGE Account or an Investor Account
with Pruco Securities Corporation; or
. purchase your shares through another broker.

This waiver is not available to investors who purchase shares directly from
the Transfer Agent. If you are entitled to the waiver, you must notify either
the Transfer Agent or your broker. The Transfer Agent may require any
supporting documents it considers to be appropriate.

QUALIFYING FOR CLASS Z SHARES

Benefit Plans. Certain group retirement plans may purchase Class Z shares,
provided that they meet the required minimum amount of assets, average account
balance or number of eligible employees. For more information about these
requirements, call Prudential at (800) 353-2847.

Mutual Fund Programs. Class Z shares can also be purchased by participants in
any fee-based program or trust program sponsored by Prudential or an affiliate
which includes mutual funds as investment options and the Fund as an available
option. Class Z shares can also be purchased by investors in certain programs
sponsored by broker-dealers, investment advisers and financial planners who
have agreements with Prudential Investments Advisory Group relating to:

. Mutual fund "wrap" or asset allocation programs, where the sponsor places
Fund trades, links its clients' accounts to a master account in the
sponsor's name and charges its clients a management, consulting or other
fee for its services; and

. Mutual fund "supermarket" programs, where the sponsor links its clients'
accounts to a master account in the sponsor's name and the sponsor
charges a fee for its services.

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

27
<PAGE>

other fees charged by these programs in connection with investing in each
available share class before selecting a share class.

Other Types of Investors. Class Z shares of the Fund can be purchased by any of
the following:

. 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 option

. Current and former directors/trustees of the Prudential Mutual Funds
(including the Fund)
. Prudential with an investment of $10 million or more.

In connection with the sale of shares, the Manager, the Distributor or one
of their affiliates may pay brokers, financial advisers and other persons a
commission of up to 4% of the purchase price for Class B shares, up to 2% of
the purchase price for Class C shares, and a finder's fee for Class Z shares
from their own resources based on a percentage of the net asset value of shares
sold or otherwise.

CLASS B SHARES CONVERT TO CLASS A SHARES AFTER APPROXIMATELY SEVEN YEARS
If you buy Class B shares and hold them for approximately seven years, we will
automatically convert them into Class A shares without charge. At that time, we
will also convert any Class B shares that you purchased with reinvested
dividends and other distributions. Since the 12b-1 fees for Class A shares are
lower than for Class B shares, converting to Class A shares lowers your Fund
expenses.
When we do the conversion, you will get fewer Class A shares than the number
of converted Class B shares if the price of the Class A shares is higher than
the price of Class B shares. The total dollar value will be the same, so you
will not have lost any money by getting fewer Class A shares. We do the
conversions quarterly, not on the anniversary date of your purchase. For more
information, see the SAI, "Purchase, Redemption and Pricing of Fund Shares--
Conversion Feature--Class B Shares."

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<PAGE>

- --------------------------------------------------------------------------------
MUTUAL FUND SHARES
The NAV of mutual fund shares changes every day because the value of a fund's
portfolio changes constantly. For example, if Fund XYZ holds ACME Corp. stock
in its portfolio and the price of ACME stock goes up while the value of the
fund's other holdings remains the same and expenses don't change, the NAV of
Fund XYZ will increase.

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

STEP 3: UNDERSTANDING THE PRICE YOU'LL PAY
The price you pay for each share of the Fund is based on the share value. The
share value of a mutual fund--known as the NET ASSET VALUE or NAV--is
determined by a simple calculation: it's the total value of the Fund (assets
minus liabilities) divided by the total number of shares outstanding. For
example, if the value of the investments held by Fund XYZ (minus its
liabilities) is $1,000 and there are 100 shares of Fund XYZ owned by
shareholders, the price of one share of the fund--or the NAV--is $10 ($1,000
divided by 100). Portfolio securities are valued based upon market quotations
or, if not readily available, at fair value as determined in good faith under
procedures established by the Fund's Board. Most national newspapers report the
NAVs of most mutual funds, which allows investors to check the prices of mutual
funds daily.
We determine the NAV of our shares once each business day at 4:15 p.m. New
York time on days that the New York Stock Exchange is open for trading. We do
not determine the NAV on days when we have not received any orders to purchase,
sell or exchange Fund shares, or when changes in the value of the Fund's
portfolio do not materially affect the NAV.

WHAT PRICE WILL YOU PAY FOR SHARES OF THE FUND?
For Class A and Class C shares, you'll pay the public offering price, which is
the NAV next determined after we receive your order to purchase, plus an
initial sales charge (unless you're entitled to a waiver). For Class B and
Class Z shares, you will pay the NAV next determined after we receive your
order to purchase (remember, there are no up-front sales charges for these
share classes). Your broker may charge you a separate or additional fee for
purchases of shares.

- --------------------------------------------------------------------------------
29
<PAGE>

STEP 4: ADDITIONAL SHAREHOLDER SERVICES
As a Fund shareholder, you can take advantage of the following services and
privileges:

Automatic Reinvestment. As we explained in the "Fund Distributions and Tax
Issues" section, the Fund pays out--or distributes--its net investment income
and capital gains to all shareholders. For your convenience, we will
automatically reinvest your distributions in the Fund at NAV without any sales
charge. If you want your distributions paid in cash, you can indicate this
preference on your application, notify your broker or notify the Transfer Agent
in writing (at the address below) at least five business days before the date
we determine who receives dividends.

PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: ACCOUNT MAINTENANCE
P.O. BOX 15015
NEW BRUNSWICK, NJ 08906-5015

Automatic Investment Plan. You can make regular purchases of Fund shares for as
little as $50 by having the funds automatically withdrawn from your bank or
brokerage account at specified intervals.

Retirement Plan Services. Prudential offers a wide variety of retirement plans
for individuals and institutions, including large and small businesses. For
information on IRAs, including Roth IRAs or SEP-IRAs for a one-person business,
please contact your financial adviser. If you are interested in opening a
401(k) or other company-sponsored retirement plan (SIMPLES, SEP plans, Keoghs,
403(b) plans, pension and profit-sharing plans), your financial adviser will
help you determine which retirement plan best meets your needs. Complete
instructions about how to establish and maintain your plan and how to open
accounts for you and your employees will be included in the retirement plan kit
you receive in the mail.

The PruTector Program. Optional group term life insurance--which protects the
value of your Prudential mutual fund investment for your beneficiaries against
market declines--is available to investors who purchase their shares through
Prudential. This insurance is subject to various restrictions and charges and
is not available in all states.

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<PAGE>

Systematic Withdrawal Plan. A systematic withdrawal plan is available that will
provide you with monthly or quarterly checks. Remember, the sale of Class B and
Class C shares may be subject to a CDSC.

Reports to Shareholders. Every year, we will send you an annual report (along
with an updated prospectus) and a semi-annual report, which contain important
financial information about the Fund. To reduce Fund expenses, we will send one
annual shareholder report, one semi-annual shareholder report and one annual
prospectus per household, unless you instruct us or your broker otherwise.

HOW TO SELL YOUR SHARES
You can sell your shares of the Fund for cash (in the form of a check, by wire
or by electronic deposit to your bank account) at any time, subject to certain
restrictions.
When you sell shares of the Fund--also known as redeeming your shares--the
price you will receive will be the NAV next determined after the Transfer
Agent, the Distributor or your broker receives your order to sell (less any
applicable CDSC). If your broker holds your shares, he must receive your order
to sell by 4:15 p.m. New York time to process the sale on that day. Otherwise
contact:

PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: REDEMPTION SERVICES
P.O. BOX 15010
NEW BRUNSWICK, NJ 08906-5010

Generally, we will pay you for the shares that you sell within seven days
after the Transfer Agent, the Distributor or your broker receives your sell
order. If you hold shares through a broker, we will credit payment to your
account. If you are selling shares you recently purchased with a check, we may
delay sending you the proceeds until your check clears, which can take up to 10
days from the purchase date. You can avoid this delay if you purchase shares by
wire, certified check or cashier's check. Your broker may charge you a separate
or additional fee for sales of shares.

RESTRICTIONS ON SALES
There are certain times when you may not be able to sell shares of the Fund, or
we may delay paying you the proceeds from a sale. This may

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31
<PAGE>

happen during unusual market conditions or emergencies when the Fund can't
determine the value of its assets or sell its holdings. For more information,
see the SAI, "Purchase, Redemption and Pricing of Fund Shares--Sale of Shares."
If you are selling more than $100,000 of shares, you want the check sent to
someone or some place that is not in our records, or you are a business or a
trust, and if you hold your shares directly with the Transfer Agent, you will
need to have the signature on your sell order guaranteed by an "eligible
guarantor institution." An "eligible guarantor institution" includes any bank,
broker, dealer or credit union. For more information, see the SAI, "Purchase,
Redemption and Pricing of Fund Shares--Sale of Shares--Signature Guarantee."

CONTINGENT DEFERRED SALES CHARGE (CDSC)
If you sell Class B shares within six years of purchase or Class C shares
within 18 months of purchase (one year for Class C shares purchased before
November 2, 1998), you will have to pay a CDSC. To keep the CDSC as low as
possible, we will sell amounts representing shares in the following order:
. Amounts representing shares you purchased with reinvested dividends and
distributions
. Amounts representing shares that represent the increase in NAV above the
total amount of your payments for shares made during the past six years
for Class B shares (five years for Class B shares purchased before
January 22, 1990) and 18 months for Class C shares (one year for Class C
shares purchased before November 2, 1998)
. Amounts representing the cost of shares held beyond the CDSC period (six
years for Class B shares and 18 months for Class C shares).

Since shares that fall into any of the categories listed above are not
subject to the CDSC, selling them first helps you to avoid--or at least
minimize--the CDSC.
Having sold the exempt shares first, if there are any remaining shares that
are subject to the CDSC, we will apply the CDSC to amounts representing the
cost of shares held for the longest period of time within the applicable CDSC
period.

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<PAGE>

As we noted before in the "Share Class Comparison" chart, the CDSC for Class
B shares is 5% in the first year, 4% in the second, 3% in the third, 2% in the
fourth and 1% in the fifth and sixth years. The rate decreases on the first day
of the month following the anniversary date of your purchase, not on the
anniversary date itself. The CDSC is 1% for Class C shares-- which is applied
to shares sold within 18 months of purchase (or one year for Class C shares
purchased before November 2, 1998). For both Class B and Class C shares, the
CDSC is calculated using the lesser of the original purchase price or the
redemption proceeds. For purposes of determining how long you've held your
shares, all purchases during the month are grouped together and considered to
have been made on the last day of the month.
The holding period for purposes of determining the applicable CDSC will be
calculated from the first day of the month after initial purchase, excluding
any time shares were held in a money market fund.

WAIVER OF THE CDSC--CLASS B SHARES
The CDSC will be waived if the Class B shares are sold:
. after a shareholder dies or is disabled (or, in the case of a trust
account, the death or disability of the grantor). This waiver applies to
individual shareholders as well as shares owned in joint tenancy (with
rights of survivorship), provided the shares were purchased before the
death or disability;
. to provide for certain distributions--made without IRS penalty--from a
tax-deferred retirement plan, IRA or Section 403(b) custodial account;
and
. on certain sales from a Systematic Withdrawal Plan.

For more information on the above and other waivers, see the SAI, "Purchase,
Redemption and Pricing of Fund Shares--Waiver of Contingent Deferred Sales
Charge--Class B Shares."

WAIVER OF THE CDSC--CLASS C SHARES

Benefit Plans. The CDSC will be waived for redemptions by certain group
retirement plans for which Prudential or brokers not affiliated with Prudential
provide administrative or recordkeeping services. The CDSC will also be waived
for certain redemptions by benefit plans sponsored by

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

33
<PAGE>

Prudential and its affiliates. For more information, call Prudential at (800)
353-2847.

REDEMPTION IN KIND
If the sales of Fund shares you make during any 90-day period reach the lesser
of $250,000 or 1% of the value of the Fund's net assets, we can then give you
securities from the Fund's portfolio instead of cash. If you want to sell the
securities for cash, you would have to pay the costs charged by a broker.

SMALL ACCOUNTS
If you make a sale that reduces your account value to less than $500, we may
sell the rest of your shares (without charging any CDSC) and close your
account. We would do this to minimize the Fund's expenses paid by other
shareholders. We will give you 60 days' notice, during which time you can
purchase additional shares to avoid this action. This involuntary sale does not
apply to shareholders who own their shares as part of a 401(k) plan, an IRA, or
some other tax-deferred plan or account.

90-DAY REPURCHASE PRIVILEGE
After you redeem your shares, you have a 90-day period during which you may
reinvest any of the redemption proceeds in shares of the same Fund without
paying an initial sales charge. Also, if you paid a CDSC when you redeemed your
shares, we will credit your new account with the appropriate number of shares
to reflect the amount of the CDSC you paid. In order to take advantage of this
one-time privilege, you must notify the Transfer Agent or your broker at the
time of the repurchase. See the SAI, "Purchase, Redemption and Pricing of Fund
Shares--Sale of Shares."

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34
<PAGE>

RETIREMENT PLANS
To sell shares and receive a distribution from your retirement account, call
your broker or the Transfer Agent for a distribution request form. There are
special distribution and income tax withholding requirements for distributions
from retirement plans and you must submit a withholding form with your request
to avoid delay. If your retirement plan account is held for you by your
employer or plan trustee, you must arrange for the distribution request to be
signed and sent by the plan administrator or trustee. For additional
information, see the SAI.

HOW TO EXCHANGE YOUR SHARES
You can exchange your shares of the Fund for shares of the same class in
certain other Prudential mutual funds--including certain money market funds--if
you satisfy the minimum investment requirements. For example, you can exchange
Class A shares of the Fund for Class A shares of another Prudential mutual
fund, but you can't exchange Class A shares for Class B, Class C or Class Z
shares. Class B and Class C shares may not be exchanged into money market funds
other than Prudential Special Money Market Fund, Inc. After an exchange, at
redemption, the CDSC will be calculated from the first day of the month after
your initial purchase, excluding any time shares which were held in a money
market fund. We may change the terms of the exchange privilege after giving you
60 days' notice.
If you hold shares through a broker, you must exchange shares through your
broker. Otherwise contact:

PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: EXCHANGE PROCESSING
P.O. BOX 15010
NEW BRUNSWICK, NJ 08906-5010

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35
<PAGE>

Remember, as we explained in the section entitled "Fund Distributions and
Tax Issues--If You Sell or Exchange Your Shares," exchanging shares is
considered a sale for tax purposes. Therefore, if the shares you exchange are
worth more than you paid for them, you may have to pay capital gains tax. For
additional information about exchanging shares, see the SAI, "Shareholder
Investment Account--Exchange Privilege."
If you own Class B or Class C shares and qualify to purchase Class A shares
without paying an initial sales charge, we will automatically exchange your
Class B or Class C shares which are not subject to a CDSC for Class A shares.
We make such exchanges on a quarterly basis if you qualify for this exchange
privilege. We have obtained a legal opinion that this exchange is not a
"taxable event" for federal income tax purposes. This opinion is not binding on
the IRS.

FREQUENT TRADING
Frequent trading of Fund shares in response to short-term fluctuations in the
market--also known as "market timing"--may make it very difficult to manage the
Fund's investments. When market timing occurs, the Fund may have to sell
portfolio securities to have the cash necessary to redeem the market timer's
shares. This can happen at a time when it is not advantageous to sell any
securities, so the Fund's performance may be hurt. When large dollar amounts
are involved, market timing can also make it difficult to use long-term
investment strategies because we cannot predict how much cash the Fund will
have to invest. When, in our opinion, such activity would have a disruptive
effect on portfolio management, the Fund reserves the right to refuse purchase
orders and exchanges into the Fund by any person, group or commonly controlled
account. The Fund may notify a market timer of rejection of an exchange or
purchase order after the day on which the order is placed. If the Fund allows a
market timer to trade Fund shares, it may require the market timer to enter
into a written agreement to follow certain procedures and limitations.

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36
<PAGE>

- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------

The financial highlights will help you evaluate the Fund's financial
performance. The TOTAL RETURN in each chart represents the rate that a
shareholder earned on an investment in that share class of the Fund, assuming
reinvestment of all dividends and other distributions. The information is for
each share class for the periods indicated.
Review each chart with the financial statements and report of independent
accountants which appear in the annual report and the SAI and are available
upon request. Additional performance information for each share class is
contained in the annual report, which you can receive at no charge.

CLASS A SHARES
The financial highlights for the period ended May 31, 1999 were audited by
PricewaterhouseCoopers LLP, independent accountants, whose report was
unqualified.

<TABLE>
<CAPTION>
CLASS A SHARES (FISCAL PERIOD ENDED 5-31-99)
- ------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1999/1/
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (.05)
Net realized and unrealized gain on investment and foreign
currency transactions .21
TOTAL FROM INVESTMENT OPERATIONS .16
- ------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.16
TOTAL RETURN/2/ 1.60%
- ------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA 1999
<S> <C>
NET ASSETS, END OF PERIOD (000) $41
Average net assets (000) $29
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution fees 3.43%/3/
Expenses, excluding distribution fees 3.18%/3/
Net investment income (loss) (.55)%/3/
Portfolio turnover 345%
</TABLE>
- --------------------------------------------------------------------------------

1 Information shown is for the period 6-26-98 (when shares were first offered)
through 5-31-99.
2 Total return assumes reinvestment of dividends and any other distributions,
but does not include the effect of sales charges. It is calculated assuming
shares are purchased on the first day and sold on the last day of each period
reported. Total return for a period of less than a full year is not
annualized.
3 Annualized.

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

37
<PAGE>

- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------

CLASS B SHARES
The financial highlights for the period ended May 31, 1999 were audited by
PricewaterhouseCoopers LLP, independent accountants, whose report was
unqualified.

<TABLE>
<CAPTION>
CLASS B SHARES (FISCAL PERIOD ENDED 5-31-99)
- -------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1999/1/
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (.10)
Net realized and unrealized gain on investment and foreign
currency transactions .19
TOTAL FROM INVESTMENT OPERATIONS .09
- -------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.09
TOTAL RETURN/2/ .90%
- -------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA 1999
<S> <C>
NET ASSETS, END OF PERIOD (000) $148
Average net assets (000) $59
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution fees 4.18%/3/
Expenses, excluding distribution fees 3.18%/3/
Net investment income (loss) (1.21)%/3/
Portfolio turnover 345%
</TABLE>
- --------------------------------------------------------------------------------

1Information shown is for the period 6-26-98 (when shares were first offered)
through 5-31-99.
2 Total return assumes reinvestment of dividends and any other distributions,
but does not include the effect of sales charges. It is calculated assuming
shares are purchased on the first day and sold on the last day of each
period reported. Total return for a period of less than a full year is not
annualized.
3Annualized.

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PRUDENTIAL DEVELOPING MARKETS EQUITY FUND (800) 225-1852
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<PAGE>

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Financial Highlights
- --------------------------------------------------------------------------------

CLASS C SHARES
The financial highlights for the period ended May 31, 1999 were audited by
PricewaterhouseCoopers LLP, independent accountants, whose report was
unqualified.

<TABLE>
<CAPTION>
CLASS C SHARES (FISCAL PERIOD ENDED 5-31-99)
- -------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1999/1/
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (.10)
Net realized and unrealized gain on investment and foreign
currency transactions .19
TOTAL FROM INVESTMENT OPERATIONS .09
- -------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.09
TOTAL RETURN/2/ .90%
- -------------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA 1999
<S> <C>
NET ASSETS, END OF PERIOD (000) $74
Average net assets (000) $27
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution fees 4.18%/3/
Expenses, excluding distribution fees 3.18%/3/
Net investment income (loss) (1.21)%/3/
Portfolio turnover 345%
</TABLE>
- --------------------------------------------------------------------------------

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39
<PAGE>

- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------

CLASS Z SHARES
The financial highlights for the period ended May 31, 1999 were audited by
PricewaterhouseCoopers LLP, independent accountants, through whose report was
unqualified.

<TABLE>
<CAPTION>
CLASS Z SHARES (FISCAL PERIOD ENDED 5-31-99)
- -----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1999/1/
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (.03)
Net realized and unrealized gain on investment and foreign
currency transactions .21
TOTAL FROM INVESTMENT OPERATIONS .18
- -----------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.18
TOTAL RETURN/2/ 1.90%
- -----------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA 1999
<S> <C>
NET ASSETS, END OF PERIOD (000) $20,380
Average net assets (000) $18,337
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution fees 3.18%/3/
Expenses, excluding distribution fees 3.18%/3/
Net investment income (loss) (.38)%/3/
Portfolio turnover 345%
</TABLE>
- --------------------------------------------------------------------------------

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PRUDENTIAL DEVELOPING MARKETS EQUITY FUND (800) 225-1852
[GRAPHIC]

40
<PAGE>

- --------------------------------------------------------------------------------
The Prudential Mutual Fund Family
- --------------------------------------------------------------------------------

Prudential offers a broad range of mutual funds designed to meet your
individual needs. For information about these funds, contact your financial
adviser or call us at (800) 225-1852. Read the prospectus carefully before you
invest or send money.

STOCK FUNDS
Prudential Distressed Securities Fund, Inc.
Prudential Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Index Series Fund
Prudential Small-Cap Index Fund
Prudential Stock Index Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Mid-Cap Value Fund
Prudential Real Estate Securities Fund
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Tax-Managed Equity Fund
Prudential 20/20 Focus Fund
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund

ASSET ALLOCATION/BALANCED FUNDS
Prudential Balanced Fund
Prudential Diversified Funds
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund

GLOBAL FUNDS
GLOBAL STOCK FUNDS
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Prudential Latin America Equity Fund
Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Index Series Fund
Prudential Europe Index Fund
Prudential Pacific Index Fund
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Global Series
International Stock Series
Global Utility Fund, Inc.

GLOBAL BOND FUNDS
Prudential Global Limited Maturity Fund, Inc.
Limited Maturity Portfolio
Prudential Intermediate Global Income Fund, Inc.
Prudential International Bond Fund, Inc.
The Global Total Return Fund, Inc.
- --------------------------------------------------------------------------------

41
<PAGE>

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

BOND FUNDS
TAXABLE BOND FUNDS
Prudential Diversified Bond Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential High Yield Total Return Fund, Inc.
Prudential Index Series Fund
Prudential Bond Market Index Fund
Prudential Structured Maturity Fund, Inc.
Income Portfolio

TAX-EXEMPT BOND FUNDS
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Income Series
Insured Series
Prudential Municipal Series Fund
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.

MONEY MARKET FUNDS
TAXABLE MONEY MARKET FUNDS
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund, Inc.
Money Market Series
Prudential MoneyMart Assets, Inc.

TAX-FREE MONEY MARKET FUNDS
Prudential Tax-Free Money Fund, Inc.
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series

COMMAND FUNDS
Command Money Fund
Command Government Fund
Command Tax-Free Fund

INSTITUTIONAL MONEY MARKET FUNDS
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series

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<PAGE>

FOR MORE INFORMATION
________________________________________________________________

Please read this prospectus before you invest in the Fund and keep it for fu-
ture reference. For information or shareholder questions contact:

PRUDENTIAL MUTUAL FUND SERVICES LLC
P.O. BOX 15005
NEW BRUNSWICK, NJ 08906-5005
(800) 225-1852
(732) 417-7555
(if calling from outside the U.S.)
- --------------------------------------------------------------------------------
Outside Brokers Should Contact:
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
P.O. BOX 15035
NEW BRUNSWICK, NJ 08906-5035
(800) 778-8769
- --------------------------------------------------------------------------------
Visit Prudential's Web Site At:
HTTP://WWW.PRUDENTIAL.COM
- --------------------------------------------------------------------------------
Additional information about the Fund can be obtained without charge and can be
found in the following documents:

STATEMENT OF ADDITIONAL INFORMATION (SAI)
(incorporated by reference into this prospectus)

ANNUAL REPORT
(contains a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance)

SEMI-ANNUAL REPORT

You can also obtain copies of Fund documents from the Securities and Exchange
Commission as follows:

By Mail:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-6009
(The SEC charges a fee to copy documents.)

In Person:
Public Reference Room in Washington, DC
(For hours of operation, call 1(800) SEC-0330)

Via the Internet:
http://www.sec.gov
- --------------------------------------------------------------------------------
CUSIP NUMBERS:
CLASS A: 7443IP-10-8
CLASS B: 7443IP-20-7
CLASS C: 7443IP-30-6
CLASS Z: 7443IP-40-5

Investment Company Act File No: 811-8753

Printed on Recycled Paper
[RECYCLE LOGO APPEARS HERE]

MF179A
<PAGE>

FUND TYPE:
_________________________________
Global stock

INVESTMENT OBJECTIVE:
_________________________________
Long-term growth of capital

Prudential Developing
Markets Fund
[LOGO OF PRUDENTIAL INVESTMENTS APPEARS HERE]

- --------------------------------------------------------------------------------
PRUDENTIAL LATIN AMERICA EQUITY FUND

PROSPECTUS: AUGUST 10, 1999

- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------

<TABLE>
<C> <S>
1 Risk/Return Summary
1 Investment Objective and Principal Strategies
1 Principal Risks
2 Evaluating Performance
3 Fees and Expenses
5 How the Fund Invests
5 Investment Objective and Policies
6 Other Investments
8 Derivative Strategies
9 Additional Strategies
10 Portfolio Turnover
10 Investment Risks
14 How the Fund is Managed
14 Board of Trustees
14 Manager
14 Investment Adviser
14 Portfolio Managers
15 Distributor
15 Year 2000 Readiness Disclosure
17 Fund Distributions and Tax Issues
17 Distributions
18 Tax Issues
19 If You Sell or Exchange Your Shares
21 How to Buy, Sell and Exchange Shares of the Fund
21 How to Buy Shares
29 How to Sell Your Shares
33 How to Exchange Your Shares
35 Financial Highlights
35 Class A Shares
36 Class B Shares
37 Class C Shares
38 Class Z Shares
39 The Prudential Mutual Fund Family
For More Information (Back Cover)
</TABLE>
- --------------------------------------------------------------------------------

[GRAPHIC]
PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
<PAGE>

- --------------------------------------------------------------------------------
Risk/Return Summary
- --------------------------------------------------------------------------------

This section highlights key information about the PRUDENTIAL LATIN AMERICA
EQUITY FUND, which we refer to as "the Fund." Additional information follows
this summary.

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is LONG-TERM GROWTH OF CAPITAL, which means we look
for investments that we think will increase in value over a period of years. We
normally invest at least 65% of the Fund's total assets in equity-related
securities of companies doing business principally in or domiciled in Latin
America. We refer to these securities throughout this Prospectus as LATIN
AMERICAN SECURITIES. We define Latin America as Mexico and all countries in
Central America and South America. There is no limit on the percentage of the
Fund's assets that may be invested in any single country.
We ordinarily look for one or more of the following characteristics:
. prospects for above-average earnings growth per share;
. high return on invested capital;
. healthy balance sheets;
. sound financial and accounting policies and overall financial strength;
. strong competitive advantages;
. effective research and product development and marketing;
. efficient service;
. pricing flexibility;
. strength of management; and
. general operating characteristics that will allow the companies to
compete successfully in their marketplace.

PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. Since the Fund
invests primarily in equity-related securities, such as common stock, there is
the risk that the value of a particular stock could go down. Also, because the
Fund invests primarily in a single region of the world, its investments are
geographically concentrated. This can result in more pronounced risks based

- --------------------------------------------------------------------------------
WE'RE GROWTH INVESTORS
We look primarily for stock that we believe is undervalued and/or will grow
faster--and earn better profits--than other companies. We also look for
companies with strong competitive advantages, effective research, product
development, strong management or financial strength.

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

1
<PAGE>

- --------------------------------------------------------------------------------
Risk/Return Summary
- --------------------------------------------------------------------------------

upon economic conditions that impact Latin America more or less than other
global regions.

In addition to an individual security losing value, the value of the equity
markets as a whole could go down. Investing in foreign securities presents
additional risks, since foreign political, economic and legal systems may be
less stable than those in the U.S. and these risks or other factors may cause
foreign stock markets to decline. The changing value of foreign currencies also
affects the value of the assets we hold and our performance. Also, the Fund may
actively and frequently trade its portfolio securities.
The risks of investing in foreign securities are heightened for Latin
American securities. Moreover, Latin American securities present additional
risks which should be considered carefully by an investor in the Fund.
Investing in Latin American securities involves exposure to economies that are
less diverse and mature, and political and legal systems which are less stable,
than those of more developed markets. In addition, investment decisions by
international investors, such as the Fund, particularly concurrent buying or
selling programs, have a greater effect on securities prices and currency
values than in more developed markets. As a result, Latin American securities
have historically been, and may continue to be, subject to greater volatility
and share price declines than securities issued by U.S. corporations or
companies in other markets that are considered developed.
Many Latin American countries have also experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have a negative
impact on securities prices.

There is also risk involved in the derivatives strategies we may use. Some
of our strategies require us to try to predict whether the price or value of an
underlying investment will go up or down over a certain period of time. There
is always the risk that investments will not perform as we thought they would.
Like any mutual fund, an investment in the Fund could lose value, and you could
lose money. The Fund does not represent a complete investment program.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

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PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
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<PAGE>

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Risk/Return Summary
- --------------------------------------------------------------------------------

SHAREHOLDER FEES/1/ (PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Z
<S> <C> <C> <C> <C>
Maximum sales charge (load) 5% None 1% None
imposed on purchases (as a
percentage of offering price)

Maximum deferred sales charge None 5%/2/ 1%/3/ None
(load) imposed on sales (as a
percentage of the lower of
original purchase price or sale
proceeds)

Maximum sales charge (load) None None None None
imposed on reinvested dividends
and other distributions

Redemption fees None None None None

Exchange fee None None None None

ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
- -------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B CLASS C CLASS Z
<S> <C> <C> <C> <C>
Management fees 1.25% 1.25% 1.25% 1.25%
+ Distribution and service (12b-1) .30%/4/ 1.00% 1.00% None
fees
+ Other expenses 7.22% 7.22% 7.22% 7.22%
= TOTAL ANNUAL FUND OPERATING 8.77% 9.47% 9.47% 8.47%
EXPENSES
- Waivers and/or reimbursements 6.53%/4/ 6.48%/4/ 6.48%/4/ 6.48%/4/
= NET ANNUAL FUND OPERATING 2.24% 2.99% 2.99% 1.99%
EXPENSES
</TABLE>

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

3
<PAGE>

- --------------------------------------------------------------------------------
Risk/Return Summary
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR 3 YRS 5 YRS 10 YRS
<S> <C> <C> <C> <C>
Class A shares $1,317 $2,853 $4,276 $7,397
Class B shares $1,426 $2,955 $4,333 $7,408
Class C shares $1,117 $2,729 $4,291 $7,626
Class Z shares $ 832 $2,411 $3,883 $7,137
</TABLE>

You would pay the following expenses on the same investment if you did not sell
your shares:

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR 3 YRS 5 YRS 10 YRS
<S> <C> <C> <C> <C>
Class A shares $1,317 $2,853 $4,276 $7,397
Class B shares $ 926 $2,655 $4,233 $7,408
Class C shares $1,017 $2,729 $4,291 $7,626
Class Z shares $ 832 $2,411 $3,883 $7,137
</TABLE>

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

PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
[GRAPHIC]

4
<PAGE>

- --------------------------------------------------------------------------------
How the Fund Invests
- --------------------------------------------------------------------------------

. the principal trading market for the security is in Latin America
. the company that issued the security derives 50% or more of its total
revenue from goods produced or sales made in Latin America
. the company that issued the security is organized under the laws of, and
has a principal office in, Latin America or
. the security was issued or guaranteed by the government (or its agencies
and instrumentalities), a political subdivision or the central bank of a
Latin American country

The principal type of security in which the Fund invests is common stock. In
addition to common stock, equity-related securities include, but are not
limited to, preferred stock, warrants or rights to purchase or subscribe to
common or preferred stock, American Depositary Receipts (ADRs), European
Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), convertible
securities, trust certificates, limited partnership interests and equity
participations. ADRs, EDRs and GDRs are certificates that represent an equity
investment in a domestic or foreign company or some other issuer and are
usually issued by a bank or trust company. Although not considered principal
investments, the Fund may invest up to 35% of its total assets in equity-
related securities of non-Latin American companies and in fixed-income
obligations.
- --------------------------------------------------------------------------------
OUR GROWTH STRATEGY

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

5
<PAGE>

- --------------------------------------------------------------------------------
How the Fund Invests
- --------------------------------------------------------------------------------

In selecting securities for the Fund, we use a bottom-up approach based on a
company's growth potential, and we focus the Fund's portfolio on those areas
within Latin America with the most attractive near-term prospects. We
ordinarily look for one or more of the following characteristics:
. prospects for above-average earnings growth per share;
. high return on invested capital;
. healthy balance sheets;
. sound financial and accounting policies and overall financial strength;
. strong competitive advantages;
. effective research and product development and marketing;
. efficient service;
. pricing flexibility;
. strength of management; and
. general operating characteristics that will allow the companies to
compete successfully in their marketplace.
Generally, we consider selling a security when the security no longer
displays the conditions for growth, is no longer undervalued, or falls short of
expectations.
For more information, see "Investment Risks" and the Statement of Additional
Information, "Description of the Fund, Its Investments and Risks." The
Statement of Additional Information--which we refer to as the SAI--contains
additional information about the Fund. To obtain a copy, see the back cover
page of this prospectus.
The Fund's investment objective is a fundamental policy that cannot be
changed without shareholder approval. The Fund's Board of Trustees can change
investment policies that are not fundamental.

OTHER INVESTMENTS
In addition to the principal strategies discussed above, we may also use the
following strategies to increase the Fund's returns or protect its assets if
market conditions warrant.

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

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[GRAPHIC]

6
<PAGE>

- --------------------------------------------------------------------------------
How the Fund Invests
- --------------------------------------------------------------------------------

principal. Typically, fixed-income securities don't increase or decrease in
value in relation to an issuer's financial condition or business prospects as
stock may, although their value does fluctuate inversely to changes in interest
rates generally and directly in relation to their perceived credit quality.
Corporations and governments issue money market instruments and bonds to raise
money. The Fund may buy obligations of companies, foreign countries or the U.S.
Government. The Fund may also invest in Brady Bonds, which are created in
connection with debt restructuring through the exchange of existing bank loans
to foreign nations for new obligations. Money market instruments include the
commercial paper and short-term obligations of foreign and domestic
corporations, banks and governments and their agencies.

The Fund will purchase only money market instruments that have received one
of the two highest short-term debt ratings from Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Rating Group ("S&P"), or another nationally
recognized statistical rating organization (NRSRO). For bonds and other long-
term fixed-income obligations, we may invest in obligations rated at least C by
Moody's or S&P. We may also invest in obligations that are not rated, but which
we believe are of comparable quality. As a matter of operating policy, which
may be changed without shareholder approval, we will not invest more than 10%
of total assets in obligations rated lower than Baa by Moody's or BBB by S&P
(or in unrated obligations of comparable quality).
After a security has been purchased by the Fund, it may be assigned a lower
rating or cease to be rated. This does not mean that the Fund must sell the
security, but the investment adviser will consider such an event in deciding
whether the Fund should continue to hold the security in its portfolio.
An obligation is considered investment grade if it has received one of the
top four long-term debt ratings from a NRSRO. Obligations rated in the fourth
category (Baa for Moody's or BBB for S&P) have speculative characteristics and
are subject to a greater risk of loss of principal and interest. Obligations
rated below investment grade are referred to as high-yield or "junk" bonds, and
their value is more likely to react to developments affecting market or credit
risk than higher-rated debt obligations, which react primarily to movements in
the general level of interest rates. In particular, "junk" bond investments may
increase or

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

7
<PAGE>

- --------------------------------------------------------------------------------
How the Fund Invests
- --------------------------------------------------------------------------------

decrease in value due to an issuer's financial condition. Obligations rated C
by S&P are of the lowest quality and may be used when an issuer has filed a
bankruptcy petition but continues to make debt payments. Moody's lowest rating
is C, and obligations given this rating have extremely poor prospects of ever
attaining any real investment standing.
For more information about bonds and bond ratings, see the SAI, "Appendix
I--Description of Security Ratings."

INVESTMENT FUNDS
Certain markets are closed to equity investments by foreigners except through
authorized investment funds. An investment in such funds can result in the
duplication of management and advisory fees.

DERIVATIVE STRATEGIES
We may use a number of alternative investment strategies--including
DERIVATIVES--to try to improve the Fund's returns or protect its assets,
although we cannot guarantee these strategies will work, that the instruments
necessary to implement these strategies will be available or that the Fund will
not lose money. Derivatives--such as futures, options, forward foreign currency
exchange contracts and options on futures--involve costs and can be volatile.
With derivatives, the investment adviser tries to predict whether the
underlying investment--a security, market index, currency, interest rate or
some other benchmark--will go up or down at some future date. We may use
derivatives to try to reduce risk or to increase return consistent with the
Fund's overall investment objective. The investment adviser will consider
various factors (such as cost) in deciding whether or not to employ any
particular strategy or use any particular instrument. Any derivatives we may
use may not match the Fund's underlying holdings.

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

PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
[GRAPHIC]

8
<PAGE>

- --------------------------------------------------------------------------------
How the Fund Invests
- --------------------------------------------------------------------------------

For more information about these strategies, see the SAI, "Description of
the Fund, its Investments and Risks--Hedging and Return Enhancement
Strategies."

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

9
<PAGE>

- --------------------------------------------------------------------------------
How the Fund Invests
- --------------------------------------------------------------------------------

PORTFOLIO TURNOVER

INVESTMENT TYPE
% OF FUND'S TOTAL RISKS POTENTIAL REWARDS
ASSETS

LATIN AMERICAN . Geographically . Rewards
SECURITIES concentrated associated with
investments can foreign
result in more securities in
pronounced risks general and
based upon equity-related
economic securities as
conditions that described below
impact that
region either
more or less than
other global
regions

At least 65%; up
to 100%
. Subject to
greater
volatility and
share price
declines than
securities issued
by U.S.
corporations or
companies in
other more
developed
countries
. Unpredictable
volatility
arising from cash
flows into and
out of Latin
American markets
and currencies
from
international
investors
. Other risks
associated with
foreign
securities in
general and
equity-related
securities as
described below,
which risks are
heightened for
Latin American
securities
- --------------------------------------------------------------------------------

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10
<PAGE>

- --------------------------------------------------------------------------------
How the Fund Invests
- --------------------------------------------------------------------------------

INVESTMENT TYPE (CONT'D)
% OF FUND'S TOTAL RISKS POTENTIAL REWARDS
ASSETS

FOREIGN . Foreign markets, . Investors can
SECURITIES IN economies and participate in
GENERAL political systems the growth of
may not be as foreign markets
stable as in the and companies
U.S., operating in
particularly those markets
those in
developing
countries

At least 65%; up . Currency risk--
to 100% changing values
of foreign
currencies or
risk of
devaluation of a
currency by a
country's
government or
central bank

. May be less
liquid than U.S.
stocks and bonds

. Differences in
foreign laws,
accounting
standards, public
information and
custody and
settlement
practices

. Year 2000
conversion may be
more of a problem
for some foreign
issuers,
governments and
securities
markets

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

COMMON STOCK AND . Individual stocks . Historically,
OTHER EQUITY- could lose value stocks have
RELATED outperformed
SECURITIES . The equity other
markets could go investments over
down, resulting the long term
in a decline in
value of the . Generally,
Fund's economic growth
investments means higher
corporate
For U.S. compa- . Companies that profits, which
nies and other pay dividends may leads to an
companies outside not do so if they increase in
of Latin America, don't have stock prices,
up to 35%, usu- profits or known as capital
ally less adequate cash appreciation
flow
. May be a source
. Changes in of dividend
economic or income
political
For Latin conditions, both
American domestic and
companies, at international,
least 65%, up to resulting in a
100% decline in value
of the Fund's
investments

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

11
<PAGE>

- --------------------------------------------------------------------------------
How the Fund Invests
- --------------------------------------------------------------------------------

INVESTMENT TYPE (CONT'D)
% OF FUND'S TOTAL RISKS POTENTIAL REWARDS
ASSETS
FIXED-INCOME . The Fund's . Bonds have
OBLIGATIONS holdings, share generally
price, yield and outperformed
total return may money market
fluctuate in instruments over
response to bond the long term
market movements with less risk
than stocks

Up to 35% . Credit risk--the
default of an . Most bonds will
issuer would rise in value
leave the Fund when interest
with unpaid rates fall
interest or
principal. The
lower a bond's
quality, the
higher its . Regular interest
potential income
volatility
. Investment grade
. Market risk--the bonds have a
risk that the lower risk of
market value of default
an investment may
move up or down, . Generally more
sometimes rapidly secure than
or unpredictably. stock since
Market risk may companies must
affect an pay their debts
industry, a before paying
sector or the stockholders
market as a whole

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

PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
[GRAPHIC]

12
<PAGE>

- --------------------------------------------------------------------------------
How the Fund Invests
- --------------------------------------------------------------------------------

INVESTMENT TYPE (CONT'D)
% OF FUND'S TOTAL RISKS POTENTIAL REWARDS
ASSETS

. The other party
to a derivatives
contract could
default

. Derivatives can
increase share
price volatility
and those that
involve leverage
could magnify
losses

. Certain types of
derivatives
involve costs
that can reduce
returns

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

. Limits potential . May preserve the
MONEY MARKET for capital Fund's assets
INSTRUMENTS appreciation

Up to 100% on a . See credit risk
temporary basis and market risk

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

13
<PAGE>

- --------------------------------------------------------------------------------
How the Fund is Managed
- --------------------------------------------------------------------------------

BOARD OF TRUSTEES

MANAGER
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM)
GATEWAY CENTER THREE, 100 MULBERRY STREET
NEWARK, NJ 07102-4077

PORTFOLIO MANAGERS

The Fund is managed by MARIA ELENA CARRION, CFA.

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

PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
[GRAPHIC]

14
<PAGE>

- --------------------------------------------------------------------------------
How the Fund is Managed
- --------------------------------------------------------------------------------

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

15
<PAGE>

- --------------------------------------------------------------------------------
How the Fund is Managed
- --------------------------------------------------------------------------------

year 2000 readiness as those in developed markets. As a result, the Fund may
have a greater negative impact in value of securities held or in the duration
of the remediation process than investors in securities in developed markets.

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

PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
[GRAPHIC]

16
<PAGE>

- --------------------------------------------------------------------------------
Fund Distributions and Tax Issues
- --------------------------------------------------------------------------------

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

17
<PAGE>

- --------------------------------------------------------------------------------
Fund Distributions and Tax Issues
- --------------------------------------------------------------------------------

qualified tax-deferred plan or account. For more information about automatic
reinvestment and other shareholder services, see "Step 4: Additional
Shareholder Services" in the next section.

IF YOU PURCHASE JUST BEFORE RECORD DATE
If you buy shares of the Fund just before the record date for a distribution
(the date that determines who receives the distribution), we will pay that
distribution to you. As explained above, the distribution may be subject to
income or capital gains taxes. You may think you've done well since you bought
shares one day and soon thereafter received a distribution. That is not so
because when dividends are paid out, the value of each share of the Fund
decreases by the amount of the dividend to reflect the payout although this may
not be apparent because the value of each share of the Fund will also be
affected by market changes, if any. The distribution you receive makes up for
the decrease in share value. However, the timing of your purchase means that
part of your investment came back to you as taxable income.

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

PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
[GRAPHIC]

18
<PAGE>

- --------------------------------------------------------------------------------
Fund Distributions and Tax Issues
- --------------------------------------------------------------------------------

If you sell shares and realize a loss, you will not be permitted to use the
loss to the extent you replace the shares (including pursuant to the
reinvestment of a dividend) within a 61-day period (beginning 30 days before
the sale of the shares). If you acquire shares of the Fund and sell your shares
within 90 days, you may not be allowed to include certain charges incurred in
acquiring the shares for purposes of calculating gain or loss realized upon the
sale of the shares.
Exchanging your shares of the Fund for the shares of another Prudential
mutual fund is considered a sale for tax purposes. In other words, it's a
"taxable event." Therefore, if the shares you exchanged have increased in value
since you purchased them, you have capital gains, which are subject to the
taxes described above.
Any gain or loss you may have from selling or exchanging Fund shares will
not be reported on the Form 1099; however, proceeds from the sale or exchange
will be reported on Form 1099-B. Therefore, unless you hold your shares in a
qualified tax-deferred plan or account, you or your financial adviser should
keep track of the dates on which you buy and sell--or exchange--Fund shares, as
well as the amount of any gain or loss on each transaction. For tax advice,
please see your tax adviser.

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

CAPITAL GAIN
(taxes owed)
RECEIPTS FROM SALE OR
CAPITAL LOSS
(offset against gain)

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

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

19
<PAGE>

- --------------------------------------------------------------------------------
Fund Distributions and Tax Issues
- --------------------------------------------------------------------------------

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

PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
[GRAPHIC]

20
<PAGE>

PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: INVESTMENT SERVICES
P.O. BOX 15020
NEW BRUNSWICK, NJ 08906-5020

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

21
<PAGE>

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Z

<S> <C> <C> <C> <C>
Minimum purchase $1,000 $1,000 $2,500 None
amount/1/

Minimum amount for $100 $100 $100 None
subsequent purchases/1/

Maximum initial 5% of the public None 1% of the public None
sales charge offering price offering price

Contingent Deferred None If sold during: 1% on sales None
Sales Charge Year 1 5% made within
(CDSC)/2/ Year 2 4% 18 months of
Year 3 3% purchase/2/
Year 4 2%
Years 5/6 1%
Year 7 0%

Annual distribution and .30 of 1%; 1% 1% None
service (12b-1) fees (.25 of 1%
(shown as a percentage currently)
of average net
assets)/3/
</TABLE>
1 The minimum investment requirements do not apply to certain retirement and
employee savings plans and custodial accounts for minors. The minimum initial
and subsequent investment for purchases made through the Automatic Investment
Plan is $50. For more information, see "Additional Shareholder Services--
Automatic Investment Plan."
2 For more information about the CDSC and how it is calculated, see "How to
Sell Your Shares-- Contingent Deferred Sales Charge (CDSC)." Class C shares
bought before November 2, 1998, have a 1% CDSC if sold within one year.
3 These distribution fees are paid from the Fund's assets on a continuous
basis. Over time, the fees will increase the cost of your investment and may
cost you more than paying other types of sales charges. The service fee for
Class A, Class B and Class C shares is .25 of 1%. The distribution fee for
Class A shares is limited to .30 of 1% (including the .25 of 1% service fee).
Class B and Class C shares pay a distribution fee (in addition to the service
fee) of .75 of 1%.

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

PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
[GRAPHIC]

22
<PAGE>

REDUCING OR WAIVING CLASS A'S INITIAL SALES CHARGE
The following describes the different ways investors can reduce or avoid paying
Class A's initial sales charge.

* If you invest $1 million or more, you can buy only Class A shares, unless you
qualify to buy Class Z shares.

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

23
<PAGE>

Brokers-dealers, investment advisers or financial planners sponsoring these
mutual fund programs may offer their clients more than one class of shares in
the Fund in connection with different pricing options for their programs.
Investors should consider carefully any separate transaction and other fees
charged by these programs in connection with investing in each available share
class before selecting a share class.

WAIVING CLASS C'S INITIAL SALES CHARGE

Benefit Plans. Certain group retirement plans may purchase Class C shares
without the initial sales charge. For more information, call Prudential at
(800) 353-2847.

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

PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
[GRAPHIC]

24
<PAGE>

QUALIFYING FOR CLASS Z SHARES

.Mutual fund "wrap" or asset allocation programs, where the sponsor places Fund
trades, links its clients' accounts to a master account in the sponsor's name
and charges its clients a management, consulting or other fee for its services.

.Mutual fund "supermarket" programs, where the sponsor links its clients'
accounts to a master account in the sponsor's name and the sponsor charges a
fee for its services.

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

25
<PAGE>

charged by these programs in connection with investing in each available share
class before selecting a share class.

Other Types of Investors. Class Z shares of the Fund can be purchased by any of
the following:

. 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 option

. Current and former directors/trustees of the Prudential Mutual Funds
(including the Fund)
. Prudential with an investment of $10 million or more.

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

PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
[GRAPHIC]

26
<PAGE>

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

27
<PAGE>

STEP 4: ADDITIONAL SHAREHOLDER SERVICES
As a Fund shareholder, you can take advantage of the following services and
privileges:

PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: ACCOUNT MAINTENANCE
P.O. BOX 15015
NEW BRUNSWICK, NJ 08906-5015

Automatic Investment Plan. You can make regular purchases of Fund shares for as
little as $50 by having the funds automatically withdrawn from your bank or
brokerage account at specified intervals.

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

PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
[GRAPHIC]

28
<PAGE>

PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: REDEMPTION SERVICES
P.O. BOX 15010
NEW BRUNSWICK, NJ 08906-5010

RESTRICTIONS ON SALES
There are certain times when you may not be able to sell shares of the Fund, or
we may delay paying you the proceeds from a sale. This may

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

29
<PAGE>

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

PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
[GRAPHIC]

30
<PAGE>

For more information on the above and other waivers, see the SAI, "Purchase,
Redemption and Pricing of Fund Shares--Waiver of Contingent Deferred Sales
Charge--Class B Shares."

WAIVER OF THE CDSC--CLASS C SHARES

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

31
<PAGE>

Prudential and its affiliates. For more information, call Prudential at (800)
353-2847.

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

PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
[GRAPHIC]

32
<PAGE>

request to be signed and sent by the plan administrator or trustee. For
additional information, see the SAI.

PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: EXCHANGE PROCESSING
P.O. BOX 15010
NEW BRUNSWICK, NJ 08906-5010

There is no sales charge for exchanges. However, if you exchange--and then
sell--Class B shares within approximately six years of your original purchase
or Class C shares within 18 months of your original purchase, you must still
pay the applicable CDSC. If you have exchanged Class B or Class C shares into a
money market fund, the time you hold the shares in the money market account
will not be counted for purposes of calculating the required holding periods
for CDSC liability.
Remember, as we explained in the section entitled "Fund Distributions and
Tax Issues--If You Sell or Exchange Your Shares," exchanging shares is
considered a sale for tax purposes. Therefore, if the shares you exchange are
worth more than you paid for them, you may have to pay capital gains tax. For
additional information about exchanging shares, see the SAI, "Shareholder
Investment Account--Exchange Privilege."

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

<PAGE>

If you own Class B or Class C shares and qualify to purchase Class A shares
without paying an initial sales charge, we will automatically exchange your
Class B or Class C shares which are not subject to a CDSC for Class A shares.
We make such exchanges on a quarterly basis if you qualify for this exchange
privilege. We have obtained a legal opinion that this exchange is not a
"taxable event" for federal income tax purposes. This opinion is not binding on
the IRS.

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34
<PAGE>

- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------

CLASS A SHARES
The financial highlights for period ended May 31, 1999 were audited by
PricewaterhouseCoopers LLP, independent accountants, whose report was
unqualified.

<TABLE>
<CAPTION>
CLASS A SHARES (FISCAL PERIOD ENDED 5-31-99)
- --------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1999/1/
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (.20)
Net realized and unrealized gain (loss) on investment
transactions (.50)
TOTAL FROM INVESTMENT OPERATIONS (.70)
- --------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.30
TOTAL RETURN/2/ (7.00)%
- --------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA 1999
<S> <C>
NET ASSETS, END OF PERIOD (000) $96
Average net assets (000) $36
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution fees 8.72%/3/
Expenses, excluding distribution fees 8.47%/3/
Net investment loss (2.61)%/3/
Portfolio turnover 448%
</TABLE>
- --------------------------------------------------------------------------------

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

35
<PAGE>

- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------

CLASS B SHARES
The financial highlights for the period ended May 31, 1999 were audited by
PricewaterhouseCoopers LLP, independent accountants, whose report was
unqualified.

<TABLE>
<CAPTION>
CLASS B SHARES (FISCAL PERIOD ENDED 5-31-99)
- --------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1999/1/
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (.29)
Net realized and unrealized gain (loss) on investment
transactions (.48)
TOTAL FROM INVESTMENT OPERATIONS (.77)
- --------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.23
TOTAL RETURN/2/ (7.70)%
- --------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA 1999
<S> <C>
NET ASSETS, END OF PERIOD (000) $234
Average net assets (000) $68
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution fees 9.47%/3/
Expenses, excluding distribution fees 8.47%/3/
Net investment loss (3.95)%/3/
Portfolio turnover 448%
</TABLE>
- --------------------------------------------------------------------------------

1 Information shown is for the period 6-26-98 (when shares were first offered)
through 5-31-99.
2 Total return assumes reinvestment of dividends and any other distributions,
but does not include the effect of sales charges. It is calculated assuming
shares are purchased on the first day and sold on the last day of each
period reported. Total return for a period of less than a full year is not
annualized.
3 Annualized.

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36
<PAGE>

- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------

CLASS C SHARES
The financial highlights for the period ended May 31, 1999 were audited by
PricewaterhouseCoopers LLP, independent accountants, whose report was
unqualified.

<TABLE>
<CAPTION>
CLASS C SHARES (FISCAL PERIOD ENDED 5-31-99)
- --------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1999/1/
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (.46)
Net realized and unrealized gain (loss) on investment
transactions (.31)
TOTAL FROM INVESTMENT OPERATIONS (.77)
- --------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.23
TOTAL RETURN/2/ (7.70)%
- --------------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA 1999
<S> <C>
NET ASSETS, END OF PERIOD (000) $15
Average net assets (000) $11
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution fees 9.47%/3/
Expenses, excluding distribution fees 8.47%/3/
Net investment loss (6.07)%/3/
Portfolio turnover 448%
</TABLE>
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37
<PAGE>

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Financial Highlights
- --------------------------------------------------------------------------------

CLASS Z SHARES
The financial highlights for the period ended May 31, 1999 were audited by
PricewaterhouseCoopers LLP, independent accountants whose report was
unqualified.

<TABLE>
<CAPTION>
CLASS Z SHARES (FISCAL PERIOD ENDED 5-31-99)
- ----------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1999/1/
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (.40)
Net realized and unrealized gain (loss) on
INVESTMENT TRANSACTIONS (.29)
TOTAL FROM INVESTMENT OPERATIONS (.69)
- ----------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.31
TOTAL RETURN/2/ (6.90)%
- ----------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA 1999
<S> <C>
NET ASSETS, END OF PERIOD (000) $4,687
Average net assets (000) $4,207
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution fees 8.47 %/3/
Expenses, excluding distribution fees 8.47 %/3/
Net investment loss (5.16)%/3/
Portfolio turnover 448 %
</TABLE>
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PRUDENTIAL LATIN AMERICA EQUITY FUND [GRAPHIC](800) 225-1852

38
<PAGE>

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The Prudential Mutual Fund Family
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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

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PRUDENTIAL LATIN AMERICA EQUITY FUND (800) 225-1852
[GRAPHIC]

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<PAGE>

FOR MORE INFORMATION
________________________________________________________________

Please read this prospectus before you invest in the Fund and keep it for fu-
ture reference. For information or shareholder questions contact:

STATEMENT OF ADDITIONAL INFORMATION (SAI)
(incorporated by reference into this prospectus)

ANNUAL REPORT
(contains a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance)

SEMI-ANNUAL REPORT

You can also obtain copies of Fund documents from the Securities and Exchange
Commission as follows:

By Mail:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-6009
(The SEC charges a fee to copy documents.)

In Person:
Public Reference Room in Washington, DC
(For hours of operation, call 1(800) SEC-0330)

Via the Internet:
http://www.sec.gov
- --------------------------------------------------------------------------------
CUSIP NUMBERS:
CLASS A: 74437M-10-9
CLASS B: 74437M-20-8
CLASS C: 74437M-30-7
CLASS Z: 74437M-40-6

Investment Company Act File No: 811-8753

Printed on Recycled Paper
[RECYCLE LOGO APPEARS HERE]

MF180A
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND

PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
PRUDENTIAL LATIN AMERICA EQUITY FUND

Statement of Additional Information

dated August 10, 1999

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).

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
located 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 "Description of the Fund,
its Investments and Risks."

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 "Description of the Fund, its Investments and Risks."

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

The Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus for the relevant Series dated August
10, 1999, a copy of which may be obtained from the Fund upon request.

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Fund History.............................................................. B-2
Description of the Fund, its Investments and Risks........................ B-2
Investment Restrictions................................................... B-16
Management of the Fund.................................................... B-17
Control Persons and Principal Holders of Securities....................... B-19
Investment Advisory and Other Services.................................... B-20
Brokerage Allocation and Other Practices.................................. B-24
Securities and Organization............................................... B-26
Purchase, Redemption and Pricing of Fund Shares........................... B-27
Shareholder Investment Account............................................ B-38
Net Asset Value........................................................... B-42
Taxes, Dividends and Distributions........................................ B-43
Performance Information................................................... B-46
Financial Statements...................................................... B-
Report of Independent Accountants......................................... B-
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-I
</TABLE>

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MF179B
<PAGE>

FUND HISTORY

The Fund was organized under the laws of Delaware on October 24, 1997 as an
unincorporated business trust, a form of organization that is commonly
referred to as a Delaware business trust.

DESCRIPTION OF THE FUND, ITS INVESTMENTS AND RISKS

(A) CLASSIFICATION

The Fund is a diversified open-end management investment company.

(B) INVESTMENT STRATEGIES AND RISKS

PRUDENTIAL DEVELOPING MARKETS EQUITY FUND: Prudential Developing Markets
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 located 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: 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 "How the Fund Invests--
Investment Objective and Policies" in the Series' Prospectus.

PORTFOLIO STRATEGY

In selecting portfolio securities, The Prudential Investment Corporation
(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 analysis. 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.

For purposes of compliance with the Investment Company Act, each Series
relies on The North American Industry Classification System published by the
Bureau of Economic Analysis, U.S. Department of Commerce, in determining
industry classification.

SECURITIES OF FOREIGN ISSUERS

The value of a Series' foreign investments may be significantly affected by
changes in currency exchange rates. The dollar value of a foreign security
generally decreases when the value of the dollar rises against the foreign
currency in which the security is denominated and tends to increase when the
value of the dollar falls against such currency. In addition, the value of a
Series' assets may be affected by losses and other expenses incurred in
converting between various currencies in order to purchase and sell foreign
securities and by currency restrictions and exchange control regulation.

The economies of many of the countries in which a Series may invest are not
as developed as the economy of the U.S. and may be subject to significantly
different forces. Political or social instability, expropriation or
confiscatory taxation, and limitations on the removal of funds or other
assets, could also adversely affect the value of investments.

B-2
<PAGE>

Foreign companies are generally not subject to the regulatory controls
imposed on U.S. issuers and, in general, there is less publicly available
information about foreign securities than is available about domestic
securities. Many foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic companies. Income from foreign
securities owned by a Series may be reduced by a withholding tax at the source
which would reduce dividend income payable to shareholders.

Brokerage commission rates in foreign countries, which are generally fixed
rather than subject to negotiation as in the U.S. are likely to be higher. The
securities markets in many of the countries in which a Series may invest will
have substantially less trading volume than the principal U.S. markets. As a
result, the securities of some companies in these countries may be less liquid
and more volatile than comparable U.S. securities. There is generally less
government regulation and supervision of foreign stock exchanges, brokers and
issuers which may make it difficult to enforce contractual obligations.

FOREIGN DEBT SECURITIES

A Series is permitted to invest in foreign corporate and government debt
securities. "Foreign government debt securities" include debt securities
issued or guaranteed, as to payment of principal and interest, by governments,
quasi-governmental entities, governmental agencies, supranational entities and
other governmental entities (collectively, Government Entities) of foreign
countries denominated in the currency of another such country.

A "supranational entity" is an entity constituted by the national
governments of several countries to promote economic development. Examples of
such supranational entities include, among others, the World Bank
(International Bank for Reconstruction and Development), the European
Investment Bank and the Asian Development Bank. Debt securities of "quasi-
governmental entities" are issued by entities owned by a national, state, or
equivalent government or are obligations of a political unit that are not
backed by the national government's "full faith and credit" and general taxing
powers. Examples of quasi-government issuers include, among others, the
Province of Ontario and the City of Stockholm. Foreign government debt
securities shall also include debt securities of Government Entities
denominated in European Currency Units. A European Currency Unit represents
specified amounts of the currencies of certain of the member states of the
European Community. Foreign government securities shall also include mortgage-
backed securities issued by foreign Government Entities including quasi-
governmental entities.

DEPOSITARY RECEIPTS

Each Series may purchase American Depositary Receipts (ADRs), European
Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs). 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. For purposes of the Series' investment
policies, a Series' investments in depositary receipts will be deemed to be
investments in the underlying securities.

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 Yugosiav Republic of Macedonia, Mexico, Nigeria,
Panama, Peru, the

B-3
<PAGE>

Philippines, Poland, Russia, Solvenia, 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 Venezula 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.

RISK FACTORS AND SPECIAL CONSIDERATION OF INVESTING IN EURO-DENOMINATED
SECURITIES

A Series may invest in euro-denominated Securities to the extent consistent
with its investment objective and policies. Effective January 1, 1999, 11 of
the 15 member states of the European Union introduced the "euro" as a common
currency. During a three year transitional period, the euro will coexist with
each member state's currency. Beginning July 1, 2002, the euro is expected to
become the sole currency of the member states. During the transition period,
the Series will treat the euro as a separate currency from that of any member
state.

The conversion may impact the trading in securities of issuers located in,
or denominated in the currencies of, the member states, as well as foreign
exchanges, payments, the settlement process, custody of assets and accounting.
In addition, the transition of member state's currency into the euro will
eliminate the risk among member states and will likely affect the investment
process and considerations of the Series' investment adviser. To the extent a
Series holds non-U.S. dollar-denominated securities, including those
denominated in the euro, the Series will still be subject to currency risk due
to fluctuations in those currencies as compared to the U.S. dollar.

The introduction of the euro is expected to affect derivative and other
financial contracts in which a Series may invest insofar as price sources
based upon current currencies of the member states will be replaced, and
market conventions, such as day-count fractions or settlement dates applicable
to underlying instruments may be changed to conform to the conventions
applicable to euro currency.

B-4
<PAGE>

The overall impact of the transition of the member states' currencies to the
euro cannot be determined with certainty at this time. In addition to the
effects described above, it is likely that more general short- and long-term
ramifications can be expected, such as changes in economic environment and
change in behavior of investors, all of which will impact the Series'
investments.

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 its 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 a Series may invest must comply with
the quality restrictions for debt securities described in each Series'
prospectus.

WARRANTS

A Series may invest in warrants. A warrant gives the holder thereof the
right to subscribe by a specified date to a stated number of shares of stock
of the issuer at a fixed price. Warrants tend to be more volatile than the
underlying stock, and if at a warrant's expiration date the stock is trading
at a price below the price set in the warrant, the warrant will expire
worthless. Conversely, if at the expiration date the underlying stock is
trading at a price higher than the price set in the warrant, the Series can
acquire the stock at a price below its market value. Neither Series intends to
have more than 5% of its net assets invested in warrants during the coming
year.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

From time to time, in the ordinary course of business, a Series may purchase
or sell 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 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,
U.S. Government securities or other liquid unencumbered assets, marked to
market daily, having a value equal to or greater than such 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 a Series' assets committed
to the purchase of securities on a when-issued or delayed delivery basis may
increase the volatility of the Series net asset value. If a Series chooses to
dispose of the right to acquire a when-issued security prior to its
acquisition, it could, as with the disposition of any portfolio security,
incur a gain or loss due to market fluctuations. Neither Series intends to
have more than 5% of its 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.

REPURCHASE AGREEMENTS

A Series may enter into repurchase agreements, whereby the seller of a
security agrees to repurchase that security from the Series at a mutually
agreed-upon time and place. The repurchase date is usually within a day or two
of the original purchase, although it may extend over a number of months. The
resale price is in excess of the purchase price, reflecting an agreed-upon

B-5
<PAGE>

rate of return effective for the period of time the Series' money is invested
in the repurchase agreement. A 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' investment adviser 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,
the 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, the Series will suffer a
loss.

Each Series participates in a joint repurchase agreement 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 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 the 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 could use the collateral to replace the securities while
holding the borrower liable for any excess of replacement cost over
collateral. As with any extensions of credit, there are risks of delay in
recovery and in some cases loss of rights in the collateral should the
borrower of the securities fail financially. However, these loans of portfolio
securities will only be made to firms determined to be creditworthy pursuant
to procedures approved by the Board of Trustees of the Fund. On termination of
the loan, the borrower is required to return the securities to the Series, and
any gain or loss in the market price during the loan would inure to the
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 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
investment companies. Each Series does not intend to invest in such securities
during the coming year. If a Series does invest in securities of other
investment companies, shareholders of a Series may be subject to duplicate
management and advisory fees.

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

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experience difficulty satisfying redemptions within seven days. A mutual fund
might also have to register such restricted securities in order to dispose of
them resulting in additional expense and delay. Adverse market conditions
could impede such a public offering of securities.

However, a large institutional market has developed for certain securities
that are not registered under the Securities Act including repurchase
agreements, commercial paper, foreign securities, municipal securities,
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."

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 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. Short sales will be made primarily for the purpose of hedging for a
limited period of time certain long positions maintained by the Fund. In
certain limited circumstances, a short sale against-the-box may be entered
into without triggering the recognition of gains of an appreciated financial
position in the security being sold short, but the short position must be
closed within 30 days of the close of the tax year of the Series to avoid
recognition of gain for federal income tax purposes. Neither Series intends to
have more than 5% of its net assets (determined at the time of the short sale)
subject to short sales against-the-box during the coming year.

BORROWING

Each Series 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

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borrowings must be maintained at 300% at all times. Each Series has
contractually agreed to limit its borrowing to an amount equal to no more than
25% of the value of its total assets. A Series may pledge up to 20% of its
total assets to secure these borrowings. If a Series 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 Series, the net
asset value of the Series' shares will decrease faster than would otherwise be
the case. This is the speculative factor known as "leverage." Neither Series
currently intends to borrow money in order to invest in securities.

HEDGING AND RETURN ENHANCEMENT STRATEGIES

OPTIONS TRANSACTIONS

OPTIONS ON EQUITY SECURITIES. Each Series may 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
(OTC). 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 obligations and other
liquid unencumbered assets.

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

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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.

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

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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
option; (ii) restrictions may be imposed by an exchange on operating
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 options 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.

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

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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 fail 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

Options on foreign currencies involve the currencies of two nations and,
therefore, developments in either or both countries can affect the values of
options on foreign currencies. Risks include 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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RISKS RELATED TO FORWARD CURRENCY EXCHANGE CONTRACTS

A forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date agreed upon by the parties, at a price set at the
time of the contract. 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 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.

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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.

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

A Series may purchase and sell futures contracts which are traded on a
commodities exchange or board of trade. A futures contract is an agreement to
purchase or sell an agreed amount of securities or currencies at a set price
for delivery in the future. 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.

B-13
<PAGE>

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.

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 charges, resulting from market or political
conditions, in the value of the currencies to which such Series is subject or
to which such Series expects

B-14
<PAGE>

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.

When conditions dictate a defensive strategy, a Series may temporarily
invest without limit in money market instruments, including commercial paper
of corporations, certificates of deposit, bankers' acceptances and the
obligations of domestic and foreign banks, obligations issued or guaranteed by
the U.S. Government or foreign governments and their agencies or
instrumentalities and repurchase agreements maturing in seven days or less. In
addition to the risks typically associated with money market instruments, such
as credit risk and market risk, money market instruments issued by foreign
issuers may be subject to additional 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.

(D) PORTFOLIO TURNOVER

As a result of the investment policies described above, the Fund may engage
in a substantial number of portfolio transactions. The portfolio turnover rate
is generally the percentage computed by dividing the lesser of portfolio
purchases or sales (excluding all securities, including options, whose
maturities or expiration date at acquisition were one year or less) by the
monthly average value of the portfolio. High portfolio turnover (over 100%)
involves correspondingly greater brokerage commissions and other transaction
costs, which are borne directly by the relevant Series. In addition, high
portfolio turnover may also mean that a proportionately greater amount of
distributions to shareholders will be taxed as ordinary income rather than
long-term capital gains compared to investment companies with lower portfolio
turnover. See "Taxes, Dividends and Distributions."

B-15
<PAGE>

INVESTMENT RESTRICTIONS

The following restrictions are fundamental policies. Fundamental policies
are those which cannot be changed without (i) in the case of 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 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.

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 action within three days to reduce its borrowings, as required by
applicable law.

B-16
<PAGE>

MANAGEMENT OF THE FUND

(A) DIRECTORS

The Fund has Trustees who, in addition to overseeing the actions of each
Series' Manager, Subadviser and Distributor, decide upon matters of general
policy.

The Trustees also review the actions of officers of the Fund, who conduct
and supervise the daily business operations of the Fund.

(B) MANAGEMENT INFORMATION--TRUSTEES AND OFFICERS

<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE (1) POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
------------------------- ------------------ --------------------------------------------
<C> <C> <S>
Edward D. Beach (74) Trustee President and Director of BMC Fund,
Inc., a closed-end investment
company; previously, Vice Chairman
of Broyhill Furniture Industries,
Inc.; Certified Public Accountant;
Secretary and Treasurer of
Broyhill Family Foundation, Inc.;
Member of the Board of Trustees of
Mars Hill College and Director of
The High Yield Income Fund, Inc.
Delayne Dedrick Gold (60) Trustee Marketing and Management
Consultant; Director of The High
Yield Income Fund, Inc.
*Robert F. Gunia (52) Trustee and Vice President Vice President of Prudential
Investments since September 1997;
Executive Vice President and
Treasurer (since December 1996) of
Prudential Investments Fund
Management LLC (PIFM); Senior Vice
President (since March 1987) of
Prudential Securities Incorporated
(Prudential Securities); formerly
Chief Administrative Officer (July
1990-September 1996). Director
(January 1989-September 1996) and
Executive Vice President,
Treasurer and Chief Financial
Officer (June 1987-September 1996)
of Prudential Mutual Fund
Management, Inc. (PMF); Vice
President and Director (since May
1989) of The Asia Pacific Fund
Inc.; Director of The High Yield
Income Fund, Inc.
Robert E. LaBlanc (64) Trustee President (since 1981) of Robert E.
LaBlanc Associates, Inc.
(telecommunications); formerly
General Partner at Salomon
Brothers; and Vice Chairman of
Continental Telecom; Director of
Storage Technology Corporation,
Titan Corporation, Salient 3
Communications, Inc. and Tribune
Company; and Trustee of Manhattan
College.
Robin B. Smith (59) Trustee Chairman and Chief Executive
Officer (since August 1996) of
Publishers Clearing House;
formerly President and Chief
Executive Officer (January 1989-
August 1996) and President and
Chief Operating Officer (September
1981-December 1988) of Publishers
Clearing House; Director of
BellSouth Corporation, Texaco
Inc., Springs Industries Inc. and
Kmart Corporation.
</TABLE>

B-17
<PAGE>

<TABLE>
<CAPTION>
NAME, ADDRESS AND
AGE (1) POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
----------------- ------------------ --------------------------------------------
<C> <C> <S>
Stephen Stoneburn (55) Trustee President and Chief Executive Officer
(since June 1996) of Quadrant Media
Corp. (a publishing company); formerly
President (June 1995-June 1996) of Argus
Integrated Media, Inc.; Senior Vice
President and Managing Director (January
1993-1995), Cowles Business Media;
Senior Vice President (January 1991-
1992) and Publishing Vice President (May
1989-December 1990) of Gralla
Publications (a division of United
Newspapers, U.K.); and Senior Vice
President of Fairchild Publications,
Inc.
*John R. Strangfeld (45) Trustee and President Chief Executive Officer, Chairman,
President and Director of The Prudential
Investment Corporation (since January
1990); Executive Vice President of the
Prudential Global Asset Management Group
of Prudential (since February 1998);
Chairman of Pricoa Capital Group (since
August 1989); Chief Executive Officer of
Private Asset Management Group of
Prudential (November 1994-December
1998).
Nancy H. Teeters (68) Trustee Economist; Director of Inland Steel
Industries (since July 1991); formerly
Vice President and Chief Economist
(March 1986-June 1990) of International
Business Machines Corporation; Director
of The High Yield Income Fund, Inc.
Grace C. Torres (40) Treasurer and First Vice President (since December
Principal Financial 1996) of PIFM; First Vice President
and Accounting (since March 1994) of Prudential
Officer Securities; formerly, First Vice
President (March 1994-September 1996) of
Prudential Mutual Fund Management, Inc.
and Vice President (July 1989-March
1994) of Bankers Trust Corporation.
Robert C. Rosselot (39) Secretary Assistant General Counsel (since
September 1997) of PIFM; formerly,
partner with the firm of Howard &
Howard, Bloomfield Hills, Michigan
(December 1995-September 1997) and
Corporate Counsel, Federated Investors
(1990-1995).
Stephen M. Ungerman (45) Assistant Treasurer Vice President and Tax Director (since
March 1996) of Prudential Investments;
formerly First Vice President of
Prudential Mutual Fund Management, Inc.
(February 1993-September 1996).
</TABLE>
- ----------
(/1/Unless)otherwise noted the address for each of the above persons is c/o
Prudential Investments Fund Management LLC, Gateway Center Three, 100
Mulberry Street, 9th Floor, Newark, New Jersey 07102-4077.

* "Interested" Trustee, as defined in the Investment Company Act, by reason
of his affiliation with 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 or Prudential Investment Management Services LLC.

Pursuant to the terms of the Management Agreement with the Fund, the Manager
pays all compensation of officers and employees of the Fund 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
or Prudential Investments (PI) annual compensation of $1,000, in addition to
certain out-of-pocket expenses. The amount of annual compensation paid to each
Trustee may change as a result of the introduction of additional funds upon
which the Trustee may be asked to serve.

Trustees may receive their Trustees' fees pursuant to a deferred fee
arrangement with the Fund. Under the terms of the agreement, the Fund accrues
daily the amount of Trustees' fees in installments which accrue interest at a
rate equivalent to the

B-18
<PAGE>

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 (the Fund rate). The Fund's obligation to make
payments of deferred Trustees' fees, together with interest thereon, is a
general obligation of the Fund.

The Trustees have adopted a retirement policy which calls for the retirement
of Trustees on December 31 of the year in which they reach the age of 72,
except that retirement is being phased in for Trustees who were age 68 or
older as of December 31, 1993. Under this phase-in provision, Mr. Beach is
scheduled to retire on December 31, 1999.

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 May 31, 1999 and the aggregate compensation paid to such Trustees for
service on the Fund's Board and that of any other investment companies managed
by PIFM (Fund Complex) for the calendar year ended December 31, 1998. Below
are listed the Trustees who have served the Fund during its most recent fiscal
year.

COMPENSATION TABLE

<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM FUND
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL AND FUND
COMPENSATION AS PART OF FUND BENEFITS UPON COMPLEX PAID
NAME AND POSITION FROM FUND EXPENSES RETIREMENT TO DIRECTORS (2)
----------------- ------------ ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Edward D. Beach--Trustee $1,000 None N/A $135,000(44/71)*
Stephen C. Eyre--Former $ 500 None N/A $ 45,000(14/17)*
Trustee
Delayne D. Gold--Trustee $1,000 None N/A $135,000(44/71)*
Robert F. Gunia (1)-- -- None N/A --
Trustee
Don G. Hoff--Former $1,000 None N/A $ 45,000(14/17)*
Trustee
Robert F. LaBlanc-- $1,000 None N/A $ 45,000(14/17)*
Trustee
Mendel A. Melzer (1)-- -- None N/A --
Former Trustee
Richard A. Redeker (1)-- -- None N/A --
Former Trustee
Robin B. Smith (2)-- $1,000 None N/A $ 90,000(32/41)*
Trustee
Stephen Stoneburn-- $1,000 None N/A $ 45,000(14/17)*
Trustee
Brian Storms (1)--Former -- None N/A --
Trustee
John R. Strangfeld (1)-- -- None N/A --
Trustee
Nancy H. Teeters-- $1,000 None N/A $ 90,000(26/47)*
Trustee
</TABLE>
- ----------
*Indicates number of funds/portfolios in Fund Complex (including the Fund) to
which aggregate compensation relates.

(1) Trustees who are "interested" do not receive compensation from the Fund
Complex (including the Fund).

(2) Total compensation from all of the funds in the Fund Complex for the
calendar year ended December 31, 1998, including amounts deferred at the
election of Directors under the funds' Deferred Compensation Plans.
Including accrued interest, total deferred compensation amounted to
$116,225 for Robin B. Smith. Currently, Ms. Smith has agreed to defer some
of her fees at the T-Bill rate and other fees at the Fund rate.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of July , 1999, the Trustees and officers of the Fund, as a group, owned
less than 1% of the outstanding shares of beneficial interest of each Series.

As of July , 1999, the beneficial owners, directly or indirectly, of more
than 5% of the outstanding shares of any class of shares of Prudential
Developing Markets Equity Fund were: , and the beneficial owners, directly
or indirectly, of more than 5% of the outstanding shares of any class of
shares of Prudential Latin America Equity Fund were:

As of July , 1999, Prudential Securities was the record holder for other
beneficial owners of Class A shares (or approximately % of the
outstanding Class A shares), Class B shares (or approximately % of the
outstanding Class B shares), Class C shares (or approximately % of the
outstanding Class C shares) and Class Z

B-19
<PAGE>

shares (or approximately % of the outstanding Class Z shares) of Prudential
Developing Markets Equity Fund and Class A shares (or approximately % of
the outstanding Class A shares), Class B shares (or approximately % of
the outstanding Class B shares), Class C shares (or approximately % of
the outstanding Class C shares) and Class Z shares (or approximately %
of the outstanding Class Z shares) of Prudential Latin America Equity Fund. In
the event of any meetings of shareholders, Prudential Securities will forward,
or cause the forwarding of, proxy materials to beneficial owners for which it
is the record holder.

INVESTMENT ADVISORY AND OTHER SERVICES

(A) INVESTMENT ADVISERS

The manager of each Series is Prudential Investments Fund Management LLC
(PIFM or the Manager), Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077. PIFM serves as manager to all of the other investment
companies that, together with the Series, comprise the Prudential Mutual
Funds. See "How the Fund is Managed--Manager" in the relevant Series'
Prospectus. As of May 31, 1999, PIFM managed and/or administered open-end and
closed-end management investment companies with assets of approximately $72
billion. According to the Investment Company Institute, as of November 30,
1998, the Prudential Mutual Funds were the 18th 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' Subadivser;

(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 or the
Subadviser), 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 transaction, (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

B-20
<PAGE>

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 May 25, 1999.

For the fiscal year ended May 31, 1999, PIFM received management fees from
Prudential Developing Markets Equity Fund and Prudential Latin America Equity
Fund of 212,953 and 49,884, respectively.

PIFM has entered into a Subadvisory Agreement with PI. The Subsidiary
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 May 25, 1999.

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.

(B) PRINCIPAL UNDERWRITER, DISTRIBUTOR AND RULE 12B-1 PLANS

Prudential Investment Management Services LLC (PIMS or the Distributor),
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, acts
as the distributor of the shares of each Series. Prior to June 1, 1998,
Prudential Securities Incorporated (Prudential Securities) was the distributor
for each Series. PIMS and Prudential Securities are subsidiaries of
Prudential.

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.

Each Series Class A Plan provides that (i) 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 (ii) total
distribution fees (including the service fee of .25 of 1%) may not exceed .30
of 1% of the average daily net assets of the Class A shares. The Distributor
has contractually agreed to limit its distribution-related fees payable under
the Class A Plan to .25 of 1% of the average daily net assets of the Class A
shares for the fiscal year ending May 31, 2000 and voluntarily limited its
distribution-related fees for the fiscal year ending May 31, 1999 to .25 of 1%
of the average daily net assets of the Class A shares. The Class B and Class C
Plans of each Series provide for the payment to the Distributor 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.

Under the Plans, each Series 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

B-21
<PAGE>

distribution and service fees, the relevant Series 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.

The distribution and/or service fees may also be used by the Distributor to
compensate dealers on a continuing basis in consideration for the
distribution, marketing, administrative and other services and activities
provided by dealers with respect to the promotion of the sale of a Series'
shares and the maintenance of related shareholder accounts.

PRUDENTIAL DEVELOPING MARKETS EQUITY FUND

CLASS A PLAN. For the fiscal year ended May 31, 1999, Prudential Securities
and PIMS collectively received payments of $66 under the Class A Plan. This
amount was expended on commission credits to Prudential Securities and Pruco
Securities Corporation, an affiliated broker-dealer (Prusec), for payments of
commissions and account servicing fees to financial advisers and other persons
who sell Class A shares. For the fiscal year ended May 31, 1999, Prudential
Securities and PIMS also collectively received approximately $-0- in initial
sales charges.

CLASS B PLAN. For the fiscal year ended May 31, 1999, Prudential Securities
and PIMS collectively received $551 under the Class B Plan and spent
approximately $3,500, in distributing the Class B shares. It is estimated that
of the latter amount $3,100 (88.0%) was spent on printing and mailing of
prospectuses to other than current shareholders; $300 (8.5%) was spent on
compensation to Prusec for commissions to its representatives and other
expenses, including an allocation on account of overhead and other branch
office distribution-related expenses incurred by it for distribution of Class
B shares; and $100 (3.5%) was spent on the aggregate of (i) payments of
commissions and account servicing fees to its financial advisers $100 (3.5%)
and (ii) an allocation on account of overhead and other branch office
distribution-related expenses $-0- (-0-%). The term "overhead and other branch
office distribution-related expenses" as used herein represents (a) the
expenses of operating Prusec's and Prudential Securities' branch offices in
connection with the sale of Series shares, including lease costs, the salaries
and employee benefits of operations and sales support personnel, utility
costs, communications costs and the costs of stationery and supplies, (b) the
costs of client sales seminars, (c) expenses of mutual fund sales coordinators
to promote the sale of Series shares, and (d) other incidental expenses
relating to branch promotion of Series sales.

The Distributor also receives the proceeds of contingent deferred sales
charges paid by holders of Class B shares upon certain redemptions of Class B
shares. For the fiscal year ended May 31, 1999, Prudential Securities and PIMS
collectively received approximately $500 in contingent deferred sales charges.

CLASS C PLAN. For the fiscal year ended May 31, 1999, Prudential Securities
and PIMS collectively received $246 under the Class C Plan and spent
approximately $1,600 in distributing the Class C shares. It is estimated that
of the latter amount $700 (43.8%) was spent on printing and mailing of
prospectuses to other than current shareholders; $600 (37.5%) was spent on
compensation to Prusec for commissions to its representatives and other
expenses, including an allocation on account of overhead and other branch
office distribution-related expenses incurred by it for distribution of Class
C shares; and $300 (18.7%) was spent on the aggregate of (i) payments of
commissions and account servicing fees to its financial advisers $-0- (-0-%)
and (ii) an allocation on account of overhead and other branch office
distribution-related expenses $300 (18.7%).

For the fiscal year ended May 31, 1999, Prudential Securities and PIMS
collectively received approximately $600 in initial sales charges. The
Distributor also receives the proceeds of contingent deferred sales charges
paid by investors upon certain redemptions of Class C shares. For the fiscal
year ended May 31, 1999, Prudential Securities and PIMS collectively received
contingent deferred sales charges of approximately $-0-.

PRUDENTIAL LATIN AMERICA EQUITY FUND

CLASS A PLAN. For the fiscal year ended May 31, 1999, Prudential Securities
and PIMS collectively received payments of $84 under the Class A Plan. This
amount was expended on commission credits to Prudential Securities and Pruco
Securities Corporation, an affiliated broker-dealer (Prusec), for payments of
commissions and account servicing fees to financial advisers and other persons
who sell Class A shares. For the fiscal year ended May 31, 1999, Prudential
Securities and PIMS also collectively received approximately $600 in initial
sales charges.

B-22
<PAGE>

CLASS B PLAN. For the fiscal year ended May 31, 1999, Prudential Securities
and PIMS collectively received $629 under the Class B Plan and spent
approximately $5,100, in distributing the Class B shares. It is estimated that
of the latter amount $3,200 (62.7%) was spent on printing and mailing of
prospectuses to other than current shareholders; $1,300 (25.5%) was spent on
compensation to Prusec for commissions to its representatives and other
expenses, including an allocation on account of overhead and other branch
office distribution-related expenses incurred by it for distribution of Class
B shares; and $600 (11.8%) was spent on the aggregate of (i) payments of
commissions and account servicing fees to its financial advisers $300 (5.9%)
and (ii) an allocation on account of overhead and other branch office
distribution-related expenses $300 (5.9%). The term "overhead and other branch
office distribution-related expenses" as used herein represents (a) the
expenses of operating Prusec's and Prudential Securities' branch offices in
connection with the sale of Series shares, including lease costs, the salaries
and employee benefits of operations and sales support personnel, utility
costs, communications costs and the costs of stationery and supplies, (b) the
costs of client sales seminars, (c) expenses of mutual fund sales coordinators
to promote the sale of Series shares, and (d) other incidental expenses
relating to branch promotion of Series sales.

CLASS C PLAN. For the fiscal year ended May 31, 1999, Prudential Securities
and PIMS collectively received $98 under the Class C Plan and spent
approximately $600 in distributing the Class C shares. It is estimated that of
the latter amount $600 (100%) was spent on printing and mailing of
prospectuses to other than current shareholders; $-0- (-0-%) was spent on
compensation to Prusec for commissions to its representatives and other
expenses, including an allocation on account of overhead and other branch
office distribution-related expenses incurred by it for distribution of Class
C shares; and $-0- (-0-%) was spent on the aggregate of (i) payments of
commissions and account servicing fees to its financial advisers $-0- (-0-
%)and (ii) an allocation on account of overhead and other branch office
distribution-related expenses $-0- (-0-%).

For the fiscal year ended May 31, 1999, Prudential Securities and PIMS
collectively received approximately $-0- in initial sales charges. The
Distributor also receives the proceeds of contingent deferred sales charges
paid by investors upon certain redemptions of Class C shares. For the fiscal
year ended May 31, 1999, Prudential Securities and PIMS collectively received
contingent deferred sales charges of approximately $-0-.

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

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 Fund 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.

B-23
<PAGE>

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 Securities Act of 1993, as amended.

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

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.

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 any foreign assets of the Fund held outside the
United States.

Prudential Mutual Fund Services LLC (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as the transfer and dividend disbursing agent of each
Series. PMFS is a wholly-owned subsidiary of PIFM. PMFS provides customary
transfer agency services to the each Series, including the handling of
shareholder communications, the processing of shareholder transactions, the
maintenance of shareholder account records, the 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 shareholder 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.

PricewaterhouseCoopers 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.

BROKERAGE ALLOCATION AND OTHER PRACTICES

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 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.

B-24
<PAGE>

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 Fund'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 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 statement 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.

B-25
<PAGE>

The table below shows certain information regarding the payment of
commissions by Prudential Developing Markets Equity Fund, including the
commissions paid to Prudential Securities, for the fiscal year ended May 31,
1999.

<TABLE>
<CAPTION>
FISCAL YEAR
ENDED MAY 31,
1999
-------------
<S> <C>
Total brokerage commissions paid by the Series................... $334,700
Total brokerage commissions paid to Prudential Securities........ $ -0-
Percentage of total brokerage commissions paid to Prudential
Securities...................................................... 0%
Percentage of total dollar amounts of transactions involving
commissions that were effected through Prudential Securities.... 0%
</TABLE>

The table below shows certain information regarding the payment of
commissions by Prudential Latin America Equity Fund, including the commissions
paid to Prudential Securities, for the fiscal year ended May 31, 1999.

<TABLE>
<CAPTION>
FISCAL YEAR
ENDED MAY 31,
1999
-------------
<S> <C>
Total brokerage commissions paid by the Series................... $99,500
Total brokerage commissions paid to Prudential Securities........ $ -0-
Percentage of total brokerage commissions paid to Prudential
Securities...................................................... 0%
Percentage of total dollar amounts of transactions involving
commissions that were effected through Prudential Securities.... 0%
</TABLE>

SECURITIES AND ORGANIZATION

The Fund is authorized to issue an unlimited number of shares of beneficial
interest, $.001 par value per share and is currently divided into two series,
Prudential Developing Markets Equity Fund and Prudential Latin America Equity
Fund. The shares of each Series are 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 relevant 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 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 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 divided rights
as the Board of Trustees may determine.

Shares of each Series when issued, are fully paid, nonassessable, fully
transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of the Fund under certain circumstances as described
under "Purchase, Redemption and Pricing of Fund Shares--Sale of 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 fee) 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 a Series is
entitled to its portion of all of such Series' assets after all debt and
expenses of such Series 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 Series' shares do not
have cumulative voting rights for the election of Trustees.

Neither Series intends to hold annual meetings of shareholders unless
otherwise required by law. A Series will not be required to hold meetings of
shareholders unless, for example, the election of Trustees is required to be
acted on by shareholders

B-26
<PAGE>

under the Investment Company Act. Shareholders of a Series have certain
rights, including the right to call a meeting upon a vote of 10% of the
Series' outstanding shares for the purpose of voting on the removal of one or
more Trustees or to transact any other business.

PURCHASE, REDEMPTION AND PRICING OF FUND SHARES

Shares of a Series may be purchased at a price equal to the next determined
net asset value (NAV) per share plus a sales charge which, at the election of
the investor, may be imposed either (1) at the time of the purchase (Class A
and Class C shares) or on a deferred basis (Class B or Class C shares). Class
Z shares of each Series are offered to a limited group of investors at NAV
without any sales charges.

PURCHASE BY WIRE. For an initial purchase of shares of a Series by wire, you
must complete an application and telephone PMFS at (800) 225-1852 (toll-free)
to receive an account number. PMFS will request the following information:
your name, address, tax identification number, class election, dividend
distribution election, amount being wired and wiring bank. You should then
give instructions 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,
Developing Markets Equity Fund Series or Latin American 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 a Series as of that day.

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, Developing Markets Equity Fund Series or Latin America Equity
Fund Series, Class A, Class B, Class C or Class Z shares and your name and
individual account number. You do not need to call PMFS to make subsequent
purchase orders utilizing Federal Funds. The minimum amount which may be
invested by wire is $1,000.

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, (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.

B-27
<PAGE>

SPECIMEN PRICE MAKE-UP

Under the current distribution arrangements between each Series and the
Distributor, the Distributor sells Class A shares at a maximum sales charge of
5%, sells Class C* shares with a 1% sales charge, and sells Class B* and Class
Z shares at NAV. Using the NAV at May 31, 1999, the maximum offering price of
the Fund's shares is as follows:

<TABLE>
<CAPTION>
DEVELOPING MARKETS LATIN AMERICA
EQUITY FUND EQUITY FUND
------------------ -------------
<S> <C> <C>
CLASS A
Net asset value and redemption price
per Class A share..................... $10.16 $9.30
Maximum sales charge (5% of offering
price)................................ .53 .49
------ -----
Offering price to public............... $10.69 $9.79
====== =====
CLASS B
Net asset value, offering price and
redemption price per Class B share*... $10.09 $9.23
====== =====
CLASS C
Net asset value and redemption price
per Class C share*.................... $10.09 $9.23
Sales charge (1% of offering price) ... .10 .09
------ -----
Offering price to public............... $10.19 $9.32
====== =====
CLASS Z
Net asset value, offering price and
redemption price per Class Z share.... $10.18 $9.31
====== =====
</TABLE>
----------
*Class B and Class C shares are subject to a contingent
deferred sales charge on certain redemptions. See "How to Buy,
Sell and Exchange Shares of the Fund--How to Sell Your
Shares--Contingent Deferred Sales Charge" in either
Prospectus.

SELECTING A PURCHASE ALTERNATIVE

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

If you intend to hold your investment in the Series for less than 4 years
and do not qualify for a reduced sales charge on Class A shares, since Class A
shares are subject to an initial sales charge 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 longer than 4 years, but less than
5 years, and do not qualify for a reduced sales charge on Class A shares, you
should consider purchasing Class B or Class C shares over Class A shares. This
is because the initial sales charge plus the cumulative annual distribution-
related fee on Class A shares would exceed those of the Class B and Class C
shares if you redeem your investment during this time period. In addition,
more of your money would be invested initially in the case of Class C shares
because of the relatively low initial sales charge, and all of your money
would be invested initially in the case of Class B shares which are sold at
NAV.

If you qualify for a reduced sales charge on Class A shares, you may benefit
by purchasing 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
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 5 years in the case of
Class C shares for the

B-28
<PAGE>

higher cumulative annual distribution-related fee on those shares plus, in the
case of Class C shares, the 1% initial sales charge to exceed the initial
sales charge plus the 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.

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

BENEFIT PLANS. Certain group retirement and savings plans may purchase Class
A shares without the initial sales charge, provided that they meet the
required minimum amount of assets, average account balance or number of
eligible employees. For more information about these requirements, call
Prudential at (800) 353-2847.

OTHER WAIVERS. In addition, Class A shares may be purchased at NAV, through
the Distributor or the Transfer Agent, by:

. officers of the Prudential Mutual Funds (including the Fund);

. employees of the Distributor, Prudential Securities, 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;

. employees of subadvisers of the Prudential Mutual Funds provided that
purchases at NAV are permitted by such person's employer;

. 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;

. members of the Board of Directors of The Prudential Insurance Company of
America;

. registered representatives and employees of brokers who have entered
into a selected dealer agreement with the Distributor provided that
purchases at NAV are permitted by such person's employer;

. investors in Individual Retirement Accounts, provided the purchase is
made in a directed rollover to such individual Retirement Account with
the proceeds of a tax-free rollover of assets from a benefit plan for
which Prudential provides administrative or recordkeeping services and
further provided that such purchase is made within 60 days of receipt of
the benefit plan distribution;

. orders placed by broker-dealers, investment advisers or financial
planners who have entered into an agreement with the Distributor, who
place trades for their own accounts or the accounts of their clients and
who charge a management, consulting or other fee for their services
(e.g. mutual fund "wrap" or asset allocation programs); and

. orders placed by clients of broker-dealers, investment advisers or
financial planners who place trades for customer accounts if the
accounts are linked to the master account of such broker-dealer,
investment adviser or financial planner and the broker-dealer,
investment adviser or financial planner charges its clients a separate
fee for its services (e.g. mutual fund "supermarket programs").

Broker-dealers, investment advisers or financial planners sponsoring fee-
based programs (such as mutual fund "wrap" or asset allocation programs and
mutual fund "supermarket" programs) may offer their clients more than one
class of shares in the Fund in connection with different pricing options for
their programs. Investors should consider carefully any separate transaction
and other fees charged by these programs in connection with investing in each
available share class before selecting a share class.

For an investor to obtain any reduction or waiver of the initial sales
charges, either the Transfer Agent must be notified directly by the investor
or the Distributor must be notified by the broker facilitating the transaction
at the time of the sale that the sale qualifies for the reduced or waived
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.

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

B-29
<PAGE>

combined to take advantage of the reduced sales charges applicable to larger
purchases. See "How to Buy, Sell and Exchange Shares of the Fund--Reducing or
Waiving Class A's Initial Sales Charge" in the relevant Series' Prospectus.

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

. an individual;

. the individual's spouse, their children and their parents;

. the individual's and spouse's Individual Retirement Account (IRA);

. 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);

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

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

. one or more employee benefit plans of a company controlled by an
individual.

In addition, an eligible group of related investors may include an employer
(or group of related employers) and one or more qualified retirement 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 Transfer Agent, the Distributor or your broker 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 your broker will not be
aggregated to determine the reduced sales charge. 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. The Distributor or the Transfer Agent must be notified
at the time of purchase that the investor is entitled to a reduced sales
charge. Reduced sales charges will be granted subject to confirmation of the
investor's holdings. Rights of accumulation are not available to individual
participants in any retirement or group plans.

LETTERS OF INTENT. Reduced sales charges also are 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 net asset value 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 each Series
and shares of 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,
Prudential or its affiliates, and through your broker will not be aggregated
to determine the reduced sales charge.

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

B-30
<PAGE>

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 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.

The Investment Letter of Intent does not obligate the investor to purchase,
or 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. If 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)
must 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. If the goal is exceeded in an amount which qualifies for a lower
sales charge, a price adjustment is made by refunding to the purchaser the
amount of excess sales charge, if any, paid during the thirteen-month period.
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 group or plan. Letters of Intent are not available to
individual participants in retirement or group plans.

CLASS B SHARES

The offering price of Class B shares is the NAV next determined following
receipt of an order in proper form by the Transfer Agent, your broker or the
Distributor. Although there is no sales charge imposed at the time of
purchase, redemptions of Class B shares may be subject to a CDSC. See
"Contingent Deferred Sales Charge" below.

The Distributor will pay, from its own resources, sales commissions of up to
4% of the purchase price of Class B shares to brokers, financial advisers and
other persons who sell Class B shares at the time of sale. This facilitates
the ability of the Series 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 advancement of sales commissions from the combination
of the CDSC and the distribution fee.

CLASS C SHARES

The offering price of Class C shares is the next determined NAV plus a 1%
sales charge. In connection with the sale of Class C shares, the Distributor
will pay, from its own resources, brokers, 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.

WAIVER OF INITIAL SALES CHARGE--CLASS C SHARES

BENEFIT PLANS. Certain group retirement plans may purchase Class C shares
without the initial sales charge. For more information, call Prudential at
(800) 353-2847.

INVESTMENTS OF REDEMPTION PROCEEDS FROM OTHER INVESTMENT
COMPANIES. Investors may purchase Class C shares at NAV, without the initial
sales charge, with the proceeds from the redemption of shares of any
unaffiliated registered investment company which were not held through an
account with any Prudential affiliate. Such purchases must be made within 60
days of the redemption. Investors eligible for this waiver include: (i)
investors purchasing shares through an account at Prudential Securities; (ii)
investors purchasing shares through an ADVANTAGE Account or an Investor
Account with Pruco Securities Corporation (Prusec); and (iii) investors
purchasing shares through other Dealers. This waiver is not available to
investors who purchase shares directly from the Transfer Agent. You must
notify the Transfer Agent directly or through your Dealer if you are entitled
to this waiver and provide the Transfer Agent with such supporting documents
as it may deem appropriate.

B-31
<PAGE>

CLASS Z SHARES

BENEFIT PLANS. Certain group retirement plans may purchase Class Z shares,
provided that they meet the required minimum amount of assets, average account
balance or number of eligible employees. For more information about these
requirements, call Prudential at (800) 353-2847.

MUTUAL FUND PROGRAMS. Class Z shares can also be purchased by participants
in any fee-based program or trust program sponsored by Prudential or an
affiliate which includes mutual funds as investment options and the Fund as an
available option. Class Z shares can also be purchased by investors in certain
programs sponsored by broker-dealers, investment advisers and financial
planners who have agreements with Prudential Investments Advisory Group
relating to:

. Mutual fund "wrap" or asset allocation programs, where the sponsor
places Fund trades, links its clients' accounts to a master account in
the sponsor's name and charges its clients a management, consulting or
other fee for its services; and

. Mutal fund "supermarket" programs, where the sponsor links its clients'
accounts to a master account in the sponsor's name and the sponsor
charges a fee for its services.

Broker-dealers, investment advisers or financial planners sponsoring these
mutual fund programs may offer their clients more than one class of shares in
the Fund in connection with different pricing options for their programs.
Investor should consider carefully any separate transaction and other fees
charged by these programs in connection with investing in each available share
class before selecting a share class.

OTHER TYPES OF INVESTORS. Class Z shares of each Series currently are
available for purchase by the following categories of investors:

. 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;

. current and former Directors/Trustees of the Prudential Mutual Funds
(including the Fund); and

. 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 who distribute shares a finders' fee, from its own resources, based on
a percentage of the net asset value of shares sold by such persons.

SALE OF SHARES

You can redeem your shares at any time for cash at the NAV next determined
after the redemption request is received in proper form (in accordance with
procedures established by the Transfer Agent in connection with investors'
accounts) by the Transfer Agent, the Distributor or your broker. In certain
cases, however, redemption proceeds will be reduced by the amount of any
applicable CDSC, as described in "Contingent Deferred Sales Charges" below. If
you are redeeming your shares through a broker, your broker must receive your
sell order before the Series computes its NAV for that day (that is, 4:15
p.m., New York time) in order to receive that day's NAV. Your broker will be
responsible for furnishing all necessary documentation to the Distributor and
may charge you for its services in connection with redeeming shares of a
Series.

If you hold shares of a Series 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, the Distributor or your
broker in order for the redemption request to be processed. If redemption is
requested by a corporation, partnership, trust or fiduciary, written evidence
of authority acceptable to the Transfer Agent must be submitted before such
request will be accepted. All correspondence and documents concerning
redemptions should be sent to the Fund in care of its Transfer Agent,
Prudential Mutual Fund Services LLC, Attention: Redemption Services, P.O. Box
15010, New Brunswick, New Jersey 08906-5010, to the Distributor or to your
broker.

B-32
<PAGE>

Payment for shares presented for redemption will be made by check within
seven days after receipt of the certificate and/or written request by the
Transfer Agent, the Distributor or your broker, except as indicated below. If
you hold shares through a broker, payment for shares presented for redemption
will be credited to your account at your broker unless you indicate otherwise.
Such payment may be postponed or the right of redemption suspended at times
(i) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (ii) when trading on such Exchange is restricted, (iii)
when an emergency exists as a result of which disposal by a Series of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Series fairly to determine the value of its net assets, or
(iv) during any other period when the Commission, by order, so permits;
provided that applicable rules and regulations of the Commission shall govern
as to whether the conditions prescribed in (ii), (iii) or (iv) exist.

Payment for redemption of recently purchased shares will be delayed until
the Series or its Transfer Agent has been advised that the purchase check has
been honored, which may take up to 10 calendar days from the time of receipt
of the purchase check by the Transfer Agent. Such delay may be avoided by
purchasing shares by wire or by certified or cashier's check.

SIGNATURE GUARANTEE. If the proceeds of the redemption (i) exceed $100,000,
(ii) are to be paid to a person other than the record owner, (iii) are to be
sent to an address other than the address on the Transfer Agent's records, or
(iv) 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.

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

INVOLUNTARY REDEMPTION. In order to reduce expenses of each Series, the Fund
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 the applicable investment minimum 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 relevent Series 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 Transfer Agent, either directly or through the Distributor or your broker,
at the time the repurchase privilege is exercised to adjust your account for
the CDSC you previously paid. Thereafter, any redemptions will be subject to
the CDSC applicable at the time of the redemption. See "Contingent Deferred
Sales Charge" below. Exercise of the repurchase privilege will generally not
affect federal tax treatment of any gain realized upon redemption. However, if
the redemption was made within a 30-day period of the repurchase and if the
redemption resulted in a loss, some or all of the loss, depending on the
amount reinvested, may not be allowed for federal income tax purposes.

CONTINGENT DEFERRED SALES CHARGE

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 18 months of purchase (or one year in the case of
shares purchased prior to November 2, 1998), 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 to an amount which is lower
than the amount of all payments by you for shares during the preceding six
years, in

B-33
<PAGE>

the case of Class B shares, and 18 months, in the case of Class C shares (one
year for Class C shares purchased before November 2, 1998). 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.

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.

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

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE
YEAR SINCE PURCHASE OF DOLLARS INVESTED OR
PAYMENT MADE 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 NAV above the total amount of payments
for the purchase of Class B shares made during the preceding six years (five
years for Class B shares purchased prior to January 22, 1990) and 18 months
for Class C shares (one year for Class C shares bought before November 2,
1998); 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 CONTINGENT DEFERRED SALES CHARGE--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), or a trust, 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 Section 403(b)
custodial account. For more information, call Prudential at (800) 353-2847.

Finally, the CDSC will be waived to the extent that the proceeds from shares
redeemed are invested in Prudential Mutual Funds. The Guaranteed Investment
Account, the Guaranteed Insulated Separate Account, or units of The Stable
Value Fund.

B-34
<PAGE>

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% is reached.

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

You must notify the Transfer Agent either directly or through your broker,
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.

In connection with these waivers, the Transfer Agent will require you to
submit the supporting documentation set forth below.

CATEGORY OF WAIVER REQUIRED DOCUMENTATION

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 be A copy of the Social Security
considered disabled if he or she is Administration award letter or a
unable to engage in any substantial letter from a physician on the
gainful activity by reason of any physician's letterhead stating that
medically determinable physical or the shareholder (or, in the case of
mental impairment which can be a trust, the grantor) is permanently
expected to result in death or to be disabled. The letter must also
of long-continued and indefinite indicate the date of disability.
duration.

Distribution from an IRA or 403(b) A copy of the distribution form from
Custodial Account the 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 Plan A letter signed by the 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.

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

WAIVER OF CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES

BENEFIT PLANS. The CDSC will be waived for redemptions by certain group
retirement plans for which Prudential or brokers not affiliated with
Prudential provide administrative or recordkeeping services. The CDSC will
also be waived for certain redemptions by benefit plans sponsored by
Prudential and its affiliates. For more information, call Prudential at (800)
353-2847.

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 each Series 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

B-35
<PAGE>

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 net asset values 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 or 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 NAV 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.

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 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 would 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 each Series will continue to be subject,
possibly indefinitely, to their higher annual distribution and service fee.

B-36
<PAGE>

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 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 net asset value per share. 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 and/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 broker. Any shareholder who receives dividends and/or
other distributions in cash may subsequently reinvest any such distribution at
NAV within 30 days after the payment date. Such reinvestment will be made at
the NAV next determined after receipt of the distribution check or proceeds by
the Transfer Agent. Shares purchased with reinvested dividends and/or
distributions will not be subject to any CDSC upon redemption.

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 a Series.
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 (including new series of the Fund), the shares of which may be
distributed by the Distributor.

In order to exchange shares by telephone, you must elect the telephone
exchange privilege 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 8:00 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, a Series, nor their respective 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.

If you hold shares through Prudential Securities, you must exchange your
shares by contacting your Prudential Securities financial adviser.

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.

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 you should make exchanges by mail
by writing to Prudential Mutual Fund Services LLC at the address noted above.

CLASS A. Shareholders of a Series may exchange their Class A shares for
Class A shares of certain Prudential Mutual Funds, shares of Prudential
Government Securities Trust (Short-Intermediate Term Series) and shares of the
money market funds

B-37
<PAGE>

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 and U.S.
Treasury Money Market Series) (Class A shares); Prudential Municipal Series
Fund (Connecticut Money Market Series, Massachusetts Money Market Series, New
York Money Market Series and New Jersey Money Market Series); Prudential
MoneyMart Assets, Inc. (Class A shares); and 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 such Series, such shares will be subject to the CDSC
calculated without regard to 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 the
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.

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 without subjecting such shares to any CDSC. 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 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.

SPECIAL EXCHANGE PRIVILEGES. A special exchange privilege is available for
shareholders who qualify to purchase Class A shares at NAV and for
shareholders who qualify to purchase Class Z shares. 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
another broker that they are eligible for this special exchange privilege.

Participants in any fee-based program for which a Series 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

B-38
<PAGE>

through participation in the program) will be exchanged for Class A shares at
net asset value. Similarly, participants in Prudential Securities' 401(k) Plan
for which a Series' Class Z shares is an available option and who wish to
transfer their Class Z shares out of the Prudential Securities 401(k) Plan
following separation from service (i.e., voluntary or involuntary termination
of employment or retirement) will have their Class Z shares exchanged for
Class A shares at NAV.

Additional details about the exchange privilege and prospectuses for each of
the Prudential Mutual Funds are available from the Transfer Agent, the
Distributor or your broker. The exchange privilege may be modified, terminated
or suspended on sixty days' notice, and any fund, including the Fund, 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. A 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 Investment 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. Information about the costs of private colleges is from the Digest of
Education Statistics, 1992; The National Center for Educational Statistics;
and the U.S. Department of Education. Average costs for private institutions
include tuition, fees and 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 the 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 INVESTMENT PLAN (AIP)

Under AIP, 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 brokerage account (including a Prudential Securities 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 AIP participants.

Further information about this program and an application form can be
obtained from the Transfer Agent, the Distributor or your broker.

B-39
<PAGE>

SYSTEMATIC WITHDRAWAL PLAN

A systematic withdrawal plan is available to shareholders through the
Distributor or the Transfer Agent. Such withdrawal plan provides for monthly,
quarterly, semi-annual or annual redemption 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.

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 additional full and fractional shares at NAV on
shares held under this plan.

The Transfer Agent or the Distributor acts 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 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 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, their administration, custodial fees and other
details are available from the Distributor 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 the 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

B-40
<PAGE>

will be subject to tax when withdrawn from the account. Distributions from a
Roth IRA which meets 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, such as, 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 the 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 financial
advisor 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.

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

B-41
<PAGE>

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

Each Series has elected to qualify and intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code.
As a regulated investment company, a Series will not be liable for federal
income tax on its net investment income and capital gains provided that at
least 90% of the Series' net investment income (including net short-term
capital gains) other than long-term capital gains earned in the taxable year
is distributed. Qualification as a regulated investment company under the
Internal Revenue Code requires, among other things, that the Series (a) derive
at least 90% of its gross income from dividends, interest, 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 in such securities or currencies; and (b) diversify
its holdings so that, at the end of each fiscal quarter, (i) at least 50% of
the market value of the Series' assets is represented by cash, U.S. Government
securities and securities of other regulated investment companies, and other
securities (for purposes of this calculation generally limited, in respect of
any one issuer, to an amount not greater than 5% of the market value of the
Series' assets and 10% of the outstanding voting securities of such issuer),
and (ii) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than U.S. Government securities or the
securities of other regulated investment companies), or two or more issuers
which the Series controls and which are determined to be engaged in the same
or similar trades or businesses. These requirements may limit the Series'
ability to invest in other types of assets. A Series generally will be subject
to a nondeductible excise tax of 4% to the extent that it does not meet
certain minimum distribution requirements as of the end of each calendar year.
Each Series intends to make timely distributions of its income in compliance
with these requirements and anticipates that it will not be subject to the
excise tax.

Under the Internal Revenue Code, any distributions designated as being made
from a Series' net capital gains are taxable to its shareholders as long-term
capital gains, regardless of the holding period of such shareholders. Such
distributions of net capital gains will be designated by the Series as a
capital gains distribution in a written notice to its shareholders which
accompanies the distribution payment. Any loss on the sale of shares held for
less than six months will be treated as a long-term capital loss for federal
tax purposes to the extent a shareholder receives net capital gain
distributions on such shares. The maximum federal income tax rate applicable
to long-term capital gains is currently 20% for individual shareholders and
35% for corporate shareholders. Dividends and distributions are taxable as
described whether received in cash or reinvested in additional shares of the
Series.

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.

A shareholder who acquires shares of a Series and sells or otherwise
disposes of such shares within 90 days of acquisition may not be allowed to
include certain sales charges incurred in acquiring such shares for purposes
of calculating gain or loss realized upon a sale or exchange of shares of the
Series.

Gains or losses attributable to foreign currency contracts, or to
fluctuations in exchange rates between the time a Series accrues income,
expenses or other liabilities denominated in a foreign currency and the time
the Series actually collects such income or pays such liabilities, are treated
as ordinary income or ordinary loss for federal income tax purposes.
Similarly, gains

B-42
<PAGE>

or losses on the disposition of debt securities held by a Series, if any,
denominated in a foreign currency, to the extent attributable to fluctuations
in exchange rates between the acquisition and its disposition dates are also
treated as ordinary income or loss.

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 the 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 purchase by the Series of the option from its holder, the Series
will generally realize short-term capital gain or loss, depending on whether
the premium income is greater or less than the amount paid by the Fund in the
closing transaction. If securities are sold by a Series pursuant to the
exercise of a call option written by it, the 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, straddle, constructive sale and short sale provisions of
the Internal Revenue Code which may, among other things, require the Series to
defer losses or cause gain to be treated as ordinary income rather than as
capital gain. In addition, debt securities acquired by a Series may be subject
to original issue discount rules which may, among other things, cause the
Series to accrue income in advance of the receipt of cash with respect to
interest, and market discount rules which may, among other things, 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. These investments generally will 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, i.e., treated as having been
sold at market value. Sixty percent of any capital 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, which may
result in the deferral of losses in positions held by the Series to the extent
of any unrecognized gain on offsetting positions held by the Series, and the
deductibility of interest or other charges incurred to purchase or carry such
positions may be limited.

A "passive foreign investment company" (PFIC) is a foreign corporation that,
in general, meets either of the following tests: (a) at least 75% of its gross
income is passive or (b) an average of at least 50% of its assets produce, or
are held for the production of, passive income. If a Series acquires and holds
stock in a PFIC beyond the end of the year of its acquisition, the Series will
be subject to federal income tax on a portion of any "excess distribution"
received on the stock or of any gain from disposition of the stock
(collectively, PFIC income), plus interest thereon, even if the Series
distributes the PFIC income as a taxable dividend to its shareholders. If a
Series elects to treat any PFIC in which it invests as a "qualified electing
fund" then in lieu of the foregoing tax and interest obligation, the Series
will be required to include in income each year its pro rata share of the
qualified electing funds' annual ordinary earnings and net capital gain, even
if they are not distributed to such Series; those amounts would be subject to
the distribution requirements applicable to the Series described above.
Because the election to treat a PFIC as a qualifying fund cannot be made
without the provision of certain information by the PFIC, a Series may not be
able to make such an election. If a Series does not or cannot elect to treat
such a PFIC as a "qualified electing fund," the Series can make a "mark-to-
market" election, i.e., treat the shares of the PFIC as sold on the last day
of such Series' taxable year, and thus avoid the special tax and interest
charge. The gains the Series recognizes from the mark-to-market election would
be included as ordinary income in the net investment income the Series must
distribute to shareholders, notwithstanding that the Series would receive no
cash in respect of such gains. Any loss from the mark-to-market election may
be recognized to the extent of previously reported mark-to-market gains.

Dividends of net investment income will be taxable to a U.S. shareholder as
ordinary income regardless of whether such shareholder receives such dividends
in additional shares or in cash. Dividends received from a Series will be
eligible for the dividends-received deduction to corporate shareholders only
to the extent that the Series' income is derived from certain dividends
received from domestic corporations. Since a Series is not likely to have a
substantial portion of its assets invested in stock of domestic corporations,
the amount of the Series' dividends eligible for the corporate dividends-
received deduction will be minimal. The amount of dividends qualifying for the
dividends-received deduction will be designated as such in a written notice to
shareholders mailed not later than 60 days after the end of the Series'
taxable year. Distributions of net long-term capital gains, if

B-43
<PAGE>

any, will be taxable as long-term capital gains regardless of whether the
shareholder receives such distribution in additional shares or in cash and
regardless of how long the shareholder has held the Series' shares, and will
not be eligible for the dividends-received deduction for corporations.

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

Distributions of net investment income made to a nonresident alien
individual, a nonresident alien fiduciary of a foreign estate or trust,
foreign corporation or foreign partnership (foreign shareholder) will be
subject to U.S. withholding tax at a rate of 30% (or lower treaty rate),
unless the dividends are effectively connected with the U.S. trade or business
of the shareholder and the shareholder complies with certain filing
requirements. Gains realized upon the sale or redemption of shares of a Series
by a foreign shareholder and distributions of net long-term capital gains to a
foreign shareholder will generally not be subject to U.S. income tax unless
the gain is effectively connected with a trade or business carried on by the
shareholder within the United States or, in the case of a shareholder who is a
nonresident alien individual, the shareholder is present in the United States
for more than 182 days during the taxable year and certain other conditions
are met. If distributions are effectively connected with a U.S. trade or
business carried on by a foreign shareholder, distributions of net investment
income and net long-term capital gains will be subject to U.S. income tax at
the graduated rates applicable to U.S. citizens or domestic corporations.
Transfers by gift of shares of a Series by a foreign shareholder who is a
nonresident alien individual will not be subject to U.S. federal gift tax, but
the value of the shares of the Series held by such a shareholder at his death
will be includable in his gross estate for U.S. federal estate tax purposes.
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.

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

If a Series is liable for foreign taxes, the Series expects to meet the
requirements of the Internal Revenue Code for "passing-through" to its
shareholders foreign income taxes paid, but there can be no assurance that the
Series will be able to do so. Under the Internal Revenue Code, if more than
50% of the value of a Series' total assets at the close of its taxable year
consists of stocks or securities of foreign corporations, the Series will be
eligible and may file an election with the Internal Revenue Service to "pass-
through" to the Series' shareholders the amount of foreign income taxes paid
by the Series. Pursuant to this election, shareholders will be required to:
(i) include in gross income (in addition to taxable dividends actually
received) their pro rata share of the foreign income taxes paid by the Series;
(ii) treat their pro rata share of foreign income taxes as paid by them; and
(iii) either deduct their pro rata share of foreign income taxes in computing
their taxable income or, subject to certain limitations, use it as a foreign
tax credit against U.S. income taxes imposed on foreign source income. For
this purpose, the portion of dividends paid by the Series from its foreign
source income will be treated as such. No deduction for foreign taxes may be
claimed by a shareholder who does not itemize deductions. A shareholder that
is a nonresident alien individual or foreign corporation may be subject to
U.S. withholding tax on the income resulting from the election described in
this paragraph, but may not be able to claim a credit or deduction against
such tax for the foreign taxes treated as having been paid by such
shareholder. A tax-exempt shareholder will not ordinarily benefit from this
election. The amount of foreign taxes for which a shareholder may claim a
credit in any year will generally be subject to various limitations including
a separate limitation for "passive income," which includes, among other
things, dividends, interest and certain foreign currency gains.

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 as a result of the higher
distribution-related fee applicable to the Class B and Class C 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. See "Net Asset
Value."

A Series may also be subject to state or local taxes in certain other states
where it is deemed to be doing business. Further, in those states which have
income tax laws, the tax treatment of the Series and of shareholders of the
Series with respect to distributions by the Series may differ from federal tax
treatment. Distributions to shareholders may be subject to additional state
and local taxes. Shareholders should consult their own tax advisers regarding
specific questions as to federal, state or local taxes.

B-44
<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.

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

P(1+T) to the power of n = ERV

Where:P= a hypothetical initial payment of $1000.
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 $1000 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.

Below are the average annual total returns for Prudential Developing Markets
Equity Fund's share classes for the period ended May 31, 1999.

<TABLE>
<CAPTION>
SINCE
INCEPTION
---------
<S> <C> <C>
Class A............................................... 9.41% (6-26-98)
Class B............................................... 10.26 (6-26-98)
Class C............................................... 12.09 (6-26-98)
Class Z............................................... 15.39 (6-26-98)
</TABLE>

Below are the average annual total returns for Prudential Latin America
Equity Fund's share classes for the period ended May 31, 1999.

<TABLE>
<CAPTION>
SINCE
INCEPTION
---------
<S> <C> <C>
Class A............................................... -3.15% (6-26-98)
Class B............................................... -2.86 (6-26-98)
Class C............................................... -.90 (6-26-98)
Class Z............................................... 2.07 (6-26-98)
</TABLE>

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.

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

ERV - P
T = -------
P

Where: P = a hypothetical initial payment of $1000.
T = aggregate total return.
ERV = ending redeemable value at the end of the 1, 5 or 10 year periods
(or fractional portion thereof) of a hypothetical $1000 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.

B-45
<PAGE>

Below are the aggregate total returns for Prudential Developing Markets
Equity Fund's share classes for the period ended May 31, 1999.

<TABLE>
<CAPTION>
SINCE
INCEPTION
---------
<S> <C> <C>
Class A............................................... 1.60% (6-26-98)
Class B............................................... .90 (6-26-98)
Class C............................................... .90 (6-26-98)
Class Z............................................... 1.90 (6-26-98)
</TABLE>

Below are the aggregate total returns for Latin America Equity Fund's share
classes for the period ended May 31, 1999.

<TABLE>
<CAPTION>
SINCE
INCEPTION
---------
<S> <C> <C>
Class A............................................... -7.00% (6-26-98)
Class B............................................... -7.70 (6-26-98)
Class C............................................... -7.70 (6-26-98)
Class Z............................................... -6.90 (6-26-98)
</TABLE>

B-46
<PAGE>

A Series also may include comparative performance information in advertising
or marketing the Series' shares. Such performance information may include data
from Lipper Analytical Services, Inc., Morningstar Publications, Inc., other
industry publications, business periodicals and market 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/

Performance Comparison of Different Types of Investments
Over the Long-Term (12/31/25 - 12/31/98)

[BAR CHART]

Common Stocks 11.2%
Long-Term Gov't Bonds 5.3%
Inflation 3.1%

/1/Source: Ibbotson Associates. Used with permission. 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.

B-47
<PAGE>

Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--90.0%
COMMON STOCKS--83.4%
- ------------------------------------------------------------
Argentina--2.6%
35,500 CEI Citicorp Holdings SA
(Class B Shares) $ 120,792
9,800 YPF Sociedad Anonima (ADR) 412,825
-----------
533,617
- ------------------------------------------------------------
Brazil--6.9%
11,100 Aracruz Celulose SA (ADR) 213,675
20,800 Companhia Cervejaria Brahma (ADR) 213,200
10,300,000 Sider Nacional Cia 195,058
7,000 Telecomunicacoes Brasileiras SA
(ADR)(a) 584,500
6,400 Telesp Participacoes SA (ADR)(a) 140,000
3,200 Unibanco-Uniao de Bancos Brasileiros
SA (GDR) 72,200
-----------
1,418,633
- ------------------------------------------------------------
Chile--2.5%
5,700 Chilectra SA (ADR) 130,387
6,900 Cia de Telecomunicaciones de Chile
SA (ADR) 150,075
6,100 Enersis SA (ADR) 119,713
3,200 Sociedad Quimica y Minera de Chile
SA
(Series B Shares) (ADR) 111,600
-----------
511,775
- ------------------------------------------------------------
Egypt--2.3%
5,300 Al-Ahram Beverages Co. S.A.E
(GDR)(a) 159,795
21,100 Egypt Mobile Phone 318,100
-----------
477,895
Greece--3.8%
10,675 Chipita International SA(a) $ 253,295
9,100 Minoan Lines 261,150
2,930 Titan Cement Co. SA 270,574
-----------
785,019
- ------------------------------------------------------------
Hong Kong--0.2%
194,000 Jiangsu Expressway Co., Ltd. 32,772
- ------------------------------------------------------------
Hungary--1.9%
4,100 EGIS Gyogyszergyar Rt. 85,451
2,200 Gedeon Richter Rt. 81,733
4,300 MOL Magyar Olaj-es Gazipari Rt.
(GDR) 104,920
5,997 Pannonplast Rt. 118,475
-----------
390,579
- ------------------------------------------------------------
India--6.4%
8,000 Bajaj Auto, Ltd. (GDR) 137,000
700 Bajaj Auto, Ltd.(a) 11,988
7,800 Hindalco Industries, Ltd. (GDR) 111,930
8,200 ICICI, Ltd. 72,160
1,770 Infosys Technologies, Ltd.(a) (ADR) 88,057
100 Larsen & Toubro, Ltd. 1,248
13,500 Larsen & Toubro, Ltd. (GDR) 168,412
23,900 Mahanagar Telephone Nigam, Ltd.
(GDR) 216,295
9,500 Mahindra & Mahindra, Ltd. (GDR) 45,125
10,800 Ranbaxy Laboratories, Ltd. (GDR)(a) 145,800
19,800 State Bank of India (GDR) 208,395
10,400 Videsh Sanchar Nigam, Ltd. (GDR)(a) 117,520
-----------
1,323,930
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-48
<PAGE>

Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Indonesia--1.8%
7,946,000 PT Bank Internasional Indonesia $ 220,179
1,500 PT Indosat (Persero) Tbk 3,048
130,500 PT Ramayana Lestari Sentosa Tbk 70,714
147,400 PT Telekomunikasi 68,526
-----------
362,467
- ------------------------------------------------------------
Israel--2.1%
50,100 Bank Hapoalim, Ltd. 126,880
71,700 Bank Leumi Le Israel 134,796
11,000 Blue Square-Israel, Ltd. (ADR) 167,750
-----------
429,426
- ------------------------------------------------------------
Malaysia--0.3%
31,000 Malaysian Pacific Industries Berhad 61,723
- ------------------------------------------------------------
Mexico--13.4%
125,900 Cifra SA de CV (Series V shares) 219,126
155,800 Control Comerc Mexicana 150,826
58,800 Corporacion GEO SA de CV(a)
(Series B shares) 224,058
93,000 Corporativo Fragua SA (Series B
shares) 102,195
43,600 Fomento Economico Mexico
SA de CV(a) 144,585
55,100 Grupo Carso Global Telecom 306,426
545,600 Grupo Financiero Bancomer SA de CV 186,549
15,900 Grupo Financiero Inbursa SA de CV
(Series B shares) 46,668
116,600 Grupo Industrial Bimbo SA de CV
(Series A shares) 225,995
13,500 Grupo Televisa SA (ADR) 564,469
5,100 Telefonos de Mexico SA (ADR)
(Class L shares) 407,681
21,800 Tubos de Acero de Mexico SA 199,814
-----------
2,778,392
The Philippines--1.8%
130,700 Ayala Land, Inc. $ 42,078
53,100 Manila Electric Company
(Series B shares) 182,814
5,000 Metropolitan Bank & Trust Company 48,292
2,000 Philippine Long Distance Telephone 56,242
187,000 SM Prime Holdings (Class B shares) 40,791
-----------
370,217
- ------------------------------------------------------------
Poland--1.7%
7,200 Bank Handlowy w Warszawie (GDR) 81,900
3,200 Bank Rozwoju Eksportu SA 85,965
15,100 Orbis SA(a) 119,319
12,600 Telekomunikacja Polska SA (GDR)(a) 75,915
-----------
363,099
- ------------------------------------------------------------
Russia--4.6%
25,300 AO Tatneft (ADR) 72,738
16,600 LUKoil Holding (ADR) 601,750
37,000 Surgutneftegaz (ADR) 277,500
-----------
951,988
- ------------------------------------------------------------
South Africa--4.3%
5,900 Anglo American Corp. of South
Africa, Ltd. 267,202
12,700 Barlow, Ltd. 59,022
3,900 Impala Platinum Holdings, Ltd. 93,375
11,300 Imperial Holdings, Ltd. 91,994
101 Nedcor, Ltd. 2,020
13,900 Sasol, Ltd. 77,965
37,970 South African Breweries, Ltd.(a) 304,855
-----------
896,433
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-49
<PAGE>

Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
South Korea--11.3%
14,300 Housing & Commercial Bank, Korea $ 391,913
12,000 Kookmin Bank 181,642
7,900 Korea Electric Power Corp. 241,827
15,190 L.G. Chemical, Ltd. 298,458
14,032 L.G. Securities Co. 236,657
12,910 Medison Co., Ltd. 164,389
3,980 Pusan City Gas Co., Ltd. 100,687
9,000 Samsung Electro-Mechanics Company 190,496
2,761 Samsung Electronics (GDR) 192,084
14,600 Shinhan Bank 142,202
4,460 Sindo Ricoh Co.(a) 188,051
210 Sk Telecom Co., Ltd. (ADR) 2,993
-----------
2,331,399
- ------------------------------------------------------------
Taiwan--8.9%
10,000 Advanced Semiconductor Engineering,
Inc. (GDR)(a) 157,500
36,000 Asustek Computer, Inc. (GDR)(a) 555,300
223,000 Bank Sinopac 146,621
30,000 Cathay Life Insurance Co., Ltd. 102,752
118,799 Compal Electronics, Inc. 317,887
50,000 D-Link Corp. 117,737
5,000 Hon Hai Precision Industry 29,358
32,000 President Chain Store Corp. 101,284
1,000 Quanta Computer, Inc. 18,746
197,000 Taishin International Bank 135,551
43,000 Taiwan Semiconductor Manufacturing
Company 154,511
-----------
1,837,247
- ------------------------------------------------------------
Thailand--3.8%
7,000 Advanced Info Service PLC 85,237
19,800 Bangkok Bank Public Co., Ltd. 61,342
31,000 Bank of Ayudhya Public Co., Ltd. 22,548
14,400 BEC World Public Co., Ltd. 75,647
58,700 Eastern Water Resources Development
& Management Public Co., Ltd. 77,487
53,000 Electricity Generating Public Co.,
Ltd. 112,796
14,000 PTT Exploration & Producton Co.,
Ltd. 113,901
42,000 Thai Farmers Bank Public Co., Ltd. 115,409
40,700 Thai Military Bank Public Co., Ltd. 25,218
4,200 The Siam Cement Co., Ltd. 109,073
-----------
798,658
- ------------------------------------------------------------
Turkey--1.3%
2,958,000 Akbank T.A.S. 48,663
5,916,000 Akbank T.A.S.(a) 97,325
1,061,700 Vestel Elektronik Sanayi ve Ticaret
A.S. 121,221
-----------
267,209
- ------------------------------------------------------------
Venezuela--1.5%
3,700 C.A. La Electricidad de Caracas
(ADR)(a) 84,637
9,900 Compania Anonima Nacional Telefonos
de Venezuela (ADR) 230,794
-----------
315,431
-----------
Total common stocks
(cost $15,023,308) 17,237,909
-----------
PREFERRED STOCKS(a)--6.5%
- ------------------------------------------------------------
Brazil
15,900 Companhia Vale do Rio Doce 279,994
5,500,000 Gerdau Metalurgica SA 127,338
15,400,000 Gerdau SA 231,178
3,600,000 Petrol Brasileiros 509,238
21,100,000 Sider de Tubarao 188,828
-----------
Total preferred stocks
(cost $1,119,047) 1,336,576
-----------
------------------------------------------------------------
RIGHTS(a)--0.1%
------------------------------------------------------------
Greece--0.0%
1,200 Alpha Credit Bank
Expiring 6/9/99 4,098
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-50
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Portfolio of Investments as
of May 31, 1999 PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
South Korea--0.1%
1,785 Samsung Electro-Mechanics Company
Expiring 6/15/99 $ 5,869
383 Samsung Electronics (GDR)
Expiring 6/23/99 4,069
-----------
9,938
-----------
Total rights
(cost $0) 14,036
-----------
Total long-term investments
(cost $16,142,355) 18,588,521
-----------
SHORT-TERM INVESTMENT--0.3%
Principal Amount
(000)
- ------------------------------------------------------------
Repurchase Agreement--0.3%
United States
$ 51 Joint Repurchase Agreement Account,
4.795%, 6/1/99
(cost $51,000; Note 5) 51,000
-----------
- ------------------------------------------------------------
Total Investments--90.3%
(cost $16,193,355; Note 4) 18,639,521
Other assets in excess of
liabilities--9.7% 2,004,155
-----------
Net Assets--100% $20,643,676
===========
</TABLE>
- ---------------
(a) Non-income producing security.
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
PLC--Public Limited Company.

The industry classification of portfolio holdings and other assets in excess of
liabilities shown as a percentage of net assets as of May 31, 1999 was as
follows:

Oil & Gas Exploration/Production...................... 12.0%
Telecommunications Services........................... 11.7
Banking............................................... 11.4
Utilities............................................. 5.7
Computers............................................. 5.3
Steel & Metals........................................ 4.7
Beverage.............................................. 4.0
Retail................................................ 3.9
Media................................................. 3.9
Electronic Components................................. 3.6
Finance............................................... 3.2
Mining................................................ 2.7
Food Processing....................................... 2.3
Building & Products................................... 1.8
Real Estate-Development............................... 1.5
Transportation-Road & Rail............................ 1.4
Medical Products & Services........................... 1.2
Manufacturing......................................... 1.2
Pharmaceutical........................................ 1.1
Chemicals............................................. 1.1
Forestry & Paper...................................... 1.0
Automobile Manufacturing.............................. 1.0
Office Equipment & Supplies........................... 0.9
Diversified Operations................................ 0.7
Lodging............................................... 0.6
Electrical Goods...................................... 0.6
Audio/Visual.......................................... 0.6
Insurance............................................. 0.5
Aerospace/Defense..................................... 0.4
Short-term investment................................. 0.3
-----
90.3%
Other assets in excess of liabilities................. 9.7
-----
100.0%
=====
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-51

<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Statement of Assets and Liabilities PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets May 31, 1999
<S> <C>
Investments, at value (cost $16,193,355)..................................................................... $18,639,521
Foreign currency, at value (cost $1,043,359)................................................................. 1,073,995
Cash......................................................................................................... 361,072
Receivable for investments sold.............................................................................. 934,908
Deferred organization costs and other assets................................................................. 87,349
Dividends and interest receivable............................................................................ 65,966
------------
Total assets.............................................................................................. 21,162,811
------------
Liabilities
Payable for investments purchased............................................................................ 382,407
Accrued expenses............................................................................................. 78,243
Withholding tax payable...................................................................................... 35,291
Management fee payable....................................................................................... 22,974
Distribution fee payable..................................................................................... 220
------------
Total liabilities......................................................................................... 519,135
------------
Net Assets................................................................................................... $20,643,676
============
Net assets were comprised of:
Shares of beneficial interest, at par..................................................................... $ 2,028
Paid-in capital in excess of par.......................................................................... 20,188,684
------------
20,190,712
Accumulated net investment loss........................................................................... (121,775)
Accumulated net realized loss on investments and foreign currency transactions............................ (1,873,770)
Net unrealized appreciation on investments and foreign currency translations.............................. 2,448,509
------------
Net assets, May 31, 1999..................................................................................... $20,643,676
============
Class A:
Net asset value and redemption price per share $10.16
($41,321 / 4,069 shares of beneficial interest issued and outstanding).................................
Maximum sales charge (5% of offering price)............................................................... .53
------------
Maximum offering price to public.......................................................................... $10.69
============
Class B:
Net asset value, offering price and redemption price per share $10.09
($148,443 / 14,717 shares of beneficial interest issued and outstanding)............................... ============

Class C:
Net asset value, redemption price per share $10.09
($73,513 / 7,288 shares of beneficial interest issued and outstanding).................................
Sales charge (1% of offering price)....................................................................... .10
------------
Offering price to public.................................................................................. $10.19
============
Class Z:
Net asset value, offering price and redemption price per share $10.18
($20,380,399 / 2,001,488 shares of beneficial interest issued and outstanding)......................... ============
</TABLE>

- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-52
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
June 26, 1998(a)
Through
Net Investment Loss May 31, 1999
<S> <C>
Income
Dividends (net of foreign withholding taxes
of $33,447)............................. $ 259,318
Interest................................... 216,994
----------------
Total income............................ 476,312
----------------
Expenses
Management fee............................. 212,953
Distribution fee--Class A.................. 66
Distribution fee--Class B.................. 551
Distribution fee--Class C.................. 246
Custodian's fees and expenses.............. 146,000
Registration fees.......................... 94,000
Audit fee and expenses..................... 35,000
Reports to shareholders.................... 25,000
Amortization of organization expenses...... 11,627
Legal fees and expenses.................... 10,000
Trustees' fees............................. 3,500
Transfer agent's fees and expenses......... 1,000
Miscellaneous.............................. 1,958
----------------
Total expenses.......................... 541,901
----------------
Net investment loss........................... (65,589)
----------------
Realized and Unrealized Gain (Loss) on Investment and Foreign Currency
Transactions Net realized gain (loss) on:
Investment transactions.................... (1,874,015)
Foreign currency transactions.............. (127,884)
Financial futures contracts................ 245
----------------
(2,001,654)
----------------
Net unrealized appreciation on:
Investments................................ 2,446,166
Foreign currencies......................... 2,343
----------------
2,448,509
----------------
Net gain on investments and foreign
currencies................................. 446,855
----------------
Net Increase in Net Assets
Resulting from Operations..................... $ 381,266
================
</TABLE>
- ---------------
(a) Commencement of investments operations.

PRUDENTIAL DEVELOPING MARKETS FUND
PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
June 26, 1998(a)
Increase (Decrease) in Through
Net Assets May 31, 1999
<S> <C>
Operations
Net investment loss....................... $ (65,589)
Net realized loss on investment and
foreign
currency transactions.................. (2,001,654)
Net unrealized appreciation of investments
and foreign currencies................. 2,448,509
----------------
Net increase in net assets resulting from
operations............................. 381,266
----------------
Series share transactions (Note 6)
Net proceeds from shares sold............. 20,346,784
Cost of shares reacquired................. (134,374)
----------------
Net increase in net assets from Series
share transactions..................... 20,212,410
----------------
Total increase............................... 20,593,676
Net Assets
Beginning of period.......................... 50,000
----------------
End of period................................ $ 20,643,676
================
</TABLE>
- ---------------
(a) Commencement of investment operations.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-53
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Notes to Financial Statements PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------

Prudential Developing Markets Fund (the 'Fund') is registered under the
Investment Company Act of 1940, as an open-end, diversified management
investment company presently consisting of two series: Prudential Developing
Markets Equity Fund (the 'Series') and Prudential Latin America Equity Fund. The
Fund was organized as a business trust in Delaware on October 24, 1997. The
Series had no significant operations other than the issuance of 1,250 shares
each of Class A, Class B, Class C and Class Z shares of beneficial interest for
$50,000 on June 16, 1998 to Prudential Investments Fund Management LLC ('PIFM').
Prudential Developing Markets Equity Fund commenced investment operations on
June 26, 1998.

The investment objective of the Series is to achieve long-term growth of capital
through investment in equity related securities of companies whose principal
activities are in developing markets throughout the world. Under normal
circumstances, the Series intends to invest at least 65% of its total assets in
such securities.

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

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

Security Valuation: Securities listed on a securities exchange are valued at the
last sales price on such exchange on the day of valuation, or, if there was no
sale on such day, at the mean between the last bid and asked prices on such day
or at the bid price on such day in the absence of an asked price. Securities
that are actively traded in the over-the-counter market, including listed
securities for which the primary market is believed by the Manager, in
consultation with the Subadvisor, to be over-the-counter, are valued by an
independent pricing agent or principal market maker. Futures contracts and
options traded on a commodities exchange or board of trade are valued at the
last sales price at the close of trading on such exchange or board of trade or,
if there was no sale on the applicable commodities exchange or board of trade on
such day, at the mean between the most recently quoted bid and asked prices on
such exchange or board of trade. Privately placed securities including equity
securities for which market prices may be obtained from primary dealers shall be
valued at the bid prices provided by such primary dealers. Securities for which
reliable market quotations are not readily available are valued by the Valuation
Committee or Board of Trustees in consultation with the Manager or Subadvisor.

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

In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, take
possession of the underlying securities, the value of which exceeds the
principal amount of the repurchase transaction including accrued interest. If
the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.

All securities are valued as of 4:15 p.m., New York time.

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

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

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

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

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

- --------------------------------------------------------------------------------
B-54
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Notes to Financial Statements PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------

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

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

Net investment income (loss), other than distribution fees, and unrealized and
realized gains or losses are allocated daily to each class of shares based upon
the relative proportion of net assets of each class at the beginning of the day.

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

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

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

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

Taxes: For federal income tax purposes, each series in the Fund is treated as a
separate taxpaying entity. It is the intent of the Series to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to shareholders.
Therefore, no federal income tax provision is required.

Withholding taxes on foreign dividends have been provided for in accordance with
the Fund's understanding of the applicable country's tax rules and rates. In
addition, certain countries impose taxes on capital gains realized on the sale
of portfolio securities, and as such, taxes have been accrued on the unrealized
gain on such securities.

Deferred Organization Cost: The Series incurred approximately $62,000 in
connection with the organization of the Series. Organization costs are being
amortized over a period of 60 months ending June 2003.

Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants (AICPA) Statement of Position 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to decrease accumulated net realized loss on investments and
foreign currency transactions by $127,884, increase accumulated net investment
loss by $56,186 and decrease paid-in capital in excess of par by $71,698 due to
nondeductible stock issuance expenses and realized foreign currency losses. Net
investment loss, net realized loss and net assets were not affected by these
changes.

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

The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the Subadvisor's performance of such
services. PIFM has entered into a subadvisory agreement with The Prudential
Investment Corporation ('PIC'), PIC furnishes investment advisory services in
connection with the management of the Fund. PIFM pays for the cost of the
Subadvisor's services, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.

- --------------------------------------------------------------------------------
B-55
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Notes to Financial Statements PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------

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

The Fund has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS') which acts as the distributor of the Class A, Class B,
Class C and Class Z shares of the Fund. The Fund compensates PIMS for
distributing and servicing the Fund's Class A, Class B and Class C shares,
pursuant to plans of distribution, (the 'Class A, B and C Plans'), regardless of
expenses actually incurred by PIMS. The distribution fees are accrued daily and
payable monthly. No distribution or service fees are paid to PIMS as distributor
for Class Z shares of the Fund.

Pursuant to the Class A, B and C Plans, the Fund compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, 1% and 1%
of the average daily net assets of the Class A, B and C shares, respectively.
Such expenses under the Plans were .25 of 1%, 1% and 1% of the average daily net
assets of the Class A, B and C shares respectively, for the period ended May 31,
1999.

PIMS has advised the Series that for the period ended May 31, 1999, it received
approximately $600 in front-end sales charges resulting from sales of Class C
shares. No front-end sales charges were received from sales of Class A shares.

PIMS has advised the Series that for the period ended May 31, 1999, it received
approximately $500 in contingent deferred sales charges imposed upon redemptions
by Class B shareholders. No contingent deferred sales charges were received upon
redemptions by Class C shareholders.

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

As of March 11, 1999, the Fund, along with other affiliated registered
investment companies (the 'Funds'), entered into a syndicated credit agreement
('SCA') with an unaffiliated lender. The maximum commitment under the SCA is $1
billion. The Funds pay a commitment fee at an annual rate of .065 of 1% on the
unused portion of the credit facility, which is accrued and paid quarterly on a
pro rata basis by the Funds. The SCA expires on March 9, 2000. Prior to March
11, 1999, the Funds had a credit agreement with a maximum commitment of
$200,000,000. The commitment fee was .055 of 1% on the unused portion of the
credit facility. The Fund did not borrow any amounts pursuant to either
agreement during the period ended May 31, 1999. The purpose of the agreements is
to serve as an alternative source of funding for capital share redemptions.

Note 3. Other Transactions with Affiliates

Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the period ended May 31, 1999, the
Series incurred fees of approximately $300 for the services of PMFS. As of May
31, 1999 approximately $50 of such fees were due to PMFS. Transfer agent fees
and expenses in the Statement of Operations include certain out-of-pocket
expenses paid to nonaffiliates.

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

Purchases and sales of portfolio securities of the Series, excluding short-term
investments, for the period ended May 31, 1999 were $63,801,002 and $45,791,072,
respectively.

The United States federal income tax basis of the Series' investments as of May
31, 1999 was $16,229,331 and accordingly, net unrealized appreciation on
investments for federal income tax purposes was $2,410,190 (gross unrealized
appreciation--$3,004,154, gross unrealized depreciation--$593,964).

For federal income tax purposes, the Series has a capital loss carryforward at
May 31, 1999 of approximately $1,837,800 which expires in 2007. Accordingly, no
capital gains distributions are expected to be paid to shareholders until net
gains have been realized in excess of such amount. In addition, the Series is
electing to treat net currency losses of approximately $86,500 incurred in the
seven-month period ended May 31, 1999 as having been incurred in the following
fiscal year.

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

The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or federal agency obligations. As of May 31, 1999, the Series
had a .01% undivided interest in the repurchase agreements in the joint account.
The undivided interest for the Series represents $51,000 in principal amount. As
of such date, each repurchase agreement in the joint account and the collateral
therefor were as follows:

Bear, Stearns & Co. Inc., 4.82%, in the principal amount of $200,000,000,
repurchase price $200,107,111, due 6/1/99. The value of the collateral including
accrued interest was $204,177,828.

Credit Suisse First Boston Corp., 4.60%, in the principal amount of $85,711,000,
repurchase price $85,754,808, due 6/1/99. The value of the collateral including
accrued interest was $88,385,257.

- --------------------------------------------------------------------------------
B-56
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Notes to Financial Statements PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------

Deutsche Bank Securities Inc., 4.83%, in the principal amount of $200,000,000,
repurchase price $200,107,333, due 6/1/99. The value of the collateral including
accrued interest was $204,000,179.

Morgan (J.P.) Securities, Inc., 4.82%, in the principal amount of $200,000,000,
repurchase price $200,107,111, due 6/1/99. The value of the collateral including
accrued interest was $204,000,892.

- ------------------------------------------------------------
Note 6. Capital

The Fund offers Class A, Class B, Class C and Class Z shares. Class A shares are
sold with a front-end sales charge of up to 5%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Prior to November 2, 1998 Class C shares
were sold with a contingent deferred sales charge of 1% during the first year.
Effective November 2, 1998, Class C shares are sold with a front-end sales
charge of 1% and a contingent deferred sales charge of 1% during the first 18
months. Class B shares automatically convert to Class A shares on a quarterly
basis approximately seven years after purchase. A special exchange privilege is
also available for shareholders who qualified to purchase Class A shares at net
asset value. Class Z shares are not subject to any sales or redemption charge
and are offered exclusively for sale to a limited group of investors. Of the
2,027,562 shares of beneficial interest issued and outstanding at May 31, 1999,
Prudential owned 2,012,687.

The Fund has authorized an unlimited number of shares of beneficial interest at
$.001 par value.

Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- -------------------------------------- --------- -----------
<S> <C> <C>
June 26, 1998(a) through May 31, 1999:
Shares sold........................... 2,819 $ 25,830
========= ===========
<CAPTION>
Class B
- --------------------------------------
<S> <C> <C>
June 26, 1998(a) through May 31, 1999:
Shares sold........................... 13,881 $ 134,932
Shares reacquired..................... (414) (3,466)
--------- -----------
Net increase in shares outstanding.... 13,467 $ 131,466
========= ===========
<CAPTION>
Class C
- --------------------------------------
<S> <C> <C>
June 26, 1998(a) through May 31, 1999:
Shares sold........................... 18,225 $ 183,754
Shares reacquired..................... (12,187) (130,697)
--------- -----------
Net increase in shares outstanding.... 6,038 $ 53,057
========= ===========
<CAPTION>
Class Z
- --------------------------------------
<S> <C> <C>
June 26, 1998(a) through May 31, 1999:
Shares sold........................... 2,000,257 $20,002,268
Shares reacquired..................... (19) (211)
--------- -----------
Net increase in shares outstanding.... 2,000,238 $20,002,057
========= ===========
</TABLE>
- ---------------
(a) Commencement of investment operations.

- --------------------------------------------------------------------------------
B-57
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Financial Highlights PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 26, 1998(a) Through May 31, 1999
-------------------------------------------
Class A Class B Class C Class Z
------- ------- ------- -------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...................... $10.00 $10.00 $10.00 $ 10.00
------- ------- ------- -------
Income from investment operations:
Net investment loss(d).................................... (.05 ) (.10 ) (.10 ) (.03)
Net realized and unrealized gain on investment and foreign
currency transactions.................................. .21 .19 .19 .21
------- ------- ------- -------
Total from investment operations....................... .16 .09 .09 .18
------- ------- ------- -------
Net asset value, end of period............................ $10.16 $10.09 $10.09 $ 10.18
======= ======= ======= =======
TOTAL RETURN(a)........................................... 1.60% .90% .90% 1.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................... $ 41 $ 148 $ 74 $20,380
Average net assets (000).................................. $ 29 $ 59 $ 27 $18,337
Ratios to average net assets:(b)
Expenses, including distribution fees.................. 3.43% 4.18% 4.18% 3.18%
Expenses, excluding distribution fees.................. 3.18% 3.18% 3.18% 3.18%
Net investment loss.................................... (.55)% (1.21)% (1.21)% (.38)%
Portfolio turnover rate................................... 345% 345% 345% 345%
</TABLE>
- ---------------
(a) Total return does not consider the effect of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total return for periods of less than a full year is not
annualized.
(b) Annualized.
(c) Commencement of investment operations.
(d) Calculated based upon weighted average shares outstanding during the period.

- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-58
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Report of Independent Accountants PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------

To the Shareholders and Board of Trustees of
Prudential Developing Markets Fund--
Prudential Developing Markets Equity Fund

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential Developing Markets
Fund--Prudential Developing Markets Equity Fund (the 'Fund') at May 31, 1999,
and the results of its operations, the changes in its net assets and the
financial highlights for the period June 26, 1998 (commencement of operations)
through May 31, 1999, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as 'financial statements') are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at May 31, 1999 by correspondence with the custodian
and brokers, provides a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
July 20, 1999

- --------------------------------------------------------------------------------
B-59
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Portfolio of Investments as of
May 31, 1999 PRUDENTIAL LATIN AMERICA EQUITY FUND
- ------------------------------------------------------------
<TABLE>
<CAPTION>

Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--87.2%
COMMON STOCKS--62.1%
- ------------------------------------------------------------
Argentina--6.8%
22,900 CEI Citicorp Holdings SA (Class B
shares) $ 77,919
6,300 YPF Sociedad Anonima (ADR) 265,388
----------
343,307
- ------------------------------------------------------------
Brazil--8.8%
7,100 Aracruz Celulose SA (ADR) 136,675
13,400 Companhia Cerveja Brahma (ADR) 137,350
6,600,000 Sider Nacional Cia 124,988
2,000 Unibanco-Uniao de Bancos Brasileiros
SA (GDR) 45,125
----------
444,138
- ------------------------------------------------------------
Chile--6.8%
4,000 Chilectra SA (ADR) 91,500
4,500 CIA de Telecomunicaciones de Chile SA
(ADR) 97,875
3,900 Enersis SA (ADR) 76,537
2,200 Sociedad Quimica Y Minera de Chile SA
(Series B shares) (ADR) 76,725
----------
342,637
- ------------------------------------------------------------
Mexico--35.5%
35,200 Carso Global Telecom (Series A
shares) 195,757
81,400 Cifra SA de CV (Series V shares) 141,674
100,700 Controladora Comerical Mexicana SA de
CV 97,485
42,800 Corporacion GEO SA de CV
(Series B shares) 163,089
62,000 Corporativo Fragua SA (Series B
shares) 68,130
29,000 Fomento Economico Mexico SA(a) 96,169
273,200 Grupo Financiero Bancomer SA de CV 93,411
10,100 Grupo Financiero Inbursa SA de CV
(Series B shares) $ 29,645
75,000 Grupo Industrial Bimbo SA de CV
(Series A shares) 145,366
8,700 Grupo Televisa SA (GDR) 363,769
3,300 Telefonos de Mexico SA (ADR)
(Class L shares) 263,794
14,100 Tubos de Acero de Mexico SA (ADR) 129,238
----------
1,787,527
- ------------------------------------------------------------
Venezuela--4.2%
2,300 C.A. La Electricidad de Caracas (ADR) 52,613
6,600 Compania Anonima Nacional Telefonos
de Venezuela (ADR) 153,862
----------
206,475
----------
Total common stocks
(cost $2,713,169) 3,124,084
----------
PREFERRED STOCKS--25.1%
- ------------------------------------------------------------
Brazil
11,500 Companhia Vale do Rio Doce(a) 202,512
10,300,000 Gerdau SA(a) 154,619
3,600,000 Gerdau Metalurgica SA(a) 83,349
1,700,000 Petrol Brasileiros(a) 240,473
13,600,000 Sider De Tubarao(a) 121,709
4,500 Telecomunicacoes Brasileiras SA(a)
(ADR) 375,750
4,000 Telesp Participacpoes SA, $1.21 (ADR) 87,500
----------
Total preferred stocks
(cost $1,083,773) 1,265,912
----------
Total long-term investments
(cost $3,796,942) 4,389,996
----------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-60
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Portfolio of Investments as of
May 31, 1999 PRUDENTIAL LATIN AMERICA EQUITY FUND
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
SHORT-TERM INVESTMENT--9.4%
- ------------------------------------------------------------
Repurchase Agreement
United States
$ 472 Joint Repurchase Agreement Account,
4.795%, 6/1/99
(cost $472,000; Note 5) $ 472,000
----------
- ------------------------------------------------------------
Total Investments--96.6%
(cost $4,268,942; Note 4) 4,861,996
Other assets in excess of
liabilities--3.4% 170,754
----------
Net Assets--100% $5,032,750
==========
</TABLE>
- ---------------
(a) Non-income producing security.
ADR--American Depository Receipt.
GDR--Global Depository Receipt.

The industry classification of portfolio holdings and other assets in excess of
liabilities shown as a percentage of net assets as of May 31, 1999 was as
follows:

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

Telecommunications.................................... 23.3%
Oil & Gas Exploration/Production...................... 10.1
Steel & Metals........................................ 9.8
Media................................................. 7.2
Retail................................................ 6.1
Beverages............................................. 4.6
Mining................................................ 4.0
Real Estate-Development............................... 3.3
Food Processing....................................... 2.9
Banking............................................... 2.8
Forest & Paper........................................ 2.7
Utilities............................................. 2.6
Manufacturing......................................... 2.4
Finance............................................... 2.1
Electrical & Electronics.............................. 1.8
Chemicals............................................. 1.5
Short-term investment................................. 9.4
-----
96.6%
Other assets in excess of liabilities................. 3.4
-----
100.0%
=====

- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-61
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Statement of Assets and Liabilities PRUDENTIAL LATIN AMERICA EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets May 31, 1999
<S> <C>
Investments, at value (cost $4,268,942)...................................................................... $4,861,996
Foreign currency, at value (cost $85,153).................................................................... 85,123
Cash......................................................................................................... 19,533
Receivable for investments sold.............................................................................. 184,246
Deferred organization costs and other assets................................................................. 41,661
Dividends and interest receivable............................................................................ 24,796
Receivable for Series shares sold............................................................................ 5,015
------------
Total assets.............................................................................................. 5,222,370
------------
Liabilities
Payable for investments purchased............................................................................ 103,733
Accrued expenses and other liabilities....................................................................... 77,814
Management fee payable....................................................................................... 5,711
Withholding taxes payable.................................................................................... 2,167
Distribution fee payable..................................................................................... 195
------------
Total liabilities......................................................................................... 189,620
------------
Net Assets................................................................................................... $5,032,750
============
Net assets were comprised of:
Shares of beneficial interest, at par..................................................................... $ 541
Paid-in capital in excess of par.......................................................................... 5,164,106
------------
5,164,647
Accumulated net investment loss........................................................................... (62,356)
Accumulated net realized loss on investments and foreign currency transactions............................ (662,565)
Net unrealized appreciation on investments and foreign currency translations.............................. 593,024
------------
Net assets, May 31, 1999..................................................................................... $5,032,750
============
Class A:
Net asset value and redemption price per share $9.30
($96,150 / 10,341 shares of beneficial interest issued and outstanding)................................
Maximum sales charge (5% of offering price)............................................................... .49
------------
Maximum offering price to public.......................................................................... $9.79
============
Class B:
Net asset value, offering price and redemption price per share $9.23
($233,835 / 25,344 shares of beneficial interest issued and outstanding)............................... ============

Class C:
Net asset value and redemption price per share $9.23
($15,351 / 1,664 shares of beneficial interest issued and outstanding).................................
Sales charge (1% of offering price)....................................................................... .09
------------
Offering price to public.................................................................................. $9.32
============
Class Z:
Net asset value, offering price and redemption price per share $9.31
($4,687,414 / 503,323 shares of beneficial interest issued and outstanding)............................ ============
</TABLE>

- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-62
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
PRUDENTIAL LATIN AMERICA EQUITY FUND
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
June 26, 1998(a)
Through
Net Investment Loss May 31, 1999
------------
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $10,235).................... $ 80,872
Interest................................ 53,522
----------------
Total income......................... 134,394
----------------
Expenses
Management fee.......................... 49,884
Distribution fee--Class A............... 84
Distribution fee--Class B............... 629
Distribution fee--Class C............... 98
Custodian's fees and expenses........... 113,000
Registration fees....................... 86,000
Audit fee and expenses.................. 35,000
Reports to shareholders................. 25,000
Legal fees and expenses................. 15,000
Amortization of organizational costs.... 8,304
Trustees' fees.......................... 3,500
Transfer agent's fees and expenses...... 1,000
Miscellaneous........................... 1,267
----------------
Total expenses....................... 338,766
----------------
Net investment loss........................ (204,372)
----------------
Realized and Unrealized Gain (Loss)
on Investment and Foreign Currency
Transactions
Net realized loss on:
Investment transactions................. (662,565)
Foreign currency transactions........... (64,716)
----------------
(727,281)
----------------
Net unrealized appreciation/depreciation on:
Investments............................. 593,054
Foreign currencies...................... (30)
----------------
593,024
----------------
Net loss on investments and foreign
currencies.............................. (134,257)
----------------
Net Decrease in Net Assets
Resulting from Operations $ (338,629)
================
</TABLE>
- ---------------
(a) Commencement of investment operations.

PRUDENTIAL DEVELOPING MARKETS FUND
PRUDENTIAL LATIN AMERICA EQUITY FUND
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
June 26, 1998(a)
Increase (Decrease) In Through
Net Assets May 31, 1999
------------
<S> <C>
Operations
Net investment loss......................... $ (204,372)
Net realized loss on investment and foreign
currency transactions.................... (727,281)
Net unrealized appreciation of investments
and foreign currencies................... 593,024
----------------
Net decrease in net assets resulting from
operations............................... (338,629)
----------------
Series share transactions (Note 6)
Net proceeds from shares sold............... 5,502,477
Cost of shares redeemed..................... (181,098)
----------------
Net increase in net assets from Series share
transactions............................. 5,321,379
----------------
Total increase................................. 4,982,750
Net Assets
Beginning of period............................ 50,000
----------------
End of period.................................. $5,032,750
================
</TABLE>
- ---------------
(a) Commencement of investment operations.

- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-63
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Notes to Financial Statements PRUDENTIAL LATIN AMERICA EQUITY FUND
- --------------------------------------------------------------------------------

Prudential Developing Markets Fund (the 'Fund') is registered under the
Investment Company Act of 1940, as an open-end, diversified management
investment company presently consisting of two series: Prudential Developing
Markets Equity Fund and Prudential Latin America Equity Fund (the 'Series'). The
Fund was organized as a business trust in Delaware on October 24, 1997. The
Series had no significant operations other than the issuance of 1,250 shares
each of Class A, Class B, Class C and Class Z shares of beneficial interest for
$50,000 on June 16, 1998 to Prudential Investments Fund Management LLC ('PIFM').
Prudential Latin America Equity Fund commenced investment operations on June 26,
1998.

The investment objective of the Series is to achieve long-term growth of capital
through investments 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.

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

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

Securities Valuation: Securities listed on a securities exchange are valued at
the last sales price on such exchange on the day of valuation, or, if there was
no sale on such day, at the mean between the last bid and asked prices on such
day or at the bid price on such day in the absence of an asked price. Securities
that are actively traded in the over-the-counter market, including listed
securities for which the primary market is believed by the Manager, in
consultation with the Subadvisor, to be over-the-counter, are valued by an
independent pricing agent or principal market maker. Futures contracts and
options traded on a commodities exchange or board of trade are valued at the
last sales price at the close of trading on such exchange or board of trade or,
if there was no sale on the applicable commodities exchange or board of trade on
such day, at the mean between the most recently quoted bid and asked prices on
such exchange or board of trade. Privately placed securities including equity
securities for which market prices may be obtained from primary dealers shall be
valued at the bid prices provided by such primary dealers. Securities for which
reliable market quotations are not readily available are valued by the Valuation
Committee or Board of Trustees in consultation with the Manager or Subadvisor.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.

In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Series' policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, take
possession of the underlying securities, the value of which exceeds the
principal amount of the repurchase transaction including accrued interest. If
the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.

All securities are valued as of 4:15 p.m., New York time.
Foreign Currency Translation: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:

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

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

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

- --------------------------------------------------------------------------------
B-64
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Notes to Financial Statements PRUDENTIAL LATIN AMERICA EQUITY FUND
- --------------------------------------------------------------------------------

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

Deferred Organization Cost: The Series incurred approximately $45,000 in
connection with the organization of the Series. Organization costs are being
amortized over a period of 60 months ending June 2003.

Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants (AICPA) Statement of Position 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to decrease paid-in capital by $206,732, decrease accumulated
net investment loss by $142,016 and decrease accumulated net realized loss on
investments and foreign currency transactions by $64,716 due to the Fund
experiencing a net investment loss, realized foreign currency losses and
nondeductible stock issuance expenses. Net investment loss, net realized loss
and net assets were not affected by these changes.

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

The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the Subadvisor's performance of such
services. PIFM has entered into a subadvisory agreement with The Prudential
Investment Corporation ('PIC'); PIC furnishes investment advisory services in
connection with the management of the Fund. PIFM pays for the cost of the
Subadviser's services, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.

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

PIMS has advised the Series that for the period ended May 31, 1999, it received
approximately $600 in front-end sales charges resulting from sales of Class A
shares. No front-end sales charges were received from sales of Class C shares.
PIMS has advised the Series that for the period ended May 31, 1999, it has not
received any contingent deferred sales charges imposed upon redemptions by Class
B and Class C shareholders.

- --------------------------------------------------------------------------------
B-65
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Notes to Financial Statements PRUDENTIAL LATIN AMERICA EQUITY FUND
- --------------------------------------------------------------------------------

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

As of March 11, 1999, the Series, along with other affiliated registered
investment companies (the 'Funds'), entered into a syndicated credit agreement
('SCA') with an unaffiliated lender. The maximum commitment under the SCA is $1
billion. The Funds pay a commitment fee at an annual rate of .065 of 1% on the
unused portion of the credit facility, which is accrued and paid quarterly on a
pro rata basis by the Funds. The SCA expires on March 9, 2000. Prior to March
11, 1999, the Funds had a credit agreement with a maximum commitment of
$200,000,000. The commitment fee was .055 of 1% on the unused portion of the
credit facility. The Series did not borrow any amounts pursuant to either
agreement during the period ended May 31, 1999. The purpose of the agreements
are to serve as an alternative source of funding for capital share redemptions.

- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates

Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the period ended May 31, 1999, the
Series incurred fees of approximately $400 for the services of PMFS. As of May
31, 1999 approximately $100 of such fees were due to PMFS. Transfer agent fees
and expenses in the Statement of Operations include certain out-of-pocket
expenses paid to nonaffiliates.

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

Purchases and sales of portfolio securities, excluding short-term investments,
for the period ended May 31, 1999 were $18,974,834 and $14,517,817,
respectively.

The United States federal income tax basis of the Series' investments as of May
31, 1999 was $4,291,348 and accordingly, net unrealized appreciation on
investments for federal income tax purposes was $570,648 (gross unrealized
appreciation--$662,017, gross unrealized depreciation--$91,369).

For federal income tax purposes, the Series has a capital loss carryforward at
May 31, 1999 of approximately $640,200 which expires in 2007. Accordingly, no
capital gains distributions are expected to be paid to shareholders until net
gains have been realized in excess of such amount. In addition, the Series is
electing to treat net currency losses of approximately $60,200 incurred in the
seven-month period ended May 31, 1999 as having been incurred in the following
fiscal year.

Note 5. Joint Repurchase Agreement Account

The Series, along with other affiliated registered investment companies,
transfers uninvested cash balances into a single joint account, the daily
aggregate balance of which is invested in one or more repurchase agreements
collateralized by U.S. Treasury or federal agency obligations. As of May 31,
1999, the Series had a .07% undivided interest in the repurchase agreements in
the joint account. The undivided interest for the Series represents $472,000 in
principal amount. As of such date, each repurchase agreement in the joint
account and the collateral therefore were as follows:

Bear, Stearns & Co. Inc., 4.82%, in the principal amount of $200,000,000,
repurchase price $200,107,111, due 6/1/99. The value of the collateral including
accrued interest was $204,177,828.

Credit Suisse First Boston Corp., 4.60%, in the principal amount of $85,711,000,
repurchase price $85,754,808, due 6/1/99. The value of the collateral including
accrued interest was $88,385,257.

Deutsche Bank Securities, Inc., 4.83%, in the principal amount of $200,000,000,
repurchase price $200,107,333, due 6/1/99. The value of the collateral including
accrued interest was $204,000,179.

Morgan (J.P.) Securities, Inc., 4.82%, in the principal amount of $200,000,000,
repurchase price $200,107,111, due 6/1/99. The value of the collateral including
accrued interest was $204,000,892.

- ------------------------------------------------------------
Note 6. Capital

The Series offers Class A, Class B, Class C and Class Z shares. Class A shares
are sold with a front-end sales charge of up to 5%. Class B shares are sold with
a contingent deferred sales charge which declines from 5% to zero depending on
the period of time the shares are held. Prior to November 2, 1998 Class C shares
were sold with a contingent deferred sales charge of 1% during the first year.
Effective November 2, 1998, Class C shares are sold with a front-end sales
charge of 1% and a contingent deferred sales charge of 1% during the first 18
months. Class B shares automatically convert to Class A shares on a quarterly
basis approximately seven years after purchase. A special exchange privilege is
also available for shareholders who qualified to purchase Class A shares at net
asset value. Class Z shares are not subject to any sales or redemption charge
and are offered exclusively for sale to a limited group of investors. Of the
540,672 shares of beneficial interest issued and outstanding at May 31, 1999,
Prudential owned 503,750.

- --------------------------------------------------------------------------------
B-66
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Notes to Financial Statements PRUDENTIAL LATIN AMERICA EQUITY FUND
- --------------------------------------------------------------------------------

The Series has authorized an unlimited number of shares of beneficial interest
at $.001 par value.

Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
Class A Shares Amount
- ------- ----------- -------------
<S> <C> <C>
June 26, 1998(a) through May 31, 1999:
Shares sold....................... 12,779 $ 119,093
Shares reacquired................. (3,688) (33,811)
----------- -------------
Net increase in shares
outstanding..................... 9,091 $ 85,282
=========== =============
<CAPTION>
Class B
- -------
<S> <C> <C>
June 26, 1998(a) through May 31, 1999:
Shares sold....................... 38,116 $ 339,380
Shares reacquired................. (14,022) (126,738)
----------- -------------
Net increase in shares
outstanding..................... 24,094 $ 212,642
=========== =============
<CAPTION>
Class C
- -------
<S> <C> <C>
June 26, 1998(a) through May 31, 1999:
Shares sold....................... 414 $ 4,264
=========== =============
<CAPTION>
Class Z
- -------
<S> <C> <C>
June 26, 1998(a) through May 31, 1999:
Shares sold....................... 504,850 $ 5,039,740
Shares reacquired................. (2,777) (20,549)
----------- -------------
Net increase in shares
outstanding..................... 502,073 $ 5,019,191
=========== =============
</TABLE>

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

- --------------------------------------------------------------------------------
B-67
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Financial Highlights PRUDENTIAL LATIN AMERCIA EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 26, 1998(a) through May 31, 1999
-----------------------------------------------
<S> <C> <C> <C> <C>
Class A Class B Class C Class Z
-------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................................ $10.00 $10.00 $10.00 $10.00
-------- -------- -------- --------
Income from investment operations:
Net investment loss(d)...................................................... (.20) (.29) (.46) (.40)
Net realized and unrealized gain (loss) on investment and foreign currency
transactions............................................................. (.50) (.48) (.31) (.29)
-------- -------- -------- --------
Total from investment operations......................................... (.70) (.77) (.77) (.69)
-------- -------- -------- --------
Net asset value, end of period.............................................. $ 9.30 $ 9.23 $ 9.23 $ 9.31
======== ======== ======== ========

TOTAL RETURN(b)............................................................. (7.00)% (7.70)% (7.70)% (6.90)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............................................. $ 96 $ 234 $ 15 $4,687
Average net assets (000).................................................... $ 36 $ 68 $ 11 $4,207
Ratios to average net assets:(c)
Expenses, including distribution fees.................................... 8.72% 9.47% 9.47% 8.47%
Expenses, excluding distribution fees.................................... 8.47% 8.47% 8.47% 8.47%
Net investment loss...................................................... (2.61)% (3.95)% (6.07)% (5.16)%
Portfolio turnover rate..................................................... 448% 448% 448% 448%
</TABLE>

- ---------------
(a) Commencement of investment operations.
(b) Total return does not consider the effect of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total return for periods of less than a full year are not
annualized.
(c) Annualized.
(d) Calculated based upon weighted average shares outstanding during the period.

- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-68
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND
Report of Independent Accountants PRUDENTIAL LATIN AMERICA EQUITY FUND
- --------------------------------------------------------------------------------

To the Shareholders and Board of Trustees of
Prudential Developing Markets Fund--
Prudential Latin America Equity Fund

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential Developing Markets
Fund--Prudential Latin America Equity Fund (the 'Fund') at May 31, 1999, and the
results of its operations, the changes in its net assets and the financial
highlights for the period June 26, 1998 (commencement of operations) through May
31, 1999, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
'financial statements') are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities at May 31,
1999 by correspondence with the custodian and brokers, provides a reasonable
basis for the opinion expressed above.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
July 20, 1999

- --------------------------------------------------------------------------------
B-69
<PAGE>

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 these 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.

I-1
<PAGE>

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.

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 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.

I-2
<PAGE>

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-3
<PAGE>

APPENDIX II--GENERAL INVESTMENT INFORMATION

The following terms are used in mutual fund investing.

ASSET ALLOCATION

Asset allocation is a technique for reducing risk and 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 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 off-set 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.

STANDARD DEVIATION

Standard Deviation is an absolute (non-relative) measure of volatility
which, for a mutual fund, depicts how widely the returns varied over a certain
period of time. When a fund has a high standard deviation, its range of
performance has been very wide, implying greater volatility potential.
Standard deviation is only one of several measures of a fund's volatility.

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.

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

EACH INVESTMENT PROVIDES A DIFFERENT OPPORTUNITY (VALUE OF $1 INVESTED ON
12/31/25)

[GRAPH APPEARS HERE]

Value of $1.00 invested on
1/1/26 through 12/31/98

Small Stocks $5,116.95

Common Stocks $2,350.89

Source:Ibbotson Associates. Used with permission. All rights reserved. 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 distributions. Bond returns are due mainly to the reinvestment of interest.
Also, stock prices usually are 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 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 1988
through 1998. 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 "Risk/Return Summary--Fees and Expenses" in the
applicable prospectus. The net effect of the deduction of the operating
expenses of a mutual fund on the historical total returns, including the
compounded effect over time, could be substantial.

Historical Total Returns of Different Bond Market Sectors

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
Treasury
Bonds/1/ 7.0% 14.4% 8.5% 15.3% 7.2% 10.7% -3.4% 18.4% 2.7% 9.6% 10.0%
- ------------------------------------------------------------------------------------------------------------------------
U.S. Government
Mortgage
Securities/2/ 8.7% 15.4% 10.7% 15.7% 7.0% 6.8% -1.6% 16.8% 5.4% 9.5% 7.0%
- ------------------------------------------------------------------------------------------------------------------------
U.S. Investment Grade
Corporate Bonds/3/ 9.2% 14.1% 7.1% 18.5% 8.7% 12.2% -3.9% 22.3% 3.3% 10.2% 8.6%
- ------------------------------------------------------------------------------------------------------------------------
U.S. High Yield
Bonds/4/ 12.5% 0.8% -9.6% 46.2% 15.8% 17.1% -1.0% 19.2% 11.4% 12.8% 1.6%
- ------------------------------------------------------------------------------------------------------------------------
World Government
Bonds/5/ 2.3% -3.4% 15.3% 16.2% 4.8% 15.1% 6.0% 19.6% 4.1% -4.3% 5.3%
- ------------------------------------------------------------------------------------------------------------------------
Difference between
highest and lowest
returns percent 10.2% 18.8% 24.9% 30.9% 11.0% 10.3% 9.9% 5.5% 8.7% 17.1% 8.4%
- ------------------------------------------------------------------------------------------------------------------------
</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 mortgaged-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 S&P or Fitch Investors
Service). All bonds in the index have maturities of at least one year. Data
retrieved from Lipper, Inc.
/5/ Salomon Smith Barney Brothers World Government Index (Non U.S.) include 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
performance of major world stock
markets for the period from 12/31/85
through 12/31/98. It does not
represent the performance of any
Prudential Mutual Fund.

Average Annual Total Returns of
Major World Stock Markets 12/31/85-
12/31/98 (in U.S. Dollars)

Beligum 22.7%
Spain 22.5%
The Netherlands 20.8%
Sweden 19.9%
Switzerland 18.3%
USA 18.1%
Hong Kong 17.8%
France 17.4%
UK 16.7%
Germany 13.4%
Austria 8.9%
Japan 6.5%

Source: Morgan Stanley Capital
International (MSCI) and Lipper,
Inc. as of 12/31/98. Used with
permission. Morgan Stanley Country
indices are unmanaged indices which
include those stocks making up the
largest two-thirds of each country's
total stock market capitalization.
Returns reflect the reinvestment of
all distributions. This chart is for
illustrative purposes only and is
not indicative of the past, present
or future performance of any
specific investment. Investors
cannot invest directly in stock
indices.

This chart shows the growth of a hypothetical $10,000 investment made in the
stocks representing the S&P 500 stock index with and without reinvested
dividends.

[MAC CHART APPEARS HERE]

Source: Lipper, Inc. Used with permission. All rights reserved. This chart is
used for illustrative purposes only and is not intended to represent the past,
present or future performance of any Prudential Mutual Fund. Common stock total
return is based on the Standard & Poor's 500 Stock Index, a market-value-
weighted index made up of 500 of the largest stocks in the U.S. based upon
their stock market value. Investors cannot invest directly in indices.

III-3
<PAGE>

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

WORLD STOCK MARKET CAPITALIZATION BY REGION
WORLD TOTAL: $15.8 TRILLION

[PIE CHART]

Canada 1.8%
U.S. 51.0%
Europe 34.7%
Pacific Basin 12.5%

Source: Morgan Stanley Capital
International, December 31, 1998. 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 1577 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-4
<PAGE>

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

Long Term U.S. Treasury Bond Yield in Percent (1926-1998)

[LINE GRAPH]

- ------------------------------------------
Source: Ibbotson Associates. Used with permission. All rights reserved. The
chart illustrates the historical yield of the long-term U.S. Treasury Bond
from 1926-1998. 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-5
<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 the
Prospectus. The data will be used in sales materials relating to the
Prudential Mutual Funds. Unless otherwise indicated, the information is as of
December 31, 1997 and is subject to change thereafter. All information relies
on data provided by The Prudential Investment Corporation (PIC) or from other
sources believed by the Manager to be reliable. Such information has not been
verified by the Fund.

INFORMATION ABOUT PRUDENTIAL

The Manager and PIC/1/ are subsidiaries of Prudential, which is one of the
largest diversified financial services institutions in the world and, based on
total assets, the largest insurance company in North America as of December
31, 1997. Principal products and services include life and health insurance,
other healthcare products, property and casualty insurance, securities
brokerage, asset management, investment advisory services and real estate
brokerage. Prudential (together with its subsidiaries) employs more than
81,000 persons worldwide, and maintains a sales force of approximately 11,500
agents and 6,400 domestic and international financial advisors. Prudential is
a major issuer of annuities, including variable annuities. Prudential seeks to
develop innovative products and services to meet consumer needs in each of its
business areas. Prudential uses the rock of Gibraltar as its symbol. The
Prudential rock is a recognized brand name throughout the world.

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

Money Management. Prudential is one of the largest pension fund managers in
the country, providing pension services to 1 in 3 Fortune 500 firms. It
manages $36 billion of individual retirement plan assets, such as 401(k)
plans. As of December 31, 1997, Prudential had more than $370 billion in
assets under management. Prudential Investments, a business group of
Prudential (of which Prudential Mutual Funds is a key part), manages over $211
billion in assets of institutions and individuals. In Institutional Investor,
July 1998, Prudential was ranked eighth in terms of total assets under
management as of December 31, 1997.

Real Estate. The Prudential Real Estate Affiliates is one of the leading
real estate brokerage networks in North America and has more than 37,000 real
estate brokers and agents and more than 1,400 offices throughout the United
States.

Healthcare. Over two decades ago, Prudential introduced the first federally-
funded, for-profit HMO in the country. Today, approximately 4.9 million
Americans receive healthcare from a Prudential managed care membership./2/

Financial Services. The Prudential Savings Bank FSB, a wholly-owned
subsidiary of Prudential, has nearly $1 billion in assets and serves nearly
1.5 million customers across 50 states.

INFORMATION ABOUT THE PRUDENTIAL MUTUAL FUNDS

As of November 30, 1998 Prudential Investments Fund Management is the 18th
largest mutual fund company in the country, with over 2.5 million shareholders
invested in more than 50 mutual fund portfolios and variable annuities with
more than 3.7 million shareholder accounts.

The Prudential Mutual Funds have over 30 portfolio managers who manage over
$55 billion in mutual fund and variable annuity assets. Some of Prudential's
portfolio managers have over 20 years of experience managing investment
portfolios.
- ----------
/1/ Prudential Investments serves as the Subadvisor to substantially all of
the Prudential Mutual Funds. Wellington Management Company serves as the
subadvisor to Global Utility Fund, Inc., Nicholas-Applegate Capital
Management as the subadviser to Nicholas-Applegate Fund, Inc., Jennison
Associates Capital Corp. as one of the subadvisors to Prudential
Investment Portfolios, Inc., and Mercator Asset Management LP as the
Subadvisor to International Stock Series, a portfolio of Prudential World
Fund, Inc. There are multiple subadvisors for The Target Portfolio Trust.
/2/ On December 10, 1998, Prudential announced its intention to sell
Prudential Health Care to Aetna, Inc. for $1 billion.

IV-1
<PAGE>

From time to time, there may be media coverage of portfolio managers and
other investment professionals associated with the Manager and the Subadviser
in national and regional publications, on television and in other media.
Additionally, individual mutual fund portfolios are frequently cited in
surveys conducted by national and regional publications and media
organizations such as The Wall Street Journal, The New York Times, Barron's
and USA Today.

Equity Funds. Prudential Equity Fund is managed with a "value" investment
style by PIC. In 1995, Prudential Securities introduced Prudential Jennison
Growth Fund, a growth-style equity fund managed by Jennison Associates Capital
LLC, a premier institutional equity manager and a subsidiary of Prudential.

High Yield Funds. Investing in high yield bonds is a complex and research
intensive pursuit. A separate team of high yield bond analysts monitor
approximately 200 issues held in the Prudential High Yield Fund (currently the
largest fund of its kind in the country) along with 100 or so other high yield
bonds, which may be considered for purchase./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. Investment grade bond analysts monitor the financial
viability of different bond issuers in the investment grade corporate and
municipal bond markets--from IBM to small municipalities, such as Rockaway
Township, New Jersey. These analysts consider among other things sinking fund
provisions and interest coverage ratios.

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

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

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

INFORMATION ABOUT PRUDENTIAL SECURITIES

Prudential Securities is the fifth largest retail brokerage firm in the
United States with approximately 6,000 financial advisors. It offers to its
clients a wide range of products, including Prudential Mutual Funds and
Annuities. As of December 31, 1998, assets held by Prudential Securities for
its clients approximated $268 billion. During 1998, over 31,000 new customer
accounts were opened each month at Prudential Securities.

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.

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 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.

For more complete information about any of the Prudential Mutual Funds,
including changes 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.
- ----------
/3/ The number of bonds and the size of the Fund are subject to change.

IV-2
<PAGE>

PART C

OTHER INFORMATION

ITEM 23.

EXHIBITS:

(a) Declaration of Trust of the Registrant, incorporated by reference to
Exhibit 1(a) to the Registration Statement on Form N-1A (File No.
33-50373) filed via EDGAR on April 17, 1998.

(b) By-Laws of the Registrant, incorporated by reference to Exhibit 2 to
the Registration Statement on Form N-1A (File No. 33-50373) filed
via EDGAR on April 17, 1998.

(c) Instruments defining the rights of shareholders, incorporated by
reference to Exhibit 4 to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (File No. 33-50373) filed via
EDGAR on June 19, 1998.

(d) (i) Management Agreement between the Registrant and Prudential
Investments Fund Management LLC, incorporated by reference to
Exhibit 5(a) to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 33-50373) filed via EDGAR on June
19, 1998.

(ii) Subadvisory Agreement between the Registrant and Prudential
Securities Incorporated, incorporated by reference to Exhibit 5(b) to
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A (File No. 33-50373) filed via EDGAR on June 19, 1998.

(e) (i) Distribution Agreement between the Registrant and Prudential
Securities Incorporated, incorporated by reference to Exhibit No.
6(a) to Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A (File No. 33-50373) filed via EDGAR on June 19, 1998.

(ii) Distribution Agreement between the Registrant and Prudential
Investment Management Services, incorporated by reference to Exhibit
No. 6(b) to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 33-50373) filed via EDGAR on June
19, 1998.

(iii) Form of Dealer Agreement, incorporated by reference to Exhibit
No. 6(c) to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 33-50373) filed via EDGAR on June
19, 1998.

(f) Not Applicable.

(g) Custodian Contract between the Registrant and State Street Bank and
Trust Company, incorporated by reference to Exhibit 8 to Pre-
Effective Amendment No. 1 to the Registration Statement on Form N-1A
(File No. 33-50373) filed via EDGAR on June 19, 1998.

(h) Transfer Agency and Service Agreement between the Registrant and
Prudential Mutual Fund Services LLC, incorporated by reference to
Exhibit 9 to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 33-50373) filed via EDGAR on June
19, 1998.

(i) Opinion of Morris, Nichols, Arsht & Tunnell, incorporated by
reference to Exhibit 10 to the Registration Statement on Form N-1A
(File No. 33-50373) filed via EDGAR on April 17, 1998.

(j) Consent of Independent Accountants.*

(k) Not Applicable.

(l) Not Applicable.

(m) (i) Distribution and Service Plan for Class A shares, incorporated
by reference to Exhibit 15(a) to Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-1A (File No. 33-50373) filed
via EDGAR on June 19, 1998.

(ii) Distribution and Service Plan for Class B shares, incorporated
by reference to Exhibit 15(b) to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (File No. 33-50373) filed via
EDGAR on June 19, 1998.

(iii) Distribution and Service Plan for Class C shares, incorporated
by reference to Exhibit 15(c) to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (File No. 33-50373) filed via
EDGAR on June 19, 1998.

C-1
<PAGE>

(iv) Amended Distribution and Service Plans for Class A, B and C
shares, incorporated by reference to Exhibit 15(d) to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A (File No.
33-50373) filed via EDGAR on June 19, 1998.

(n) Not Applicable.

(o) Rule 18f-3 Plan, incorporated by reference to Exhibit 18 to Pre-
Effective Amendment No. 1 to the Registration Statement on Form N-1A
(File No. 33-50373) filed via EDGAR on June 19, 1998.

- ----------

*Filed herewith.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

None.

ITEM 25. INDEMNIFICATION.

As permitted by Sections 17(h) and (i) of the Investment Company Act of
1940, as amended (the 1940 Act) and pursuant to Article XI of the Fund's By-
Laws (Exhibit (b) to the Registration Statement), officers, trustees,
employees and agents of the Registrant will not be liable to the Registrant,
any shareholder, officer, director, employee, agent or other person for any
action or failure to act, except for bad faith, willful misfeasance, gross
negligence or reckless disregard of duties, and those individuals may be
indemnified against liabilities in connection with the Registrant, subject to
the same exceptions. As permitted by Section 17(i) of the 1940 Act, pursuant
to Section 10 of the Distribution Agreement (Exhibit (e) (ii) to the
Registration Statement), the Distributor of the Registrant may be indemnified
against liabilities which it may incur, except liabilities arising from bad
faith, gross negligence, willful misfeasance or reckless disregard of duties.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (Securities Act), may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the foregoing provisions
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the 1940 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a trustee,
officer, or controlling person of the Registrant in connection with the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such trustee, officer or controlling person in connection with
the shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the 1940 Act and will be governed
by the final adjudication of such issue.

The Registrant has purchased an insurance policy insuring its officers and
directors against liabilities and certain costs of defending claims against
such officers and directors, to the extent such officers and directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of
indemnification payments to officers and directors under certain
circumstances.

Section 9 of the Management Agreement (Exhibit (d)(i) to the Registration
Statement) and Section 4 of the Subadvisory Agreement (Exhibit (d)(ii) to the
Registration Statement) limit the liability of Prudential Investments Fund
Management LLC and The Prudential Investment Corporation, respectively, to
liabilities arising from willful misfeasance, bad faith or gross negligence in
the performance of their respective duties or from reckless disregard by them
of their respective obligations and duties under the agreements.

The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws and each Distribution Agreement in a manner
consistent with Release No. 11330 of the Securities and Exchange Commission
under the 1940 Act so long as the interpretation of Sections 17(h) and 17(i)
of such Act remains in effect and is consistently applied.

C-2
<PAGE>

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

(a) Prudential Investments Fund Management LLC (PIFM)

See "How the Fund Is Managed--Manager" in the Prospectus constituting Part A
of this Post-Effective Amendment to the Registration Statement and "Investment
Advisory and Other Services" in the Statement of Additional Information
constituting Part B of this Post-Effective Amendment to the Registration
Statement.

The business and other connections of the officers of PIFM are listed in
Schedules A and D of Form ADV of PIFM as currently on file with the Securities
and Exchange Commission, the text of which is hereby incorporated by reference
(File No. 801-31104).

The business and other connections of PIFM's directors and principal
executive officers are set forth below. Except as otherwise indicated, the
address of each person is Gateway Center Three, Newark, NJ 07102.

<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIMF PRINCIPAL OCCUPATIONS
---------------- ------------------ ---------------------
<C> <C> <S>
William V. Healey Executive Vice President, Executive Vice President, Secretary and Chief
Secretary and Chief Legal Officer Legal Officer, PIFM
Robert F. Gunia Executive Vice President Vice President, Prudential Investments;
and Treasurer Executive Vice President and Treasurer,
PIFM; Senior Vice President, Prudential
Securities
Neil A. McGuinness Executive Vice President Executive Vice President and Director of
Marketing, PMF&A; Executive Vice President,
PIFM.
John V. Scicutella Officer-in-Charge, Acting President, PMF&A; Officer-in-Charge,
Acting President, Chief Acting President, Chief Executive Officer
Executive Officer and and Chief Operating Officer, PIFM
Chief Operating Officer
</TABLE>

(b) The Prudential Investment Corporation (PIC)

See "How the Fund is Managed" in the Prospectus constituting Part A of this
Post-Effective Amendment to the Registration Statement and "Investment
Advisory and Other Services" in the Statement of Additional Information
constituting Part B of this Post-Effective Amendment to the Registration
Statement.

The business and other connections of PIC's directors and executive officers
are as set forth below. Except as otherwise indicated, the address of each
person is Prudential Plaza, Newark, NJ 07102.

<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
---------------- ----------------- ---------------------
<C> <C> <S>
E. Michael Caulfield Chairman of the Board, Chief Executive Officer of Prudential
President and Chief Investments
Executive Officer
and Director

John R. Strangfeld Vice President and President of Private Asset Management Group
Director of Prudential; Senior Vice President,
Prudential; Vice President and Director, PIC
</TABLE>

ITEM 27. PRINCIPAL UNDERWRITERS

(a) Prudential Investment Management Services LLC (PIMS)

Prudential Investment Management Services LLC is distributor for Prudential
Government Securities Trust, The Target Portfolio Trust, Cash Accumulation
Trust, Command Government Fund, Command Money Fund, Command Tax-Free Fund,
Global

C-3
<PAGE>

Utility Fund, Inc., Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth
Equity Fund), Prudential Balanced Fund, Prudential California Municipal Fund,
Prudential Developing Markets Fund, Prudential Distressed Securities Fund,
Inc., Prudential Diversified Bond Fund, Inc., Prudential Diversified Funds,
Prudential Emerging Growth Fund, Inc., Prudential Equity Fund, Inc.,
Prudential Equity Income Fund, Prudential Europe Growth Fund, Inc., Prudential
Global Genesis Fund, Inc., Prudential Global Limited Maturity Fund, Inc., The
Global Total Return Fund, Inc., Prudential High Yield Fund, Inc., Prudential
Index Series Fund, Prudential MoneyMart Assets, Inc., Prudential Natural
Resources Fund, Inc., Prudential Government Income Fund, Inc., Prudential High
Yield Total Return Fund, Inc., Prudential International Bond Fund, Inc.,
Prudential Institutional Liquidity Portfolio, Inc., Prudential Intermediate
Global Income Fund, Inc., The Prudential Investment Portfolios, Inc.,
Prudential Mid-Cap Value Fund, Prudential Municipal Bond Fund, Prudential
Municipal Series Fund, Prudential National Municipals Fund, Inc., Prudential
Pacific Growth Fund, Inc., Prudential Real Estate Securities Fund, Prudential
Small-Cap Quantum Fund, Inc., Prudential Small Company Value Fund, Inc.,
Prudential Special Money Market Fund, Inc., Prudential Structured Maturity
Fund, Inc., Prudential Tax-Free Money Fund, Inc., Prudential Tax-Managed
Equity Fund, Prudential 20/20 Focus Fund, Prudential Utility Fund, Inc. and
Prudential World Fund, Inc.

(b) Information concerning the directors and officers of PIMS is set forth
below.

<TABLE>
<CAPTION>
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME(1) UNDERWRITER REGISTRANT
- ------- ------------- -------------
<S> <C> <C>
Robert F. Gunia......... President Vice President and Director
John R. Strangfeld...... Executive Vice President President and Director
William V. Healey....... Senior Vice President, Secretary and Chief Legal Officer None
Kevin Frawley........... Senior Vice President and Chief Compliance Officer None
Margaret Deverell....... Vice President and Chief Financial Officer None
Brian Henderson......... Senior Vice President and Chief Operating Officer None
</TABLE>
- ----------
(/1/)The address of each person named is Prudential Plaza, 751 Broad Street,
Newark, New Jersey 07102.

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder are maintained at the offices
of State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts, 02171; The Prudential Investment Corporation, Prudential Plaza,
751 Broad Street, Newark, New Jersey 07102; the Registrant, Gateway Center
Three, 100 Mulberry Street, Newark, New Jersey 07102-4077; and Prudential
Mutual Fund Services LLC, Raritan Plaza One, Edison, New Jersey 08837.
Documents required by Rules 31a-1(b)(4), (5), (6), (7), (9), (10) and (11) and
31a-1(d) and (f) will be kept at Gateway Center Three, 100 Mulberry Street,
Newark, New Jersey 07102-4077, and the remaining accounts, books and other
documents required by such other pertinent provisions of Section 31(a) and the
Rules promulgated thereunder will be kept by State Street Bank and Trust
Company and by Prudential Mutual Fund Services LLC.

ITEM 29. MANAGEMENT SERVICES

Other than as set forth under the captions "How the Fund is Managed--
Manager" and "How the Fund is Managed-- Distributor" in the Prospectus and the
caption "Investment Advisory and Other Services" in the Statement of
Additional Information, constituting Parts A and B, respectively, of this
Post-Effective Amendment to the Registration Statement, Registrant is not a
party to any management-related service contract.

ITEM 30. UNDERTAKINGS

Not applicable.

C-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Newark, and State of New Jersey, on the 10th day of
August, 1999.

PRUDENTIAL DEVELOPING MARKETS FUND

By: /s/ John R. Strangfeld
------------------------------------
JOHN R. STRANGFELD, PRESIDENT

Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ Edward D. Beach Trustee August 10, 1999
--------------------------------------
EDWARD D. BEACH
/s/ Delayne D. Gold Trustee August 10, 1999
--------------------------------------
DELAYNE D. GOLD
/s/ Robert F. Gunia Trustee August 10, 1999
--------------------------------------
ROBERT F. GUNIA
/s/ Robert E. LaBlanc Trustee August 10, 1999
--------------------------------------
ROBERT E. LABLANC
/s/ Robin B. Smith Trustee August 10, 1999
--------------------------------------
ROBIN B. SMITH
/s/ Stephen Stoneburn Trustee August 10, 1999
--------------------------------------
STEPHEN STONEBURN
/s/ John R. Strangfeld Trustee and President August 10, 1999
--------------------------------------
JOHN R. STRANGFELD
/s/ Nancy H. Teeters Trustee August 10, 1999
--------------------------------------
NANCY H. TEETERS
/s/ Grace C. Torres Treasurer, Principal Financial August 10, 1999
-------------------------------------- and Accounting Officer
GRACE C. TORRES
</TABLE>

C-5
<PAGE>

PRUDENTIAL DEVELOPING MARKETS FUND

EXHIBIT INDEX

EXHIBIT NUMBER DESCRIPTION

(a) Declaration of Trust of the Registrant, incorporated by reference to
Exhibit 1(a) to the Registration Statement on Form N-1A (File No.
33-50373) filed via EDGAR on April 17, 1998.

(b) By-Laws of the Registrant, incorporated by reference to Exhibit 2 to
the Registration Statement on Form N-1A (File No. 33-50373) filed
via EDGAR on April 17, 1998.

(c) Instruments defining rights of shareholders, incorporated by
reference to Exhibit 4 to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (File No. 33-50373) filed via
EDGAR on June 19, 1998.

(ii) Subadvisory Agreement between the Registrant and Prudential
Securities Incorporated, incorporated by reference to Exhibit 5(b) to
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1A
(File No. 33-50373) filed via EDGAR on June 19, 1998.

(e) (i) Distribution Agreement between the Registrant and Prudential
Securities Incorporated, incorporated by reference to Exhibit 6(a)
to Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A (File No. 33-50373) filed via EDGAR on June 19, 1998.

(ii) Distribution Agreement between the Registrant and Prudential
Investment Management Services, incorporated by reference to Exhibit
6(b) to Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A (File No. 33-50373) filed via EDGAR on June 19, 1998.

(iii) Form of Dealer Agreement, incorporated by reference to Exhibit
6(c) to Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A (File No. 33-50373) filed via EDGAR on June 19, 1998.

(f) Not Applicable.

(i) Opinion of Morris, Nichols, Arsht & Tunnell, incorporated by
reference to Exhibit 10 to the Registration Statement on Form N-1A
(File No. 33-50373) filed via EDGAR on April 17, 1998.

(j) Consent of Independent Accountants.*

(k) Not Applicable.

(l) Not Applicable.

(ii) Distribution and Service Plan for Class B shares, incorporated by
reference to Exhibit 15(b) to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (File No. 33-50373) filed via EDGAR
on June 19, 1998.
<PAGE>

EXHIBIT DESCRIPTION
NUMBER

(iv) Amended Distribution and Service Plan for Class A, B and C
shares, incorporated by reference to Exhibit 15(d) to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A (File No.
33-50373) filed via EDGAR on June 19, 1998.

(n) Not applicable.

(o) Rule 18f-3 Plan, incorporated by reference to Exhibit 18 to Pre-
Effective Amendment No. 1 to the Registration Statement on Form N-1A
(File No. 33-50373) filed via EDGAR on June 19, 1998.
----------

* Filed herewith.

<PAGE>

EXHIBIT 99(J)

Consent of Independent Accountants

We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 2 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated July
20, 1999, relating to the financial statements and financial highlights of
Prudential Developing Markets Fund, which appears in such Statement of
Additional Information, and to the incorporation by reference of our report into
the Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Investment Advisory and Other
Services" in such Statement of Additional Information and to the reference to us
under the heading "Financial Highlights" in such Prospectus.

PricewaterhouseCoopers LLP
1177 Avenue of Americas
New York, New York 10036
August 10, 1999