<PAGE>
(ICON)
Prudential
Developing
Markets
Equity
Fund
SEMI
ANNUAL
REPORT
Nov. 30, 1999
<PAGE>
A Message from the Fund's President January 7, 2000
(PHOTO)
Dear Shareholder,
Prudential Developing Markets Equity Fund's Class A shares
returned 27.07% over the six-month reporting period ended
November 30, 1999. The Fund significantly out-performed the
19.80% return posted by the Lipper Emerging Markets Funds
Average.
For most of the reporting period, our country selection was
an important contributor to performance. Specifically, our
overweight positions in Mexico, Brazil, Korea, India and
South Africa benefited the Fund, given the strong price
appreciations seen in these markets during the period.
Our sector and stock selection was also an
important contributor to performance. Our portfolio is
constructed along a barbell structure of growth stocks
and deep value commodity stocks. Both sectors performed
extremely well during the fiscal year. Our growth stocks
were concentrated along the telecom and media sectors,
which saw their valuations re-rated upward on a global
basis. On the other hand, our commodity stocks performed
well as commodity prices worldwide continue to rebound.
In the following report, Portfolio Manager Maria Elena
Carrion explains why Prudential Developing Markets
Equity Fund performed so well, and why it can be an
important part of an investor's portfolio. Thank you
for your continued confidence in Prudential mutual
funds.
Sincerely,
John R. Strangfeld
President
Prudential Developing Markets Equity Fund
<PAGE>
Performance Review
(PHOTO)
Maria Elena Carrion
Fund Manager
Investment Goals and Style
Prudential Developing Markets Equity Fund's objective is
long-term growth of capital. We pursue our objective by
investing primarily in equity-related securities of companies
whose principal activities are in countries that are defined
as developing by the International Finance Corporation, the World
Bank, or the United Nations. The Fund looks for above-average
growth in earnings per share; high return on invested capital;
healthy balance sheets; strong competitive advantages;
effective research, product development, and marketing; efficient
service; pricing flexibility; strength of management; and
a security's price. There can be no assurance that the
Fund's investment objective will be achieved.
Starting off the period
The Fund had very positive returns overall; however, early in
the reporting period, the Fund's performance was hurt by its
slight underweight in Asian markets, as compared to its
competitive benchmark. It was in Asian markets that we saw
the highest returns for the second quarter of 1999--a 60%
return in Asia versus 30% in Latin America and 11% in
emerging Europe/Middle East/Africa. However, the effect
of our underweight in Asia was partially offset by our
strong performance in Latin America. The Fund was able
to rebound since it was overweight--had
heavier exposure to Latin American holdings in Brazil
and Mexico--when our six-month reporting period began
in June 1999.
Getting better as we move along
As 1999 progressed from summer into fall, investors
continued to feel that the world was a
safe place to invest their money since many global
economies continued to recover. Stock markets rose
in many countries that experienced significant drops
in the last few years. Developing markets were no
exception, and most countries in this arena
benefited from this resurgence. Moreover, our
overweight position in South African gold
stocks, which experienced a strong rally
toward the close of the third quarter,
also bolstered the Fund's healthy return.
However, our country exposure in emerging Europe was
one of the biggest detractors from our performance.
We were underweight in our exposure to stocks in the
Greek market, which rallied 33% for the third quarter
of 1999, and we were overweight in Russian stocks,
which declined for a good portion of the period.
Finishing ahead
Most developing markets continued their rally to the
end of our reporting period--the fall of 1999. A key
factor behind the Fund's strong performance at this
time was our overweight position, compared to our
competitive benchmark, in Latin America--especially
Brazil and Mexico. Each rallied in excess of 15% in
November 1999. Furthermore, in Asia, our overweight
position in Korean stocks continued to pay off as this
market increased in value in excess of 20% in November
1999. Other key driving forces behind performance in
the fall of 1999 included our holdings in Russia,
Egypt, and South Africa.
<PAGE>
Looking Ahead
A plethora of opportunities
We continue to believe that the developing markets' asset class
could be entering a new period of outperformance after multiple
years of poor performance. We look for this to be driven by
an acceleration in global growth, a reduction in systemic
risk due to the prevalence of free-floating exchange rates,
and attractive valuations.
We continue to have a favorable outlook and plan to be
overweight, compared to our competitive benchmark, in
Latin America. Our focus will likely remain centered
on holdings in Mexico and Brazil. In Mexico, the
catalyst for continued strong performance could be
an acceleration of Gross Domestic Product (GDP) growth
in the year 2000. In Brazil, our current strategy is
to look for the best bargains, particularly in the
telecommunications sector.
Within Asia, our emphasis will likely continue to be
on holdings in Korea and India. In Korea, strong
earnings growth should continue as a result of
restructuring and deleveraging, while in India
the prospects for improved structural reforms
have improved after recent government elections.
Performance at a Glance
<TABLE>
Cumulative Total Returns1 As of 11/30/99
<CAPTION>
Six One Since
Months Year Inception2
<S> <C> <C> <C>
Class A 27.07% (26.67%) 44.57% (44.12%) 29.10% (28.70%)
Class B 26.66 (26.26) 43.60 (43.15) 27.80 (27.40)
Class C 26.66 (26.26 43.60 (43.15) 27.80 (27.40)
Class Z 27.18 (26.79) 44.97 (44.52) 29.60 (29.20)
Lipper Emerging Markets Fd. Avg.3 19.80 42.36 24.98
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 12/31/99
<CAPTION>
One Since
Year Inception2
<S> <C> <C>
Class A 63.22% (62.78%) 26.45% (26.22%)
Class B 64.52 (64.05) 27.03 (26.79)
Class C 66.82 (66.36) 28.50 (28.26)
Class Z 71.26 (70.79) 30.62 (30.39)
</TABLE>
Past performance is not indicative of future results. Principal
and investment return will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
1 Source: Prudential Investments Fund Management LLC and Lipper
Inc. The cumulative total returns do not take into account
sales charges. The average annual total returns do take
into account applicable sales charges. The Fund charges a
maximum front-end sales charge of 5% for Class A shares.
Class B shares are subject to a declining
contingent deferred sales charge (CDSC) of 5%, 4%, 3%,
2%, 1%, and 1% for six years. Class B shares will
automatically convert to Class A shares, on a quarterly
basis, approximately seven years after purchase. Class C
shares are subject to a front-end sales charge of 1% and
a CDSC of 1% for 18 months. Class Z shares are not subject
to a sales charge or distribution and service (12b-1) fees.
Without waiver of management fees and/or expense subsidization,
the Fund's cumulative and average annual total returns would
have been lower, as indicated in parentheses ( ).
2 Inception date: Class A, B, C, and Z, 6/26/98.
3 Lipper average returns are for all funds in each share
class for the six-month, one-year, and since inception periods
in the Emerging Markets Fund category. The Lipper average
is unmanaged. Emerging Markets funds seek long-term capital
appreciation by investing at least 65% of total assets in
emerging market equity securities, where "emerging market"
is defined by a country's GNP per capita or other economic measures.
1
<PAGE>
Review Cont'd.
In addition, we will also focus on natural resource stocks
in both South Africa and Russia--both should benefit from
higher commodity prices in this rebounding world economy.
Geographic Concentration
Expressed as a percentage of net assets
as of 11/30/99
Asia & Pacific Basin 37.5%
Latin America 31.8
Africa 14.1
Russia 9.1
Continental Europe 3.8
Cash & Equivalents 3.7
Five Largest Holdings
Expressed as a percentage of net assets
as of 11/30/99
Surgutneftegaz (ADR) 4.5%
Russia--Oil & Gas
Exploration/Production
LUKoil Holding (ADR) 4.2
Russia--Oil & Gas
Exploration/Production
Billiton PLC 2.7
South Africa--Mining
and Commodities
Gold Fields, Ltd. 2.3
South Africa--Gold Mines
Barlow, Ltd. 2.3
South Africa--Conglomerate
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2
<PAGE>
Portfolio of Investments as
of November 30, 1999 PRUDENTIAL DEVELOPING MARKETS FUND
(Unaudited) PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--96.9%
COMMON STOCKS--86.4%
- ------------------------------------------------------------
Brazil--6.1%
20,900 Aracruz Celulose SA (ADR) $ 425,838
10,200 Companhia Vale do Rio Doce 197,051
15,500,000 Sider Nacional Cia 531,981
1,600 Sider Nacional Cia (ADR) 50,800
4,800 Telecomunicacoes Brasileiras SA
(ADR)(a) 435,600
-----------
1,641,270
- ------------------------------------------------------------
Chile--2.6%
57,700 Antofagasta Holdings PLC 386,217
11,600 Sociedad Quimica y Minera de Chile
SA (Series B shares) (ADR) 329,875
-----------
716,092
- ------------------------------------------------------------
Egypt--2.5%
17,900 Al-Ahram Beverages Co. S.A.E.
(GDR)(a) 289,085
11,400 Egypt Mobile Phone 389,078
-----------
678,163
- ------------------------------------------------------------
Hungary--1.8%
6,000 BorsodChem Rt. (GDR) 183,780
6,100 Gedeon Richter Rt. 313,956
-----------
497,736
- ------------------------------------------------------------
India--9.1%
1,770 Infosys Technologies, Ltd. (ADR)(a) 364,620
100 Larsen & Toubro, Ltd. 2,238
19,800 Larsen & Toubro, Ltd. (GDR) 443,124
20,200 Ranbaxy Laboratories, Ltd. (GDR)(a) 462,176
9,400 Reliance Industries, Ltd. (GDR)(a) 125,208
2,000 Satyam Infoway, Ltd. (ADR)(a) 234,875
25,100 State Bank of India (GDR) 307,977
22,800 Videsh Sanchar Nigam, Ltd. (GDR)(a) 518,700
-----------
2,458,918
Indonesia--0.7%
19,500 PT Hanjaya Mandala Sampoerna Tbk $ 44,457
51,500 PT Indofood Sukses Makmur Tbk 56,422
8,000 PT Indosat (Persero) Tbk 11,167
126,500 PT Ramayana Lestari Sentosa Tbk 80,735
-----------
192,781
- ------------------------------------------------------------
Mexico--12.6%
132,000 Alfa SA (Series A shares) 573,121
78,000 Fomento Economico Mexico SA de CV(a) 292,293
67,800 Grupo Carso Global Telecom 532,612
125,300 Grupo Mexico (Series B shares) 518,758
18,000 Grupo Radio Centro SA de CV (ADR) 99,000
7,300 Grupo Televisa SA (ADR) 356,331
13,200 Panamerican Beverages, Inc. (Class A
shares) 247,500
3,500 Telefonos de Mexico SA (ADR)
(Class L shares) 323,969
37,000 Tubos de Acero de Mexico SA 468,195
-----------
3,411,779
- ------------------------------------------------------------
The Philippines--1.1%
515,000 Ayala Land, Inc. 121,842
16,820 Metropolitan Bank & Trust Co. 121,022
301,800 SM Prime Holdings (Class B shares) 47,846
-----------
290,710
- ------------------------------------------------------------
Poland--2.0%
21,200 KGHM Polska Miedz SA (GDR) 272,420
13,600 Powszechny Bank Kredytowy SA (GDR) 262,888
-----------
535,308
- ------------------------------------------------------------
Russia--9.1%
25,300 AO Tatneft (ADR) 110,688
33,700 LUKoil Holding (ADR) 1,137,375
128,900 Surgutneftegaz (ADR) 1,208,438
-----------
2,456,501
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as
of November 30, 1999 PRUDENTIAL DEVELOPING MARKETS FUND
(Unaudited) PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
South Africa--11.6%
108,800 AECI, Ltd. $ 222,778
105,700 Barlow, Ltd. 615,072
152,800 Billiton PLC(a) 740,227
141,300 Gold Fields, Ltd. 634,683
49,000 Harmony Gold Mining Co., Ltd. 317,255
68,500 Sappi, Ltd. 614,260
-----------
3,144,275
- ------------------------------------------------------------
South Korea--13.6%
12,800 Housing & Commercial Bank, Korea 358,853
9,900 Hyundai Electronics Industries Co. 203,252
9,700 Hyundai Motor Company, Ltd. 196,636
7,400 Keumkang Development Ind. Co. 82,985
3,700 Korea Electric Power Corp. 146,819
7,400 Korea Technology Banking Co. 103,877
11,690 L.G. Chemical, Ltd. 348,910
4,532 L.G. Securities Co. 107,118
4,400 Pohang Iron & Steel Co., Ltd. (ADR) 158,125
2,660 Pusan City Gas Co., Ltd. 62,183
18,490 Samsung Corporation 384,394
7,580 Samsung Electro-Mechanics Co. 588,484
2,744 Samsung Electronics (GDR) 568,092
14,600 Shinhan Bank 170,024
2,529 Sindo Ricoh Co.(a) 81,809
5,100 SK Corp. 128,462
210 SK Telecom Co., Ltd. (ADR) 4,974
-----------
3,694,997
- ------------------------------------------------------------
Taiwan--9.7%
18,900 Acer, Inc. (GDR)(a) 219,240
21,570 Advanced Semiconductor Engineering,
Inc. (GDR)(a) 481,011
30,852 Asustek Computer, Inc. (GDR) 485,302
262,256 Bank Sinopac 152,344
34,500 Cathay Life Insurance Co., Ltd. 83,867
36,000 Chinatrust Commercial Bank 33,983
56,800 Compal Electronics, Inc. 181,115
81,000 Far Eastern Textile, Ltd. 139,369
99,000 Formosa Plastics Corp. 184,404
2,682 Quanta Computer, Inc. $ 20,829
268,800 Taishin International Bank 165,481
4,000 Taiwan Semiconductor Manufacturing
Co. (ADR) 143,320
52,890 Taiwan Semiconductor Manufacturing
Co. 247,961
36,000 United Microelectronics Corp., Ltd. 101,152
-----------
2,639,378
- ------------------------------------------------------------
Thailand--3.3%
16,700 Advanced Info Service PLC 238,908
30,500 BEC World Public Co., Ltd. 170,465
62,300 Electricity Generating Public Co.,
Ltd. 79,862
17,500 PTT Exploration & Production Co.,
Ltd. 107,678
217,100 Thai Farmers Bank Public Co., Ltd. 292,213
-----------
889,126
- ------------------------------------------------------------
United States--0.6%
12,800 Apex Silver Mines, Ltd. 152,000
-----------
Total common stocks
(cost $18,760,563) 23,399,034
-----------
PREFERRED STOCKS(a)--10.5%
- ------------------------------------------------------------
Brazil
10,200 Companhia Vale do Rio Doce (ADR) 237,048
31,600 Embratel Participacoes SA (ADR) 588,550
7,908,000 Gerdau Metalurgica SA 301,433
16,200,000 Gerdau SA 320,125
1,300,000 Petrol Brasileiros 262,637
29,950,000 Sider de Tubarao 425,031
19,600 Tele Norte Leste Participacoes SA
(ADR) 349,125
20,000 Telesp Participacoes SA (ADR) 360,000
-----------
Total preferred stocks
(cost $2,107,771) 2,843,949
-----------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as
of November 30, 1999
(Unaudited) PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- ------------------------------------------------------------
<TABLE>
<CAPTION>
WARRANTS(a) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Indonesia--0.0%
24,000 PT Bank Pan Indonesia Tbk
Expiring 7/8/2002 $ 623
- ------------------------------------------------------------
United States--0.0%
6,400 Apex Silver Mines, Ltd.
Expiring 11/4/2002 0
-----------
Total warrants
(cost $0) 623
-----------
------------------------------------------------------------
RIGHTS(a)
------------------------------------------------------------
South Korea--0.0%
1,227 Keumkang Development Ind. Co.
Expiring 12/3/1999 2,752
1,243 SK Corp.
Expiring 12/10/1999 12,546
-----------
15,298
- ------------------------------------------------------------
Taiwan--0.0%
56,800 Compal Electronics, Inc.
Expiring 1/4/2000 38
-----------
Total rights
(cost $0) 15,336
-----------
Total long-term investments
(cost $20,868,334) 26,258,942
-----------
SHORT-TERM INVESTMENT--2.7%
Principal Amount
(000)
------------------------------------------------------------
Repurchase Agreement--2.7%
$ 721 Joint Repurchase Agreement
Account,
5.512%, 12/1/1999
(cost $721,000; Note 5) 721,000
-----------
- ------------------------------------------------------------
Total Investments--99.6%
(cost $21,589,334; Note 4) 26,979,942
Other assets in excess of
liabilities--0.4% 105,527
-----------
Net Assets--100% $27,085,469
-----------
-----------
</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 November 30, 1999 was as
follows:
Telecommunications.................................... 13.9%
Electronic Components................................. 10.0
Steel & Metals........................................ 8.3
Banking............................................... 6.9
Mining and Commodities................................ 6.9
Conglomerates......................................... 6.0
Oil & Gas Exploration/Production...................... 4.9
Chemicals............................................. 4.5
Oil & Gas Production & Refining....................... 4.2
Paper & Forest Products............................... 3.8
Gold Mines............................................ 3.5
Computers............................................. 3.4
Beverages............................................. 3.1
Pharmaceuticals....................................... 2.9
Diversified Resources................................. 2.3
Media................................................. 2.3
Computer Software & Services.......................... 2.2
Oil & Gas Services.................................... 1.6
Financial Services.................................... 0.8
Utilities............................................. 0.8
Automobile Manufacturing.............................. 0.7
Plastic Products...................................... 0.7
Real Estate-Development............................... 0.6
Retail................................................ 0.6
Oil Refining & Marketing.............................. 0.5
Textiles.............................................. 0.5
Insurance............................................. 0.3
Office Equipment & Supplies........................... 0.3
Food Processing....................................... 0.2
Tobacco............................................... 0.2
Short-term investment................................. 2.7
-----
99.6%
Other assets in excess of liabilities................. 0.4
-----
100.0%
-----
-----
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL DEVELOPING MARKETS FUND
Statement of Assets and Liabilities
(Unaudited) PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets November 30, 1999
<S> <C>
Investments, at value (cost $21,589,334)................................................................ $26,979,942
Foreign currency, at value (cost $297,593).............................................................. 296,777
Cash.................................................................................................... 1,771
Receivable for investments sold......................................................................... 114,428
Deferred organization costs and other assets............................................................ 76,350
Dividends and interest receivable....................................................................... 12,813
Receivable for Series shares sold....................................................................... 11,685
-----------------
Total assets......................................................................................... 27,493,766
-----------------
Liabilities
Payable for investments purchased....................................................................... 324,296
Accrued expenses........................................................................................ 43,381
Withholding tax payable................................................................................. 27,333
Management fee payable.................................................................................. 12,534
Distribution fee payable................................................................................ 586
Payable for Series shares reaquired..................................................................... 167
-----------------
Total liabilities.................................................................................... 408,297
-----------------
Net Assets.............................................................................................. $27,085,469
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at par................................................................ $ 2,091
Paid-in capital in excess of par..................................................................... 20,921,245
-----------------
20,923,336
Accumulated net investment loss...................................................................... (91,331)
Accumulated net realized gain on investments and foreign currency transactions....................... 890,505
Net unrealized appreciation on investments and foreign currency translations......................... 5,362,959
-----------------
Net assets, November 30, 1999........................................................................... $27,085,469
-----------------
-----------------
Class A:
Net asset value and redemption price per share $12.91
($429,057 / 33,226 shares of beneficial interest issued and outstanding)..........................
Maximum sales charge (5% of offering price).......................................................... .68
-----------------
Maximum offering price to public..................................................................... $13.59
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per share $12.78
($474,710 / 37,152 shares of beneficial interest issued and outstanding).......................... -----------------
-----------------
Class C:
Net asset value, offering price and redemption price per share $12.78
($220,818 / 17,283 shares of beneficial interest issued and outstanding)..........................
Sales charge (1% of offering price).................................................................. .13
-----------------
Offering price to public............................................................................. $12.91
-----------------
-----------------
Class Z:
Net asset value, offering price and redemption price per share $12.96
($25,960,884 / 2,003,541 shares of beneficial interest issued and outstanding).................... -----------------
-----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL DEVELOPING MARKETS FUND
PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income November 30, 1999
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $16,448)..................... $ 209,346
Interest................................. 21,621
-----------------
Total income.......................... 230,967
-----------------
Expenses
Management fee........................... 147,115
Distribution fee--Class A................ 216
Distribution fee--Class B................ 1,371
Distribution fee--Class C................ 593
Custodian's fees and expenses............ 96,000
Registration fees........................ 21,000
Audit fee and expenses................... 17,500
Reports to shareholders.................. 12,500
Legal fees and expenses.................. 7,000
Amortization of organization expenses.... 6,308
Trustees' fees........................... 2,000
Transfer agent's fees and expenses....... 800
Miscellaneous............................ 481
-----------------
Total expenses........................ 312,884
Less: expense reimbursement (Note 2)..... (75,582)
-----------------
Net expenses.......................... 237,302
-----------------
Net investment loss......................... (6,335)
-----------------
Realized and Unrealized Gain (Loss)
on Investment and Foreign Currency
Transactions
Net realized gain on:
Investment transactions.................. 2,764,275
Foreign currency transactions............ 36,779
-----------------
2,801,054
-----------------
Net change in unrealized appreciation (depreciation) on:
Investments.............................. 2,944,442
Foreign currencies....................... (29,992)
-----------------
2,914,450
-----------------
Net gain on investments and foreign
currencies............................... 5,715,504
-----------------
Net Increase in Net Assets
Resulting from Operations................... $ 5,709,169
-----------------
-----------------
</TABLE>
PRUDENTIAL DEVELOPING MARKETS FUND
PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months June 26, 1998(a)
Increase (Decrease) in Ended Through
Net Assets November 30, 1999 May 31, 1999
<S> <C> <C>
Operations
Net investment loss...... $ (6,335) $ (65,589)
Net realized gain (loss)
on investment and
foreign currency
transactions.......... 2,801,054 (2,001,654)
Net change in unrealized
appreciation
(depreciation) of
investments and
foreign currencies.... 2,914,450 2,448,509
----------------- ----------------
Net increase in net
assets resulting from
operations............ 5,709,169 381,266
----------------- ----------------
Series share transactions
(Note 6)
Net proceeds from shares
sold.................. 1,022,786 20,346,784
Cost of shares
reacquired............ (290,162) (134,374)
----------------- ----------------
Net increase in net
assets from Series
share transactions.... 732,624 20,212,410
----------------- ----------------
Total increase.............. 6,441,793 20,593,676
Net Assets
Beginning of period......... 20,643,676 50,000
----------------- ----------------
End of period............... $27,085,469 $ 20,643,676
----------------- ----------------
----------------- ----------------
</TABLE>
- ---------------
(a) Commencement of investment operations.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL DEVELOPING MARKETS FUND
Notes to Financial Statements
(Unaudited) 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. 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.
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.
- --------------------------------------------------------------------------------
8
<PAGE>
PRUDENTIAL DEVELOPING MARKETS FUND
Notes to Financial Statements
(Unaudited) PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
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 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 investment loss by $36,779 and
decrease accumulated net realized gain on investments and foreign currency
transactions by $36,779 for foreign currency gains realized and recognized
during the six months ended November 30, 1999. Net investment loss, net realized
gain 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.
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 six months ended
November 30, 1999.
PIMS has advised the Series that for the six months ended November 30, 1999, it
received approximately $1,800 and $1,100 in front-end sales charges resulting
from sales of Class A and Class C shares, respectively. From these fees, PIMS
paid such sales 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 six months ended November 30, 1999, it
received approximately $200 and $100 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.
- --------------------------------------------------------------------------------
9
<PAGE>
PRUDENTIAL DEVELOPING MARKETS FUND
Notes to Financial Statements
(Unaudited) PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
PIFM voluntarily agreed to reimburse the Fund 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, on an
annualized basis. For the six months ended November 30, 1999, such
reimbursements amounted to $75,582 (0.32% of average net assets; $0.036 per
share for Class A, B, C and Z shares).
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. Interest on any borrowings will be at market rates. The Funds pay a
commitment fee at an annual rate of .065 of 1% on the unused portion of the
credit facility, which is accrued and paid quarterly on a pro rata basis by the
Funds. The SCA expires on March 9, 2000. Prior to March 11, 1999, the Funds had
a credit agreement with a maximum commitment of $200,000,000. The commitment fee
was .055 of 1% on the unused portion of the credit facility. The Fund did not
borrow any amounts pursuant to either agreement during the six months ended
November 30, 1999. The purpose of the agreements is to serve as an alternative
source of funding for capital share redemptions.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the six months ended November 30,
1999, the Series incurred fees of approximately $600 for the services of PMFS.
As of November 30, 1999 approximately $160 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 six months ended November 30, 1999 were $23,718,424 and
$21,775,296, respectively.
The United States federal income tax basis of the Series' investments as of
November 30, 1999 was $21,553,714 and accordingly, net unrealized appreciation
on investments for federal income tax purposes was $5,354,987 (gross unrealized
appreciation--$6,058,114, gross unrealized depreciation--$703,127).
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 this 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 November 30, 1999, the
Series had a .11% undivided interest in the repurchase agreements in the joint
account. The undivided interest for the Series represents $721,000 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., 5.68%, in the principal amount of $210,000,000,
repurchase price $210,033,133, due 12/1/99. The value of the collateral
including accrued interest was $214,561,994.
Deutsche Bank Securities Corp., 5.41%, in the principal amount of $30,000,000,
repurchase price $30,004,508, due 12/1/99. The value of the collateral including
accrued interest was $30,600,246.
Goldman, Sachs & Co., 5.45%, in the principal amount of $210,000,000, repurchase
price $210,031,792, due 12/1/99. The value of the collateral including accrued
interest was $214,200,305.
Warburg Dillon Read LLC, 5.42%, in the principal amount of $202,578,000,
repurchase price $202,608,499, due 12/1/99. The value of the collateral
including accrued interest was $206,633,395.
- ------------------------------------------------------------
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. 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.
- --------------------------------------------------------------------------------
10
<PAGE>
PRUDENTIAL DEVELOPING MARKETS FUND
Notes to Financial Statements
(Unaudited) PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
Of the 2,091,202 shares of beneficial interest issued and outstanding at
November 30, 1999, Prudential owned 2,011,980.
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>
Six months ended November 30, 1999:
Shares sold........................... 48,551 $ 560,298
Shares reacquired..................... (19,394) (219,463)
--------- ------------
Net increase in shares outstanding 29,157 $ 340,835
--------- ------------
--------- ------------
June 26, 1998(a) through
May 31, 1999:
Shares sold........................... 2,819 $ 25,830
--------- ------------
--------- ------------
<CAPTION>
Class B
- --------------------------------------
<S> <C> <C>
Six months ended November 30, 1999:
Shares sold........................... 26,149 $ 296,102
Shares reacquired..................... (3,714) (42,090)
--------- ------------
Net increase in shares outstanding 22,435 $ 254,012
--------- ------------
--------- ------------
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 Shares Amount
- -------------------------------------- --------- ------------
<S> <C> <C>
Six months ended November 30, 1999:
Shares sold........................... 10,911 $ 125,783
Shares reacquired..................... (916) (10,081)
--------- ------------
Net increase in shares outstanding 9,995 $ 115,702
--------- ------------
--------- ------------
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>
Six months ended November 30, 1999:
Shares sold........................... 3,533 $ 40,603
Shares reacquired..................... (1,480) (18,528)
--------- ------------
Net increase in shares outstanding 2,053 $ 22,075
--------- ------------
--------- ------------
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.
- --------------------------------------------------------------------------------
11
<PAGE>
PRUDENTIAL DEVELOPING MARKETS FUND
Financial Highlights (Unaudited) PRUDENTIAL DEVELOPING MARKETS EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B Class C
------------------------- ------------------------- -------------------------
June 26, June 26, June 26,
Six Months 1998(a) Six Months 1998(a) Six Months 1998(a)
Ended Through Ended Through Ended Through
November 30, May 31, November 30, May 31, November 30, May 31,
1999 1999 1999 1999 1999 1999
------------ -------- ------------ -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $10.16 $10.00 $10.09 $10.00 $10.09 $10.00
----- -------- ----- -------- ----- --------
Income from investment operations:
Net investment income(d)................... (.01)(e) (.05) (.05)(e) (.10) (.07)(e) (.10)
Net realized and unrealized gain on
investment and foreign currency
transactions............................ 2.76 .21 2.74 .19 2.76 .19
----- -------- ----- -------- ----- --------
Total from investment operations........ 2.75 .16 2.69 .09 2.69 .09
----- -------- ----- -------- ----- --------
----- -------- ----- -------- ----- --------
Net asset value, end of period............. $12.91 $10.16 $12.78 $10.09 $12.78 $10.09
----- -------- ----- -------- ----- --------
TOTAL RETURN(a)............................ 27.07% 1.60% 26.66% .90% 26.66% .90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............ $ 429 $ 41 $ 474 $ 148 $ 221 $ 74
Average net assets (000)................... $ 173 $ 29 $ 274 $ 59 $ 119 $ 27
Ratios to average net assets:(b)
Expenses, including distribution fees... 2.24%(e) 3.43% 2.99%(e) 4.18% 2.99%(e) 4.18%
Expenses, excluding distribution fees... 1.99%(e) 3.18% 1.99%(e) 3.18% 1.99%(e) 3.18%
Net investment loss..................... (.10)%(e) (.55)% (.90)%(e) (1.21)% (1.18)%(e) (1.21)%
Portfolio turnover rate.................... 99% 345% 99% 345% 99% 345%
<CAPTION>
Class Z
-------------------------
June 26,
Six Months 1998(a)
Ended Through
November 30, May 31,
1999 1999
------------ --------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $ 10.18 $ 10.00
------ --------
Income from investment operations:
Net investment income(d)................... .00(e) (.03)
Net realized and unrealized gain on
investment and foreign currency
transactions............................ 2.78 .21
------ --------
Total from investment operations........ 2.78 .18
------ --------
------ --------
Net asset value, end of period............. $ 12.96 $ 10.18
------ --------
TOTAL RETURN(a)............................ 27.18% 1.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............ $ 25,961 $20,380
Average net assets (000)................... $ 22,972 $18,337
Ratios to average net assets:(b)
Expenses, including distribution fees... 1.99%(e) 3.18%
Expenses, excluding distribution fees... 1.99%(e) 3.18%
Net investment loss..................... (.04)%(e) (.38)%
Portfolio turnover rate.................... 99% 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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 12
<PAGE>
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Trustees
Delayne Dedrick Gold
Robert F. Gunia
Robert E. LaBlanc
David R. Odenath, Jr.
Robin B. Smith
Stephen Stoneburn
John R. Strangfeld
Nancy H. Teeters
Clay T. Whitehead
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Robert C. Rosselot, Secretary
Stephen M. Ungerman, Assistant Treasurer
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Prudential Investments is a unit of The Prudential Insurance Company
of America, 751 Broad Street, Newark, NJ 07102.
The views expressed in this report and information about the
Fund's portfolio holdings are for the period covered by this
report and are subject to change thereafter.
The accompanying financial statements as of November 30, 1999,
were not audited and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a current prospectus.
<PAGE>
(LOGO)
Prudential Mutual Funds BULK RATE
Gateway Center Three U.S. POSTAGE
100 Mulberry Street PAID
Newark, NJ 07102-4077 Permit 6807
(800) 225-1852 New York, NY
Class NASDAQ Cusip
A -- 74431P108
B -- 74431P207
C -- 74431P306
Z -- 74431P405 MF179E2
<PAGE>
(ICON)
Prudential
Latin
America
Equity
Fund
SEMI
ANNUAL
REPORT
Nov. 30, 1999
(LOGO)
<PAGE>
A Message from the Fund's President January 7, 2000
- -------------------------------------------------------------------------------
(PHOTO)
Dear Shareholder,
Prudential Latin America Equity Fund's Class A shares rose 20.75% over the
six-month reporting period ended November 30, 1999. The Fund significantly
outperformed the 11.04% return posted by the Lipper Latin American Funds
Average.
One of the important contributors to performance was our country allocation
decision to concentrate the portfolio around the Mexican and Brazilian markets
where we identified the greatest upside opportunities. These two markets were
strong outperformers during the period. Our sector and stock selection was also
an important contributor to performance. Our portfolio is constructed along a
barbell structure of growth stocks and deep value commodity stocks. Both
sectors performed extremely well during the year. Our growth stocks were
concentrated along the telecom and media sectors, which saw their valuations
re-rated upward on a global basis. On the other hand, our commodity stocks
performed well as commodity prices worldwide continue to rebound.
In the following report, Portfolio Manager Maria Elena Carrion explains why
Prudential Latin America Equity Fund performed so well, and why it may be an
important part of an investor's portfolio. Thank you for your continued
confidence in Prudential mutual funds.
Sincerely,
John R. Strangfeld
President
Prudential Latin America Equity Fund
<PAGE>
Performance Review
- -------------------------------------------------------------------------------
(PHOTO
Maria Elena Carrion
Fund Manager
Investment Goals and Style
Prudential Latin America Equity Fund's objective is long-term growth of
capital, which it seeks by investing primarily in equity-related securities of
companies domiciled or doing business principally in Latin America. The Fund
looks for above-average growth in earnings per share; high return on invested
capital; healthy balance sheets; strong competitive advantages; effective
research, 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.
The Fund is subject to all the risks associated with foreign investing,
including currency, political and social risks, and potential illiquidity.
There can be no assurance that the Fund's investment objective will be
achieved.
Beginning the period
The Fund's performance during the beginning of the reporting period was helped
by its positions in Mexico and Brazil, two of the region's best performing
markets. Prospects for the Brazilian economy continued to improve as the
country benefited from a decline in interest rates following its currency
devaluation earlier in 1999. The Mexican economy continued to show steady
growth in what was expected to be a recession year in the Latin America region
and further benefited from the sharp rebound in oil prices.
Stock selection protected downside during difficult months
Overall for the period, the big winners in the portfolio were found among the
telco, media and technology sectors, paralleling the moves seen in world
markets. Some noteworthy outperformers during the period included Telmex and
Televisa in Mexico, and TBH, Telespi and Embratel in Brazil.
However, our commodity/cyclical names, such as CVRD and Aracruz in Brazil, and
Alfa, Tamsa and G.Mexico in Mexico, helped us also outperform during the
difficult third quarter of 1999. As our principal markets in Mexico and Brazil
were correcting in excess of 10%, our fund held up pretty well mainly as a
result of our overweight position in these names.
Finished very strong
Latin America, as did most regions in emerging markets, rallied to the end of
our reporting period--the fall of 1999. Key factors behind the Fund's strong
performance at this time was our overweight position, compared to our
competitive benchmark, in Brazil and Mexico--each rallied in excess of 15% in
November 1999. Expressed as a percentage of net assets as of 11/30/99
Five largest Holdings
Expressed as a percentage of net assets as of 11/30/99
Embratel Participacoes SA 6.2%
Brazil--Telecommunications
Sider Nacional Cia 5.8
Brazil--Steel & Metals
Carso Global Telecom 5.2
Mexico--Conglomerate
Tubos de Acero de Mexico SA 5.1
Mexico--Metal-Non ferrous
Telecommunicacoes Brasileiras SA 4.7
Brazil--Telecommunications
<PAGE>
Looking Ahead
Many opportunities
Our outlook on Latin America continues to be positive. We believe that after
the third-quarter 1999 correction, the region offers compelling value.
Moreover, Latin American economies are currently at a trough in their economic
cycle. This means there is ample room for upside earnings revisions as well as
cuts in interest rates.
We anticipate that the Fund will continue to have overweight positions in both
Brazil and Mexico. In Mexico, we feel there will be an acceleration in economic
growth in the year 2000 so long as the U.S. economy avoids a hard landing, oil
prices stay strong, and corporate restructuring continues. In Brazil, the
economy is recovering faster than expected, and after a flat 1999, we expect to
see a return to stronger growth in the year 2000. We feel the key drivers for
growth in Brazil are an extremely competitive currency and lower interest
rates.
We will strive to keep our stock holdings in Latin America concentrated around
our current barbell strategy: telecommunications stocks, which are cheap
relative to global peers while offering higher growth rates, and
cyclical/commodity stocks in Mexico and Brazil. These stocks should benefit
from rising commodity prices and competitive currencies, providing a nice
cushion to the Fund at times of market volatility.
Geographic Concentration
Expressed as a percentage of net assets as of 11/30/99
Brazil 47.4%
Mexico 35.4
Chile 8.0
United States 1.6
Cash & Equivalents 7.6
Performance at a Glance
Cumulative Total Returns1 As of 11/30/99
<TABLE>
<CAPTION>
Six One Since
Months Year Inception2
<S> <C> <C> <C>
Class A 20.75% (12.88%) 35.63% (26.78%) 12.30% (4.98%)
Class B 20.26 (13.31) 34.55 (27.36) 11.00 (5.20)
Class C 20.26 (16.13) 34.55 (30.04) 11.00 (7.11)
Class Z 20.95 (19.01) 35.83 (33.66) 12.60 (10.80)
Lipper Latin American Fd. Avg.3 11.04 23.23 1.31
</TABLE>
Average Annual Total Returns1 As of 12/31/99
<TABLE>
<CAPTION>
One Since
Year Inception2
<S> <C> <C>
Class A 74.06% (71.43%) 19.98% (18.78%)
Class B 76.83 (74.05) 20.79 (19.52)
Class C 79.01 (76.25) 22.36 (21.12)
Class Z 83.51 (80.74) 24.36 (23.11)
</TABLE>
Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
1 Source: Prudential Investments Fund Management LLC and Lipper Inc. The
cumulative total returns do not take into account sales charges. The average
annual total returns do take into account applicable sales charges. The Fund
charges a maximum front-end sales charge of 5% for Class A shares. Class B
shares are subject to a declining contingent deferred sales charge (CDSC) of
5%, 4%, 3%, 2%, 1%, and 1% for six years. Class B shares will automatically
convert to Class A shares, on a quarterly basis, approximately seven years
after purchase. Class C shares are subject to a front-end sales charge of 1%
and a CDSC of 1% for 18 months. Class Z shares are not subject to a sales
charge or distribution and service (12b-1) fees. Without waiver of management
fees and/or expense subsidization, the Fund's cumulative and average annual
total returns would have been lower as indicated in parentheses ( ).
2 Inception date: Class A, B, C, and Z, 6/26/98.
3 Lipper average returns are for all funds in each share class for the
six-month, one-year, and since inception periods in the Latin American Fund
category. The Lipper average is unmanaged. Latin American funds concentrate
their investments in equity securities with primary trading markets or
operations concentrated in the Latin American region or a single country
within this region.
1
<PAGE>
Portfolio of Investments as of PRUDENTIAL DEVELOPING MARKETS FUND
November 30, 1999 (Unaudited) PRUDENTIAL LATIN AMERICA EQUITY FUND
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--92.4%
COMMON STOCKS--54.9%
- ------------------------------------------------------------
Brazil--14.2%
14,400 Aracruz Celulose SA (ADR) $ 293,400
200 Companhia Siderurgica National (ADR) 6,350
6,000 Companhia Vale Do Rio Doce (ADR) 139,440
11,000,000 Sider Nacional Cia 377,535
5,800 Vale Rio Doce Cia 112,049
----------
928,774
- ------------------------------------------------------------
Chile--3.7%
8,500 Sociedad Quimica Y Minera de Chile SA
(Series B shares) (ADR) 241,719
- ------------------------------------------------------------
Mexico--35.4%
69,000 Alfa Corp. (Series A shares) 299,586
43,500 Carso Global Telecom (Series A
shares) 341,720
54,000 Fomento Economico Mexico SA
(Series B shares)(a) 202,357
71,200 GPO Mexico (Series B shares) 294,777
24,000 Grupo Carso SA de CV (Series A
shares) 111,592
12,600 Grupo Radio Centro SA (ADR) 69,300
5,200 Grupo Televisa SA (ADR) 253,825
9,300 Panamerican Beverages, Inc.
(Series A shares) 174,375
2,500 Telefonos de Mexico SA (ADR)
(Class L Shares) 231,406
26,100 Tubos de Acero de Mexico SA (ADR) 330,268
----------
2,309,206
- ------------------------------------------------------------
United States--1.6%
9,000 Apex Silver Mines Ltd. 106,875
----------
Total common stocks
(cost $2,919,752) 3,586,574
----------
PREFERRED STOCKS--37.5%
- ------------------------------------------------------------
Brazil--33.2%
12,500,000 Gerdau SA(a) 247,010
21,600 Embratel Participacoes SA (ADR) 402,300
5,455,000 Gerdau Metalurgica SA(a) $ 207,931
900,000 Petrol Brasileiros(a) 181,825
20,750,000 Sider De Tubarao(a) 294,471
15,400 Tele Norte Leste Participacoes SA(a) 274,313
3,400 Telecomunicacoes Brasileiras SA(a)
(ADR) 308,550
14,100 Telesp Participacpoes SA (ADR) 253,800
----------
2,170,200
- ------------------------------------------------------------
Chile--4.3%
41,300 Antofagasta Holdings(a) 276,442
----------
Total preferred stocks
(cost $1,818,027) 2,446,642
----------
WARRANTS
- ------------------------------------------------------------
United States
Apex Silver Mines Limited(a)
4,500 Warrants expiring November 2002 0
----------
Total long-term investments
(cost $4,737,779) 6,033,216
Principal Amount
(000)
SHORT-TERM INVESTMENTS--6.2%
- ------------------------------------------------------------
Repurchase Agreement
United States
408,000 Joint Repurchase Agreement Account,
5.512%, 12/01/99
(cost $408,500; Note 5) 408,000
----------
- ------------------------------------------------------------
Total Investments, Net of Outstanding Options Written--98.6%
(cost $5,145,779; Note 4) 6,441,216
Other assets in excess of
liabilities--1.4% 90,006
----------
Net Assets--100% $6,531,222
----------
----------
</TABLE>
- ---------------
(a) Non-income producing security.
ADR--American Depository Receipt.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 2
<PAGE>
PRUDENTIAL DEVELOPING MARKETS FUND
PRUDENTIAL LATIN AMERICA EQUITY FUND
Portfolio of Investments as of November 30, 1999 (Unaudited)
- ------------------------------------------------------------
The industry classification of portfolio holdings and other assets in excess of
liabilities shown as a percentage of net assets as of November 30, 1999 was as
follows:
<TABLE>
<S> <C>
Telecommunications.................................... 22.5%
Steel & Metals........................................ 19.1
Mining................................................ 12.5
Manufacturing......................................... 6.2
Conglomerate.......................................... 5.2
Food Processing....................................... 5.1
Forest & Paper........................................ 4.5
Media................................................. 3.9
Chemicals............................................. 3.7
Business & Public Service............................. 3.1
Oil & Gas Exploration/Production...................... 2.8
Beverages............................................. 2.7
Publishing, Broadcasting & Advertising................ 1.1
Short-term investment................................. 6.2
-----
98.6%
Other assets in excess of liabilities................. 1.4
-----
100.0%
-----
-----
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3
<PAGE>
Statement of Assets and Liabilities PRUDENTIAL DEVELOPING MARKETS FUND
(Unaudited) PRUDENTIAL LATIN AMERICA EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets November 30, 1999
<S> <C>
Investments, at value (cost $5,145,779)................................................................. $ 6,441,216
Foreign currency, at value (cost $4,196)................................................................ 4,187
Cash.................................................................................................... 31
Due from Manager........................................................................................ 71,737
Deferred organization costs and other assets............................................................ 32,589
Receivable for Series shares sold....................................................................... 28,575
Dividends and interest receivable....................................................................... 2,918
-----------------
Total assets......................................................................................... 6,581,253
-----------------
Liabilities
Accrued expenses........................................................................................ 48,295
Payable for investments purchased....................................................................... 1,110
Distribution fee payable................................................................................ 439
Withholding taxes payable............................................................................... 187
-----------------
Total liabilities.................................................................................... 50,031
-----------------
Net Assets.............................................................................................. $ 6,531,222
-----------------
-----------------
Net assets were comprised of:
Shares of beneficial interest, at par................................................................ $ 581
Paid-in capital in excess of par..................................................................... 5,571,065
-----------------
5,571,646
Accumulated net investment loss...................................................................... (115,143)
Accumulated net realized loss on investments and foreign currency transactions....................... (220,589)
Net unrealized appreciation on investments and foreign currency translations......................... 1,295,308
-----------------
Net assets, November 30, 1999........................................................................... $ 6,531,222
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($259,280 / 23,095 shares of beneficial interest issued and outstanding).......................... $11.23
Maximum sales charge (5% of offering price).......................................................... .59
-----------------
Maximum offering price to public..................................................................... $11.82
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per share
($446,314 / 40,224 shares of beneficial interest issued and outstanding).......................... $11.10
-----------------
-----------------
Class C:
Net asset value and redemption price per share
($137,758 / 12,415 shares of beneficial interest issued and outstanding).......................... $11.10
Sales charge (1% of offering price).................................................................. .11
-----------------
Offering price to public............................................................................. $11.21
-----------------
-----------------
Class Z:
Net asset value, offering price and redemption price per share
($5,687,870 / 505,114 shares of beneficial interest issued and outstanding)....................... $11.26
-----------------
-----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4
<PAGE>
PRUDENTIAL DEVELOPING MARKETS FUND
PRUDENTIAL LATIN AMERICA EQUITY FUND
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income November 30, 1999
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $3,540)................... $ 23,213
Interest.............................. 5,727
-----------------
Total income....................... 28,940
-----------------
Expenses
Management fee........................ 33,884
Distribution fee--Class A............. 186
Distribution fee--Class B............. 1,338
Distribution fee--Class C............. 259
Custodian's fees and expenses......... 66,000
Registration fees..................... 18,500
Audit fee and expenses................ 17,500
Reports to shareholders............... 11,000
Legal fees and expenses............... 5,600
Amortization of organizational
expenses........................... 4,505
Trustees' fees........................ 1,750
Transfer agent's fees and expenses.... 900
Miscellaneous......................... 408
-----------------
Total expenses..................... 161,830
Less: Expense subsidy................. (105,622)
-----------------
Net expenses....................... 56,208
-----------------
Net investment loss...................... (27,268)
-----------------
Realized and Unrealized Gain (Loss)
on Investment and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions............... 441,976
Foreign currency transactions......... (25,519)
-----------------
416,457
-----------------
Net change in unrealized appreciation
(depreciation) on:
Investments........................... 702,383
Foreign currencies.................... (99)
-----------------
702,284
-----------------
Net gain on investments and foreign
currencies............................ 1,118,741
-----------------
Net Decrease in Net Assets
Resulting from Operations $ 1,091,473
-----------------
-----------------
</TABLE>
- ---------------
(a) Commencement of investment operations.
PRUDENTIAL DEVELOPING MARKETS FUND
PRUDENTIAL LATIN AMERICA EQUITY FUND
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months June 26, 1998(a)
Increase (Decrease) in Ended Through
Net Assets November 30, 1999 May 31, 1999
<S> <C> <C>
Operations
Net investment loss...... $ (27,268) $ (204,372)
Net realized gain (loss)
on investment and
foreign currency
transactions.......... 416,457 (727,281)
Net change in unrealized
appreciation of
investments and
foreign currencies.... 702,284 593,024
----------------- ----------------
Net increase (decrease)
in net assets
resulting from
operations............ 1,091,473 (338,629)
----------------- ----------------
Series share transactions
(Note 6)
Net proceeds from shares
sold.................. 1,027,207 5,502,477
Cost of shares
redeemed.............. (620,208) (181,098)
----------------- ----------------
Net increase in net
assets from Series
share transactions.... 406,999 5,321,379
----------------- ----------------
Total increase.............. 1,498,472 4,982,750
Net Assets
Beginning of period......... 5,032,750 50,000
----------------- ----------------
End of period............... $ 6,531,222 $ 5,032,750
----------------- ----------------
----------------- ----------------
</TABLE>
- ---------------
(a) Commencement of investment operations.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5
<PAGE>
Notes to Financial Statements PRUDENTIAL DEVELOPING MARKETS FUND
(Unaudited) 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.
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.
- --------------------------------------------------------------------------------
6
<PAGE>
Notes to Financial Statements PRUDENTIAL DEVELOPING MARKETS FUND
(Unaudited) PRUDENTIAL LATIN AMERICA 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.
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 $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 increase accumulated net investment loss by $25,519 and
decrease accumulated net realized loss on investments and foreign currency
transactions by $25,519 for foreign currency losses realized and recognized
druing the six months ended November 30, 1999. 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.
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 six months ended
November 30, 1999.
PIMS has advised the Series that it has received approximately $360 and $1,000
in front-end sales charges resulting from sales of Class A and Class C shares,
respectively, during the six months ended November 30, 1999.
PIMS has advised the Series that for the six months ended November 30, 1999, it
has received $50 in contingent deferred sales charges imposed
- --------------------------------------------------------------------------------
7
<PAGE>
Notes to Financial Statements PRUDENTIAL DEVELOPING MARKETS FUND
(Unaudited) PRUDENTIAL LATIN AMERICA EQUITY FUND
- --------------------------------------------------------------------------------
upon redemptions by Class B shareholders. No contingent deferred sales charges
were imposed upon redemptions by Class C shareholders.
PIMS, PIFM and PIC are indirect, wholly owned subsidiaries of The Prudential
Insurance Company of America.
PIFM voluntarily agreed to reimburse the Fund 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, on an
annualized basis. For the year ended November 30, 1998, such reimbursements
amounted to $105,622 (1.95% of average net assets; $.18 per share for Class A,
B, C and Z shares).
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 six months ended November 30, 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 six months ended November 30,
1999, the Series incurred fees of approximately $778 for the services of PMFS.
As of November 30, 1999 approximately $150 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 six months ended November 30, 1999 were $6,531,269 and $6,032,409,
respectively.
The United States federal income tax basis of the Series' investments as of
November 30, 1999 was $5,149,880 and accordingly, net unrealized appreciation on
investments for federal income tax purposes was $1,291,336 (gross unrealized
appreciation--$1,315,729, gross unrealized depreciation--$24,393).
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
six months ended May 31, 1999 as having been incurred in this 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 November
30, 1999, the Series had a .06% undivided interest in the repurchase agreements
in the joint account. The undivided interest for the Series represents $408,000
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., 5.68%, in the principal amount of $210,000,000,
repurchase price $210,033,133, due 12/1/99. The value of the collateral
including accrued interest was $214,561,994.
Deutsche Bank Securities Corp., 5.41%, in the principal amount of $30,000,000,
repurchase price $30,004,508, due 12/1/99. The value of the collateral including
accrued interest was $30,600,246.
Goldman Sachs & Co., 5.45%, in the principal amount of $210,000,000, repurchase
price $210,031,792, due 12/1/99. The value of the collateral including accrued
interest was $214,200,305.
Warburg Dillon Read LLC, 5.42%, in the principal amount of $202,578,000,
repurchase price $202,608,499, due 12/1/99. The value of the collateral
including accrued interest was $206,633,395.
- ------------------------------------------------------------
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
- --------------------------------------------------------------------------------
8
<PAGE>
Notes to Financial Statements PRUDENTIAL DEVELOPING MARKETS FUND
(Unaudited) PRUDENTIAL LATIN AMERICA EQUITY FUND
- --------------------------------------------------------------------------------
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 580,848 shares of beneficial interest
issued and outstanding at November 30, 1999, Prudential owned 500,027.
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>
Six months ended November 30, 1999:
Shares sold............................. 16,507 $ 169,158
Shares reacquired....................... (5,982) (57,688)
------- ----------
Net increase in shares outstanding
before conversion..................... 10,525 $ 111,470
Shares issued upon conversion from Class
B..................................... 2,229 21,674
------- ----------
Net increase in shares outstanding...... 12,754 $ 133,144
------- ----------
------- ----------
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
------- ----------
------- ----------
Class B
- ----------------------------------------
Six months ended November 30, 1999:
Shares sold............................. 47,616 $ 469,248
Shares reacquired....................... (30,485) (288,868)
------- ----------
Net increase in shares outstanding
before conversion..................... 17,131 $ 180,380
Shares reacquired upon conversion into
Class A............................... (2,251) (21,674)
------- ----------
Net increase in shares outstanding...... 14,880 $ 158,706
------- ----------
------- ----------
Class B Shares Amount
- ---------------------------------------- ------- ----------
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
------- ----------
------- ----------
Class C
- ----------------------------------------
Six months ended November 30, 1999:
Shares sold............................. 31,283 $ 291,524
Shares reacquired....................... (20,532) (193,641)
------- ----------
Net increase in shares outstanding...... 10,751 $ 97,883
------- ----------
------- ----------
June 26, 1998(a) through
May 31, 1999:
Shares sold............................. 414 $ 4,264
------- ----------
------- ----------
Class Z
- ----------------------------------------
Six months ended November 30, 1999:
Shares sold............................. 9,741 $ 97,277
Shares reacquired....................... (7,950) (80,011)
------- ----------
Net increase in shares outstanding...... 1,791 $ 17,266
------- ----------
------- ----------
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.
- --------------------------------------------------------------------------------
9
<PAGE>
PRUDENTIAL DEVELOPING MARKETS FUND
Financial Highlights (Unaudited) PRUDENTIAL LATIN AMERCIA EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B
--------------------------------- ------------
Six Months Six Months
Ended June 26, 1998(a) Ended
November 30, through November 30,
1999(d) May 31, 1999(d) 1999(d)
------------ ---------------- ------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............................ $ 9.30 $10.00 $ 9.23
----- ----- -----
Income from investment operations:
Net investment loss............................................. (.06)(e) (.20) (.09)(e)
Net realized and unrealized gain (loss) on investment and
foreign currency transactions................................ 1.99 (.50) 1.96
----- ----- -----
Total from investment operations............................. 1.93 (.70) 1.87
----- ----- -----
----- ----- -----
Net asset value, end of period.................................. $11.23 $ 9.30 $11.10
----- ----- -----
TOTAL RETURN(b)................................................. 20.75% (7.00)% 20.26%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)................................. $ 259 $ 96 $ 446
Average net assets (000)........................................ $ 149 $ 36 $ 268
Ratios to average net assets:(c)
Expenses, including distribution fees........................ 2.24%(e) 8.72% 2.99%(e)
Expenses, excluding distribution fees........................ 1.99%(e) 8.47% 1.99%(e)
Net investment loss.......................................... (1.28)%(e) (2.61)% (1.94)%(e)
For Class A, B, C and Z shares:
Portfolio turnover rate......................................... 120% 448% 120%
<CAPTION>
<S> <C>
June 26, 1998(a)
through
May 31, 1999(d)
----------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............................ $10.00
-----
Income from investment operations:
Net investment loss............................................. (.29)
Net realized and unrealized gain (loss) on investment and
foreign currency transactions................................ (.48)
-----
Total from investment operations............................. (.77)
-----
-----
Net asset value, end of period.................................. $ 9.23
-----
TOTAL RETURN(b)................................................. (7.70)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)................................. $ 234
Average net assets (000)........................................ $ 68
Ratios to average net assets:(c)
Expenses, including distribution fees........................ 9.47%
Expenses, excluding distribution fees........................ 8.47%
Net investment loss.......................................... (3.95)%
For Class A, B, C and Z shares:
Portfolio turnover rate......................................... 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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 10
<PAGE>
PRUDENTIAL DEVELOPING MARKETS FUND
Financial Highlights (Unaudited) PRUDENTIAL LATIN AMERCIA EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Class Z
--------------------------------- ------------
Six Months Six Months
Ended June 26, 1998(a) Ended
November 30, through November 30,
1999(d) May 31, 1999(d) 1999(d)
------------ ---------------- ------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............................ $ 9.23 $10.00 $ 9.31
----- ----- -----
Income from investment operations:
Net investment loss............................................. (.11)(e) (.46) (.05)(e)
Net realized and unrealized gain (loss) on investment and
foreign currency transactions................................ 1.98 (.31) 2.00
----- ----- -----
Total from investment operations............................. 1.87 (.77) 1.95
----- ----- -----
----- ----- -----
Net asset value, end of period.................................. $11.10 $ 9.23 $11.26
----- ----- -----
TOTAL RETURN(b)................................................. 20.26% (7.70)% 20.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)................................. $ 138 $ 15 $5,688
Average net assets (000)........................................ $ 52 $ 11 $4,953
Ratios to average net assets:(c)
Expenses, including distribution fees........................ 2.99%(e) 9.47% 1.99%(e)
Expenses, excluding distribution fees........................ 1.99%(e) 8.47% 1.99%(e)
Net investment loss.......................................... (2.21)%(e) (6.07)% (.94)%(e)
<CAPTION>
<S> <C>
June 26, 1998(a)
through
May 31, 1999(d)
----------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............................ $10.00
-----
Income from investment operations:
Net investment loss............................................. (.40)
Net realized and unrealized gain (loss) on investment and
foreign currency transactions................................ (.29)
-----
Total from investment operations............................. (.69)
-----
-----
Net asset value, end of period.................................. $ 9.31
-----
TOTAL RETURN(b)................................................. (6.90)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)................................. $4,687
Average net assets (000)........................................ $4,207
Ratios to average net assets:(c)
Expenses, including distribution fees........................ 8.47%
Expenses, excluding distribution fees........................ 8.47%
Net investment loss.......................................... (5.16)%
</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. 11
<PAGE>
Getting the Most from Your Prudential Mutual Fund
How many times have you read these reports--or other financial materials--and
stumbled across a word that you don't understand?
Many shareholders have run into the same problem. We'd like to help. So we'll
use this space from time to time to explain some of the words you might have
read, but not understood. And if you have a favorite word that no one can
explain to your satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half of one percent is 50 basis
points.
Collateralized Mortgage Obligations (CMOs): Mortgage-backed bonds that separate
mortgage pools into different maturity classes, called tranches. These
instruments are sensitive to changes in interest rates and homeowner
refinancing activity. They are subject to prepayment and maturity extension
risk.
Derivatives: Securities that derive their value from other securities. The rate
of return of these financial instruments rises and falls--sometimes very
suddenly--in response to changes in some specific interest rate, currency,
stock, or other variable.
Discount Rate: The interest rate charged by the Federal Reserve on loans to
member banks.
Federal Funds Rate: The interest rate charged by one bank to another on
overnight loans.
Futures Contract: An agreement to purchase or sell a specific amount of a
commodity or financial instrument at a set price at a specified date in the
future.
Leverage: The use of borrowed assets to enhance return. The expectation is that
the interest rate charged on borrowed funds will be lower than the return on
the investment. While leverage can increase profits, it can also magnify
losses.
Liquidity: The ease with which a financial instrument (or product) can be
bought or sold (converted into cash) in the financial markets.
Price/Earnings Ratio: The price of a share of stock divided by the earnings
per share for a 12-month period.
Option: An agreement to purchase or sell something, such as shares of stock, by
a certain time for a specified price. An option need not be exercised.
Spread: The difference between two values; often used to describe the
difference between "bid" and "asked" prices of a security, or between the
yields of two similar maturity bonds.
Yankee Bond: A bond sold by a foreign company or government in the U.S. market
and denominated in U.S. dollars.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Trustees
Delayne Dedrick Gold
Robert F. Gunia
Robert E. LaBlanc
David R. Odenath, Jr.
Robin B. Smith
Stephen Stoneburn
John R. Strangfeld
Nancy H. Teeters
Clay T. Whitehead
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Robert C. Rosselot, Secretary
Stephen M. Ungerman, Assistant Treasurer
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Prudential Investments is a unit of The Prudential Insurance Company of
America, 751 Broad Street, Newark, NJ 07102.
The views expressed in this report and information about the Fund's portfolio
holdings are for the period covered by this report and are subject to change
thereafter.
The accompanying financial statements as of November 30, 1999, were not audited
and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Class NASDAQ Cusip
A -- 74437M109
B -- 74437M208
C -- 74437M307
Z -- 74437M406 MF180E2
BULK RATE
U.S. POSTAGE
PAID
Permit 6807
New York, NY
