<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Portfolio of Investments as of May 31, 2000
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 89.2%
Common Stocks 68.1%
-------------------------------------------------------------------------------------
Brazil 14.6%
21,500 Aracruz Celulose SA (ADR) $ 360,125
19,800 Companhia Cerveja Brahma (ADR) 287,100
8,600,000 Sider Nacional Cia 283,205
5,800 Vale Rio Doce Cia 130,516
12,300 Votorantim Celulose e Papel SA (ADR) 195,263
---------------
1,256,209
-------------------------------------------------------------------------------------
Chile 5.8%
8,200 CIA de Telecomunicaciones de Chile SA (ADR) 161,950
5,500 Enersis SA (ADR) 117,906
9,700 Sociedad Quimica Y Minera de Chile SA
(Series B shares) (ADR) 220,069
---------------
499,925
-------------------------------------------------------------------------------------
Mexico 39.6%
78,000 Alfa Corp. (Series A shares) 212,940
10,400 Cemex SA (ADR) 220,350
9,500 Coca-Cola Femsa SA (ADR) 144,281
208,000 Controladora Comerical Mexicana SA de CV 181,621
98,556 GPO Mexico (Series B shares) 335,932
838,000 Grupo Financiero Bancomer SA de CV 430,218
11,600 Grupo Radio Centro SA (ADR) 127,600
5,400 Grupo Televisa SA (GDR)(a) 300,712
161,900 Industrias Penoles SA 358,529
109,800 Kimberly-Clark de Mexico SA de CV 340,761
5,000 Telefonos de Mexico SA (Class L Shares) (ADR) 243,437
31,100 Tubos de Acero de Mexico SA 412,246
7,000 Tubos de Acero de Mexico SA (ADR) 94,500
---------------
3,403,127
-------------------------------------------------------------------------------------
Peru 4.5%
25,800 Compania de Minas Buenaventura SA (Series B
Shares) (ADR) 388,612
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Portfolio of Investments as of May 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
United Kingdom 1.8%
30,600 Antofagasta PLC $ 154,467
-------------------------------------------------------------------------------------
Venezuela 1.8%
5,300 Compania Anonima Nacional Telefonos de Venezuela
(ADR) 150,719
---------------
Total common stocks (cost $6,396,201) 5,853,059
---------------
PREFERRED STOCKS 21.0%
-------------------------------------------------------------------------------------
Brazil 21.0%
14,300 Companhia Vale Do Rio Doce (ADR) 364,650
11,400 Embratel Participacoes SA (ADR) 238,688
28,800,000 Gerdau SA(a) 327,833
18,750,000 Sider De Tubarao(a) 242,865
16,261 Tele Norte Leste Participacoes SA(a) 319,122
2,700 Telecomunicacoes Brasileiras SA(a) (ADR) 312,525
---------------
Total preferred stocks (cost $1,650,082) 1,805,683
---------------
WARRANTS(a) 0.1%
-------------------------------------------------------------------------------------
United States
Apex Silver Minnes Limited(a)
4,500 Warrants expiring November 2002 9,000
---------------
Total long-term investments (cost $8,046,283) 7,667,742
---------------
SHORT-TERM INVESTMENTS 10.7%
<CAPTION>
Principal
Amount
(000)
<C> <S> <C> <C>
-------------------------------------------------------------------------------------
Repurchase Agreements 10.7%
-------------------------------------------------------------------------------------
United States
923 Joint Repurchase Agreement Account,
6.307%, 6/01/00 (cost $923,000; Note 5) 923,000
---------------
Total Investments 99.9%
(cost $8,969,283) 8,590,742
Other assets in excess of liabilities 0.1% 5,593
---------------
Net Assets 100% $ 8,596,335
---------------
---------------
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Portfolio of Investments as of May 31, 2000 Cont'd.
--------------------------------------------------------------------------------
(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, 2000 was as
follows:
Telecommunications................................................... 16.8%
Mining............................................................... 14.5
Steel & Metals....................................................... 12.2
Metals - Non Ferrous................................................. 9.0
Paper & Packaging.................................................... 6.2
Banking.............................................................. 5.0
Beverages............................................................ 5.0
Forest & Paper....................................................... 4.2
Media & Agencies..................................................... 3.5
Manufacturing........................................................ 2.8
Engineering.......................................................... 2.6
Chemicals............................................................ 2.6
Retail............................................................... 2.1
Publishing, Broadcasting & Advertising............................... 1.4
Utilities............................................................ 1.3
Short-term investment................................................ 10.7
-----
99.9%
Other assets in excess of liabilities................................ 0.1
-----
100.0%
-----
-----
See Notes to Financial Statements 9
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
May 31, 2000
<S> <C> <C>
---------------------------------------------------------------------------------------
ASSETS
Investments, excluding repurchase agreement at value (cost
$8,046,283) $7,667,742
Repurchase agreement, at value (cost $923,000) 923,000
Foreign currency, at value (cost $25,368) 25,340
Cash 656
Dividends and interest receivable 56,271
Receivable for Fund shares sold 19,532
Deferred expenses and other assets 32,999
Receivable due from manager 9,185
------------
Total assets 8,734,725
------------
LIABILITIES
Accrued expenses 71,551
Payable for investments purchased 51,841
Payable for shares repurchased 10,019
Withholding taxes payable 4,606
Distribution fee payable 373
------------
Total liabilities 138,390
------------
NET ASSETS $8,596,335
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 684
Paid-in capital in excess of par 6,990,343
------------
6,991,027
Accumulated net investment loss (5,365)
Accumulated net realized gain on investments and foreign
currency transactions 1,989,452
Net unrealized appreciation on investments and foreign
currencies (378,779)
------------
Net assets, May 31, 2000 $8,596,335
------------
------------
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Statement of Assets and Liabilities Cont'd.
<TABLE>
<CAPTION>
May 31, 2000
---------------------------------------------------------------------------------------
<S> <C> <C>
Class A:
Net asset value and redemption price per share ($705,807 /
56,238 shares of beneficial interest issued and
outstanding) $12.55
Maximum sales charge (5% of offering price) .66
------------
Maximum offering price to public $13.21
------------
------------
Class B:
Net asset value, offering price and redemption price per
share ($1,065,232 / 85,998 shares of beneficial interest
issued and outstanding) $12.39
------------
------------
Class C:
Net asset value and redemption price per share ($240,823 /
19,443 shares of beneficial interest issued and
outstanding) $12.39
Sales charge (1% of offering price) .13
------------
Offering price to public $12.52
------------
------------
Class Z:
Net asset value, offering price and redemption price per
share ($6,584,473 / 522,325 shares of beneficial interest
issued and outstanding) $12.61
------------
------------
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Statement of Operations
<TABLE>
<CAPTION>
Year
Ended
May 31, 2000
<S> <C> <C>
---------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Dividends (net of foreign withholding taxes of $20,246) $ 173,653
Interest 24,387
------------
Total income 198,040
------------
Expenses
Management fee 85,368
Distribution fee--Class A 892
Distribution fee--Class B 4,834
Distribution fee--Class C 1,184
Custodian's fees and expenses 142,000
Audit fees 35,000
Registration fees 29,000
Reports to shareholders 15,000
Amortization of organizational expenses 9,011
Legal fees and expenses 7,000
Trustees' fees 7,000
Transfer agent's fees and expenses 4,000
Miscellaneous 1,659
------------
Total expenses 341,948
Less: Expense subsidy (199,892)
------------
Net expense 142,056
------------
Net investment income 55,984
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN
CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 2,667,445
Foreign currency transactions (25,951)
------------
2,641,494
------------
Net change in unrealized appreciation (depreciation) on:
Investments (971,595)
Foreign currencies (208)
------------
(971,803)
------------
Net gain on investments and foreign currencies 1,669,691
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,725,675
------------
------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year June 26, 1998(a)
Ended Through
May 31, 2000 May 31, 1999
<S> <C> <C> <C>
------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income (loss) $ 55,984 $ (204,372)
Net realized gain (loss) on investment and
foreign currency transactions 2,641,494 (727,281)
Net change in unrealized appreciation
(depreciation) on investments and
foreign currencies (971,803) 593,024
-------------- ------------------
Net increase (decrease) in net assets
resulting from operations 1,725,675 (338,629)
-------------- ------------------
Fund share transactions (Note 6)
Net proceeds from shares sold 2,999,939 5,502,477
Cost of shares redeemed (1,162,029) (181,098)
-------------- ------------------
Net increase in net assets from Series
share transactions 1,837,910 5,321,379
-------------- ------------------
Total increase 3,563,585 4,982,750
NET ASSETS
Beginning of period 5,032,750 50,000
-------------- ------------------
End of period $ 8,596,335 $5,032,750
-------------- ------------------
-------------- ------------------
</TABLE>
------------------------------
(a) Commencement of investment operations.
See Notes to Financial Statements 13
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Notes to Financial Statements
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.
14
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Notes to Financial Statements Cont'd.
Repurchase Agreements: 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, net realized foreign currency
gains and losses are included in the reported net realized gain (loss) on
investment transactions.
Net realized gains or losses on foreign currency transactions represent
net foreign exchange gains or 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 Series' 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 or depreciation on foreign currencies.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of domestic origin
as a result of, among
15
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Notes to Financial Statements Cont'd.
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.
Dividends and Distributions: The Series 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 $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 accumulated net investment loss by $1,007 and
increase accumulated net realized gain on investments and foreign currency
transactions by $10,523, and
16
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Notes to Financial Statements Cont'd.
decrease paid in capital in excess of par by $11,530 due to the Fund
experiencing a realized foreign currency loss, nondeductible stock issuance
expenses and reclass of current year net operating loss. Net investment income,
net realized gain and net assets were not affected by these changes.
Note 2. Agreements
The Fund has a management agreement with 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 services of PIC, 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. For
the period June 1, 1999 through May 23, 2000, the management fee was 1.25% of
the average daily net assets of the Fund. Effective May 24, 2000, the management
fee was discontinued.
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 June 1, 1999
through May 2, 2000. For the period May 3, 2000 through May 23, 2000, such
expenses under the Plans were .25 of 1% of the average daily net assets of the
Class A, B and C shares,
17
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Notes to Financial Statements Cont'd.
respectively. Effective May 24, 2000, such expenses under the Plans were
discontinued.
PIMS has advised the Series that it has received approximately $2,900 and
$2,000 in front-end sales charges resulting from sales of Class A and Class C
shares, respectively, during the year ended May 31, 2000.
PIMS has advised the Series that for the year ended May 31, 2000, it has
received $3,000 in contingent deferred sales charges imposed upon redemptions by
Class B shareholders. No contingent deferred sales charges were imposed upon
redemptions by Class C shareholders.
PIFM, PIC and PIMS are wholly owned subsidiaries of The Prudential
Insurance Company of America ('The Prudential').
PIFM agreed to reimburse the Series in order to reduce total expenses so
as not to exceed 2.24%, 2.99%, 2.99% and 1.99% of the average daily net assets
of the Class A, Class B, Class C and Class Z shares, respectively. For the
period May 3, 2000 through May 23, 2000 expenses were limited to 2.24%, 2.24%,
2.24% and 1.99% of the average daily net assets of the Class A, Class B, Class C
and Class Z shares, respectively. For the period May 24, 2000 through May 31,
2000 expenses were limited to .74% of the average daily net assets of the Class
A, Class B, Class C and Class Z shares. For the year ended May 31, 2000, such
reimbursements amounted to $199,892 (2.86% of average net assets; $.29 per share
for Class A, B, C and Z shares).
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.
Interest on any such borrowings will be at market rates. The purpose of the
agreement is to serve as an alternative source of funding for capital share
redemptions. The Funds pay a commitment fee at an annual rate of .080 of 1% of
the unused portion of the credit facility. The commitment fee is accrued and
paid quarterly on a pro rata basis by the Funds. The expiration date of the SCA
is March 9, 2001. Prior to March 9, 2000, the commitment fee was .065 of 1% of
the unused portion of the credit facility. The Fund did not borrow any amounts
pursuant to the SCA during the year ended May 31, 2000.
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 year ended May 31, 2000, the
Series incurred fees of approximately $3,200 for the services of PMFS. As of May
31, 2000 approximately $600 of such fees were due to PMFS. Transfer agent fees
and
18
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Notes to Financial Statements Cont'd.
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 year ended May 31, 2000 were $18,353,915 and $16,666,026, respectively.
The United States federal income tax basis of the Series' investments as
of May 31, 2000 was $9,055,357 and accordingly, net unrealized depreciation on
investments for federal income tax purposes was $464,615 (gross unrealized
appreciation--$474,537, gross unrealized depreciation--$939,152).
The Fund utilized its capital loss carryforward of approximately $640,159
to offset net taxable gains realized and recognized during the fiscal year ended
May 31, 2000.
The Fund has elected to treat approximately $759 of net currency losses
incurred in the seven month period ended May 31, 2000 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,
2000, the Series had a .11% undivided interest in the repurchase agreements in
the joint account. The undivided interest for the Series represents $923,000 in
principal amount. As of such date, each repurchase agreement in the joint
account and the collateral therefore were as follows:
ABN AMRO Incorporated, 6.37%, in the principal amount of $110,000,000,
repurchase price $110,019,464, due 6/1/00. The value of the collateral including
accrued interest was $112,200,491.
Bear, Stearns & Co. Inc., 6.37%, in the principal amount of $130,000,000,
repurchase price $130,023,003, due 6/1/00. The value of the collateral including
accrued interest was $133,856,194.
Chase Securities Inc., 6.15%, in the principal amount of $114,985,000,
repurchase price $115,004,643, due 6/1/00. The value of the collateral including
accrued interest was $117,289,066.
Credit Suisse First Boston Corp., 6.40%, in the principal amount of
19
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Notes to Financial Statements Cont'd.
$90,000,000, repurchase price $90,016,000, due 6/1/00. The value of the
collateral including accrued interest was $93,252,694.
Salomon Smith Barney, Inc., 6.38%, in the principal amount of
$220,000,000, repurchase price $220,038,989, due 6/1/00. The value of the
collateral including accrued interest was $224,578,626.
Warburg Dillon Read LLC, 6.20%, in the principal amount of $200,000,000,
repurchase price $200,034,444, due 6/1/00. The value of the collateral including
accrued interest was $204,004,940.
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. 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
684,004 shares of beneficial interest issued and outstanding at May 31, 2000,
Prudential owned 505,000.
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>
Year ended May 31, 2000:
Shares sold 57,739 $ 734,509
Shares reacquired (15,920) (191,410)
------- ----------
Net increase in shares outstanding before conversion 41,819 543,099
Shares issued upon conversion from Class B 4,078 47,491
------- ----------
Net increase in shares outstanding 45,897 $ 590,590
------- ----------
------- ----------
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
------- ----------
------- ----------
</TABLE>
20
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Notes to Financial Statements Cont'd.
<TABLE>
<CAPTION>
Class B Shares Amount
---------------------------------------------------------------- ------- ----------
Year ended May 31, 2000:
<S> <C> <C>
Shares sold 112,611 $1,360,733
Shares reacquired (47,835) (520,412)
------- ----------
Net increase in shares outstanding before conversion 64,776 840,321
Shares reacquired upon conversion into Class A (4,122) (47,491)
------- ----------
Net increase in shares outstanding 60,654 $ 792,830
------- ----------
------- ----------
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>
Year ended May 31, 2000:
Shares sold 46,444 $ 496,334
Shares reacquired (28,665) (295,907)
------- ----------
Net increase in shares outstanding 17,779 $ 200,427
------- ----------
------- ----------
June 26, 1998(a) through
May 31, 1999:
Shares sold 414 $ 4,264
------- ----------
------- ----------
<CAPTION>
Class Z
----------------------------------------------------------------
<S> <C> <C>
Year ended May 31, 2000:
Shares sold 32,347 $ 408,363
Shares reacquired (13,345) (154,300)
------- ----------
Net increase in shares outstanding 19,002 $ 254,063
------- ----------
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.
Note 7. Fund Liquidation
On May 23, 2000, the Board of Trustees decided it was in the shareholders' best
interests to liquidate the Series as soon as practicable and no later than July
28, 2000. The Series suspended the sale of shares to new accounts on May 4,
2000. Shares of the Series may no longer be purchased by any existing
shareholder accounts. The current exchange privilege of obtaining shares of
other Prudential mutual funds and the current redemption rights are still in
effect.
21
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Financial Highlights
<TABLE>
<CAPTION>
Class A
-------------------------------------
June 26, 1998(a)
Year Ended Through
May 31, 2000(d) May 31, 1999(d)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.30 $10.00
------- -------
Income from investment operations:
Net investment income (loss) .16(e) (.20)
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 3.09 (.50)
------- -------
Total from investment operations 3.25 (.70)
------- -------
Net asset value, end of period $ 12.55 $ 9.30
------- -------
------- -------
TOTAL RETURN(b) 34.95% (7.00)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 706 $ 96
Average net assets (000) $ 371 $ 36
Ratios to average net assets:
Expenses, including distribution and
service (12B-1) fees 2.17%(e) 8.72%(c)
Expenses, excluding distribution and
service (12B-1) fees 1.93%(e) 8.47%(c)
Net investment income (loss) 1.24%(e) (2.61)%(c)
For Class A, B, C and Z shares:
Portfolio turnover rate 266% 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.
(e) Net of expense subsidy.
22 See Notes to Financial Statements
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class B
-------------------------------------
June 26, 1998(a)
Year Ended Through
May 31, 2000(d) May 31, 1999(d)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.23 $10.00
------- -------
Income from investment operations:
Net investment income (loss) .07(e) (.29)
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 3.09 (.48)
------- -------
Total from investment operations 3.16 (.77)
------- -------
Net asset value, end of period $ 12.39 $ 9.23
------- -------
------- -------
TOTAL RETURN(b) 34.13% (7.70)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 1,065 $ 234
Average net assets (000) $ 551 $ 68
Ratios to average net assets:
Expenses, including distribution and
service (12B-1) fees 2.87%(e) 9.47%(c)
Expenses, excluding distribution and
service (12B-1) fees 1.93%(e) 8.47%(c)
Net investment income (loss) 0.58%(e) (3.95)%(c)
</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.
(e) Net of expense subsidy.
See Notes to Financial Statements 23
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class C
-------------------------------------
June 26, 1998(a)
Year Ended Through
May 31, 2000(d) May 31, 1999(d)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.23 $10.00
------- -------
Income from investment operations:
Net investment income (loss) .08(e) (.46)
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 3.08 (.31)
------- -------
Total from investment operations 3.16 (.77)
------- -------
Net asset value, end of period $ 12.39 $ 9.23
------- -------
------- -------
TOTAL RETURN(b) 34.13% (7.70)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 241 $ 15
Average net assets (000) $ 134 $ 11
Ratios to average net assets:
Expenses, including distribution and
service (12B-1) fees 2.87%(e) 9.47%(c)
Expenses, excluding distribution and
service (12B-1) fees 1.93%(e) 8.47%(c)
Net investment income (loss) 0.65%(e) (6.07)%(c)
</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.
(e) Net of expense subsidy.
24 See Notes to Financial Statements
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class Z
-------------------------------------
June 26, 1998(a)
Year Ended Through
May 31, 2000(d) May 31, 1999(d)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.31 $10.00
------- -------
Income from investment operations:
Net investment income (loss) .09(e) (.40)
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 3.21 (.29)
------- -------
Total from investment operations 3.30 (.69)
------- -------
Net asset value, end of period $ 12.61 $ 9.31
------- -------
------- -------
TOTAL RETURN(b) 35.34% (6.90)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 6,584 $4,687
Average net assets (000) $ 5,953 $4,207
Ratios to average net assets:
Expenses, including distribution and
service (12B-1) fees 1.93%(e) 8.47%(c)
Expenses, excluding distribution and
service (12B-1) fees 1.93%(e) 8.47%(c)
Net investment income (loss) 0.79%(e) (5.16)%(c)
</TABLE>
------------------------------
(a) Commencement of investment operations.
(b) 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.
(e) Net of expense subsidy.
See Notes to Financial Statements 25
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Report of Independent Accountants
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, 2000, the
results of its operations for the year then ended, and the changes in its net
assets and the financial highlights for the year then ended and for the period
June 26, 1998 (commencement of operations) through May 31, 1999, in conformity
with accounting principles generally accepted in the United States. These
financial statements and financial highlights (hereafter referred to as
'financial statements') are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at May 31, 2000 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
As disclosed in Note 7, on May 23, 2000, the Board of Trustees elected to
liquidate the Fund as soon as practicable and no later than July 28, 2000.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
July 20, 2000
26
<PAGE>
Prudential Developing Markets Fund
Prudential Latin America Equity Fund
Federal Income Tax Information
The Series has elected to give the benefit of foreign tax credits to its
shareholders. Accordingly, shareholders who must report their gross income
dividends and distributions in a federal income tax return will be entitled to a
foreign tax credit, or an itemized deduction in computing their U.S. income tax
liability. It is generally more advantageous to claim rather than take a
deduction. For the fiscal year ended May 31, 2000 the Series intends on passing
through $.026 per share of ordinary income distributions as a foreign tax
credit. We wish to advise you that the corporate dividends received deduction
for the Series is zero.
For the purpose of preparing your annual federal income tax return,
however, you should report the amounts as reflected on the appropriate Form
1099-DIV or substitute 1099-DIV.
See Notes to Financial Statements 27
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Portfolio of Investments as of May 31, 2000
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 82.3%
Common Stocks 75.3%
-------------------------------------------------------------------------------------
Brazil 5.3%
22,600 Aracruz Celulose SA (ADR) $ 378,550
20,800 Companhia Cervejaria Brahma (ADR) 301,600
10,200 Companhia Vale do Rio Doce 229,528
5,900 Enersis SA (ADR)(a) 126,481
8,900,000 Sider Nacional Cia 293,085
12,700 Votorantim Celulose E Papel SA (ADR)(a) 201,612
----------------
1,530,856
-------------------------------------------------------------------------------------
Chile 2.1%
42,700 Antofagasta Holdings PLC 215,546
8,600 Compania de Telecomunicaciones de Chile (ADR) 169,850
10,200 Sociedad Quimica y Minera de Chile SA (Series B
shares) (ADR) 231,413
----------------
616,809
-------------------------------------------------------------------------------------
Greece 3.9%
5,550 Alpha Bank SA 236,434
51,600 Hellenic Telecommunications Organization SA (ADR) 622,425
5,600 National Bank of Greece SA 264,294
----------------
1,123,153
-------------------------------------------------------------------------------------
Hungary 1.2%
3,000 Gedeon Richter Rt. 176,321
4,800 Matav Rt. (ADR) 163,800
----------------
340,121
-------------------------------------------------------------------------------------
India 3.8%
270 Infosys Technologies, Ltd. 42,340
1,320 Infosys Technologies, Ltd. (ADR)(a) 202,620
14,440 Larsen & Toubro, Ltd. (GDR) 132,126
13,600 Ranbaxy Laboratories, Ltd. (GDR)(a) 225,488
9,400 Reliance Industries, Ltd. (GDR)(a) 230,112
5,200 Satyam Infoway Ltd. (ADR)(a) 107,900
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Portfolio of Investments as of May 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
10,100 SSI, Ltd. (GDR) $ 70,700
4,600 Videsh Sanchar Nigam, Ltd. (GDR)(a) 71,898
----------------
1,083,184
-------------------------------------------------------------------------------------
Indonesia 0.3%
51,500 PT Indofood Sukses Makmur Tbk 25,675
8,000 PT Indosat (Persero) Tbk 8,673
126,500 PT Ramayana Lestari Sentosa Tbk 65,633
----------------
99,981
-------------------------------------------------------------------------------------
Italy 1.5%
28,100 Compania De Minas Buenaventura (Series B shares)
(ADR) 423,256
-------------------------------------------------------------------------------------
Mexico 11.5%
10,900 Cemex SA de CV (ADR) 230,944
9,900 Coca Cola Femsa SA (ADR) 150,356
217,400 Control Comerc Mexicana 189,830
862,000 Grupo Financiero Bancomera SA de CV 442,540
94,000 Grupo Mexico (Series B shares) 320,404
12,000 Grupo Radio Centro SA de CV (ADR) 132,000
5,500 Grupo Televisa SA (ADR) 306,281
174,200 Industrias Penoles 385,767
114,700 Kimberly-Clark de Mexico SA(a) 355,968
5,100 Telefonos de Mexico SA (ADR) (Class L shares) 248,306
40,100 Tubos de Acero de Mexico SA (ADR) 531,887
----------------
3,294,283
-------------------------------------------------------------------------------------
The Philippines 0.2%
275,400 Ayala Land, Inc. 31,640
20,000 Bank of The Philippine Islands 38,218
----------------
69,858
-------------------------------------------------------------------------------------
Russia 6.8%
8,600 LUKoil Holding (ADR) 470,850
100,400 Norilsk Nickel(a) 908,620
40,000 Surgutneftegaz (ADR) 570,000
----------------
1,949,470
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Portfolio of Investments as of May 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
South Africa 12.8%
265,700 Billiton PLC(a) $ 903,442
16,500 Gold Fields, Ltd. (ADR) 64,969
264,100 Gold Fields, Ltd. 956,877
8,100 Harmony Gold Mining Co., Ltd. (ADR) 39,741
84,400 Harmony Gold Mining Co., Ltd. 412,581
17,300 Impala Platinum Holdings, Ltd. 579,548
95,400 Sappi, Ltd. 713,245
----------------
3,670,403
-------------------------------------------------------------------------------------
South Korea 12.2%
81,000 Alfa Capital SA (Series A shares)(a) 221,130
24,400 Hyundai Electronics Industries Co. 380,203
2,475 Jusung Engineering Co., Ltd.(a) 60,697
11,690 L.G. Chemical, Ltd. 227,694
1,100 L.G. Home Shopping, Inc. 93,298
1,300 L.G. Information & Communication, Ltd. 75,733
5,100 Medidas Co., Ltd. 51,248
14,890 Samsung Corporation 119,304
9,380 Samsung Electro-Mechanics Co., Ltd. 589,624
3,894 Samsung Electronics (GDR) 1,061,843
5,600 Shinhan Bank 41,895
1,700 SK Telecom Co., Ltd. 579,460
----------------
3,502,129
-------------------------------------------------------------------------------------
Taiwan 11.0%
21,900 Acer, Inc. (GDR)(a) 221,847
24,070 Advanced Semiconductor Engineering, Inc. (GDR)(a) 393,544
14,000 Ambit Microsystems Corp. 138,137
41,852 Asustek Computer, Inc. (GDR) 507,665
73,912 Compal Electronics, Inc. 176,324
18,000 Compeq Manufacturing Co., Ltd. 106,329
126,000 Far Eastern Textile, Ltd. 204,479
8,000 Hon Hai Precision Industry Co., Ltd. (GDR)(a) 182,000
10,200 Macronix International Co., Ltd. (ADR)(a) 326,400
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Portfolio of Investments as of May 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
532,800 Taishin International Bank $ 352,779
28,019 Taiwan Semiconductor Manufacturing Co., Ltd.(a) 142,778
2,944 Taiwan Semiconductor Manufacturing Co., Ltd.
(ADR)(a) 103,960
102,000 United Microelectronics Corp., Ltd. 309,542
----------------
3,165,784
-------------------------------------------------------------------------------------
Thailand 1.6%
16,700 Advanced Info Service PLC 191,832
30,500 BEC World Public Co., Ltd. 186,854
17,500 PTT Exploration & Production Co., Ltd. 83,535
----------------
462,221
-------------------------------------------------------------------------------------
Turkey 0.5%
48,590 Haci Omer Sabanci Holdings SA (ADR) 153,059
-------------------------------------------------------------------------------------
Venezuela 0.6%
5,600 Compania Anonima Nacional Telefonos de Venezuela
(Class D shares) (ADR) 159,250
----------------
Total common stocks (cost $22,013,137) 21,643,817
----------------
-------------------------------------------------------------------------------------
Preferred Stocks(a) 7.0%
-------------------------------------------------------------------------------------
Brazil 6.5%
15,100 Companhia Vale do Rio Doce (ADR) 385,050
11,800 Embratel Participacoes SA (ADR) 247,063
30,000,000 Gerdau SA 341,493
19,650,000 Sider de Tubarao 254,522
16,807 Tele Norte Leste Participacoes SA (ADR) 329,837
2,800 Telecomunicacoes Brasileiras SA (ADR) 324,100
----------------
1,882,065
-------------------------------------------------------------------------------------
Russia 0.5%
10,500 Surgutneftegaz (ADR) 139,125
----------------
Total preferred stocks (cost $1,793,178) 2,021,190
----------------
Warrants(a)
-------------------------------------------------------------------------------------
Indonesia
24,000 PT Bank Pan Indonesia Tbk,
expiring July 2002 @ IDR650 (cost $0) 237
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Portfolio of Investments as of May 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
United States
6,400 Apex Silver Mines, Ltd.,
expiring November 2002 @ $18 (cost $0) $ 12,800
----------------
Total warrants (cost $0) 13,037
----------------
Total long-term investments (cost $23,806,315) 23,678,044
----------------
SHORT-TERM INVESTMENTS 13.5%
<CAPTION>
Principal
Amount
(000)
<C> <S> <C> <C>
-------------------------------------------------------------------------------------
Repurchase Agreements
$ 3,880 Joint Repurchase Agreement Account,
6.31%, 6/1/00 (cost $3,880,000; Note 5) 3,880,000
----------------
Total Investments 95.8% (cost $27,686,315; Note
4) 27,558,044
Other assets in excess of liabilities 4.2% 1,196,137
----------------
Net Assets 100% $ 28,754,181
----------------
----------------
</TABLE>
--------------------------------------------------------------------------------
(a) Non-income producing security.
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
PLC--Public Limited Company.
12 See Notes to Financial Statements
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Portfolio of Investments as of May 31, 2000 Cont'd.
<TABLE>
<S> <C> <C>
The industry classification of portfolio holdings and other assets in excess
of liabilities shown as a percentage of net assets as of May 31, 2000 was as
follows:
Telecommunications 14.4%
Electronic Components 11.3
Resources and Mining 8.4
Steel & Metals 6.9
Diversified Operations 6.7
Beverages 4.6
Paper & Forest Products 3.8
Computers 2.7
Chemicals 2.4
Banking 2.3
Media 2.2
Diversified Resources 2.1
Oil & Gas Exploration/Production 2.0
Paper & Packaging 1.9
Gold Mines 1.7
Oil & Gas Production & Refining 1.6
Finance 1.5
Pharmaceuticals 1.4
Retail 1.2
Computer Software & Services 1.1
Oil & Gas Services 0.8
Textiles 0.7
Utilities 0.4
Real Estate-Development 0.1
Food Processing 0.1
Short-term investment 13.5
-----
95.8%
Other assets in excess of liabilities 4.2
-----
100.0%
-----
-----
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
May 31, 2000
<S> <C> <C>
---------------------------------------------------------------------------------------
ASSETS
Investments excluding repurchase agreement, at value (cost
$23,806,315) $23,678,044
Repurchase agreement, at value (cost $3,880,000) 3,880,000
Foreign currency, at value (cost $115,715) 114,710
Cash 420
Receivable for investments sold 1,104,101
Dividends and interest receivable 76,988
Deferred organization costs and other assets 71,541
Receivable for Series shares sold 10,616
------------
Total assets 28,936,420
------------
LIABILITIES
Accrued expenses 92,210
Payable for investments purchased 49,445
Payable for Series shares reaquired 17,242
Withholding tax payable 13,763
Management fee payable 9,049
Distribution fee payable 530
------------
Total liabilities 182,239
------------
NET ASSETS $28,754,181
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 2,272
Paid-in capital in excess of par 23,528,995
------------
23,531,267
Undistributed net investment income 115,487
Accumulated net realized gain on investments 5,242,735
Net unrealized depreciation on investments and foreign
currencies (135,308 )
------------
Net assets, May 31, 2000 $28,754,181
------------
------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Statement of Assets and Liabilities Cont'd.
<TABLE>
<CAPTION>
May 31, 2000
---------------------------------------------------------------------------------------
<S> <C> <C>
Class A:
Net asset value and redemption price per share
($932,011 / 73,812 shares of beneficial interest issued
and outstanding) $12.63
Maximum sales charge (5% of offering price) .66
------------
Maximum offering price to public $13.29
------------
------------
Class B:
Net asset value, offering price and redemption price per
share ($1,508,131 / 121,191 shares of beneficial interest
issued and outstanding) $12.44
------------
------------
Class C:
Net asset value and redemption price per share ($238,750 /
19,186 shares of beneficial interest issued and
outstanding) $12.44
Sales charge (1% of offering price) .13
------------
Offering price to public $12.57
------------
------------
Class Z:
Net asset value, offering price and redemption price per
share ($26,075,289 / 2,058,003 shares of beneficial
interest issued and outstanding) $12.67
------------
------------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Statement of Operations
<TABLE>
<CAPTION>
Year
Ended
May 31, 2000
<S> <C> <C>
---------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Dividends (net of foreign withholding taxes of $45,297) $ 630,492
Interest 94,223
------------
Total income 724,715
------------
Expenses
Management fee 337,210
Distribution fee--Class A 1,254
Distribution fee--Class B 6,408
Distribution fee--Class C 1,889
Custodian's fees and expenses 200,000
Registration fees 38,000
Audit fees 35,000
Reports to shareholders 30,000
Legal fees and expenses 20,000
Amortization of organization expenses 17,576
Trustees' fees and expenses 7,000
Transfer agent's fees and expenses 4,500
Miscellaneous 1,993
------------
Total expenses 700,830
Less: Expense subsidy (Note 2) (148,097 )
------------
Net expenses 552,733
------------
Net investment income 171,982
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
Net realized gain on:
Investment transactions 7,613,029
Foreign currency transactions 1,813
------------
7,614,842
------------
Net change in unrealized appreciation/depreciation on:
Investments (2,574,437 )
Foreign currencies (9,380 )
------------
(2,583,817 )
------------
Net gain on investments and foreign currencies 5,031,025
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,203,007
------------
------------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year June 26, 1998(b)
Ended Through
May 31, 2000 May 31, 1999
<S> <C> <C> <C>
------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income $ 171,982 $ (65,589)
Net realized gain (loss) on investment and
foreign currency transactions 7,614,842 (2,001,654)
Net change in unrealized
appreciation/depreciation of investments
and foreign currencies (2,583,817 ) 2,448,509
------------ ----------------
Net increase in net assets resulting from
operations 5,203,007 381,266
------------ ----------------
Distributions from net realized gains (Note 1)
Class A (7,875 ) --
Class B (10,397 ) --
Class C (4,173 ) --
Class Z (450,798 ) --
------------ ----------------
(473,243 ) --
------------ ----------------
Series share transactions (Note 6)
Net proceeds from shares sold 4,779,655 20,346,784
Net asset value of shares issued in in
reinvestment of distributions 472,061 --
Cost of shares reacquired (1,870,975 ) (134,374)
------------ ----------------
Net increase in net assets from Series share
transactions 3,380,741 20,212,410
------------ ----------------
Total increase 8,110,505 20,593,676
NET ASSETS
Beginning of period 20,643,676 50,000
------------ ----------------
End of period(a) $28,754,181 $ 20,643,676
------------ ----------------
------------ ----------------
------------------------------
(a) Includes undistributed net investment income
of $ 115,487 $ --
------------ ----------------
(b) Commencement of investment operations.
</TABLE>
See Notes to Financial Statements 17
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Notes to Financial Statements
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').
The Series 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. 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.
Repurchase Agreements: 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
18
<PAGE>
Prudential Developing Markets Fund Prudential Developing Markets
Equity Fund
Notes to Financial Statements Cont'd.
commenced with respect to the seller of the security, realization of the
collateral by the Series 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 year, the Fund does not
isolate that portion of the results of operations arising as a result of changes
in the foreign exchange rates from the fluctuations arising from changes in the
market prices of securities held at the end of the fiscal year. 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 fiscal year. Accordingly, net realized foreign
currency gains (losses) are included in the reported net realized gain (loss) on
investment transactions.
Net realized gains or losses on foreign currency transactions represent
net foreign exchange gains or 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 Series' 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 year end exchange rates are reflected as a component
of net unrealized appreciation (depreciation) on investments and foreign
currencies.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of domestic origin
as a result of, among other factors, the possibility of political and economic
instability and the level of governmental supervision and regulation of foreign
securities markets.
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.
19
<PAGE>
Prudential Developing Markets Fund Prudential Developing Markets
Equity Fund
Notes to Financial Statements Cont'd.
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.
Dividends and Distributions: The Series 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
continue 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' 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 increase undistributed net investment income by $65,280
and decrease accumulated net realized gain on investments by $25,094 and
decrease paid-in capital in excess of par by $40,186 due to nondeductible
expenses and foreign withholding taxes. Net investment income, net realized
gains and net assets were not affected by these changes.
Note 2. Agreements
The Fund has a management agreement with PIFM. Pursuant to this agreement, PIFM
has responsibility for all investment advisory services and supervises the
20
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Notes to Financial Statements Cont'd.
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 services of the subadvisor, 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. For
the period June 1, 1999 through May 23, 2000, the management fee was 1.25% of
the average daily net assets of the Fund. Effective May 24, 2000, the management
fee was discontinued.
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 June 1, 1999
through May 2, 2000. For the period May 3, 2000 through May 23, 2000, such
expenses under the Plans were .25 of 1% of the average daily net assets of the
Class A, B and C shares, respectively. Effective May 24, 2000, such expenses
under the Plans were discontinued.
PIMS has advised the Series that for the year ended May 31, 2000, it
received approximately $20,200 and $2,200 in front-end sales charges resulting
from sales of Class A and Class C shares, respectively. From these fees, PIMS
paid such sales
21
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Notes to Financial Statements Cont'd.
charges to affiliated broker-dealers, which in turn paid commissions to
salespersons and incurred other distribution costs.
PIMS has advised the Series that for the year ended May 31, 2000, it
received approximately $2,500 and $200 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PIMS, PIFM and PIC are wholly owned subsidiaries of The Prudential
Insurance Company of America.
PIFM agreed to reimburse the Series in order to reduce total expenses. For
the period June 1, 1999 through May 2, 2000 expenses were limited to 2.24%,
2.99%, 2.99% and 1.99% of the average daily net assets of the Class A, Class B,
Class C and Class Z shares, respectively. For the period May 3, 2000 through May
23, 2000 expenses were limited to 2.24%, 2.24% 2.24% and 1.99% of the average
daily net assets of the Class A, Class B, Class C and Class Z shares,
respectively. For the period May 24, 2000 through May 31, 2000 expenses were
limited to .74% of the average daily net assets of the Class A, Class B, Class C
and Class Z shares. For the year ended May 31, 2000, such reimbursements
amounted to $148,097 (.54% of average net assets; $.065 per share for Class A,
B, C and Z shares).
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.
Interest on any such borrowings will be at market rates. The purpose of the
agreement is to serve as an alternative source of funding for capital share
redemptions. The Funds pay a commitment fee at an annual rate of .080 of 1% of
the unused portion of the credit facility. The commitment fee is accrued and
paid quarterly on a pro rata basis by the Funds. The expiration date of the SCA
is March 9, 2001. Prior to March 9, 2000, the commitment fee was .065 of 1% of
the unused portion of the credit facility. The Fund did not borrow any amounts
pursuant to the SCA during the year ended May 31, 2000.
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 year ended May 31, 2000, the
Series incurred fees of approximately $3,700 for the services of PMFS. As of May
31, 2000 approximately $700 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.
22
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Notes to Financial Statements Cont'd.
Note 4. Portfolio Securities
Purchases and sales of portfolio securities of the Series, excluding short-term
investments, for the year ended May 31, 2000 were $54,415,533 and $54,384,716,
respectively.
The United States federal income tax basis of the Series' investments as
of May 31, 2000 was $27,817,391 and accordingly, net unrealized depreciation on
investments for federal income tax purposes was $259,347 (gross unrealized
appreciation--$2,718,342, gross unrealized depreciation--$2,977,689).
For federal income tax purposes, the Series utilized its capital loss
carryforward of approximately $1,837,800 to partially offset the Series' net
taxable gains realized and recognized in the year ended May 31, 2000. In
addition, the Series is electing to treat net currency losses of approximately
$9,700 incurred in the seven-month period ended May 31, 2000 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,
2000, the Series had a .45% undivided interest in the repurchase agreements in
the joint account. The undivided interest for the Series represents $3,880,000
in principal amount. As of such date, each repurchase agreement in the joint
account and the collateral therefore were as follows:
ABN AMRO Incorporated, 6.37%, in the principal amount of $110,000,000,
repurchase price $110,019,464, due 6/1/00. The value of the collateral including
accrued interest was $112,200,491.
Bear, Stearns & Co. Inc., 6.37%, in the principal amount of $130,000,000,
repurchase price $130,023,003, due 6/1/00. The value of the collateral including
accrued interest was $133,856,194.
Chase Securities Inc., 6.15%, in the principal amount of $114,985,000,
repurchase price $115,004,643, due 6/1/00. The value of the collateral including
accrued interest was $117,289,066.
Credit Suisse First Boston Corp., 6.40%, in the principal amount of
$90,000,000, repurchase price $90,016,000, due 6/1/00. The value of the
collateral including accrued interest was $93,252,694.
Salomon Smith Barney, Inc., 6.38%, in the principal amount of
$220,000,000, repurchase price $220,038,989, due 6/1/00. The value of the
collateral including accrued interest was $224,578,626.
Warburg Dillon Read LLC, 6.20%, in the principal amount of $200,000,000,
23
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Notes to Financial Statements Cont'd.
repurchase price $200,034,444, due 6/1/00. The value of the collateral including
accrued interest was $204,004,940.
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. 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
2,272,192 shares of beneficial interest issued and outstanding at May 31, 2000,
Prudential owned 2,033,235 Class Z shares.
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>
Year ended May 31, 2000:
Shares sold 145,941 $ 1,984,447
Shares issued in reinvestment of distributions 560 7,551
Shares reacquired (79,513) (1,067,996)
--------- -----------
Net increase in shares outstanding before conversion 66,988 924,002
Shares issued upon conversion from Class B 2,755 40,906
--------- -----------
Net increase in shares outstanding 69,743 $ 964,908
--------- -----------
--------- -----------
June 26, 1998(a) through May 31, 1999:
Shares sold 2,819 $ 25,830
--------- -----------
--------- -----------
<CAPTION>
Class B
-------------------------------------------------------------
<S> <C> <C>
Year ended May 31, 2000:
Shares sold 132,417 $ 1,831,792
Shares issued in reinvestment of distributions 757 10,105
Shares reacquired (23,910) (325,621)
--------- -----------
Net increase in shares outstanding before conversion 109,264 1,516,276
Shares reacquired upon conversion into Class A (2,790) (40,906)
--------- -----------
Net increase in shares outstanding 106,474 $ 1,475,370
--------- -----------
--------- -----------
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
--------- -----------
--------- -----------
------------------------------
(a) Commencement of investment operations.
</TABLE>
24
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Notes to Financial Statements Cont'd.
<TABLE>
<CAPTION>
Class C Shares Amount
------------------------------------------------------------- --------- -----------
Year ended May 31, 2000:
<S> <C> <C>
Shares sold 22,158 $ 289,277
Shares issued in reinvestment of distributions 292 3,891
Shares reacquired (10,552) (143,151)
--------- -----------
Net increase in shares outstanding 11,898 $ 150,017
--------- -----------
--------- -----------
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>
Year ended May 31, 2000:
Shares sold 48,205 $ 674,139
Shares issued in reinvestment of distributions 33,273 450,514
Shares reacquired (24,963) (334,207)
--------- -----------
Net increase in shares outstanding 56,515 $ 790,446
--------- -----------
--------- -----------
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
--------- -----------
--------- -----------
------------------------------
(a) Commencement of investment operations.
</TABLE>
Note 7. Fund Liquidation
On May 23, 2000, the Board of Trustees decided it was in the shareholders' best
interests to liquidate the Series as soon as practicable and no later than July
28, 2000. The Series suspended the sale of shares to new accounts on May 4,
2000. Shares of the Series may no longer be purchased by any existing
shareholder accounts. The current exchange privilege of obtaining shares of
other Prudential mutual funds and the current redemption rights are still in
effect.
25
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Financial Highlights
<TABLE>
<CAPTION>
Class A
---------------------------------
Year June 26, 1998(c)
Ended Through
May 31, 2000 May 31, 1999
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE(d):
Net asset value, beginning of period $10.16 $10.00
------------ -------
Income from investment operations:
Net investment income (loss) .15(e) (.05)
Net realized and unrealized gain on
investment and foreign currency
transactions 2.55 .21
------------ -------
Total from investment operations 2.70 .16
------------ -------
Less distributions:
Distributions from net realized gains (.23) --
------------ -------
Net asset value, end of period $12.63 $10.16
------------ -------
------------ -------
TOTAL RETURN(a) 26.28% 1.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 932 $ 41
Average net assets (000) $ 521 $ 29
Ratios to average net assets:
Expenses, including distribution and
service (12b-1) fees 2.22%(e) 3.43%(b)
Expenses, excluding distribution and
service (12b-1) fees 1.97%(e) 3.18%(b)
Net investment income (loss) 1.07%(e) (.55)%(b)
For Class A, B, C and Z shares:
Portfolio turnover rate 217% 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.
(e) Net of expense subsidy.
26 See Notes to Financial Statements
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class B
---------------------------------
Year June 26, 1998(c)
Ended Through
May 31, 2000 May 31, 1999
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE(d):
Net asset value, beginning of period $10.09 $10.00
------------ -------
Income from investment operations:
Net investment income (loss) .06(e) (.10)
Net realized and unrealized gain on
investment and foreign currency
transactions 2.52 .19
------------ -------
Total from investment operations 2.58 .09
------------ -------
Less distributions:
Distributions from net realized gains (.23) --
------------ -------
Net asset value, end of period $12.44 $10.09
------------ -------
------------ -------
TOTAL RETURN(a) 25.37% .90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $1,508 $ 148
Average net assets (000) $ 741 $ 59
Ratios to average net assets:
Expenses, including distribution and
service (12b-1) fees 2.85%(e) 4.18%(b)
Expenses, excluding distribution and
service (12b-1) fees 1.97%(e) 3.18%(b)
Net investment income (loss) .46%(e) (1.21)%(b)
</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.
(e) Net of expense subsidy.
See Notes to Financial Statements 27
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class C
---------------------------------
Year June 26, 1998(a)
Ended Through
May 31, 2000 May 31, 1999
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE(d):
Net asset value, beginning of period $10.09 $10.00
------------ -------
Income from investment operations:
Net investment loss (.01)(e) (.10)
Net realized and unrealized gain on
investment and foreign currency
transactions 2.59 .19
------------ -------
Total from investment operations 2.58 .09
------------ -------
Less distributions:
Distributions from net realized gains (.23) --
------------ -------
Net asset value, end of period $12.44 $10.09
------------ -------
------------ -------
TOTAL RETURN(a) 25.37% .90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 239 $ 74
Average net assets (000) $ 207 $ 27
Ratios to average net assets:(b)
Expenses, including distribution and
service (12b-1) fees 2.90%(e) 4.18%
Expenses, excluding distribution and
service (12b-1) fees 1.97%(e) 3.18%
Net investment loss (.09)%(e) (1.21)%
</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.
(e) Net of expense subsidy.
28 See Notes to Financial Statements
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Financial Highlights Cont'd.
<TABLE>
<CAPTION>
Class Z
---------------------------------
Year June 26, 1998(c)
Ended Through
May 31, 2000 May 31, 1999
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE(d):
Net asset value, beginning of period $ 10.18 $ 10.00
------------ --------
Income from investment operations:
Net investment income (loss) .08(e) (.03)
Net realized and unrealized gain on
investment and foreign currency
transactions 2.64 .21
------------ --------
Total from investment operations 2.72 .18
------------ --------
Less distributions:
Distributions from net realized gains (.23) --
------------ --------
Net asset value, end of period $ 12.67 $ 10.18
------------ -------- ---
------------ -------- ---
TOTAL RETURN(a) 26.40% 1.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 26,075 $ 20,380
Average net assets (000) $ 26,113 $ 18,337
Ratios to average net assets:
Expenses, including distribution and
service (12b-1) fees 1.97%(e) 3.18%(b)
Expenses, excluding distribution and
service (12b-1) fees 1.97%(e) 3.18%(b)
Net investment income (loss) .62%(e) (.38)%(b)
</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.
(e) Net of expense subsidy.
See Notes to Financial Statements 29
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Report of Independent Accountants
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, 2000,
the results of its operations for the year then ended, and the changes in its
net assets and the financial highlights for the year then ended and for the
period June 26, 1998 (commencement of operations) through May 31, 1999, in
conformity with accounting principles generally accepted in the United States.
These financial statements and financial highlights (hereafter referred to as
'financial statements') are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at May 31, 2000 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
As disclosed in Note 7, on May 23, 2000, the Board of Trustees elected to
liquidate the Fund as soon as practicable and no later than July 28, 2000.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
July 20, 2000
30
<PAGE>
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Federal Income Tax Information (Unaudited)
We are required by the Internal Revenue Code to advise you within 60 days
of the Series' fiscal year-end (May 31, 2000) as to the federal tax status of
dividends paid by the Series during such fiscal period. Accordingly, we are
advising you that in the fiscal year-ended May 31, 2000, the Series paid
dividends of $.225 per Class A, B, C and Z shares. Of these amounts, $.145 per
Class A, B, C and Z shares represent distributions from long-term capital gains
and are taxable as such. The remaining $.08 per Class A, B, C and Z shares
represent dividends from short-term capital gains and is taxable as ordinary
income.
The Series has elected to give the benefit of foreign tax credits to its
shareholders. Accordingly, shareholders who must report their gross income
dividends and distributions in a federal income tax return will be entitled to a
foreign tax credit, or an itemized deduction in computing their U.S. income tax
liability. It is generally more advantageous to claim rather than take a
deduction. For the fiscal year ended May 31, 2000 the Series intends on passing
through $.029 per share of ordinary income distributions as a foreign tax
credit. We wish to advise you that the corporate dividends received deduction
for the Series is zero.
For the purpose of preparing your annual federal income tax return,
however, you should report the amounts as reflected on the appropriate Form
1099-DIV or substitute 1099-DIV.
31
